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I don't think government projects being more expensive than private projects simply is an impression created by the media. Sure, private project failures aren't
by BjoernKW 9y ago
I don't think government projects being more expensive than private projects simply is an impression created by the media. Sure, private project failures aren't bandied about as much (though sometimes they still are, especially if a failure simply is too spectacular not to be talked about), simply because they often aren't interesting to the general public. However, save for downright cover-ups project failures are usually known to the stakeholders.
Government projects starting with too low an estimate is a well-known but deeply unethical practice. Everyone involved knows that the finished project will be above budget yet there's a silent agreement to not say anything because once the public realises there's a problem it's already too late to cancel the project and the project has to continue whatever the final costs may be. That's the common argument anyway. It's a bit like the 'too big to fail' fallacy. So, we keep throwing good money after bad because we're afraid of the consequences of admitting failure.
It's exactly that kind of unethical behaviour that should be punishable by disciplinary action in order to disincentivise civil servants from going down that road in the first place.
Finally, I suppose the larger the organisation the more lack of accountability becomes a problem. You see that with larger companies where projects often regularly are over time and budget as well. However, I still think that those in leadership positions in larger private organisations are more accountable. While there are misaligned incentives in these organisations, too (like CEOs getting a bonus or a generous severance package even though they performed badly) there are two crucial differences here: A company goes out of business if it runs out of money. It's also much easier to hold you both civilly and criminally liable if you overstepped your boundaries.
When was the last time a state or city went out of business due to lack of funds? When was the last time a politician actually did time for embezzling and deliberately wasting tax money?
- bluGill 9y agoThe problem is time an materials - when the contractor is ethical - is the cheapest option. Anything else means that someone needs to overbid and make "excessive profits", or risk they underbid and have to make up millions of dollars to finish the contract. However ethical is a key part of this, and we know from experience that not everyone is ethical and we have no way of knowing who will be until it is too late. They get around this by carefully fixing the work to be done - which seems like a great idea, but in construction there are always something you don't know about until you get there. What happens is they bid for standard dirt work and when they start moving the dirt they go back and say "We bid to dig down 3 feet as standard, but there is a sink hole here: do you want us to complete the job as bid knowing the road will collapse there within a week of of finishing or pay extra to fix the sinkhole" (there are millions of variations of this). Of course the only sane thing to do is pay for the design change so it is done right.
- losteric 9y agoI don't understand why we don't negotiate a fixed rate and spec for each project, with financial incentives for early completion. The contractor takes some risk, but the risk can be mitigated with better research and uncertainty factored into the bid.
- pascalxus 9y agoHere's what I don't understand. Why on earth do they get paid more than their estimate? That's rediculous. They should get paid precisely the amount they estimated and not a penny more. This would get rid of ALLL the underbidding.
- mikepurvis 9y agoIt would probably get rid of all bidding period, and it would create an unnecessarily adversarial relationship between parties who need to work together productively across multiple projects. Also, if you follow this logic through to it's conclusion, you end up with a bankrupt contractor, a project that's still unfinished, and embarrassed politicians. It's usually still a better deal (within reason) for the person already doing the work to be the one to finish the work.
- dllthomas 9y agoIt seems like you could include penalties if project goals are not met, and then open up a re-bidding process. If it's true (as I think it generally is) that it's "usually still a better deal [..] for the person already doing the work to be the one to finish the work" then they can presumably bid lower than the rest at that next phase - but it's not just free money.
- mikepurvis 9y agoWhat good does a penalty do if the entity who owes it declares bankruptcy?
- deleted 9y ago[deleted]
- dllthomas 9y agoYou'd presumably have to require a bond. Otherwise, yeah. Still probably an improvement over handing them additional money with no competition, though...
- Paul-ish 9y agoAs for low-balling estimates, what if there were a contract penalty for going over by some %? Moreover, what if you took some of that penalty and gave it to whichever contractor had bid closest to the true cost, incentivizing contractors to bid what they think it will cost, even if they have no intent of taking the job. This could act as a sort of information market, where you could get a sense of what people think the true cost would be.