When Nice Things Do Cost Too Much

Jacob Bacharach makes an excellent observation about the cost of building mass transit (boldface mine):

Hidden within all this no-nice-things nose-thumbing is a legitimate problem, however. Railroads that cost as much per mile as the entire annual operating budget of a small city really are ruinously expensive. Building a China-sized network at United States prices would cost more than $3.5 trillion, which, in perspective, approaches the nominal GDP of Germany, the fourth-largest economy in the world. These hyperinflated costs are endemic and uniquely American: you need only read the daily stories of the preposterous failures and costs of New York City subway repairs and improvements to see another example, even as cities around the world, from Paris and Madrid to Moscow to Hyderabad are building and expanding their metros.

This demonstrable ability of other nations to build public works at reasonable—or at least bearable—cost puts lie to the most common excuses for the cost and complexity of American transit projects. America is densely populated and right-of-way property is expensive here? Same goes for Western Europe. America is big? So is China. Unions? Europe, again. You can easily believe that the unique combination of these exacerbating factors of cost and distance would lead to a state where American rail would be the most costly in the world. But more costly by an order of magnitude?

American infrastructure is this costly because of immense, endemic, universal public-private corruption—systems of both direct and financialized graft at every stage of infrastructure development, from the planning to the ribbon-cutting to the use of deferred maintenance to ransack public transportation budgets for cash, year after year, after which the responsible authorities claim that fixing the century-old signals is just too damn pricey. This system of legal fraud begins with the bevies of project consultants, continues through ludicrous private contractor and labor costs, and continues when, years later, high-paid administrative fixers and new armies of consultants and contractors arrive to fix what broke because it was never maintained. It is a system of tolerated kleptocracy that may be the only thing that America still does better than anyone else in the world. It is baked into every assumption about building for the public benefit.

A big part of this is subcontracting:

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.

We have an infrastructure construction system that is entirely subcontracted out: we hire contractors whose sole job is to hire contractors, who hire… you get the idea. While coverage of infrastructure costs will often describe the overall cost, there is never a deep dive into how these costs are accrued–and local political leadership is too often unwilling and unable to make high costs an issue that can be fixed. I italicize that end clause because there never seems the willingness to comprehensively review contracts, even post facto. It’s incredibly boring, but until that happens, nice things will cost far too much.

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1 Response to When Nice Things Do Cost Too Much

  1. Bonnie Resnick says:

    There’s a parallel to our healthcare system. Insurance companies that neither receive nor provide care, but make money off it just the same.

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