A Possible Reason Why Building Infrastructure Is So Expensive In The U.S.

In a sort of throwaway line about Whitefish Energy–the very small Montanan electrical utility that has been tapped to rebuild much of Puerto Rico’s electrical infrastructure, Charles Pierce makes a critical observation (boldface mine):

In addition, if you’re looking for a tell in the whole Whitefish thing, note that the company isn’t being paid $300 million to do the work. It’s being paid $300 million to find people to do the work. I can tell you from 40 years of watching public works here in the Commonwealth (God save it!), if you want to get rich skimming the public trough, this is the way you do it.

When it comes to infrastructure, there is a lot of subcontracting. And it’s not just a single subcontract: sometimes these things end up looking like those Matryoshka dolls. One contractor hires contractors, who hires contractors. Leaving aside whether the work itself is shoddier under this system, every subcontractor gets a profit markup (they’re not doing this at cost). I’ve never dived into large infrastructure contracts (and have no desire to do so), but I suspect this plays a big role in why infrastructure costs are so high in the U.S. Part of this probably stems from state and local agencies lacking capacity to do many functions they used to do, including oversight (which is essentially what Whitefish is getting paid for). Might want to do something about this if we want shiny, new stuff.

Aside: Whitefish really seems to be padding the bills, even by federal contractor standards.

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2 Responses to A Possible Reason Why Building Infrastructure Is So Expensive In The U.S.

  1. jrkrideau says:

    What amazes me is the bare faced blatantness of this move.

  2. kaleberg says:

    This is a lot like the contractor / subcontractor structure after Katrina. The Feds finally put up the money, but the contracts were grabbed by a bunch of big, well connected sorts who follow the CBD. They then subcontracted their politically connected clients who in turn subcontracted and so on. Eventually, a bunch of minimum wage workers were hired to do the actual work, but the big management tree made out quite nicely.
    A lot of this does have to do with cuts to our civil service. It is harder than ever for them to hire competent people. They can’t compete on the wage front, even if they offer good benefits. This started to get bad in NYC in the 1960s. I used to read my father’s DC37 union newspaper, and they often had articles on how the city preferred to give outside contracts, even when they had the capability to do the work or oversight in house.
    I get the impression it has gotten progressively worse. The contracting deal is so completely internalized that our infrastructure is nearly parallelized. A couple of years ago The Atlantic had an article, “Why New York Subway Lines Are Missing Countdown Clocks”, that discussed the subway signals problem. Interestingly, in 2010, the NYC bus people had hired a few recent engineering graduates and managed to get countdown clocks working for the bus system relatively cheaply and simply. So much for the private sector.

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