GAO: Transportation Projects Often Fail to Meet Cost and Usage Projections

The Government Accountability Office has published a new report with some not so startling news:

“The available evidence indicates that highway and transit projects often do not meet projected outcomes such as cost and usage, while other projected outcomes such as economic development or land-use impacts are not regularly evaluated. Results from our case studies…show that completed highway and transit investments often result in higher than expected costs and usage that are different from what was projected…According to transportation officials we interviewed, these projected outcomes were important reasons that the projects were pursued. However, we found that evaluations of the outcomes of completed highway and transit projects are typically not conducted. Because these evaluations are not regularly conducted, officials only have limited or anecdotal evidence of whether the projects produced the intended results.”

Of course, we all intuitively believe this, but it’s nice to see it analyzed in a comprehensive manner. Some of the report’s examples include:

  • A study of over 250 transportation projects in Europe, North America, and elsewhere found that costs for all projects were 28 percent higher than projected costs at the alternatives analysis stage, on average. Rail projects showed the highest cost escalation, averaging at least 44.7 percent, while road projects averaged escalations of 20.4 percent. This study further found that cost underestimation has not improved over time, indicating systematic downward bias on costs.
  • Initial results from an ongoing study of New Starts projects by FTA show that nearly half of the 19 projects, for which ridership was reviewed, will achieve less than two-thirds of forecast ridership by the forecast year. In addition, costs escalated on 16 of the 21 projects reviewed from the alternatives analysis stage, where decisions are made to go forward with a preferred alternative, to the completion of the projectââ?¬â??with 4 of those projects experiencing increases of between 10 and 20 percent and 9 projects with increases over 20 percent.
  • In a 1997 report, we collected and analyzed data for 30 highway projects costing $100 million or more. We found that cost growth occurred on 23 of 30 projects when comparing actual costs to costs estimated at the alternatives analysis stage, with about half of the projects experiencing increases of more than 25 percent.

Of course, if you follow the light rail issue closely, you already knew that projected ridership and cost figures are always wishful thinking. But highway projects have their own problems as well. I think that a call for rigorous outcome evaluation in transportation planning is long overdue. The report rightly goes into great detail about the tremendous difficulty in placing a price tag on all projected direct and indirect costs and benefits. Sure, it’s easy to compare a project’s final costs with projections, but what about valuing more intangible costs and benefits, such as the value of land use changes or reduced emissions, for example? This is tricky work with no clear cut solutions. Still, transportation planners need to do better, for all of our sakes:

“With growing concerns about the size of federal and state budget deficits, combined with the future mandatory commitments to Social Security and Medicare set to consume a greater share of the nation’s resources, the prospects of future fiscal imbalances are a certainty. Given the current and long-term fiscal challenges, careful decisions need to be made to ensure that transportation investments systematically consider the benefits of each federal dollar invested.”

Leonard Gilroy is vice president of government reform at Reason Foundation and senior managing director of Reason's Pension Integrity Project.