08 July 2011
Transport infrastructure costs
Rob Fisher

Virginia Postrel reports on Bent Flyvbjerg’s studies into the costs of public infrastructure projects:

On average, urban and intercity rail projects run over budget by 45 percent, roads by 20 percent, and bridges and tunnels by 34 percent.

And the averages tell only part of the story. Rail projects are especially prone to cost underestimation. Seventy-five percent run at least 24 percent over projections, while 25 percent go over budget by at least 60 percent, Flyvbjerg finds.

By comparison, 75 percent of roads exceed cost estimates by at least 5 percent, and 25 percent do so by at least 32 percent.

Promoters of rail and toll-road projects also tend to substantially overstate future use, making those projects look more appealing to whoever is footing the bill. Rail projects attract only about half the expected passengers, on average, while in new research still in progress, Flyvbjerg finds that toll roads (including road bridges and tunnels) fall 20 percent short.

H/T Instapundit.

This doesn’t bode well for Crossrail. I’m also wondering how the M6 toll road is working out. It seems like a fantastic road to me, but is it making enough money?

  1. I’m also wondering how the M6 toll road is working out. It seems like a fantastic road to me, but is it making enough money?

    Last I heard, no, although that is a complicated question, which depends on which buying-in point you measure from. However, that does not matter, because a private company (Macquarie Infrastructure) took the risk. This will influence whether private companies take similar risks in future, but matters not at all with respect to the M6 toll, which has been built already. If there is lots of history of some companies making good decisions and some companies bad, potential investors will learn when it is sensible to invest their money. This is good in a great many ways.

    Posted by Michael Jennings on  08 July 2011 at 11:57 pm

  2. I’m fairly optimistic about Crossrail. Two of the things it is designed to alleviate are congestion on the Central Line at rush hour and congestion on the Jubilee line at rush hour, and if you ever ride these lines at 8.30am, it is fairly easy to see that ridership levels on Crossrail are going to be very high.

    Also, there are some very large property projects around the stations. Some of these (Farringdon, Tottenham Court Road, etc) are going to be very profitable indeed. I am not sure what the situation is at Canary Wharf, but I hope there is a lot of retail space coming with the station, because space for large retail units is very constrained there are the moment.

    Posted by Michael Jennings on  10 July 2011 at 09:00 pm

  3. While I don’t disbelieve the figures I do wonder how he got them.  Must have been a hell of a job: different languages, inflation, numbers in different documents - not to mention various forms of obfuscation that governments indulge in.

    Posted by Patrick Crozier on  11 July 2011 at 03:21 am

  4. My experience is not so much that planners and governments are prone to overstating likely ridership (although they are to an extent) but simply that these things are extremely hard to estimate. I can think of projects where the ultimate ridership has been pathetic compared to estimates, and also projects where the ridership has been much greater than the estimates. (That Jubilee line extension is one of these: they have had to increase capacity on it much faster than was originally intended).

    In Sydney, Australia, a government about 20 years ago decided to fund new urban motorways using what was referred to as a BOOT model (Build, own, operate, transfer), in which the developer was invited to built the road and then collect tolls (the amount of which was preset when the contract was signed) for a concession period, after which ownership of the road would revert to the government and the road would cease to be tolled. The first four of these were hugely profitable for the companies that built them and road use was way above projections. Of course, after this, there was much more competition for subsequent contracts, and cheap credit also dried up. So the next two such road projects led to the developers losing their shirts. This is fine, of course, as long as private investors are taking the risk. The trouble is that such companies get into dubious relationships with governments and want to be bailed out when things like this happen. Genuinely making the private companies accept the risk tends to be hard.

    Posted by Michael Jennings on  12 July 2011 at 07:51 pm

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