What caused the explosion in construction costs such as the James children's hospital project?


Patslatt1

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Typical of exploding construction costs,the final estimates for the St James Children's hospital has ballooned to a horrendous 1.7 thousand million euros, more than double the initial estimate. This hyper inflation in costs has a number of causes. The most important cost driver is recovery in commercial construction from the construction depression which lasted for several years after the collapse of the Celtic Tiger construction boom. With the construction labour force dramatically reduced by mass emigration in the depression, construction costs and bid prices were poised to spike upwards in cyclical recovery.

Still, the government might have done more to keep costs from exploding. Irish and eastern European trades and professions who emigrated in the depression are likely deterred from returning by high 50% marginal tax rates on incomes above the average and absurdly high rents and housing costs in Dublin, both the fault of government. In construction,overtime can be important at times to meet project deadlines but construction workers who work in hard manual jobs are reluctant to take a pay cut of half on overtime for income tax.

Apprenticeships in construction have also been neglected going by the drastic reduction in construction training programmes in many ITs. The government should have a campaign to persuade young Irish that they would have a better career in construction trades than with many mediocre or useless third level degrees and diplomas. This is not to disparage the value of high quality degrees and diplomas but the third level has attracted too many "bums on seats" just to earn fees and keep going despite parsimonious government funding and inadequate average fees.
 

Ardillaun

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Cheer up, Ireland, you’ve got lots of company. Construction cost overruns are a global problem:

Three types of explanation for cost overrun exist: technical, psychological, and political-economic. Technical explanations account for cost overrun in terms of imperfect forecasting techniques, inadequate data, etc. Psychological explanations account for overrun in terms of optimism bias with forecasters. Scope creep, where the requirements or targets rises during the project, is common. Finally, political-economic explanations see overrun as the result of strategic misrepresentation of scope or budgets. Historically, political explanations for cost overrun have been seen to be the most dominant.[4] In the USA, the architectural firm Home Architects has attributed this to a human trait they call "Psychology of Construction Cost Denial", regarding the cost inflation of custom homes.[5]

Cost overrun - Wikipedia
Success in megaproject management is typically defined as projects being delivered on budget, time, and benefits. If, as the evidence indicates, approximately one out of ten megaprojects is on budget, one out of ten is on schedule, and one out of ten is on benefits, then approximately one in a thousand projects is a success, defined as on target for all three. Even if the numbers were wrong by a factor two – so that two, instead of one, out of ten projects were on target for cost, schedule, and benefits, respectively – the success rate would still be dismal, now eight in a thousand. This serves to illustrate what may be called the "iron law of megaprojects": Over budget, over time, over and over again (Flyvbjerg, 2011). Best practice is an outlier, average practice a disaster in this interesting and very costly area of management.

https://arxiv.org/pdf/1409.0003.pdf
Flyvbjerg...writes that megaproject planners are often outright dishonest, systematically overestimating​ benefits and underestimating costs. He cites an unusually candid comment that Willie Brown, a former speaker of the California State Assembly and mayor of San Francisco, made in a 2013 newspaper column. Referring to huge cost overruns during the construction of San Francisco’s four-and-a-half-billion-dollar Transbay Transit Center, Brown wrote, “We always knew the initial estimate was way under the real cost…. If people knew the real cost from the start, nothing would ever be approved. The idea is to get going. Start digging a hole and make it so big, there’s no alternative to coming up with the money to fill it in.”

The Trouble with Megaprojects | The New Yorker
And things could be far worse. In my Canadian province, we are currently wrestling with a hydro dam project that may bankrupt us:

common cause of cost overrun, expert says at public inquiry over $12.7B Muskrat Falls dam | National Post
 
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Franzoni

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Berlins new Airport....six years overdue and so far has cost 6.6 Billion euro and still not open...

I heard Harris on the news he says they want to put the latest technology in now so they have a state of the art facility and don't have to start upgrading as soon as it's finished.....

As someone who has worked on these projects it makes sense as i've seen the reverse and it ends up costing more.....
 
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Patslatt1

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Cheer up, Ireland, you’ve got lots of company. Construction cost overruns are a global problem:







And things could be far worse. In my Canadian province, we are currently wrestling with a hydro dam project that may bankrupt us:

common cause of cost overrun, expert says at public inquiry over $12.7B Muskrat Falls dam | National Post
Berlins new Airport....six years overdue and so far has cost 6.6 Billion euro and still not open...

I heard Harris on the news he says they want to put the latest technology in now so they have a state of the art facility and don't have to start upgrading as soon as it's finished.....

As someone who has worked on these projects it makes sense as i've seen the reverse and it ends up costing more.....
TAKE RESPONSIBILITY
Responsibility is usually diffused in the management of government contruction projects, with committees making decisions. Irish civil servants have form in this. That's a formula for disastrous cost overruns. Responsibility needs to be entrusted to one person who will be held accountable but if that puts his or her career at risk, the rewards such also compensate for the risk assumed. In the case of a civil servant, it might mean a huge bonus payment. Civil service culture would balk at that but tolerates
magnificent tax free lump sums for time serving.
 
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General Mayhem

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Cheer up, Ireland, you’ve got lots of company. Construction cost overruns are a global problem:







And things could be far worse. In my Canadian province, we are currently wrestling with a hydro dam project that may bankrupt us:

common cause of cost overrun, expert says at public inquiry over $12.7B Muskrat Falls dam | National Post
Mega projects should be broken down into multiple smaller contracts.

The last article is interesting in that is contains virtually no useful information and then suggests that local groups and indigenous populations are the problem.

It’s one thing to overrun after construction is underway, it’s quite another to overrun before the project starts.

The latter is preferable but until we see the side by side lists of items costed for the nch, then (and then, and then, and then) and now, this thread is entirely speculatorific.

Have at it.
 

PBP voter

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When the job was priced wages in construction were a lot lower. Same goes for materials.

Good look trying to get a shuttering capenter or a groundworkers to work for 2011 level wages.

Those lads deserve big wages given how scummy builders paid the few of them working ************************ all during the recession.
 

Fr. Ted Crilly

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We should get a load of boggers up from the country to build it.
Those lads will work for peanuts.....
 

PBP voter

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We should get a load of boggers up from the country to build it.
Those lads will work for peanuts.....
People know their worth.

So you're pro low wages.:rolleyes2:

Then they have to get a welfare top up. :rolleyes2:
 

Ardillaun

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Mega projects should be broken down into multiple smaller contracts.

The last article is interesting in that is contains virtually no useful information and then suggests that local groups and indigenous populations are the problem.

It’s one thing to overrun after construction is underway, it’s quite another to overrun before the project starts.

The latter is preferable but until we see the side by side lists of items costed for the nch, then (and then, and then, and then) and now, this thread is entirely speculatorific.

Have at it.
Here’s some more info on that project. You can see here that one cause of the cost overrun may have been a deliberate underestimation of the cost.

I didn't question Muskrat Falls cost estimates, former premier tells inquiry | CTV News

As pointed out above, this is an all too common occurrence in large projects.
 

General Mayhem

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Ardillaun

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The premiers are like the First Ministers of Scotland or NI or US governors. They’re a level of elected government between national and municipal.
 

wombat

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I heard Harris on the news he says they want to put the latest technology in now so they have a state of the art facility and don't have to start upgrading as soon as it's finished.....

As someone who has worked on these projects it makes sense as i've seen the reverse and it ends up costing more.....
The main cause of cost overruns is not labour costs but what is known as project creep. This means that additions are made to the original project scope. It is a basic principle of project management that the scope of work is agreed before contracts are awarded and no changes are made thereafter.
 

Fr. Ted Crilly

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The main cause of cost overruns is not labour costs but what is known as project creep. This means that additions are made to the original project scope. It is a basic principle of project management that the scope of work is agreed before contracts are awarded and no changes are made thereafter.
That's some project creep when the cost multiplies by 5.....
€1.7 billion now, according to RTE news yesterday.

Of course, Paddy thinks he/she'll be getting a 'state of the art' children's hospital that will be fully staffed and well run.

The dog on the street knows that there's no chance of that happening.
 

Patslatt1

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Mega projects should be broken down into multiple smaller contracts.

The last article is interesting in that is contains virtually no useful information and then suggests that local groups and indigenous populations are the problem.

It’s one thing to overrun after construction is underway, it’s quite another to overrun before the project starts.

The latter is preferable but until we see the side by side lists of items costed for the nch, then (and then, and then, and then) and now, this thread is entirely speculatorific.

Have at it.
It's important to have single managers with full authority in charge who manage the bidding processes and construction. Taking responsibility instead of dodging it through committees should improve cost controls substantially in government projects.
 

Patslatt1

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When the job was priced wages in construction were a lot lower. Same goes for materials.

Good look trying to get a shuttering capenter or a groundworkers to work for 2011 level wages.

Those lads deserve big wages given how scummy builders paid the few of them working ************************ all during the recession.
Your PBP mentality blinds you to the fact that builders were faced with a collapse in contract prices which dictated a collapse in pay.
 
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Patslatt1

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Patslatt1

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The main cause of cost overruns is not labour costs but what is known as project creep. This means that additions are made to the original project scope. It is a basic principle of project management that the scope of work is agreed before contracts are awarded and no changes are made thereafter.
Twists and turns to original contracts have led to disastrous cost overruns in the UK government contracts. The civil servants never learn from past mistakes.
 

toughbutfair

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I said during the recession that the government should hire builders for 10 euro an hour , and if they refused then no dole as not available for work. Could have CPOd land at rock bottom prices , created employment at practically no cost (after dole savings) and the stuff that did cost would have generated tax revenue. It is a pity that governments , of any parties, lack great brains.
 

popular1

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We should get a load of boggers up from the country to build it.
Those lads will work for peanuts.....
thats what they used to do
now they can get anyone from anywhere in the world
and they are quite willing and able to undercut amyone
its called a race to the bottom
isnt it great a small open economy
where the top get the benefit and the workers
compete with some of the poorest people in the world
to build so vulture funds and the type of financial bucanneers
who bankrupted the country with the help of the EU
can continue on their merry way
 
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