Public projects are plagued by cost overruns- we all know that.
But what is a cost overrun? Say you go to town to buy a bag of candy, and it turns out the candy is now much more expensive. If you had budgeted for the cost of the candy and now purchased at the much higher price, that presumably would be a cost overrun. If you had ‘planned’ to pay whatever price was asked, would that be a cost overrun? If you turned around and went home without buying anything, would that be a cost overrun?
Public projects are done when nobody else will assume the expense, or when experience has shown that the public interest is only served if the project is public in nature. We have learned from experience that these projects are very likely to cost more and deliver less than expected if we don’t break the project into pieces that can offered for multiple bids and analyzed by independent auditors.
Even so, the Port of Seattle, for example, was able to sneak millions of dollars of illegal payments through their system by lying and hiding these payments. They characterized this as ‘overrun’ but a court might just as easily call it fraud.
In fact, it appears that almost the only time the term ‘cost overrun’ is used is when a public agency admits something cost more than predicted. When the Boeing Airplane company announced last year that Dreamliner costs had soared, we politely and dutifully ‘moved on’. Boeing would, we assumed, make up the shortfall in revenues from lost sales by flying political prisoners around the world, or bribing foreign governments to buy AWACS, or selling tankers to the military. The military doesn’t have cost overruns- they have cost-plus contracts.
Hey, wait a minute- why can’t we have ‘cost-plus’ contracts? Well, mainly because we would then have grotesquely huge cost overruns with our projects, just like the military.
At the bottom line, a ‘cost overrun’ is generally spending the speaker disagrees with by a public agency. Private companies have them occasionally, usually when the term is preferable to ‘fraud’ or ‘managerial malfeasance’. And that guy who took twice as long and cost twice as much to do your kitchen? Well, good luck with that one. If you paid him to get the job done, he’s not the guy stuck with the ‘overrun’.
Military projects do have cost overruns all the time. I don’t think that is hidden with terminology — it’s a huge problem that needs to be fixed.
When Boeing goes over, it affects their bottom line and not ours. Why would we care as much?
When a project like Sound Move is underestimated — well, in that case, we didn’t just “pay to get it done” — we added years to construction, shortened the line, and prevented the political will for expansion from occurring until just last year. Those are real and tangible effects of poor planning and poor cost estimates.
What good is ignoring complexity when we live in a complex world?
Pretty much what I was saying. But I don’t think ST got more expensive because of poor planing and poor cost estimates. I think it got more expensive because of delay, change orders, and new expectations- stuff the military likes to call “cost-plus”.
But I’ve spent enough time responding to a column Danny Westneat wrote to save himself some work.