Edwards’ Law of Cost Doubling

September 8, 2014
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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.

It looks like New York’s World Trade Center train station is the latest example of Edwards’ Law. The Wall Street Journal reports:

The most expensive train station in the U.S. is taking shape at the site of the former World Trade Center, a majestic marble-and-steel commuter hub that was seen by project boosters as a landmark to American hope and resilience.

Instead, the terminal connecting New Jersey with downtown Manhattan has turned into a public-works embarrassment. Overtaking the project’s emotional resonance is a practical question: How could such a high-profile project fall eight years behind schedule and at least $2 billion over budget?

An analysis of federal oversight reports viewed by The Wall Street Journal and interviews with current and former officials show a project sunk in a morass of politics and government.

Edwards’ law takes effect:

When completed in 2015, the station is on track to cost between $3.7 and $4 billion, more than double its original budget of $1.7 billion to $2 billion.

What were some of the causes of the cost doubling? Typical government stuff, it appears, such as squabbling between agencies and political incentives detached from the bottom line:

Those redesigning the World Trade Center—destroyed by terrorists in 2001—were besieged by demands from various agencies and officials, and “the answer was never, ‘No,’ ” said Christopher Ward, executive director from 2008 to 2011 of the Port Authority of New York and New Jersey, the project’s builder.”

…The Port Authority, run jointly by the two states, has long been known for political infighting. City, state and federal agencies, as well as real-estate developer Larry Silverstein, also joined in. In public and private clashes, they each pushed to include their own ideas, making the site’s design ever more complex, former project officials said. These disputes added significant delays and costs to the transit station…

Former New York Mayor Michael Bloomberg, for example, insisted the memorial plaza be finished by the 10th anniversary of the Sept. 11, 2001 attacks. The request added more than $100 million to costs and months of delay…”

Conflicting goals among agencies were a major cause of delays and added costs, an analysis by the Journal of monthly oversight reports by the Federal Transit Administration shows.

Here is a rule of thumb for citizens to remember when they hear about a proposed government project: whatever dollar figure the politician claims, double it for a more realistic estimate. For more, see here.

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