Transportation SustainabilityCE 256Prof. Susan Shaheen

MEGAPROJECTS AND THE CALIFORNIA HIGH-SPEED RAIL PROJECT

UNIVERSITY OF CALIFORNIA BERKELEY

PRESENTED BY ARTHUR BAUERMARCH 10, 2016

USDOT: A project costing $1B or more

Mega implies the size of the task involved in developing, planning, and managing projects are challenging

Socio-economic impacts

Engineering or construction innovation

The risks are substantial

WHAT IS A MEGAPROJECT?

Today the focus will be on public projects, especially the California high-Speed Rail Project

Because of the scale of megaprojects, the general public and public officials become enamored or disenchanted

A sense of mastering the universe

There is an awe quality surrounding megaprojects

Important Benefits may flow from Megaprojet

WHAT IS A MEGAPROJECT?

Technical Complex design and engineering Complex construction technology Complex construction management Difficult to manage cost to budget

Social Demand Community impacts may be large Bought into the “project” Difficult to discuss the unknown or unexpected Difficult to account for risk

Model of Megaprojects developed by Bent Flyvbjerg See: Megaprojects and Risk: an Anatomy of Ambition

ELEMENTS OF A MEGAPROJECTSchedule

Budget

Scop

e

Big dreams

Big dollars

Big risks

CORE ELEMENTS OF A MEGAPROJECT

An analysis of 258 projects in 20 different countries found the following cost overruns by project category:

20% on road projects

34% on bridge and tunnel projects

45% on rail projects

Key to dealing with Megaprojects is identifying and managing RISK!!!

MEGAPROJECT TRACK RECORD

Built in 2550BCE Tallest structure unti l

about 1300CE when the Lincoln Cathedral was built

Largest structure in the world for nearly 4,000 years

Special housing for workers

2.5 to 6 ton stone blocks some from Aswan about 450 miles away

Some blocks within 1/8” Platform on which pyramid

is build is within tolerances expected of a laser leveler

MEGAPROJECTS AREN’T NEWGREAT PYRAMID OF GIZA

Optimism Bias: Project promoters and planners spin scenarios of success and gloss over

risks and possible failure

Strategic misrepresentation

Why? Competition for funds

“The dream” or the character of the project

Commitments made to a particular stakeholders, project or project scope without understanding risks ,e.g.., financial, construction, patronage, managerial, other

WHY DO MEGAPROJECTS EXCEED COST PROJECTIONS

At the front-end, planning stage identify comparable, high profile megaprojects and analyze drivers for costs increases, schedule delay, and scope changes. This is for reference

Ensure project decision-makers bare burden of financing

Ensure the skill mix of the planners, engineers, and contractors meet the demands of the project

Transparent decision-making

Honesty

HOW TO CONTROL MEGAPROJECTS?

Understanding demand is critical for transportation projects, including airports, highways, toll bridges and tunnels, and public mass transit projects

Financing is linked to demand forecast

Project scope and scale often linked to demand forecast

Manipulating demand infects the project with misplaced optimism

Understanding demand forecast is daunting and trust is usually assumed in formulating of the forecast

DEMAND

Megaprojects evolve overtime—”organic phenomena”

Megaprojects function as agents of change for society, e.g., Channel Tunnel between Britain and France or the HSR Project, Interstate Highway System, California Water Project

Impacts cannot be assessed at the front end

Projects can meet schedule and budget, but fail to meet current or future needs

But: Not easy to separate projects from scope, schedule, budget issues

Trade-offs abound. For example, more debt to pay for increasing costs takes funds for debt service that could be used in other projects

Om ega Cen t re a t th e Ba r t l e t t Scho o l o f P lann i ng , U n i ve rs i t y o f Lo ndo n

ANOTHER POINT OF VIEWMEGAPROJECTS NEED A BROADER

DEFINITION OF SUCCESS

1981—Japanese-American group proposes a HSR project between Los Angeles and San Diego Project goes nowhere after legislative delegation visits Japan.

Legislators found the technology incompatible with coastal communities because of noise

1990—Proposition 116 ($2B transit bond) authorizes $500,000 to identify a corridor for HSR to cross the Tehachapi Mountains

1996—Legislation establishes the HSR Authority

2008—Legislator places Proposition 1A on ballot to fund a HSR project Prop 1A passes with 52.6 percent of the vote

HIGH-SPEED RAIL COMES TO CALIFORNIA

Funding Requirements

Authorizes $9.95B bond—$9B to HSR & .950B for local projects

Allows 0.900B for planning, engineering &up to 0.450B for admin

Bond funds used for construction must be matched dollar for dollar

Other sources of funding anticipated, including federal, local gov’t, & private

REQUIREMENTS OF PROPOSITION 1A OF 2008

Program Requirements

First phase Anaheim/LA to San Francisco Transbay Transit Center

Required to travel LA to SF 2:40 with a top speed of 220 MPH & an average running time of 200MPH

Legislative intent HSR be completed by 2020

Before bond funds may be used for construction, HSRA must demonstrate passenger service in a usable segment (a segment with 2 or more stations) or an entire corridor shall not require an operating subsidy

REQUIREMENTS OF PROPOSITION 1A OF 2008

Business Plan to be delivered by Sept 2008, but delivered at end of October days before the November election

Voters told construction cost of full system would be $33B

December 2009 new Business Plan with cost of $42.6B

Salient issue ridership

2007 by 2020 when fully operational ridership would be 68M passengers

2008 Business Plan ridership between 42M to 68M by 2020 2009 Business Plan (initial phase, SF, LA/Anaheim) 13.5M passengers

by 2020.

HSR ISSUES AT THE OUTSET

State Senate Transportation Committee asks ITS to review the HSRA’s travel demand model

HSRA paid for the review

ITS reviewed the “Bay Area/California High-Speed Rail Ridership and Revenue Forecasting Study”

RESOLVING RIDERSHIP ISSUESITS TO THE RESCUE

“. . .we have found some significant problems that render the key demand forecasting models unreliable for policy analysis.”

“. . .the mode choices of the individuals surveyed were not representative of California interregional travelers.”

Because of the above findings, the report concluded “. . .it is likely that the resulting model gives a distorted view of the tastes of the average California traveler.”

“CS changed key parameter values after the model development because estimates did not accord with the modelers’ a prior expectations.”

ITS’S FINDINGS

SOURCE OF DISPUTES: ALIGNMENT

Highway 99

Agricultural an issue from day one California largest ag state: $45.5B, Iowa is second $29.9B

Dairy $7.6B, Almonds $3.8B

Number 1 export ag product almonds--$2.4B

Community issues on the San Francisco Peninsula 30 minutes San Francisco to San Jose

Community issues in East Los Angeles entrapped by highway

Orange County opposed HSR because of community concerns

ISSUES

Cost control is always an issue with megaprojects

Time itself becomes an enemy of cost control

Competency of project management and construction management has an impact on cost

Selection of alignment and more precise engineering can influence cost in either direction

Cost of property acquisition influences cost

Politics may affect project cost

HSR COST ISSUES

Draft 2012 Business Plan $98B

COMPARISON OF DRAFT 2012 AND FINAL 2012 BUSINESS PLANS

The great flip-flop: Merced to San Fernando Valley is dropped as the Initial Operating Segment (IOS) and Silicone Valley to “near” Bakersfield is the new IOS.

Later improvements to Caltrain will offer “one seat ride” between San Francisco and Bakersfield

Phase I San Francisco to LA/Anaheim forecasted to open in 2029

What happened: no alignment for tunneling through the Tehachapi Mountains

San Francisco to LA/Anaheim is now $64B

2016 DRAFT BUSINESS PLANTHE GREAT FLIP-FLOP

Draft 2016 Business Plan Flip-Flop Silicone Valley to Bakersfield

NO CLEAR PATH THROUGH THE TEHACHAPI MOUNTAINS

“Engineering and Environmental challenges associated with tunnels in mountainous terrains including-Design, constructability and commercial challenges, groundwater resources & geotechnical investigation”

Source: HSRA, Peer Review Group Semi-Annual Update, September 2015

The 2:40 travel time in Proposition 1A is no longer discussed

Cost Unknown

RISKS ARE HIGH TO CROSS THE MOUNTAINS

PROPOSED BUDGET UNREALISTIC

1. State bonds to pay for construction can’t be sold until it can be demonstrated that the IOS won’t require an operating subsidy

2. $2.552B of Federal funds must be spent & matched by 2017

3. Committed state bonds must meet the no operating subsidy requirement

4. $5.341B in cap & trade funds is all that can be counted on. Cap & trade sunsets in 2020.

To access bond funds must prove to satisfaction of the Legislature, an independent peer review group, the Department of Finance, the Legislative Analyst that the IOS can offer service that will pay for O&M to get bond funds—about $6.775B

Use cap & trade funds—about $5.341B

Awarded federal fund—about $3.165B

$15.281B

About $5B short to build Northern California segment

WHERE WILL THE MISSING MONEY COME FROM

Thank you

Questions