BIG Fat Lies
By Guy Span
![](New%20Image.jpg) |
A typical
early series High-Speed Bullet Train. |
Why is it so many big transit construction
projects have so many big cost overruns and fail to provide
the benefits promised? BART to SFO was going to cost $590
million and attract lots of riders. Instead, we got a $1.5
billion project that is not attracting riders. How could
this be? Are we just that bad at planning and cost analysis
or is there, perhaps, another reason?
There is an interesting history to
gigantic rail projects, and this story begins in Japan. In
1957, as America was passing its Defense and Interstate
Highway Act and trains are on their way out, Japan was
struggling with what to do with its creaky narrow gauge
railway. Some railway men wanted to enhance capacity by
building additional narrow gauge tracks. The other camp
wanted the standard gauge Shinkansen, literally a new main
line.
According to Bill Hoskawa, author of Old
Man Thunder, Sinji Sogo, the old man of the title, felt the
300 billion yen construction costs for the new 136 mph
Bullet Train (speeds were later raised to 160 mph) would
never be funded, so he ordered the estimates cut in half. He
was asked by his subordinates what he would do when they ran
out of money and it was only half built. He replied that
they would have to give him more money because with the
project half built, the country would have been thoroughly
committed.
So it was clear that the Shinkansen was
designed for cost overruns and the original budget had been
drafted before standards had been set and even before a
final alignment had been chosen. In other words, the
designers, estimators and engineers had no idea what the
final cost would be. But they firmly believed that investing
in high-speed standard gauge railways would be better for
Japan than in keeping its old, slow and narrow railway and
building highways. One small group ended up spending 380
million yen and designing the transportation future for
Japan. Project managers everywhere studied how the Japanese
constructed (and funded) this new type of railway.
Closer to home, we have San Francisco’s
Bechtel Corporation, one of the largest construction
companies in the world. They have a really big project going
on in Boston, called the “Big Dig,” where they are burying
7.5 miles of roadway to eliminate a rusting elevated
structure. But all is not well in Beantown, as the state
filed a complaint in Superior Court seeking up to $146
million in damages, the estimated profits and incentive fees
for Bechtel and Parsons Brinkerhoff (an engineering
consultancy). The familiar cause for this action is that the
original 1994 estimate was a whopping $7.7 billion and as it
nears completion later than expected, it looks to be almost
double, chiming in at an unbelievable $14.6 billion.
![](New%20Image%202.jpg) |
This
painting by James Deering is a close up of one
of the many construction vehicles that have
become a symbol of the Big Dig. |
And just like in Japan, the main reason
for the overrun, according to the Boston Globe, was that
they lied about it. The Globe discovered that confidential
1995 documents purport that Bechtel was asked by state
officials to lower estimates in order to make the project
more palatable to voters. Ironically, the state’s lawsuit
claims it was Bechtel’s error. Either way, it was a huge
error. And the Globe also noted that Bechtel and its
subcontractors have spent $225,000 funding Massachusetts
legislators over the life of the project.
Back in 1957, while Japan was developing
136 mph trains, the Bay Area was getting ready to fund BART,
a nice shiny new electric railway that would have an average
speed of 45 mph (including stops). So voters agreed and
funded several bonds for a total of $996 million for a 71.5
mile system. Helping it get built were some familiar names,
like Parsons Brinkerhoff, Tudor Engineering, and Bechtel.
When it did get built, the final price tag was a
breathtaking $1.6 billion.
The other interesting fact about BART’s
beginning is that planners thought so many people would ride
that it would be profitable. When that didn’t happen, BART
had to scramble for operating subsidies, eerily similar to
the way Samtrans has had to scramble for more BART subsidies
when the ridership on the new SFO line was grossly over
projected. And the SFO extension construction costs only
missed the original estimate by $1 billion.
While it looks like there is a pattern
developing, someone has actually studied it. Bent Flyvbjerg
suggests in the 2002 Summer APA Journal that the majority of
errors are indeed on purpose. Flyvbjerg is not alone in his
analysis, as other scholars have concluded intentional
deception as a cause of the overruns. He found that 9 out of
10 transportation projects were underestimated and that rail
projects had the highest overruns at 45% (not counting the
Big Dig). He also found that cost estimates had not improved
in 70 years and that the error could not be explained by
statistical analysis. His conclusion was that it could best
be explained by “strategic misrepresentation, i.e., lying.”
So far, we have had huge cost overruns on every bridge
project, including the “replacement” Bay Bridge, a signature
structure that pleased politicians. It is clear that the
cozy relationship between the builders, the politicians and
the suckers who pay for it all needs further investigation.
In the meantime, BART has another bond measure, where the
taxpayers need to step to the plate to fund a huge
additional expense. This is on top of what BART calls its
“successful” enhancements.
BART in 1995 had a 10 year, $1.2 billion systemwide
renovation program. This was to rehabilitate stations,
renovate the existing and aging fleet of cars, upgrade train
controls, replace fare machines, and update escalators and
elevators. BART says this is now 95% complete. Here’s what
BART said we bought:
• BART
Cars: rehabilitation of the entire original fleet of 439
cars, now complete
•
Elevators: overhaul of 60 elevators, now complete
•
Stations: renovation of 20 stations, now complete
•
Bill-to-bill changers: 67 changers installed in 43 stations,
now complete
•
Shops and yard: $82 million expansion and improvement
program, now complete
•
Faregates: 572 new gates installed in 43 stations, now
complete
•
Ticket vending machines: 185 new machines installed, 114
remaining
•
Add-fare machines: 118 new machines installed, 44 remaining
•
Escalator Rehabilitation: 114 complete, six remaining
•
Escalator Replacement: 23 replaced, now complete
But this is not enough. Now BART wants a $980 million
general obligation bond paid by property taxes to
“strengthen its Transbay Tube, stations and elevated
tracks.” It’s on the November ballot. The full cost
according to BART is $1.3 billion, with the remainder coming
from federal sources and the riders of BART. While BART
wishes to use the Transbay Tube as its poster child for
earthquake readiness, the fact is that the RM-2 (Regional
Measure 2, which raised tolls by one dollar on local
bridges) is already paying for the seismic work that is
underway. There is a shortfall, but given BART’s history,
one wonders who will really benefit from this next billion
dollar program.
We have seen that mega-projects are consistently
underestimated. While the public benefits from the
completion of the project, there is a serious question of
whether the public would support such a project, if the true
costs were known. Without a doubt, we know the winners here,
Parsons Brinkerhoff and Bechtel, and the losers, the dumb
taxpayers.
You can contact Guy Span at info@baycrossings.com.