Why American construction costs are so high (2019)

https://pedestrianobservations.com/2019/03/03/why-american-costs-are-so-high-work-in-progress/

by simonsarris • 5 years ago

129 153 5 years ago

dang• 5 years ago

Some past threads:

Why American Construction Costs Are So High - https://news.ycombinator.com/item?id=19313042 - March 2019 (158 comments)

Why US Major Infrastructure Construction Costs Are So High - https://news.ycombinator.com/item?id=19308481 - March 2019 (2 comments)

An adjacent one for good measure:

Why Are Canadian Construction Costs So High? (2018) - https://news.ycombinator.com/item?id=21618134 - Nov 2019 (140 comments)

asploder• 5 years ago

Thanks for linking these past threads.

Alon has continued their work on this subject with a team of other scholars as the "Transit Costs Project": https://transitcosts.com/about/

jimmyed4• 5 years ago

Tl;dr anyone?

I'm guessing it's something to do with the US dollar being overvalued.

rodonn• 5 years ago

No that isn't one of the reasons given.

The bigger reasons are: a) US unwillingness to learn best practices from other countries about how to keep costs of construction down, especially for public transit infrastructure. b) US builds much bigger + fancier stations for the trains compared to other countries, which drives up cost c) US procurement is done based on cost alone, which leads to frequent cost overruns and delays. d) a lack of internal managerial competence and instead relying frequently on costly external consultants e) bad political incentives

jimmyed4• 5 years ago

Well, thank you.

The reliance on external "consultants" seems like a cabal, much like the ones you find in the Pakistani army. How rampant is corruption in the states?

rfrey• 5 years ago

The article has very good headers that you could scan in < 15 seconds, no guessing required.

1. Engineering part 1: station construction methods

2. Engineering part 2: mezzanines

3. Management part 1: procurement

4. Management part 2: conflict resolution

5. Management part 3: project management

6. Management part 4: agency turf battles

7. Institutions part 1: political lading with irrelevant priorities

8. Institutions part 2: political incentives

9. Institutions part 3: global incuriosity

Retric• 5 years ago

Glosses over the real reasons, both high costs and cost overruns are incentivized.

Usually this money comes from outside sources, such as higher-level governments, but even when it is purely local, individual stakeholders may treat it as money coming from other parts of the city. In this environment, there is an incentive to demand extra scope in order to spend other people’s money on related but unnecessary priorities.

There is little reason to be efficient when spending other people’s money without their input or any long term consequences.

2OEH8eoCRo0• 5 years ago

Slightly different but I work in defense as a contractor and I usually summarize it as "being paid for work".

The incentive is to do the most work because being done early and under budget doesn't maximize $. Usually the market keeps these entities honest. Do shit work that's over budget and you lose business. But there is no market at play here, thus the govt needs to play the part of the market and penalize for this behavior but they do not. /Endrant

Joker_vD2• 5 years ago

Well, you see, if you get the work done earlier and under budget, then the next time you'll be given stricter deadlines and less budget.

throwaway-8c93• 5 years ago

In other words - different business environments create different equilibria.

In Chinese/Soviet/1920s America equilibrium, with an insatiable demand for construction work, the profit maximizing behavior is to be done quickly in decent quality, then hop on to another project.

In the modern western equilibrium, where projects are few and far between, the profit maximizing behavior is to extract as much revenue as possible from any single project, employ lawyers, ask for extensions, attempt regulatory capture, create an opaque chain of subcontractors, etc. - as it's not clear whether there will be any new opportunity to do so in the future.

epa• 5 years ago

Alfred Chandler Jr described this as 'hidden unemployment'. The true social cost to society is high prices to support mostly inefficient jobs, this keeps people employed.

JPKab4• 5 years ago

The article lacks precision in the fact that it's not necessarily "American" construction costs, so much as "why are construction costs in large American cities so costly". DC, NYC, LA, SF are not representative of how infrastructure projects are pursued in the rest of the country.

We know very well that there are orders of magnitude more bureaucratic obstacles, as well as dramatically higher labor costs, when comparing any building project conducted in Texas vs. California. New York City's municipal projects are widely-known to have dramatically inflated labor costs due to various factors, not limited to rampant corruption within unionized labor. I'm a supporter of labor unions, but a minority of unions give the majority a bad name by allowing themselves to be used as tools to enrich corrupt officials. European unions seem to be far, far less susceptible to these kinds of grifters.

There are certainly issues at the federal level as well with metrics for funding allocation, but let's not pretend that building large infrastructure in states with lower regulations is remotely as expensive as in places like California which have ridiculous levels of red tape and NIMBY empowerment. (Understood that construction in California has to take into account earthquake mitigation, but it isn't remotely enough to explain the cost deltas.)

xxpor• 5 years ago

We know very well that there are orders of magnitude more bureaucratic obstacles, as well as dramatically higher labor costs, when comparing any building project conducted in Texas vs. California. New York City's municipal projects are widely-known to have dramatically inflated labor costs due to various factors, not limited to rampant corruption within unionized labor.

Please read the actual link. This simply isn't an issue the way you think it is. "It's the unions" is simply being intellectually lazy because it fits your preconceived notions.

"I am not overlooking union power, I believe it is not an important factor, not when right-to-work US states have very high construction costs too while Scandinavia has low costs."

The problem is the quantity of labor. In the US we use many more people to operate a TBM vs what they'd use in Europe. On commuter rail lines we pay conductors $100k a year to collect tickets when in Europe they'd use a ticket machine. On the NYC subway they have a driver and a conductor when in Europe they'd only have a driver at best, or even some lines are being made driverless I believe. They're trying that in NYC too but it's complicated and costly because of how old the signaling system is, because it was too costly to ever upgrade.

The agencies should focus less during union negotiations on keeping salaries and benefits down and more on reducing the quantity of required workers. If they were able to do it in Europe, they can certainly do it here.

bpodgursky• 5 years ago

You can try to break it down, but the fact is in NYC the quantity of labor is a union-negotiated (and demanded) problem.

The NYTimes did a detailed article on this a couple years ago, with a focus on the NY subway expansion: https://www.nytimes.com/2017/12/28/nyregion/new-york-subway-.... There's no escaping that the overstaffing was a political boon to a union.

_Why_ NY construction unions are so much worse than Scandinavian unions is a whole different question. But it's not really deniable that the public-union interaction in big cities here is incredibly extractive and antagonistic, and that drives up costs.

wil421• 5 years ago

Who do you think requests more quantity of labor for every job?

CraigJPerry• 5 years ago

> quantity of labor

This is something I don’t really understand about American business. In my experience it’s pretty common in America to have “superfluous” jobs - the Walmart greeter for example, valet parking attendants etc. etc.

Now on the one hand you can say these roles aren’t superfluous at all, they’re required, maybe some people find a valet convenient (does not compute for me), maybe some customers spend more in your store after a cheery hello at the entrance.

On the other hand, society works just fine without these roles and at lower overall cost.

Is it a workaround for capitalism’s failings? Like “hey of course there’s a job for everyone who wants one” kind of thing and we’ll just quietly eat the cost because the flaking out on society payments (taxes to cover rule of law etc.) is cheaper overall than having a couple of extra minimum wages on the balance sheet?

JPKab4• 5 years ago

Your response was well-reasoned and thought out, and I certainly wasn't TRYING to imply it was mostly unions.

But having done work in the past to do detailed analysis for the WMATA (they run the DC metro system) on various understaffing issues, the unions do contribute to issues with operations and maintenance. I will not and cannot comment on their issues with construction of the Silver Line.

But as far as maintenance, the unions (they do the same for BART by the way) constrain hiring the proper number of maintenance techs, so that the employed techs get large quantities of overtime pay. A single person working 12 hours a day ends up costing the same as two people working 8 hour days, but is definitely not going to be able to keep up with repairs, resulting in the constant broken escalators and elevators and out of commission tracks that have plagued WMATA increasingly since the late 2000's.

Reducing the quantity of workers when negotiating with an entrenched union is very, very difficult to do. They tend to want to keep the same quantity, or very slowly increase the quantity. This is very well documented behavior that is covered extensively in the book "The Machine That Changed the World", which was the first book documenting Toyota's journey with LEAN manufacturing, and then talking about the challenges GM faced with their unions when trying to implement these same practices.

All that being said, you were correct to poke holes in my statement and you added to the conversation significantly, so thank you for that.

rsynnott• 5 years ago

On commuter rail lines we pay conductors $100k a year to collect tickets when in Europe they'd use a ticket machine. On the NYC subway they have a driver and a conductor when in Europe they'd only have a driver at best

Hold on, commuter and metro rail in the US have dedicated conductors? As in one per train, rather than someone spot-checking tickets on one in a hundred trains?

bradleyjg3• 5 years ago

DC, NYC, LA, SF are not representative of how infrastructure projects are pursued in the rest of the country.

If the suburbs are different, this is a decent point. But the major American cities and their suburbs are a majority of the country on every metric that matters. BOS-WASH + SoCal alone is more than 20%.

ff317• 5 years ago

The state of Texas is ~9% of the US pop, and Dallas, TX (top metro area by pop in the state, 4th in the country) has a substantial public transit infra to study (DART).

closeparen2• 5 years ago

The rest of the country keeps its transit infrastructure costs down by refusing to have transit.

New York and California have plenty of roads.

Ericson23145• 5 years ago

And roads aren't even cheap, but they are nice and decentralized and do not require smart planners.

That's a nice resiliency and I give roads credit where they are due for it. But cars are terrible and we simple cannot continue to do the easy status quo thing.

aidenn02• 5 years ago

They are comparing large American cities to large cities in other countries, so it's apples-to-apples.

whereis2• 5 years ago

Take a peek at the Honolulu Rail Transit project on O'ahu. Boondoggle plagued with fraud, waste and abuse.

whereis2• 5 years ago

https://www.civilbeat.org/2021/04/hanabusa-awarded-200k-hart...

realitysballs• 5 years ago

This title is too generalized , it’s not talking about ‘American construction’ . It’s talking about American large-scale civic construction in large metropolitan areas.

zinckiwi• 5 years ago

Agreed, I came in ready to argue that US residential construction was positively cheap compared to much of the OECD!

andbberger• 5 years ago

It's a transit blog

Dumblydorr• 5 years ago

Regarding station costs: can you include opportunity cost into your analyses? Maybe NYC is just far more economically productive than Paris, like if there are 50 story buildings all along that block, vs 5 story buildings in Paris...couldn't the cost even out because NYC is trying to diminish the disruption to local economy? Also hard to measure, but what are the QoL diffs between the two station methods, is one louder and more disruptive?

I'm also wondering about technological differences. Can stations be constructed in a more modular fashion, can innovation occur to allow cheaper builds? And what about using more advanced tech in boring machines, like what TBC is trying in Vegas?

Lastly, do we think a lot of stations is truly optimal? I don't know trains well, but if we get a fleet of SDCs in 20 years, maybe these can reduce station numbers by shuttling passengers their last mile or two, rather than building out billions of extra dollars of stations?

gehatare• 5 years ago

Outside of Manhattan this is unlikely, Paris is much denser than NYC and the difference in GDP or however you want to measure economic productivity is too small to make much of a difference.

brianwawok• 5 years ago

Google puts NY GDP at 1.75T, and Paris GDP at 785M (in USD).

So more than double?

nobodyandproud5• 5 years ago

NYC is unusual.

Manhattan is mostly solid bedrock, for one.

Thus the time it takes to create tunnels below all the pipeworks cannot be overlooked, as it’s a very noisy endeavor.

Also, the NYC subway system is (or was, pre-covid) 24 hours, extensive, and was forward thinking.

The grates and vents you see today sidesteps the heat trapping of, say, the Tube (London).

It’s also built robustly because honestly, the riders abuse every feature.

deepsun• 5 years ago

I feel like solid bedrock is actually a perfect soil type for engineering. Other towns has to account for moving sandy or clay soils, diverting or pumping out their ground waters (sometimes it's even easier to actively freeze large areas of land).

inglor_cz• 5 years ago

Precisely. Here in Prague, the subterranean geology is horrible. Broken rock, cavities, a lot of river deposits, unexpected (and rich) water springs. Not to mention a thick layer of shit dating from 1350 to approximately 1800 along a former ditch that separated the Old Town from the New Town and that served as a latrine for thirty generations of burghers.

Building subway tunnels in such conditions is an equivalent of Olympic Games for engineers.

ant6n• 5 years ago

Plenty of subways get built in bedrock. Its a bit more expensive to tunnel, but not unusual at all. It’s not so easy to use tunnel boring machines, but you can blast. Its also possible to make station caverns right in the rock.

Btw, the tunnels aren’t the biggest cost of subway systems. Maybe 15-30%. I think the biggest tickets are usually the stations.

bradleyjg3• 5 years ago

As pointed out in part 2, the 2nd Avenue stations are grotesquely large. Sure they are pretty but I’d rather have 4x ugly stations.

mschuster91• 5 years ago

I'm not sure if underground blasting is a good idea when there are skyscrapers nearly a century old aboveground. Hard enough to assume recent building haven't had someone in the loop cutting corners (e.g. concrete that isn't as robust as expected), the old stuff had zero checks during constructions and definitely no computer aided simulations.

Honestly it's a miracle that skyscraper collapses are so rare.

nobodyandproud5• 5 years ago

They’re not built for the same capacity, however.

Ironically I think the city may shrink in the coming years, thanks to Covid and the upcoming fiscal crisis.

somethoughts• 5 years ago

It'd be interesting to see a breakdown of a private mega-project (i.e. office/residential skyscraper) in NYC versus any other urban metro in the rest of the world to compare it to these public works mega-project. Is it mostly more labor costs, general technical challenges, bad project management, general corruption, etc.?

Ericson23145• 5 years ago

This is classic bad NY exceptionalism (and I'm living in NY as I write this!)

- Bedrock is easier

- Every city has pipes. Including NYC when they did cut and cover.

- Arguably the 1930s IND started the trend of overbuilding. Being redundant with existing lines to drive out an already money-loosing bussiness isn't forward-thinking.

- The grates and vents and easier precisely because cut and cover.

- Elsewhere people abuse every feature less? More like the NYC subway is not in a state of good repair so the normal wear and tear is more visible.

nobodyandproud5• 5 years ago

- I’ll take your word for it, but building above ground seems easier.

- NYC is old. We still have steam pipes in active use, and it predates the subway. Also, asbestos. Nor is every city at the same scale.

- How do you quantify the amount of tax money that comes in, because the subway enables business? Home taxes are very low in NYC, because of the amount of money generated from business.

Rent is high near any station, unless it’s a completely run down neighborhood.

It also enables immigrants and students in a way that car-heavy cities can’t match. I know because I was this immigrant and student.

We don’t have the problem SF does, as less desirabke neighborhoods are affordable by teachers and nurses. - You know what vents attract? Trash. If not cleaned out it becomes a fire hazard.

- Abuse: Absolutely. DC and Boston trains are pristine by comparison, and I’ve ridden trains and railways in Japan.

New York is by far the worst, for many reasons.

It was even worse in the 70s and 80s, and the mindset never wentvaway.

sesuximo• 5 years ago

OT: I’ve often thought the easiest way to alleviate the MTA’s load would be to make it affordable/desirable to live near work. It seems unnecessary and painful to have to commute ~1hr from one side of the city to the other especially when the city can’t afford the metro system.

capekwasright• 5 years ago

The section discussing (inter/intra)agency turf battles reminded me of a recent article discussing how the pandemic has led to some significant reevaluation of what the role and purpose of traditional "commuter rail" is within public transit as a whole (particularly focusing on the MBTA/Boston, contrasting the quote from Frank DePaola):

https://www.governing.com/now/taking-the-commuter-out-of-ame...

Ericson23145• 5 years ago

Yes American computer rail service is a complete scourge.

It's a regressive sop to white fighters and their posh descendents.

It simply begets more car culture, a band-aid that hides scaling limitations where they are most salient.

It's a self-defeating honey-pot that soaks up the political will for transit in something that will never get broad traction.

sthnblllII• 5 years ago

Maybe try having some compassion for white America, and try to see the race riots of the 1960's that destroyed the cities their grandparents built from their perspective. Demonizing an entire ethnic group would not be tolerated if any other group were being attacked. Honestly this is probably just flame bait. Never mind.

nonameiguess• 5 years ago

I don't see this discussed at all, but if you're going to use New York City as your exemplar and you're going back to 1910 for data, I don't see how you can avoid the fact that both labor unions and the construction companies were under the control of the mafia. They put people on the payroll to do literally nothing, sold materials at way above market value, and the buyer had no choice but to pay because anyone underbidding would get murdered.

Unfortunately, the ratchet effect for pricing means getting rid of mafia control doesn't necessarily undo the cost increases they dictated. Also, prevailing wage practices mean labor unions for the same trades that aren't themselves corrupt still end up with the same price inflation, at least regionally.

raincom• 5 years ago

Here is a book that describes various 'corrupt' schemes: Corruption and Racketeering in the New York City Construction Industry: The Final Report of the New York State Organized Crime Taskforce

Here is a pdf the report: https://www.ceic.gouv.qc.ca/fileadmin/Fichiers_client/centre...

kryogen1c• 5 years ago

michael franzese talks about this alot in various podcasts and interviews. it was true much more recently than 1910. the family isnt what it used to be, but its certainly not gone.

j_walter2• 5 years ago

There are still stupid high costs for stuff and people are still put on the payroll to do nothing. $70/hr for a guy who does nothing but get coffee... https://nypost.com/2018/03/05/union-workers-are-making-42-pe...

There was a great piece done by John Stossel about why a pretty basic public park bathroom cost $2M to build and took years to finish construction. https://www.youtube.com/watch?v=qKRuhiMDOjo

tylermw• 5 years ago

John Stossel really shows his hand in that piece when he uses "wheelchair access" as an example of government spending run amok. Why shouldn't disabled people should be able to access facilities they pay for with their tax dollars? Why is complying with the ADA--a bipartisan law signed by George H.W. Bush--seen as a waste of taxpayer money?

spaced-out• 5 years ago

I'm not sold on labor unions being the primary factor in this, though they may contribute, because construction costs in the US are so much higher than countries like France, which has even stronger labor unions and stricter regulation. I find it hard to believe that US labor unions are able to extract so much more value than their French counterparts.

I think a bigger culprit is excessive local control and zoning restrictions, wielded to benefit property owners or to bleed developers and generate revenue for city governments. The shocking part, IMO, is that these costs far outweigh the cost added by notoriously strong French labor unions and EU regulation.

bluGill10• 5 years ago

Unions in the US work different from France.

In France unions wouldn't attempt to get their people $200/hour that the sandhogs in NYC get. We should bring the high priced unions to a realistic wage. However most union wages are not that far out of line.

Also in France the union is more relaxed about letting go of jobs that are automated away. There is no reason a TBM needs twice as many people to operate it in NYC as in France. There is no reason for any trains to have a conductor anymore, and train drivers are something that should be all but dead as well (though France is way behind the automation curve here as well)

That said, union labor is only a small part of the problem. Even if all of the most anti-union propaganda is taken as 100% true, union labor is still only a small fraction of the total cost of any build in the US. As such we need to look hard at what is going on in the other parts of construction.

steveBK1235• 5 years ago

From family in the industry, my understanding is it’s not union benefits/wages/etc per se, but more the work rules that haven’t changed with the times driving over staffing, inability to fire bad performers, and overtime issues.

There’s a lot of on-the-clock non-work built into the work rules. My relatives in the industry described the typical day as involving on-the-clock time built in for cleanup&changing into/out of work clothes, briefing on tasks for the day, safety briefing (AM and again after lunch for legal reasons), smoke/coffee breaks, etc. The longest stretch of uninterrupted construction is about a 2 hour sprint into the end of the day.

On the staffing front, the only lever a project manager has is to give the 2-3 hardworking guys out of 12 a boatload of overtime hours to get the actual work done. This is one reason that on most every job site around the city you see some pretty sick cars. Those 2-3 guys are getting 50% of the work done out of the 12, and getting paid Google engineering money for it.

NYT article years back talked about 2nd avenue subway covered examples of work rules. Tunnel boring machine in NY requires 3-4x the staffing of Paris, because thats the contract negotiated in the 70s when it was seen to be reducing jobs.. and no one has revisited it. This is no small figure as we have a handful of these digging tunnels the last few years, at the rate of 50ft/day... for months. Similarly there is a mandatory on-site oiler who basically sits in the break room all day because the machines do not need constant oiling anymore the way they did when the rule was written half a century ago.

One example from my relative - on a large NYC project he worked, they couldn’t take deliveries from suppliers on Saturday because it required the job site to be opened. Per union rules this would have required some inane number of staff to be on-site getting overtime rather than just say the guy to open the gate & staff (if any) required to empty the truck.

A lot of this is because public sector unions are treated as a voting constituent rather than a vendor by the government, and no politician ever wants to cross them.

barbacoa• 5 years ago

In New York City unions are essentially a subsidiary of the political system, funneling money into reelection champagnes. In return politicians return their support by requiring that any government contract must be awarded to contractors that use union labor. It is all a racket. I have heard stories from people who have done civil work in NYC and the level of corruption and waste is staggering. Like $5000 billed labor hours to drive to a site to plug in a cable. Firms will bit a 50% surcharge on any projects in NYC to compensate with the red tape and union labor costs.

mc322• 5 years ago

Why can’t the feds do for construction corruption what Blumenthal and Giuliani did to organized crime in NYC.

The feds know it’s corrupt. Why can’t they go there and say all projects need to come through us and they ensure there is no monkey business going on with the contracts?

bluGill10• 5 years ago

What makes you think the feds are any less corrupt?

bilbo0s• 5 years ago

If I were a developer in NYC and the feds said that, I would sue. constitutionally speaking, they don't have the power to say all building projects need to come through us.

Yes, construction contracts and rates are fueled by corruption. That said, I would only be OK with the feds going after the corruption. Not taking over construction. Do investigations. Trap people in stings. Do all the good old FBI tricks. I encourage that, but governmental takeover of all contracting is going too far.

wombatmobile• 5 years ago

Why can’t the feds do for construction corruption what Blumenthal and Giuliani did to organized crime in NYC.

Ha! When I read that line I completely missed the last letter in the word "organized", and it made perfect sense. I thought it was an historical quote from Guiliani's last job application.

hellbannedguy• 5 years ago

I have worked construction in San Francisco, and a former General Contractor.

There is a cost difference between all union projects, and non-union projects.

The costs seem outrageous at first. If I wanted to hire a union local 6 Electican a few years ago the union would charge me $101/hr. for a skilled worker to show up.

Yes--it sounds nutty?

The answer is bypass the union, and go non-union?

When all us said and done, and the project is completed, and the developer gets the bill; the few projects I worked on, the total cost of building was roughly the same?

That doesn't take into account what non-union shops cost society either.

Very few non-union shops provide health care. If they do, it's usually a lousy plan.

Workers get sick, or hurt, and worker's compensation runs out; you have workers looking for government medical care.

My point is I'm pretty sure the mob is not affiliated with unions in San Francisco. (I know that was not your point)

My main point is when the building is completed, and it's time for the developer to sell the shiny new building; the price you pay is exactly the same.

Non-union workers make developers more money. The buyer will not see those savings.

You the buyer will not receive a better deal ever. The market determines the price.

Now--if you are the developer, it's a no brainer--kind of--you want the building built as cheaply as possible. You hire non-union, provide lousy training, but live in a grand mansion. You spit out a few spoiled kids, and they run the money machine. (Big Bill of Bradley electric was apprentice for 5 years. Learned the trade. Turned around and opened a non-union shop. Made millions. Made so much money he could shoot his son in-law, and somehow get out if a long jail sentence. Making a lot of money is nice?)

Many unions now have a no compete clause in their agreement. Unions don't want to pay for your schooling, and have their guys opening up non-union shops. I am pretty sure it's never enforced, or even legal? Wow--I'm just writing too much today. Don't feel that great? I'm finding this opening depressing in a weird way. Sorry about bothering anyone with my issues. I sometimes have no one to talk to.)

O.k, I say "kind of" because with a union run job, it's usually done on time, and done well.

This crazy rant is basically developers are usually the only one's saving money with non-union help.

stale2002• 5 years ago

My main point is when the building is completed, and it's time for the developer to sell the shiny new building; the price you pay is exactly the same.

It is more complicated than that.

The way that supply and demand works, is that if costs go up, then there is less reason to create new supply.

And a lower supply of an item, means that prices, for the overall market, will go up.

That is how supply and demand works, and housing is no different.

You the buyer will not receive a better deal ever. The market determines the price.

The market is determined by supply and demand. This is standard, 101 economic theory. If costs go up, supply go down (or supply increases a smaller amount), and price goes up.

quickthrowman• 5 years ago

O.k, I say "kind of" because with a union run job, it's usually done on time, and done well.

This is why owners of Class A real estate usually mandate union labor, at least for MEP trades.

I bid and run work at a union shop, it’s sometimes difficult to compete on prevailing wage/public jobs here since only the cash wage portion is counted and not the benefits portion. So, a non-union shop can pay the $45/hr prevailing wage and cheap out on fringe benefits, maybe an additional 12-15/hr, where the union labor gets the prevailing wage and negotiated fringe benefits package that is roughly 2x the base wage (total comp). Right now we pay union journeyman electricians $87/hr in IBEW 292, which will go to $90/hr next Monday.

The good thing is, there’s plenty of work for union shops since as I mentioned, lots of Class A real estate and giant companies stick to union labor for construction, as the quality or perceived quality is higher (in general).

You’re also correct about the extra savings going to the developer, if you hire non-union labor and are bidding against a union shop and it’s a lump sum bid, you only need to beat the union guy by 1-2%, the rest is profit to keep.

It’s refreshing to see someone with actual experience commenting about construction on HN, nice post!

sdsaga12• 5 years ago

Agreed that New York City is an outlier in a number of ways, but there does appear to be something interesting going on with regard to rising U.S. costs for a variety of things besides just construction (e.g., health care and education). Slate Star Codex did an interesting though definitely inconclusive piece on this in 2017: https://slatestarcodex.com/2017/02/09/considerations-on-cost...

ChrisMarshallNY2• 5 years ago

I have no opinions on the American industry, but I have known folks that have run local (NY) construction companies.

They have all said that you need to deal with the wiseguys. They also have told me that they are nothing like what TV makes them out to be.

Sort of like the famous "widgets" scene in Back to School[0].

I can tell you that the Japanese (at least in Tokyo) construction industry is awesome. They build incredibly ambitous and robust buildings, in a really short time.

I traveled to Tokyo regularly, for 20+ years. I tended to stay in the same hotel.

I remember looking out my window one year, and seeing a big field.

The next year, it was a big hole in the ground.

The next year, it was a 30-story skyscraper; fully occupied.

[0] https://www.youtube.com/watch?v=YlVDGmjz7eM

criddell2• 5 years ago

Isn't Japan known for tearing down homes after 25-30 years? Are commercial buildings built to last?

yummypaint• 5 years ago

I think part of the quick turnaround on houses is related to superstitions about dwellings in which people have died. Most of the value is also in the land rather than the structure so the economics are less punishing. I suspect the costs of building in commercial areas is high enough to offset some of this.

njharman• 5 years ago

I thought they were known for the 100yr mortgage. And multigenerational living/thinking.

That's all I've heard about.

dcolkitt2• 5 years ago

What does it matter if construction is cheap and efficient?

Nobody cares if cars are “built to last” 30+ years, because we can just make new cars. There’s a persistent mythology in construction about “they don’t make ‘em like they used too” and “back in the day they were true craftsmen”.

It’s mostly BS, old houses are incredibly shitty compared to modern standards. But this type of attitude slows down progress. Any sort of innovation or productivity improvement gets looked down upon as just being a way to cut corners.

ChrisMarshallNY2• 5 years ago

That may be the case, but Tokyo sits on one of the most active seismic faults in the world.

Buildings need to be solid (actually, they are often built to jiggle around). Friends who were in Tokyo when they had that horrible Sendai earthquake, said looking out the window from the 20th floor was scary as hell, but the buildings were fine, afterwards.

gibsonf1• 5 years ago

New York is definitely not representative of America in the sense that NYC Unions have a true strangle-hold on labor and logistics costs in the city unlike most other places. (I think NYC is likely #1 in the free world for distorted construction markets because of this) As an architect living in NYC, I was shocked by how blatant this control was, how unaccountable labor was during construction, and the killing of a great pioneer project with modular construction because the modules weren't built in the city for example.)

narrator• 5 years ago

An extreme example: 1 mile of subway in San Francisco cost just over 1 billion dollars to build. The central subway was a 1.7 mile long subway extension that recently finished construction:

"Total cost overrun, largely driven by the claims settlement, three change order omnibus packages, contingency reserves and additional project management and other services, puts the final cost at $1.89 billion and sticks SFMTA with a $184 million deficit for this single project alone."

https://www.sfexaminer.com/news/major-construction-on-centra...

throwawaysea2• 5 years ago

In Seattle we paid $3.4 billion for a 1.7 mile tunnel (https://www.seattletimes.com/seattle-news/berthas-woes-grind...). Construction began in 2013 and it was supposed to open in 2015 but didn’t until 2019. It replaced a 4 lane elevated highway on the waterfront, which gave all drivers beautiful views, with an underground 4 lane highway that gave waterfront property owners a big boost in value, while relegating everyone else to views of subterranean walls. Somehow our local government saw this project as value for our money.

Slippery_John• 5 years ago

Costs aside, lets not pretend the viaduct was removed just to improve property values. The thing was a ticking time bomb that would have killed dozens or hundreds of people the next time a moderately sized earthquake hit, to say nothing of the cost of cleaning up the damage and replacing it.

Speaking a somebody who lived in the area both before and after the demolition (not a property owner), the whole place is just so much more beautiful. Some commuters may have lost a view, but what they lost pedestrians all over the area gained. Even outside of the waterfront itself, the view from the street level in the adjoining neighborhoods is gorgeous now.

m0llusk• 5 years ago

This is woefully lacking in context. The Second Avenue subway in particular was proposed more than a hundred years ago and at that time the proposal was considered to be far more expensive than could possibly make sense. Over and over again the proposal came back up and got shot down again because of the expense. By the time New York actually committed to building the Second Avenue subway there was roughly a hundred years of literature going in detail into why the project was simply to complicated and costly to ever make sense.

So then they actually built it and if you can actually imagine this it turned out to be so expensive it didn't necessarily make sense. But instead of referring to the hundred or so years of detailed documentation of this problem neophyte analysts descend and make what they think is a detailed comparison of costs when in fact they should have been examining the many complications faced by this extremely complex project. Ultimately this analysis is drug down by the weight of their failure to comprehend the Second Avenue subway alone because of the huge scale of that project and the complications that it faced.

This is like looking at per seat construction costs of the Airbus 380 and deciding that something strange must have gone on to make it cost more per seat than a basic small scale commuter aircraft.

bluGill10• 5 years ago

Sure, but they finally got the current part done because it was worth it - at seven times the cost to do a similar capacity tunnel in Spain. If NYC could control their costs a little better there are a lot of tunnels that right not are not worth it that would be obviously worth doing.

ncmncm• 5 years ago

Short answer: legalized corruption.

Waste and overrun are not problems, they are the whole point of the endeavor. It is the opportunity to direct those into chosen pockets that motivates the stakeholders. The project itself amounts to legal cover, similarly to real estate now used for international money laundering. It looks like a real project, and something comes out at the end, but the majority of the money moved is just dollars shuffled from public purse to private.

It's all legal, so no risk of indictments. The US is the world leader in legalized corruption.

tibbydudeza• 5 years ago

No show jobs ???.

baybal22• 5 years ago

Even if it is so, you don't get it much cheaper when 60%-70% percent of a single family home is land.

Going from expensive to ridiculously cheap in construction methods will only mean shaving $100k-$150k from a $1m home.

Going for extra-cheap interiors will probably save more for house in such price range.

The real solution is to rehouse America in highrise appartments.

This way, you can get up 100 fold land price reduction.

dcolkitt2• 5 years ago

There’s very few homes in America where land is 60% of the property value.

baybal22• 5 years ago

Then, there is more runway there. But still...

Foundation work is not going anywhere on any construction method except for smallest homes.

Framework work is probably easiest to eliminate, but you will still have to count one most basic.

Even if you have 4 fold work hours reduction, and 2-3 fold in materials you save $300k on a $1m home, and end up with a very basic house.

Apartments are better than trying to improve upon a single family home.

tomekjapan• 5 years ago

Since I came to live in America I have been constantly shocked by how much different contractors are trying to screw you up. The spread in quotes can easily be as much as 5 times from the (already expensive) cheapest to the most expensive ones, with what I am guessing is the majority of contractors high balling and trying to score easy money. I dread the upcoming weeks of negotiations every time I need to get anything fixed around the house.

1cvmask• 5 years ago

This point the author makes is an interesting observation:

9. Institutions part 3: global incuriosity

The eight above factors all explain why American infrastructure costs are higher than in the rest of the world, and also explain high costs in some other countries, especially Canada. However, one question remains: how come Americans aren’t doing anything about it? The answer, I believe, has to do with American incuriosity.

Incuriosity is not merely ignorance. Ignorance is a universal trait, people just differ in what they are ignorant about. But Americans are unique in not caring to learn from other countries even when those countries do things better. American liberals spent the second Bush administration talking about how health care worked better in most other developed countries, but displayed no interest in how they could implement universal health care so that the US could have what everyone else had, even when some of these countries, namely France and Israel, had only enacted reforms recently and had a population of mostly privately-insured workers. In contrast, they reinvented the wheel domestically, coming up with the basic details of Obamacare relying on the work on domestic thinktanks alone. The same indifference to global best practices occurs in education, housing policy, and other matters even among wonks who believe the US to be behind.

This is not merely a problem in public policy. In the private sector, the same problem doomed the American auto industry. American automakers have refused to adopt the practices of Japanese and German competitors even after the latter produced small cars better suited for post-1973 oil prices. They instead dug in, demanded and got government protection, and have been in effect wards of the American federal government for about 40 years.

WalterGR• 5 years ago

American liberals spent the second Bush administration talking about how health care worked better in most other developed countries, but displayed no interest in how they could implement universal health care so that the US

The Right would never allow that.

In contrast, they reinvented the wheel domestically, coming up with the basic details of Obamacare relying on the work on domestic thinktanks alone.

Obamacare is based on Romneycare, Massachusetts's health care reform under Mitt Romney (R)'s governorship.

ipexnet• 5 years ago

This is my bread and butter; and honestly, the entire issue is engineering (or lack thereof). That is not that you have bad engineering, but more the oversight into the level of engineering is where things fall over. The article notes specific example of "low-bid" contractors demanding change notices. That isn't a function of a low bid contractor, that is an issue with the specifications and quality of engineering they are building too. A lot of the issues the US faces are related to soil conditions! Nowhere in the article is there a note that soil conditions are the biggest factor in tunneling costs. When we back up a little too, large infrastructure in the US is very political. The government doesn't deal with "project management" to ensure a project comes in on time and budget, they deal with yearly budget allocations - thats it! So the entire management ethos on public works is so drastically different you can't even compare. Anyway, stoked to see the discussion about construction here.

tmaly• 5 years ago

This is going to sound funny, but I saw a video on TikTok last night where a guy in the construction industry was saying that material producers for construction are price gouging right now.

Why American construction costs are so high (2019)

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