See the lovely bridge above? It cost about $13 billion dollars.
To update last week’s post about California’s disastrous high speed rail project, Regulation Strangling Innovation: Planes, Trains, and Hyperloop, the Obama administration has just given the already-failed project another four years to throw taxpayer money at connected consultants and contractors, delaying a halt to the boondoggle and recognition of its failure until long after Jerry Brown and Barack Obama are out of office (and then its waste of $billions will be blamed on “Republican intransigence”– which is rich in a one-party state.) The inept and corrupt process for building any large government project, especially in California, is more to blame.
First we’ll take a look at the mismanaged and endlessly-delayed project to replace the eastern half of the San Francisco-Oakland Bay Bridge, which had been damaged by the Loma Prieta quake of 1989. After the quake, temporary repairs reopened the old bridge to traffic but it was clear the span needed to be replaced as soon as possible.
The Atlantic’s Citylab summarizes the disastrous Bay Bridge saga:
The first cost estimates, released in 1995, figured both east and west spans of the bridge could be upgraded for a cuddly $250 million. By the time the new east span opened in September 2013 the price tag for that span alone had reached a reported $6.5 billion, with a B. Just your run-of-the-mill rise of 2,500 percent.
UC Berkeley planning scholar Karen Trapenberg Frick meticulously chronicles the reconstructed bridge in a new book, Remaking the San Francisco-Oakland Bay Bridge. With Frick and her book as guide, CityLab tracked bridge expenses over time to get some sense of how the project that Herbert Hoover once called “the greatest bridge yet constructed in the world” became yet another example of a major public works project in which the cost ended outrageously higher than it began — and some ideas for what to do about it.
$250 million (1995)
Following the earthquake, the California Department of Transportation (which goes by Caltrans) assembled a board to advise on a seismic retrofit of the Bay Bridge. The agency’s initial estimate for fixing both east and west spans came to $250 million…
$1 billion (1996)
In the blink of an eye, the Bay Bridge cost quadrupled. “I remember one day I woke up and it was a $1 billion estimate,” says Frick, who was working at the Metropolitan Transportation Commission (MTC) at the time. “Here you tell the public in ’95: we can do the whole thing for $250 million. They vote on a bond measure that allows them to fund this plus other retrofits in the state. Then they come back and go, actually it’s $1 billion.”
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. The public, of course, wasn’t pleased. In the book, one Caltrans manager recalled the immediate reaction:
“The numbers we put together (on the bridge costs) at lunchtime on Tuesday became the main front-page heading in both the San Francisco Chronicle and the Los Angeles Times on Wednesday morning.”
$1.3 billion (1997)
In 1997, Caltrans offered a range of cost estimates for various retrofit designs to the east span. Ultimately the state legislature agreed to fund the bridge to the tune of $1.285 billion.
There was still the big question of what the bridge would look like. Governor Pete Wilson expressed official preference for a basic “skyway” — a straightforward viaduct unadorned by a tower. He said if Bay Area residents wanted “an aesthetically enhanced bridge,” they should pay for it themselves.
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….
$2.6 billion (2001)
When Caltrans released new estimates for the east span in April 2001, the cost had roughly doubled to $2.6 billion. The agency gave two main reasons for the rise. Construction costs were way up with a strong economy — steel and concrete prices, in particular, spiked 18 percent from 1999 to 2000. Caltrans also blamed the two years of delay associated with selecting the final single-tower design.
Despite a cost increase of a couple billion dollars in just six years, Caltrans was confident in its new figure. “We’re pretty comfortable with these numbers,” said its director in 2001. The legislature passed a new law to fund the bridge in October. It included a $448 million rainy day provision that one state senator said “insulates us from what we were worried about—open-ended cost overruns.”
$5.5 billion (2005)
Famous last words. In August 2004, a new cost of $5 billion was announced, with the tower alone expected to cost at least twice the estimated $750 million. Caltrans blamed the rise on three factors: elevated insurance rates in the wake of 9/11, a 50-percent rise in steel costs related to China’s boom, and greater staff needs owing to so many bridge projects going at once. A state auditor added one more to the list — poor cost management.
“People like to blame the tower,” says Frick. “Well, the whole span increased cost, and the other bridges increased cost, too. We really have a problem of cost-estimating in addition to a challenge of doing a design at this magnitude in earthquake country. That’s what gets lost in the story.”
In late 2004, Governor Arnold Schwarzenegger tried to terminate some of the costs by suggesting the bridge didn’t need the tower at all. (“Without thinking that there’s a ton of engineering and that this has actually been designed as a whole structure,” says Frick.) The following year he relented and signed a law to cover the new costs — with a provision that any further overruns be the region’s responsibility….
$6.5 billion (Current)
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. [Ed. note: there are still suspect welds and parts of the bridge understructure that may fail in a quake the bridge was designed to survive — investigations are ongoing.] Frick says the current $6.5 billion total is a rough estimate, and that it doesn’t include interest or financing costs.
At least the state got a functioning half-bridge for its $13 billion, though hidden defects may end up causing it to fail or need more expensive repairs. But an entire cross-continent standard 4-lane Interstate highway could have been built for that — the usual figure cited for rural Interstate construction costs is $4 million per mile, so one could have built 3,000 miles of Interstate with enough left over to handle suburban bypasses. Did the state learn any lessons from the bridge fiasco?
Not really. Because of the long drawn-out nature of these boondoggles, voters can find no single politician or legislator to bring to task for failures. Meanwhile, politicians can promise new projects and collect campaign contributions from interested unions and contractors. Voters are inclined to turn down big bond issues for infrastructure as a result, rightly suspecting they are being sold a fantasy budget for projects which will end up costing more and doing less. But they weren’t cynical enough to dodge the bullet train… which voters authorized in 2008 with passage of Proposition 1A.
Eight years have passed, and the goals of the project have been downsized: from the original promise of routine and fast passenger service from downtown LA to downtown San Francisco, to maybe a line from San Jose ending in the Central Valley. Speeds are down, costs are up, and ridership estimates and operating costs are far from the goals promised. Yet California courts have refused to halt the project, and it lives on through a drip of federal funds and California carbon credit subsidies — another tax weighing down state industry. The most recent Republican candidate for governor got some traction by labelling the project the “Crazy Train,” but not enough to overcome California’s preference for Democrats:
An attempt to get enough signatures to put an initiative on the ballot to shift some of the bullet train money to water supply and storage projects has been postponed until 2018.
Now the struggling project has received an extraordinary lifeline from the Obama administration:
The Obama administration threw the California bullet train project another lifeline Wednesday, extending the schedule by four years for construction of 118 miles of rail through the Central Valley, according to congressional officials.
The extension came through modification of a $2.5-billion grant that originally required completion of a segment of rail structures from Madera to Shafter by 2017.
The changes also allow the Department of Transportation to extend a cash advance to the state, which potentially means the California High-Speed Rail Authority can continue spending long after the original deadline that was set in 2009 under the American Recovery and Reinvestment Act.
The change brought an immediate attack by Republican critics, who said the Transportation Department and its Federal Railroad Administration awarded the project an unprecedented concession. “This is the oversight agency that is supposed to monitor taxpayer money,” said Rep. Jeff Denham, (R-Turlock) chairman of the House rail subcommittee and a longstanding critic of the project. “For them to give a blank check and authorize a cash advance is a clear conflict of interest.”
…The Obama administration has made five previous modifications of the grant in recent years, including one that allowed the state to provide required matching funds after first using the federal money. Normally, grants require states to match federal funds on a dollar-for-dollar basis as they are spent….
A Federal Railroad Administration spokesman said the agreement will not amend the 2017 deadline for spending the grant, but acknowledged that it would allow the state to make its required match several years later. Denham believes the amendment may also attempt to allow spending the federal dollars after the deadline.
The project was supposed to be “shovel ready” when it received the grant in 2010, but has been hobbled by a series of political, legal, environmental and financial problems. One original purpose of the project was to help the nation recover from the Great Recession, which officially ended long ago.
In addition to the stimulus grant, the California project is receiving about $500 million a year from state greenhouse gas fees and an additional $1 billion federal grant approved in 2010. But it faces an estimated $43.5-billion shortfall to complete the San Francisco to Anaheim system by 2029.
The rail authority has had difficulty acquiring property since early 2013, when it claimed publicly that it was going to start construction by that summer even though it hadn’t bought a single piece of land. Even today, fewer than half of the parcels it needs for the 118 miles are in hand. The Central Valley was supposed to be the easiest section of the 500 miles system to build, but has proven to be a virtual minefield.
The delays have forced contractors leave to equipment idle, which is likely to result in multimillion-dollar claims of losses. Some outside construction experts are projecting the first 29 miles of construction alone could be as much as $400 million over budget.
The Central Valley segment had been running about two years behind schedule, based on the start of construction last summer. But this year, the rail authority said that under its new business plan, that segment would begin service from San Jose to Shafter in 2025, about three years past the previously scheduled start.
…Denham said he is alarmed by the potential for Transportation officials to advance far more than that just before the 2017 deadline, allowing the state to bypass the normal process under which grant recipients submit invoices after spending the money….
Without the cash advance and the grant modification, Denham asserted that the state rail authority would have been unable to spend all $2.5 billion by the 2017 deadline and would have forfeited it back to federal treasury.
The rail authority had spent only $1.1 billion of the $2.5-billion federal grant as of February. If it had not received the grant modification, it appears the rail authority would have had to spend nearly $3 million of the federal money and a similar amount of required state matching funds every calendar day through June 30, 2017. That $6 million per day burn rate would be far higher than any transportation project in U.S. history.
Starting in the 1970s, California gave veto and delaying power over all development projects to its politically-powerful attorneys and environmental groups, including local NIMBYs who delay or stifle most for-profit development. This litigious atmosphere now extends to all government projects as well, and it is nearly impossible to bring in a project on budget and on time. Rare exceptions to typical multiyear delays occur only when politicians cut the red tape of contracting and environmental assessments, as in the rebuilding of the Santa Monica Freeway in LA after the Northridge quake of 1994:
Less than three months after the Northridge earthquake knocked down two sections of the world’s busiest thoroughfare, Gov. Pete Wilson announced Tuesday that the Santa Monica Freeway will reopen next week, ending frustrating delays and bottlenecks for thousands of commuters.
State officials hope the final cleanup of construction work can be completed early April 12 in time to let rush-hour traffic inaugurate the two new freeway bridges at La Cienega and Washington boulevards.
Spurred by the promise of an extra $200,000 a day for every day work was completed ahead of schedule, the contractor, C. C. Myers Inc., will finish the project 74 days before a June 24 deadline and rack up a $14.5-million bonus for the company.
The high-speed construction was made possible by crews working around the clock, seven days a week, and by state officials cutting through red tape.
So it’s not that infrastructure is inherently complicated and slow to build; when voters demand action, they can get it. But such a quick project timetable doesn’t allow for all the padding and white-collar lawyering and consulting that returns a fraction of contract dollars as campaign contributions.
A high speed rail line through dense urban areas and mountains was always going to be a difficult project. But pie-in-the-sky projects pay off when you can direct money to your political supporters preparing for it, get back some of that as campaign contributions, and retire from public life before the public realizes they got nothing for their tax dollars. As in all these Bootleggers and Baptists stories, the “bootleggers” — politicians, unions, and contractors — pushed the project through fully aware the proposal was a fantasy and sold the dream to idealistic voters. Having foolishly voted for the bonds, the voters will never be allowed another vote to stop the project.
Update: Funding through sale of carbon emission credits has evaporated, and one of the contractors pointed out the system would never be likely to be self-funding (since nowhere in the world is such high speed rail profitable) — Update: California High-Speed Rail Nearly Dead
Death by HR: How Affirmative Action Cripples Organizations
[From Death by HR: How Affirmative Action Cripples Organizations, available now in Kindle and trade paperback.]
Corporate HR Scrambles to Halt Publication of “Death by HR”
Nobody gets a job through HR. The purpose of HR is to protect their parent organization against lawsuits for running afoul of the government’s diversity extortion bureaus. HR kills companies by blanketing industry with onerous gender and race labor compliance rules and forcing companies to hire useless HR staff to process the associated paperwork… a tour de force… carefully explains to CEOs how HR poisons their companies and what steps they may take to marginalize this threat… It is time to turn the tide against this madness, and Death by HR is an important research tool… All CEOs should read this book. If you are a mere worker drone but care about your company, you should forward an anonymous copy to him.
More reading on other topics:
Regulation Strangling Innovation: Planes, Trains, and Hyperloop
Who Killed Prince? Restrictions on Buprenorphine
The Great Progressive Stagnation vs. Dynamism
Captain America and Progressive Infantilization
FDA Wants More Lung Cancer
Corrupt Feedback Loops: Public Employee Unions
Jane Jacobs’ Monstrous Hybrids: Guardians vs Commerce
Death by HR: How Affirmative Action is Crippling America
Death by HR: The End of Merit in Civil Service
Death by HR: History and Practice of Affirmative Action and the EEOC
Civil Service: Woodrow Wilson’s Progressive Dream
Bootleggers and Baptists
Corrupt Feedback Loops: Justice Dept. Extortion
Corrupt Feedback Loops, Goldman Sachs: More Justice Dept. Extortion
Death by HR: The Birth and Evolution of the HR Department
Death by HR: The Simple Model of Project Labor
Levellers and Redistributionists: The Feudal Underpinnings of Socialism
Sons of Liberty vs. National Front
Trump World: Looking Backward
Minimum Wage: The Parable of the Ladder
Culture Wars: Co-Existence Through Limited Government
Social Justice Warriors, Jihadists, and Neo-Nazis: Constructed Identities
Tuitions Inflated, Product Degraded, Student Debts Unsustainable
The Morality of Glamour
On Affirmative Action and Social Policy:
Affirmative Action: Chinese, Indian-Origin Citizens in Malaysia Oppressed
Affirmative Action: Caste Reservation in India
Diversity Hires: Pressure on High Tech<a
Title IX Totalitarianism is Gender-Neutral
Public Schools in Poor Districts: For Control Not Education
Real-Life “Hunger Games”: Soft Oppression Destroys the Poor
The Social Decay of Black Neighborhoods (And Yours!)
Child Welfare Ideas: Every Child Gets a Government Guardian!
“Income Inequality” Propaganda is Just Disguised Materialism
The greatest hits from SubstrateWars.com (Science Fiction topics):
Fear is the Mindkiller
Mirror Neurons and Irene Gallo
YA Dystopias vs Heinlein et al: Social Justice Warriors Strike Again
Sons of Liberty vs. National Front
“Tomorrowland”: Tragic Misfire
The Death of “Wired”: Hugo Awards Edition
Hugos, Sad Puppies 3, and Direct Knowledge
Selective Outrage and Angry Tribes
Men of Honor vs Victim Culture
SFF, Hugos, Curating the Best
“Why Aren’t There More Women Futurists?”
Science Fiction Fandom and SJW warfare
More reading on the military: