Infrastructure

How Staff Quality and Procurement Rules Inflate Infrastructure Costs

There are lots of people in the United States discussing why it costs so much to build infrastructure there. This recent State Craft podcast put it into four buckets: personnel, permitting, procedures and weak data. This recent paper researches personnel and, in particular, state capacity.

Key Takeaways

• Highway construction costs have increased substantially over time, and the cost of urban rail is about three times more expensive in the U.S. than in other rich countries.
• Leading theories for high infrastructure costs include overregulation and litigation, citizen opposition, and political distortions.
• Low state capacity at the agency delivering the projects is a primary cost driver.
• A survey of experts shows that state Departments of Transportation (DOTs) across the country are concerned about a decline in the size and experience of their workforce.
• States with “low-capacity” practices—less staffing, reliance on consultants, more frequent contract modifications, and administrative delays—have higher costs.
• Higher-quality government engineers deliver observationally similar projects at significantly lower cost.
• Going from the 25th to the 75th percentile of engineer quality is associated with a 14% reduction in project-level costs, amounting to more than three times the average engineer salary.
• States that engage in practices to increase competition, i.e., bidder outreach, have significantly lower costs.
• Practices that have the effect of dampening competition, i.e., subcontracting limits, are correlated with higher costs.
• An increase in retirements is followed by an increase in average project costs, cost overruns, and duration: the cost increase arising from engineer departures is six times the size of their wages.
• Retaining high-quality employees and preventing early retirements is therefore one possible policy to manage costs.

Comment

I have written about some of the problems in state capacity. Friends from countries with strong engineering cultures have often commented on the importance of quality. Therefore, it is not a surprise that higher infrastructure costs are a consequence, but it is good to get data on the issue.

Government procurement rules in many jurisdictions make it very expensive to bid for contracts reducing the number of bidders and increasing costs.

Will A.I. enable average engineers to perform like superstars or replace them with high-quality engineers reviewing A.I. outputs?

What Next?

Do you have HR policies in place to recruit and retain top talent? How can A.I. support your engineers? Are your procurement practices hindering competition and increasing costs?

Net Zero

Why Australia's Transport Sector Won't Reach Net Zero by 2050

Australia has announced its carbon reduction targets for 2035, including this roadmap and action plan for transport.

Key Takeaways

• The transport sector currently emits 22% of Australia’s annual carbon dioxide equivalent gas emissions and is on track to be the largest source of greenhouse gas emissions in Australia by 2030.
• This plan is guided by five guiding principles: maximise emissions reduction, provide value for money, maximise economic opportunity, be inclusive and equitable and be evidence-based.
• The avoid-shift-improve (ASI) framework is used to identify all opportunities for abatement.
• There are five key priority actions:
  1. Invest in enabling low and zero-emission transport infrastructure.
  2. Electrify and increase transport’s energy performance.
  3. Switch to low-carbon alternatives to power transport where electrification is not feasible.
  4. Innovate to expand cost competitive transport technology options.
  5. Scale up efforts to reduce embodied emissions in transport infrastructure.
• Treasury modelling indicates it is technically feasible to reduce transport emissions from 100 Mt CO2-e in 2025 to 36 Mt CO2-e in 2050.
• Emissions from passenger transport in 2050 are projected to decrease by 90% between 2025 and 2050.
• By 2050, emissions from commercial transport are projected to decline by 45% from 2025 levels.

Comment

Interestingly, the plan acknowledges that transport will not reach net zero by 2050, primarily due to a shortfall in commercial transport, and deserves credit for this admission.

However, a part of the failure is down to poor policy choices. For example, the Australian Government continues to build a lot of roads and heavily subsidise road freight, at the expense of lower emissions rail freight. Road user charging for freight would help to address this imbalance.

Australia should also be taking the opportunity to rethink its transport system to deliver better outcomes, such as in health, not just to reduce carbon emissions. For example, investment in active transport is still significantly less than 1% of transport budgets.

What next?

Does your government have a credible plan to achieve net zero in transport? Is it taking the opportunity to transform its transport system for the better?

Decision Making

The BCR Paradox: How Sound Methodology Can Still Lead to Poor Project Selection

Why is it possible to have excellent guidance on creating Benefit Cost Ratios (BCRs) and still end up with the wrong projects being progressed? This blog by Omer Rafael Bor discusses the UK situation and makes recommendations that will be applicable around the world.

Key Takeaways

• Officials from dozens of countries visit Britain to learn its transport analysis methods.
• Cities across the US and Western Europe offer better access to jobs by car or public transport than the UK.
• It's not just about transport outcomes. Decision-making processes seem equally ineffective in the UK.
• The answer lies in three fundamental problems:
  1. Decision-makers sideline rigorous economic analysis with weak strategic arguments
  2. Analysts face pressure to justify predetermined projects
  3. The guidance ignores transport regulation and industrial organisation
• Transport Analysis Guidance (TAG) needs to change to influence high-quality transport investments effectively
  • Provide more guidance on how to make a high-quality strategic assessment for a project.
  • Address the principal-agent problem - the organisations that would deliver projects also produce the business case.
  • Cover regulation and industrial organisation policies - Major recent transport policies involved no new infrastructure investment—they were organisational and regulatory changes, but TAG offers no guidance on how to produce the business cases for these types of change.

Comment

The recommendations are good suggestions for improved analysis in many jurisdictions. For decision makers who really value analysis (as opposed to making predetermined project decisions), this should improve decision-making.

The principal-agent problem is an interesting one. After all, most business cases are produced by transport agencies who are also tasked with delivering a project. We may need to have business case teams independent of delivery agencies.

In my experience, a lot of policy analysis is relatively weak compared to the requirements for justifying infrastructure so additional guidance would be welcome.

What next?

Would you benefit from any of these recommendations being incorporated into your analysis guidance?

Quick Adventures in Transport Wonderland

Here is what else I came across this week:

• ​Unintended consequences of transport electrification​
• ​App based travel behaviour change ​
• ​Global Cities Can Still Turn the Tide on Car-Centric Growth​

Blog

Are Generalists a Problem in Transport Leadership?

This week, my blog asked whether having generalists in charge of transport is an issue.

Innovation

Music On The Subway

I am a big fan of incorporating the arts into public transport. Here is an article about how sound art is being incorporated into some stations in New York.

Tool

Emergency Streets

​Emergency Streets is a rapid, visible response to fatal traffic crashes. Within 48 hours, cities install temporary traffic-calming tools, such as speed humps, bollards, and signs, to slow cars and signal that the road is under investigation.