Why America Can't Build

Interesting article from the online magazine Palladium, Why America Can't Build.  The author is Brian Balkus who has experience in the large project management field.  It poses the question of why do large infrastructure projects take longer to build and cost considerably more per unit than similar projects, not just in Asia, but in Western Europe where just about everything else costs more than in America.

The subject is actually broader than large projects and has become in recent years the subject of much study, often referred to as The Cost Disease; why does the cost of certain things, like electronics/computers, go down, while others, like healthcare/construction, go up?

In the case of large projects, Balkus starts with a Los Angeles freeway expansion that the company he worked for at the time, Kiewit, was managing and then extends the discussion to other examples like the fiasco of California's proposed high speed rail line, which California voters approved in 2008 and which now, fourteen years later, is $44 billion over budget, with very line actual work done.

The reasons specific to large projects identified by Balkus include:

- Environmental review requirements, including the use of litigation by opponents to slow projects down.  As Balkus notes:

The NEPA/CEQA process incentivizes the public agencies to seek what is often termed a “bulletproof” environmental compliance document to head off future legal challenges. This takes time, with the average EIS taking 4.5 years to complete. Some have taken longer than a decade. A cottage industry of consultants is devoted to completing these documents, earning themselves millions in fees.

- The lack of in house expertise at the agencies overseeing these projects, forcing reliance on outside contractors who often have interests other than speeding along a project.  Balkus writes:

These consultants were well paid, with the primary consultant compensation for HSR at $427,000 per engineer, compared with the Authority’s in-house cost of $131,000 per engineer. This structure creates a principal-agent problem where they are incentivized to maximize their billable hours. As a California State Auditor assessment of the project noted, consultants “may not always have the state’s best interest as their primary motivation.”

- Unionization, or more specifically how unions operate in the U.S., since as Balkus points out all of the European countries that do public projects at less cost also have unions working on the projects:

The fundamental problem isn’t unions per se, but rather the way that unions operate within parts of the U.S. system. The Netherlands has strong unions, but the Port of Rotterdam has been automated to an extent that has proven impossible in the U.S. due to union resistance . . . There are too many layers of permission needed to innovate, including groups whose interests run counter to innovation.

The result is that innovation is inhibited by both labor resistance and a decentralized government bureaucracy that has neither the incentives nor the capability of driving real change. Perhaps it should not be shocking that U.S. construction productivity has fallen by half since the 1960s . . .

According to Balkus, things are posed to get even worse:

President Biden has signed executive orders strengthening construction unions and increasing the stringency of NEPA requirements. 

As a counterexample, the author writes of Madrid's successful project to expand its subway system, which it did for a fraction of the per mile cost of similar projects in the U.S.  He also points out to exceptions in the U.S., including my home state of Arizona.

However, not every building environment in the U.S. is the same. Roughly 40 percent of U.S. megaprojects are in New York, California, or Texas. While megaprojects run into issues everywhere, the Texas projects have a significantly better track record than either of its coastal peers.

Other states have learned from their example. Arizona explicitly studied lessons learned from Texas when building the largest public works project in its history, the $1.7 billion Loop 202 South Mountain Freeway Project. By using a non-standard project delivery approach, this project was completed in 2019 in fewer than 1,000 days, an estimated three years earlier than what would normally be expected. Early coordination between the contractor and engineer ensured that the design issues that appeared on Sepulveda or HSR were avoided, saving the project an estimated $100 million.

Maybe that's why so much of America's new industrial capacity is being built in those two states. 

One objection to this type of critical review is that it is a legitimate choice to favor environmental and regulatory process concerns, and to preserve high paying union jobs.  I agree.  But those who do favor that approach also seem to be constantly harping on our need to improve infrastructure without any seeming awareness of the difficulties in undertaking such projects and why they cost so much.  It's a choice.  You can't have both.  Decide what your priorities are.

A few years ago I wrote a post about a video Rachel Maddow and Spike Lee did at the Hoover Dam about the need to do big projects like that in America, funded by the government, without any awareness of why it is so difficult to do projects like this in 21st century America.  The Hoover Dam project was approved by Congress in 1928, construction started in 1931 and was completed in 1936.  How many decades would it take to do this same project if it started now?  What are the odds it would even be approved?

Deciding on priorities will become even more important as we look to greatly expand solar, wind, and batteries over the coming decades.  The amount of metals and rare earths required for these technologies is staggering.  Unless we want to become dependent upon China for our future, this will require legal and regulatory changes to facilitate enormous increases in mining and metal processes.

It's not just mega projects that are subject to extended times.  Regarding just the regulatory review process, in the 1990s, at the company I worked for, we conducted a comparative study of how long it would take to get a new production line approved by environmental regulators at our plants in the U.S., France, and Australia.  All these countries were heavily regulated and the pollution control requirements very similar yet it took twice as long (several months) to get approval in the U.S.