Tuesday, June 05, 2012

New Delays Pushing Revenue Service on 7 Line Extension To 2014

Once again, the MTA has fallen behind on another one of its major capital projects. This time, the MTA wont meet its December 2013 deadline to initiate revenue service on the 7 Line extension into Hudson Yards on the West Side. Instead, it will be hoping for a July 2014 open, though parts wont be done until 2015 (more than 12 months late):
The No. 7 subway line extension to 11th Avenue and West 34th Street won’t carry passengers until mid-2014 — six months later than was widely expected — and the new station won’t be entirely finished until the end of 2015, the MTA said yesterday.
The agency had long cited a December 2013 target opening.

But “passenger train service [to the new station] is scheduled for June 2014,” an MTA spokesman told us.

The six-month delay is hopefully not a sign of greater trouble at a project that’s of paramount importance to Gary Barnett’s Extell Development Co. and Stephen M. Ross’ Related Cos.

It’s also crucial to City Hall, which heralds it as the mass-transit gateway to a redeveloped Far West Side.

The station’s at the doorstep of One Hudson Yards, the 56-story office tower Extell plans to build on 11th Avenue and 33rd and 34th streets.
There's no reason given for this latest setback, but it echoes similar problems with other MTA projects, including the East Side Access and 2d Avenue Subway line projects. The projects continue to come in over budget and are delayed long past when they were initially expected to be completed.

These delays are going to affect the real estate developers who were hoping to capitalize on the new service by building skyscrapers in and around Hudson Yards, but the real problem is that the MTA still can't seem to keep its capital costs and deadlines on schedule.

It's a problem that isn't confined to the MTA, or even the New York metro area. Nationally, it's rare to find major infrastructure projects that are coming in on budget and on schedule. We have to do better, and the problems aren't the result of greedy unions either. The companies that are providing the backbone of the work are repeatedly low-balling offers to get the work and then continue to charge overages for work until it is completed. The replacement Oakland Bay Bridge project is one such example. Back when the project was bid, it was expected to cost $1.75 billion. The low bid at the time was a joint American bid (American Bridge Company and Fluor Corporation) for $1.8 billion. The state then rebid and a the same bidder (American Bridge Company and Fluor Corporation) won the bid with a $1.43 billion offer with the state seeing this as a savings for taxpayers. American Bridge and Fluor sought to save money by using Chinese-fabricated steel. Now, the work looks like it will cost at least $1.85 billion and everyone's harping about the potential jobs that were not created by going with the Chinese steel.

Yet, the real question is why anyone thought that we'd see the same bidder with essentially the same bid coming in at $400+ less than its original figure stick to that lower figure when it knew or had reason to know that the final cost would have been closer to the final figure. Costs weren't going to drop. Construction costs only increase over time.

We've got a bunch of competing interests, but the problems start with unrealistic bidding. Everyone wants to see the bidding low-balled; politicians need to get projects started to show that they're doing stuff, and companies need the projects to get work started. Once work is underway, there's not enough incentives to keep the projects on budget - everyone figures that taxpayers will soak up the difference since politicians don't want to be on the hook for an unfinished project. Inertia drives the projects through to completion, but at tremendous cost.

Would the American bid have stayed on budget? That's doubtful given that most projects go overbudget. Would it have created more jobs in the states? That's quite possible. But would California have gone ahead with the project had the up front cost been at the $1.8 billion point? We're talking about a $500 million difference, which in a cash-strapped state is big money (including on lending terms, bond offerings, etc.).

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