Bent Flyvbjerg: Teach Your Kids It’s Not a Dirty Word
by David Deutsch
Bent Flyvbjerg. I did not just curse you in Danish; Bent Flyvbjerg is a name you may not know but you probably should. According to his website, he is Professor of Planning in the Department of Development and Planning at Aalborg University, Denmark; is Doctor of Technology and Engineering and Doctor of Science from Aalborg University; has a Ph.D. in Urban Geography and Planning from Aarhus University, Denmark; was twice a Visiting Fulbright Scholar to the USA, where he did research at UCLA, Berkeley and Harvard; has been a Visiting Fellow with the European University Institute in Florence; and currently holds a concurrent position as Chair in Infrastructure Policy and Planning at Delft University of Technology in the Netherlands. Sure, that’s very impressive, but there are plenty of know-it-all-academic types out there. Why should you know the name “Bent Flyvbjerg” in particular, and care about what he has to say? Here’s why: he is probably the world’s leading expert on wasteful public works projects.
And unlike rank amateurs such as myself, he can prove with scientific certainty that the vast majority of public works projects will likely cost a lot more than their publicly-touted price. And this is not an accident.
I first came across Flyvbjerg’s name when working as a Federal auditor, as I was examining why transportation projects kept busting their budgets. One of his articles, “Underestimating Costs in Public Works Projects: Error or Lie?” took me for a loop. I strongly recommend you take about 20 minutes and read this article, as his findings are truly stunning: a whopping 9 out of every 10 public transportation projects will be have an underestimated budget.
Underestimation sounded like it was a good thing to me when I first came across his article. Heck, underestimation almost sounds like the project is on sale or something. Unfortunately, nothing could be further from the truth. Underestimation means that the project ends up costing more (oftentimes much more) than the original estimated cost. This generally leads to one of four outcomes:
- The project is abandoned and left incomplete;
- The project ends up costing a lot more than original estimates, resulting in lost taxpayer money;
- The project is less comprehensive than planned and therefore sub-optimal; or,worst of all,
- The project is completed on budget, but it is unsafe.
Let’s randomly select a city like, say, Los Angeles and represent the effects of underestimation. This is only a hypothetical example and the below scenario is fictitious, but it is not entirely unrealistic.
So let’s assume the MTA gets a new transit plan approved for Los Angeles and secures FTA (Federal Transit Administration) funding, and construction begins. Almost immediately, the trouble will start. Neighbors may threaten lawsuits due to easements, violations of codes and excessive noise pollution. Construction workers may come across an overlooked drainage pipe that cannot be redirected. The subcontracted cement company may suddenly go belly-up, forcing the city to re-bid for cement in a situation where it can only get a higher price. Worse, at least from a transportation perspective, construction workers may come across a dinosaur fossil or a pre-Columbian village, and construction is forced to a stop. Sure, these are great finds for the La Brea Tar Pits Museum, but they are very bad for the transportation folks.
Slowly but surely, costs increase. Initially, contingency money offsets incremental cost increases. The FTA requires that each transportation project include a certain percentage (in the 10% range) to deal with unexpected costs. But this contingency will run dry three years before the project is supposed to be finished, at which point transportation officials go before the local legislature with hats in hand, begging for just a few hundred thousand dollars more to get things right.
After securing the additional funding, they find themselves with more lawsuits, more cool but somewhat annoying villages, and more hats in their hands. And the price just goes up and up and up, inevitably costing millions of dollars more than originally anticipated. Again, this is not an isolated event: 90% of transportation projects go through some kind of process exactly like this.
Okay, so underestimation is bad. But public transportation projects are notoriously difficult to accurately plan and are subject to various price pressures, most of which are unforeseen. I mean, how can any locality predict finding a pre-Columbian village?
Flyvbjerg might reply something like this: “My study encompassed over 250 transportation projects totaling over $90 billion—that’s billion with a B—over seventy friggin’ years across the entire friggin’ planet. Let me repeat that: $90 billion, seventy years, Planet Earth. Do you mean to tell me that in those 70 years and countless hours of research that nobody has ever learned anything at all about how to accurately estimate costs?” “Oh,” you might reply, blushing and hanging your head down ever so slightly.
Okay, maybe he wouldn’t be so snarky, but that’s the gist of his reply to this argument. He addresses many other objections in his article, and again I encourage you to take a look at it.
So why does all this matter to you, dear reader? How does this affect housing and the poor?
It cost millions of dollars more than predicted (millions of dollars that could be directed toward a more comprehensive transportation plan that permits the urban poor to engage in the global economy); beyond that, you should ask Milena Del Valle why it matters. Actually, you’ll have to ask her widower husband.
The Big Dig
A couple of years ago Del Valle, 38, was driving in Boston in their notorious Big Dig tunnel, when suddenly tons of concrete fell on her car, killing her. Her husband somehow managed to crawl to safety. Del Valle was a newlywed and a mother. She’s gone, her husband is a widower, and her kids have no mother. The Big Dig may be the best example of cost underestimation in history; I cannot go into details here, given the scope of this monumental failure, but just as a primer: transportation officials originally estimated the project (which included burying an entire highway underground) would cost under $3 billion. The final cost was supposed to be $14.6 billion, but that number is still too low, as a recent report said the tunnel is still being fixed, and has sprung 237 leaks in the past two years alone. If this is not proof of the perils of underestimation, I don’t know what is.
Let me be clear: I do not believe that transportation officials set out to burden or kill taxpayers. In fact, most transportation employees I’ve encountered passionately believe in the social, economic and environmental benefits of mass transit, and by and large I sympathize with them. It seems to me that no individual is to blame, but that the process itself is fundamentally flawed. With scarce Federal funds available, it is only logical that localities petitioning to the FTA would set unrealistically low cost expectations. Naturally, the FTA wants to save taxpayer money, so they usually go for less expensive, more cost-effective projects.
The bottom line is this: the entire process of cost estimation needs to be reformed. Flyvbjerg argues that transportation proposals should tack 20-50% onto their estimated cost to accurately reflect the final price. That’s a lot of money, but,given the comprehensive nature of his research, his findings are pretty hard to refute.
One additional caveat: the FTA may have overhauled its cost estimation process since I left the IG’s office in 2006. If so, good for them. If not, it may be a good time to put on their winter coats, fly over to Denmark and learn a thing or two about underestimation.
I am sure Mrs. Del Valle would have appreciated it.