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MegaProjects
(Innovation Briefs, Vol. 14, No. 4, July/August 2003)

After nearly twenty years of planning and construction, significant segments of Boston's Central Artery project (" The Big Dig") finally opened this year. Coinciding with the opening has been a publication of two groundbreaking new books discussing complex multi-billion dollar transportation projects. They are "Mega-projects: The Changing Politics of Urban Investment by Harvard University's Alan Altshuler and David Luberoff (Brooking Institution Press, 2003) and "Megaprojects and Risk: An Anatomy of Ambition" by Bent Flyvbjerg, Professor at Denmark's Aalborg University (Cambridge University Press, 2003). The books provide fresh perspectives and new insights into the forces that are shaping contemporary public works projects.

Of the two books Flyvbjerg's is the more critical. Based on ten years of research, the author documents in detail how the marketing of megaprojects involves, in his words, "underestimating costs, overestimating revenues, inflating ridership forecasts, undervaluing environmental impacts and exaggerating economic development benefits." The past two decades have furnished the author with plenty of material to draw upon. In Europe, multi-billion dollar transportation projects include, among others, the Channel Tunnel, The Great Belt Link connecting East Denmark with continental Europe, the Øresund bridge between Denmark and Sweden, the planned new cross-Alpine tunnels and the creation of a European-wide high-speed rail network. Elsewhere, there is Hong Kong's Chek Lap Kok airport built on an artificial island in the Hong Kong harbor, China's maglev line and ambitious highway projects in South America. The author has found a remarkably similar pattern in all these projects. When their actual versus predicted performance are compared , "the picture is often dismal."

Flyvbjerg's indictment contains several counts: Item: Cost overruns of 50 percent are common and overruns above 50 percent are not uncommon. A study carried out at Aalborg University in Denmark which reviewed 40 urban rail projects, found actual costs to be on the average 45 percent higher than estimated costs. Item: Forecasts overestimating travel demand are the norm. For example, traffic forecasts for the Channel Tunnel predicted 15.9 million passengers on the Eurostar trains in the opening year. Actual number of passengers, after more than six years of operations, in 2001, had reached only 6.9 million passengers or 43 percent of the original estimate for the opening year. A U.K. Transport and Road Research Laboratory study of nine urban rail systems found that ridership forecasts were achieved only for two of these systems. For the other seven systems forecasts ranged 20 to 90 percent higher than actual ridership. Concludes Flyvbjerg: "On the basis of evidence presented, we conclude that the traffic estimates used in decision making for rail infrastructure development are highly, systematically and significantly misleading." Nor are the overly optimistic estimates limited to cost and ridership forecasts. Biases can also be found in downplaying the extent and magnitude of adverse environmental effects and in overestimating regional development benefits, the author claims.

Why do the predicted results so consistently miss the mark? Flyvbjerg's answer sounds hauntingly familiar to anyone who has studied the history of contemporary urban rail projects in the United States. "Contractors and other project promoters who stand to gain from the mere construction of projects -- and who are often powerful movers in the early stages of project development -- may have a self serving interest in underestimating costs and overestimating demand," the author states. "They are happy to go ahead with highly risky projects as long as they themselves do not carry the risks involved and will not be held accountable for lack of performance." But isn't it the function of government to shield the taxpayers from risky ventures? Yes, answers Flyvbjerg, but too often local officials themselves become the project's most ardent advocates and promoters. With project completion many years away, and with most of the cost funded by higher levels of government, local officials lose any sense of accountability and ignore mounting overruns. When this happens, they cease to be the guardians of the public interest and become part of the problem.

To some extent, that also is the conclusion of Messrs. Altshuler and Luberoff, authors of Mega-projects: The Changing Politics of Urban Investment. Using the example of Boston's "Big Dig" and other major U.S. transportation projects, the authors describe how powerful coalitions of suppliers and contractors, downtown business interests, transit labor unions, environmentalists and community activists join forces with local public officials to promote expensive public works projects with scant attention to their ultimate cost or to whether their benefits exceed their costs.

The authors cite three cases to illustrate cost escalation: Boston's Central Artery project, Denver's International Airport and Seattle's planned new light rail line. The "Big Dig's" cost rose from $3.1 billion in 1987, when Congress approved funding for it, to $14.6 billion in 2002. Denver International Airport more than doubled in cost from the late 1980s when it received voter approval to its completion six years later. And the Seattle light rail project's projected costs have more than tripled (from $900 million to $2.9 billion for an initial segment) in the five years after its approval -- and that is even before the first spade of dirt has been turned.

Altshuler's and Luberoff's conclusion: optimistic cost estimates and inflated ridership projections are not the result of technical errors or innocent mistakes -- they are deliberate attempts at shaving the truth in order to gain public support and federal approval. These tactics in the authors' view "corrode public confidence in government overall...even as they help advance specific projects." The federal government, through generous subsidies and an 80-20 matching ratio, often becomes a powerful enabler of these megaprojects.

What can be done to prevent future excesses? Altshuler and Luberoff think there is no substitute for local champions of "fiscal sobriety" to watch out for the public interest, and to forcefully make their views heard "when representative institutions, in thrall to vested interests, have become unresponsive." In the end, an alert and informed public, empowered through referenda, constitutes the most effective check against irresponsible public profligacy.

The End of an Era?

Is the era of transportation megaprojects and specifically of multibillion dollar urban rail projects over?

While Altshuler and Luberoff contend that the momentum for rail transit is still strong, there are signs that the tide may have turned. Most U.S. cities that could reasonably justify region-wide rail systems on the scale of San Francisco's BART, Washington DC's Metrorail or Atlanta's MARTA, already have them. While this has not deterred smaller cities from trying to join the "rail club," (as the 50 projects in FTA's New Starts pipeline testify), light rail projects have been surrounded by intensified controversy over their costs and benefits. Construction costs have been escalating because of growing political pressures to mitigate adverse social and environmental impacts or, as the authors put it, "to do no harm." Benefits of light rail systems are being increasingly questioned as evidence of high operating costs, disappointing patronage, and failure to reduce traffic congestion or reduce sprawl accumulates. Public skepticism has come to the surface in two recent cases. When the question of light rail was put to voters in Cincinnati and Orange County, CA, both referenda lost by a substantial margin. At a May 21 hearing on "Benefits and Costs of Transportation Options" held by the Subcommittee on Transportation of the House Appropriations Committee, committee members and expert witnesses virtually unanimously voiced doubts about the benefits of further investment in urban light rail systems.

And yet, as the saga of the Seattle light rail project illustrates, the political forces aligned in support of rail transit are often formidable. They include the entrenched transit bureaucracy, powerful architect-engineering firms, contractors, labor unions, the downtown business community, and assorted civic boosters. Few politicians are able to resist the relentless public relations campaigns orchestrated by rail coalitions (see, Innovation Briefs, "Seattle's Link Project: The Anatomy of a Rail Controversy," Nov/Dec 2000; and "Seattle's Rail Controversy Comes to a Head," May/Jun 2001).

What is more, as Altshuler and Luberoff point out, rail advocates seldom give up on the first try. Voter-rejected proposal are often brought back a year or two later for a second vote after changes have been made to make the proposal more palatable to hesitant voters. Once assured of local financial support and endorsed by the congressional delegation, a project stands a good chance of qualifying for federal financial support. After all, the Federal Transit Administration, whose very mission in life is to dole out transit grants, has little incentive to turn down applicants so long as Congress continues to vote money for New Starts.

Which, sad to say, explains why even rail projects of doubtful value, such as the Seattle light rail line, often get built.

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