Wednesday, July 20, 2005

"Not-so-Light-Rail" Editorial in Railway Age

Mr. Alfred E. Fazio, a VP at MTA Capital Construction Corporation, who has also had experience working with a company that built and operated the Hudson-Bergen Light Rail owned by New Jersey Transit, has an interesting article in the July '05 Railway Age Magazine. His main point is that Light Rail construction costs now approach $50M per mile, a price which may jeopardize future projects.

I think he has a point. Often times, Project Managers, Engineers, and Transit Owners almost act like kids whose Father has given them an unlimited allowance! Those of us on the supply side have often commented and wondered who has their fingers on the cost control knob, or for that matter, who even wants the chance? Fazio argues that if Light Rail Projects become too costly, costs will be controlled by someone selecting something besides Light Rail, maybe something like Bus Rapid Transit for example.

I do take issue with where Mr. Fazio assigns these higher costs. If I read correctly, he says that Light Rail owners, engineers, and contractors are building costly designs that are not being driven by operational performance or requirements. That point is true, but I believe that higher project costs can be found elsewhere in more significant amounts.

A premium track component, no matter what it is specifically, will cost a transit agency MORE than the exact, same, identical product will cost a Class One Railroad. Why? Suppliers have learned that agencies require more tests, more documentation, more accounting staff, and more "contingencies". Not only that, the delay between invoicing for delivered material and actual payment seems to grow longer and longer, forcing contractors and suppliers to assume a greater cost of capital! Contractors and suppliers have to become bankers! I maintain that these added costs significantly outweigh the cost of any overdesigned or premium project components.

Where these extra costs come from is important, but regardless, there should be an alarm bell that goes off in many heads as a result of Mr. Fazio's article. He is right. Sooner or later Dad is going to cut that hefty allowance, or worse, give it to someone else. Light Rail is too good of a product to allow that to happen.


At 9:54 AM, August 14, 2005, Anonymous Track Guy said...

The old saying "pay me now or pay me later" is very appropriate to this discusion. One reason that LRT costs so much is because high quality materials and designs are used. Some of the LRT systems are 24/7 operations and to shut down for repairs or maintenance is a costly process. A system can lose ridership and taking all the safety precautions involved with "lock out tag out" is expensive. St. Louis built their system very cheaply (wood ties, relay rail etc.) and are now rebuilding with concrete ties and the cost of rail has doubled in 3 years. Doing a 50 year cost analysis shows more is better. We need to look at the complete life cycle cost before we say it is too expensive. We focus to much on the cost today and overlook the future costs that can drive an agency out of business.


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