What is Happening with California High-Speed Rail?
Unfortunately, not much is happening with California high-speed rail.
In mid-February, the California high-speed rail project was effectively cancelled. There is much debate and sweating over the future of this project to connect San Francisco and Los Angeles. And a lot of this comes down to politics.
I’m not going to dig into the politics here of the why’s and how’s of the California high-speed rail project.
My focus in this article is with the planning, project oversight, cost overruns, and mistakes that have effectively shelved a high-speed rail system that had great potential.
To do this I’m going to take you on a deep dive into the 2018 California State Auditor report titled: California High-Speed Rail Authority – Its Flawed Decision Making and Poor Contract Management Have Contributed to Billions in Cost Overruns and Delays in the System’s Construction.
Now, that is quite the title. In fact, it does an amazing job of highlighting our core belief system at PCS and reason for being – that ultimately Construction Is Personal™.
Mistakes in planning, research, budgeting, and vision impact people. Real people who are relying on a construction project for jobs. Real people who are displaced and forced to relocate because of a project that is promised to eventually change their lives for the better. Real people who want to understand how such large mistakes could be made.
The California high-speed rail project had great vision. The originally planned system would connect San Francisco and Los Angeles with a high-speed passenger train in under 3 hours by 2029.
People were excited. It would cut their commute times. Make it easier for people struggling with high costs of living. Help the environment. Reduce the number of cars on the road. Create jobs.
But, now here we are in March 2019 with only a commitment for the completion of 110 miles of the projected 700 miles of rail. These 110 miles when completed will connect the cities of Merced and Bakersfield – two cities which were not part of the original plan that Californian voters approved in 2008.
Our goal with this series is to highlight the lessons from projects that haven’t gone as planned, showing how these lessons should be used to improve the decision-making process before digging starts.
The Facts on California High-Speed Rail
There was a lot of promise for a lot of people riding on the California high-speed rail system connecting San Francisco and Los Angeles. The plan was to connect most of California’s large cities with as many as 24 different stations.
The people who voted 53 per cent in favor of the high-speed rail plan in 2008, were likely excited by promises that included:
- Shorter and more affordable commute times.
- The 220-mph train would mean less cars on the road and fewer short-haul flights.
- People struggling to live in the cities in which they work, would find it is easier and cheaper to get to and from their jobs.
- This rail project would help offset the booming Californian population and the ageing freeways and over-maxed airports.
- Cities would benefit from funds from the high-speed rail – allowing them to put money into their own city improvement projects.
- The train would help California meet its goal to cut carbon emissions to 40 per cent below 1990 levels by 2030.
- The state estimated that by 2040, high-speed rail would cut 10 million miles of daily vehicle travel and reduce 180 daily short-haul flights.
- The promise of construction-related jobs for many years as the entire rail project was planned and built.
After multiple changes and revisions to the originally approved and estimated construction plan, construction finally began in 2015:
- Construction started in Fresno in 2015.
- Construction crews started working on a 119-mile segment of rail track in Central Valley.
- Highway 99 traffic was realigned to accommodate the future train – encouraging hope in the project’s success.
- Cities had begun getting ready for the arrival of high-speed rail.
- Fresno had rezoned the area around the city’s future stations to accommodate buildings up to 15-stories tall. The city had also started work on a pair of Bus Rapid Transit lines to connect the city’s northern and eastern areas.
- Los Angeles and Anaheim started moving forward with their upgrades to their one-day high-speed rail stations.
- Caltrain began an electrification upgrade with the expectation that the corridor would serve high-speed rail.
- Transbay Terminal was designed with the expectation that the bullet train would arrive.
A 2017 article by sf.curbed.com includes an interactive map showing the construction progress of the California high-speed rail project. These paragraphs from this 2017 article have proved to be ambitious:
The entirety of phase one, from San Francisco to Anaheim, is supposed to be open for business in 2029.
Right now of course, the work actually visible on the map is just a small piece of what will eventually be a long and winding course through the state, with the construction furthest north right now being an overpass under construction just above Madera and the lowest lying work being another overpass just south of Fremont.
But even a journey of 407.7 miles or so starts with a single step.
I suggest reading California high-speed rail: Everything you need to know, for a good overview of this project. This paragraph was written optimistically in 2017:
The state ultimately hopes the high-speed rail project will generate enough revenue to cover operating costs once construction is complete. Once the plan moves closer to completion, they anticipate funds from private donors.
And now, here we are. Government funding for the California high-speed rail project was cancelled in mid-February 2019. The U.S. Department of Transportation announced it was cancelling $929 million in grants to fund the rail project.
As a result, only the 110 miles between Merced and Bakersfield will be completed.
Why Did the California High-Speed Rail Project Go Off the Rails?
Yes, politics is a big part of the underlying reason for the failure of the California high-speed rail project – but it wasn’t the only reason.
In 2018, the California State Auditor released a revealing report showcasing the problems with this project from day 1:
- The California High-Speed Rail Authority (Authority) began construction in the Central Valley in October 2013 despite being aware of the risks associated with beginning construction early.
- The Authority had not acquired sufficient land for building, had not determined how it would relocate utility systems and had not obtained agreements with external stakeholders.
- As of 2018, these unmitigated risks contributed to $600 millions in costs overruns for the three active Central Valley construction projects. An additional $1.6 billion was needed to complete the costs.
- The Authority cited the terms of a 2010 federal grant – which originally required construction to be complete by 2017 – as the primary factor in its decision to begin construction when it did.
As the report details, further problems with decision-making, oversight, planning, budgets, and communication resulted in further delays, costs, and mistakes:
- Since 2012 the Authority has incrementally modified its plans for a fully dedicated high-speed rail system. Instead, it now intends to share existing infrastructure wherever feasible, with an approach known as blending – to help offset rising costs in the system.
- While less costly than the original approach, blending also subjects high-speed trains to lower speed limits and sometimes requires sharing time on the tracks with other rail operators.
- The fact that it has now exhausted all feasible options to use existing infrastructure raises concerns about its ability to mitigate future cost increases.
- The Authority needs to improve its contract management to control soaring costs – it currently has 56 contract managers throughout its organization, but these individuals generally do not serve in contract management roles full time.
- Moreover, it has placed portions of its oversight of large contracts into the hands of outside consultants.
- In reviewing 9 planning, engineering, and consulting contracts, few contract managers could provide evidence of reviewing each monthly invoice for accuracy, none maintained tracking logs of deliverables, and most were unable to demonstrate how they ensured the quantity and quality of the work for which the Authority paid.
- The Authority often amended its contracts to add time or additional funds and that when they were doing so, it relied on the contractors’ own estimates and projections of the associated costs and delays.
- Although it has estimated the environmental impacts of its current construction, it has not comprehensively evaluated its performance against those estimates.
The conclusions and findings in this report, are not a surprise to me or the rest of the PCS team. Unfortunately, we’ve read and heard variations on these themes too many times.
It’s time for governments, companies, decision-makers, policy makers, and contractors to put a stop to types of decisions, mistakes, and misguided ambition that convince people to sign dotted lines, to vote for, and get excited about construction projects before consulting external independent analysis of project feasibility and success.
November 2018 Recommendations for the California High-Speed Rail Project
The recommendations made by the California State Auditor, speak to the universal problems that contribute to large-scale construction project cost overruns, delays, and failures:
- The Authority should establish formal prerequisites for beginning construction to prevent avoidable cost overruns and project delays.
- At a minimum, these prerequisites should identify specific benchmarks related to property acquisition, utility agreements and relocations, and agreements with external stakeholders, including impacted local governments and other railroad operators.
- To enable policymakers and the public to track the Authority’s progress toward meeting the Recovery Act deadline of 2022, the Authority should begin providing quarterly updates to the Legislature detailing the progress of Central Valley construction by January 2019.
- Prioritize contract management efforts by establishing a process for hiring and assigning full-time, experienced contract managers.
- Hold contract manager accountable for performing the duties that the Authority’s policies assign to them.
- To help ensure the that it meets its sustainability goals, the Authority should comprehensively compare the environmental impacts of its construction to its baseline estimates on a quarterly basis by May 2019.
The Costs of Construction Failures
When construction projects are delayed, amended, and over-budget – no one wins.
The decision-makers who backed and promoted the project lose. The citizens directly impacted by the faltering construction lose. The contractors who committed and promised to do the work lose.
Everyone loses. Everyone becomes tainted. And now we’re in a situation where no one believes in construction viability.
At PCS, we want to change this mindset. We want people to really believe that a construction project can happen on schedule, on-budget, and on-vision.
To do this takes working with a company such as ours to provide the independent voice that improves cost certainty, reduce risk, and ensures project cost control.
Contact us to learn how we can help you avoid problem bids, stay on budget, limit costly overruns and gain more value for your construction dollar.
About the author
Lee Thomas, MBA is the chairman and CEO of Project Cost Solutions. Lee has over 20 years of hands-on operational process experience under his belt. He is deeply committed to seeing your construction project succeed.