The 2012 CAHSR business plan has some bombshell construction cost numbers: the headline number is $98 billion, leading to predictable complaints that the cost has run over by a factor of 3 over the original $33 billion budget of 2008. This is somewhat misleading since it includes inflation, but there’s still a factor-of-2 real cost overrun to investigate: in 2010 dollars the cost is $65 billion, as predicted by CARRD though with a somewhat different distribution of cost overrun among the various segments.
Some of it is scope creep that could be removed later via value engineering, and some is additional delays. The new plan assumes construction will take until 2033, vs. 2020 originally. The one point of light is that the initial construction segment (ICS) from Fresno to Bakersfield is still within budget, giving time to send the people involved in scope creep to early retirement and do the designs better. The biggest cost overruns are on the Peninsula and LA Basin segments, which are now up to $25 billion, about triple the original cost estimate. This already suggests that lack of money is what is causing costs to grow: just as it’s expensive to be poor, so is it expensive for an agency to have no money and drag construction over decades, in many segments.
But it’s not just the delays. The Peninsula blended plan includes many extra features, such as $1.5 billion for 80 km of electrification (in Auckland the same amount of electrification cost $80 million), $1 billion for 10 km of very tall and unnecessary viaducts through downtown San Jose, and
$500 million $1.9 billion to tunnel under Millbrae (see update below) in order to preserve BART’s three tracks.
There’s scope creep and there’s scope creep. Sometimes, a project’s costs go up because new features are added that are useful (for example, converting a single-track diesel project into a dual-track electrified light rail, as was done on the LA Blue Line), or that are necessary but were glossed over initially in order to keep cost estimates down. A little bit of the latter kind of scope creep is present in the Central Valley, in the form of more viaducts than originally planned; CARRD’s cost overrun estimate was based entirely on taking CAHSR’s unit costs and applying them to the added features as of 1-2 years ago. But the kind of scope creep we see on the Peninsula is entirely different: they are adding features that are of marginal operational use, and instead exist mainly to reinforce agency turf lines (namely, separation of agencies at San Jose).
My suspicion is that the same is true of the other segments. The fact that a cost overrun was averted on the initial construction segment in the Central Valley, after extensive value-engineering (for example, fewer viaducts), shows that the one segment CAHSR needs to build within budget in order to survive is indeed being built within budget. The other segments, for which the HSR Authority hopes to obtain private and local funding, offer easy opportunities for contractor profiteering: once the initial segment is built, there may well be momentum to complete the system, and the consultants could strong-arm local governments and the federal government to cough up more money. Indeed, no extra features useful to passengers have been added – everything is just about agency turf and more viaducts.
The only places where there could plausibly be an honest overrun, which cannot be eliminated simply by putting adults in charge and going back to older plans, are the mountain crossings. And indeed, the Grapevine alternative, now posited to be $1-4 billion cheaper than the Tehachapis, could resolve the major issue heading south toward the LA Basin. In the north, they keep studying the Altamont overlay with options including one proposed by SETEC that lets trains run at full speed right up until the built-up area of southern Alameda County; together with the Dumbarton water tunnel, it could help the project stay within budget by switching to a superior alternative, and avoid the San Jose viaduct mess entirely.
Although the political supporters of CAHSR tend to discount the Grapevine and be skeptical of switching to Altamont, they are still interested in the option of value-engineering. But it’s stupid to first propose an outrageous plan and then value-engineer it back to the original cost estimate. It offers no political advantages over doing it right the first time, and just breeds justifiable mistrust of the authority. For all I know, there could be a large real overrun that is not the result of agency turf wars.
To make sure people don’t react to the apparent factor-of-three overrun the way they should – i.e. propose to pull the plug unless costs are scaled down to reasonable levels – the 2012 plan includes higher numbers for the cost of doing nothing, i.e. of expanding freeways and airports to provide the same capacity. It was originally $100 billion, and is now $170 billion. This is less self-serving than it seems: the plan assumes a slower buildout and higher inflation, which accounts for most of the difference. But it’s still a backhanded way of trying to force the state to kick more money toward the contractors. If they can slow down airport and freeway construction (thereby increasing the final cost), perhaps they can halt it entirely – fair’s fair.
I’m still optimistic that they could put adults in charge and reduce costs to the original estimate, as they already have in the Central Valley. That is, if the federal government dangles a few billion dollars for the LA-Bakersfield segment and demands even a modicum of accountability, then they will gladly use the money to build a useful initial operable segment and only try to extort the public later. But optimistic and certain are not the same, and it’s an outrage that such a project could cost $65 billion. The tunnel-heavy Shin-Aomori extension of the Tohoku Shinkansen cost $4.6 billion for 82 km, a little more than half the proposed per-km cost of the new business plan – and Japan is a high-construction cost country.
Unless they cut the costs, I don’t see how I can continue to support the project. The initial construction segment, useless as it is on its own, is fine; the question is whether it stakes the territory for a very expensive future extension, or for one with reasonable cost. Since I doubt they’ll be able to get any additional money until they connect to the LA Basin except from the federal government and even then it will be a small number of billions, I think it’s the latter option. But the rest should be scrapped and restarted unless the construction costs drop dramatically. I would peg the maximum that the project can cost before it should be canceled, on the outside, at $60 billion or so in today’s money. This assumes timely construction – waiting decades with rapidly depreciating track hosting limited service makes the situation worse. The only consolation I have is that no matter what, the other projects they could spend the money on if CAHSR is canceled are even worse. And this says more about those other projects than about CAHSR.
Update: here is the cost escalation breakdown. It’s overwhelmingly the addition of new features, i.e. tunnels and viaducts, most of which are unnecessary (though one major issue, additional tunnels from Palmdale to LA, is required due to further study showing the need for more environmental protection). For example, Millbrae gets a gratuitous tunnel, previously estimated at $500 million, now estimated at $1.9 billion (p. 20). Unsurprisingly, SF-SJ has the biggest overrun, a factor of 2.5. Hat-tip goes to Clem for noting the extra cost of Millbrae, which I missed looking at just the business plan.