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From $250 Million to $6.5 Billion: The Bay Bridge Cost Overrun

A new book offers insights on how yet another huge mega-project soared way over budget.

The new eastern span of the San Francisco-Oakland Bay Bridge seen on September 3, 2013. (REUTERS/Stephen Lam)

After the 1989 Loma Prieta earthquake that rocked the Bay Area, officials got serious about rebuilding the vulnerable Bay Bridge connecting San Francisco and Oakland. The first cost estimates, released in 1995, figured both east and west spans of the bridge could be upgraded for a cuddly $250 million. By the time the new east span opened in September 2013 the price tag for that span alone had reached a reported $6.5 billion, with a B. Just your run-of-the-mill rise of 2,500 percent.

UC Berkeley planning scholar Karen Trapenberg Frick meticulously chronicles the reconstructed bridge in a new book, Remaking the San Francisco-Oakland Bay Bridge. With Frick and her book as guide, CityLab tracked bridge expenses over time to get some sense of how the project that Herbert Hoover once called “the greatest bridge yet constructed in the world” became yet another example of a major public works project in which the cost ended outrageously higher than it began—and some ideas for what to do about it.

$250 million (1995)

Following the earthquake, the California Department of Transportation (which goes by Caltrans) assembled a board to advise on a seismic retrofit of the Bay Bridge. The agency’s initial estimate for fixing both east and west spans came to $250 million—a figure, writes Frick, “that could be viewed as a rounding error for the final (and still being counted) total.” In June 1995, the state legislature agreed to $2 billion in total funding for all the state’s toll bridges, plus more than 1,000 non-toll structures.

The upper deck of the Bay Bridge collapsed onto the lower deck after the Loma Prieta earthquake in San Francisco in 1989. (AP Photo/George Nikitin)

$1 billion (1996)

In the blink of an eye, the Bay Bridge cost quadrupled. “I remember one day I woke up and it was a $1 billion estimate,” says Frick, who was working at the Metropolitan Transportation Commission (MTC) at the time. “Here you tell the public in ’95: we can do the whole thing for $250 million. They vote on a bond measure that allows them to fund this plus other retrofits in the state. Then they come back and go, actually it’s $1 billion.”

The cost increase was the result of detailed engineering studies conducted during the year or so after the initial estimate was released. Among other things, soil testing in the Bay had revealed that bridge pilings would need to be anchored “deeper into bedrock than expected,” she writes. The public, of course, wasn’t pleased. In the book, one Caltrans manager recalled the immediate reaction:

“The numbers we put together (on the bridge costs) at lunchtime on Tuesday became the main front-page heading in both the San Francisco Chronicle and the Los Angeles Times on Wednesday morning.”

$1.3 billion (1997)

In 1997, Caltrans offered a range of cost estimates for various retrofit designs to the east span. Ultimately the state legislature agreed to fund the bridge to the tune of $1.285 billion.

There was still the big question of what the bridge would look like. Governor Pete Wilson expressed official preference for a basic “skyway”—a straightforward viaduct unadorned by a tower. He said if Bay Area residents wanted “an aesthetically enhanced bridge,” they should pay for it themselves.

That didn’t sit well. Pulitzer-winning architectural critic Allan Temko blasted the skyway option as “dull” and likened it to “an outsized freeway ramp.” MTC head Mary King said of the skyway: “While we appreciate the governor has offered vanilla ice cream, we want chocolate sauce on top.” One Oakland resident wrote that since the Bay Area was full of such creative types, “I think each of us should draw our own bridge” and send it to MTC for consideration.

In June 1998, officials settled on a new suspension bridge with a single tower. But that choice, plus studies shedding light on new technical challenges, would lead the cost to rise yet again.

$2.6 billion (2001)

When Caltrans released new estimates for the east span in April 2001, the cost had roughly doubled to $2.6 billion. The agency gave two main reasons for the rise. Construction costs were way up with a strong economy—steel and concrete prices, in particular, spiked 18 percent from 1999 to 2000. Caltrans also blamed the two years of delay associated with selecting the final single-tower design.

Despite a cost increase of a couple billion dollars in just six years, Caltrans was confident in its new figure. “We’re pretty comfortable with these numbers,” said its director in 2001. The legislature passed a new law to fund the bridge in October. It included a $448 million rainy day provision that one state senator said “insulates us from what we were worried about—open-ended cost overruns.”

$5.5 billion (2005)

Famous last words. In August 2004, a new cost of $5 billion was announced, with the tower alone expected to cost at least twice the estimated $750 million. Caltrans blamed the rise on three factors: elevated insurance rates in the wake of 9/11, a 50-percent rise in steel costs related to China’s boom, and greater staff needs owing to so many bridge projects going at once. A state auditor added one more to the list—poor cost management.

“People like to blame the tower,” says Frick. “Well, the whole span increased cost, and the other bridges increased cost, too. We really have a problem of cost-estimating in addition to a challenge of doing a design at this magnitude in earthquake country. That’s what gets lost in the story.”

In late 2004, Governor Arnold Schwarzenegger tried to terminate some of the costs by suggesting the bridge didn’t need the tower at all. (“Without thinking that there’s a ton of engineering and that this has actually been designed as a whole structure,” says Frick.) The following year he relented and signed a law to cover the new costs—with a provision that any further overruns be the region’s responsibility.

Via the MTC executive director:

“… the Legislature as part of this agreement, said ‘Enough, we do not want that to happen again, we don’t want to see your ugly mugs again, we want to give you a budget, and we want you to stick to that budget this time, and we really mean it this time.’ ”

$6.5 billion (Current)

In April 2006, a consortium involving American Bridge and Fluor won the tower contract. It was built in China to save money—a decision that carried its own costs when inspectors later found poor welding and busted bolts at key points that required fixing. Frick says the current $6.5 billion total is a rough estimate, and that it doesn’t include interest or financing costs.

With those costs included, some expect the total price to double yet again—to $13 billion.

The eastern span tower in May 2015. (Kai Friis / Flickr)

Future lessons

Reference other projects. Frick points to a couple ideas for controlling mega-project costs. Scholar Bent Flyvbjerg, who has studied infrastructure cost overruns around the world—and who often boils them down to political deception—has promoted the idea of basing costs on a “reference class” of similar projects already completed. The fear with that is project leaders won’t bother to keep costs down if they know they can hit a certain number, but Frick says that possibility bothers her less than the uncertainty surrounding costs that goes on right now.

Widen early cost ranges. Giving a precise cost number out to multiple decimals, as the state legislature did with its $1.285 billion estimate in 1997, makes the figure seem more scientific and precise than it really is, and creates that much more public frustration when the costs keep rising in the future. “In the early planning stages, ranges in the projects would be really important to provide,” she says.

Track progress more closely. Frick also suggests that officials pay more attention to “transaction cost economics”—an approach that “analyzes project development over time,” she writes, in an effort to identify the precise “political and economic origins” of new costs. This fuller accounting also considers costs that often go overlooked, such as the time and energy that go into public participation. Without better cost estimates, projects will continue to suffer from the type of strategy described to Frick by one senior engineer:

“Basically at the onset of a project I think the higher ups prefer a dollar amount and schedule that doesn’t shock the public.”

Which, as the Bay Area knows, only makes the shock that much worse when it finally arrives.

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