Introduction
The problems of politicization, sudden design changes, and subsequent delays and increased expenses are common in large infrastructure projects. In that regard, the construction of the Second Avenue Subway in New York shares similarities with the Edinburgh tram system project. Phase 1 of the 13.7 km line has become the world’s most expensive subway line per kilometer (Goldwyn et al., 2023).
Phase 1 successfully solved the traffic problem — before the COVID pandemic, the line handled approximately 200,000 riders per day (Goldwyn et al., 2023). As such, Phase 1 provided utility intended by the Metropolitan Transportation Authority (MTA), the project-managing organization. However, the reasons behind the record-breaking construction costs of Phase 1 should be investigated because this issue could put an end to less ambitious but potentially useful infrastructure projects.
Examination of Budgets and Schedules
The Second Avenue Subway has a long, troubled history of hopes, setbacks, and revisions. Attempts to build a new subway line and reduce congestion on the parallel Lexington Avenue have been made since the 1970s (Goldwyn et al., 2023). However, the funds for Phase 1 construction in its current form were allocated in 2007, when the MTA and the Federal Transit Administration (FTA) agreed to a $1.35 billion budget.
The start of revenue service was scheduled for June 30, 2014 (Goldwyn et al., 2023). In reality, Phase 1 was launched in 2017, three years behind the original plan. The project costs inflated from $1.35 billion to $3.16 billion, spread across 10 construction contracts and an additional $656 million for 2 design and engineering contracts (Appendix A). In comparison, similar projects in European countries cost 8 to 12 times less (Woodhouse, 2023). From this perspective, the Phase 1 construction project management organization wasted taxpayers’ money.
Deviations From the Original Plan
As with other multi-year infrastructure projects, Phase 1 construction quickly fell behind schedule due to external factors. In particular, the tunneling contract had to be revised and delayed due to the discovery of an unanticipated subsurface wall. Contract repackaging and tunneling delays over 2008 led to the postponement of the revenue service date from June 2014 to March 2016 (Goldwyn et al., 2023).
In addition, the 2008 economic downturn led to a sudden increase in steel and concrete prices, which rose by 91% and 25%, respectively. As a result, the MTA had to review the project and set a new estimated cost of $4.37 billion(Goldwyn et al., 2023). However, the U.S. economy’s poor performance was not the only factor driving a drastic increase in projected costs. The MTA’s project management practices led to multiple delays, which were resolved through the allocation of additional funds and the intervention of political officials.
Attributes of Project Management Practices
Unlike TIE, which gradually decreased the number of contractors and outsourced the majority of work to BBS, the MTA broke contracts into smaller packages. According to Goldwyn et al. (2023), the MTA adopted this approach to ensure that all contractors could promptly pay their subcontractors and laborers.
However, such a reliance on a large number of outside companies produced an unexpected side effect. The MTA failed to properly oversee and control a dozen contractors, becoming entangled in their problems (Hicks, 2023). For instance, the construction of Phase 1 was divided into 10 contract packages, including station construction, finishes, and systems contracts (Goldwyn et al., 2023). Naturally, the completion of each package determined the project’s overall workflow. Ultimately, the cumulative effect of deviations from the original plan compelled the MTA to adopt acceleration-based project management practices.
Time has become a priority, especially after Andrew Cuomo, the Governor of New York, became particularly interested in the project. According to Goldwyn et al. (2023), the governor made the completion of the Phase 1 project by the end of 2016 a matter of his attention. Instead of “taking weeks and months” on construction-related decisions, the contractors’ staff would “jump on the planes to get the job done the next day” (as cited in Goldwyn et al., 2023, p. 346).
The direct involvement of a high-ranking politician allowed the launch of Phase 1 in January 2017. However, such management practices led to a drastic decline in quality. By January 1, 2017, reports had surfaced of out-of-service elevators, leaks, and damaged structural elements (Goldwyn et al., 2023). In that regard, one can argue that overreliance on outside expertise disrupted a project manager’s organizational capacity. The subsequent intervention of political authorities allowed the MTA to win time, but only at the cost of severe quality issues.
Examination of Administrative Performance
The shortcomings of MTA’s administrative performance are exemplified in tunnel boring works from 63rd Street to 96th Street. According to Hicks (2023), the MTA spent $655 million on outside consultants, while the tunnel boring cost $378 million. In total, tunnel boring costs approximately 25 percent of the budget allocated for Phase 1 construction. To put these numbers into perspective, transit authorities in European countries allocate between 5% and 10% of their total funds to similar engineering and design services (Hicks, 2023). In that regard, the MTA has displayed poor administrative performance, as it has been unable to control cost increases driven by preventable factors.
Additionally, the MTA failed to develop ironclad master agreements with city agencies due to its reliance on these third parties for various projects outside the Second Avenue Subway construction (Goldwyn et al., 2023). As a result, the MTA became highly vulnerable to sudden changes in project design. In that regard, one can argue that the MTA could not control the global financial crisis or predict the emergence of subsurface obstacles. However, the MTA could have delivered better administrative performance and controlled its contractors and third-party agencies to prevent the costs from skyrocketing.
Relevance of Organizational Structure
The organizational structure was a significant factor in the project’s cost inflation. Since the MTA granted substantial autonomy to the contractors, the companies utilized it to protect their reputations and bottom lines against potential risks (Hicks, 2023). For instance, the company responsible for the Tunnel Boring Machine (TBM) operation employed 46 laborers. In comparison, contractors working on similar projects in Europe and Asia deploy two to three times fewer laborers for underground construction (Goldwyn et al., 2023).
As such, the organizational structure of MTA’s contractors was a direct culprit of project cost inflation. Ultimately, overstaffing had no positive impact on Phase 1 construction speed and resulted in additional workforce maintenance costs. In addition, the MTA’s overreliance on its contractors and the division of Phase 1 construction works into ten package contracts further eroded the MTA’s influence over the workflow.
Team Composition and Key Stakeholders
One can determine three key stakeholder groups affected by the Phase 1 construction project. The first group consisted of New York residents and taxpayers. On the one hand, this group benefited from Phase 1 construction, which alleviated traffic congestion in the area. On the other hand, this stakeholder group suffered from the MTA’s inefficient project management.
The MTA, the project managing organization, was the second major stakeholder. While the project was eventually completed, the MTA incurred significant financial losses in the aftermath. Finally, the MTA’s contractors, consultants, and city agencies composed the third stakeholder group that has emerged as a clear winner in the aftermath. Due to the MTA’s project management practices, these stakeholders had excessive influence over the project and reaped substantial financial gains.
Conclusion and Recommendations
The MTA should take lessons from the events that led to project cost inflation and make corresponding adjustments before constructing other sections of the Second Avenue Subway. In particular, project management should revise its strategic approach to contractor relationships. New York should follow the example of Boston or European countries, where dedicated teams of experts oversee consultants and contractors (Hicks, 2023). Otherwise, contractors will continue to exploit the project-managing organization for financial gain. The current policies incentivize contractors to make claims that lead to unnecessary cost increases on projects.
Ideally, the MTA should prepare to handle early planning, procurement, and construction management without cost-inefficient outside assistance. In addition, the Phase 1 example construction demonstrated that political authorities’ intervention in project management can cause severe deterioration in quality. Therefore, the MTA should focus on forming its own talent pool of experts to prevent unnecessary overstaffing and cumulative schedule slippages. Ultimately, optimizing the MTA’s administrative capacity would improve the Second Avenue Subway’s overall quality, since accelerating work at the expense of result quality would become unnecessary.
References
Goldwyn, E., Levy, A., Ensari, E., & Chitti, M. (2023). Transit costs project: Understanding transit infrastructure costs in American cities. Marron Institute of Urban Management.
Hicks, N. (2023). MTA spent twice as much on Second Ave subway consultants as it did to tunnel. New York Post.
Woodhouse, S. (2023). How NYC’s Second Avenue Subway became the world’s most expensive line. Bloomberg.
Appendix A
