Overruns on Police Station were Always Predictable

Yesterday Salem Reporter had a piece on the cost inflation at the new Police Station.

"'Snowballing-out-of-control': How the price rose by millions on Salem police headquarters" is interesting in many ways, but here it's worth focusing on the City's admission that "the original estimates were too low...[and] not high enough."

The implied context might be a little disingenuous, however, and the story might dwell too much on the City's perspective and not enough on criticism during the process as well as the academic study of estimating and project management. There should be less surprise about the overruns.

An early concept used only surface parking, not a structured garage,
and was for a 75,000 square foot building.
(Council worksession presentation, June 3rd, 2013)

The focus on palateableness for voters may cast the City in a light a little too charitable. During the debates earlier this decade, citizen criticism was not that the "estimates are too high," as if the project had bad or inaccurate estimating, but that the project was too big and too fancy. It was about scope, not estimating. Criticisms of the cost sometimes also included proposals for cheaper and smaller construction, not quibbles over the accuracy of estimates for the bigger and fancier proposal. Criticism was of the underlying plan, and some of the modeling behind it, not of the quality or accuracy of estimating on the plan once baked. The quote from the City seems to retcon the nature of the criticism.

The piece doesn't adequately account for the way that over the whole process, the City, Police, and Consultants consistently tried to upgrade size, finishes, and bells and whistles for a "Police Palace," seeking the maximum size and the most deluxe finishes and amenities.

And though the article focuses on heated ramps for the parking garage and ice machines for every floor, these bells and whistles are still savings or expenses on the margins. The idea of heated ramps sounds a little decadent, but what about the whole concept of a parking garage? It's the parking garage itself that's extra, not merely the heated ramps!

There are very basic ways that the whole concept was inflationary from the start, and the piece does not dig sufficiently into those.

Estimating on the SRC

On a different project, there was voluminous criticism of the quality and truthfulness of estimating. And setting it side-by-side with the Police Station should add additional context.

ODOT's recent history of cost overruns on big projects
via BikePortland and Joe Cortright

On the SRC person after person suggested the cost estimate of $430 million was not realistic. They showed a pattern at ODOT of budget-busting on large and very large projects. They also showed ways that the SRC estimate elided key difficulties and minimized their impact to budget.

More than this, there is an ample body of academic research on large construction projects that finds budget-busting is the norm, not exception. (So keep this in mind as people try to revive the CRC, on our own SK school bond projects, and, sadly, the Library seismic project.)

Megaproject expert Bent Flyvbjerg in the New Yorker

As we've noted before, Bent Flyvbjerg is probably the world's authority on megaprojects, and he has identified a great number of problems with them. Other scholars echo his findings. This is no longer a novel academic niche, and it even has an "Oxford Handbook" for it.

The Iron Law of Megaprojects:
"over budget, over time, under benefits"
Oxford Handbook of Megaproject Management

The Police Station does not qualify per se as a "megaproject," but the SRC would have been close and given our provincial status should qualify as one in a relative way. We are not a big city or state, and by comparison our megaprojects are smaller than ones in LA, New York, or London.

Four smaller projects back in April that went over budget

Regardless of the exact definition of a megaproject, ODOT has a documented history of overruns on large and very large projects. And now, in this construction market, even small and medium-sized projects are going over budget as we see at SKATS.

Budget-busting is more norm than exception, and watchdog journalism should look at patterns, history, and systems in addition to local culpability. It should also be more skeptical of City-provided estimates during preliminary planning and debate. This is where the watchdog stance might be most helpful, rather than after-the-fact! Given the overruns here, why have journalists been so credulous on the SRC numbers?

All in all, when citizens complain about the likelihood of cost overruns on big projects, they are not merely whining.