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If the first segment of Manhattan’s Second Avenue subway opens on schedule in 2016, New Yorkers will be reminded that it was once “the line that time forgot” -- a project more than 75 years in the making, with no end in sight. It should be remembered for another failing as well: It will be one of the most expensive subways in the world.

Tunneling in any dense urban environment is an expensive proposition, but the $5 billion price tag for just the first two miles of the Second Avenue subway cannot be explained by engineering difficulties. The segment runs mainly beneath a single broad avenue, unimpeded by rivers, super-tall skyscraper foundations or other subway lines.

American taxpayers will shell out many times what their counterparts in developed cities in Europe and Asia would pay. In the case of the Second Avenue line and other new rail infrastructure in New York City, they may have to pay five times as much.

Amtrak is just as bad. Its $151 billion master plan for basic high-speed rail service in the Northeast corridor is more expensive than Japan’s planned magnetic levitating train line between Tokyo and Osaka, most of which is to be buried deep underground, with tunnels through the Japan Alps and beneath its densest cities.

The numbers for California’s proposed high-speed rail system are similarly shocking.

California Bloat

The French rail operator SNCF told the California High-Speed Rail Authority that it could cut $30 billion off the project’s $68 billion estimated price tag. San Francisco can barely build underground light rail for the price that Tokyo pays for high-capacity subways. Los Angeles’s planned subway to the sea will be a bit cheaper, but is still very expensive considering the area’s lack of density.

The budgets for other types of urban public-works projects can be just as shocking. Who can forget Boston’s Big Dig, the $24 billion highway boondoggle? But mass-transit networks stand to lose most from out-of-control infrastructure costs.

A huge part of the problem is that agencies can’t keep their private contractors in check. Starved of funds and expertise for in-house planning, officials contract out the project management and early design concepts to private companies that have little incentive to keep costs down and quality up. And even when they know better, agencies are often forced by legislation, courts and politicians to make decisions that they know aren’t in the public interest.

Comparing American transit-construction practices with those abroad yields a number of lessons. Spain has the most dynamic tunneling industry in the world and the lowest costs. In 2003, Metro de Madrid Chief Executive Officer Manuel Melis Maynar wrote a list describing the practices he used to design the system’s latest expansion. The don’t-do list, unfortunately, reads like a winning U.S. transit-construction bingo card.

Perhaps the most ostentatious violation of Melis’s manual of best practices is expensive architecture in stations. “Design should be focused on the needs of the users,” he wrote, “rather than on architectural beauty or exotic materials, and never on the name of the architect.”

American politicians have different priorities. The Port Authority of New York and New Jersey is spending $3.8 billion on a single subway station at the World Trade Center designed by Santiago Calatrava, a Spanish architect known for his costly projects. If New York could build subways at the prices that Paris and Tokyo pay, $3.8 billion would be enough to build the entire Second Avenue subway, from Harlem to the Financial District.

Spain’s Model

Melis also warned against “consultants who consultant with consultants and advisers who advise advisers,” something American planners would do well to learn. He said he didn’t hire any “large firm of consulting engineers” as general project managers for his Metro de Madrid expansions, and that designers weren’t allowed to interfere with, or bid for, their own construction contracts.

Not so in the U.S. Parsons Brinckerhoff, perhaps the biggest name in the nation’s transit construction industry, is both the lead-design contractor and project manager for California’s planned high-speed rail line, and the company stands a good chance of winning construction contracts for its own designs.

As if that conflict of interest wasn’t bad enough, the California High-Speed Rail Authority’s new CEO, Jeff Morales, arrived at the agency after a stint as senior vice present at Parsons Brinckerhoff, where he worked on the authority’s business plan.

Parsons Brinckerhoff, like all the other multinational contractors and construction companies that win bloated contracts in the U.S., can do good work. Its rail projects for Hong Kong’s Mass Transit Railway were built at a reasonable cost, and its participation in Turkey’s Marmaray rail tunnel across the Bosporus in Istanbul shows that it can deliver affordable results in forbidding terrain. But absent the right incentives and oversight, even the best private companies will resort to rent seeking.

Larry Littlefield, who has worked in logistics and as a budget analyst at New York City Transit, also suggests the U.S. legal system is an obstacle to designing and building affordable infrastructure. (The U.K. and India share a common-law legal heritage with the U.S. that is heavy on judicial review, and they also have trouble controlling costs.)

New York government agencies are saddled by procurement rules dating back generations, Littlefield says, when corruption in infrastructure projects was endemic. Reformers demanded objective and easily policeable standards, which often meant lowest-price bidding rules. Bidders compete mostly on price, not quality.

Speed Matters

In Madrid, on the other hand, cost was given only a 30 percent weight when picking designers and builders, according to Melis. Speed was weighted at 20 percent. Melis praised quick execution as necessary for an efficient, affordable project. (Compare this with multigenerational projects, such as California’s high-speed rail and New York’s Second Avenue subway.) The remaining 50 percent was determined by the technical merits of proposals and the staff’s subjective considerations.

Littlefield also argues that judges in New York routinely side with contractors in disputes with the Metropolitan Transportation Authority. “In the private sector, if you rob your customer, you will suffer a hit to your reputation and possible losses in the courts,” he said in an interview. “Not so if you rob an agency like the MTA. Then it’s all rights and no responsibilities.”

The MTA must continue to award contracts to the lowest-price bidder, and without the ability to hold bad contractors accountable, Littlefield said, the agency turns to “writing longer and longer and longer contracts, expressly prohibiting every way it has been ripped off in the past.” The byzantine contracts that come out of this process drive entrants away, limiting competition and pushing up costs.

Littlefield holds out hope, however, that transit agencies are capable of building with reasonable costs and timelines -- at least when they have to. “Remember how fast and how cheap they rebuilt the 1 train after 9/11? That’s what they’re capable of. But it just doesn’t happen otherwise.”

(Stephen Smith is a writer based in Brooklyn, New York, who covers land use and transportation. The opinions expressed are his own. Read Part 2 here.)

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.