What do Boston’s Big Dig, Tokyo’s Bay Aqua Line and Spain’s Castellón Airport have in common? They were way over budget or did not deliver the services that were originally intended.
Seventeen years ago, researchers named the factors negatively affecting big infrastructure projects. Since the publication, few lessons have been learned, and the same old issues continue to plague these mega projects. Topping the list of troubled projects are those in transportation.
The authors found in 2002 that costs are underestimated in nine out of 10 transportation infrastructure projects. These projects are bigger than rural roads and highways, they may sometimes require contractors to literally move mountains and burrow beneath cities.
Some argue, what else can you expect from these projects? They’re big, they’re complex, and they often happen right where centuries of previous work lay in wait to surprise and confound. Still, the budget overage numbers the researchers reported were pretty severe:
— Rail projects cost 45 percent more than estimated
— Tunnels and bridges cost 34 percent more than estimated
— Underestimating costs is a global problem spanning at least 20 nations and five continents.
The authors wrote: “We conclude that the cost estimates used in public debates, media coverage, and decision making for transportation infrastructure development are highly, systematically, and significantly deceptive.”
Multiple studies on the costs of transportation infrastructure have consistently revealed cost overruns. In 2008, the Government Accounting Office found that 77 percent of U.S. highway projects had cost overruns. Going back as far as 1987, a review of 3,500 projects found overruns ranging between 40 percent and 200 percent.
Fast forward to today’s even bigger infrastructure projects, and the story is the same.
— London’s Crossrail Project was 20 percent over budget and two years late in 2013.
— Boston’s Big Dig went from a $4 billion project to $20 billion, noting a five times increase.
— The Channel Tunnel was over budget by $15 billion.
— The Tokyo Bay Aqua-Line reportedly cost $11.2 billion when completed in 1997, and most people couldn’t afford to use it when it opened. It wasn’t until 2009 that tolls came down enough to support the traffic the designers originally envisioned. In order to achieve it, a a billion-dollar-a-year subsidy scheme was put in place.
— Spain’s Castellón Airport cost €150 million when completed in 2011, but it’s never really taken off. The low-cost airlines it was originally meant to host decided not to use it. Instead, they continued using the other two airports located nearby.
Behind most under-estimated transportation projects you’ll find systemic issues at work. Unfortunately, that hasn’t changed over time. Researchers reported that projects are just as under-estimated today as they were “10, 30, and 70 years ago.” There appear to be strong incentives to underestimate, and perhaps equally strong disincentives to overestimate.
If you’re one of the people responsible for estimating or preparing forecasts for these kinds of projects, take heart, it’s not your fault. Researchers found that even with all our new tools and better-trained people, estimates haven’t become more accurate. So, it’s not about errors or poor forecasting.
It is, however, about risk. Over numerous studied projects, geological, environmental and safety risks routinely and severely threw off schedules and budgets. People didn’t accurately anticipate their likelihood of happening or their severity.
Competition is another factor that causes underestimating on transportation infrastructure projects. The states and municipalities compete for federal money to build out their infrastructure, so they have to make their projects look more appealing than someone else’s. Part of that process includes measuring the relative “bang for the buck,” which often determines who gets the money. Competition to show lowest costs with most benefits can set the final cost expectations way too low.
Then, there is the problem of deliberately underestimating costs. The idea is to save the tax payer money by not incentivizing higher costs on the contractors’ parts. However, this strategy actually works in reverse. It causes project starts that aren’t economically feasible while stopping others that would serve the public better.
Egos and Deception
There are also psychological aspects to troubled transportation projects which can contribute to cost overruns. One arises from ego. Politicians like to build monuments, engineers like to build, and public officials sometimes think in empire terms. However, those factors don’t significantly contribute to cost overruns. That’s not the case though with deception and lying.
Multiple studies conclude that parties with economic interests in transportation projects use deception and lying to get the projects off the ground. Lying and deceiving is far from anecdotal—it is actually systemic. According to researchers, lying and deception in these large transportation projects is present in all spheres, including public debates and media coverage.
The public won’t fund the work if it costs too much. However, once started, they’ll eventually accept the costs.