Shining More Lights on a Multi-Billion Dollar Problem: High Costs for Transit Construction

Eno and the NYU Marron Institute have been trying to answer similar questions. Marron Institute has been assessing “Why do transit-infrastructure projects in New York cost 20 times more on a per kilometer basis than in Seoul?” while Eno has been asking: “Why does the U.S. pay more than a 50 percent premium to build at-grade and tunneled rail projects?”

The goal of this work is to reduce the costs and time to build transit projects in the United States. Both organizations have been conducting their own multi-year in-depth studies that take a close look at considerations and variables that are not easily quantified, such as project management and governance.

While their researchers have been sharing information and building upon each other’s findings, the programs are independent. For example, the Marron Institute has created a database that spans more than 50 countries and totals more than 6,800 miles of urban rail built since the late 1990s. Meanwhile, Eno has collected its own construction cost data for more than 180 rail transit projects and developed its own database and case studies. These efforts have been yielding very similar conclusions.

This week, Marron Institute released its report, “Understanding Transit Infrastructure Costs in American Cities.” Aaron Gordon, who moderated an October 26 panel in Brooklyn about the report, said he had been looking forward to seeing these recommendations for a long time ever since he wrote a 2020 story, provocatively titled, “Why the US Sucks at Building Public Transit.”

Alon Levy, one of the authors of the Marron Institute’s October report, said that overall construction costs are twice as high as they could be because of procurement problems, poor management of contractors, change order litigation, risk compensation, and contingency. Levy said, “the causes of high American (especially New York) costs are institutional, and fixable, without a revolutionary upending of the legal or social system.”

Levy noted that labor costs are between 20 and 30 percent of the construction costs for major projects in Turkey, Italy, Sweden – while it is twice that percentage in New York and New England. This disparity includes both blue-collar and white-collar positions – from construction workers building tunnels to utilities demanding that their own supervisors monitor tunnel construction.

The Marron Institute team emphasized the importance of transparency. Eric Goldwyn, the institute’s program director, noted that transit agencies often do not reveal the numerous components that go into a project’s cost. More public disclosure about projects can help reduce costs since contractors may be more likely to bid on projects and those bids can be more realistic when everyone has access to relevant cost data.

When asked whether there are examples of cities or countries that have significantly reduced costs, NYU researcher Marco Chitti pointed to the experience in Italy. Corruption scandals in the late 1980s and early 1990s, he said, led to a series of institutional reforms most notably in procurement laws. Moreover, Italy has reduced costly delays associated with interagency conflict by forcing Italian government agencies and stakeholders to come together before projects are underway.

The NYU paper recommendations to overcome these challenges include:

  • Find champions who will advocate for the project
  • Collaborate and work with agencies in the same region, particularly utilities
  • Foster a culture of transparency
  • Staff up internal permanent positions
  • Reform the procurement process
  • Integrate value engineering into every project and standardize designs so that they can be repeated between different projects

Is the U.S. likely to make changes that are needed to dramatically reduce project costs?

Panelists pointed out that will only happen when elected officials acknowledge the extent of the problem, look at best practices around the world, and then are willing to make changes to long-standing practices. Chitti said in Italy that the public and elected officials realized there was a problem with corruption, so there has been a continuous effort to solve it. In the United States, he said, “until we get to that point, it’s hard to make changes.”

Many U.S. government officials either do not acknowledge or are unwilling to address the construction cost problem according to Goldwyn. He said his research team has been getting three different types of responses when they talk about the disparity between the United States and other countries: “One, this is crazy. Two, this isn’t an apples to apples to comparison and I won’t address it. Three, I don’t know what’s going on outside our world.”

Levy said a lot of solutions need to come from politicians. If voters are not particularly motivated then the politicians won’t be either. Not many people, they realized, rank high transit construction costs as one of their top-ten concerns.

Goldwyn said “we need to shine a light on” the problem. So many projects, he observed, don’t get out of the planning stage because costs are so high. He thinks transportation advocates should talk about what else could be done with the savings, if construction costs are reduced. Goldwyn hopes that once people understand that high costs preclude development, they will understand the larger issue.

After the panel concluded, Goldwyn thanked Eno for its ongoing help and cooperation – sharing preliminary findings, exchanging notes about research methods, identifying countries that have had success controlling costs (such as Chile), and providing contact information. His colleague, Elif Ensari, said that since Eno and the Marron Institute have come up with similar recommendations, their work has “amplified” the issue and more people are paying attention to it.

Both Eno and Marron Institute are continuing their research efforts on improving the delivery of major transit projects. Marron Institute is starting a report on the efforts to transform the Northeast Corridor passenger rail system into a high speed train line and finalizing a report on the Second Avenue Subway. The White House’s Infrastructure Team recently emphasized the importance of a study that Eno just kicked off – identifying measures to help transit agencies better recruit, train, and retain project managers for large projects.

Philip Plotch is Eno Center’s principal researcher. He is also a research fellow at the NYU Marron Institute.

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