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Explosion of Construction Costs: Why Are State-Owned Construction Projects Often Much More Expensive than Expected? – Economy – Economic and Financial News


Why is the cost of building the state exploding? Florian Hehenberger, a civil engineer, explains why private builders have an easier life and what the state might change.

Every year criticizes the Taxpayers Federation the waste of taxpayer money. The airport of the capital, the Elbphilharmonie and the railway project Stuttgart 21 count among the best-known large German expensive projects. There were also critics for 2012 Augsburg and the reconstruction of the Curt-Frenzel Stadium. The doctor in civil engineering, Florian Hehenberger, explains what the state could do differently in public buildings.

Why are the costs of public buildings becoming uncontrollable?

Florian Hehenberger: There are two main reasons for this. The first is the legal situation, which forces the contracting authority to adopt certain measures that a private customer would not choose to save time and money. In particular, the requirement of transparency – which is good and should in no way be put into perspective – has the consequence that projects become more expensive. The call for public offers costs time. And when you have to invest time, you usually have to invest money. Construction management has the means to counter this. But it is much easier for a private builder to recover things that are out of control.

And the second reason?

Hehenberger: This is what is called the "first number curse". Often, the first issue in a construction project is motivated more by political considerations than by work – and is far below what the experts said. In some circumstances, only half of the price is mentioned here to make things easier to manage politically or administratively. This figure is obviously false and the truth inevitably comes to the table. Either if the person who made the calculation has a say. Or if you start planning more precisely, then simply name the construction costs, but they will be twice as high as expected. Of course, the public perceives this as an explosion of costs, which is not the case.

So, politics is the problem?

Hehenberger: Everything that happens outside the sphere of purely technical construction project management is part of the problem. A clear line must be drawn between the two spheres. Both spheres can then do their job properly according to their respective professional qualifications. And then, there are fewer misunderstandings and negative surprises.

Is not it a solution, public? construction projects complete with all the risks for a general contractor?

Hehenberger: When public funds are used, not only money, but inevitably, many regulations are in effect. This is why it is not easy to privatize public construction projects. You can possibly win if you give to a private general contractor. But that means that when you make the contracts, you say exactly what you want. You can not come later and change too much. Once a public builder defines exactly what he wants, then leaves hands free to construction management professionals, whether they are private or not, things go much faster and cheaper.

Often, we hear that the attribution of work simply follows the lowest price. This creates a lot of problems.

Hehenberger: Despite all the rules of purchase, it is in practice in our practice that the cheapest must be taken. Price is often the only clear criterion. If you introduce more specific criteria, such as the bidder who seems most promising or who has better construction practices or better references, these are flexible criteria. This can attack a losing bidder – whether justified or not. And if someone attacks a mission, he then blocks the progress of the project. Six months ago and the builder suffered the damage. The public builder must be absolutely sure that his work is under attack, otherwise he has almost passed control to others.

These large projects are under construction in the region

Picture: Silvio Wyszengrad

How could you improve public construction?

Hehenberger: First, there needs to be regulated communication that ensures everyone is talking about the same thing at all times. There must be a single, binding source of numbers that will be broadcast. This would require strengthening the position of the building management. He would have the sovereignty to publish these figures and to represent them. Second, knowing what construction costs for the public sector and why they are more expensive, you should not perform calculations for the public sector with the figures for the private sector. Until now, these statistics are purely statistical based on the experience of the private sector.

What public project did you find good?

Hehenberger: The London Olympics in 2012 were as dynamic as ours. It was calculated what it would cost and then added a factor calculated for the risks of about a factor of four. This is not in accordance with us. So you have all the risks at stake, you can cover everything that is unforeseen and even have left money in the end. This is exemplary because it allowed construction managers to save money and meet the completion date. This method of work was also advantageous for the political authorities because it was credible and comprehensible to the public.

To the person: Florian Hehenberger, 54, holds a PhD in Civil Engineering and is a member of the Bavarian Chamber of Engineers.

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