Construction Costs and Perceptions

While looking for South Korean cost data for a major update of my construction costs posts, I stumbled upon a newspaper article excoriating Seoul’s extravagant construction, comparing it unfavorably with the US. Per Joong-Ang, the US neglect of infrastructure is a form of frugality that South Korea should imitate; the National Mall’s poorly maintained, weedy lawns are treated as something to admire. Moreover, Seoul subway construction is more extravagant than in the Washington Metro:

I got on a train at the Smithsonian Metro station. All the stations there have the same architectural styles. They are the 1976 creation of American architect Harry Weese. High ceilings and open spaces are their trademarks. They are known for their practicality. But they are very modest compared to the subway stations of Seoul. The platforms are dimly lighted. It’s hard to read a book there. The walls are concrete, with none of Korea’s flashing signboards. The architecture is very quiet.

After I returned to Seoul, I got on the subway at Guryong Station in Gangnam District, southern Seoul. Marble proliferates at the entrance. A public table is covered with glass. Every day, about 3,600 people use the station, which cost 55 billion won ($51.2 million) to build.

Of course, in reality, Korean construction costs are a fraction of American ones. Guryong Station is an infill subway station in a dense urban neighborhood, opening about a year after the rest of the Bundang Line; it cost about $75 million in 2010 PPP dollars. The US sometimes builds at-grade infill commuter stations for more than that, and those do not have marble entrances or glass tables (update: New York Avenue in Washington is another example of more expensive US infill, this time an elevated station). Building just the shell of an infill subway station on the 7 extension simultaneously with the rest of the extension was estimated at $500 million. Similarly, the Sin-Bundang Line, a driverless rapid transit line, cost 1,169 billion won, about $1.4 billion, for about 18 km; the line is described as “largely underground,” fully underground, and its city terminus is under a dense secondary CBD. In contrast, in Washington, the suburban Silver Line, with very little tunneling, is $6.8 billion (in 2009-2018 dollars) for 37 km. $183 million per km versus about $80.

There are two takeaway lessons from this. The first is that to gauge whether something is cheap or extravagant we need to know the normal range of costs and compare, rather than looking at the quality of construction. Seoul may build very extravagant-looking stations, but it builds them cheaply for some reason.

The second, more important lesson is that people perceive costs the way they perceive local corruption. The US is indeed the world’s most expensive country to build transit in, which Americans can easily believe since they do not trust their government very much. At the opposite corner, Switzerland is quite cheap: a rejected mountain tunneling project in Neuchatel was CHF 850 million for 17 km, and a recently completed urban tunnel in Lucern was CHF 250 million for 1.32 km; accounting for the Swiss franc’s 87% overvaluation relative to PPP, these are $28 and $121 million per km respectively. And as far as I hear from Swiss commenters, the Swiss are proud of the success of their public transportation system. Indeed, Swiss levels of trust in government and institutions are very high.

In contrast, in cheap countries where people do not trust the government, people do not readily accept that construction costs are low. When I talk to Spaniards who are not railfans, they talk about corrupt and extravagant infrastructure projects, and do not believe that both high-speed rail and subway construction costs in Spain are so low. (It doesn’t help that Barcelona’s L9/10, despite still being about average-cost, went over budget by a factor of over 3.) This is no different from the Joong-Ang attitude toward Korean costs: the government self-evidently doesn’t work, and so a $75 million infill subway station is self-evidently a boondoggle.

The situation in the opposite corner – high trust/low perceptions of corruption, high costs – exists as well, in Singapore. The sixth MRT line, soon to begin construction, is S$18 billion for 30 km; the PPP exchange rate between Singapore and US dollars is about 1:1. The line is automated and fully underground, but about half of it is under very wide arterial roads and portions of it are in undeveloped rather than built-up land; it shouldn’t cost this much. The fifth line, currently under construction, is cheaper, S$12 billion for 40-42 km, but still much more expensive than the non-Anglophone average.

And yet, although Singapore’s not far behind Japan in its construction costs, I doubt Singaporeans are as willing to consider their construction practices expensive as Americans, Britons, and Japanese are. I know for a fact that international commentators who hold Singapore in high regard for its efficient government would not be willing to think of it as an expensive-construction country.

All this makes good transit activism somewhat frustrating, in that people will not usually recognize efficient government in absolute numbers. Percentages, certainly – people understand cost overruns and (much less common) cost underruns, and as we’ve seen in Canada people can compare different technologies. But absolute numbers are not as well-understood, and neither are international comparisons of the same technology, where cost differences revolve around questions of project management, contracting practices, labor rules, and details of geology and surrounding infrastructure; people have only recently begun to think in terms of per-km costs in New York, and in the rest of the US I have not seen such thinking. When a transit agency proposes a project, people automatically think it’s expensive, and some will also say it’s necessary, regardless of whether it actually is either. I don’t think reactions to Second Avenue Subway at $5 billion would be materially different from what they were when Phase 1 alone grew to $5 billion.

The upside is that in budget negotiations, the amounts given to transportation are based on absolute shares of the budget rather than on the needs of specific megaprojects, which means that lower costs would translate to more projects built for the same budget. People might not notice that costs have gone down, and might still complain that every subway line is a boondoggle, but more lines would be built and more people would ride those lines. Just the perception of government competence would not change.

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26 Responses to Construction Costs and Perceptions

  1. PeakVT says:

    The New York Avenue station on the Red Line is an infill (the first and only completed so far). Via Wikipedia, WMATA says, “The cost of the New York Ave-Florida Ave-Gallaudet U Metrorail station was approximately $103.7 million. It was funded through a unique partnership that included the District of Columbia government ($53.7 million), the federal government ($25 million), and a special assessment district of area private land owners ($25 million).” WMATA data says there was an average of 5673 weekday passenger boardings at the station in 2010.

    Semi-random thought: one factor you could try to analyze in the future is how much construction is allowed to disrupt normal activities in each country. Apparently maintain/dodging existing traffic can substantially increase a project’s cost.

    • Anon256 says:

      Alon was referring to underground infill stations (like Guryong), which are of course much more difficult and expensive to construct than those above ground.

  2. Ryan says:

    But absolute numbers are not as well-understood, and neither are international comparisons of the same technology, where cost differences revolve around questions of project management, contracting practices, labor rules, and details of geology and surrounding infrastructure; people have only recently begun to think in terms of per-km costs in New York, and in the rest of the US I have not seen such thinking. When a transit agency proposes a project, people automatically think it’s expensive, and some will also say it’s necessary, regardless of whether it actually is either.

    I think looking at things in terms of cost/km is a folly, actually.

    All other things being equal, 1 km of construction on the ground is always going to be cheaper than a 1 km tunnel, whose costs in turn are not the same across all methods of tunneling. Building a 1/4 mile bridge over a lake is certainly cheaper than tunneling under the lake, and in terms of pure cost analysis, it’s always cheaper to punch through something than it is to work around it. (Of course, going through carries its own costs – environmental costs, political costs, and legal costs. So, while the actual work is always cheaper, going through can easily end up more expensive due to external forces.)

    What we should be looking at to get the real numbers is the ratio of cost:benefit, the cost/rider, and the cost breakdown of materials, acquisition, and labor. All of these carry far more obviously useful data than cost/km does. Indeed, a $24 billion project that spans 400 km and would generate 5 million new riders costs us $4800 per rider and $60 million per km, and a $1 billion project that spans 40 km and would generate 5000 new riders costs us $200 thousand per rider but only $25 million per km. Which of these projects is a better use of our money?

    • Alon Levy says:

      Well, obviously a surface project is cheaper than a tunnel. What I’m pointing out is that people should really think of comparative costs of different projects within the same category, and if your project is much more expensive than the average in its category and there is no extenuating circumstance (e.g. Parisian tunnels going under the entire Métro network are a bit more expensive than the average) then it means something is wrong with the way you’re doing construction. It doesn’t mean the project is automatically cost-ineffective, nor do low costs mean it’s automatically cost-effective, and I’ve already drawn comparisons between Second Avenue Subway and Madrid’s Metrosur, which despite a factor-of-40 difference in per-km costs have similar per-rider costs. In fact because Spanish costs are so low, Spain builds lines that would be white elephants anywhere else, which in Spain are only marginal. (The distinction is as follows: assuming normal-world construction costs, HSR from Atlanta to Miami is marginal, whereas HSR from Denver to Salt Lake City is a white elephant.)

    • Andre Lot says:

      Your 40km and your 400km links probably don’t serve the same function.

      It is somehow pointless to compare projects that serve so much different markets (long-distance vs. regional/commuter).

      It would be like entering a discussing of whether a new subway in Chicago or High-Speed Rail in California are better uses of federal dollars, or which – expanded locks in the Mississippi or a deeper port access channel in Houston – makes more sense.

      • Ryan says:

        Yeah, I probably could have picked a better hypothetical there. In my mind I was trying to emphasize how misleading cost/km can be, compared to cost/rider which paints a more accurate picture.

        So, to alter my hypothetical: we take the $1 billion project that spans 40 km, generates 5000 new riders, and costs us $25 million per km (or $200 thousand per rider), and we compare that project against another project spanning 40 km. The other project, however, costs $5 billion and generates 100000 new riders – in other words, it costs us $125 million per km but only $50 thousand per rider.

        We can assume, based on the length, that they’re both the same kind of project – let’s go ahead and say they’re both a new commuter rail line. One connects a large city to another city through a string of smaller towns, and the other connects that same large city to a suburb – passing only through the rural countryside to get there. The more expensive line costs us five times more per km, but four times less per rider. Which project, then, is more worth doing?

        • Anon256 says:

          Cost per rider is appropriate for deciding whether a project is worth doing, but cost per km can expose when something is seriously rotten in the planning and construction process such that reform could bring drastic improvements for potential future projects.

        • snogglethorpe says:

          Is the U.S. competitive even by such other measures? Indeed, I’d think it’d fair worse in most cases…

          E.g., the S.A.S. has a projected ridership of 200k passengers/day. The Tokyo Fukutoshin line has ~380k passengers/day, is built in a similarly challenging location in a high-cost country, and yet was still 1/5 the cost per km. [In both cases, the lines will probably later increase ridership, the S.A.S. due to future extensions, and the Fukutoshin line due to interlining with the Toyoko line (in about four months!).]

          And note that the S.A.S. is probably the best case in the U.S.—other U.S. cities probably have far lower ridership for their subways/transit lines…

  3. Winston says:

    The interesting question in my mind is “Why are U.S. construction costs systematically so far out of line with the rest of the world?” I don’t have a good answer to this. In some specific cases of giant cost blow-outs (say the $6 Billion spent to replace the SF Bay Bridge), there are specific failures to point to, but these failures are always idiosyncratic and don’t get to why even the original $1.3 Billion estimate for replacing the bridge was still twice what the same project would cost the French.

    • Andre Lot says:

      Special works such as viaducts, tunnels or tunneling should have costs compared with a bit of salt. Especially if the constraints (such as the SF Bay being an active seismic zone, 2nd Avenue in New York can’t be severely disrupted more than 14 months per block!) reduce or force designers to use more costly alternatives.

      • Miles Bader says:

        Sure, but it’s not like NYC/SF are unique in such ways. Other cities are seismically active, other cities have extremely valuable real-estate, dense development, etc., and yet still manage to have lower costs.

        • Henry says:

          Well, BART is expensive simply because it’s BART and no one else has anything like it, and the SAS has a lot of skyscrapers (and irritable neighbors) around it. The only parallel to the SAS I’m aware of (lots of tunneling beside and underneath skyscrapers) is Hong Kong’s South Island Line project, which may be going along faster because there’s no real place to vent popular discontent in Hong Kong other than the street.

          My main concern with SAS is not the cost, but the amount of time it’s taking. Its original completion date was 2014 – now it’s 2016, and the Feds believe it’s actually 2017 or 2018. I’m wondering if there’s any particular reason for these delays.

          • Alon Levy says:

            Go to Google Street View and look around Gangnam Station, the city terminus of the Sin-Bundang Line. It won’t look too different from a Midtown avenue. Similarly, look around Shinjuku and Shibuya, which are served by the Fukutoshin Line.

            The problem with making special excuses for BART and SAS is that high costs are a national problem, and to some extent a problem of the entire common law world. The Red-Blue connection in Boston is very expensive, though that you could chalk to Menino sandbagging the cost estimate because he doesn’t want the project. The Silver Line in Washington is astoundingly expensive for how little tunneling it has. The same is true of Portland’s Milwaukie MAX. BRT in Hartford and on Staten Island comes in at the same cost of the more expensive European light rail projects.

          • Winston says:

            But BART’s extension costs are similar to the DC metro silver line ($250m/mile vs. $300m/mile but with fewer stations per mile). In both cases costs are stupidly high for a rail extension into the distant outer suburbs. Further any other developed country a)exercise better judgement in what they build and b) be able to build the same thing for a fraction of the cost.

          • Matthew says:

            The latest on Red/Blue is that cut-n-cover is not feasible, despite Cambridge Street being “urban renewal”ized, therefore they must use a deeper bore to complete the last thousand or so feet, plus the tail tracks.

            As far as I know, they are officially trying to drop the project.

          • I think Alon gets at the mistake we make too often in North America: dismissing some rapid transit project out of hand because of high cost estimates. The problem is very often with the costs, and not with the project itself. The Silver Line in Washington, for example, is a very reasonable project connecting an international airport and some major development notes, designed in a very economical way to run mostly on the surface. The problem isn’t with the project, it’s with the fact that a mostly surface rail line shouldn’t be costing hundreds of millions of dollars per kilometre.

    • Nathanael says:

      The excessive NY costs are generally believed to be due to NY’s bidding rules. The excessive costs in the rest of the US are driven up by the endless, endless rounds of paperwork required. I’m all for doing an alternatives analysis / environmental impact statement, but it’s turned into a gazillion-step rigamarole (when did the “major investment study” get inserted? and the feasiblity study? and the ‘permission to go into final engineering?’)

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  5. I write about mass transit myself, and I was very impressed with your analysis

  6. Eric says:

    “High ceilings and open spaces are their trademarks. They are known for their practicality. But they are very modest compared to the subway stations of Seoul.”

    That seems to prove the opposite of what the speaker intended. High ceilings, i.e. extensive excavation underground, is the most expensive part of the station. The “bling” that Seoul puts on its station walls probably has negative cost if it’s used for advertising.

    • Exactly. This is a problem we see in Toronto all the time. We think that new stations are very spartan because they have concrete walls, but in fact they are vastly oversized with immense unused mezzanines and deep excavation. If we built more reasonably scaled stations (like the original Bloor Line stations, for example) and used marble and gold leaf on the walls, they could still cost a fraction of the immense stations with unfinished concrete.

      • snogglethorpe says:

        There’s no absolute “reasonably scaled station.” Deep construction, and mezzanines (and other “large station” features) are called for in some circumstances, and not in others. It’s of course pretty silly to compare different systems without considering the context in which they’re built…

        • Of course you’re absolutely right. I might have been more specific and said that a lot of these mega-stations are located in suburban areas with no connecting bus routes and will never see overwhelming ridership. Obviously a new station in a dense downtown area or connecting to a busy bus route needs to be built to accommodate large ridership, but there are many places where stations are massively over-scaled. The point is that making stations aesthetically pleasing is not the major cost driver, it’s the size and depth.

  7. Keep Houston Houston says:

    Fascinating.

  8. Clem says:

    There must also be something wrong with the public perception of the relative order of magnitude between a million and a billion. This ratio, as perceived by the innumerate masses, is far less than 1000. In countries like the US where public agencies are weak and held captive to the transit industrial complex, the profit motive can lead to successfully exploiting the public’s misperception of costs to accomplish vast transfers of public wealth to private pockets, irrespective of actual transportation utility. This can’t happen in countries with strong and competent government agencies that hold private contractors in check and defend the public interest.

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