simpleshow explains: why so many public construction projects go wrong.
www.simpleshow.com
This is Julia. She's protesting against the building of a new railway station. The ambitious project seems to cost much more than planned, and its completion has been delayed. She feels the politicians have cheated her - after all, she's also financing the project through her taxes! So why do big public building projects in Germany often face such major cost overruns? Well, let's say Julia wants to build a house:
She commissions a construction company, generally choosing the one that makes the cheapest offer. The company starts building her house. However, the first problems occur quickly: material costs go up, the garage costs extra, and the planned terrace means getting a building permit which she doesn't have. Completion is delayed, and the planned costs explode, because Julia, when it came to potential risks and additional costs, didn't budget enough. That's exactly what happens with public construction projects. When a project is in the planning, the tender goes out to several competing building companies. Like Julia, a decision is made by the awarding authority - generally in favour of the cheapest bid. On the one hand, that's because it will probably then face less politicial opposition, and, on the other hand, because that's what public tender regulations require. But: the cheapest offer isn't always the best. The construction companies estimate costs when tendering for public building projects as low as possible, because there are always items that haven't been considered in the tender. Construction companies exploit that. The politicians know about this, but even higher costs make it less likely that voters will approve the project. And thus cost estimates are, from the very beginning, far below what's realistic. Building work starts, but even then, additional costs are concealed. Because halting a project in the middle of construction would threaten the jobs of workers, architects and planners. Changes to construction plans, special wishes, fluctuating material costs or requirements for special permits mean costs rise radically. So how can this be prevented? Construction costs should be calculated realistically. To do that, apart from revamped tender regulations, what's needed are independent inspectors with experience of big construction projects. In addition, the construction company's building plans need to be more precise and a construction schedule that's realistic has to be pinned down. That means that the construction company can complete the project successfully the politicians manage to cling to their reputations, and Julia doesn't have any reason to get worked up anymore. Along with everybody else, she's happy that her taxes are being invested sensibly.
