The deluded and deceptive foist megaprojects on an unwilling, broke public
TO THE SURPRISE OF nobody with a clear view of the situation, the region’s light rail transit scheme is now officially behind schedule to go along with over budget.
Equally unsurprising is rumblings about looking to township residents previously promised they wouldn’t have to finance the project – at least not directly, but certainly in diminished services and massive lost opportunity costs – to pick up part of the growing tab.
Production backlog at Bombardier, which is making the train cars, was the catalyst for the region admitting service on the mall-to-mall transit line would be pushed back to at least 2018 instead of 2017. Likewise, there have been a host of other small delays that have also served to drive up costs, some of which are being borne not by the project but by the lower-tier municipalities.
That the delays and overruns are blamed on bad luck or other factors beyond the control of regional politicians and bureaucrats is par for the course: It’s a matter of routine in more than 90 per cent of such large public infrastructure programs, a reality ignored by boosters eager to get the unpopular project to the point of no return. Now, there’s no turning back despite whatever string of bad news starts flowing.
This is no new phenomenon, as Danish economist Bent Flyvbjerg has identified in his studies. He’s found what he calls the “optimism bias” used to hype big infrastructure projects such as public transit.
He points out that a major study of large projects – more than $100 million – in 20 countries found nine out of ten had cost overruns. A study of 44 urban rail projects around the globe found costs were on average 45 per cent over budget, with a quarter of them coming in at 60 per cent higher.
“In addition, passenger ridership was, on average, 50 per cent lower than forecast. Furthermore, for a quarter of the projects, ridership was at least 70 per cent lower than estimated. An appropriate slogan seems to be ‘over budget, over time, over and over again,’” he writes in a 2009 paper with Australian colleagues Massimo Garbuio and Dan Lovallo entitled “Delusion and Deception in Large Infrastructure Projects.”
The authors posit three categories of explanation for the regular occurrence of bad forecasting when it comes to both budgets (overruns) and results (underwhelming).
“The underlying reasons for all forecasting errors can usefully be grouped into three categories: 1) delusions or honest mistakes; 2) deceptions or strategic manipulation of information or processes or 3) bad luck. Bad luck or the unfortunate resolution of one of the major project uncertainties is the attribution typically given by management for a poor outcome.”
No surprise that those involved turn to bad luck rather than poor or corrupt decision making to explain the often poor results.
Matti Siemiatycki, an associate professor in the Department of Geography and Planning at the University of Toronto, has similar analysis of the all-toocommon cost overruns and delays with infrastructure projects. His list of three explanations are technical challenges, over-optimism and strategic misrepresentations.
“Technical challenges include scope changes and change orders, problems coordinating a large cast of contractors and subcontractors, increased labour or material costs, inaccurate forecasting, and poor monitoring of projects. Since most of these factors could be anticipated and controlled, however, one might expect that budgeting and scheduling would improve over time as those who manage megaprojects gain more experience, but this is not the case,” he writes in a 2015 paper.
“Rather, the all-toohuman tendency to underestimate the costs and time required to complete a project means that megaprojects are well-nigh guaranteed to exceed their budgets and schedules. At the same time, promoters of megaprojects may deliberately misrepresent the budget and schedule to ensure approval of projects from which they will gain – financially, professionally, or politically.”
While the tendency to overhype projects – with or without malicious intent – is clear, there is little effort made to even admit the biases (never mentioned during discussions of the LRT project) let alone to put in measures that would hold politicians, bureaucrats and contractors accountable with severe civil and even criminal repercussions for their failures, the social and economic costs of which are borne completely by the public, not those who messed the bed in the first place.
A report this week from the federal Competition Bureau warning of the increased possibility of corruption and bid-rigging given the increasing number of infrastructure projects in the country makes the case for both greater vigilance and stiffer penalties ... well, any penalties, as accountability is pretty much nonexistent even with a long history of waste and corruption.
Historically, it’s only the public that pays the price for cost overruns while, quite often, being saddled with white elephants in perpetuity.
We’re already seeing signs of this with the LRT despite the project being a so-called private-public partnership. That arrangement has some theoretical upsides in that the use of private funds is an incentive to stay within budget – Infrastructure Ontario reports that a sample of 30 such projects over the last decade shows 29 came in below budget, with 22 completed on time – but at a great cost. Price tags can easily balloon by 10, 20 or 30 per cent over their lifespan as governments commit to private profits. The provincial Auditor General estimates this costs Ontarians billions of dollars.
We’re unlikely to see
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any change to the current course of action visible in the region’s LRT hopes and prayers, nor the assortment of much-hyped infrastructure projects across the province and beyond. The delusional thinks – the planning fallacy – Flyvbjerg identifies is very much alive.
“In its grip, managers make decisions based on delusional optimism rather than on a rational weighting of gains, losses, and probabilities. They overestimate benefits and underestimate costs and time. They involuntarily spin scenarios of success and overlook the potential for mistakes and miscalculations. As a result, managers pursue initiatives that are unlikely to come in on budget or on time, or to ever deliver the expected returns.”
Sounds like a story we’ve heard before ... and will hear again and again.