
Why American Construction Costs Are So High - cocoflunchy
https://pedestrianobservations.com/2019/03/03/why-american-costs-are-so-high-work-in-progress/
======
jonawesomegreen
_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._ \- Willie
Brown (former SF mayor)

I think the inability of politicians to have a real conversation about costs
is a big part of high construction costs. Without this sort of difficult
conversation it's hard to plan and try to mitigate things that might cause
ballooning costs because you need to pretend that don't exist in the first
case.

~~~
nck4222
While I agree that the attitude shown in the quote is undesirable, I think
it's more a symptom of the problem, not the underlying problem itself. He's
essentially right. Infrastructure projects are constantly shot down because of
cost concerns, yet we have crumbling infrastructure that needs to be replaced.
If estimates became higher, approvals would decrease.

One other piece I haven't seen mentioned yet: large construction projects that
take years to complete are incredibly hard to estimate accurately, because
unpredictable economic swings can cause the cost of items to vary quite a bit
between when the estimate was produced, and when the work was actually being
performed and purchased.

This was one of the reasons why the Big Dig's estimates were so far off.
Although there are a dozen other factors with that particular case as well.

~~~
chii
Why can't the cost of materials be hedged against rising?

Costs above initial estimates should only happen when there's an unknown (e.g,
digging discovered a really hard rock layer that nobody knew about). Or
weather issues beyond prediction (like tornadoes or hurricanes).

~~~
vonmoltke
> Why can't the cost of materials be hedged against rising?

How, other than by buying everything you need up-front, finding a place to
store it until you need it, and hoping that it is still usable when you do?

~~~
andymcsherry
You can buy futures on basically any commodity to hedge against price
fluctuations.

------
alwaysdoit
> In Paris, as well as Athens, Madrid, Mexico City, Caracas, Santiago,
> Copenhagen, Budapest, and I imagine other cities for which I can’t find this
> information, metro stations are built cut-and-cover... There is extensive
> street disruption, for about 18 months in the case of Paris, but the
> merchants and residents get a subway station at the end of the works.

The cost of using a more expensive method ($750M per station vs $110) of
building in order to prevent disruption to car traffic is almost always
attributed to the cost of public transportation. But it seems to me like it at
least partially should be considered a cost of maintaining car infrastructure.

~~~
vinay427
I'm actually curious: how do those businesses, particularly smaller ones,
survive 18 months of highly impeded traffic?

~~~
danp
As an example, the Los Angeles Metro actually has a "Business Interruption
Fund" that they use to help small businesses in areas impacted by street-level
construction (like subway station construction sites).

[https://www.metro.net/projects/business-interruption-
fund/](https://www.metro.net/projects/business-interruption-fund/)

~~~
derekdahmer
This seems like the best of both worlds. The millions in savings for using
more invasive construction methods should offset the $60,000 per business they
are paying.

------
dashundchen
Regarding point 9 about the inability to look outside North America. I always
wondered why it seems transit agencies haven't looked to bring in teams of
people who have managed/built successful projects in Europe, Asia, or even
closer like Mexico City.

California HSR for example went to solicit bids from foreign operators and
selected Deutsche Bahn/German Railways. But AFAIK the initial design
work/RFP/proposals were done by California and domestic engineers, who
obviously wouldn't have much, if any, experience in designing or managing HSR
construction.

Would an experienced team be able to overcome a very different regulatory and
political environment to make a difference in cost and time?

~~~
zaphod12
NYC MTA brought in the former leader of London's underground and Toronto's
public transit

~~~
frosted-flakes
Andy Byford was the CEO of the Toronto Transit Commission and the COO for
RailCorp in NSW, Australia, but he was not the former leader of the
Underground; he only held managerial positions there (a station manager and
general manager of customer service on some lines).

------
burlesona
Ok, this is worth reading for the section on “Incuriosity” alone. It’s worth
quoting in its entirety but too long to paste here, so I’ll just say if you do
nothing else, click through to the article and read that section.

~~~
meej
Agreed, though I was surprised it didn't point to a cause, which I might
identify as American Exceptionalism. No need to be curious about how other
countries do things when you're operating under a mythology that your country
is the best.

~~~
mattlondon
+1 to this.

As an outsider it appears to me that this "we're the best in the world!"/"our
unique freedoms" propaganda is drummed into people from a young age without
anyone ever questioning it. Its no wonder there is this pervasive "what could
we ever learn from them? We're the best." mentality.

The other common excuse is size. "Oh no, we can't have trains like that! We
just such a big state that won't work here!" Japan is roughly the size of
California. EU is roughly 10x the size of California. Both are criss-crossed
by high-speed rail.

------
bluedino
One of my first jobs in IT was for a big general contractor.

We built schools, hotels, restaurants, you name it.

Whenever we had a government project, like a building for the county, a jail,
new secretary of state/dmv office...we went way over budget and way over
schedule. EVERY. SINGLE. TIME.

We'd have a 'groundbreaking ceremony' and then not be able to actually dig at
the site for 12 more days because permits got tripped up. How can the
government not approve their own permits on time?

~~~
jimktrains2
"the government" is more a loose confederation of public agencies. They're not
a monolith that has the ability to know everything about everything,
especially at the local and county levels. I don't know the specifics of that
case, but last minute citizen protests or protests that weren't able to be
resolved quickly enough are another issue.

It's also not like this doesn't happen in the private sector. A company bough
some land on the main road where I am, razed the building, graded, and then
stopped for almost 2 years now because the board won't change the zoning for
them. (Which is the right decision imho.)

~~~
jessaustin
What are they putting in, a slaughterhouse? Maybe a brothel? What horrible
business can't be accepted on "the main road"?

~~~
rootusrootus
It doesn't matter. There is always some group of citizens who will protest any
new building project.

~~~
jessaustin
Sure. 'jimktrains2 indicated above that he is among that group. I had hoped he
would take the opportunity to attempt to justify that political preference.

~~~
jimktrains2
It's not any horrible business; the developer wants to build lower density
housing than the lots are zoned for; condos vs an apartment building. Part of
my position is definitely rooted in "well, you should have taken care of this
before starting instead of trying to strong-arm the township later on" and not
necessarily the zoning issue itself; although I'm always a fan of higher
density housing.

~~~
jessaustin
If this is lower-density housing replacing previously-existing-at-that-site
higher-density housing, I see your point. It's my understanding that zoning
typically enforces the opposite preference, so I'm still suspicious of zoning
in general. However, if the previous use was substantially anything other than
housing (which would be my guess with it being on "the main road"), this is
crazy. There is no rational set of preferences that would prefer both non-
housing and dense housing to less-dense housing. At some point the meddlers
have to stop second-guessing the market.

Of course, building permits are one thing and demolition permits are another.
What municipality happily countenances the destruction of high-density housing
without seeing the plans for what's coming next? That is even more crazy.

~~~
jimktrains2
The lots were previously two smaller apartment buildings. I have a feeling the
issue is a little more complex than _just_ the zoning, but the zoning appears
to be a major issue from the news and comments in council.

> here is no rational set of preferences that would prefer both non-housing
> and dense housing to less-dense housing. At some point the meddlers have to
> stop second-guessing the market.

While I agree that anything productive is better than vacant lots, I do think
we need some more dense housing, especially since there are already a couple
of other apartment buildings, transit, and high demand for housing in that
area.

I also think that it's a bad precedence that a developer can just get the
zoning changed by holding their breath and stamping their feet. That said, I
often think that zoning laws are a bit to restrictive and could use a broad
rethinking _in general_.

I would personally like to see a mixed-use building, with retail on the first
floor, but that's another issue entirely.

> Of course, building permits are one thing and demolition permits are
> another. What municipality happily countenances the destruction of high-
> density housing without seeing the plans for what's coming next? That is
> even more crazy.

We moved in after the buildings were demolished, but my understanding was that
the buildings weren't in the best condition and may have been demolished by
the previous owners. However, there has been a good deal of grading and site
prep work going on when we moved in, and all work has ground to a halt since
then.

------
objektif
NYC MTA is a great example of why. We need to put blame on all parties
involved politicians, corporations and labor unions. Anyone who
unconditionally defends labor is naive at best. NYT reports:

“Trade unions, which have closely aligned themselves with Gov. Andrew M. Cuomo
and other politicians, have secured deals requiring underground construction
work to be staffed by as many as four times more laborers than elsewhere in
the world, documents show.”

Source: [https://www.nytimes.com/2017/12/28/nyregion/new-york-
subway-...](https://www.nytimes.com/2017/12/28/nyregion/new-york-subway-
construction-costs.html)

~~~
rjkennedy98
I am certainly of the left, but Labor Unions have been a huge contributor to
so many problems in the United States. I'm not against people getting a living
wage, ect but Labor Unions have always been about getting "theirs".

A huge reason the US doesn't have universal healthcare is Labor Unions who
preferred that they got good healthcare benefits from their work.

A huge reason we have major infrastructure problems in the US is because of
the absurd cost of labor. Nothing gets built in most big cities unless Labor
Unions are involved and they rip everyone off. This makes public transit
unworkable, cities unlivable and unaffordable, ect.

~~~
objektif
I also stand at the far left of political spectrum and in my experience labor
unions completely abuse their positions. I think it is way past time to find
another way to provide decent wages to workers.

~~~
ams6110
Why are unions even permitted on public infrastructure projects? All municipal
projects that I have heard about in recent years had extensive work rules,
safety, "living wage" requirements, etc. as conditions of the bid.

------
ghobs91
Those who blame it squarely on unions, explain how Europe has strong unions
and yet construction there is orders of magnitude cheaper than in the US?

It's because there isn't a proper bidding process. Politicians just give
sweetheart bloated contracts to the same contractors every time, and those
contractors then "donate to their campaign". If they instead used things like
sealed bids and had contractors compete against eachother, it wouldn't cost
$1B per mile for NYC's 2nd avenue subway, absurd.

NY Governor Cuomo surprisingly called this out recently, describing it as a
"transit industrial complex": [https://nypost.com/2019/01/04/mta-officials-
are-fuming-over-...](https://nypost.com/2019/01/04/mta-officials-are-fuming-
over-cuomos-brazen-blindsides/)

~~~
Nitramp
There are unions, and then there are unions.

In Germany, labour unions are strong, but things like union security
agreements are unheard of (and I was amazed something like that would exist
when I first heard of it). The stories you read about corruption in US labour
unions (admittedly subject to selection bias) are unheard of over here.

There are strong laws and customs around arbitration processes, and a culture
of unions considering survival and success of the business above pushing
through maximal demands. E.g. in a prolonged strike, if employers and union
are unable to resolve the conflict, after some time arbitration by a generally
respected elder statesman kicks in. They hear both sides, and then make a
binding decision, which usually is generally accepted. It all seems a bit more
balanced.

I'm not sure how much that transfers to other European countries. France
famously has a different culture around strikes and unions, but doesn't seem
to be representative ([https://www.etui.org/Services/Strikes-Map-of-
Europe](https://www.etui.org/Services/Strikes-Map-of-Europe)).

------
sct202
The point about the size of the stations is very obvious in Chicago. Most of
the stations were built 100 years ago, and are roughly the same size. A
handful of stations have been rebuilt--at great cost. At some of the older
stations, you can't barely walk 2 people side by side on the platform without
feeling like you're about to fall on to the tracks. The new stations by
comparison are 4 times as wide and have gigantic entrances.

~~~
secabeen
The interesting question is, do we need the huge stations? If that's a the
difference between a $80mil project and a $400mil project, could we build the
smaller ones?

------
lukewrites
Funny that the article doesn't once mention unions as a factor that drives up
cost. It's almost as if attacks on unions for making public works slow and
expensive are disingenuous.

~~~
magissima
Indeed, the author even wrote another article explicitly refuting the anti-
union argument.

[https://pedestrianobservations.com/2019/01/08/meme-
weeding-u...](https://pedestrianobservations.com/2019/01/08/meme-weeding-
unions-and-construction-costs/)

~~~
vonmoltke
That post has a few problems:

\- His line about the DART Orange Line is mixing three different projects (the
actual Orange Line, the Trinity River Expressway, and the Dulles (VA) Metro
extension)

\- He is mixing actual project costs with projected costs, as if the
comparison is equivalent

\- The biggest problem, though, is that he is using "Right to Work" to mean
"no unions", which is ridiculous. He even doubled down on that in the comments
with the asinine statement "But in places with zero union density, like
Texas".

Those are just the problems I saw from ~10 minutes of research on the subject.
Considering that, I don't put a lot of faith in his arguments.

~~~
abduhl
I noted similar issues as well. Particularly for the Silver Line (which he
later calls the Orange Line) the guy neglects the fact that this is a
government job, despite being in a Right to Work state, and is a
federally/publicly funded project and so falls under Davis Bacon Act
provisions which are strongly driven by union rates within the region.
Especially for Silver Line, union rates in MD/DC have a large impact on the
greater DMV area, including the Silver Line.

------
paulddraper
> Politicians in the United States do not have an incentives to control costs.

Do any other politicians have systemic incentive to control costs? If so, how?

~~~
addicted
Let’s take the UK for example. Grayling, the transport minister, is currently
getting pressure from all sides and definitely from the public to quit his
post because of his poor decision making that led to a 33m pound out of court
settlement.

Theresa May, the Prime Minister, is facing questions and tremendous public
pressure on a daily basis for her austerity led decisions to cut the police
budget (something that would be unheard of in the US).

They have tremendous incentives to cut costs. In fact, the UK, which was also
booming (growth which has slowed since the Brexit vote, however) over the past
5-6 years, continues to be engaged in austerity measures.

Clearly something there is incentivizing UK politicians to pay attention to
costs. I think part of the reason is that in the UK you have (a) a populace
that believes that government should be providing services where it is
effective, and as a result, considers reductions in services a major negative
against the government, and (b) you have actual ministers who ar directly
responsible for specific areas, such as transport, who can be held accountable
by the public. Not being able to control costs means not being able to provide
services effectively, which in turn leads to the government failing in
elections.

In the US, there isn’t a transport minister to point to when the California
HSR fails, which means responsibility and blame is diffused. Maybe that’s
where the difference lies.

Also, contrary to what some believe, most people who believe in government
providing certain services don’t believe in the government being inefficient
in doing so, and will hold that inefficiency against the government since it
means they get less, or substandard services.

------
chanakya
It'll be useful if the title could clarify that this is about metro/subway
construction costs in large cities, rather than all construction costs in
America.

~~~
paulddraper
Indeed, residential/commercial construction costs are actually relatively low
historically speaking.

(The land that you build it on is another matter.)

~~~
the_economist
[https://www.buildzoom.com/blog/whats-up-with-construction-
co...](https://www.buildzoom.com/blog/whats-up-with-construction-costs)

Real construction costs are 50% higher than they were in the 1950s, according
to our analysis.

~~~
lainga
Off topic, what led you to snag "the_economist" for BuildZoom?

~~~
the_economist
This is not a company account.

------
sitkack
This is refreshingly low level and candid. I would welcome this kind of
analysis in more places. Please emulate this document!

------
MarkSweep
The part about mezzanines struck me. BART has huge barren mezzanines. There is
not one shop in the entire station. The other subways I've visited in the US
(Boston, DC, NYC) also don't have any shops except in some of the largest like
Grand Central or Penn station.

Compare this with subways and train stations in Japan which often have shops
in the mezzanines and sometimes at the platform. There are always at least
vending machines at the platform. I don't think this is unique to Japan, I
recall there being shops in the station in Korea, Taiwan, and London too.

Why do the stations in our supposed capitalistic society not have any shops?

~~~
bane
I think part of it has to do with how the lines are financed and built. In
Japan and Korea for example, individual companies own the lines and stations
and basically use them to funnel customers to shopping areas where they
actually make their money.

In the U.S. they are built as public works projects and owned in the end by
some local municipal authority. Since they are public property, there's no
incentive/ability to conduct commerce there. It would be like having a
McDonalds inside of a library.

~~~
icebraining
As far as I know, stations in Western EU are also mostly public works, and
they do have shops. As an example, Brussels-Central has multiple coffeeshops
(including a Starbucks), a waffle kiosk, a fast-food joint, a newsstand, and
even a small supermarket.

And funny you should mention libraries; my local public library has a private
café inside (not in the reading area, of course).

~~~
bane
Ha! I stand corrected!

In the U.S. at least it's pretty rare to see shops of any kind inside of
subway stations or libraries. There's a few news stands in some NYC subway
stations, but not many. I've been throughout much of Europe and don't recall
seeing many stores in most of the subway systems -- but maybe I wasn't paying
attention.

But there will be some kind of place to get a bite in many train and even bus
stations.

------
pimmen
Americans not wanting to learn from other countries is just so puzzling to me.
If I ever get an answer to why it's often "the US is much bigger than Sweden,
it wouldn't work here" to which I reply "then why don't your _states_ look at
the European countries? Germany and France have way more people than any US
state" to which I get some defeatist drivel about that too.

Meanwhile in Brazil, China and India curiosity reigns.

------
3pt14159
I actually have a reasonably large amount of knowledge on this topic. I took a
break after the dot com bubble burst through structural / construction
engineering[0] before returning and my brother has been and continues to be in
charge of some mega projects for EllisDon.

It is certainly worse in America, but it's not great in Canada either. The
issue is this: There is no incentive alignment at multiple levels of these
projects.

For example, I've worked with a couple great unions[1] but overall unions slow
things down. There have been times where I've been reprimanded for lending a
utility knife to open a pallet to a unionized worker.

It's too adversarial here and it really does slow things down. I've seen
countless work-arounds to the rules just so employers can pay people that work
harder more. For example, only valued employees are offered snow plowing work
in the winter when construction is slow, but these tactics don't scale.

Then, on the other side, we do not pay our public servants enough and nor do
we have high enough standards for their work. There are good public servants,
to be true, but that's essentially random chance. It isn't because we've
intentionally created a culture of achievement or excellence in our public
works departments.

In both cases firing someone is too difficult. I'm not saying it should be
easy, but I've known people that show up for work at 10:30am and leave, no
joke, at 2:00pm. It's completely ridiculous.

Then there is the issue of building for the first time versus expanding or
maintaining. First time construction is much easier. Standards are lower,
there is less stuff in the way, everyone in the city is excited for the new
thing so people make sacrifices. A new subway or sports stadium brings in
business to the surrounding area, so part of the cost can be pushed on to
local property owners in the area. Thirty years later when the soffit is
cracked because subsurface water wasn't as expected there is none of that
stuff. Just some angry commuters and shop owners wondering why it is taking so
long.

I'm starting to think that capital projects, especially subterranean ones, are
inherently worse than smaller alternatives. They're so expensive to maintain
and once they're in there is no going back. I'd rather have lots of bike lanes
or streetcars than subways. We could build a lot of bike lanes for the same
cost of a subway, and even have them covered so snow and rain wouldn't be
annoyances.

[0] I worked on lots of stuff for the TTC, including subway stations, and some
stuff for the City of Toronto.

[1] Electrical worker union IBEW Local 353 was especially great because they
pushed their employees to work hard. In exchange, they were able to negotiate
default conditions like nine-hour, four-day work weeks. It fostered a sense of
pride in their trade and work.

------
drpgq
Interesting about the stations. My Ontario city is close to starting an LRT
system and the station costs for just those seem kind of high.

We recently added a new station for the GO regional railway transit system
that currently has two trains a day and I think it was something like $50
million Canadian. I can understand needing an elevator for disability, but it
could have started as something simple besides that.

------
sys_64738
I found this article really fascinating.

[https://www.nytimes.com/2017/12/28/nyregion/new-york-
subway-...](https://www.nytimes.com/2017/12/28/nyregion/new-york-subway-
construction-costs.html)

------
strangemonad
“That said, having spent the last nine years looking at topline costs and a
few itemized breakdowns does let me reach some initial conclusions, ones that
I believe are robust to new data.“

So... a hypothesis?

------
thisisweirdok
The Big Dig in Boston was originally estimated to cost $8 billion. People were
upset about this.

There were multiple problems along the way. It ultimately ended up costing $22
billion. People were also upset about this.

At the end of the day? It was an awesome project. They completely buried a
highway that cut through the city, and added a ton of green space downtown
(The Greenway).

The city is better for it. Taxpayers would never have allowed it if they had
their way.

We need a similar program to revitalize the MBTA. It should be done regardless
of the cost. I will happily pay more real estate taxes and highway tolls for
the rest of my life to support it.

~~~
masonic

      The Big Dig in Boston was originally estimated to cost $8 billion. 
    

No, $6 billion in 2006 dollars ($2.8 billion in 1982) per Wikipedia.

    
    
      It ultimately ended up costing $22 billion
    

$24 billion, according to the Boston Globe (10 July 2012), yielding a nice,
round 300% in overruns.

    
    
      At the end of the day? It was an awesome project. 
    

Seriously! It's so nice when your "$6 billion" project gets _$8.55 million in
Federal_ funds that the locals don't even have to pay for.

The Big Dig cost almost triple what the entire Panama Canal project did
(adjusted for inflation). There's nothing to be proud of there.

~~~
thisisweirdok
If you want to put the Panama Canal through Boston it's going to cost
astronomically more than $24bn — the logistics (not to mention the
requirements and processes of the time period) are entirely different.

~~~
BubRoss
How is that at all relevant?

~~~
sporkland
The grandparent poster compared the cost of the big dig to the cost of the
panama canal to in an attempt to show that the big dig was overly expensive.

This parent poster is pointing out the fallacy by hypothesizing that the
Panama canal in Boston would be way more expensive than the Panama canal in
Panama, thereby showing the error in the grandparent post's reasoning.

------
vuln
Regulation.

~~~
cortesoft
Yeah, wanting building not to fall down really slows down construction.

------
dreamache
Government. I didn't read it, but that's the reason.

~~~
bsder
And you are wrong, so go read the article.

------
abduhl
I haven’t had time to read through the entire article in detail but my
skimming indicates that the article fails to identify what I believe is the
true reason for tunneling increases in the USA: third parties and their
ability to sue projects.

This increases costs due to risk of lawsuits/challenges and excessive amounts
of money put towards mitigating this risk. This continues from procurement
through design and through construction. Environmental concerns have
ironically been coopted into this category by NIMBY folks.

~~~
helen___keller
This is addressed in section 8, "Institutions part 2: political incentives":

> the political system favors NIMBYs and really anyone who complains.
> Infrastructure construction takes a long time and the politician who gets
> credit for it is rarely the one who started it, whereas complaints happen
> early. This can lead to many of the above-named problems, especially
> overbuilding, such as tunneling where elevated segments would be fine or
> letting agency turf battles and irrelevant demands dictate project scope.

~~~
abduhl
My point is related but not exactly the same as his section 8. Litigation in
America is what has driven defensive design and construction because we are
ALWAYS positioning for claims, especially from third parties. The author is
zeroing in on politicians and their lack of a need to take a project from
"cradle to grave" and/or answer for cost overruns. This is a symptom of the
problem, in my opinion.

