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More on Megaprojects

In my post about Trumps Great Wall­™ I pointed out that it would be considered a megaproject. Commenter bill left the following comment regarding megaprojects.

as for the “mega=project” slam, sure- that happens mainly in the uber-corrupt dem states, not where the wall is going. heck, we could you mexicans on work visa’s to keep the corruption at a minimum…..

In a word, “No.”

A megaproject is defined as,

“Megaprojects are temporary endeavors (i.e. projects) characterized by: large investment commitment, vast complexity (especially in organizational terms), and long-lasting impact on the economy, the environment, and society”…Megaprojects can also be defined as “initiatives that are physical, very expensive, and public”.

They usually come with a very large price tag, typically a $1 billion or more and usually have an impact on a vary large number of people. Megaprojects make up about 8% of global GDP according to Bent Flyvberg.

It is a mistake to try and fob this off on simple partisan differences. Megaprojects are projects that come from all political views. The Three Gorges Dam is a megaproject. Boston’s Big Dig is another example of a megaproject. The U.S. national highway system is yet another megaproject. The Sydney Opera House is a megaproject. That project went so badly the architect left well before it was completed and his name has only recently been associated with it people were so angry and bitter about that particular project.

Policy makers across the political spectrum are attracted to megaprojects for four reason,

  • Technological sublime – the rapture that engineers and technologists get from building large and innovative projects, pushing the boundaries for what technology can do.
  • Political sublime – the rapture politicians get from building monuments to themselves and for their causes.
  • Economic sublime – the delight business people and trade unions get from making lots of money and jobs from megaprojects.
  • Aesthethic sublime – the pleasure designers and people who appreciate good design get from building, using, and looking at something very large that is also iconically beautiful.

See here for more on the four sublimes.

These things are not particular to Democrats or Republicans, conservatives or progressives, etc. Even people of a libertarian view might be less susceptible to the political and economic sublimes, but I could see them easily falling for the technological and aesthethic sublimes. One might even add national/nationalist sublime which could account for the Olympics which are now considered a megaproject.

Further, megaprojects have a failure rate of 90% in each of the three categories: coming it at or below cost, coming in on time, providing the specified benefits. A simple calculation suggests that a megaproject would fail to deliver on all three 73% of the time. Thus, megaprojects incredibly wasteful.

And consider this list from Bent Flyvberg’s article,

  • Creates and sustains employment.
  • Contains a large element of domestic inputs relative to imports.
  • Improves productivity and competitiveness by lowering producer costs.
  • Benefits consumers through higher-quality services.
  • Improves the environment when infrastructures that are environmentally sound replace infrastructures that are not (Helm, 2008: 1).

Sound familiar? That is the usual list of reasons why the public should support a megaproject. That list is something either a Democrat, Republican or even a Socialist could give for a megaproject. But as Bent Flyvberg points out, there is a big “if” in there. That list may be true if the megaproject is done right. But as history shows megaprojects are generally failures. Very expensive failures just using basic accounting. If we were to include opportunity costs it would be vastly more.

Consider the Sydney Opera House, it is considered an architectural marvel. However, the architect Jørn Utzon did very few works after the Sydney Opera House. One could speculate that this was due in part to the problems associated with the Sydney Opera House. If this is true, then it is quite likely that the world is worse of by not having more architecture designed by Utzon. Similarly with the Great Wall of Trump™ what else could we spend that money on? Funding research into for cancer, HIV, dementia? What about the long term damage to the relationship with our largest trading partner?

When somebody proposes a megaproject you should automatically be suspect. Set aside partisan Bravo Sierra and look at the facts. The facts are these things are incredibly wasteful unless managed correctly and more often than not…they are managed incorrectly.

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About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research.

Comments

  1. HarvardLaw92 says:

    Not that I disagree (I don’t), but dude, you spent an entire blog piece responding to bill?!?!?!

    :-)

    Like or Dislike: Thumb up 13 Thumb down 0

  2. Argon says:

    To be fair to Boston’s Big Dig… The engineers knew thel cost was going to be much, much higher than the figures the politicians originally sold.

    I think by the very nature of the political decision making process, most mega-projects are going to be promoted as costing much less than actual amount.

    My dream mega-project would be the reworking of the Northeast train corridor. However, I suspect autonomous car technologies coming in the next 10 years or so could make it obsolete.

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  3. Gustopher says:

    I am pretty sure that we will not be getting great architects to design the Great Wall of Mexico, so I wouldn’t worry about their career.

    Our processes for Megaprojects are designed to fail. We go for the lowest bidder, but don’t bother to enforce the contracts — a relationship where the public not only takes the risks of going over-budget, but maximizes the chances of going over-budget. The contractors just pocket the profit.

    Better than letting the private companies own the infrastructure afterwards, but not much.

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  4. al-Ameda says:

    When somebody proposes a megaproject you should automatically be suspect. Set aside partisan Bravo Sierra and look at the facts. The facts are these things are incredibly wasteful unless managed correctly and more often than not…they are managed incorrectly.

    Well I’m not going to stop advocating for a project that results in Donald Trump being buried in the Meadowlands. Sure there might be waste, but the benefit to the public far outweighs any concern about cost overruns.

    Like or Dislike: Thumb up 1 Thumb down 0

  5. Liberal Capitalist says:

    Follow the money…

    There are several companies that do Megaprojects. Bechtel, AECOM, etc.

    With Trump election, stock went up due to the talk of infrastructure investment.

    Bet the wall… it’s the new bridge to nowhere… or as some say: a staircase to no place.

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  6. dxq says:

    sports stadiums are the worst.

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  7. Pch101 says:

    The Sydney Opera House was financed through lottery ticket sales. In spite of the fact that it went well over budget and was years behind schedule, it was paid for in short order.

    Australia used to be a backwater. The Opera House is an icon that has contributed to transforming Sydney into a desirable world class city (with high real estate values to match.) I doubt that a kiosk dedicated to Ayn Rand would have produced the same bang for the buck, even if it was far cheaper and on budget.

    Construction projects large and small are often late and over budget. I suspect that has little to do with anything sublime, and has a lot more to do with some less colorful realities:

    (a) Buildings and other infrastructure are essentially handmade products, which doesn’t do wonders for efficiency

    (b) Numerous unrelated parties and bottlenecks are involved in the process. If one subcontractor is late, it can delay the entire process and many others who follow.

    (c) The process can involve an unrealistic dreamer at the top (an architect) and a bunch of unsophisticated grunts at the bottom (construction companies), none of whom particularly care if the thing is late and on budget because an entirely different entity (the developer) is responsible for dealing with the financial problems. It can be an odd combination for getting things done.

    Ironically, an architect was a hero in an Ayn Rand novel, but architects are often culprits in bad projects. Everybody loves Frank Lloyd Wright from a distance, but the guy had a habit of building stuff that leaked. (Hint: Water and building materials are not a good combination.) Living with one day after day isn’t the same as seeing one in a book.

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  8. dxq says:

    dude, my girlfriend graduated from a college in south fla that was part-designed by FLW. It was built around 1950. it’s completely crumbling. He would make these boutique concretes that just did not work.

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  9. dxq says:

    Ironically, an architect was a hero in an Ayn Rand novel, but architects are often culprits in bad projects.

    A hilarious 70-part Fisking of Atlas Srugged. I recommend that link for anyone who thinks Atlas Shrugged made even the slightest bit of sense. It’s embarrassing.

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  10. MarkedMan says:

    Your assumption that because a project costs more than expected it should be considered a failure makes no sense. Would the US be better off without the national highway system? San Francisco without the Golden Gate Bridge? NYC without the Brooklyn Bridge?

    As projects become more complex it gets harder to foresee every contingency and control the timing hundreds of concurrent efforts. And the nature of any project is that uncertainty, changes and delays almost always increase costs.

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  11. Daryl's other brother Darryl says:

    Most every project is prone to going over budget and schedule for any number of reasons. Trying to lump them all together and find some defining characteristic is a fools errand. I’m sure the Great Pyramids were behind schedule and over budget. Likely all of the great Gothic Cathedrals in Europe. The addition on your neighbors house, too. The post above is, necessarily so I suppose, simplistic.
    Australia is not what Australia is today without the Opera House. The last time you were driving on the Interstate System did you care that it was over budget and behind schedule? The long-term benefits that the best of these projects have generated more than make up for their initial deficiencies.
    My favorite Mega-Project is the Grand Cooley Dam. At the time it was built it was the largest man-made structure on the planet. Strongly supported by FDR and fought tooth and nail by Republicans; Seattle, Portland, and Vancouver do not exist, as they do today, without it. It also provided power for plutonium production that was part of the Manhattan Project…so it helped us win WW2. And yes…it was way over budget and behind schedule. Does anyone care today?
    I think the Grand Coulee is a great contrast with Trumps Wall…because of what it has helped us accomplish. Trumps Wall accomplishes nothing. Absolutely nothing. The short-term benefits are dubious, at best. There are no long-term benefits to be derived from it.

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  12. MarkedMan says:

    @dxq:

    A hilarious 70-part Fisking of Atlas Srugged. I recommend that link for anyone who thinks Atlas Shrugged made even the slightest bit of sense. It’s embarrassing.

    That is priceless. I remember trying to slog through that mess when my 19 year old brain became briefly fascinated by libertarianism. Examples two and three from the link, both in the first chapter, make me reading it and slapping my head over the increasingly stupid ways the ‘heroic’ characters acted. In the first example Dagny forces her employees, experienced train engineers, to charge ahead and ignore the red track warning light because it’s probably just a defective signal. In the second she invests the future of her family’s company because some other like minded champion of industry convinced her that his brand new metal, although untested and unused in any other project was shovel ready and no pilot studies or even pilot projects were just signs of weakness. (A new metal? Really? Not an alloy? But maybe Scientists had just not noticed a gap in the periodic table until shown the error of their parasitic ways by the heroic captain of industry, Reardon.)

    Libertarianism. Because real truth emerges not from tests and experience and rational planning, but from how dramatically you talk and act and how much contempt you show for those who haven’t drunk the koolaid.

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  13. gVOR08 says:

    @MarkedMan: Yeah. I read Atlas Shrugged in high school.I don’t recall finishing it. Even as an antisocial, ignorant teenager I kept going, “What, nobody acts like this. No one talks like this.”.

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  14. gVOR08 says:

    Utzon received the Pritzker Architecture Prize, architecture’s highest honour, in 2003.[24] The Pritzker Prize citation read:

    There is no doubt that the Sydney Opera House is his masterpiece. It is one of the great iconic buildings of the 20th century, an image of great beauty that has become known throughout the world – a symbol for not only a city, but a whole country and continent.

    You are failing to distinguish between failures of the project and failure of product. As I commented on the earlier thread, it seems to be necessary to oversell and underbid these projects.

    The Interstate Highway system went about 400% over budget and 200% over schedule. I drive on some part of it nearly every day.

    None of the above is in any way support for the Gross Wall. My examples above promised some actual utility.

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  15. MarkedMan says:

    @gVOR08: At some point I realized that Roark in The Fountainhead was essentially a really d*ckish version of Frank Lloyd Wright. ( I understand many people believe Rand’s philosophically corrupt architect Keating was actually Raymond Hood, and the building she slams as being a travesty of kitsch is Rockerfeller Center in NYC). I’m a big fan of Wright but am also from Chicago, where there are a lot of Wright homes, from fairly conventional to striking. It is well known to Chicagoans that, like libertarianism, his projects appear better from a distance than when viewed from inside while trying to live your life. Innovative mixtures of concrete (that Rand’s Dagny would have no doubt seen in an instant were infinitely superior to the old mixes because she had ‘seen the formula and test results’) had a tendency to crumble and crack a decade or so out. One hapless homeowner’s plight always stuck in my head: Wright insisted on an huge, admittedly beautiful, expanse of glass for the living room, with no frame. It was mortared directly into the stone and cement wall. Inevitably, the house settled, and the thick window cracked, letting in the frigid winter air. The only way to fix it was to tear down essentially the whole side of the house.

    Here’s one architect’s take:

    There’s only one problem: modernistic houses didn’t work very well. Inevitably, flat roofs leaked (Wright once said that if the roof doesn’t leak, the architect hasn’t been creative enough). Built-in furniture limited the uses to which rooms could be put, and a total design that included movable furniture militated against bringing your own furniture inside (when visiting the homes of his clients, Wright was known to move “his” furniture back where it belonged). Angles that were anything but ninety degrees made it difficult to add or expand rooms as desired in order to meet new needs (several of Wright’s clients simply ordered a new house when they outgrew the old one). The use of new, untried materials complicated maintenance and improvement. As a result, many houses by Frank Lloyd Wright are no longer family homes but museums lovingly (and expensively) cared for by non-profit trusts and foundations. In short, these machines for living often turned out to be not so livable.

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  16. al-Alameda says:

    @dxq:

    sports stadiums are the worst.

    The San Francisco Giants, after being turned down by the voters in 3 or 4 elections, finally came forward with an electoral proposal to privately finance their waterfront ballpark, one of the very best in baseball. The financed cost of the park was about $425 million, and the city provided approximately $75M for infrastructure improvements in and around the site.

    The interesting fact here is that the Giants were the first team to privately their stadium since the Dodgers did when the moved to Los Angeles in 1968. Needless to say, the other MLB owners were not amused by the Giants’ ownership group plans to privately finance their ballpark, because most owners are so accustomed to extorting getting resident voters to cave in to a threat to move the team, and they usually vote to finance these private profit making teams.

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  17. gVOR08 says:

    @MarkedMan: Forget the details, but many years ago in an engineering magazine I saw an article about a Wright’s Fallingwater house. There were bad cracks in the reinforced concrete cantilevered deck. During refurbishment someone dug out the original Architectural Engineer’s structural analysis and found it was incorrectly done.

    I looked at the WIKI article on the house, says the owner referred to it as a seven-bucket house for the roof leaks and as Rising Mildew.

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  18. al-Alameda says:

    @al-Alameda:

    since the Dodgers did when the moved to Los Angeles in 1968

    … oops, 1958 …

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  19. Mr. Bluster says:

    Everybody loves Frank Lloyd Wright from a distance, but the guy had a habit of building stuff that leaked.

    See R. Buckminster Fuller Geodesic Dome.
    https://en.wikipedia.org/wiki/Geodesic_dome

    Some denizens of Sleepytown worship Fuller like a deity and consider the dome he lived in here a temple.
    Bucky had the good sense to move out before it started leaking like a sieve.

    https://en.wikipedia.org/wiki/R._Buckminster_Fuller_and_Anne_Hewlett_Dome_Home

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  20. HarvardLaw92 says:

    @MarkedMan:

    My go to example is the Johnson house in Racine. It began leaking from day one, and Wright’s response to Hib Johnson was simply that he should move his chair. Thus began decades of endless puttying and leak chasing. When they finally pulled the roof off in the 90s to assess the extent of preservation efforts necessary, they found structural members that were little more than butt nailed 2 x 4’s with some plywood. Repairing it involved having custom pieces watercut out of structural aluminum and carbon fiber / tenting the entire house & turning it into an oven so the epoxy would cure. It cost millions.

    I’m not sure if Wright’s ideas simply outpaced the materials available at the time or he was simply an artist instead of an architect. Maybe a little of both, but I’ve always felt that he’s praised for being the former while his abject failings as the latter get ignored.

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  21. HarvardLaw92 says:

    @gVOR08:

    During refurbishment someone dug out the original Architectural Engineer’s structural analysis and found it was incorrectly done.

    It may be apocryphal, but I’ve always heard that the engineers hired by Kaufman plainly told Wright that there wasn’t enough structural support in the cantilevers and more reinforcement was necessary. Wright apparently threatened to abandon the project entirely if things were done as he directed, so they simply snuck more reinforcement in when he wasn’t looking (although it was still insufficient). That they began to sag almost immediately tells the tale. Wright was a gifted artist, but he wasn’t much of an architect when it came to understanding durability & load distribution.

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  22. That’s a common theme with Modernist Architects. I´ve never liked Oscar Niemeyer with his obsession with concrete and his disdain for trees, many Brazilians think that Brasilia is a Architectural abomination.

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  23. grumpy realist says:

    @dxq: I live in Oak Park, where you can’t go ten feet without tripping over something designed/built by FLW and we’re in the middle of redoing Unity Temple. Because the roof leaks…

    FLW may have been a Great Architect, but he was a lousy civil engineer.

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  24. grumpy realist says:

    @MarkedMan: As has been pointed out, Ayn Rand had no understanding of how science works, how things get invented, how things get built…..

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  25. grumpy realist says:

    P.S. Ol’ Frank decided to use carved oya stone to cover his Imperial Hotel in Tokyo. Which is great, except that the stuff makes the hotel facade look like it’s been attacked by diseased lichen.

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  26. Pch101 says:

    An oldie but a goodie:
    ____

    There are two novels that can change a bookish fourteen-year old’s life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world. The other, of course, involves orcs.
    ____

    Personally, I found it funny that the oppressive police state that puts the hero on trial allowed him to make rambling fifty-page speeches under questioning without objection from the prosecutor or admonishment from the judge.

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  27. MarkedMan says:

    @grumpy realist:

    Ayn Rand had no understanding of how science works, how things get invented, how things get built…..

    Libertarians fall into the category of “October 23-ers” or people who have seen reality completely disprove their theories but just double down on them despite any evidence. I coined the name after the Millerites, who sold off their property, forgave their debts and gave away their worldly possessions because their leaders, George Miller and eventually Samuel Snow, predicted a series of dates for the the end of the world. As each date passed without incident, the calculations were rejiggered and a new date would be trotted out, with the last predicted on October 22, 1844. The faithful followers stayed true and became the Seventh Day Adventist Church.

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  28. grumpy realist says:

    @MarkedMan: My standard argument I use against libertarians is this: if your system is so fantastic and fail-safe and wonderful, HOW COME WE DON’T HAVE AN EXAMPLE FROM HISTORY?!!!!

    At which point a lot of them pull out “The Gilded Age” of the US and I really go medieval on their asses, pointing out exactly how NON-utopia it was for anyone who was a) female b)non-WASP c) poor. At which point they usually fall back on example #2, which is 11th century town halls in Iceland and I just laugh.

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  29. DrDaveT says:

    A simple calculation suggests that a megaproject would fail to deliver on all three 73% of the time.

    Only if you assume that cost, schedule, and effectiveness are independent — which they most certainly aren’t. Cost and schedule are highly correlated, and are negatively correlated with effectiveness (as people trade away features to minimize cost and schedule overruns). Risk analysis for such projects is complicated.

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