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November 21, 2005

NEW REPORT CALLS ON FEDERAL GOVERNMENT TO HELP TRANSIT AGENCIES REDUCE COSTS FOR NEW LIGHT RAIL SYSTEMS

University Transportation Research Center Recommends Initiatives on Training, Purchasing, Project Management and Standardization

NEW YORK, November 21, 2005 – A report produced for the Federal Transit Administration (FTA) by the Region 2 University Transportation Research Center (UTRC) calls on that federal agency to help local transit agencies get costs of light rail transit projects under control. 

The report, “Analysis of Capital Cost Elements and Their Effect on Operating Costs,” contains several recommendations to mitigate project costs ranging from regulatory relief to increased competition among suppliers to helping agencies develop their in-house expertise.

“Rising costs mean projects get funded (by the FTA) at a lower level or they don’t get funded at all,” said UTRC Director Robert Paaswell, Distinguished Professor of Civil Engineering at The City College of New York (CCNY).  “This delays or eliminates the benefits that a new system might provide and adversely impacts transit usage at a time that people are increasingly looking for alternatives to driving.”

Light rail transit systems deploy lightweight passenger railcars in short trains that operate over tracks either embedded in streets or on their own rights of way.  They are distinct from heavy rail transit systems whose trains run at higher speeds, exclusively over separate rights of way and often in subway tunnels or on elevated structures.

Even though unit costs for transit project components have been relatively stable over the last decade, overall costs continue to rise due to increased project complexity, unforeseen conditions and delays.  “The escalation in costs stems largely from people changing the nature of the projects, which have become increasingly more complex” Professor Paaswell said.  “Agencies are using a lot more high-tech equipment than a decade ago and safety and security concerns have driven costs higher, as well.”

Examples of new elements include more sophisticated communications and fare collection system, GPS tracking capability and low-floor transit cars, which facilitate access by persons with disabilities. 

The report also noted many of the agencies building light rail projects are relatively inexperienced and rely heavily on consultants.  Agencies with in-house expertise in areas such as planning, engineering, vendor selection and project management were found to be better at containing project costs than those without.

Federal regulations governing such issues as pollutant discharge elimination systems, procurement, project management, advance payments to contractors, performance bonds and safety also add to project costs, the report said.  For example, procurement and project management rules “squelch innovation and flexibility” by forcing agencies to organize workflow in very specific ways that add administrative time and expense. 

The 100 percent performance bond requirement increases “soft” costs by requiring projects to be broken into smaller contracts so contractors can obtain bonds.  “Soft” costs, which include planning, engineering, design, construction management and project mitigation, are the largest component of transit system capital projects.  Since 1995, they have represented 22.9 percent of expenditures.

Several factors, including increased complexity, over-design, performance bond premium and a trend toward smaller quantity orders, contributed to escalating costs for light rail vehicles.  In addition, power systems were found to have been over-designed, as well, with frequent use of heavy catenaries “more appropriate to the higher speeds of commuter or intercity rail.”

Other contributors to cost increase included increased expenditures on safety and security, limited competition among vendors, and procurement techniques.  The traditional procurement approach involving separate contracts for design and construction reduces opportunities for innovative cost-saving designs, the report noted.

It also identified several areas where the FTA could pursue research and policy guidance initiatives to help transit agencies contain capital project costs.  These include minimization of soft costs, evaluating the potential for standardization and developing a template for allowable costs under the Federal Share of project expenses.

Report recommendations include development by the FTA of:

  • A strategy to encourage “peer systems” with similar needs to coordinate future procurements in order to reduce costs.
  • Policies to promote alternative contracting and project management strategies.
  • Training and technical assistance programs to help agencies learn state-of-the-art-procurement, project management, lifecycle economic assessment and risk management strategies.

In addition, the report calls on the FTA to implement peer reviews of projects in the planning phases and rating of New Start proposals based on the quality of their cost control strategies.  It also recommends evaluating the potential for standards for emerging technologies, reduced reliance on proprietary technologies, lifecycle cost analysis, appropriate design and simpler specifications.  Finally, it suggests development of a template governing allowable standard light rail vehicle costs, project soft cost budgets and land acquisition costs.

The report was based on in-depth interviews with industry experts and transit agency officials, a review of literature on cost drivers and an analysis of unit costs and project characteristics for 25 projects from 1984 forward in the following locations: Sacramento, Portland, Pittsburgh, San Jose, Los Angeles, Salt Lake City, Hudson County (New Jersey), St. Louis, Denver, Minneapolis, southern New Jersey, San Diego, Baltimore, Charlotte, Seattle and Phoenix.

Copies of the report may be obtained from the Region 2 University Transportation Research Center, 212-650-8050, http://www.utrc2.org/index.php.

About the Region 2 University Transportation Research Center

The Region 2 University Transportation Research Center (UTRC) is one of ten original University Transportation Centers established in 1987 by the U.S. Congress in order to support research, education and transfer of technology in the field of transportation. The theme of the Center is "Planning and Management of Regional Transportation Systems".

Under the direction of Dr. Robert E. Paaswell, the UTRC represents USDOT Region II, including New York, New Jersey, Puerto Rico and the U.S. Virgin Islands. Functioning as a consortium of 12 major Universities throughout the region, UTRC is located at the CUNY Institute for Transportation Systems at The City College of New York, the lead institution of the consortium.

About The City College of New York

For over 158 years, The City College of New York has provided low-cost high-quality education for New Yorkers in a wide variety of disciplines.  Over 12,200 students pursue undergraduate and graduate degrees in the College of Liberal Arts and Science, the School of Architecture, the School of Education, the School of Engineering, the Center for Worker Education and the Sophie Davis School of Biomedical Education.

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