‘Design-build’ contracts key to infrastructure success
Now that congressional action on federal infrastructure legislation is in overtime, it’s vital to consider an issue that has been largely ignored in the debate so far: As important as how much we spend is how we spend it. Both political parties should consider some recent lessons.
Remember the “Big Dig” in Boston? It rerouted parts of a major highway from the heart of the city into a 1.5-mile tunnel. Construction began in 1991 and was supposed to take seven years and cost $2.8 billion. It actually took 16 years and cost over $15 billion. (The latest sticker-shock is a Boston Globe estimate of more than $24 billion, including interest.) The project was plagued by cost overruns, design flaws, delays, leaks, substandard materials, corruption and a fatal ceiling collapse.
In that case, money wasn’t the issue, performance was.
There’s a better model for policymakers to follow: the replacement bridge for the Tappan Zee Bridge in New York — the largest single procurement in the state’s history. It opened ahead of schedule, and the costs were approximately 40 percent (more than $2 billion) under budget.
What was the difference between the Boston and New York experiences? New York was a “design-build” contract. Any final infrastructure financing plan that emerges from Washington ($3 trillion, $2 trillion or $1 trillion) should embody this highly efficient concept.
Design-build is a process in which a single bidder is responsible for both design and construction. The bidder must, during the design process, factor in time, complexity and the total cost of construction.
Avoiding Boston’s Big Dig fiasco was very much on the mind of one of us, Howard Milstein, when he was chairman of the New York State Thruway Authority and assumed responsibility for replacing the Tappan Zee. Without an incentive to meet deadlines and keep costs within estimates, even the best public infrastructure projects fall prey to spiraling costs and rolling deadlines.
Democrats and Republicans in the New York State Legislature joined together to pass legislation creating a “build and design” model for the bridge. That allowed the state to engage in an efficient and transparent plan. The Tappan Zee procurement was a model of collaboration.
The Thruway Authority didn’t just issue a Request For Proposals (RFP) and wait for the bids to come in. They decided to draw on the knowledge and experience of the bidders themselves, who had been deeply involved in building bridges all over the world. During the 10-week period when the bids were prepared, they held separate weekly meetings with each of the four teams involved and asked them: If you were leading the process, how would you run it? What changes would you make in the RFP? What would you do differently?
They ran each suggestion by competing bidders to develop consensus on what would work and (just as importantly) what wouldn’t. When in-house engineers confirmed these conclusions, they made the changes. The usual finger-pointing that happens when things go wrong was minimized because the developers were fully accountable for delays and overruns.
To paraphrase Sinatra’s “New York, New York,” if we can make a bridge on-time and under-budget there, we can make it anywhere.
All state and local governments must follow public bidding and procurement laws for public-works projects. That means the feds set the rules. Because federal grants account for about one-third of total state funding, Congress and federal agencies determine the nature of the grants, oversee their implementation and hold administering agencies accountable for meeting performance standards. The federal government has enormous leverage to incorporate design-build as a requirement for federal aid.
The federal government can also lead by incorporating design-build into repairing and replacing the infrastructure it owns and operates: the inland waterway system, roads and bridges on federal lands, the air traffic control system and federally owned dams and levees.
Rep. Peter DeFazio (D-Ore.), chairman of the House Committee on Transportation and Infrastructure, has said that there are more than 46,000 bridges on our nation’s highway systems that are structurally deficient, some 230,000 that need repair and a long list of bridges that need to be replaced. Imagine the time and money savings if all those contracts were let with design-build requirements.
Neither the states nor the private sector can do it alone; the federal government needs to be the driver. But private-sector experience, with the entrepreneurial instincts that are so ingrained in the running of a business, can help guide the process in ways that complement highly talented government experts. Design-build would be a critical step in that process.
The debate over infrastructure cost and revenues is important. But if the orthodoxies of “too much” or “not enough” asphyxiate innovative, efficient and successful models such as design-build (particularly with historic investments), Big Digs will stretch from coast to coast.
Howard Milstein is chairman, president and CEO of New York Private Bank & Trust and its operating bank, Emigrant Bank, the country’s largest privately-owned, family-run bank. He served as chairman of the New York State Thruway Authority until November 2014 and led the procurement process for the replacement of the Tappan Zee Bridge.
Steve Israel represented New York in the U.S. House of Representatives over eight terms and was chairman of the Democratic Congressional Campaign Committee from 2011 to 2015. He is now the director of the Institute of Politics and Global Affairs at Cornell University. Follow him on Twitter @RepSteveIsrael.