TL;DR: Why does infrastructure cost so much? In this article, we delve into the complexities and inefficiencies driving up the costs of American infrastructure projects—from the expanding role of citizen involvement and its ramifications, to the contract systems that often incentivize overruns. We also examine how the involvement of multiple stakeholders leads to convoluted decision-making and how union labor adds another layer to the rising costs. Yet, despite these challenges, we see potential pathways to reform, emphasizing the need for a balance between democratic principles and practical realities. As we grapple with modernizing America's crumbling infrastructure, this paper serves as an essential guide to understanding the systemic factors at play and offers insights for future projects.
"Back In My Day" - The Cost of Building Yesteryear.
Between 1900 and 1908, the Interborough Rapid Transit Corporation dug tunnels, cut through streets, and built an entire power station from scratch to give the United States its very first subway line—the first of what would become the largest in the world. Running from Atlantic Avenue in Brooklyn to Dyckman Street in the Bronx, the new lines did not come cheap; the scale, technology, and labor required to build them were immense. The IRT spared no expense on the extras, adorning each station with a dazzling array of custom tile, mosaic, and ironwork—the kind they "don't make anymore." The entire project cost $1.6 billion.
Today, we seldom see projects of this size and scale completed in such a short timeframe. When we do attempt such feats, they are rarely carried out to the same extent by private companies and infrequently finished on time or on budget. The MTA—New York City's public mass transit system—recently announced such a project: a new connector line from Brooklyn to Queens called the "Interborough Express." According to the MTA, this line would "create a new transit option for close to 900,000 residents" and "connect with up to 17 different subway lines.”
So, what is the projected cost of this new line? A whopping $5.5 billion. To recap: In 1900, we paid $1.6 billion for an entirely new subway system, including two lines and miles of newly built tunnels (including a tunnel under the East River). Yet in 2023, we can't build 13 miles of light rail on pre-existing right-of-way for less than $5.5 billion. This isn't an isolated example; in the most recent review of America's expansive Interstate system, the estimated costs for upgrades and repairs are expected to equal or surpass the cost of building the entire system from scratch—which totaled around $1 trillion from the 1950s to the 1990s, adjusted for inflation.
In this article, we will delve into the cost of infrastructure to try and understand why America's roads and railways cost so much more today than they did in the past.
"Think Of The Children!" - The Price of The People’s Voice.
Citizen participation is a cornerstone of a liberal democracy like ours, but it can also significantly impact the cost of infrastructure projects. Before a project even exits the planning phase, it is subject to a barrage of public opinion, fueled by lawyers, media, and special interest groups. In the United States, the cost to construct a mile of interstate highway has tripled in real dollars from the 1960s to the 1980s, largely due to the expanding role of "citizen voice" in shaping these projects. Not only do we now have longer open discussion periods than before (or even hold them at all), but we also consider a much broader range of demographics than ever before. It is no longer acceptable to simply plow a freeway or railroad through a low-income neighborhood in the name of progress, as was once common practice.
In addition to concerns for disadvantaged neighborhoods, affluent citizens often use their influence to halt or modify infrastructure initiatives that they believe will negatively impact their property values or quality of life. These individuals, colloquially known as “NIMBYs” (Not In My Back Yard), block proposals, lobby local and state representatives, and generally cause a stir whenever something might change their neighborhood or a place they like.
Environmental groups also frequently intervene to oppose projects they consider incompatible with progressive environmental principles. This involvement can result in delays, budget overruns, and the development of less efficient or effective infrastructure. A study by the Brookings Institution found that the cost to construct a mile of light rail in the United States is triple that of Europe, partly because of more active participation by citizen groups in the planning phase on this side of the Atlantic.
Keystone XL Pipeline
Perhaps the most notorious infrastructure project to be halted by public sentiment in recent years is the Keystone XL pipeline. This proposed 1,179-mile oil pipeline was intended to transport crude oil from Canada to the Gulf Coast of the United States. The project faced strong opposition from environmental organizations, indigenous communities, and landowners along the proposed path. These groups expressed concerns about potential impacts on water resources, wildlife, and the project's alignment with progressive climate policies.
In response to this opposition, multiple legal challenges were filed against the Keystone XL pipeline, and public protests were organized to heighten awareness of the issues. These actions led to delays and heightened scrutiny. In November 2015, the Obama administration denied the pipeline permit, citing concerns that echoed those of the protesters. Although the project was briefly revived by the Trump administration, it was ultimately abandoned by the responsible company in 2021 after President Biden revoked its permit again.
Although NIMBYs and Environmentalist groups often earn a bad reputation, they are key in ensuring that project opposed by the majority (like the KXL pipeline) are stopped at the planning phase; consider Jane Jacobs, who famously stopped Robert Moses' plans to bulldoze Greenwich Village in Manhattan for a cross-town expressway. To many at the time, she was a busy-body getting in the way of progress; to many today, she is a bonafide hero.
While America could adopt a Chinese-style approach—building what they want, when they want, without much regard for resident sentiments—such an approach conflicts with the tenets of liberal democracy that the U.S. is built on. Given the current focus on ensuring that specific demographics are not disadvantaged by infrastructure projects, as has occurred historically, it seems unlikely that this particular social-cost can be reduced without a significant shift in the national character. This would involve moving away from ensuring that each voice is considered in decision-making, and towards something more centrally planned for "the greater good."
"What's It Worth To You?" - Incentives, Contracts, and Costs.
But the general public is only part of the issue. Once a plan has been approved, the frameworks for incentives and contracts play a significant role in the final costs of each infrastructure project. In the United States, the prevailing contracting system is based on time and materials. In this setup, contractors are compensated based on the hours worked and the materials used. This arrangement can lead to budget overruns, as it incentivizes contractors to take longer, employ more laborers for tasks, or use excessive materials.
In earlier times, such as when the IRT built the subway, contracts would often be publicly initiated but privately funded. Profits from the operation of the infrastructure would be returned to investors for a period of time in place of a large up-front budget coming directly from the government. This approach still occurs occasionally today, but often the private sector is only involved in the construction stage, incentivizing them to extract as much value as possible during that limited period, rather than them (and their investors) earning long-term revenues from utilization of the infrastructure.
The situation is worsened by a lack of expertise among public servants. Government contracts often gain approval from politicians and departments who typically lack specialized knowledge in engineering or construction, or the experience of building large projects themselves. This absence of technical and project management insight allows government contractors to charge excessive fees for services that would be far less expensive in the private sector. The most egregious example of this practice is in U.S. military contracts, where simple components like screws can be billed at tens or even hundreds of dollars, but it affects all government contracts more broadly.
Moreover, a substantial portion of government contracts stipulate or mandate the employment of unionized labor. According to the U.S. Bureau of Labor Statistics, union labor in the U.S. typically costs 18% more than its non-union counterpart. As one can deduce, this does not help the cost problem.
"That's Above My Pay Grade" - Complexity and Accountability.
After contracts are signed and contractors are hired, the complexity of the U.S. infrastructure system quickly contributes to the escalating costs of infrastructure projects. These projects undergo a convoluted, compartmentalized series of steps involving multiple stakeholders, each guarding their own interests. Often, decision-making is delayed by one or more parties involved. This fragmented process can result in delays, budget overruns, and less efficient or effective infrastructure, as centralized planning gives way to decision-by-committee.
Opacity and a lack of collaborative effort in decision-making further exacerbate the problem. When various entities fail to cooperate effectively, decision-making becomes unclear, and tracking project progress becomes challenging. These issues can lead to mistakes, delays, and even corruption, further inflating costs. Often, the public—and sometimes even the politicians who approved the project—remain unaware of these issues until it's far too late.
The Big Dig:
The Big Dig, formally known as the Central Artery/Tunnel Project, serves as a cautionary tale. This monumental endeavor in Boston rerouted the city's main highway into a tunnel and introduced several new infrastructure elements, including the Bunker Hill Memorial Bridge and the Rose Kennedy Greenway. The project became the most expensive highway venture in U.S. history, plagued by a series of challenges such as cost overruns, delays, and design flaws.
Among the factors contributing to these setbacks was the project's sheer complexity. The Big Dig involved 110 major contracts, each filled with intricate technical, legal, and economic considerations. The initiative also required exhaustive environmental feasibility studies, risk assessments, and additional documentation.
With all these different contractors and service providers, accountability quickly became a concern. The labyrinthine structure and multiple governing bodies behind the project made obscuring the truth all too easy. A federal task force investigation into spiraling costs found that project managers deliberately hid cost overruns from the public. In 1997—15 years after the planning phase had started and just a few years into construction—the state legislature transferred the project to an "independent" authority and established an "integrated project organization," merging the Massachusetts Turnpike Authority and Bechtel/Parsons Brinckerhoff as co-owners of the initiative.
The story of the Big Dig has been repeated time and time again across U.S. cities. Often, American infrastructure projects fall under the jurisdiction of numerous public entities, with various private groups participating at different stages. This dispersion of oversight and decentralization of control lead to significant cost inflation and open the floodgates for corruption. Politicians, unions, private contractors, and even organized crime entities exploit this fragmented system to extract maximum value for personal gain, always at the expense of the taxpayer.
"You Meddling Kids" - What do we do now?
The labyrinthine nature of American infrastructure development combines complexity, citizen involvement, and systemic inefficiencies into a potent brew. While the role of citizen voice is invaluable in a democracy, it also layers on additional scrutiny and costs. This is further complicated by multiple stakeholders with varying interests, as well as contracting systems that often encourage cost overruns. Add to this the inflated costs associated with union labor and the involvement of non-technical decision-makers in government. The high expense of modern infrastructure isn't simply the sum of steel, concrete, and labor—it's amplified by a multitude of voices, interests, and systems that govern its creation.
To build a more efficient system reminiscent of past practices, we must critically examine our current inefficiencies for areas of improvement. While we can't artificially lower the cost of building materials or sidestep public opinion, there are viable solutions. These may include creating a more competitive labor market in the construction industry or overhauling governmental contract, environmental, and approval systems by learning from more efficient countries. Perhaps it's also time for a deeper reevaluation of how the U.S. funds and builds its infrastructure, questioning whether our public sector—known for its designed inefficiency—can truly deliver on the ambitious visions we have for our country. In some cases, these goals may be better achieved through private market initiatives, as demonstrated by Florida's Brightline project and historical examples like New York City's original IRT and BMT subway lines.
Addressing the question of whether these cost drivers can be mitigated is a complex challenge. Substantive changes would require not just procedural adjustments but also a cultural reckoning about how we perceive and value infrastructure. Finding a balance between the public's right to voice concerns and the necessity for efficient project execution, while maintaining transparent and accountable processes, could pave the way for more cost-effective American infrastructure in the future. Navigating this narrow path will demand rigorous research, well-crafted policy, and most importantly, the political will to strike a balance between democratic ideals and pragmatic realities.