Monday, August 27, 2007

On time, on budget...NOT

Every engineering management firm you talk too, especially if they are in marketing mode, and these days that's nearly all the time, will boast of their record of "on time, on budget" project delivery. And yet, a prestigious and widely read study out of Duke University shows that the vast majority of Engineering projects are neither. And it adds, most also fall short of their original scope too. Here's the scoop, the Dukies got it right, nearly every "on time, on budget" claim is bogus.

Managing a large engineering project is an extremely long and complex process involving thousands of people and dozens of entities, both public and private generally under the overall direction of a public agency whose mission is something other than capital project execution. By this I mean they are large transportation agencies, public utilities, educational institutions, or airports.

Traditionally then, they have hired outside assistance to perform these tasks under their general direction. There are generally three broad phases to any project - planning, design, construction. Clever entrepreneurs have set out to define other phases, but these are in fact sub-sets of the big three and need not be discussed here. Each phase is performed by individuals and firms who specialize in the kinds of tasks required for that phase. Over the years ambitious firms have attempted to expand to cover more than one, with results that are generally pretty dismal.

In recent years, however, the concept of Program Management has arisen from some of the larger Engineering firms such as Bechtel, Parsons, and Halliburton. It is useful to ponder what Program management purports to be, why these firms chose to move in this direction, and what Program Management adds to a project, if anything.

Major crime enterprises, the Mafia if you will, have always moved aggressively from illegal to legal activities. The reason is simple, risk is lowered. Any financial adviser will tell you about the risk-reward curve. The higher the reward you seek (return on investment) the bigger risk you have to take. The lotteries are a simple example of this. If you win, you win big, but the most likely result is you'll throw a lot of money away. All business more or less follows this rule. Oil companies get very rich when they are going well, but the business has a lot of unknowns. Ford and Coca Cola, two giants of American industry, took risks in recent memory and lost. I speak of course of the Edsel and New Formula Coke.

Engineering work, particularly design work, has become increasingly risky in the past 25 years. Liabilities for faulty designs or designs that just didn't work well have increased spectacularly. It has become more and more difficult to predict these costs and to recover them from future clients. Conversely, Program Management was conceived and structured to minimize risk to the firm.

Program Managers present themselves to an agency embarking on a large capital program, often the only one that will be done during the professional lifetime of its managers, as their one stop, fix all answer to all the problems and the unknowns that are about to occur. A couple of things should be noted here, first most agencies begin planning for large capital programs after it's too late to do them well, and second the governing boards of the agencies are typically political appointees with little or no expertise in capital programs. Oh, and a third: the programs are usually underfunded.

So the agency hires the Program Manager and, lacking the resources to manage them well, turns all decision making authority over to them. And here's the rub: the Program Manager has no incentive to deliver the program on time or on budget. The longer the program runs, the more work they have for idle and marginal employees, the more over budget the greater their profit. Profit is almost always tied to total cost.

Delays and cost overruns occur, the agency becomes unhappy. Explanations are demanded. This is where the firm displays their real talent, providing the artful explanation, generally involving some outside force that couldn't have been foreseen, and redefining time and budget to demonstrate how the program is still adhering to both. Agencies are also happy if the explanation flies, gets them off the hook. The key of course is maintaining a lock on the expertise.

i shall be deconstructing some of the elements of this scam in future posts.

Bridges in the News

There are reports today that the authorities have closed an interstate highway bridge near Memphis. The reason given is rapid settlement at one of the piers. I will state unequivocally that had this problem been detected a month ago that bridge would not have been closed. Although the closed bridge carries I-40 across the river, a similar bridge for I-55 is available near by, so the inconvenience to traffic will be minimized. The report also notes that the I-40 bridge is expected to be open in a few days. We will watch this one.

Back in Minneapolis the state and city came to a remarkably fast resolution on the issue of light rail for the replacement I-35W bridge. Of interest is the fact that Federal money cannot be used to fund the structural upgrade light rail will necessitate. In any event what we should learn from this is that politicians of differing parties and differing priorities can work together when the stakes are high enough.

Locally, a new bridge, total cost in excess of a billion bucks, opened on I-680 across the Carquinez Straits. As near as I can tell it will save a few minutes off the commutes of about 2% of the region's population. Needless to say, this project took many years and ended up costing a lot more than originally estimated. What I find particularly interesting is the hoopla surrounding this event with the predictable speeches by the predictable politicians. Not to be a wet blanket, or even a cynic, but I hearby predict that the bridge will be obsolete within ten years.

Minnesota has it right, do some things to improve mass transit in the rush to provide more freeways. There has to be a limit to space available to accommodate the automobile. Look at large cities all over the world and they are moving towards keeping motor vehicles out of heavily developed areas. There is a limit to sprawl development, too. We haven't reached it yet, but we'll be there sooner than you think.

Saturday, August 25, 2007

Katrina

In pondering the events that transpired in New Orleans two years ago this week what is really shocking is not the lack of governmental response to suffering, our governments don't respond to suffering any more, but the neglect of such a vital item of infrastructure as the seawall system there.

We all pretty much understand what New Orleans is all about from a cultural perspective, home to many poor minority people, playground for drunken students in February, and somewhat classy alternative to Las Vegas when we set out to be naughty. But from a national economic perspective, its ports are an integral part of the engine that keeps us afloat.

The Mississippi River drains about half of the United States and the portion it drains produces most of the grain and livestock products we ship overseas. This is a huge part of our foreign exports and one that we can ill do without. Yet the Army Corps of Engineers, charged with maintaining the Engineering works that protect our ports failed in its job.

What is happened here, among other failures, is a failure to properly prioritize assets. Since business schools came into vogue in the Eighties, the emphasis has been on what is measurable and not on what is most important. Thus the Corps fell into the trap of "measuring" its performance in terms of percentages of particular tasks accomplished. The seawalls in New Orleans were lumped with similar facilities across the nation and percentages of all facilities being built or maintained was the criteria.

They are not alone in this and, as we have seen in the case of the I-35W bridge in Minneapolis, these percentages denoting good performance don't really mean much, they are, in fact, quite flexible. An agency can redefine good performance on its own with only cursory oversight. In the process, managers who do well in meeting these measurable goals are rewarded above those making sound judgments.

The neglect of the seawalls was particularly egregious given their importance to the nation's economy. The Corps has known for nearly half a century that the Mississippi River delta is very precarious and has chosen stop gap measures and has scrimped on maintenance anyway. One day the river will change its course dramatically and we will not be prepared. This is not simply a matter of protecting the lives and livelihoods of a lot of poor people, or of protecting a tourist attraction. This will have serious economic and geopolitical impacts when it happens.

Thursday, August 23, 2007

Riding the rails

The automobile is a wonderful invention. I've owned one throughout my adult life and sometimes two. There are few things I enjoy more than a long road trip covering unlikely distances in few days. I've done more than a thousand miles in a single day and consider six hundred to be a baseline number.

Beyond my fetishes, a car is pretty much required if you are to live in this country, particularly the arid west where distances are long and other forms of transport simply not available. Much is heard these days about the death of the automobile era, but don't believe a word of it. Technology is now available to keep us safely in our vehicles and happy long after the last drop of oil has been burned.

That said, we really should be developing and building rail transport systems starting right away. These should take three forms, urban rail transit systems similar to what exist in New York, London, and elsewhere; commuter trains like the newer transit systems in San Francisco, Atlanta, and Washington; and inter-city train systems on the European model.

The car as prime means of travel grew here largely because of the amount of land available. The vast continent provided ample land for the people and our history developed around the myth of the individual yeoman sustaining self and family on land he owned. This morphed in the second half of the twentieth century into a suburban tract which provided ample space for a person to maintain the myth.

Cities grew up during the years of the Industrial Age, but many of them have failed and are often viewed as places for misfits and suspicious classes of people. It's axiomatic that cities are populated by the very rich and very poor with no place for the vibrant middle. Such is the paradigm of the past 60 years or so, the post-war years.

More and more however this model is proving unsustainable. Cheap power is no longer available. In the more attractive areas sprawl development has become more and more difficult. We are learning that land, like oil, is not an infinite resource. Long commutes from depressing suburbs along pollution soaked corridors are not attractive to more and more people. Infill is the new game.

I think the European models of mass transport are looming on the horizon as a solution to many of these ills. Already in the Bay Area BART has shown itself to be a heavily used commuter service bringing armies of workers from distant suburbs quickly and efficiently. The New York subway system does the same. Both of these are reaching critical junctures in their lives. rather than using our transportation dollars on more freeways that aren't free, we should be diverting them to strengthening these systems and developing new ones. Those that insist on driving should finance their extravagance through toll roads and the like.

Saturday, August 18, 2007

More Weasel Words

A lot of interesting stuff is coming out in the wake of the I-35W bridge failure in Minneapolis, Minnesota. Now we learn that that state's transportation bureaucracy quietly lowered its goals for bridge maintenance in 2003 from 65% to 55% of bridges receiving a "good" or better rating. Here's a wonderful quote from one of the top bureaucrats there: "Once we started looking at what others were doing, we realized that 65 percent was an unrealistic number." In other words, if we can show that we're no worse than others, it's okay.

The 65% goal was set in 1997 when actual inspections showed that 62% of Minnesota's bridges were rated "good" or better. By the time 2003 rolled around and the bureaucracy determined that 65 was an unrealistic number, their performance has dropped to 52% One wonders what happened in the intervening six years.

One thing that happened is the bureaucrats were advising the policy leadership that they were having problems keeping up because of "dwindling financial resources", a set of weasel words that are hereby nominated for immediate elevation into the Weasel Word Hall of Fame. We all know, of course, that it means we need more money or we can't do this.

Recall now how the Governor of Minnesota vetoed a gas tax increase that may have enabled the bureaucrats to meet the more ambitious goal. I think he should be reminded of this sad fact daily, but what is even better is the massive memory loss currently being suffered by policy makers across the political spectrum. None of them has the vaguest memory of this reduction occurring!

The reduction in goal was done very quietly, one paragraph buried deep inside the department's budget request. In fairness it should be reported that the latest data available show that Minnesota improved its "good" or better rating to 54% in 2006, in other words they came very close to meeting their new lower goal.

But what about those "others" who Minnesota wishes to be compared with? Well, neighboring Michigan established a goal of 95% "good" rating for freeway bridges and 85% for other bridges by 2008. Since then they have gone from 63% to 87% good. How, you may ask, did they do this? Well, first off they enacted a 4 cents per gallon increase in their gas tax and then they postponed some expansion for maintenance. Here's a really outstanding quote from a Michigan Department of Transportation bureaucrat: "We are working (under) the theory that you don't put an addition on your house while the roof is leaking."

Must be a tax and spend liberal.

Utah, always a place where good sense seems to abound in government, has established a goal of 65% very good and 25% good and by all indications they are succeeding. But most states are like Minnesota, doing very little, hoping that nothing bad happens, and keeping their heads well buried in the sand. How is your state doing?

Thursday, August 16, 2007

London Smog

The protests in London against the expansion of Heathrow Airport bring a couple of points into focus.

The first of these is the dismal record of on-time departure of flights at Heathrow, an occurrence that's become more and more common at large International facilities. The Evening Standard reports that on a recent morning every single flight departed late, 14% by more than an hour. This is attributed to overcrowding and a poor record of baggage handling. I would suggest a third cause, cheap tickets fueling demand for more and more flights.

The response, as always, is to build more capacity. More capacity will create more opportunities to add flights and lower prices in a perpetual spiral. The demand for cheaper tickets also exacerbates the very causes of the overcrowding, namely poor baggage handling and too many planes for too few gates. Expansion plans, or any plans to deal with the overcrowding, are generally started only when the situation reaches crisis proportions. Much easier to sell under those conditions.

The next would be exactly that problem that the protesters are pointing out; the destruction of the natural and community environments that expansion will foster. Airplanes have been identified as a major contributor to global warming, air pollution, and the destruction of the ozone layer. And the Heathrow expansion would eliminate homes and businesses in the area. While, presumably, the people dislocated will be compensated, perhaps even fairly, the natural environment will, again, be viewed as a "commons", something for the developers to utilize without cost.

So the trade off is cheap airline tickets for serious travel inconvenience and ongoing environmental degradation. The sad fact is that an overwhelming majority will favor the cheap tickets. This will not change until we recognize that we need to pay full price for our life styles.

Wednesday, August 15, 2007

For whom the toll bells

We who live in the Western United States don't care much for toll roads or tolls of any kind. They are fairly common in the east and parts of the Midwest but the ethos in California which, deal with it, dominates the west is that tolls are somehow un-American. There are tolls on bridges, primarily in the Bay Area but no others. The issue came up recently in San Francisco when a proposal was made to finance improvements to the US Highway 101 approach to the Golden Gate Bridge.

There were predictable objections to the idea, the crux of them being that we already pay for roads via gas tax, a toll would amount to double taxation. My own feelings on the matter are decidedly mixed, however, if forced to choose, I would choose having toll roads over not having them.

With toll roads the authority that owns them (generally some quasi-governmental body although not necessarily) could collect sufficient money to operate them and to maintain them in good condition. The toll payers would absolutely insist on it.

Americans, and particularly Westerners, have abundantly shown that they will pay just about any price to travel in their automobiles. Just look what happens every time the price of gas goes up sharply. There is a spate of media attention including quotes from a few people complaining about the increase. Then nothing, business goes on as usual. Gas price hikes are justified in the public mind because they are perceived as the workings of a free market.

This perception, I believe, would also attach to toll roads, in fact it might be good if they are perceived as being operated by the private sector assuming guarantees of access for all. Set out to increase the gas tax and be prepared for war. Increase the cost of a toll road and be seen as an efficient free market.

Yes, it's a bit of a sham, but still an idea worthy of our consideration. The toll bridges in the Bay Area are much better maintained than the rest of the transportation system and that should be attributed to the stream of funds they have dedicated solely to them. The weakness they have is that they are still subject to political pressures.

So why do I have mixed feelings? Because a corollary to the idea that toll roads would be better maintained is the likelihood that other roads would be more poorly maintained. This raises the scepter of dual systems, one for the affluent, the other for the rest of us. But I don't believe this has been the case in those areas where toll roads are fairly common.

Monday, August 13, 2007

You want cheap, you get cheap

This has been a difficult year for air travelers. The popular press has been full of horror stories of people stuck on immobile aircraft for six, eight, ten hours. This is indeed a very unpleasant thought. The latest such incident was Saturday at Los Angeles International Airport(LAX), one of the world's busiest. News reports tell of how a computer failure at the US Customs and Border Control agency delayed several thousand arriving passengers for up to ten hours. Many of these apparently were left stranded on their arrival aircraft for much of this time.

The news stories in the aftermath of the LAX incident sound very familiar. Many quotes from disgruntled victims, some with hard luck stories of varying intensity, quotes from the agency spokesperson to the effect that this is all very unprecedented, that it could not have been anticipated, that it's very unfortunate, the problem will most surely be fixed soon. Also included are vague explanations regarding what went wrong. This is of course essentially the same news stories we read last winter when some unlucky people were trapped for long hours on immobile airplanes, ostensibly because of bad weather.

Except for those who suffer through the indignities, no one seems to notice these stories much. We read them, shudder at the thought of being one of the victims, and move on to the next outrage. Shelf life is about a day, maybe two if it happens in your town. We accept it as inevitable. And we may as well, because the way the air transportation infrastructure operates these days, you can expect events like these to continue and probably increase in frequency in the future.

After deregulation in the eighties, air travelers clearly indicated that what we wanted in air travel was cheap and cheaper. And, as it generally does when it comes to a discretionary activity, the market responded very nicely. New airlines were born and some prospered and grew by providing basic transportation between selected lucrative routes without food, legroom, or convenience. Redundancies were eliminated and ancillary services were cut to the bone. Established airlines scrambled to survive and some didn't. The results are in and, indeed, we have some of the lowest air fares in history. And not much else.

Delays occur for a lot of individual reasons, but by scratching the surface we see the cheap and cheaper ethos in just about every case. The Customs agency delays upgrading its equipment because the airlines and passengers complain that it would raise prices. In a similar vein, airlines have no back-up equipment if a plane must be taken out of service. Airports delay needed improvements because no one wants to pay for them.

And, not surprisingly, the airports are woefully overcrowded and inefficient. Planes that leave a gate in a snowstorm sit on the tarmac, there's no gate for them to return to. And, who knows, the weather may improve to the point where the plane can leave saving the costs of cancellation. Remember this when it's your turn to sit in a hot, stinky plane with a bunch of caterwauling children and moaning old folks for six hours or so.

Saturday, August 11, 2007

The Weasel Words

On August 1 the I-35W bridge in Minneapolis collapsed suddenly and catastrophically dumping dozens of vehicles into the Mississippi River and stranding many more. There were an as yet undetermined number of people killed and dozens more injured. A vital transportation link in this major American city was destroyed.



We take our infrastructure for granted in this country with not much consciousness of how important it is to our health and well being. Consider the upheaval we in the Bay Area experienced when the Bay Bridge was out of service for a month in the wake of the Loma Prieta earthquake. People in the Twin Cities area will be without a similar transit link for a longer period.



Imagine the effect of losing our potable water supply for a month, or even a week. What would happen if a major sewerage treatment plant was knocked out of service? Some ten years ago when I was working in downtown San Francisco, a garden-variety construction screw-up knocked out the electricity for six hours. Things came to a halt. Six hours! Imagine six weeks.


What the bridge in Minneapolis shows us, or should show us, is that all our infrastructure is vulnerable. Knowledgeable people working on these things have been saying for some time that we’re not maintaining our infrastructure and we’re moving into peril as a consequence. Yet, other than the typical run of bloviation from the political leadership, little gets done.


The I-35W bridge, along with over 70,000 others have been deemed structurally deficient. There’s been a lot of speculation about what that means and doesn’t mean.


What it means in essence is that some engineers looked at the bridges and found areas of potential structural weakness. They were then faced with a dilemma of how to report their findings. They could not in good conscience say the bridge was okay, because obviously it wasn’t. Nor could they call for the bridge to be closed until repaired because 1) it would not happen and; 2) they would never get work inspecting bridges again.


So they said the bridges were “structurally deficient” which is weasel wording for “somebody should do something here, we don’t know what but in case something bad happens, our asses are covered.” This is not meant to denigrate these people, just to say that they know how their business works and that it works by denial and deferment.


Anyone who has worked in the infrastructure business knows that no one wants to put money or effort into maintenance and repair. Everyone loves a shiny new project. They put plaques on them with the names of all the folks involved. They hold dedication ceremonies that you can watch on the evening news. Politicians who happened to be in office at the time cite the project when they go for higher office. By contrast, maintenance and repair are orphans.


And then when something like I-35W happens there is a run of concern, studies are commissioned, blue ribbon panels make reports. Will anything change? Here’s hoping, we will be watching, you should be too because it might be your bridge next time. What’s needed most is a commitment of more money. In Minneapolis, I-35W was scheduled for replacement albeit at some date well into the future – again asses were at least partially covered. Had there been the money available maybe it would have been replaced in time, who can tell?


It’s interesting that a number of reports have pointed out that the Governor of Minnesota had recently vetoed a gas tax increase that might have provided some money for this work. While we can all be sure the good Governor now regrets this, we also damn well know that vetoing tax increases plays well politically. This will change only when we face further infrastructure failures, such as the bridges, and that we need to pay full price for the way we live.


More later.