The problems with federal highway spending are well documented. The program distorts project incentives and distributes money inefficiently. A new report from the Government Accountability Office (GAO) adds to the list of problems, detailing improper fund management within the Federal Highway Administration (FHWA).
Governments tend to spend money on low-value activities because they do not have market signals or customer feedback to guide them. In this report, I examined the problem with respect to the Transportation Security Administration. As one example, TSA’s SPOT program for finding terrorists spends more than $200 million a year with few if any benefits.
Large government projects often double in cost between when they are first considered and when they are finally completed. This pattern—call it “Edwards’ Law”—is revealed in story after story about highways, airports, computer systems, and other types of government infrastructure.
Perhaps the most suspicious thing about the disappearance of Lois Lerner’s emails is that the IRS is not a small business operation that cannot afford high-quality computer, email, and backup systems. It is a huge modern bureaucracy that has computer technology at the core of its operations. The IRS IT budget in 2014 is a massive $2.4 billion (page 149 here).
Did you know that the White House has a fleet of 19 helicopters? The Washington Post today discusses efforts to replace this fleet of aging Sikorsky’s with 21 new vehicles yet to be procured. The fleet is used by the president, vice president, and cabinet secretaries.
An op-ed in the Wall Street Journal today indicates that Edwards’ Law of Cost Overruns is an international standard. If a politician says that a project will cost $100 million, it will end up costing $200 million or more.
My op-ed in today’s New York Times has prompted numerous critical comments on theNYT website. Let me address some of them.
Here is a rule of thumb to remember when you hear about a proposed government project: If a politician says that it will cost $1, it will end up costing $2 or more. Call it Edwards’ Law.
From the Wall Street Journal, here’s the latest evidence on quality and efficiency in government infrastructure spending