Question

CASE STUDY 13.3 “Dear Mr. President—Please cancel our project!”: The Honolulu Elevated Rail Project Speaking on the status of Honolulu’s Elevated Rail public transport system, former Hawaii Governor Benjamin Cayetano had an interesting message for President Trump: “As a lifelong Democrat and former governor of Hawaii, I opposed your candidacy. I must admit, however, that you are on the right track scrutinizing wasteful spending on pork barrel projects.” The admission by former governor Cayetano was prompted by the latest details emerging from a project that the New York Times has written is in danger of becoming a financial boondoggle. The Honolulu Authority for Rapid Transportation’s (HART) 20-mile elevated heavy steel rail system that has been under construction for six years is now slated to cost nearly $10 billion, or $500 million per mile. If these costs are realized, Honolulu’s rail project would have the distinction of being the most expensive transit project in the country’s history. Honolulu is a beautiful but increasingly congested city on the south coast of Oahu. Residents and visitors have long complained that transportation options, highways, and other infrastructure have not kept pace with the growth of the city. In 2008 and following a close referendum vote, the city approved the beginning of the elevated rail system. To partially offset costs of the system, the mayor and city council instituted a temporary excise tax increase for residents and visitors. They also received $1.5 billion in Federal funding to support the project. Initially budgeted for $4.6 billion, the rail project is intended to start in the western edge of Honolulu, run through the middle of the city, and terminate at the Waikiki beaches. Included in the huge project are 21 stations, of which seven will be elevated and set 60 feet high above the city’s streets, and a 35-foot high elevated rail line that will run four miles through the middle of the city. The project has drawn fire from residents who are increasingly sick of blocked streets, traffic jams, and dirt and noise from multiple construction sites. In fact, a poll conducted in late 2016 showed that only 15% of the city’s residents favor completion of the rail project. Meanwhile, costs continue to rise. The original $4.6 billion budget was readjusted to $6.7 billion, and with the newly-announced delays in construction, being at least two years behind schedule and counting, the city has announced a five-year extension in the “temporary” excise tax to cover what critics are arguing will actually end up being over $10 billion in costs. Critics of the project such as Mr. Cayetano, who argues that the elevated rail “will change the beauty and ambience of the city forever,” also charge that in addition to its aesthetic shortcomings the final environmental impact study revealed that the rail project would, at best, reduce traffic congestion by under two percent and noted, “traffic congestion will be worse in the future with rail than what it is today without rail.” Opponents of the project note, among other problems, that the Honolulu rail project will employ light rail-sized cars limited to about 650 passengers in two-car combinations. Moreover, it can run only up to four cars for peak period service. Thus, they contend that this rail project is the worst design possible because it combines an intrusive and expensive infrastructure including 21 stations, along with a low passenger carrying capacity where over 60% of passengers will be forced to stand and hold handrails. Advocates of the project also appear to have minimized the power needs for adding this rail system to the city’s electrical grid. In fact, the rail project’s power draw is estimated at nearly 50 MW, which is a major requirement. The city’s utility company is requiring the HART to renegotiate a price for the combined cost of substations, power generation, and possible airport utility relocation tasks that are likely to add an extra $500 million to the price tag. Why has the project budget ballooned to its present state? Some of it is due to issues of timing. When cost estimates were first given to voters, the region was suffering from the effects of the Great Recession and construction work was at a stand-still, leading to expectations of low costs. However, after delays from lawsuits took over a year to resolve, Honolulu’s construction industry had dramatically changed for the better and preliminary cost estimates were no longer even close to accurate. “We gagged on the number. It was something over 60 percent higher than the estimates we had in 2011 and 2010,” said Daniel Grabauskas, the executive director of the Honolulu Authority for Rapid Transportation. Other reasons for the cost escalation are more insidious; critics have long charged the project’s advocates and public officials with deliberately low-balling their initial estimates to win public approval, reasoning that once the project was started and “on the books,” it would be nearly impossible to cancel it. At this stage in the rail project, projected future cost estimates are nearly meaningless. Both advocates and opponents of the rail system understand that the summer of 2017 will be a watershed year for the project, as the next round of bids for construction along the critical four-mile corridor through downtown Honolulu is set to be held. Opponents like former governor Cayetano and Dr. Panos Prevedouros, a civil engineering professor at the University of Hawaii, are adamant that the project’s budget is not supportable. “They cannot complete the four in-town miles because those are very expensive and we don’t have an actual budget for them,” noted Prevedouros, who has run for mayor as an opponent of the project. “Honolulu’s rail project does not deserve a single dollar more from the federal government,” stated Cayetano. “It has become a poster boy for how politics, incompetence, disinformation and outright lies are at the root of wasteful rail projects which do little for the public except raise taxes.”

Why are public works projects like the Honolulu Rail project nearly impossible to stop once they have been approved, even if later cost estimates skyrocket?

Project management researchers have charged that many large infrastructure projects, like this one, suffer from “delusion” and “deception” on the parts of their advocates. Explain how “delusion” might be a cause of ballooning budgets in this project. How does “deception” affect the final project budget overruns?

Answer 1

ANS- Public works projects like the Honolulu Rail Project are nearly impossible to stop once they have been approved, even if later cost estimates skyrocket because the money gets already sanctioned to the various departments. The tax already increases and moreover the work gets half completed and the public projects are not a small one that it can be stopped, they are the big project like in this case the construction of Honolulu Elevated Rail public transport system is a big one and they already started the construction of it by doing several works and if it now gets stopped then the resources will be wasted and area where it is built will also not look good because of half completion and people would criticize the government for not being able to complete the project just because of additional money when they are too already paying their taxes.

Delusion was the cause of ballooning budgets in this projects in the sense that when the costs estimates were first given to voters, the region was suffering from the effects of the Great Recession and construction works was at stand still leading to expectations of low costs.

Deception affected the final project budget overruns in the sense that the advocates and public officials estimated the low costs initially to win public approval. They thought once the project gets started it would be nearly impossible to stop the project. Advocates of the project also minimized the power needs fro adding this rail system to the city's electrical grid. In fact the rail project's power draw is estimated at nearly 50 MW, which is a major requirement.