Taking Taxpayers for a Ride

Even if you don’t ride the subway, a startling new report on the cost of building transit systems deserves the attention of anyone interested in infrastructure. This report, the result of a five-year project by the Transit Costs Project at New York University, digs deeply to explore why the United States has among the highest transit construction costs in the world — more than twice as high, per kilometer, as France, Japan, Canada, and Sweden. Among the causes it identifies:

  • Political meddling. In the United States, the political decision to go forward with a project typically comes early in the design process, making it hard to abandon part or all of the project if more detailed engineering identifies construction challenges or less costly alternatives. “In 2016, Seattle voters approved a slate of projects that were based on 1-2% design, which one former official described as ‘a drawing on a napkin,’” the study reports. In low- and medium-cost countries, professionals plan and design projects, and politicians tend to get involved only later, when spending decisions are required.
  • Public agencies’ lack of in-house expertise, which leads them to turn too much control over to consultants. This is a big deal. There’s been a big push to turn transit design, construction, and operation over to the private sector, but this can prove costly if the government agency doesn’t have staff with the skills to oversee its consultants and contractors.
  • Seeking construction bids when design is still in an early phase, which means contractors must incorporate design risks into their bids. Fixed-price contracts can ultimately increase costs if the contractors must go through a complicated administrative process to make small design changes once construction is underway.
  • Obscuring costs. In the United States, itemized costs are often kept secret. Low-cost countries do the opposite, disclosing costs for individual items to increase transparency and to allow the public agency to built up its internal expertise in cost estimation.

While this exhaustive study focuses on transit, its findings are relevant to construction of rail lines, highway tunnels, air terminals, and port infrastructure, as well as harbor dredging. Thanks to the Infrastructure Investment and Jobs Act, enacted in November 2021, hundreds of billions of federal dollars are starting to flow to infrastructure projects around the country. If we can spend those dollars more wisely, taxpayers are less likely to be taken for a ride.


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