RCAA ON-LINE LIBRARY
Rising Costs
Issues in Brief: The Port's estimates of the construction cost of the third runway have a history of continuous, & enormous, increases. The project was first proposed, in January 1992, as a 7000-foot facility, at a cost of $229 million. (That would have worked out to $278 million for the later 8500-foot version.) By the time of the next estimate, in September 1994, the runway had grown to 8500 feet, a 21% increase. But the price tag read $364 million, a 63% jump.
Various increases followed, until June 1999, when a figure of $773 million was tossed around. Much happened in the project thereafter, but no new figures were released till June 2003. Then, the cost estimate rose to $1.1 to $1.3 B billion.
Even at that huge price, no-one is sure that all components have been accounted for. See sec. IV-3, above. And, there are other costs that should be charged to the project that are being ignored. See Secs. 2 & 3, below.
How can these increases be explained? Luckily for them, Port staff are never asked any hard questions by the Port Commission, so no real explanations are ever offered. But we do know that there is a consistent pattern of irrational underestimates. The cost of acquiring the real-estate for the embankment was understated by more than $100 million. Compliance with environmental rules was disregarded almost completely until quite recently. You can read the staff memo's for yourself, to see if there are explanations that make sense to you.
Documents:
June 24, 2003 Power Point Presentation [Adobe Acrobat 353KB] by Port Staff to Port Commission on Cost Overruns
June 24 Memo to Port Commission on Cost Estimate Increases since last estimate in June 1999.
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