We’re seeing a lot of articles in the mainstream press these days about how declining productivity and increasing costs have hampered US construction. It’s good to see the issue getting exposed to the general public, but it’s an enormously complicated and difficult problem to solve. Here are a few mainstream media highlights.
From The New York Times (might be behind a paywall):
It’s everywhere. “The Organization for Economic Cooperation and Development tracked construction productivity in 29 countries between 1996 and 2019. In 40 percent of them, productivity fell during that time.”
The south is doing better. “The worst performers…were Alaska, Idaho, Wyoming, Delaware and Michigan. The relative stars were Georgia, North Carolina, South Carolina, Virginia and Colorado.”
Safety takes time. “The safety features on jobs when I started in the industry were not even noticeable. Safety on a job today is incredibly different.”
Paperwork. “The level of reporting that you have to send to the government, to the insurance companies, to the owner, to show you’re meeting all the requirements on the job site, all of that has increased. “
Check out the link at: https://www.nytimes.com/2023/02/05/opinion/economy-construction-productivity-mystery.html
US compared to the world
A more academic analysis is provided in this research study on the Transit Costs Project led by Eric Goldwyn, an assistant professor and program director in the Transportation and Land Use Program at the NYU Marron Institute.
The premise of their study was this:
Why do transit-infrastructure projects in New York cost 20 times more on a per kilometer basis than in Seoul? We investigate this question across hundreds of transit projects from around the world. We have created a database that spans more than 50 countries and totals more than 11,000 km of urban rail built since the late 1990s. We will also examine this question in greater detail by carrying out six in-depth case studies that take a closer look at unique considerations and variables that aren’t easily quantified, like project management, governance, and site conditions.
And the findings:
“The United States is the sixth most expensive country in the world when it comes to building rapid rail projects. The reasons why range from the politicization of project management to the expanding role of consultants, the costs of labor, and efforts to limit disruption to normal traffic flow during construction.”
“In the countries that are more expensive than the U.S., they’re building 65 percent or more of their projects underground, and in the U.S., we’re only building like 37 percent of our projects underground. So we’re choosing a less expensive method and we’re still very close to being the most expensive in the world.”
“If it costs $1 billion a mile or $2 billion a mile, depending on the city you live in, it’s very hard to scale at more than a mile or two at a time. It’s very hard to raise those sums of money to build something. If you’re moving toward a more global average of, say, $350 million to $400 million a mile, then a total of $4 billion or $5 billion can get you 10 or 12 miles of rail instead of 2 miles. All of a sudden that’s a big line. You can do a lot more with it.”
“If you have a $5 billion project and you assume 5 percent inflation per year, then every year you’re not making a decision, it costs $250 million. Every six months you’re not making a decision, it’s $125 million.”
And my favorite finding of all:
“Much of the premium [in labor cost] comes from white-collar overstaffing: in our Massachusetts’ Green Line Extension (GLX) case, we found that during the first iteration of the project, the ratio was estimated at 1.8 craft laborers to 1 supervisor by the CM/GC. In New England, the expected ratio is 2.5 or 3 craft laborers per supervisor; thus, GLX had 40-60% more supervisors than is normal in the Northeast.”
Goldwyn also found one project in North Carolina that spent $150 million on consultants before the project was shelved even though the scope of the work done by the consultants was within the ability of the engineers in the DOT.
Mobile workforce
Another interesting difference between US and European workers were that the European workers were highly mobile and thus more experienced:
“…A nationally mobile workforce is a more productive workforce–such workers gain experience from tunnels built elsewhere, whether for infrastructure or for the mining of natural resources. Present-day New York laborers only have experience with New York projects; thus, they are a dedicated and driven workforce but also a low-productivity one, having never seen more efficient tunnel projects.
Hit the link below if you want to dig into the details of the NYU study. And next week I’ll give you my boots-on-the-ground take.
https://www.governing.com/finance/why-are-u-s-transit-projects-so-costly-this-group-is-on-the-case
Hat tip: I found the NYU study on the always-interesting website www.marginalrevolution.com.
In the comments section his readers were very vocal about the burden put on construction through insurance requirements and the legal system. To wit:
“…there is never any substantive discussion of the bloated insurance and liability costs of absolutely everything. As an American living in the EU I see the difference in almost every sector, both in terms of cost and operational efficiency overall. I wish there were more research done to establish exactly how this ridiculous bloat steals from Americans and hinders American prosperity.”
Do you agree? If you have something to contribute, please hit the comments button below. It’s a big problem and our industry isn’t doing enough to solve it.
# # #