3 ms·

Fascinating. Why don't you think it's possible to build such a construction company? (I have no experience in construction.)

saghm 6y ago
I read their comment more as saying that building a better construction company wouldn't fix the issue (e.g. they might not get hired), not that it wasn't possible to build a better company.
- bvandewalle 6y ago
  I think you hit the nail on the head. Elected officials unfortunately don't have that much incentive to hire the "cheapest" company as the debt will be incurred over the next 100 years while they will be long gone. They probably hire the company that they feel will give them the least amount of trouble, which is the easiest to navigate or that will do something for them in exchange. It's the "not my money" issue at play.
  - selectodude 6y ago
    I think it's quite the opposite. There is heavy incentive to pick the lowest bidder without any consideration paid to how absurd the bid is, which is where you get these crazy cost overruns. The bid was never doable to begin with.
    - imtringued 6y ago
      And once there is a cost overrun it's easy to bloat the budget because the government is stuck with the contractor they hired.
jldugger 6y ago
Presumably the problem is that honest construction companies don't win bids.
- renewiltord 6y ago
  They win when the project is needed. Most of these projects aren't needed. Another HNer pointed out to me that when the East Bay interchange had a collapse due to a tank truck fire, the replacement came in under budget and ahead of time - bidding lower than everyone else and making it back on speed-of-delivery incentives. The reality of most construction projects? You don't need them. You're not going to get better with them and you're not going to get worse without them.
  - jldugger 6y ago
    I don't think you understand how corruption works, so let me share a worked example with you. A stretch of road is past its shelf life and scheduled to be repaved. The city does some analysis, and estimates the cost for that mile of road to be 1M^1. Then they put out a Request for Bids for contractors to do the work, lowest bidder wins. Corrupting the auction is how things fail. The simplest corruption is to leak sealed bids so that you know how much to bid. Remember, this isn't a vickery auction, bidders are paid what they bid and no more. If you want to maximize your profits, all else being equal you want to bid one dollar less than the 2nd best bid. If you were going to bid 800k, someone who informs you the second highest bid is 900k is worth 100k. Sending them a bribe for that tip will still leave you ahead, and the city behind. And if you repeat this, eventually that 2nd bidder is discouraged enough to leave the market, or at least stop participating in Corrupt City IFBs. Which raises the cost per mile even higher. The other method is to disqualify competitors and proposals. Contracts often give a measure of leeway to officials disqualify bids. Or, to advise a bidder to change their proposal before they get disqualified. Or you can just write the work to be done in such a way that only one bidder could feasibly win. ^1 I really don't know the costs here, just examples.
    - renewiltord 6y ago
      For the necessary projects, no one fucks them, because the costs of failure are too high. They are very rare, though, but when comes around it moves like a grass fire on a windy day[0]. That road "past its shelf life"? It's not. Your standards are just too high for your wallet. 0: https://en.wikipedia.org/wiki/MacArthur_Maze#2007_I-580_East_Connector_collapse https://en.wikipedia.org/wiki/MacArthur_Maze#2007_I-580_East...

saghm 6y ago

I read their comment more as saying that building a better construction company wouldn't fix the issue (e.g. they might not get hired), not that it wasn't possible to build a better company.

bvandewalle 6y ago
I think you hit the nail on the head. Elected officials unfortunately don't have that much incentive to hire the "cheapest" company as the debt will be incurred over the next 100 years while they will be long gone. They probably hire the company that they feel will give them the least amount of trouble, which is the easiest to navigate or that will do something for them in exchange. It's the "not my money" issue at play.
- selectodude 6y ago
  I think it's quite the opposite. There is heavy incentive to pick the lowest bidder without any consideration paid to how absurd the bid is, which is where you get these crazy cost overruns. The bid was never doable to begin with.
  - imtringued 6y ago
    And once there is a cost overrun it's easy to bloat the budget because the government is stuck with the contractor they hired.

jldugger 6y ago

Presumably the problem is that honest construction companies don't win bids.

renewiltord 6y ago
They win when the project is needed. Most of these projects aren't needed. Another HNer pointed out to me that when the East Bay interchange had a collapse due to a tank truck fire, the replacement came in under budget and ahead of time - bidding lower than everyone else and making it back on speed-of-delivery incentives. The reality of most construction projects? You don't need them. You're not going to get better with them and you're not going to get worse without them.
- jldugger 6y ago
  I don't think you understand how corruption works, so let me share a worked example with you. A stretch of road is past its shelf life and scheduled to be repaved. The city does some analysis, and estimates the cost for that mile of road to be 1M^1. Then they put out a Request for Bids for contractors to do the work, lowest bidder wins. Corrupting the auction is how things fail. The simplest corruption is to leak sealed bids so that you know how much to bid. Remember, this isn't a vickery auction, bidders are paid what they bid and no more. If you want to maximize your profits, all else being equal you want to bid one dollar less than the 2nd best bid. If you were going to bid 800k, someone who informs you the second highest bid is 900k is worth 100k. Sending them a bribe for that tip will still leave you ahead, and the city behind. And if you repeat this, eventually that 2nd bidder is discouraged enough to leave the market, or at least stop participating in Corrupt City IFBs. Which raises the cost per mile even higher. The other method is to disqualify competitors and proposals. Contracts often give a measure of leeway to officials disqualify bids. Or, to advise a bidder to change their proposal before they get disqualified. Or you can just write the work to be done in such a way that only one bidder could feasibly win. ^1 I really don't know the costs here, just examples.
  - renewiltord 6y ago
    For the necessary projects, no one fucks them, because the costs of failure are too high. They are very rare, though, but when comes around it moves like a grass fire on a windy day[0]. That road "past its shelf life"? It's not. Your standards are just too high for your wallet. 0: https://en.wikipedia.org/wiki/MacArthur_Maze#2007_I-580_East_Connector_collapse https://en.wikipedia.org/wiki/MacArthur_Maze#2007_I-580_East...