The Long-Term Cost of Building Transportation Projects on the Cheap

Factoring in the lifetime cost of new construction is considered good practice in the transportation industry, but surprisingly few government agencies do it.
by | October 1, 2014

When it came time to replace a runway that is nearly three miles long at John F. Kennedy International Airport in New York City a few years ago, the agency that runs the airport decided to take a close look at what options would make the most sense for its budget in the long run.

The Port Authority of New York and New Jersey considered the long-term costs of paving the runway with either concrete or asphalt. Concrete was more expensive initially, but it was projected to last four times as long as asphalt. Officials selected concrete, because they predicted it would save $500 million over the life of the runway and reduce maintenance costs as well.

The Port Authority’s approach on the project, known in the industry as “life cycle cost analysis,” is well-known but not commonly used, according to a report released Tuesday.

“While there is widespread agreement among governmental agencies and the private sector that economic and fiscal analyses such as (life cycle cost analysis) should inform decision-making, in practice it has had little application,” wrote the report’s authors, from the American Society of Civil Engineers and the Eno Center for Transportation.

Beth Osborne, a vice president for the advocacy group Transportation for America, said transportation agencies should be crunching numbers on long-term costs before deciding which projects to build. That is the type of analysis, she said, that the public expects.

“Thank heavens the American people don’t know that we don’t do this now. I think they’d be quite startled,” she said. “If the American people knew we don’t do this as a matter of course, they would be thinking about how much money to take out of the program, not how much to put into it.”

Only 59 percent of respondents in a survey of transportation officials this spring said their agency used some form of life cycle cost analysis. The survey, conducted by the Governing Institute and ASCE, also found that 72 percent of respondents said their agency's process for that type of analysis needed improvement, was barely adequate or was inadequate.

A federal law passed in 2012 will require states to start reporting the life cycle costs of their transportation infrastructure, but experts at a Capitol Hill briefing noted that the agencies would not have to use those figures when making decisions.

Other, existing requirements could actually discourage transportation planners from relying on long-term cost projections. The federal government, for example, insists that states build projects that can handle future traffic loads. Those requirements can lead to bigger projects, which are more expensive to maintain, Osborne said. “What we’re doing is going the capacity route, not looking at the cost, and then sending the American people the bill.”

Other factors discourage planners from focusing on long-term costs. They may not have reliable data on how much roads, rails or other infrastructure cost to maintain. Agency workers may not be trained to develop cost projections or use them in their decisions.

Developing cost projections can also take a lot of money and staff time up front. Government agencies may not believe they have the money or staff time to spare.

Joshua Schank, president of the Eno Center, said long-term costs should be one factor of many that political leaders use when deciding how to spend transportation money.

“Transportation decision making is a political process, it will always be a political process and it really should be a political process,” he said. “The point of life cycle cost analyses … is to help inform that process; it is not to substitute for that process.”

The report suggested several ways states and localities could start to use life cycle cost analyses:

  • Start with pilot programs
  • Work with legislators to create laws tying funding to cost analyses
  • Train workers to use the analyses
  • Work with private companies, especially through public-private partnerships, to develop a better understanding of how the private sector uses the analyses.

Gregory Nadeau, the acting administrator of the Federal Highway Administration, said Congress’ inability to pass a long-term funding bill for transportation makes it harder for planners to focus on the distant future.

Transportation officials are focused on making sure they get projects done while there is still money available, he said. “It is often true that pressure to deliver projects often leads agencies to the lowest common denominator -- the lowest cost for an asset up front.”

“Until we have a predictable, reliable, long-term ability to invest in these transportation assets,” he added, “it’s going to be very difficult to persuade state DOTs and local transportation agencies on the ground … to think long term.”