Cost Bundling

It’s common to bundle multiple construction projects into one, either to save money or to take advantage of a charismatic piece of infrastructure that can fund the rest. For example, on-street light rail is frequently bundled with street reconstruction or drainage work, and rail lines can also be bundled with freeway construction in the same corridor (as in Denver) or widening the road they run under (as in New York). Combining different constructions into one project can be a powerful cost saver, as seen in the Denver example and also in Houston.

The problem is when it leads to scope creep. In case there is one charismatic project that carries the rest, it’s always tempting to add more features to the project to get more funding. If the funding comes from a pot specific to one use – in the examples in this post transit, but it could be anything – then it will also lead to a misleading reporting of the total cost, making it look higher than it is. Part of the surreptitious underfunding of transit in the US comes from such bundling, for example parking garages for commuter rail. More commonly the projects in question will be transit, just not necessarily cost-effective on their own.

Because one agency tends to have the lead on such projects, there is no incentive for cost control. The worst case I know of is high-speed rail construction on the Caltrain corridor; the segment from San Francisco to San Jose incurred the highest cost overrun in the system, its cost rising by a factor of nearly 3 versus a systemwide average of 2, and most of the overrun came from tunnels and viaducts reinforcing various agency turf boundaries.

The flip side is bundling projects not so that a charismatic major project can support others, but rather so that a major project can get the support of others by throwing them bones. This is essentially Amtrak’s Vision plan for the Northeast: Gateway is meant to get support from New York and New Jersey now that ARC is canceled, Market East is meant to get support from Philadelphia on the dubious idea that the city wants a Center City stop, and so on. In this case, there is a symbiotic relationship: the charismatic project, in this case HSR, gets to brand all these separate projects as necessary for a grand goal, while the presence of the smaller project ensures that local politicians, whose priorities rarely include providing intercity transportation maximally efficiently, support the project.

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10 Responses to Cost Bundling

  1. Beta Magellan says:

    Too often nice-to-haves are attached to projects, often significantly increasing prices. Here in Chicago, the CTA has been looking to replace the 98th Street yards and shops, which are fairly inconvenient from a logistical standpoint (grade-separated, tight space, no mainline rail connection). The construction of a more expansive yards facility to the southeast, at grade and with a connection to mainline rail, is part of the Red Line Extension (LPA pdf) at a cost of $215 million (2009 dollars, like everything else in this post); the full project cost is $879 million, so thanks to the yards and shops the extension pushes it past the big billion dollar mark and elevates costs-per-mile by about 25%. However, the yards aren’t necessary for the extension—they aren’t included in the New Starts application because the existing yards have enough capacity to accommodate the extension and the yards will be paid out of state, city and agency funds. However, why even bother spending that money in the first place—do cumbersome deliveries really cut into operating costs enough to justify this?

    Of course, it’s arguable whether the line should head to 130th—a pedestrian-hostile location which would feature a big park-and-ride (http://www.thetransportpolitic.com/2009/06/05/chicago-recommends-red-line-extension-route/>Yonah brought this up a couple of years ago).

  2. Andre Lot says:

    It is hard to actually “un-bundle” costs in any infrastructure project that has synergies. Keeping the discussion within transportation, how to threat situations like these:

    1- New convention center is opening in a satellite location. It generates business more-or-less year-round and it can be the demand anchor of a new light rail, which will also provide service for lower density areas in the way that otherwise wouldn’t warrant a light rail on their own. Is the convention center “skimming” transit funds or is transit “skimming” money from the convention center project?

    2- New airport opens (not only new terminal). A new heavy rail line is constructed, serving the airport but also creating a shortcut that saves time for an otherwise more circuitous route in the region. Is it an airport project or a rail project? On whose account (airport site development or rail infrastructure) should the costs be put?

    3- Local government is reclaiming some old derelict industrial sites for greenfield development and a major new waterfront area. A tram/streetcar line connecting the development with another station with existing subway/metro services is planned. The line will massively increase the attractiveness of the areas slated for residential mid-rise construction, increasing the value the city can capture when auctioning off the lots for construction. Is the streetcar/tram line transportation? Is it neighborhood development? Is it housing support infrastructure?

    All 3 situations I mentioned actually describe projects undertaken here in The Netherlands where I’m currently living (RAI, Schiphol rail link, IJbrug project, respectively).

    What I think should be done, at least, is a clarification of the costs of infrastructure projects themselves, regardless of the budget account they are allocated to.

    For instance, many US streetcar projects are absurdly expensive because they are city beautification projects of which a tram line is just the bigger element, but sometimes not even half the total cost. Cities will often use the opportunity to relocate utility lines, completely rebuild the roadbed and also put all the electrical wiring underground -. And then come design choices like vibration-cancelling track bed, APR or other non-aerial solutions for energy supply to trams/trains, major architectural renovation of buildings through the line etc.

    • Nathanael says:

      This is why “cost per mile” is a useless, meaningless measure. The costs have to be reported per component to be meaningful.

    • Alon Levy says:

      In all three cases, you can at least in principle compute costs by looking at just the cost of the rail portion. This is what was done in Nice – the headline cost per km figure I’ve seen includes only the tram component, without the streetscaping components. In case 1 and to a lesser extent the other two, the transportation-development synergy is such that under the model of privatization that’s common in Japan and Hong Kong but not in Europe the same company might well own both components.

      At any rate, my problem with American bundling is not that it exists. Rather, it’s that,

      a) It is used as an excuse to offload debt onto transit agencies because they’re strong enough to potentially get bailed out when things are about to collapse but not too strong that they can resist this offloading, and

      b) In many cases it results in a situation in which nobody has an interest in cost control. The Californian examples that Richard is citing below are sometimes a good example: Caltrain has counted on CAHSR to pay for its electrification costs and also for other related projects, such as signaling, where in reality the Caltrain electrification cost is the highest I am aware of anywhere in the world, and the signaling is not HSR-compatible.

  3. Richard Mlynarik says:

    I’d suggest that in the California HSR context there is far too little bundling.

    The clowns in charge propose to do things like build elevated High Speed Train Only stations, while leaving freight (and Amtrak) lines at ground level, so forming part of the pedestrian access to their TOD-tastic “downtown” stations.

    The same clowns were, of course, responsible for things like this.

    Today Caltrain is outright wasting $150 million on a grade separation that wasn’t bundled with the adjacent (cut-and-cover!) BART extension. Project designers: PB/Bechtel joint venture. Are you surprised?

    Or what about this from the same source?

    Doing things over twice or ideally ten or more times is so much more profitable than doing any sort of human-oriented socially-profitable design the first time.

    Compare and contrast with cost bundling in Span:
    Barcelona La Sagrera
    Valladolid
    etc.
    Real improvements for rail (HS, regional rail, freight), roads, and for humans and human communities. Doing it once, doing it well, doing it with a plan.

    • Adirondacker12800 says:

      It seems to be a California specialty. San Diego grade separated the trolley that runs parallel to the Amtrak/frieght line but not the Amtrak/freight line. Fresno wants to grade separate the UP and BNSF lines through town but won’t be because HSR can’t use that nice wide straight ROW UP uses.

    • Matthew says:

      Wow, having the BART aerial block visibility of the crossing flashers is the icing on that shit cake.

  4. Zmapper says:

    Denver is an example of project bundling to the extreme in my opinion. In the Tech Center, the rail line stays to the west of the Interstate despite most destinations being on the east.

    http://theoverheadwire.blogspot.com/2009/09/when-road-engineers-do-lrt.html

    Sure, it saved a little money, and reduced travel time from Lone Tree, but made it much more challenging to increase the density of the Tech Center, turning it into a “second downtown” of sorts.

    • Andre Lot says:

      I think the T-Rex project in Denver was also another case of bundling, right?

      I know that some people resent almost all highway projects on Devner from the time (not limited to the ones on the T-Rex itself) were completed, whereas some transit lines were cancelled or postponed (however, in all fairness, I think the cause was the financial crisis from 2008 onward, which couldn’t have been taken as a predicted factor on the infrastructure financing planning at the time).

      But what strikes me is that these new lines cancelled/downgraded to busways/postponed were not part of the original T-Rex project at all. Moreover, Denver only got his decently planned and reasonably efficient light-rail because they put it as a corridor project that had good money for widening of I-25 and some interchange reconstruction as well. It is not like they had x US$ billion and decided to “waste” part of it on highway widening; the highway components were critical, from a political standpoint, to get approval from voters for taxes that would finance the whole project.

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