
From $250M to $6.5B: The Bay Bridge Cost Overrun - vinayak147
http://www.citylab.com/politics/2015/10/from-250-million-to-65-billion-the-bay-bridge-cost-overrun/410254/
======
triggercut
Some of these extra costs could not have been prevented or foreseen. No one
could have anticipated China's thirst for steel back in 2001, let alone
1995/6; or the fact that, prior to the GFC, investment in major/mega
public/private infrastructure projects worldwide was snowballing due to
burgeoning western economies, putting a significant increase on demand for
that (relatively cheaper) steel too, as well as the engineering services and
human capital to drive it.

One thing I see time and again, in projects I've either been involved with
directly, or indirectly, is a failure to do any substantive geo-technical
assessment in the early planning phases. Not understanding your environmental
invariants properly (when they are usually diverse due to the physical scale
of these projects) always comes back to bite you later on. It's usually
(eventually) a critical path item on any schedule since the structural design
is so dependent on them.

 _" In April 2006, a consortium involving American Bridge and Fluor won the
tower contract. It was built in China to save money—a decision that carried
its own costs when inspectors later found poor welding and busted bolts at key
points that required fixing. Frick says the current $6.5 billion total is a
rough estimate, and that it doesn’t include interest or financing costs."_

A mistake most larger EPCM's made in those days. The horror stories regarding
the quality of Chinese steel and fabrication back then are very real. It is
unthinkable now to let any fabrication of that nature happen there without
adequate on-the-floor supervision and oversight.

~~~
SixSigma
Except one of the tenets of project management is "what happens if the cost of
my raw materials spirals?"

~~~
mikeyouse
You do everything you can to control raw materials prices, hedging gets you a
lot of the way there, but what happened to commodities prices in the
mid-2000's was completely unprecedented. After holding pretty much steady for
the previous 25 years, from 2002 to 2008, the price of steel _tripled_ on
worldwide markets.

[https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=...](https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=28Fu)

------
tristanj
The SF Chronicle did a great exposé on the bay bridge earlier this year. The
Chronicle explains how the committee that selected the bridge was made up of
specialists in fields only tangentially related to the job at hand — seismic
experts, building engineers and architects. These people had not designed
bridges before, and chose the design based on aesthetics, not practicality.
When given a choice between two bridges: a conventional cable-stayed one at
$1.5B and an experimental self-anchored suspension at $1.7B, they chose the
attention-grabbing bridge over the practical one. This led to the _enormous_
cost overruns we see today.

Note that the bridge isn't unsafe, the modern span is much, much safer than
the old WW2 era span. The new bridge won't collapse in an earthquake. However,
because of design failures and shoddy construction, it will last much shorter
than planned.

[http://www.sfgate.com/bayarea/article/Bay-Bridge-s-
troubles-...](http://www.sfgate.com/bayarea/article/Bay-Bridge-s-troubles-How-
a-landmark-became-a-6021955.php)

~~~
grandalf
This may be true, but if those experts would have only been paid if the
project came in under budget this surely would not have happened. Incentives
matter more than expertise.

~~~
jbooth
Purchasing is full of unintended consequences.

"You only get paid if the project comes in under budget" might just only give
you the lower-tier players who have no better project to work on -- maybe the
more professional people would say 'no way' to an arrangement like that,
especially given the % of these projects that wind up running over.

Then you wind up over budget with a sub-par contractor in charge of the
project.. what do you do, change horses mid-bay? No way, turns out the threat
doesn't even have teeth.

------
quanticle
This is yet another data point against people who argue, "Well, civil
engineers can estimate complex project accurately. Why can't well software
engineers?" Well, as it turns out, civil engineers aren't that good at
estimating either, for the same reasons, no less. Shifting requirements are as
much of a problem when building bridges and tunnels as they are when you're
building software.

~~~
WildUtah
Actually, civil engineers routinely deliver infrastructure projects on time
and budget with accurate projections in Spain and Korea. [0] The failure of
projections in the USA and the typical 10x cost for the same project (at least
as far as underground rail -- bridges may be only 5x) and the cost overruns
have multiple, layered causes.

Incompetent planning, political self-aggrandizement, aesthetic confusion,
diffusion of responsibility, corruption, not-invented-here, trade
protectionism, failure to learn from experience, anti-corruption measures that
actually promote corruption like closed competitive bid-plus overrun
processes, and a general lack of interest among the public in electing
officials that even promise to confront past failures and improve are just the
beginning. The Augean Stables of American infrastructure spending are deep in
muck and we have no Heracles on the horizon.

The Second Avenue Subway, the eventual Hudson tunnel, the Bay Bridge, insanely
expensive BART to SFO, Seattle's tunnel, CA High Speed Rail, and the like are
just a taste of a very expensive and gridlocked future if we don't change our
ways.

[0][https://pedestrianobservations.wordpress.com/2013/06/03/comp...](https://pedestrianobservations.wordpress.com/2013/06/03/comparative-
subway-construction-costs-revised/)

[https://pedestrianobservations.wordpress.com/2012/10/28/cons...](https://pedestrianobservations.wordpress.com/2012/10/28/construction-
costs-and-perceptions/)

~~~
smackfu
Eh, projects that finish on time don't exactly get a lot of press.

Just as an example, the NJ Turnpike recently finished a project widening it
from 6 to 12 lanes for a 35 mile stretch, and came in on schedule and $200M
under budget:
[http://www.njturnpikewidening.com/](http://www.njturnpikewidening.com/)

------
lukasm
There is joke in Poland that goes like this:

Polish minister goes to France to meet his counterpart. They meet in an
amazing office and he asks his french college \- How did you get money to
build this? \- Can you see the bridge outside the window? \- Yes. \- 500 mln
on paper, built it for 250. Voilà.

After a year they meet again in Poland in even bigger an more magnificent
building. French minister ask: \- How did you get money? \- Can you see the
bridge outside the window? \- No. \- Voilà.

~~~
azinman2
I understand the story at face value, but what is the deeper meaning of this
in polish society?

~~~
lukasm
During the transformation corruption flourished.

Straussian interpretation: "Pole can do it" resourcefulness of polish people
do due to limitation of communist state. No customer support, no warranty -
something breaks you have to fix it yourself. Inefficient economy causes lack
of services and products which require people to hack stuff.

~~~
TeMPOraL
> _No customer support, no warranty - something breaks you have to fix it
> yourself. Inefficient economy causes lack of services and products which
> require people to hack stuff._

As a Pole I'd like that part of economy back, thank you. It's better than
current "if it breaks, throw away and get a new one" combined with "if we can
make it break just after the warranty period, they'll throw it away and buy a
new one" mindset of western manufacturers.

------
arel
Regarding the prices of steel rising 50% can't this be mitigated to some
extent by buying core materials (or a proportion of) on the futures market
which is specifically designed to protect the buyer from price fluctuations?

~~~
mikeyouse
This is another project management failure -- it costs money to hedge a
position, but if the EPCM firms wanted to, they could have literally
guaranteed raw materials costs for the entire duration of the project. This is
probably where the industry will end up, with full hedging to prevent big
overruns, but there are two problems;

1\. The general public is uninformed, half-educated, and outraged easily.

2\. Money in the beginning stages of a project is relatively expensive
compared to the remainder of the project.

When the bid was selected, the project wouldn't be completed for another ~10
years -- Buying steel / concrete hedges and currency futures to guarantee
prices would tie up tens of millions (maybe more) for ten years with interest
before the bridge was operational. If the prices of steel and concrete and
returned to their historical norms, the public would likely be blaming the
firm for wasting all that money on worthless financial engineering. Could you
imagine the protests if it came to light that the bridge consortium paid
Goldman Sachs something like 10%-15% of the cost of the bridge with nothing in
return?

------
Fluxx
On the _quadrupling_ of the estimate from $250 million to $1 billion between
1995 and 1996, the article states:

" _The cost increase was the result of detailed engineering studies conducted
during the year or so after the initial estimate was released. Among other
things, soil testing in the Bay had revealed that bridge pilings would need to
be anchored “deeper into bedrock than expected,” she writes._ "

Now hindsight is 20/20 and I am not an engineer in this field, but it seems
that if you're floating an estimate that isn't informed by the engineering
studies necessary to give an accurate estimate then you probably shouldn't
have given that initial estimate in the first place? Or at least should have
given the initial estimate as a range and/or with a huge disclaimer that you
might get into researching the bridge and the estimate could cost multiples
more?

~~~
adrianN
But that's not how you get the contract.

------
nashashmi
I am a Civil Engineer and I see a problem in the industry so gaping wide, even
CEOs of the industry claim the industry is ripe for "disruption."

This industry is so old yet the innovation is really behind. __Technology
__(?lame word?) should be speeding things up and making things more accurate
and less error prone, but instead it seems to be delaying the time work gets
completed.

Some promise is held in Information Modeling like BIM or CIM, but they are not
trickling into the industry at the pace required. And further, many of the
present day engineers are not in a position to understand this stuff.

~~~
jmcmahon443
ex-BIM Engineer here. Can confirm that major construction companies are not
adopting new technologies as quickly as they should be.

These companies run on legacy networks, so I can tell first hand - developing
your own software tools is only possible at private companies. Any of the
major public companies have such old networks that no engineer can innovate.
Suffolk Construction in Boston is a great example of the future of the
industry.

~~~
petra
How much savings can be had from optimal use of BIM ? and why aren't we seeing
new companies start to operate to reap/share those savings ?

~~~
jmcmahon443
It's tough to say for sure, it depends heavily on the project and the company
and people building it.

My estimate though is that proper use of BIM (not just design & engineering,
but also accounting and time management... 5D) would save anywhere between
40-70% on their projects.

So, why isn't it happening? Because the construction industry is always the
last industry to adopt new technologies. "If it ain't broke, don't fix it" is
the mentality. Also, if you're 40-65 years old and been building forever, it's
not so fun to listen to 25-30 year olds tell you what's what. But that's what
needs to happen.

The older guys in firms don't listen (the ones that do save a bunch of
money...), and so the young talented people leave for better industries like
software engineering, where they are actually respected and valued.

We are started to see SOME private companies, like Suffolk, really adopting
new stuff. The big guys like Turner and AECOM are trying to adopt, but like I
said earlier, their technology infrastructure is a JOKE! Try writing BIM
automation scripts when your network admin won't even let you have root
access. What a sad, sad joke it is.

~~~
petra
Am i understanding this right: i can build a building in half the price if i
use BIM ?

Because if that's true, who cares about old companies - start a new company
,raise money(there's plenty for good opportunities ), train some people, and
start offering everybody 30%-40% discount on their building. You'd kill the
market and make ton of money , right ?

~~~
troisx
Then try to get a bid approved as a newcomer. With all of the language in the
bids, you'll never get a contract unless you've done a lot of these over cost,
underperforming jobs and greased enough hands along the way. If you ever want
to get a good dose of anger, read some government requests for bids. They're
totally geared towards existing large companies.

~~~
jmcmahon443
This is very true. Which is why I think this sort of BIM automation needs to
spawn from a large AEC company, or from a startup partnered with a large
company.

We are basically talking about applying AI cost functions to the AEC industry
(optimize design, time, cost).

------
ucaetano
_That didn’t sit well. Pulitzer-winning architectural critic Allan Temko
blasted the skyway option as “dull” and likened it to “an outsized freeway
ramp.” MTC head Mary King said of the skyway: “While we appreciate the
governor has offered vanilla ice cream, we want chocolate sauce on top.” One
Oakland resident wrote that since the Bay Area was full of such creative
types, “I think each of us should draw our own bridge” and send it to MTC for
consideration._

Oh, you want the chocolate sauce on top? That will be an extra few billion
dollars, please.

~~~
smcl
I wonder if he feels slightly foolish right now. In fact I wonder if there's
anyone (other than Private Eye in the UK) who make a point of calling
famous\influential talking heads on their bullshit long after it'd otherwise
be forgotten

------
carsongross
As a reminder, The Golden Gate Bridge, built in 1933, cost $1.5 billion in
todays dollars, is 8,980 feet long (to the 11,616 feet of the eastern span) is
746 feet tall (to the 525 feet of the eastern span) and is tremendously
architecturally significant, rather than looking like a highway onramp with a
small sail plopped on one end of it.

Please stop this ride.

~~~
ck2
Would you want to be standing on it when an earthquake hits?

BTW the golden gate was built mostly with private funds from bonds ($35M in
1930's dollars)

Also a record of "only" 11 people killed building it.

~~~
khuey
I would be more comfortable standing on the Golden Gate Bridge than the new
Bay Bridge during an earthquake.

~~~
mikeyouse
That seems foolhardy;

    
    
        Immediately following the Loma Prieta quake, the
        GGBHTD engaged a team of consultants to conduct a
        vulnerability study. The conclusion of the study was that
        under a Richter magnitude 7.0 or greater earthquake
        with an epicenter near the Bridge, it would experience
        severe damage that could close this important
        transportation link for an extended period. If a Richter
        magnitude 8.0 or greater earthquake centered near the
        Bridge, there would be a substantial risk of impending
        collapse of the San Francisco and Marin Approach
        Viaducts and the Fort Point Arch, and extensive damage
        to the remaining Bridge structures, including the Main
        Suspension Bridge.
    

They've spent or authorized nearly $1 billion in additional funds to
seismically retrofit the Golden Gate, and the work isn't finished yet.

[http://goldengatebridge.org/projects/retrofit.php](http://goldengatebridge.org/projects/retrofit.php)

~~~
sliverstorm
That means little without comparison to other bridges. Standing in an open
wheat field is probably safer than a bridge, but how does the GGB compare to
_other bridges_?

Also, a Richter 8.0 is a pretty damn hefty quake.

~~~
mikeyouse
So the GGB would be substantially damaged in an 8.0 quake, but the Bay Bridge
is designed to survive and be immediately accessible to emergency vehicles in
an 8.5 quake.

Those seem like relatively minor differences, but (assuming the new span
actually performs like designed) the Bay Bridge should easily survive an
earthquake that is 3.1x larger and releases over 5x more energy than one that
will "extensively damage" the Golden Gate Bridge.

[http://i.imgur.com/07u65bj.png](http://i.imgur.com/07u65bj.png)

~~~
hugh4
Seems an important distinction given that the largest quake recorded in
California was a 7.9 and the largest in San Francisco a 7.8.

So presumably an 8.0 is plausible but an 8.5 may not be.

~~~
mikeyouse
Apparently the maximum 'plausible' (which is a generous modifier) earthquake
on the San Andreas is about an 8.3, but the entire fault line from Mexico to
Northern California would have to rupture simultaneously. You're right that
we're unlikely to see an 8.5.

[http://www.smithsonianmag.com/science-nature/what-will-
reall...](http://www.smithsonianmag.com/science-nature/what-will-really-
happen-california-when-san-andreas-unleashes-big-one-180955432/?no-ist)

------
bigethan
This quote hits close to home: “Basically at the onset of a project I think
the higher ups prefer a dollar amount and schedule that doesn’t shock the
public.”

When the people who are not knowledgeable about the actual details of the
project require their expectations to be met, other expectations of theirs
will not be met (the classic "fast, cheap, or good, choose two" joke). I like
to say to people making unreasonable demands "Do you want to be disappointed
now, or later?"

------
exelius
In our environment of cost cutting and "fiscal conservatism", I don't see any
other way to fund a large public works project.

If the first estimate had been $4 billion (assuming we're taking $6.5 billion
in 2015 dollars and working back to 1998 dollars), the project never would
have gotten off the ground. The government would have said "fuck no" and asked
for another bid. It would have been mired in discussions, argument, etc for
years before eventually settling on a $1 billion price tag -- that will
eventually balloon to $7 billion or so anyway, because the winning bidder
intentionally underbid because it was the only way it would get approved.

The only way to build large public projects like this is to take advantage of
the sunk cost fallacy (or "bait and switch".) Government contractors will get
their cut, and the regulatory tack-ons added by local governments to put their
stamp on it (and get some operating budget!) also add money.

~~~
jerf
And if $250million tags consistently turn into $6billion price tags,
eventually we won't believe the $250million estimates either. Those billions
aren't coming for free, they're coming out of the social capital of various
entities, entities that you'd probably rather weren't blowing billions of
dollars worth of social capital like that.

The _other_ way to build large public works is to figure out why they are so
expensive and actually _fix it_ , and then build things for less than 24x the
original estimate in the first place.

And if that can't be done, maybe it actually shouldn't be built.

(I mean this in general, not about this specific case. But it is always
something. And that is indicative of a problem on it's own.)

~~~
exelius
But this is already the case -- nobody believes the price tags put on big
government projects, at least in the US.

You simply can't build something like the Bay Bridge for $250 million. And the
reason public works projects are so expensive is usually because they're big,
things go wrong, and there's a political element. You can't predict everything
that will go wrong, and you'll never remove politics from it.

The problem isn't that huge public works projects cost a lot of money, it's
that the estimation process is more about politics than reality. People
building the Bay Bridge knew they could go find comparable projects and build
an estimate that way -- they didn't do this because they were trying to come
in at a certain price point, which means throwing a defendable methodology out
the window.

I'm not saying this is the way it SHOULD be done, but it's the way things are
done. And if you try to do it differently, someone else will just underbid you
and raise the price later.

------
guelo
I used to be a supporter of California's high speed rail project until this
bridge. It's not just the cost overruns it's also the shoddy work, the
political interference, the secrecy, the publicly funded PR bullshiting, and
the complete lack of accountability. I really doubt the rail project will be
completed in my lifetime.

~~~
hugh4
Is that still planned to go from Bakersfield to Fresno with a promise that
they'll totally get around to building the tricky bits once everyone sees how
great it is to be able to travel quickly between Bakersfield and Fresno?

------
pcunite
I found these links helpful:

[https://en.wikipedia.org/wiki/Cable-
stayed_bridge](https://en.wikipedia.org/wiki/Cable-stayed_bridge)

[https://en.wikipedia.org/wiki/Self-
anchored_suspension_bridg...](https://en.wikipedia.org/wiki/Self-
anchored_suspension_bridge)

[https://en.wikipedia.org/wiki/Suspension_bridge_types](https://en.wikipedia.org/wiki/Suspension_bridge_types)

------
ww520
Big public projects have overrun. Another one is the Boston Big Dig.
[https://en.wikipedia.org/wiki/Big_Dig](https://en.wikipedia.org/wiki/Big_Dig).
The estimated cost was $2.8 billion initially and scheduled to complete in
1998, but it was completed only in 2007 with $14.6 billion. It's estimated
that the project will ultimately cost $22 billion, including interest, that
will be paid off until 2038.

------
dqdo
I wrote a paper on how to control the project cost escalation that is relevant
to this discussion. Typically 90% of construction projects are completed over
budget with median being 28% over. [http://leanconstructionblog.com/Target-
Value-Design-as-a-Met...](http://leanconstructionblog.com/Target-Value-Design-
as-a-Method-for-Controlling-Project-Cost-Overrun.html)

------
samstave
What I am upset about is that after $6+ Billion spent on the new bridge, we
have no greater capacity nor throughput. The toll plaza is still a traffic
jam, and they only built half a bridge with no extra capacity for such a huge
amount....

------
spenrose
I Do. Not. Get. This. Let's say the final bill after another retrofit is $13B.
At 270K trips/day, $1/trip pays for it in 14 years. For crucial infrastructure
in more-or-less the richest region the world has ever known. Yes, the
communication could have been handled better. But the real issue, the cost, is
no scandal.

------
johan_larson
I wonder if the accuracy of estimates would improve if the clients let it be
known that if the accumulated cost ever exceeded twice the initial estimate
(or some similar multiple), the whole project team running the show would be
replaced, and the project potentially scrapped.

It would be hard to stick to such a pledge, of course.

~~~
triggercut
I don't know enough about US government bidding processes to be certain but
sometimes your Front End Engineering Design (FEED) may be done my another
consultant. Once FEED is over Detail Design and Construction contracts will be
up for tender and could be won by someone else.

------
ck2
A better question is why didn't they stop when it hit 100% overrun.

$6 billion overrun could have fed, clothed and health insured million of
people

~~~
mikeyouse
> $6 billion overrun could have fed, clothed and health insured million of
> people.

Because you still need a bridge that won't collapse in an earthquake?

The Bay Bridge is the 2nd busiest bridge in the US... $6B seems like a lot
until you look at how much disruption and damage a collapse would cause to the
$600B GDP of the SF Bay area.

------
pbreit
$250m figure is highly mis-leading since it refers only to upgrade costs.
Building a new bridge is not equivalent.

------
bradys
would have only been 500m if they were agile... /s

------
AC__
I see so many comments defending this obscene, blatant, pilfering of the
public coffers. Call a spade a spade people, this thing is a massive scam. San
Fran must be lousy with greasy wheels.

