People won't vote for anything except for rosy projections. It's not much more complex than that. That's the simple answer at least.beautyfromashes wrote: ↑Fri Nov 09, 2018 2:38 pmWhy do governments bid when they don’t know exactly what they want? It seems that would cause massive increases in price. If you contracted with a house builder and then added a bedroom midprocess they would hit you with a “it’s gonna cost ya” mega increase for sure.
Why didn’t we reopen the bid process when we learned we needed 20%+ increase in the size of the airport?
It's actually well known this is on purpose and the prices are rarely real. Government knows that business is under pricing projects to make bids.
Pay attention to the type of project governments are undertaking.
P3, CM@Risk projects with private financing and maximum guaranteed rates means that the company getting paid is now incentivized to have realistic costs. So you'll see the costs up front rather than as change orders. They all go over their bid price once the project matures. I'm 100% convinced that the price they come up with will come very close to the final price that all the contractors would have charged and they will make their deadline, maybe even months early.
Look at who makes a payment guarantee. The city TIF bonds for the convention hotel make no guarantee beyond the TIF. If the hotel doesn't bring enough people into the restaurant and rooms they're out of luck. Since there's no extra money there was an incentive to move fast to keep inflation from eating into profits and build it quickly with labor being a huge part of the cost. In the airport project they're private bonds with revenue coming only from the airport. So the construction company has an incentive to have realistic costs that there's revenue coming to pay off. If ticket prices go up too much people won't fly as much so the airlines and contractor and city all feel the prices are realistic still.
Look at where design is at. This is a design-build project. A traditional designed project will come with more risk in that a project can't be as flexible to change costs but the cost is more likely to be accurate up front with design build while traditional unknowns increase costs later. For a huge project like the airport there's no way we would want to have a final price before the public can even see the project. All the large companies can design a final project and get within a ballpark cost on a city scale and they weren't expected to at the point of bid.
Now the real question after all of that is did B&M have a better idea on the final cost than Edgemoor? That's really hard to answer with hindsight. Maybe their prices would have jumped similar amounts once the changes started coming in?
Would city residents have voted for this project if it had started out higher? It's possible the only way to get the project through was to pick the lowest price with everyone in the city knowing they would all end up at about the same place. Notice this very thread is complaining about the cost being so high from a group better educated on the subject and knowing most big projects go up in cost.
We're seeing more projects look more expensive when really this is about reducing budget busting overruns that became the norm.
What needs to come next is for government to include a bid requirement for more projects that bids have cost risk assessments done to quantify their costs, like my final price will be $1.0-1.2 billion based on certain factors and then include a legal acceptance that they cannot go over their listed high price to do work listed in the bid and have bonuses for coming in low, like if the cost is $1 billion there's a $250 million performance bonus that's pure profit. Push cost assessment on both sides back to pre-bid rather than letting design-build be a reason everything goes up. Instead only unknowns can be a reason. Like if the bid document says to dig out clay and lay footers and they bid accordingly they get more money for the extra labor to remove limestone. But if they say they can provide tile and granite in a bathoom for $x and they dramatically underbid they can't charge more later unless their bid risk assessment says their price could be $x + 10%