Opportunity Cost is Opportunity Lost

Choosing one option often means foregoing the opportunity to pursue another. This basic observation is often forgotten in transport.¹

The Guardian reported on a recent story:

‘The cheap option’? Why the Gold Coast may be on track to build the most expensive light rail in the world

Last month the Queensland transport minister, Bart Mellish, released a preliminary business case that estimated stage four of the 40km G:link network could cost up to seven times more than stage one, for the same length of track.

The business plan estimated the 13km stretch of track will cost between $3.13bn and $7.6bn. If it does hit the top cost estimate, the project may be the most expensive light rail project of its type, per kilometre, on the planet.

At this middle cost, the final stage of the Gold Coast light rail would also be the most expensive comparable Australian project ever designed, 20% more costly than the Sydney CBD and south-east light rail schemes, the current record-holder . It would be up to 11 times as expensive as Canberra’s first light rail line stage (completed 2019), which is 1km shorter.

Even in Australian dollars, this is exorbitant, this is obscene. While there is a lot that goes into cost estimates that doesn’t really belong there (streetscaping, fixing up the parallel road’s drainage, relocating utilities, etc.), and newspaper articles (and business cases) don’t really give us a full breakdown, the Sydney LRT, in a much more complex urban rather than suburban environment, completed in 2020, came in at $3.147 billion for 12 km. Since 2019 prices have gone up about 17%, that’s hardly enough to explain such a high cost for the Gold Coast.

So one has to ask, what underlies this:

• Are nominal promoters of the project claiming a high price because they think someone will pay it (and are thus enriching someone), or

• Are they claiming a high price because they think no one will pay it (and thus kill the project for some reason), or

• Do they believe this?

As Alon Levy notes in his quote in the article, this is the price of a European subway, not LRT:

Though the preliminary business case of the expansion of Gold Coast light rail includes few details, Levy estimates that the project may ultimately cost as much as 10 times more than comparable European infrastructure.

The middle cost estimate for the next stage of the light rail, of $343m a kilometre or $4.5bn in total, would be expensive in Europe even for a fully underground subway with all the trimmings, according to Levy’s estimates.

Every time one of these projects costs twice (or 11 times) as much as it should, another project (or 10 other projects) cannot be done. It’s not just that money is transferred from taxpayers to contractors, from the public to the private, from projects that benefit the general welfare to the private school tuition and large screen TVs of those who get the contract, it is that other things are deferred. The problems public transport is supposed to address (sustainability, mobility for non-drivers, a higher quality of life, etc.) are less addressed than they otherwise would be. Any hopes at achieving sustainability are flushed away.

If this were only one project, it would matter for the poor Queenslanders. But this problem is so systematic in places like Australia, the US and the UK, that we have less than half the transit network we should for the money we have spent in the past few decades. Agencies have privatised away their internal technical capacity to consultants and thus have principal-agent problems in spades. Projects are over-scoped and under-baked. Alon’s Transit Cost Project discusses many of these issues.

Cost matters, because service matters, and service matters because access matters, and the higher the cost, the less the service, and thus access, provided.

The system is broken if it cannot deliver projects for a reasonable cost. We should continue to investigate the set of incentives the players in this system have for causing transport to cost so much, or perhaps more precisely, why no one has the incentive to keep costs down.

Looks lovely, but not $7B worth of lovely. Ah, look at all the lovely people, where do they all come from?

Fin.