Honolulu rail warning for Auckland

Honolulu serves as a warning to Auckland and to Len Brown over the city rail loop project. There are many, many direct comparisons between Honolulu and Auckland.

It has cost over $1.8 billion so far and expected to blow out way over $2 billion.

In 2011, officials in Honolulu, Hawaii began construction on a controversial 20-mile rail project partly because of almost $1.8 billion in federal subsidies to President Barack Obama’s home state. The project’s total cost estimate stands at $5.3 billion, but if other similar projects are any indication, the final price tag will increase dramatically before anyone even gets to buy a ticket. What’s playing out in the Aloha State is happening all over the country.  

“This rail project is our bridge to nowhere”, says University of Hawaii law professor Randall Roth. “We are convinced that it will be billions of dollars over budget and we think they will try to get the federal government to bail them out.”

 


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  • Orange

    Awesome, we’re building a rail to nowhere around in a circle where no one actually wants to be.

  • philbest

    I strongly recommend the books and papers of Prof. Bent Flyvbjerg.

    His latest paper is entitled: “Quality Control and Due Diligence in Project
    Management: Getting Decisions Right by Taking the Outside View”.

    Commuter Rail projects are the main example he uses in his critiques.

    Here are some excerpts:

    “…errors of judgment are often systematic and predictable rather than
    random, manifesting bias rather than confusion, and that any corrective
    prescription should reflect this….Due diligence is a method for systematically and reliably assessing how large biases are; and for de-biasing business cases
    and other forecasts…

    “….Using such distributional information from other ventures similar to that being forecasted is taking an outside view and it is the cure to the
    planning fallacy……

    “….The contrast between inside and outside views has been confirmed by
    systematic research…(which) shows that
    when people are asked simple questions requiring them to take an outside view, their forecasts become significantly more accurate….

    “…While understandable, planners’ preference for the inside view over the
    outside view is unfortunate. When both forecasting methods are applied with
    equal skill, the outside view is much more likely to produce a realistic
    estimate…That is because the outside view bypasses cognitive and political
    biases such as optimism bias and strategic misrepresentation and cuts
    directly to outcomes….

    “..where optimism bias is the main cause of inaccuracy, we may assume that
    managers and forecasters are making genuine mistakes and have an interest in
    improving accuracy….

    “…In the second type of situation – where strategic misrepresentation is
    the main cause of inaccuracy – differences between estimated and actual
    costs and benefits are best explained by political and organizational pressures. Here managers and forecasters would still need the outside view if accuracy were to be improved, but managers and forecasters may not be interested in this because the inaccuracy is deliberate. Biased forecasts serve strategic purposes that dominate the commitment to accuracy and truth.

    Consider, for example, the case of urban rail. Here, the assumption of innocence regarding estimates typically cannot be upheld. Cities compete fiercely for approval and for scarce national funds for such projects, and pressures are strong to present business cases as favorably as possible, that is, with low costs and high benefits, in order to beat the competition.

    There is no incentive for the individual city to debias its forecasts, but quite the opposite. Unless all other cities also debias, the individual city would lose out in the competition for funds. Managers are on record confirming that this is a common situation (Flyvbjerg and Cowi 2004:36-58).

    The result is the same as in the case of optimism: managers promote ventures
    that are unlikely to perform as promised. But the causes are different as are possible cures.

    Under these circumstances the potential for using the outside view is
    low – the demand for accuracy is simply not present – and barriers are high.
    In order to lower barriers, and thus create room for the outside view,
    incentives must be aligned to reward accurate forecasts and punish
    inaccurate ones, for instance by allocating forecasting risk directly to
    investors so they will carefully scrutinize the accuracy of forecasts before deciding to invest in a project. Below, we will see an example of how this
    works, in the case study of the A-Train. Furthermore, to curb strategic forecasts, governments and other funders may have to make the outside view mandatory and make funding contingent on the application of this particular methodology, as has been done in the UK and Denmark. However, better methods alone will not solve the problem, because any method can be gamed (Winch and Maytorena 2011:354). Better methods need to go hand in hand with better incentives.

    Finally, promoters’ forecasts should be made subject to quality control and due diligence by other parties, including banks and independent bodies such as national auditors or independent analysts. Such bodies would need the
    outside view or similar methodology to do their work. Projects that were shown to have inflated benefit-cost ratios would not receive funding or would be placed on hold. The higher the stakes, and the higher the level of political and organizational pressures, the more pronounced will be the need for measures like these…”

    “….Step four in the method for due diligence followed here consists in checking the forecaster’s track record from other, similar, forecasts.
    Forecasters typically attempt to lend credibility to their bid to do a forecast for a specific project by listing forecasting experience from other similar projects. But rarely do forecasters provide ex post data on actual accuracy of forecasts made in the past. If asked to provide such evidence of actual track record, forecasters typically reply that the evidence is confidential and cannot be released (a common explanation for private projects) or that the evidence is not available, because they have done no
    systematic follow-up studies of accuracy, and neither have others (a common explanation for public projects). Either way, evidence of documented track record of accuracy of past predictions is typically not available from
    forecasters….”

    “….Management research has recently developed strong theory to help identify
    the “fools” and “liars” Taleb talks about. Being academic, the theories
    use more polite and opaque language, needless to say, describing Taleb’s fools as people who are subject to “optimism bias” and the “planning fallacy” and liars as those practicing “strategic misrepresentation”, “agency,” and the “conspiracy of optimism” (Flyvbjerg, Garbuio, and Lovallo 2009; Gardener and Moffat 2008; Hirt 1994; Weston et al. 2007). This research has demonstrated that fools and liars constitute the majority of forecasters and that forecasts are used as sinister tools of fraud more often than we would like to think. Wachs (1990:146, 1986:28) found “nearly universal abuse” of forecasting in this manner, and it is common in all sectors of the economy where forecasting routinely plays an important role in policy debates, according to Wachs. Forecasts are used to “cloak advocacy in the guise of scientific or technical rationality”, in Wachs’ (1989, 477) classic formulation, and there is no evidence that things have improved since Wachs did his pioneering studies (Flyvbjerg 2007a).

    However, recent research has also developed the concepts, tools, and
    incentives that may help curb delusional and deceptive forecasts. The outside view and due diligence, presented above, was developed with this purpose in mind. So was reference class forecasting (Flyvbjerg, Holm, and Buhl 2005; Flyvbjerg 2006), which has been officially endorsed by the American Planning Association (2005) and made mandatory by government in the UK, Denmark, and Switzerland (UK Department for Transport 2006, Danish Ministry for Transport 2008, Swiss Association of Road and Transportation Experts 2006). Finally, the incentive structures designed by Flyvbjerg, Bruzelius, and Rothengatter (2003) and Flyvbjerg (2007a) are a means to curb both optimism bias and strategic misrepresentation in forecasting. Given the knowledge and tools we have today for making better forecasts, there is little excuse for accepting forecasts like that for the A-Train, which is incompetent at best (made by fools) and fraudulent at worst (made by liars). We have the knowledge and tools to disclose the incompetence and fraud and should clearly do so, given the
    large financial, economic, social, and environmental risks that are at stake
    in this type of multibillion-dollar investments. Luckily, government and
    business are beginning to see this…..”

  • philbest

    Corruption and fraud are pretty much inherent in commuter rail “investments”. It is a rare event indeed when any such investment ends up costing less than double the original “studies” and ends up carrying more than 2/3 the original forecast ridership.

    I am not exaggerating, either; I am going by Prof. Bent Flyvbjerg’s papers which analyse these things in a large international data set. He uses the delightfully academic terms “Strategic misrepresentation” and “Optimism bias” to describe what is going on.

    An excellent paper to start with that has a huge references list, is Wenleng Chen’s paper “Analysis of Rail Transit Project Selection Bias”.

    It is noteworthy too that Meyer, Kain and Wohl authored a massive study in the early 1960’s that presented all the evidence and concluded that commuter rail had had its day. Fred Kain in particular has continued authoring papers since, that show how the situation has steadily worsened against commuter rail systems. The fraud and corruption have had to get worse and worse as time has gone on, to “compensate” for this. Len Brown’s Akl Rail Loop is an obvious object lesson.

    The heavily unionized monopoly model is responsible for much of the inefficiency, but even so commuter rail is a dead loss sunk cost burden on the economy in almost all cases everywhere in the world. Hong Kong might be the single exception.

    Longer argument HERE:

    http://pn.org.ua/?the_growing_popularity_of_bus_rapid_transit.html

  • Johnny T

    Whale is once again completely wrong on transit issues. Yawn.

    • Dolphin fiddler

      Johnnycakes you left leaning cock sucking rail bludger….. can you use a calculator? How about read a cost benefit analysis? Ever studied at University how a CBA is written?
      Can you find the evidence to back the claims in Auckland Councils analysis?
      Have you seen the deliberate errors that were found in that CBA that essentially mean its flawed?
      Nope bet you haven’t.
      Fucking raving loonies like you need to be put in front of the train.

      • Johnny T

        I ain’t no left winger knobface. I just know that cities work better with good public transport. You’re way out of line.

        • AngryTory

          I just know that cities work better with good public transport.

          Public transport is leftist by definition.
          Peasants have legs for a reason.

  • Tonyb

    This is precisely the sort of journalism we should be getting in NZ. Holding governments to account over real matters that affect us.
    Not crap like the Andrea Vance story.
    Where is the media on the Auckland rail loop?

    • AngryTory

      Where is the media on the Auckland rail loop?

      If you haven’t realised the only media that matters in NZ is Whaleoil.

      And since Whale decided that John Key was a political genius for backing the rail-froot-loop and school meals — rather than a cowardly traitor for taking up Labour and Green extreme left policies — who else is there?

  • Policy Parrot

    The Auckland CRL will fail to meet the expected demand, will not solve problems and will go we’ll over budget.
    This Parrot predicts impeding doom and gnashing of teeth in 2021. Auckland Council will borrow for it now, expect to be bailed out and in 2021 everyone will run for the hills including the central govt of the time who will baulk at the bill.

  • Greg Davis

    No kidding, kids. You’ve gotta go libertarian or we’re all fucked. Get over your little selves.

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