Car Future Part IV – Big project failure

Thanks for reading Part I, Part II and Part III of this series exploring the future of personal transport. Part IV considers whether we’re likely to see cars go out with a bang or a whimper.

There’s a temptation to think that the problems of our car culture can be solved with one big heave-ho, if we all pull together.  But big projects, even when they look simple, are doomed, ahem, prone to failure.  Consider Myki, a project to get a transit smart card for Melbourne.

When a lay-person looks at a big project they tend to use a rule of thumb.  They look at a train, and say, ‘that’s maybe a hundred times the size of a car, I reckon it costs a hundred times as much as a car does‘.

A $20,000 car
A metro-style train costs $20,000,000

That’s a tenfold underestimate.

There’s obviously economies of scale.  Toyota has huge factories and bulk buys plastic and steel.

But the major difference is the economies of learning.  There is untold millions of accumulated knowledge built into every Corolla, but the cost of obtaining that knowledge is spread over the 30 million units they’ve sold in the last 40 years.

The same does not apply when you try to build a train.  Most buyers want a unique train designed bespoke, and at most a few hundred units are produced.  That’s why engineers grow fat on big projects.

The same lay-person looks at a tunnel and thinks, ‘that’s about ten thousand times the size of a hole I could dig in an afternoon.  Probably it’s worth 10,000 afternoon’s wages.‘ Nope.

One cubic metre - $150 at most
Cost per cubic metre - $3000

In building a tunnel, not only are there no economies of scale, and few economies of learning, but there are also pernicious interlinkages.

A big project has many interlinked components.  Individually, the odds of each sub-project failing may be low.  But the odds are high that one unexpceted sub-project will fail.  When that happens, it will throw out timelines for the other sub-projects.  If may also force redesigns.

If the ventilation for your tunnel turns out worse than it did during modelling, you need to build extra chimneys.  These might require council approval, additional maintenance entries, more parts from a fan manufacturer that has since retooled its factory, etc.

If you can count on at least one component of your plan failing, you can count on cost blowouts in more than one part of your plan.  The extent of the cost blowout depends on limiting that contagion.  None of these are problems you face when digging a hole in the backyard.

Is there nothing we can do?  Economists like to think that a contract that effectively aligns responsibilities and allocates risk to the party best able to manage that risk, should help improve project outcomes.  But contracts are tricky:

  • You choose, obviously, a supplier who promises the best capability at the lowest price. What you get, sadly, is the supplier least likely to deliver the promised capability and with the highest propensity to run out of cash.
  • Suppliers know that requirements will change during a long, complex project.  So they bid low to win the project, and once locked in, charge exorbitantly for any changes to specifications.
  • Do you only have pre-bid competition?  If you promise work to more than one company, you have a credible stick – you could cancel someone’s contract.  But if you use two companies, you lose valuable carrot, in the form of economies of scale.
  • Fixed price contracts are no good for projects involving new technology.  The chance of technical failure means no firm can bid sensibly without risking their firm’s survival.
  • Cost-plus contracts lead to gold-plating.

My research on PRT shows a big blip in the popularity of PRT back in the 70s, when the Morgantown PRT was built.  That has faded as the sources of funding ran out one at a time.  Big projects are out of favour. We’ve had a small-government surge. Winners are no longer picked, and changes are coming to us more in the form of incremental change in consumer goods.  2008 had the iPhone, 1969 had the mLanding.

Is the pendulum likely to swing back to social engineering? Will a collective push bury the car?

As exiting as grand visions are, I say no.  As the globe grows more interdependent and crowded, the problems we face are likely to be solved through the accumulation of small efforts.  If it requires big projects, we are doomed going to have to pull up our socks!

Published by

thomasthethinkengine

Thomas the Think Engine is the blog of a trained economist. It comes to you from Melbourne Australia.

4 thoughts on “Car Future Part IV – Big project failure”

  1. I wonder if the delay of Myki was due to technological factors or ideological/political factors. The same basic system has been used elsewhere which should have meant that we could benefit from learning from the mistakes of others as well as technologic improvements. Perhaps one of the factors that makes incrementalism triumph over bold plans is feature creep. If the designers of Myki had kept the system simple then it would have been operating years ago. They could have implemented a default distance/time charging like they have elsewhere. To keep those who win under the present system happy they could have created a machine that encoded an existing ticket function onto the card – i.e travel within zone 1&2 in the next two hours. Then it would be up to the user to decide for themselves how they want to use the card. Obviously either nobody managing it was in a position to know what was feasible or nobody listened to those who did. Either way I don’t think it can be realistically argued that myki has been well managed. Maybe Australians can’t be trusted to make bold plans and be competent enough to carry them out. I mean look at the insul……

    Like

  2. …and speaking of social engineering (or indoctrination), while attempting to at least tangentially relate to the post, what was the first word uttered after the aforementioned mLanding? ;-)

    …and speaking of myki, there is an intersting opinion puiece in today’s Age about how it’s not such a debacle after all.

    all these problems are soluable by densification, I reckon. NYC packed into the MEL CBD – ASAP SVP!

    Like

    1. The first word spoken on the moon was ‘Houston’. I know this because billboards are such an effective marketing tool.

      A billboard company was trying to prove that billboards worked, so they surveyed people about the first word spoken on the moon. One survey was before saturation coverage of an area of Utah with these billboards:

      http://armstrong11.com/

      One was after. Turns out Billboards are pretty effective!

      Like

Leave a Comment

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s