Lessons from history

by Ross Crockford, October 2010

Voting “no” on the delusions and deceptions of Victoria’s bridge project.

Not long ago, while looking through old newspapers, I found an omen of what may happen with the City of Victoria’s plans to replace the Johnson Street Bridge.

It was an ad in the December 8, 1948, edition of the Victoria Daily Times, when the City was four years into construction of the Memorial Arena. Back in 1944, Victoria needed a new hockey rink, and the City decided a landmark arena would commemorate those fighting in World War II. Estimates came in at $215,000, so a citizens’ group raised funds for the project, and voters passed a bylaw to borrow the rest.

Then construction started, and things went sideways.

The designs changed, and the projected cost increased to $500,000. To cover the shortfall, in 1946 the City sold its Victoria Daily Times adWillows exhibition grounds. But that wasn’t enough. Construction stalled, and didn’t resume until May of 1948, when voters approved another borrowing bylaw. Then, six months later, the project ran out of money again, prompting Victoria’s council to take out the ad I found.

“This Final By-Law Will Complete The Arena—POSITIVELY.” Many projects have turned out to be more expensive than advertised, the text says, assuring voters that the Council has “gone into all the details,” right down to the furniture. “So come on, Victoria, let’s Stop Arguing as to who is to blame for inflation, or underestimating, and just let’s say ‘YES,’ we’ll finish the job.”

Having little choice, voters approved a third borrowing bylaw. In the end, the arena cost $1.2 million, six times the original estimate.

I’ve been thinking a lot about that arena lately. This November 20, the City will put another referendum to voters, to borrow $49.2 million for a new Johnson Street Bridge. Add in $21 million of federal money and $6.8 million of redirected City cash, and the project comes to an estimated $77 million, the biggest in the City’s history.

As a fan of the existing bridge—a structure that has lived in the real world for 86 years, and survived Victoria’s biggest recorded earthquake in 1946—I’ve been publicly critical of the “100-year” replacement bridge, which so far exists only in sketches and computer simulations. But as a Victoria taxpayer, I’m also worried that we will see the financial nightmare of Memorial Arena repeat itself. I’ve spent the past year watching our mayor and councillors, and I’m afraid they haven’t learned from our own history, or that of anyone else.

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“There are some phenomena that have no cultural bounds, such as maternal love and a healthy fear of large predators,” writes Bent Flyvbjerg. “We can add to this list the fact that, across the globe, large infrastructure projects almost invariably arrive late, over-budget, and fail to perform up to expectations.”

Flyvbjerg, an Oxford professor of major programme management, is the world’s pre-eminent expert on megaprojects and financial risk. He’s in demand these days. Infrastructure spending as a percentage of GDP is the largest it has ever been, worldwide—and, Flyvbjerg notes, nine out of 10 transportation projects experience cost overruns.

Flyvbjerg studied 258 transportation projects in 20 countries, and on average, road projects cost 20 percent more than their original estimates, bridges and tunnels 34 percent more, and rail 45 percent more. Sometimes, the overruns were huge: Denver’s airport, the English Channel tunnel, and Boston’s “Big Dig” came in at twice to 10 times their original estimates. (Closer to home, Okanagan’s William Bennett Bridge was budgeted at $100 million but finished closer to $150 million, and the Port Mann Bridge has gone from $600 million to $3.3 billion.)

Politicians and planners often blame such overruns on unforeseen complexities in their projects. The pattern is so widespread, however, that Flyvbjerg considers it ridiculous to claim such underestimating is “unforeseen.” He thinks something else is at work.

In Flyvbjerg’s view, all politicians and planners connected with infrastructure projects are prone to delusion, a natural “optimism bias” that tends to overestimate the benefits of a project, and underestimate the costs and time involved. Worse yet, short election cycles and the intense competition for dollars also encourage deception—the deliberate shaping of information to win over voters and funding bodies.

In 2004, Flyvbjerg interviewed local transportation planners in Britain. Many confessed that they intentionally underestimate costs to “pass the test” of project approval—for example, a referendum—knowing it’s nearly impossible to cancel a project once it is underway. American studies have cited similar confessions by planners. The consequence, Flyvbjerg concludes, is an inverted Darwinism: “It is not the best projects that get implemented, but the projects that look best on paper. And the projects that look best on paper are the projects with the largest cost underestimates and benefit overestimates[.]”

To prevent such delusions and deceptions, Flyvbjerg prescribes strong medicine. Politicians should compare estimated and actual costs and benefits to similar projects elsewhere—and expect dramatic increases if a project uses novel technology or designs. Instead of awarding funds project-by-project, national officials should dole out fixed sums of money to local governments, making it clear that the more locals spend on one project means they’ll get less for everything else. Since local governments are often outgunned in deals with experienced contractors, they should create independent bodies that can negotiate contracts and enforce accountability. They should create oversight committees with powers to investigate and release documents, and hold public hearings where promoters are forced to provide answers. Finally, he suggests using incentives to keep costs down, including—he’s been booed at conferences for saying this—jail time for those providing grossly inaccurate estimates.

As a result of their bad experiences with bloated projects, countries such as the UK, Denmark, and the Netherlands have adopted some of Flyvbjerg’s prescriptions, including factoring for optimism bias. But nothing like them are in place for Victoria’s new bridge.

The City has never held a public hearing on the project. No tough, independent, local oversight of the project exists; instead, there’s a staff-friendly Citizen Advisory Panel that meets privately. Background details of decisions often only come to light via freedom of information requests. And—unless it has recently changed—the contract with the MMM Group to oversee the project contains no clear incentives for them to minimize costs. This is the recipe for a boondoggle.

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One might ask: So what? Even if a new bridge costs more than advertised, it could provide benefits beyond money, like seismic security, greater safety for cyclists, and civic pride. But overpriced infrastructure also comes with costs beyond its construction, affecting everything else that the City does.

Last month, the City announced that it suffers from a $467 million infrastructure deficit. Our civic buildings and water system are only in “fair” condition, and our storm drains and sewer pipes are “poor.” To combat this, engineers recommended doubling annual funding for repairing these facilities, and building up capital reserves. But the City seems to be doing the opposite: some $6 million is being shuffled from reserves into the bridge, to bring the borrowing amount down to $49.2 million.

That number is no accident. In August, City financial officers said borrowing more than $51.4 million would require tax increases. By asking for $49.2 million, the mayor can straight-facedly declare that a new bridge will need no additional taxes—assuming it comes in on budget. What he’s less likely to mention is that the borrowing maxes out the City’s credit card. Thanks to the new bridge, every other big project for the next 20 years, whether it’s replacing sewer pipes, managing the Traveller’s Inn shelters, or building a new Crystal Pool, will require huge tax increases.

We’re in this situation partly because the council has never set a ceiling on the amount of money that the City can spend on a new bridge, or demanded that staff pursue the lowest-cost option—which would be to simply repair the bridge that exists. It has threatened to eliminate rail from a new bridge to save money, but has ignored the frills built into the project.

It is still proposing to build a UK architect’s tourist attraction, with a unique open-wheel lift mechanism—the only examples of which are on two bridges half the size and just 10 years old at London’s Canary Wharf—mainly to entice sightseers along a new harbour walkway. It is spending an extra $10 million to ensure the bridge will remain open to traffic immediately after a once-in-500-years earthquake. Millions more will go to relocating roads and new landscaping; in the latest estimate, there’s even $682,000 for public art. Voters aren’t just buying a bridge, we’re buying a beautification scheme.

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Flyvbjerg’s larger point isn’t just that huge sums are often wasted on megaprojects—it’s that their associated delusions and deceptions corrode our politics. And that’s exactly what’s happened in Victoria, where noble ends (bike lanes, seismic security, low interest rates) have justified all sorts of dubious means.

Midnight borrowing bylaws. A “Pick One!” design popularity contest, and an ignored result. False claims that federal money can’t be used for repair. Closed Citizens’ Advisory Panel meetings. Repair estimates rising from $8.6 million (see last month’s Focus) to $23.6 million to $35 million to $80 million, without any council skepticism. And now, the mayor says that if he loses the referendum, he may close the existing bridge by 2012, even though nothing in the condition assessment requires it, and his own replacement plan keeps it open to 2014.

Voting “yes” won’t just start a machine that can’t stop until it runs out of money, it will ratify the City’s conduct. I can’t do it.

The mayor has also said that if he loses the referendum, he may go ahead and replace the bridge anyway, and raise taxes to pay for it. As he apparently sees it, he would have a mandate to do so largely because a majority of some 600 residents called by an Ipsos-Reid phone survey in August said they’d prefer a $77-million replacement to an $80-million repair. But a “no” vote—by thousands of citizens, in a legally verifiable referendum—would send a very different message.

Another episode from our history provides some perspective. Back in the 1940s, as Victorians watched the financial disaster of Memorial Arena unfold, City officials also called for the construction of a new City Hall. The Italianate 1884 building on Douglas Street was woefully inadequate, they complained. So in 1946, the City put the old building up for sale, got a $176,000 offer to turn it into a department store, and planned to put the money toward a modern new facility. But in 1947, voters defeated the plan at referendum.

The world did not end—only the careers of a few politicians did. The failed referendum forced the City to move on. Eventually a different mayor had the vision to save the historic building, and make it work.

It’s the same today. To vote “no” is to demand better from those who govern us. 

Ross Crockford is the author of Victoria: The Unknown City, and a director of johnsonstreetbridge.org.

 

For more of Bent Flyvbjerg's analysis of megaprojects and risk, see:

Delusion and deception in large infrastructure projects: two models for explaining and preventing executive disaster. California Management Review, vol. 51, no. 2, Winter 2009, pp. 170-193.

Survival of the unfittest: why the worst infrastructure gets built – and what we can do about it. Oxford Review of Economic Policy, vol. 25, no. 3, 2009, pp. 344–367.

Policy and planning for large-infrastructure projects: problems, causes, cures. Environment and Planning: Planning and Design, 2007, volume 24, pp. 578-597.