Efficacy of Private vs. Public Sector Construction Projects

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TheCrescent

OBS Chief
Joined
Jun 24, 2020
Messages
562
By comparison, see an article in a recent Trains magazine about Union Pacific building a new bridge in about a month.

If there were a way of getting the private sector to have more involvement in operating passenger rail, there would be fewer instances of slow, overly-priced nonsensical infrastructure development.
 
By comparison, see an article in a recent Trains magazine about Union Pacific building a new bridge in about a month.

If there were a way of getting the private sector to have more involvement in operating passenger rail, there would be fewer instances of slow, overly-priced nonsensical infrastructure development.
Oh, I don't know. If that bridge project had required the UP to work and coordinate with another railroad company in a densely populated urban area, it might be just as slow and expensive as a public sector project.
 
Oh, I don't know. If that bridge project had required the UP to work and coordinate with another railroad company in a densely populated urban area, it might be just as slow and expensive as a public sector project.
Sure, then see plenty of other projects. E.g., Brightline.
 
Sure, then see plenty of other projects. E.g., Brightline.
Just five years later than originally planned and counting. Though this time I think they will make it to the finish line :) Hey I live down here in Brightline land and campaigned for them locally even though it took a lot to get them to publicly state that they will do a station in the our County, hopefully eventually we will see. They have had their moments and their own little fiascos. And for the strangest of reasons they have had support from many who would otherwise oppose such a thing too. Someday someone ought to write a study of the whole thing. And I do actually like them and know several of the executives.
 
They have had their moments and their own little fiascos. And for the strangest of reasons they have had support from many who would otherwise oppose such a thing too. Someday someone ought to write a study of the whole thing. And I do actually like them and know several of the executives.

So have you ever thought about writing a book yourself?
 
Just five years later than originally planned and counting. Though this time I think they will make it to the finish line :) Hey I live down here in Brightline land and campaigned for them locally even though it took a lot to get them to publicly state that they will do a station in the our County, hopefully eventually we will see. They have had their moments and their own little fiascos. And for the strangest of reasons they have had support from many who would otherwise oppose such a thing too. Someday someone ought to write a study of the whole thing. And I do actually like them and know several of the executives.
Indeed, I don't think All Aboard FL/Brightline has met a single announced funding or completion date in their entire history.
 
Note - in the "old days" it was not unusual to finish a project under budget and ahead of schedule. For examples, see the Empire State Building and the Pentagon.
 
The LIRR electrified Hicksville - Ronkonkoma on time and on budget in 1987, and was done in-house, though messed up badly building the Hillside Maintenance Facility just prior. It could be done by pubicly owned railroad in recent times, but I don't think anymore.
 
The private sector has lots of flaws and lots of inefficiencies but I’m not aware of any private company that would have let project costs balloon like that have for (for example) East Side Access.

Compare Brightline’s station building to Charlotte’s uptown station, which has been planned for 15+ years by government and still isn’t complete.
 
I would suggest reading Alon Levy's blog, where he writes in great detail about the (mis)management of public works projects related to transit.

Pedestrian Observations | For Walkability and Good Transit, and Against Boondoggles and Pollution

He provides a lot of details about why these sort of projects in the "Anglosphere" end up costing too much and being poorly designed, but he does show plenty of public sector projects in other parts of the world get built efficiently. One of his suggestions is that US transit and rail agencies hire executives from Spain or Italy, or Asia, but I think that even then, those execs would be frustrated by American political culture.

As for private capital being able to build things on time and under budget, that's not always a good thing, as readers of John Howard Kunstler's books about sprawl would reveal. (Note: Kunstler has more recently slipped into conspiracy-mongering, anti-vaxxer crankery, but his stuff from the 1990s and early 2000s is still good.) Yeah, they built all those housing developments, office parks, malls, etc., and made a profit, but the stuff they built was (and is) junk, cluttering up our landscape and being the main source of the climate change apocalypse that will overtake us sooner or later. Of course, all that "private sector" suburban build out was enabled by massive government highway building projects that had all of the same types of project mismanagement we see on rail projects.

Anyway, all that private-sector sprawl buildout was done on greenfield sites, so no wonder they could be done on-time and under budget. Private capital usually skims off the cream for their projects, they don't touch anything that's going to be too complicated. So of course, they appear more "efficient." So what? If private capital could run passenger rail better, they would not have offloaded the service to the public sector. And don't go yammering about Brightline. That is a very special case. And I am still putting even money on Brightline's owners trying to offload the train service to the public sector at some time in the future once they make their money from the real estate deals.
 
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When someone can point me to a private railroad handling a large infrastructure project comparable to East Side Access and the Second Avenue Subway, and permitting comparable delays and soaring costs, then I’ll believe that the private sector is no better at such things than the public sector.

If, say, Union Pacific’s costs for a large project soared as they have for East Side Access, Union Pacific would cancel it and use the funds where they would achieve a better rate of return. But then again, a private railroad that answers to investors would never have let a project be mismanaged like East Side Access, led by people who answer to voters, unions that donate, contractors that donate, etc.
 
When someone can point me to a private railroad handling a large infrastructure project comparable to East Side Access and the Second Avenue Subway, and permitting comparable delays and soaring costs, then I’ll believe that the private sector is no better at such things than the public sector.

If, say, Union Pacific’s costs for a large project soared as they have for East Side Access, Union Pacific would cancel it and use the funds where they would achieve a better rate of return. But then again, a private railroad that answers to investors would never have let a project be mismanaged like East Side Access, led by people who answer to voters, unions that donate, contractors that donate, etc.
The private sector doesn't finance and build infrastructure projects like the East Side Access or Second Avenue Subway, as these sort of projects are inherently unprofitable.
The Transcontinental Railroad (Union Pacific/Central Pacific) was built by the private sector, but it was financed by government bonds. Of course, there was also a giant swindle involved where the Union Pacific was overcharged for the construction work, and the swindlers (who controlled both the Union Pacific and the crooked construction company that overbilled the Union Pacific.) It needed to be financed with government bonds because no sane investor was going to finance such a project, but if they had, the swindlers would have been quite happy to swindle the private investors as much as they did the government.
I would say that the difference between private sector management of infrastructure and construction and public sector management of infrastructure projects is that the public sector management has a greater risk of incompetence whereas the private sector management has a greater risk of being run by crooks and swindlers.
 
The private sector doesn't finance and build infrastructure projects like the East Side Access or Second Avenue Subway, as these sort of projects are inherently unprofitable.
The Transcontinental Railroad (Union Pacific/Central Pacific) was built by the private sector, but it was financed by government bonds. Of course, there was also a giant swindle involved where the Union Pacific was overcharged for the construction work, and the swindlers (who controlled both the Union Pacific and the crooked construction company that overbilled the Union Pacific.) It needed to be financed with government bonds because no sane investor was going to finance such a project, but if they had, the swindlers would have been quite happy to swindle the private investors as much as they did the government.
I would say that the difference between private sector management of infrastructure and construction and public sector management of infrastructure projects is that the public sector management has a greater risk of incompetence whereas the private sector management has a greater risk of being run by crooks and swindlers.

There are plenty of large infrastructure projects in the private sector. Building skyscrapers, large railroad projects and, outside the US, building airports.

Private sector participants answer to investors. That makes a big difference in how efficiently capital is used in private sector infrastructure projects.
 
For some reason I'm reminded of Motorola's fiasco of a building project: they built a truly massive office facility in Harvard, Illinois, which was never actually occupied (by them or really anybody as I understand it). So big, poorly planned project do happen in private industry/business too.
 
For some reason I'm reminded of Motorola's fiasco of a building project: they built a truly massive office facility in Harvard, Illinois, which was never actually occupied (by them or really anybody as I understand it). So big, poorly planned project do happen in private industry/business too.

Absolutely. You’re exactly right. The American Dream mall also was delayed and was a multi-billion dollar project. So that’s another example of a botched private sector project.

Overall though my sole point is that in general, a private sector company will use funds for infrastructure projects more efficiently than a public sector one will.

There are plenty of public sector operators outside the US that do better than US public sector ones, though. And there are plenty of examples of all types that do well, and all types that do badly; the private sector is far from perfect and isn’t the best choice in many situations.
 
Another example of a for Profit Company investing Hundreds of Millions in a Huge White Elephant Building is the Oracle Campus here in Austin which was completed in 2020, and has not been occupied by any High Tech Workers since they all continue to" Work from Home ".

Only Security and Custodial Workers are @ the Modern, Beautiful Campus which displaced some 600+ People that lived in " Affordable " Apartments along the Lake Front location!

There are numerous examples of such plans gone bad including Governments bailing out Private Developers here in Austin.( and everywhere for that matter)

Also Toll Roads that were built with Government backed Bonds promising a guaranteed return to Investors went Bankrupt and are now being paid for by the taxpayers!
 
Amtrak LD trains run over mostly private rail tracks, but that does not seem to generate on time delivery from those private companies?
Private companies can cherry pick their projects, public works have to take place no matter the task and problems encountered...
 
There is also more "accountability" (i.e. more transparancy and scrutiny of costs and overruns) with public projects. With projects that are financed completely with private money, there may not be public disclosure of runaway costs.

If private funds are used for any investment, infrastructure or not, the public generally doesn’t have the right to known the details- and why would the public care?

How many people in New York government have been fired or voted out of office due to the costs of East Side Access ballooning from $3.5 billion to over $11 billion?

ZERO. In the private sector, heads would roll.
 
The private sector has lots of flaws and lots of inefficiencies but I’m not aware of any private company that would have let project costs balloon like that have for (for example) East Side Access.

There are very serious problems with MTA and New York City specifically. This doesn't generalize to other places.

Projects in Buffalo, NY and Schenectady, NY and Rochester, NY got done promptly.

Compare Brightline’s station building to Charlotte’s uptown station, which has been planned for 15+ years by government and still isn’t complete.
That one is 100% CSX's fault -- I've been following it. CSX sabotaged a grade-separation project, resulting in the need to redesign the station project to deal with the cancelled grade separation. (And this'll hurt CSX: the result is that CSX trains will wait at the diamond crossing. But CSX made their bed and they'll sleep in it.)
 
Private sector participants answer to investors.
They often don't, though.

I analyze investments for a living. It's extremely common for large, stock-market-listed private sector businesses to be totally unaccountable to investors -- they respond to the CEO, the CEO answers only to the Board, the Board is handpicked by the CEO, and the company can be run completely incompetently right up until the day it declares bankruptcy, because stockholders have no influence, and generally just start selling the stock when they notice the incompetence.

Closely-held companies often don't answer to investors because the CEO *is* the controlling investor.

There are only a few rare companies which have several large, active investors who aren't the CEO who actually answer to investors. It's uncommon.

I agree that actually answering to investors does provide discipline, but don't fool yourself: private sector companies rarely answer to investors.
 
When someone can point me to a private railroad handling a large infrastructure project comparable to East Side Access and the Second Avenue Subway, and permitting comparable delays and soaring costs, then I’ll believe that the private sector is no better at such things than the public sector.

Again, don't generalize from New York City. There is something *seriously* wrong in NYC. At this point I think every analyst agrees.

The public sector in the rest of the US does just as well as the US private sector, and often better.

Perhaps the worst outcome is from "public-private partnerships", which often have the worst aspects of both. (Ordinary contracting is often OK -- though not in NYC -- but other schemes are often basically theft schemes.)
 
For some reason I'm reminded of Motorola's fiasco of a building project: they built a truly massive office facility in Harvard, Illinois, which was never actually occupied (by them or really anybody as I understand it). So big, poorly planned project do happen in private industry/business too.
How about the John Hancock office tower in Boston, where the glass wall panels kept popping off the building? I'll be that one wasn't under budget once they paid for fixing the problem.
 
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