# Efficacy of Private vs. Public Sector Construction Projects



## TheCrescent (Feb 16, 2022)

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.


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## MARC Rider (Feb 16, 2022)

TheCrescent said:


> 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.


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## TheCrescent (Feb 16, 2022)

MARC Rider said:


> 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.


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## jis (Feb 16, 2022)

TheCrescent said:


> 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.


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## Just-Thinking-51 (Feb 16, 2022)

jis said:


> 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?


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## MARC Rider (Feb 16, 2022)

jis said:


> Just five years later than originally planned and counting.


And they had no real conflicts or interfaces with any other railroads. But they did have some NIMBY issues, plus it seems, they made a goof with the construction at their Miami station.


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## joelkfla (Feb 17, 2022)

jis said:


> 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.


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## John819 (Feb 17, 2022)

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.


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## Amtrak25 (Feb 17, 2022)

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.


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## TheCrescent (Feb 17, 2022)

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.


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## AmtrakMaineiac (Feb 17, 2022)

There seems to be something about projects in New York. They could design and built an outhouse and it would end up costing a million dollars and be 3 years late in completion.


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## MARC Rider (Feb 17, 2022)

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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## TheCrescent (Feb 17, 2022)

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.


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## MARC Rider (Feb 17, 2022)

TheCrescent said:


> 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.


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## TheCrescent (Feb 17, 2022)

MARC Rider said:


> 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.


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## Metra Electric Rider (Feb 17, 2022)

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.


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## TheCrescent (Feb 17, 2022)

Metra Electric Rider said:


> 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.


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## PaTrainFan (Feb 17, 2022)

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.


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## Bob Dylan (Feb 17, 2022)

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!


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## caravanman (Feb 17, 2022)

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...


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## TheCrescent (Feb 17, 2022)

PaTrainFan said:


> 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.


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## neroden (Feb 17, 2022)

TheCrescent said:


> 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.)


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## neroden (Feb 17, 2022)

TheCrescent said:


> 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.


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## neroden (Feb 17, 2022)

TheCrescent said:


> 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.)


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## MARC Rider (Feb 17, 2022)

Metra Electric Rider said:


> 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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## west point (Feb 17, 2022)

MARC Rider said:


> 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.


ATLANTA had a hotel with that window problem as well. Replacement windows were a large multiple cost of original windows as original vendor no longer could produce them.


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## joelkfla (Feb 17, 2022)

Leaning Tower of San Francisco.


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## Bob Dylan (Feb 18, 2022)

west point said:


> ATLANTA had a hotel with that window problem as well. Replacement windows were a large multiple cost of original windows as original vendor no longer could produce them.


W Hotels had a similar problem when building their Chain all over the US.


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## Siegmund (Feb 18, 2022)

TheCrescent said:


> 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.



Ever tried to build a power plant?
There is a certain political contingent that thinks having the private sector build these and then sell the power to public utilities is magically better than having public utilities build them.

There have been two big nuclear plant construction projects in the past 15 years. One [sorta] private (Vogtle 3/4 in Georgia) and one public (Summer in South Carolina.) Both of them have gone many years and many billions of dollars over budget. In a curious twist of fate, the private project has received government assistance to the tune of ten figures, while the public project caused the bankruptcy of the lead contractor on the project.

Or we could just stick with railroads. The Northern Pacific was chartered in 1864 to build a line to Puget Sound, with the expectation that it would progress similarly to the Central and Union Pacific... and took six years to lay a single rail. Twenty years, a couple bankruptcies, and a half dozen presidents later, it finally opened. Ask Jay Cooke how rapidly the railroad gobbled up all the money he made off the Civil War.

Canadian Pacific, one of those ever-popular "public-private partnership" arrangements, came in five years late. Canadian Northern and National Transcontinental would have quietly sunk out of sight into the muskeg if they hadn't been taken over by the government.


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## Willbridge (Feb 18, 2022)

Siegmund said:


> Ever tried to build a power plant?
> There is a certain political contingent that thinks having the private sector build these and then sell the power to public utilities is magically better than having public utilities build them.
> 
> There have been two big nuclear plant construction projects in the past 15 years. One [sorta] private (Vogtle 3/4 in Georgia) and one public (Summer in South Carolina.) Both of them have gone many years and many billions of dollars over budget. In a curious twist of fate, the private project has received government assistance to the tune of ten figures, while the public project caused the bankruptcy of the lead contractor on the project.
> ...


I loved the Bank of Montreal ads for the CP centennial year. Yes, they financed it, but with methods that would have modern investors demanding heads to roll.


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## John819 (Feb 18, 2022)

The big problem today isn't the construction itself, it's the process needed to get approvals. Environmental Impact Statement - several years. Fighting off NIMBY lawsuits - several years. Procuring subcontracts - at least a year.


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## Deni (Feb 18, 2022)

The whole idea that private sector builds with amazing efficiency and the public sector can't build anything on time or on budget is such a stupid myth.


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## AmtrakMaineiac (Feb 18, 2022)

An example of a successful public sector project.

In 1958 the New York Central wished to divest itself of commuter service on the Highland Branch which ran through the western suburbs of Boston. The branch no longer had any freight service either. Boston's MTA the public transit system saw an opportunity to expand service and took over the line. A short tunnel was built connecting it into the existing Boylston St. subway. Overhead wire and signaling was installed and some fairly basic stations built as well as a yard and park-and-ride lot at Riverside near Boston's Route 128 circumferential highway (now I-95). the existing trolley fleet was augmented by converting some Cambridge trolley lines to trackless trolley (trolleybus). The line was completed on time and within budget and was up and running by July 4, 1959. A moribund rail commuter service was turned into the first modern Light Rail system in the US and a jewel in the MBTA's crown so to speak.


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## TheCrescent (Feb 18, 2022)

Deni said:


> The whole idea that private sector builds with amazing efficiency and the public sector can't build anything on time or on budget is such a stupid myth.



At least I never said that the private sector builds with amazing efficiency or that the public sector can’t building anything on time or on budget.

My specific point is stated above.


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## Deni (Feb 18, 2022)

TheCrescent said:


> At least I never said that the private sector builds with amazing efficiency or that the public sector can’t building anything on time or on budget.
> 
> My specific point is stated above.


Your statement is clear that you think the private sector is better at it than the public sector, and there is no evidence of that. That somehow it would be better if the private sector were involved in public works projects (forgetting that they already are, all public projects use private contractors and workers). Comparing one project to another is just cherry picking and isn't real data.

Public works get in the news when something goes wrong, so that's always people's perception of "how government works." When a public works project goes smoothly nobody notices. Nobody would know that projects like Dallas light rail or Chicago's south Red Line rebuild came in on time and on/under budgets.


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## TheCrescent (Feb 18, 2022)

Deni said:


> Your statement is clear that you think the private sector is better at it than the public sector, and there is no evidence of that. That somehow it would be better if the private sector were involved in public works projects (forgetting that they already are, all public projects use private contractors and workers). Comparing one project to another is just cherry picking and isn't real data.
> 
> Public works get in the news when something goes wrong, so that's always people's perception of "how government works." When a public works project goes smoothly nobody notices. Nobody would know that projects like Dallas light rail or Chicago's south Red Line rebuild came in on time and on/under budgets.



Actually, there’s a lot of evidence that the private sector, in general, uses capital for infrastructure more efficiently than the public sector does. There are plenty of studies showing that- just try Google.

There are plenty of public-sector projects that are done on time and below budget, and plenty of private-sector projects that are delayed and over budget. And the private sector makes plenty of mistakes and wastes plenty.

But my point, as again stated above, is very well documented.


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## CaptPete 43 (Feb 18, 2022)

There is a lot of pro private sector propaganda in these.

I worked for a Fortune 500 company that no longer exists due to the incompetency of its Wharton educated Chairman/President. He once stated to me he would have been richer than Trump had he been funded by his father as Trump had been.


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## Bob Dylan (Feb 18, 2022)

CaptPete 43 said:


> There is a lot of pro private sector propaganda in these.
> 
> I worked for a Fortune 500 company that no longer exists due to the incompetency of its Wharton educated Chairman/President. He once stated to me he would have been richer than Trump had he been funded by his father as Trump had been.


Lots of Biz School Whiz Kids crash and burn in the Corporate World, also when they try out Government Work!


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## Metra Electric Rider (Feb 20, 2022)

MARC Rider said:


> 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.


That's actually a poor example since it wasn't a case of a project taking forever or massively over budget. The specific issue with the Hancock was that the technology designed was actually in advance of the technology available and installation skill. Poor choice but not inefficiency per se. 

The technology used there is now common, but the materials have caught up to the design. Lots of poor design happens - the Vidara Death Ray hotel in Vegas and it's cousin in London, the Scorchie-Talkie which both focus the sun to melt objects on the ground. Same architect I might add....


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## Metra Electric Rider (Feb 20, 2022)

There are plenty of poorly built high-rises - I can think of one luxury condominium tower in Chicago that has fairly major settling in one bay. But those aren't necessarily inefficiencies, just poor workmanship. 

The MBTA example above sounds a lot like the Skokie Swift in Chicago as well, quick and cheap public sector project that turned out to be a success. 

I could also mention the Harold Washington Library in Chicago as an example of problems with public construction (the design of the building, planning specifically, is flawed and inconvenient, but it's reasonably well built and won the public competition because 'it looks like a library') in that the desire to use minority contractors backfired - why? Because it's a government project the payouts take longer because the approvals are stricter. How did it backfire? Most of the contractors were small and couldn't wait until they got paid, while a larger company would have had other income streams (however, this is really getting off the efficiency of government vs private projects I think). 

I think the power plant and old RR company examples are interesting, but power plants are notoriously complex and slow to build (especially if atomic) and raising money for RR construction was tricky and rife, in the 19th C, with graft and corruption... 

Anyways, rant over, back to our regularly scheduled programming...


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## west point (Feb 20, 2022)

According to various posts about India and UK maybe it would be Amtrak's best interest to have a dedicated force if it ever goes into major electrification?


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