23 ms·

Why construction projects always go over budget

320 points by throw0101b 4y ago

datavirtue 4y ago
TLDR; It's all the idling diesel trucks, so they can leave their lights on.
tuatoru 4y ago
See also Bent Flyvbjerg's[1] new book, How Big Things Get Done[2]. Recommended for everyone involved in projects. 1. https://en.wikipedia.org/wiki/Bent_Flyvbjerg#Megaproject_planning_and_management https://en.wikipedia.org/wiki/Bent_Flyvbjerg#Megaproject_pla... 2. https://www.amazon.com/How-Big-Things-Get-Done-ebook/dp/B0BRCF6RND?ref_=ast_author_dp https://www.amazon.com/How-Big-Things-Get-Done-ebook/dp/B0BR...
- maCDzP 4y ago
  Thank you for that recommendation. I didn’t know Flyvbjerg had a new book. For other HN readers interested in the topic I can recommend “ The Oxford Handbook of Megaproject Management”. Bent Flyvbjerg is the editor of the book I believe.
uoaei 4y ago
During my time living in Europe, I noticed that while larger construction efforts took months (since they kinda have to), smaller day-scale projects easily took inside of a day, whereas similar scale projects in the US stretch for weeks. My friends who work construction in the US say that contractors routinely do a job wrong the first time, throw some apprentice under the bus regarding the "mistake", and ask for more money to re-do it. It's a common way of milking contracts and happens everywhere all the time. Their experiences are in large (hotels, hospitals, every school in a certain district, etc.) contracts, not the domain of your neighborhood general contractor. I can't speak to the relative prevalence in Europe but anecdotally I was always pleasantly surprised by how quickly those jobs got finished. One notable exception is the new housing being thrown up quickly in metro areas of the US. Sometimes they still progress in fits and starts but sometimes they go up super quick too.
- evilantnie 4y ago
  This sounds weird to me, I've paid for quite a few large construction projects and they are always fixed-bid contracts. I've never borne the cost of a mistake made by contractors. Everything that has additional cost is strictly controlled by change order requests, to the point of being extremely annoying. Maybe it's personal preference for fixed-bid contracts, but I've never heard of a large hotel, hospital, or other large contract be time-and-material based.
  - uoaei 4y ago
    I am not well-versed in this field so I may have misinterpreted and they may have been talking about subcontractors. The friends I refer to work at one of those large consulting firms and they are complaining about the people they pay, not those who pay them.
ajsnigrutin 4y ago
It would be interesting to compare prices of privately funded projects vs publicly funded ones, both in terms of cost, over-budget amounts and time needed to complete the project. I see many public locations, where a short street or even a walkway is closed for months, because they need to repave literally 20-30 square meters of a walkway, while companies such as Hofer (Aldi) manage to repave their parking yard in a few days, while keeping half of it still open for customers.
- Spooky23 4y ago
  There’s lots of stupid rules around sidewalks and lane striping. You need to do an ADA evaluation, remediate any findings, etc. A project in my city that resulted in adding a textured crosswalk pad, new stripes and a beg button cost $1.4M and took 3 years.
  - mhalle 4y ago
    "Stupid rules" for one person are what enable another person to live an independent life. The Americans with Disabilities (ADA) act has been law since 1990 and codifies mobility and access as civil rights in the US. ADA does add to the costs of projects, but so does, say, safety code compliance. It's the law, and it exists for a good reason. As for the example of a minor accessibility project costing $1.4M and taking 3 years, I would suggest that there is probably more to the story that helps explain the cost or the time.
    - Robotbeat 4y ago
      I bet closing the sidewalk for longer is much worse for disabled people.
    - bombcar 4y ago
      The rules are fine, the stupidity is latent and revealed: 1. New construction must meet ADA requirements. 2. Old construction can remain. 3. Repairing broken old construction requires meeting ADA requirements. So between 2 and 3 you end up with broken old construction that cannot be repaired to "what it was" because repairs must meet ADA requirements. Each step makes sense on its own, but combined they result in something worse (in particular) even though overall it works out better.
bumby 4y ago
I was happy to see the author mention optimism bias. One part I didn’t see is how project managers may deliberately underestimate to take advantage of the sink cost bias. If competing for funds, a PM may intentionally low-ball an estimate to get their project selected, knowing it’s easier to continually ask for more money later rather than a larger sum upfront. I would have also liked to see more discussion about joint probabilities. If one sub-discipline goes over budget, it may other disciplines (particularly commissioning) exceed their initial estimate as well. Change orders beget change orders.
- abduhl 4y ago
  This is the Willie Brown approach: “News that the Transbay Terminal is something like $300 million over budget should not come as a shock to anyone. We always knew the initial estimate was way under the real cost. Just like we never had a real cost for the Central Subway or the Bay Bridge or any other massive construction project. So get off it. In the world of civic projects, the first budget is really just a down payment. If people knew the real cost from the start, nothing would ever be approved. The idea is to get going. Start digging a hole and make it so big, there's no alternative to coming up with the money to fill it in.”
  - bumby 4y ago
    Unfortunately, public projects also have to manage public perception. Just like you wouldn't appreciate, say, a roofing estimate to be later called a "down payment," the public in general doesn't like that approach either. "We don't know how much it'll cost but just trust us and let's just get started" isn't a particularly palatable sales pitch, especially in domains with a long history of corruption.
    - asdff 4y ago
      At the same time, you gotta give people the medicine they need. They have no concept of what a fair price on the market is for a subway line being build in your city with all the local considerations you have. No one does, that's the whole trick of it. At some point though, people need subways, they need sewers, they need bridges, and if we give them the shot to just turn their nose at anything good that seems expensive, we'd probably still be dumping our buckets out onto the street at night versus requiring plumbing.
kmod 4y ago
I'm curious about the higher level issues at play as well, which I'm just guessing about since I only have a lay understanding of the field Seems like there's probably a "winners curse" variant: conditioned on a bid being accepted, it is likely to be underestimated even if unconditioned there's an equal probability of under and over resonating Also seems like there's an incentive alignment problem as well: there's a clear benefit to bidding lower, and if the costs of underestimating are not born by the bidder then you would expect to see systematic underbidding even if we have on-average-accurate ways of estimating. These feel like important issues that are orthogonal to our ability to estimate things accurately and I wonder how much of the effect is from which type of cause (I wish the author had talked about this)
- jaclaz 4y ago
  From experience, what you mention is part of the perverse effects of the bid mechanisms, but these have nothing to do with the initial underestimation and is comparatively minor in relevance. Something is designed (years time), then it is estimated (often wrongly, however it takes some time as well), then it is approved/funded (some more years). But, IF the design was valid AND the estimation was correct at the most you could adjust the total amount by inflation/increases of prices. So, pure theory, you calculate a cost of 100 units (million dollars, whatever), then, since a few years have passed you should add (say) 10% for inflation/price adjustment before proceeding to a public bid (but it is extremely rare that this is actually done). The construction firms/contractors will offer between 15% and 25% rebate, if the bid is (as often is) given at max rebate, the one with 25% rebate will get the job. Now, assuming that the estimation is perfectly accurate (it isn't at all) the winner is (on the first day) under for at least 20%, 10% (the price adjustment, if included) and another 10% (their profit), while the remaining 5% is debatable, in the sense that it is what is actually possible that one construction company can save when compared to another for a number of reasons (machinery, organization, whatever). So, from day one the winner has two possible ways out, the first is to actually optimize the work to recover this 20-25% (difficult) the second is to find errors in the project (relatively easy). But, once the project is analyzed, what is found is not just the "missing" 20 to 25% (which if spent would not make the project over budget) but more likely something like 100%. So, at the end of the day, you are going to spend 175 instead of 100, of which 15 is connected to the perversions of the bidding, but 60 is errors in the project or in its estimation.
cduzz 4y ago
There was an article on slate.com about this same issue [1] where the tl;dr is government organizations outsource project management and any other expertise required to run a large scale (or small scale!) infrastructure project. If the organization that needs a thing done has no idea how to do the thing, it's unsurprising they do it poorly. [1] https://slate.com/business/2023/02/subway-costs-us-europe-public-transit-funds.html https://slate.com/business/2023/02/subway-costs-us-europe-pu...
- amanaplanacanal 4y ago
  I worked in state government and saw this all the time. Small projects were done in house but above a certain size they were always contracted out. I don’t know if this was political (general privatization push) or practical (we don’t have the in house expertise).
  - vkou 4y ago
    It could even be both political and practical, without a sinister motive. (We have no inhouse experience to run a large project, so we're not going to risk mucking everything up in a high-stakes large project (which would be political suicide), so we never build up the inhouse experience to run a large project...)
  - Arrath 4y ago
    I've often seen the lack in in-house expertise bite the owning entities very early in the process: "Oh god even the lowest bid came in 20% above the Engineer's Estimate!" Because the engineer(s) doing the estimate in-house didn't have enough broad experience in the various disciplines to accurately price the project to begin with, it was allocated less funding than necessary when it was put out to bid and the entire process starts out too lean for the needs of the project.
bluGill 4y ago
Projects don't always got over budget. However it is very easy to go over budget on little things. I've seen people build a house and the cost of construction was exact on budget, but the upgraded doors, lights, and similar small things made them $30,000 over budget. This is even though their contractor was constantly warning them that those upgrades were going to cost. The general contractor doesn't change any more $ to install upgraded fixtures, that money all to the manufactures of the doors, lights... (changing after they are installed costs money, but when it is time to order doors he is thinking oak, pine, or maple (minimal cost differences between them) and you decide to get the 6 panel door that will cost a lot more.
- nemo44x 4y ago
  A lot of contractors don't include the actual doors, windows, fixtures, tile material, etc in their quotes for this reason. They include the labor and supporting structures but there's a huge difference between installing a crappy vinyl window VS a Marvin signature or a wood door VS a printed door filled with styrofoam.
  - bluGill 4y ago
    The contractors I know include everything in their bid. They build both custom homes and spec homes. The later are built and then turned over to a realtor to sell, and they need to know the cost of everything on the spec home to ensure they can make a profit in the market. Since they know the full costs they will give that to everyone and then point out how the upgrades are bringing the total cost up. Of course their price is for the doors/windows they use which are on the cheaper end. Not cheapest - warranty callbacks and installation costs often make something just above the cheapest the best deal. If the difference isn't very much they will install the big brand that everyone knows is good as well as the reputation of putting in the "the best" is worth the few dollars profit lost. Good contractors know all of this and how to find the best balance.
    - nemo44x 4y ago
      The ones I work with are doing renovations for customers that aren't looking to sell a final product. Some things are based on a standard that can be upgraded (for instance, a deck is being quoted with pressure treated wood, but you can upgrade to Ipe for $x for example. Otherwise all of this would have to be selected before a quote is generated. So a ballpark/estimate is given that assumed certain things (like an Andersen 400 series window) but ultimately it's up to the customer to figure out if they want doors that cost $200 or $2000 inside, etc. and the quote is exclusive of them. This is usually detailed in the SoW as "customer supplied".
boboroshi 4y ago
There is also an element of how government purchases services from vendors. There is some weird setup where an honest estimate often will not be awarded the contract, as it is too high. A vendor will intentionally bid low, and then change order the job to way over the "honest estimate" price. Vendors need to be rated and penalized for this kind of bait and switch, but unfortunately there is no downside to low ball the bid, and they often win and continue to win contracts.
- justsomehnguy 4y ago
  Yes, and for public projects this is often mandated by the 'lowest bid' laws. > Vendors need to be rated and penalized for this kind of bait and switch That wouldn't make the process more transparent or honest, it would just drive up the starting price.
  - shagmin 4y ago
    It comes across as exactly more transparent and honest to me. The bait and switch is dishonest and this incentives against that. If the starting price is closer to the final price that's a better outcome and more transparent.
  - Arrath 4y ago
    > Yes, and for public projects this is often mandated by the 'lowest bid' laws. Thankfully we're seeing a rise in multi-point bid comparison. Judgement criteria like "40% price, 30% Proposal Quality, 30% Prior History"
    - quickthrowman 4y ago
      Yeah, I’m seeing more and more public projects awarded as ‘best value’ instead of ‘lowest cost’. It helps me get my foot in the door since I’m selling union labor and the non-union shops bend the prevailing wage laws pretty hard.
  - pif 4y ago
    > it would just drive up the starting price. And that is exactly the point! We want more realistic estimations, rather than void promises.
steve76 4y ago
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Justsignedup 4y ago
"Nobody wants to go and say that the uncertainty cost is 100% of the project cost" As a software engineer, I completely agree. This is why we do Agile (and friends), so estimates are just weeks out. But what do you do when you need to plan a decade-long project? Software industries avoid those, so I guess we're fortunate.
- icedchai 4y ago
  Plenty of companies do fake agile where they want an estimate of the complete project before its even fully scoped. Often, that estimate is made up by someone who has no idea about software engineering, like sales or the CEO. Then the sprints are made to "conform" to the estimate. Eventually someone figures out the original estimate was completely wrong and someone else wonders why the project is "late." Often, something have baked is delivered, "meeting the deadline" is celebrated, then another X weeks is spent "fixing bugs."
  - legitster 4y ago
    "Fake agile" is so pervasive at this point. It's just waterfall, but without having to bother planning out the other end of the waterfall and hiding it all behind scrum.
- stagger87 4y ago
  https://en.wikipedia.org/wiki/Waterfall_model https://en.wikipedia.org/wiki/Waterfall_model
- nitwit005 4y ago
  Agile is often zero help. Imagine you're starting from scratch. You want create a company that will make a fancy new database. You need to know things like how many people you'll need to hire, how much those people will cost, and some idea of how long a viable project will take. There's no scrum team yet, as you haven't hired them. You still need to generate some sort of answer.
- jillesvangurp 4y ago
  The difference between hardware and software is that you design hardware first, address most of the uncertainty, and only then build the thing. You can't reliably plan the design phase for hardware. Too many unknowns that have yet to be found out about. Just like with software designs. With software, the process of designing and building are the same. Upfront you know nothing, then you start iterating and at some point you have the finished thing after you've progressively learned all the requirements. There is no separate build phase. People used to pretend there was and that never really worked. The end result of a software project is an executable specification. The process of specifying is all that ever happens. Writing a specification for the specification is not really a thing. At best people attempt partial, very incomplete and hand wavy specifications. But it's not the same thing and it typically lacks the rigor of a hardware design. Agile hardware design is increasingly a thing as well. E.g. SpaceX is iterating on their rocket designs. This is not some grand design they came up with years ago but a specification that they keep on refining by attempting to build it and by learning from the failures. The number of iterations is not a fixed number. It's as many as they need to. They build parts, tools, and machinery along the way as they discover what they need. Very different from how rocket design used to work. And apparently a lot cheaper too.
5tefan 4y ago
Winning the project with a very cheap offer and making money with exessive claim management. The customer can't leave the contract and at some point has to deal with it and we're over budget...
eterevsky 4y ago
Gotthard Tunnel which was (and possibly still is) the longest and deepest tunnel, was finished on time and within budget.
oatmeal1 4y ago
Funny enough, the cost overruns for the Big Dig weren't even the main problem. The main problem was that the solution of adding more roads to solve traffic issues was already known not to work because of induced demand. Traffic engineers have known this since one lane roads were expanded to two lane roads. The real question for this project is why a solution known not to work was chosen over solutions known to work.
- wfleming 4y ago
  I think in at least some instances of projects like this, the goal is not really "traffic reduction", even if that's what officials publicly claim to sell it to the public. As you say, the phenomenon of induced demand is well known & presumably the people involved in driving these projects are aware of it. The goal is increased throughput/economic activity. If it takes X time to get a vehicle from A to B, and then you add lanes & demand goes up to keep X relatively constant, that can still be a net gain for community. It's about as equally frustrating for the folks sitting in traffic, but there's still more vehicles getting from A to B because there's more lanes, and more vehicles moving around can be good for the local economy.
  - genocidicbunny 4y ago
    There's also additional benefits from the fact that moving the highway underground made the area more desirable. There's no longer a massive concrete snake splitting downtown into pieces, and the area is cleaner and quieter due to moving all that car traffic underground.
    - wfleming 4y ago
      In the specific case of the big dig, absolutely! I moved to Cambridge right around when the dig was completed and saw those improvements accrue over the next few years. I had a bunch of friends eventually move to Southie & The Waterfront, which would have been unimaginable when I moved there. I also think the dig did make navigation around Boston easier, even if it didn’t reduce overall traffic.
  - 4y ago
edhelas 4y ago
> I purchased the M1 Mac Mini way back in 2021. Wow much time ago. Seriously ?
_uoud 4y ago
Alliance model contracting is the future of large-scale infrastructure projects to make them stay on time and under budget. Some very good and positive indications gained in Australia and lately also here in Finland. It can be a bit rough when not executed properly, but in the best case I see so much potential in getting the industry "back on track".
BiteCode_dev 4y ago
For the same reason they never go on time. Because for them to do so, every single thing needs to happen perfectly, while to be late of over budget, a single thing needs to go wrong. Over budgetting doesn't work because then your customers won't chose you when the bidding starts.
mrguyorama 4y ago
Our small Maine city recently replaced an entire bridge in a couple days, https://verandaplan.org/ https://verandaplan.org/ It worked great. They shut down the road for a couple hours, literally moved the newly built bridge from beside the road into place, and then were ready for rush hour in a couple days. I had a friend who worked the project. America can build great things if we were willing, but the past 70 years has seen strong anti-government rhetoric (weirdly after the most successful big government projects seen probably in our history) has helped hollow out local governments and remove any chance they had to cultivate internal talent that could get more efficient at doing things. Imagine having the pay of a local grocer, the turnover of Amazon warehousing, and the public animosity of Google and Facebook combined, with an entire TV channel watched by 60 million daily screaming that your very existence hurts the country, and plenty of grandmas taking that to heart. Government is overtly attacked every single day. Is it any wonder it often struggles?
- sokoloff 4y ago
  Do you think the complaints about government come unfairly out of the blue while it busily provides efficient and timely service with a friendly smile to its constituents?
  - rconti 4y ago
    I guess the better question is, are the complaints limited to those that provide a poor service? Or are they fairly evenly distributed regardless of how good or bad the government in question performs?
  - analog31 4y ago
    It could be that the two things -- complaints and actual service delivered -- are unrelated.
    - vanattab 4y ago
      Meanwhile in the the real world complaints about service and the quality of said service do tend to correlate.
mym1990 4y ago
that’s the engineer, and engineers are notoriously not good at estimating costs. Newsflash: neither is anyone else on your team if the project has any kind of reasonable complexity.
daanlo 4y ago
A close relative is an architect. The way construction projects are managed is waterfall. It is made worse by the fact that you typically have 1) a large number of different expert firms involved, creating huge dependencies (imagine instead of FE & BE, having 8 different types of engineers, that can only work in a certain pre-defined order and have very limited availability (so if you are late and miss a slot, they may only be available again a few weeks or months later) 2) communication is either physical meeting of principles (bosses/managers) - rarely actual workers, email or paper print outs. It is not uncommon for on premise workers to work with month old plans that have since been changed. Buildings are one of the few purchasable objects that have gotten more expensive over the last decades (compared to pretty much every consumer goods item).
aurelianito 4y ago
I think that there are 2 foundationañ problems that make complex projects over budget: 1. Stakeholders are incentivized to negotiate down the budget, skewing the result. 2. Breaking down a big task into smaller ones comes with the risk of missing some activities, but adding a nob-required subtask is almost imposible, also skewing the results. Estimates of big endevours must be made by comparison instead of breaking down the tasks to avoid the second issue. That's one of the little secrets that make poker planning succesfull.
fwlr 4y ago
This line jumped out at me: “Anyone who’s ever guesstimated the cost of anything knows to tack on an extra 15% for caution”. Struck me as amusing given that conservative estimating in software uses a factor of Pi, not 1.15.
- layer8 4y ago
  I thought the rule of thumb is “double the number and switch to the next bigger unit of time”. 2 hours –> 4 days, 5 days –> 10 weeks, 3 weeks –> 6 months, etc. This is accurate surprisingly often. ;)
  - fwlr 4y ago
    That’s one I’ve heard, another is “square it and then multiply by 3/multiply by Pi”. The lowest estimate method I know of is simply multiplying by Pi, which is why it was amusing to read civil engineers casually mentioning they add just 15%.
hising 4y ago
Laughing out loud as a Software Engineer, since our projects always is on budget.
jsjdbbd 4y ago
the incentive structure isn't there. equity => hustle. !hustle => !equity.
shagie 4y ago
For a counter example, the rebuilding of the MacArthur Maze in 26 days back in 2007. https://en.wikipedia.org/wiki/MacArthur_Maze#2007_I-580_East_Connector_collapse https://en.wikipedia.org/wiki/MacArthur_Maze#2007_I-580_East... > A contractor with a proven track record of rebuilding damaged freeways (most notably the Santa Monica Freeway after the 1994 Northridge earthquake) well ahead of schedule, C. C. Myers, Inc., submitted a winning bid of $876,075 to repair the damage to the I-580 connector. The bid was estimated to cover only one-third of the cost of the work, but the firm counted on making up the shortfall with an incentive of $200,000 per day if the work was completed before June 27, 2007. > On the evening of Thursday, May 24, the I-580 connector re-opened, just before the busy Memorial Day weekend. The deadline to finish the project was beaten by over a month, with the contractor earning the $5 million bonus for early completion. The entire reconstruction project was completed only 26 days after the original accident. Amazing: The Rebuilding the MacArthur Maze - https://youtu.be/-TKjwblp1XI https://youtu.be/-TKjwblp1XI
- blamazon 4y ago
  Perhaps related, in 2017 a piece of I-85 in Atlanta that carried ~250k autos per day collapsed after a major fire and was rebuilt within 44 days: Wiki: https://en.wikipedia.org/wiki/Interstate_85_bridge_collapse https://en.wikipedia.org/wiki/Interstate_85_bridge_collapse Timelapse: https://www.youtube.com/watch?v=PR0PB0BvKVI https://www.youtube.com/watch?v=PR0PB0BvKVI
- andrei_says_ 4y ago
  This is the kind of badassery that inspires me on all levels: * Bidding low * Negotiating an incredible daily reward for early completion (I imagine government did consult on the feasibility of this) * Actually completing such a project in an incredibly short amount of time
  - shagie 4y ago
    There wasn't a negotiation. Caltrans wanted it done before Memorial Day weekend and saw that the economy was losing money from the extra costs of not having that part of the maze in place and so created a structure that had very large bonuses and very large penalties. http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/05/04/MNGH5PL5471.DTL http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/05/04/... > The collapsed section of Interstate 580 will be rebuilt and reopened to traffic within 50 days under a Caltrans plan to speed up repairs on the MacArthur Maze, officials announced Thursday. > Nine construction companies have been given the weekend to prepare proposals to do the work, which Caltrans Director Will Kempton said should cost less than $20 million. Caltrans will choose one of the companies by Monday evening, rushing a bidding process that normally would take months. > The firms must repair the collapsed freeway by June 29 or face $200,000 a day in penalties from the state. But should they finish the work ahead of schedule, they'll earn a $200,000-a-day bonus for each day they were ahead of the deadline, Kempton said. > "There is absolutely no question in my mind that any incentives paid to achieve early opening is money well spent," he said at a news conference in Sacramento. > The clock starts running Tuesday morning, Kempton said, and the contractor is expected to start work immediately. > ... > Kempton said that the bonus money offered to open the freeway before June 29 is based on what officials estimate the closures are costing the state. Caltrans will pay for the project initially from a highway safety account, but federal officials have said they will reimburse California for the repairs.
heleninboodler 4y ago
I once chatted with the foreman of a skyscraper construction project who happened to always be standing out on the street near my office where I regularly got coffee, and I got to ask him a bunch of questions about the process. It was a lot of "what's that guy up there doing with that giant temporary platform" and "why do they X" kind of stuff, but when I was asking about the crane that was eventually going to have to be doubled in height when the building got too tall, he blew me away with the precision and confidence about that progress. "That will get jumped up on Memorial Day" he said, and that was several months away. I asked him how he could be so certain, and he explained that they build one floor per week, and the various trades (concrete, framing, electrical, plumbing, finish) each worked on one floor at a time in a pipelined fashion. So while concrete is working on the 19th floor, framing is working on 18, plumbing on 17, etc. When I asked what happens if one of those trades doesn't finish within their week, he looked at me like I was absolutely insane. "That doesn't happen. It can't. They have a week." Sure enough, the crane got taller on Memorial Day. After hearing that explanation it was fascinating to watch the progress and confirm that every tuesday, they'd start pouring concrete on the next floor up. Coming from a software perspective, I thought this was pretty impressive. When was the last time anyone told you something was going to take a week and it actually took a week? :D BTW, to answer a question about the crane, there are regulations limiting the crane to a specific height which change once the building gets tall enough to support having the crane bolted to the side of it.
- Panzer04 4y ago
  It makes sense when you consider each floor is essentially identical. I imagine skyscrapers and the like should be pretty predictable once the foundation is set up - it's just rinse-repeat for the next hundred floors (mostly). You don't have to deal with any preexisting limitations either, way up in the sky (unlike ground infrastructure, which has to deal with rights of ways, underground services, etc).
  - rwmj 4y ago
    A better software analogy would be "how long will it take to deploy the next Kubernetes cluster?" which can be fairly accurately predicted if you know the number of nodes etc. and how long it took to deploy previous clusters.
xphos 4y ago
I really want to know of an industrial consumer price index now. That sounds like a really interesting piece of data that a lot of businesses governments and even people could benefit from!
chiefalchemist 4y ago
Early in my business career (as a small business owner) I read somewhere (paraphrasing): "It generally takes twice as long and costs twice as much as originally estimated." Amen! Rarely has the rule of thumb failed me over the last 30+ yrs. Whether it's a project around the house or a client's new feature request*. It works. I wish I had $20 for every time I've seen someone else's best case scenario estimate knowing that nothing ever goes as planned. Humans and life so rarely work that way. * Clients aren't aware of the initial estimate, they get the rule of thumb version.
cat_plus_plus 4y ago
Because nobody involved is spending their own money. Has never been a problem in my home renovation, I get a contract saying A/C will be installed for certain amount of money and if it turns out to be more work than expected, the company has to cover that or I guess return my home to original condition and give me a refund. In bigger corporate projects the shareholders, or bank or insurance company lose money if project bombs and those in charge are fired or penalized. It's fair to say that in big corporations, a company can go bankrupt and CEO can still work away with a bonus. But still, there is choice in becoming an employee, customer or shareholder and people try their best to associate with companies where they don't think that will happen. Tax money and no consequences is on another level.
unnamed76ri 4y ago
Government construction projects often take longer and cost way more because they have no incentive to do otherwise. Safe union jobs and a taxpayer who has no say in how the money is spent. I’ve been watching construction of what looks like a 10x20 shed along the turnpike for 3 months now. If any of us hired a contractor to build us a large shed and it took more than a few days we’d start asking questions real quick.
KennyFromIT 4y ago
https://en.m.wikipedia.org/wiki/Three-point_estimation https://en.m.wikipedia.org/wiki/Three-point_estimation
civilized 4y ago
Two words: drip pricing. There's no good-faith reason to always underestimate something when it's been done millions of times.
- 13of40 4y ago
  Between rational actors who know everything from day 1, maybe, but there could be a little game theory at play here. Suppose the original estimate is $5B and it's accurate, so the customer doesn't bite. Both sides lose. Then suppose it's $2B, but it drags on and goes over budget a couple of times, ending at the same $5B. The builders get their money and the customer gets their freeway interchange.
  - civilized 4y ago
    Yes, this is called drop pricing.
NautilusWave 4y ago
Is this a problem that could be modeled with AI? Are there too many variables?
sakopov 4y ago
Kansas City's new airport, which opened just a month ago, was finished on budget and a day early. So, it's not always bad :)
ganesh7 4y ago
2x the budget does not seem too bad for such a big and useful project. Most projects should not be built at all. More annoying are simple projects like building a bridge or an airport that take forever.
TyrianPurple 4y ago
Where I come from, someone's palms have to be greased. As simple as that, and now with construction projects, the greasing is heavy.
rurban 4y ago
Rule #1: Always go through a lengthy and expensive design phase. There is not much for agile methods in big construction methods. I've worked on big construction projects as architect, billion dollar projects, and many of them were in time and under budget. This was because of the new CAD planning tools I brought in. But esp. because if falling steal prices, experts in the costly parts, the foundation, earth work, no storms, no flooding,no politicians and customers changing their wishes during construction. No litigation during the process, only after. That's why they'll never build under budget in Germany. You'll always have one of these obstacles, esp. litigations by loosing bidders. And those clueless politicians.
nitbix 4y ago
We (nPlan) built AI that forecasts and manges uncertainty and risk on megaprojects. The sad truth that I see is that there is a toxic culture where uncertainty and risk are largely ignored, both in preconstruction and construction by the vast majority of professionals. There's a lot of "I've done this the same way for 20/30/40 years so there is no uncertainty", coupled with a lot of "not my job" attitudes. If we fix that, we can then start addressing risk properly.

320 points by throw0101b 4y ago

TLDR; It's all the idling diesel trucks, so they can leave their lights on.

See also Bent Flyvbjerg's[1] new book, How Big Things Get Done[2]. Recommended for everyone involved in projects. 1. https://en.wikipedia.org/wiki/Bent_Flyvbjerg#Megaproject_planning_and_management https://en.wikipedia.org/wiki/Bent_Flyvbjerg#Megaproject_pla... 2. https://www.amazon.com/How-Big-Things-Get-Done-ebook/dp/B0BRCF6RND?ref_=ast_author_dp https://www.amazon.com/How-Big-Things-Get-Done-ebook/dp/B0BR...

maCDzP 4y ago
Thank you for that recommendation. I didn’t know Flyvbjerg had a new book. For other HN readers interested in the topic I can recommend “ The Oxford Handbook of Megaproject Management”. Bent Flyvbjerg is the editor of the book I believe.

uoaei 4y ago

During my time living in Europe, I noticed that while larger construction efforts took months (since they kinda have to), smaller day-scale projects easily took inside of a day, whereas similar scale projects in the US stretch for weeks. My friends who work construction in the US say that contractors routinely do a job wrong the first time, throw some apprentice under the bus regarding the "mistake", and ask for more money to re-do it. It's a common way of milking contracts and happens everywhere all the time. Their experiences are in large (hotels, hospitals, every school in a certain district, etc.) contracts, not the domain of your neighborhood general contractor. I can't speak to the relative prevalence in Europe but anecdotally I was always pleasantly surprised by how quickly those jobs got finished. One notable exception is the new housing being thrown up quickly in metro areas of the US. Sometimes they still progress in fits and starts but sometimes they go up super quick too.

evilantnie 4y ago
This sounds weird to me, I've paid for quite a few large construction projects and they are always fixed-bid contracts. I've never borne the cost of a mistake made by contractors. Everything that has additional cost is strictly controlled by change order requests, to the point of being extremely annoying. Maybe it's personal preference for fixed-bid contracts, but I've never heard of a large hotel, hospital, or other large contract be time-and-material based.
- uoaei 4y ago
  I am not well-versed in this field so I may have misinterpreted and they may have been talking about subcontractors. The friends I refer to work at one of those large consulting firms and they are complaining about the people they pay, not those who pay them.

ajsnigrutin 4y ago

It would be interesting to compare prices of privately funded projects vs publicly funded ones, both in terms of cost, over-budget amounts and time needed to complete the project. I see many public locations, where a short street or even a walkway is closed for months, because they need to repave literally 20-30 square meters of a walkway, while companies such as Hofer (Aldi) manage to repave their parking yard in a few days, while keeping half of it still open for customers.

Spooky23 4y ago
There’s lots of stupid rules around sidewalks and lane striping. You need to do an ADA evaluation, remediate any findings, etc. A project in my city that resulted in adding a textured crosswalk pad, new stripes and a beg button cost $1.4M and took 3 years.
- mhalle 4y ago
  "Stupid rules" for one person are what enable another person to live an independent life. The Americans with Disabilities (ADA) act has been law since 1990 and codifies mobility and access as civil rights in the US. ADA does add to the costs of projects, but so does, say, safety code compliance. It's the law, and it exists for a good reason. As for the example of a minor accessibility project costing $1.4M and taking 3 years, I would suggest that there is probably more to the story that helps explain the cost or the time.
  - Robotbeat 4y ago
    I bet closing the sidewalk for longer is much worse for disabled people.
  - bombcar 4y ago
    The rules are fine, the stupidity is latent and revealed: 1. New construction must meet ADA requirements. 2. Old construction can remain. 3. Repairing broken old construction requires meeting ADA requirements. So between 2 and 3 you end up with broken old construction that cannot be repaired to "what it was" because repairs must meet ADA requirements. Each step makes sense on its own, but combined they result in something worse (in particular) even though overall it works out better.

bumby 4y ago

I was happy to see the author mention optimism bias. One part I didn’t see is how project managers may deliberately underestimate to take advantage of the sink cost bias. If competing for funds, a PM may intentionally low-ball an estimate to get their project selected, knowing it’s easier to continually ask for more money later rather than a larger sum upfront. I would have also liked to see more discussion about joint probabilities. If one sub-discipline goes over budget, it may other disciplines (particularly commissioning) exceed their initial estimate as well. Change orders beget change orders.

abduhl 4y ago
This is the Willie Brown approach: “News that the Transbay Terminal is something like $300 million over budget should not come as a shock to anyone. We always knew the initial estimate was way under the real cost. Just like we never had a real cost for the Central Subway or the Bay Bridge or any other massive construction project. So get off it. In the world of civic projects, the first budget is really just a down payment. If people knew the real cost from the start, nothing would ever be approved. The idea is to get going. Start digging a hole and make it so big, there's no alternative to coming up with the money to fill it in.”
- bumby 4y ago
  Unfortunately, public projects also have to manage public perception. Just like you wouldn't appreciate, say, a roofing estimate to be later called a "down payment," the public in general doesn't like that approach either. "We don't know how much it'll cost but just trust us and let's just get started" isn't a particularly palatable sales pitch, especially in domains with a long history of corruption.
  - asdff 4y ago
    At the same time, you gotta give people the medicine they need. They have no concept of what a fair price on the market is for a subway line being build in your city with all the local considerations you have. No one does, that's the whole trick of it. At some point though, people need subways, they need sewers, they need bridges, and if we give them the shot to just turn their nose at anything good that seems expensive, we'd probably still be dumping our buckets out onto the street at night versus requiring plumbing.

kmod 4y ago

I'm curious about the higher level issues at play as well, which I'm just guessing about since I only have a lay understanding of the field Seems like there's probably a "winners curse" variant: conditioned on a bid being accepted, it is likely to be underestimated even if unconditioned there's an equal probability of under and over resonating Also seems like there's an incentive alignment problem as well: there's a clear benefit to bidding lower, and if the costs of underestimating are not born by the bidder then you would expect to see systematic underbidding even if we have on-average-accurate ways of estimating. These feel like important issues that are orthogonal to our ability to estimate things accurately and I wonder how much of the effect is from which type of cause (I wish the author had talked about this)

jaclaz 4y ago
From experience, what you mention is part of the perverse effects of the bid mechanisms, but these have nothing to do with the initial underestimation and is comparatively minor in relevance. Something is designed (years time), then it is estimated (often wrongly, however it takes some time as well), then it is approved/funded (some more years). But, IF the design was valid AND the estimation was correct at the most you could adjust the total amount by inflation/increases of prices. So, pure theory, you calculate a cost of 100 units (million dollars, whatever), then, since a few years have passed you should add (say) 10% for inflation/price adjustment before proceeding to a public bid (but it is extremely rare that this is actually done). The construction firms/contractors will offer between 15% and 25% rebate, if the bid is (as often is) given at max rebate, the one with 25% rebate will get the job. Now, assuming that the estimation is perfectly accurate (it isn't at all) the winner is (on the first day) under for at least 20%, 10% (the price adjustment, if included) and another 10% (their profit), while the remaining 5% is debatable, in the sense that it is what is actually possible that one construction company can save when compared to another for a number of reasons (machinery, organization, whatever). So, from day one the winner has two possible ways out, the first is to actually optimize the work to recover this 20-25% (difficult) the second is to find errors in the project (relatively easy). But, once the project is analyzed, what is found is not just the "missing" 20 to 25% (which if spent would not make the project over budget) but more likely something like 100%. So, at the end of the day, you are going to spend 175 instead of 100, of which 15 is connected to the perversions of the bidding, but 60 is errors in the project or in its estimation.

cduzz 4y ago

There was an article on slate.com about this same issue [1] where the tl;dr is government organizations outsource project management and any other expertise required to run a large scale (or small scale!) infrastructure project. If the organization that needs a thing done has no idea how to do the thing, it's unsurprising they do it poorly. [1] https://slate.com/business/2023/02/subway-costs-us-europe-public-transit-funds.html https://slate.com/business/2023/02/subway-costs-us-europe-pu...

amanaplanacanal 4y ago
I worked in state government and saw this all the time. Small projects were done in house but above a certain size they were always contracted out. I don’t know if this was political (general privatization push) or practical (we don’t have the in house expertise).
- vkou 4y ago
  It could even be both political and practical, without a sinister motive. (We have no inhouse experience to run a large project, so we're not going to risk mucking everything up in a high-stakes large project (which would be political suicide), so we never build up the inhouse experience to run a large project...)
- Arrath 4y ago
  I've often seen the lack in in-house expertise bite the owning entities very early in the process: "Oh god even the lowest bid came in 20% above the Engineer's Estimate!" Because the engineer(s) doing the estimate in-house didn't have enough broad experience in the various disciplines to accurately price the project to begin with, it was allocated less funding than necessary when it was put out to bid and the entire process starts out too lean for the needs of the project.

bluGill 4y ago

Projects don't always got over budget. However it is very easy to go over budget on little things. I've seen people build a house and the cost of construction was exact on budget, but the upgraded doors, lights, and similar small things made them $30,000 over budget. This is even though their contractor was constantly warning them that those upgrades were going to cost. The general contractor doesn't change any more $ to install upgraded fixtures, that money all to the manufactures of the doors, lights... (changing after they are installed costs money, but when it is time to order doors he is thinking oak, pine, or maple (minimal cost differences between them) and you decide to get the 6 panel door that will cost a lot more.

nemo44x 4y ago
A lot of contractors don't include the actual doors, windows, fixtures, tile material, etc in their quotes for this reason. They include the labor and supporting structures but there's a huge difference between installing a crappy vinyl window VS a Marvin signature or a wood door VS a printed door filled with styrofoam.
- bluGill 4y ago
  The contractors I know include everything in their bid. They build both custom homes and spec homes. The later are built and then turned over to a realtor to sell, and they need to know the cost of everything on the spec home to ensure they can make a profit in the market. Since they know the full costs they will give that to everyone and then point out how the upgrades are bringing the total cost up. Of course their price is for the doors/windows they use which are on the cheaper end. Not cheapest - warranty callbacks and installation costs often make something just above the cheapest the best deal. If the difference isn't very much they will install the big brand that everyone knows is good as well as the reputation of putting in the "the best" is worth the few dollars profit lost. Good contractors know all of this and how to find the best balance.
  - nemo44x 4y ago
    The ones I work with are doing renovations for customers that aren't looking to sell a final product. Some things are based on a standard that can be upgraded (for instance, a deck is being quoted with pressure treated wood, but you can upgrade to Ipe for $x for example. Otherwise all of this would have to be selected before a quote is generated. So a ballpark/estimate is given that assumed certain things (like an Andersen 400 series window) but ultimately it's up to the customer to figure out if they want doors that cost $200 or $2000 inside, etc. and the quote is exclusive of them. This is usually detailed in the SoW as "customer supplied".

boboroshi 4y ago

There is also an element of how government purchases services from vendors. There is some weird setup where an honest estimate often will not be awarded the contract, as it is too high. A vendor will intentionally bid low, and then change order the job to way over the "honest estimate" price. Vendors need to be rated and penalized for this kind of bait and switch, but unfortunately there is no downside to low ball the bid, and they often win and continue to win contracts.

justsomehnguy 4y ago
Yes, and for public projects this is often mandated by the 'lowest bid' laws. > Vendors need to be rated and penalized for this kind of bait and switch That wouldn't make the process more transparent or honest, it would just drive up the starting price.
- shagmin 4y ago
  It comes across as exactly more transparent and honest to me. The bait and switch is dishonest and this incentives against that. If the starting price is closer to the final price that's a better outcome and more transparent.
- Arrath 4y ago
  > Yes, and for public projects this is often mandated by the 'lowest bid' laws. Thankfully we're seeing a rise in multi-point bid comparison. Judgement criteria like "40% price, 30% Proposal Quality, 30% Prior History"
  - quickthrowman 4y ago
    Yeah, I’m seeing more and more public projects awarded as ‘best value’ instead of ‘lowest cost’. It helps me get my foot in the door since I’m selling union labor and the non-union shops bend the prevailing wage laws pretty hard.
- pif 4y ago
  > it would just drive up the starting price. And that is exactly the point! We want more realistic estimations, rather than void promises.

steve76 4y ago

[dead]

Justsignedup 4y ago

"Nobody wants to go and say that the uncertainty cost is 100% of the project cost" As a software engineer, I completely agree. This is why we do Agile (and friends), so estimates are just weeks out. But what do you do when you need to plan a decade-long project? Software industries avoid those, so I guess we're fortunate.

icedchai 4y ago
Plenty of companies do fake agile where they want an estimate of the complete project before its even fully scoped. Often, that estimate is made up by someone who has no idea about software engineering, like sales or the CEO. Then the sprints are made to "conform" to the estimate. Eventually someone figures out the original estimate was completely wrong and someone else wonders why the project is "late." Often, something have baked is delivered, "meeting the deadline" is celebrated, then another X weeks is spent "fixing bugs."
- legitster 4y ago
  "Fake agile" is so pervasive at this point. It's just waterfall, but without having to bother planning out the other end of the waterfall and hiding it all behind scrum.
stagger87 4y ago
https://en.wikipedia.org/wiki/Waterfall_model https://en.wikipedia.org/wiki/Waterfall_model
nitwit005 4y ago
Agile is often zero help. Imagine you're starting from scratch. You want create a company that will make a fancy new database. You need to know things like how many people you'll need to hire, how much those people will cost, and some idea of how long a viable project will take. There's no scrum team yet, as you haven't hired them. You still need to generate some sort of answer.
jillesvangurp 4y ago
The difference between hardware and software is that you design hardware first, address most of the uncertainty, and only then build the thing. You can't reliably plan the design phase for hardware. Too many unknowns that have yet to be found out about. Just like with software designs. With software, the process of designing and building are the same. Upfront you know nothing, then you start iterating and at some point you have the finished thing after you've progressively learned all the requirements. There is no separate build phase. People used to pretend there was and that never really worked. The end result of a software project is an executable specification. The process of specifying is all that ever happens. Writing a specification for the specification is not really a thing. At best people attempt partial, very incomplete and hand wavy specifications. But it's not the same thing and it typically lacks the rigor of a hardware design. Agile hardware design is increasingly a thing as well. E.g. SpaceX is iterating on their rocket designs. This is not some grand design they came up with years ago but a specification that they keep on refining by attempting to build it and by learning from the failures. The number of iterations is not a fixed number. It's as many as they need to. They build parts, tools, and machinery along the way as they discover what they need. Very different from how rocket design used to work. And apparently a lot cheaper too.

5tefan 4y ago

Winning the project with a very cheap offer and making money with exessive claim management. The customer can't leave the contract and at some point has to deal with it and we're over budget...

eterevsky 4y ago

Gotthard Tunnel which was (and possibly still is) the longest and deepest tunnel, was finished on time and within budget.

oatmeal1 4y ago

Funny enough, the cost overruns for the Big Dig weren't even the main problem. The main problem was that the solution of adding more roads to solve traffic issues was already known not to work because of induced demand. Traffic engineers have known this since one lane roads were expanded to two lane roads. The real question for this project is why a solution known not to work was chosen over solutions known to work.

wfleming 4y ago
I think in at least some instances of projects like this, the goal is not really "traffic reduction", even if that's what officials publicly claim to sell it to the public. As you say, the phenomenon of induced demand is well known & presumably the people involved in driving these projects are aware of it. The goal is increased throughput/economic activity. If it takes X time to get a vehicle from A to B, and then you add lanes & demand goes up to keep X relatively constant, that can still be a net gain for community. It's about as equally frustrating for the folks sitting in traffic, but there's still more vehicles getting from A to B because there's more lanes, and more vehicles moving around can be good for the local economy.
- genocidicbunny 4y ago
  There's also additional benefits from the fact that moving the highway underground made the area more desirable. There's no longer a massive concrete snake splitting downtown into pieces, and the area is cleaner and quieter due to moving all that car traffic underground.
  - wfleming 4y ago
    In the specific case of the big dig, absolutely! I moved to Cambridge right around when the dig was completed and saw those improvements accrue over the next few years. I had a bunch of friends eventually move to Southie & The Waterfront, which would have been unimaginable when I moved there. I also think the dig did make navigation around Boston easier, even if it didn’t reduce overall traffic.
- 4y ago

edhelas 4y ago

> I purchased the M1 Mac Mini way back in 2021. Wow much time ago. Seriously ?

_uoud 4y ago

Alliance model contracting is the future of large-scale infrastructure projects to make them stay on time and under budget. Some very good and positive indications gained in Australia and lately also here in Finland. It can be a bit rough when not executed properly, but in the best case I see so much potential in getting the industry "back on track".

BiteCode_dev 4y ago

For the same reason they never go on time. Because for them to do so, every single thing needs to happen perfectly, while to be late of over budget, a single thing needs to go wrong. Over budgetting doesn't work because then your customers won't chose you when the bidding starts.

mrguyorama 4y ago

Our small Maine city recently replaced an entire bridge in a couple days, https://verandaplan.org/ https://verandaplan.org/ It worked great. They shut down the road for a couple hours, literally moved the newly built bridge from beside the road into place, and then were ready for rush hour in a couple days. I had a friend who worked the project. America can build great things if we were willing, but the past 70 years has seen strong anti-government rhetoric (weirdly after the most successful big government projects seen probably in our history) has helped hollow out local governments and remove any chance they had to cultivate internal talent that could get more efficient at doing things. Imagine having the pay of a local grocer, the turnover of Amazon warehousing, and the public animosity of Google and Facebook combined, with an entire TV channel watched by 60 million daily screaming that your very existence hurts the country, and plenty of grandmas taking that to heart. Government is overtly attacked every single day. Is it any wonder it often struggles?

sokoloff 4y ago
Do you think the complaints about government come unfairly out of the blue while it busily provides efficient and timely service with a friendly smile to its constituents?
- rconti 4y ago
  I guess the better question is, are the complaints limited to those that provide a poor service? Or are they fairly evenly distributed regardless of how good or bad the government in question performs?
- analog31 4y ago
  It could be that the two things -- complaints and actual service delivered -- are unrelated.
  - vanattab 4y ago
    Meanwhile in the the real world complaints about service and the quality of said service do tend to correlate.

mym1990 4y ago

that’s the engineer, and engineers are notoriously not good at estimating costs. Newsflash: neither is anyone else on your team if the project has any kind of reasonable complexity.

daanlo 4y ago

A close relative is an architect. The way construction projects are managed is waterfall. It is made worse by the fact that you typically have 1) a large number of different expert firms involved, creating huge dependencies (imagine instead of FE & BE, having 8 different types of engineers, that can only work in a certain pre-defined order and have very limited availability (so if you are late and miss a slot, they may only be available again a few weeks or months later) 2) communication is either physical meeting of principles (bosses/managers) - rarely actual workers, email or paper print outs. It is not uncommon for on premise workers to work with month old plans that have since been changed. Buildings are one of the few purchasable objects that have gotten more expensive over the last decades (compared to pretty much every consumer goods item).

aurelianito 4y ago

I think that there are 2 foundationañ problems that make complex projects over budget: 1. Stakeholders are incentivized to negotiate down the budget, skewing the result. 2. Breaking down a big task into smaller ones comes with the risk of missing some activities, but adding a nob-required subtask is almost imposible, also skewing the results. Estimates of big endevours must be made by comparison instead of breaking down the tasks to avoid the second issue. That's one of the little secrets that make poker planning succesfull.

fwlr 4y ago

This line jumped out at me: “Anyone who’s ever guesstimated the cost of anything knows to tack on an extra 15% for caution”. Struck me as amusing given that conservative estimating in software uses a factor of Pi, not 1.15.

layer8 4y ago
I thought the rule of thumb is “double the number and switch to the next bigger unit of time”. 2 hours –> 4 days, 5 days –> 10 weeks, 3 weeks –> 6 months, etc. This is accurate surprisingly often. ;)
- fwlr 4y ago
  That’s one I’ve heard, another is “square it and then multiply by 3/multiply by Pi”. The lowest estimate method I know of is simply multiplying by Pi, which is why it was amusing to read civil engineers casually mentioning they add just 15%.

hising 4y ago

Laughing out loud as a Software Engineer, since our projects always is on budget.

jsjdbbd 4y ago

the incentive structure isn't there. equity => hustle. !hustle => !equity.

shagie 4y ago

For a counter example, the rebuilding of the MacArthur Maze in 26 days back in 2007. https://en.wikipedia.org/wiki/MacArthur_Maze#2007_I-580_East_Connector_collapse https://en.wikipedia.org/wiki/MacArthur_Maze#2007_I-580_East... > A contractor with a proven track record of rebuilding damaged freeways (most notably the Santa Monica Freeway after the 1994 Northridge earthquake) well ahead of schedule, C. C. Myers, Inc., submitted a winning bid of $876,075 to repair the damage to the I-580 connector. The bid was estimated to cover only one-third of the cost of the work, but the firm counted on making up the shortfall with an incentive of $200,000 per day if the work was completed before June 27, 2007. > On the evening of Thursday, May 24, the I-580 connector re-opened, just before the busy Memorial Day weekend. The deadline to finish the project was beaten by over a month, with the contractor earning the $5 million bonus for early completion. The entire reconstruction project was completed only 26 days after the original accident. Amazing: The Rebuilding the MacArthur Maze - https://youtu.be/-TKjwblp1XI https://youtu.be/-TKjwblp1XI

blamazon 4y ago
Perhaps related, in 2017 a piece of I-85 in Atlanta that carried ~250k autos per day collapsed after a major fire and was rebuilt within 44 days: Wiki: https://en.wikipedia.org/wiki/Interstate_85_bridge_collapse https://en.wikipedia.org/wiki/Interstate_85_bridge_collapse Timelapse: https://www.youtube.com/watch?v=PR0PB0BvKVI https://www.youtube.com/watch?v=PR0PB0BvKVI
andrei_says_ 4y ago
This is the kind of badassery that inspires me on all levels: * Bidding low * Negotiating an incredible daily reward for early completion (I imagine government did consult on the feasibility of this) * Actually completing such a project in an incredibly short amount of time
- shagie 4y ago
  There wasn't a negotiation. Caltrans wanted it done before Memorial Day weekend and saw that the economy was losing money from the extra costs of not having that part of the maze in place and so created a structure that had very large bonuses and very large penalties. http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/05/04/MNGH5PL5471.DTL http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/05/04/... > The collapsed section of Interstate 580 will be rebuilt and reopened to traffic within 50 days under a Caltrans plan to speed up repairs on the MacArthur Maze, officials announced Thursday. > Nine construction companies have been given the weekend to prepare proposals to do the work, which Caltrans Director Will Kempton said should cost less than $20 million. Caltrans will choose one of the companies by Monday evening, rushing a bidding process that normally would take months. > The firms must repair the collapsed freeway by June 29 or face $200,000 a day in penalties from the state. But should they finish the work ahead of schedule, they'll earn a $200,000-a-day bonus for each day they were ahead of the deadline, Kempton said. > "There is absolutely no question in my mind that any incentives paid to achieve early opening is money well spent," he said at a news conference in Sacramento. > The clock starts running Tuesday morning, Kempton said, and the contractor is expected to start work immediately. > ... > Kempton said that the bonus money offered to open the freeway before June 29 is based on what officials estimate the closures are costing the state. Caltrans will pay for the project initially from a highway safety account, but federal officials have said they will reimburse California for the repairs.

heleninboodler 4y ago

I once chatted with the foreman of a skyscraper construction project who happened to always be standing out on the street near my office where I regularly got coffee, and I got to ask him a bunch of questions about the process. It was a lot of "what's that guy up there doing with that giant temporary platform" and "why do they X" kind of stuff, but when I was asking about the crane that was eventually going to have to be doubled in height when the building got too tall, he blew me away with the precision and confidence about that progress. "That will get jumped up on Memorial Day" he said, and that was several months away. I asked him how he could be so certain, and he explained that they build one floor per week, and the various trades (concrete, framing, electrical, plumbing, finish) each worked on one floor at a time in a pipelined fashion. So while concrete is working on the 19th floor, framing is working on 18, plumbing on 17, etc. When I asked what happens if one of those trades doesn't finish within their week, he looked at me like I was absolutely insane. "That doesn't happen. It can't. They have a week." Sure enough, the crane got taller on Memorial Day. After hearing that explanation it was fascinating to watch the progress and confirm that every tuesday, they'd start pouring concrete on the next floor up. Coming from a software perspective, I thought this was pretty impressive. When was the last time anyone told you something was going to take a week and it actually took a week? :D BTW, to answer a question about the crane, there are regulations limiting the crane to a specific height which change once the building gets tall enough to support having the crane bolted to the side of it.

Panzer04 4y ago
It makes sense when you consider each floor is essentially identical. I imagine skyscrapers and the like should be pretty predictable once the foundation is set up - it's just rinse-repeat for the next hundred floors (mostly). You don't have to deal with any preexisting limitations either, way up in the sky (unlike ground infrastructure, which has to deal with rights of ways, underground services, etc).
- rwmj 4y ago
  A better software analogy would be "how long will it take to deploy the next Kubernetes cluster?" which can be fairly accurately predicted if you know the number of nodes etc. and how long it took to deploy previous clusters.

xphos 4y ago

I really want to know of an industrial consumer price index now. That sounds like a really interesting piece of data that a lot of businesses governments and even people could benefit from!

chiefalchemist 4y ago

Early in my business career (as a small business owner) I read somewhere (paraphrasing): "It generally takes twice as long and costs twice as much as originally estimated." Amen! Rarely has the rule of thumb failed me over the last 30+ yrs. Whether it's a project around the house or a client's new feature request*. It works. I wish I had $20 for every time I've seen someone else's best case scenario estimate knowing that nothing ever goes as planned. Humans and life so rarely work that way. * Clients aren't aware of the initial estimate, they get the rule of thumb version.

cat_plus_plus 4y ago

Because nobody involved is spending their own money. Has never been a problem in my home renovation, I get a contract saying A/C will be installed for certain amount of money and if it turns out to be more work than expected, the company has to cover that or I guess return my home to original condition and give me a refund. In bigger corporate projects the shareholders, or bank or insurance company lose money if project bombs and those in charge are fired or penalized. It's fair to say that in big corporations, a company can go bankrupt and CEO can still work away with a bonus. But still, there is choice in becoming an employee, customer or shareholder and people try their best to associate with companies where they don't think that will happen. Tax money and no consequences is on another level.

unnamed76ri 4y ago

Government construction projects often take longer and cost way more because they have no incentive to do otherwise. Safe union jobs and a taxpayer who has no say in how the money is spent. I’ve been watching construction of what looks like a 10x20 shed along the turnpike for 3 months now. If any of us hired a contractor to build us a large shed and it took more than a few days we’d start asking questions real quick.

KennyFromIT 4y ago

https://en.m.wikipedia.org/wiki/Three-point_estimation https://en.m.wikipedia.org/wiki/Three-point_estimation

civilized 4y ago

Two words: drip pricing. There's no good-faith reason to always underestimate something when it's been done millions of times.

13of40 4y ago
Between rational actors who know everything from day 1, maybe, but there could be a little game theory at play here. Suppose the original estimate is $5B and it's accurate, so the customer doesn't bite. Both sides lose. Then suppose it's $2B, but it drags on and goes over budget a couple of times, ending at the same $5B. The builders get their money and the customer gets their freeway interchange.
- civilized 4y ago
  Yes, this is called drop pricing.

NautilusWave 4y ago

Is this a problem that could be modeled with AI? Are there too many variables?

sakopov 4y ago

Kansas City's new airport, which opened just a month ago, was finished on budget and a day early. So, it's not always bad :)

ganesh7 4y ago

2x the budget does not seem too bad for such a big and useful project. Most projects should not be built at all. More annoying are simple projects like building a bridge or an airport that take forever.

TyrianPurple 4y ago

Where I come from, someone's palms have to be greased. As simple as that, and now with construction projects, the greasing is heavy.

rurban 4y ago

Rule #1: Always go through a lengthy and expensive design phase. There is not much for agile methods in big construction methods. I've worked on big construction projects as architect, billion dollar projects, and many of them were in time and under budget. This was because of the new CAD planning tools I brought in. But esp. because if falling steal prices, experts in the costly parts, the foundation, earth work, no storms, no flooding,no politicians and customers changing their wishes during construction. No litigation during the process, only after. That's why they'll never build under budget in Germany. You'll always have one of these obstacles, esp. litigations by loosing bidders. And those clueless politicians.

nitbix 4y ago

We (nPlan) built AI that forecasts and manges uncertainty and risk on megaprojects. The sad truth that I see is that there is a toxic culture where uncertainty and risk are largely ignored, both in preconstruction and construction by the vast majority of professionals. There's a lot of "I've done this the same way for 20/30/40 years so there is no uncertainty", coupled with a lot of "not my job" attitudes. If we fix that, we can then start addressing risk properly.