It now looks like Oregon DOT’s $450 million freeway widening project will cost over a billion dollars
Whales aren’t the only than blow up on ODOT
One of the most viewed clips on YouTube depict the handiwork of Oregon Department of Transportation engineers. Nearly 50 years ago, in the fall of 1970, confronted with the rotting corpse of a 45 foot long sperm whale on a Pacific beach, ODOT engineers planted half a ton of dynamite under the carcass; when detonated it created a rain of blubber that sent bystanders running for their lives–a a huge chunk that crushed a nearby car. ODOT has subsequently given up on exploding stranded whale carcasses (it now carefully buries them). But it has found another thing to explode, and something it does regularly: project budgets.
The latest news from the Oregon Department of Transportation is that they have new refined cost estimates for their proposed 1.7 mile I-5 Rose Quarter Freeway Widening Project. The department for years had been telling the public and the Oregon Legislature that the project would cost $450 million. The latest estimate is higher– a lot higher. As Oregon Public Broadcasting reported:
Back in 2017, ODOT estimated the project would cost $450 million. Now, a new report from ODOT pegs the cost at between $715 million and $795 million – and that doesn’t include some key changes to the project sought by local leaders. Add all of that up and it could easily top $1 billion.
And the justifications the department offered were feeble:
When ODOT gave legislators the $450 million cost estimate back in 2017, the agency didn’t bother to forecast the impact of inflation. That accounts for about half of the increase. Metro’s [President Lynn] Peterson, who has a graduate degree in engineering, shakes her head at this. Figuring in inflation is something you’d find in a fundamentals of engineering exam, she said.
But wait, there’s more
But that’s not all. This estimate doesn’t include other likely costs. First and foremost, local elected leaders in Portland, including Mayor Ted Wheeler and Metro President Lynn Peterson have tied their support for the project to proposals to make sure that the covers built over the wider freeway will be buildable locations–so as to support the Albina Vision plan to revitalize the district. ODOT estimates that the cost of these covers could be another $200 to $500 million.
ODOT also says that if the project is delayed, that will further increase its cost. They’ve specifically tried to use this cost to make a case for not undertaking a full Environmental Impact Statement, which they say could add up to three years and $66 to $86 million to their preferred timetable (which assumes ignoring objections and bulldozing ahead based solely on the current flawed Environmental Assessment (a kind of EIS-lite).
The trouble with that argument is that the project is virtually certain to attract a legal challenge due to demonstrable flaws in the EA. As we’ve chronicled here, it is based on flawed traffic projections, assumes a $3 billion Columbia River Crossing was built in 2015, ignores induced demand, understates greenhouse gas emissions, and failed to consider less expensive, more environmentally benign alternatives. And these are just a few of the legal weaknesses of the EA. The bigger cost risk to this project is that the agencies put off doing a full EIS until they after they are ordered to do so; adding time for litigation (and appeals) could stretch out the timeline by another 2 or 3 years, further increasing costs–something ODOT conveniently ignores. (Plus, ODOT could have elected to do a full EIS starting two or three years ago and avoided these cost and legal risks).
Finally, the $800 million (or more) is just the sticker price of the project; ODOT doesn’t actually have the money in hand, so it will have to borrow it. That borrowing will entail a considerable additional expense for interest. This is a part of the fiscal reality of the Oregon Department of Transportation that no one talks about: Prior to 2000, it was nearly debt free, and spent less than 1.5 percent of its budget on interest expense. Since then, its gone on periodic borrowing binges, that like consumer credit, let you enjoy shiny new things now, and push the cost off (with interest) into the distant future. No one’s bothered to spell out the interest costs of borrowing for the Rose Quarter project, but that, too is likely to run into the additional hundreds of millions of dollars.
Buildable covers, the costs of delay (especially if ODOT puts off doing a much-needed EIS), and interest expense: All of these will serve to inflate the ultimate cost of the Rose Quarter project.
ODOT: Where cost overruns are just the way we do things
To some, a cost increase of this magnitude may seem like an aberration. For anyone who has followed ODOT closely, its apparent this is very, very common. Over the past decade and a half at least, ODOT has blown through the budget estimates of virtually every large project they’ve undertaken.
Like other highway agencies, ODOT has consistently underestimated the cost to complete its major highway projects. A review of ODOTs own reports for the largest projects its undertaken in the past 20 years shows a consistent pattern of cost overruns, as summarized here:
There’s abundant academic evidence about the consistent tendency of “megaprojects” to overrun early cost estimates. Bengt Flyvberg has literally written a book about it.
No Accountability for Overruns
There have been furtive efforts to oversee ODOT. In November 2015, Governor Brown said she was commissioning an performance management audit of ODOT.
ODOT did nothing for the first five months of 2016, and said the project would cost as much as half a million dollars. Initially, ODOT awarded a $350,000 oversight contract to an insider, who as it turns out, was angling for then ODOT director Matt Garrett’s job. .
After this conflict-of-interest was exposed, the department rescinded the contract in instead gave a million dollar contract to McKinsey & Co, (so without irony, ODOT had at least a 100 percent cost overrun on the contract to do their audit.)
And what McKinsey produced amounted to a whitewash, as I explained at Bike Portland. The audit covered up a long series of ODOT cost overruns, and instead focused on a long series of meaningless measures of internal administrative processes, such as the average time needed to process purchase orders. Meanwhile, the state’s million dollar auditors excluded from their cost overrun calculations the US20 Pioneer Mountain project, the single most expensive project that ODOT had undertaken, and even though excluding it, managed to understate and mis-label the 300 percent cost-overrun.
The final report from McKinsey recommended that ODOT could become more efficient by giving more money to consultants like McKinsey (as humourist Dave Barry would say “I’m not making this up.”)
Which, in a way, brings us full circle: Dave Barry was one of those principally responsible for popularizing the exploding whale story. With ODOT, the explosions just keep coming, but now they’re confined mostly destroying project budgets, rather than raining blubber. At least with whales, ODOT learned from its mistakes. When it comes to massive cost overruns, its simply become the way this agency does business. We give the last word to Barry, who narrates the whale explosion:
So they moved the spectators back up the beach, put a half-ton of dynamite next to the whale and set it off. I am probably not guilty of understatement when I say that what follows, on the videotape, is the most wonderful event in the history of the universe. First you see the whale carcass disappear in a huge blast of smoke and flame. Then you hear the happy spectators shouting “Yayy!” and “Whee!” Then, suddenly, the crowd’s tone changes. You hear a new sound like “splud.” You hear a woman’s voice shouting “Here come pieces of… MY GOD!” Something smears the camera lens.