1. Introduction

1.1 The Issue of Infrastructure

The idea of creating a mass public works program in the United States to build useful infrastructure is a popular one in twenty-first-century politics. There was a widespread conversation on this topic during the stimulus debate of the early Obama administration. Subsequently, there have been various proposals for further federal spending on infrastructure, including state-level programs, the Trump Administration’s much-mocked Infrastructure Week, and Alexandria Ocasio-Cortez’s Green New Deal. In March 2021, the Biden Administration released the first part of its potentially $2 to $4 trillion infrastructure plan (Tankersley 2021).

This is not purely an American debate, either. The Trudeau cabinet has committed nearly C$200 billion in infrastructure spending in Canada, including, for example, helping fund a subway under Broadway in Vancouver (Wanek-Libman 2020). Within Europe, there is considerable spending on infrastructure as part of the coronavirus recovery program, even in countries that practiced fiscal austerity before the crisis, such as Germany (De Weck 2020). China likewise accelerated the pace of high-speed rail investment during the global financial crisis of 2009 and its aftermath and is currently looking for major investments of comparable scale due to the economic impact of the COVID-19 pandemic (Burroughs 2020).

With such large amounts of money at stake—the $2 to $4 trillion figure proposed by Biden is about 10%-20% of the United States’ annual economic output—it is critical to ensure the money is spent productively. The reason governments spend money on infrastructure rather than just giving people money as welfare is that infrastructure is a permanent investment. It is desirable to ensure that a fixed amount of money creates durable, permanent infrastructure that furthers a country’s economic, social, and environmental goals.

1.2 Why We Study Rapid Transit

Building rapid transit is unusually valuable for governments, as subways, metros, and light rails operating at high frequencies generate economic value by permitting urban growth. Bunten (2017) argues that solely building more housing in congested, high-demand cities like New York and San Francisco carries a benefit of 1.4%. This finding counters Hsieh and Moretti’s (2015) 13.5% benefit estimate. Bunten assumes a static transportation network since construction costs in those cities are so high; thus, more population equals greater congestion, which dampens the effect of development on the economy and introduces a negative traffic externality. In an environment where transportation networks can grow with the city, the gains from development would be closer to those in Hsieh and Moretti; put in other words, the economic gains from being able to build dense urban transportation networks are likely to be about 10% US-wide.

These dense transportation networks have to be rapid transit–based. This is partly for environmental reasons—in a dense city, it’s especially important to have low-pollution transportation. But it’s also true in a future world where all cars may be electric. It is not possible to outdo the subway in capacity per amount of land consumed—and in a high-demand city, 12-lane freeways are prohibitively land-intensive. Hook (1994) argued that Japan focused on rail transportation in its largest cities because it had high land values in the postwar era and such strong property rights that widespread condemnation for land for freeways on the American model was not possible.

Thankfully, urban rapid transit is especially amenable to comparative research, because of its scale. Each line or phase is a large undertaking by itself: a single project routinely runs into the billions of dollars. This means that each project is itself the object of debate and media coverage. Relying on media reports and official government sources, we can get access to reliable data on the construction costs of a large majority of urban rapid transit lines in the world. We can likewise obtain costs for other megaprojects, such as high-speed rail.

In contrast, the vast majority of roadwork projects are small. A state’s road money is typically split among many projects. Megaprojects for roads exist—for example, the $1 billion Sepulveda Pass Improvements Project in Los Angeles—but only cover a small share of overall spending. The more typical investment in roads is a bypass here, a new interchange there, and a widening yonder, all repeated hundreds of times to produce hundreds of billions of dollars in roadway expansion per six-year transportation bill cycle. Headline costs for these projects may not be readily available, and when they are they often include too many unrelated extra side projects to be useful to compare.

The difference between roads and urban rail extends beyond data collection. We spoke with an engineer in Los Angeles who has worked on projects on both sides, and he explained to us that American road projects are essentially commodities (Interview A 2020). For example, a new public parking garage would be one of thousands of such structures built, which means that the costs and risks are well-known. It is also a simple project—just a parking garage. In contrast, an urban light rail or subway line, besides being one of dozens in the last generation rather than thousands, has many distinct parts: the civil structures, the tracks, the signaling system, the maintenance facility, the rolling stock. Far more prior planning is needed in the latter case, and the engineer told us that Los Angeles County’s preference for outsourcing planning to private consultants with little public oversight works well for simple projects like parking but not for more complex ones like urban rail. To maximize the quality of rail investment, it is valuable to compare the efficiency of infrastructure for rail and not for higher-cost but institutionally simpler roads.

1.3 Why Costs Matter

We started the Transit Costs Project to understand how to reduce the costs of transit-infrastructure projects in the United States and other high-cost countries so that we can build more transit infrastructure. In much of the United States, there is political consensus behind the need to improve the state of public transportation. The reasons for this vary, but can include any of the following:

  • A green desire to decarbonize the transportation sector, reduce air pollution, and undo the postwar trends of suburban sprawl and mass motorization.
  • An association between the prosperity of a central city like New York or Boston and the strength of its subway system.
  • Present-day limits of freeway-centric transportation such as traffic congestion and downtown parking scarcity.

This is by no means a national consensus. But it is a consensus in most of the largest cities, including those of the Northeast and the West Coast, as well as Chicago. But despite this consensus, there is little movement on the construction of expansive urban public transit. Even projects that enjoy wide political popularity move slowly, such as Second Avenue Subway in New York.

The problem is predominantly one of costs and construction difficulties. The Commonwealth of Massachusetts is eager to spend a few billion dollars improving the state of public transportation in and around Boston. There are a number of distinct rail investments in this range under construction or under planning with broad popularity, including the Green Line Extension (GLX), South Coast Rail (SCR), and upgrades to commuter rail facilities branded as Regional Rail (RR). But as costs creep higher, timelines drag on, and promises aren’t kept, as we will see in the Green Line Extension case, the public loses faith in transit agencies’ ability to deliver high-quality infrastructure at a reasonable price.

This is not a unique problem to Boston. The problem of high costs is nationwide. According to our database (Transit Costs Project N.D.) of more than 600 projects in 58 countries, the United States is the sixth most expensive country in the world to build rapid-rail transit infrastructure. This is slightly misleading, however, because construction costs scale with the percentage of tunneled track. The five countries with greater average costs than the United States are building projects that are more than 80% tunneled. In the United States, on the other hand, only 37% of the total track length is tunneled (Graph 1).


Graph 1

Nonetheless, the bulk of American rail construction occurs in the context of broad local political support, and even then, long-term planning is not strong and the outcomes are poor. Therefore, it is valuable to understand what it is about the physical, institutional, and social situation of Massachusetts, New York, Illinois, or California that frustrates dreams of subway expansion.

2. The Boston Case

The Story of the Green Line Extension

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2.1 Project Timeline

The idea of extending grade-separated rapid transit from Boston north to Cambridge, Somerville, and Medford has been discussed since the 1920s. Studies in the 1940s, 1960s, 1970s, and 1980s all kept the idea alive, but the most recent iteration of the Green Line Extension (GLX) dates back to 1991 and the Central Artery/Tunnel Project highway project, also known as the Big Dig. In an effort to mitigate the negative air quality impacts of the Big Dig, Governor Michael Dukakis committed to several transit projects, including completing GLX by 2011, in order to comply with the Clean Air Act.[1]

While GLX has been in the pipeline for the last 30 years, changes in political administration, from Governor Michael Dukakis to Governors William Weld, Paul Cellucci, and Jane Swift, none of whom demonstrated any interest in expanding the existing transit network, have delayed its arrival. Without a champion in the governor’s office pushing the project forward, other advocates took up its mantle. During Mitt Romney’s tenure as governor, from 2003 to 2007, GLX did have the support of super-secretary Doug Foy, who, before joining the Romney administration, worked alongside the advocates pushing the Commonwealth to build GLX and honor its other transit commitments. In 2005, the second to last full year of Governor Romney’s term, the Commonwealth, compelled by threat of legal action for being in noncompliance with the Clean Air Act, recommitted to opening up new Green Line service by December 31, 2014. In order to move the project along and avoid losing federal funding for roads and transit, the Massachusetts Bay Transportation Authority (MBTA) hired Vanesse Hangen Brustlin (VHB) to conduct an Alternatives Analysis to determine how best to serve the proposed corridor through Cambridge, Somerville, and Medford, which was published in 2005.

With the election of Deval Patrick as governor in 2006, the project did move forward—at least on paper. After completing the Alternatives Analysis and selecting a two-branch expansion of the Green Line as the preferred alternative, the Executive Office of Transportation & Public Works (renamed as the Massachusetts Department of Transportation (MassDOT) in 2009) took the lead on planning the project with support from VHB. Between 2007 and 2009, MassDOT convened a Green Line Extension Advisory Group, made up of representatives from civic groups, advocates, and appointees from Cambridge, Somerville, and Medford. The Advisory Group worked with the state to refine alignment, select stations, and, in the words of Chair Steven Woelfel, to “make the project work for everyone” (Executive Office of Transportation and Public Works 2007).

It was also in 2006 that the MBTA entered into a Settlement Agreement with the Boston Center for Living, a non-profit organization that provides services to people with disabilities, to make the MBTA’s network accessible to all users. While the agreement only required adding elevators at existing stations in the network, such as Park Street and Downtown Crossing, those working on GLX decided to apply the agreement to their new stations as well, designing stations with redundant elevators, escalators, full enclosures, and fare arrays rather than a platform with a partial weather shelter, as was initially planned. In the “Beyond Lechmere Northwest Corridor Study” (2005), which contains the first conceptual cost estimate of GLX, it was estimated that these original no-frill stations, on average, would cost $535,000.

In 2007, the Executive Office of Transportation & Public Works and the MBTA submitted a New Starts Initiation Package to the Federal Transit Administration (FTA), which indicated that the Patrick administration intended to apply for federal funding to help pay for GLX. While the letter accompanying the initiation package stated that “the Commonwealth anticipates making an application to the FTA for entry into the Section 5309 New Starts process during calendar year 2008,” the actual submittal occurred at the end of 2011 (Stern 2007).

In the intervening period between 2007 and the end of 2011, the primary project management responsibilities shifted from MassDOT to the MBTA. The MBTA hired a joint venture from HDR and Gilbane (HDR/Gilbane) to manage the project, advance the design, and draft project delivery documents. VHB, a newly hired HDR/Gilbane team, and the MBTA moved the project through a number of regulatory hurdles, including a state-mandated Environmental Impact Report and an FTA-required Independent Risk Assessment.

As these steps were completed, a detailed project scope and cost estimate for GLX emerged.[2] In February of 2012, the plan for GLX was to thread 6.94 kilometers of track along two exclusive at-grade existing commuter rail rights-of-way, relocate an additional 6.44 kilometers of commuter rail track, widen the existing trench so that both the commuter rail and light rail tracks could comfortably fit, construct six new stations, relocate the existing Lechmere Station, erect four multi-span viaducts, reconstruct 11 bridges, build two new bridges, purchase power and train control systems, order 24 light-rail vehicles, install 21,000 square meters of retaining walls and noise walls, add a vehicle maintenance facility with test tracks and a transportation building, and acquire all of the necessary real estate to complete the project.[3] In 2012, the total project cost estimate, excluding finance charges, totaled $1.12 billion.

During the planning and design phase of a capital project, design and engineering advances from a general idea, such as an alignment along a specific corridor with a broad idea of station design and amenities, to a detailed final design that specifies quantities of materials and systems details. At the earliest stages of design, such as conceptual design or 10% design, cost estimates include large contingencies to account for inevitable changes. As a design approaches 100%, the contingencies decline as the details and project scope are finalized. GLX’s $1.12 billion estimate was based on an early stage, 10% design. Thus, many of the cost categories, such as stations, stops, terminals, intermodal and guideway and track element were assigned a 25% contingency to account for uncertainty. Additionally, the entire estimate had an additional unallocated contingency of 7%, which amounted to $80,474,000.

While the MBTA waited for the FTA to approve its submission to the New Starts grant program, the MBTA and its consultants bid out the first package of work for GLX. Massachusetts fully funded this initial contract, and it followed a traditional Design-Bid-Build procurement: HDR/Gilbane designed the project, and the MBTA and HDR/Gilbane team reviewed nine bids and selected Barletta Heavy Division. Their low bid was $12,989,300 to widen and reconstruct the Harvard and Medford Street railroad bridges, make roadway and drainage improvements, and demolish an MBTA-owned property in Cambridge that would serve as staging area for future construction. At the groundbreaking in December of 2012, United States Representative Michael Capuano, one of the few consistent GLX cheerleaders, underscored the urgency of getting GLX moving, saying, “We need to get as much of this project done and committed in an irrevocable way before [Governor Patrick] leaves office” (Jencks 2012). Capuano’s desire to move GLX out of the ethereal realm of studies and artistic renderings and into the tangible world of concrete and steel stemmed from his concern, based on previous administrations’ disinterest in GLX, that the project could be delayed or cancelled at any moment.

In principle the first package of work affirmed Massachusetts’ commitment to GLX with or without federal funding. In July of 2012, the FTA issued a Finding of No Significant Impact for GLX, which allowed GLX to be considered for a New Starts grant. In trying to expedite construction and keep GLX moving forward before the end of Governor Patrick’s term in January of 2015, the HDR/Gilbane team proposed that the MBTA pursue a Construction Manager/General Contractor (CM/GC) project delivery strategy.[4] The agency opted for CM/GC because as HDR/Gilbane did more design work, it discovered unknowns and uncertainty, which is common, but also because, with a tight deadline to finalize a Full Funding Grant Agreement (FFGA) with the FTA and without all of the specifications identified in advance, incoming bids would be much higher in a Design-Build than in a CM/GC, which allows for joint exploration of the project and holds the winning bidder to a fixed markup rather than a fixed cost at the outset.

Under CM/GC, the MBTA contracted with a Program Manager/Construction Manager (PM/CM), the HDR/Gilbane team, to manage the design and construction of the project. Separately, the MBTA hired a design consultant, a joint venture between AECOM and HNTB, to advance the HDR/Gilbane design from the 30% level to final design and estimate all of the different elements needed for construction. Finally, the MBTA selected a Construction Manager/General Contractor (CM/GC), a joint venture between J.F. White, Kiewit, and Skanska, to build the project.[5] The CM/GC was brought on board prior to finalizing GLX’s design so that the MBTA and its consultants could benefit from “preconstruction advice during the advanced preliminary and final design phases…concerning constructability, pricing, scheduling, staging, methods, efficiency, material procurement strategies, risk identification/management, and other areas related to the construction of the project” (Massachusetts Bay Transportation Authority 2012, p.1).[6] The MBTA and HDR/Gilbane argued that CM/GC’s appeal stemmed from its ability to tap contractors’ specific knowledge to establish a final contract price before approving a final design. CM/GC is less rigidly sequential than Design-Bid-Build. When assessing these types of projects, the FTA is less concerned about a project being in the final design stage and more interested in seeing that the local financing is in place and that a list of standard items has been identified before approving an FFGA. We were told by someone with decades of experience with CM/GC that “items, such as bridges, retaining walls, and train control systems were left in preliminary design with the idea that the [CM/GC] would be able to use its means, methods, and materials that meet the specifications of the program and played to their expertise” (Interview B 2020). Thus, CM/GC could get to an FFGA more quickly than a standard Design-Bid-Build, because there was an understanding that the CM/GC’s input would change the design, even if the overall objectives remained the same.

While the MBTA had never used CM/GC before GLX, its program management consultant, HDR/Gilbane, had experience with a variant of CM/GC, known as Construction Manager at Risk in vertical building projects. Based on its experience with this alternative project delivery method and the legacy of cost overruns and delays in transit projects, including the MBTA’s recent Greenbush commuter rail project, HDR/Gilbane believed it could deliver an on time, on budget GLX by using CM/GC rather than Design-Bid-Build or Design-Build. CM/GC, while uncommon in Massachusetts transit construction, does have a track record in the United States. In an interview with the former head of capital construction at a transit agency on the West Coast who used CM/GC routinely, he told us that, “When [CM/GC] works well, it is us [the agency and all of the contractors] against the project” (Interview C 2020). Design-Bid-Build, by contrast, he described as extremely confrontational and riven with bitterness because each contractor tries to protect its liability and offload risk onto the agency or subcontractors. Design-Build, on the other hand, is designed to keep the agency out of the design and construction work, which is a level of control that many agencies want to retain.

Without passing judgement on CM/GC, it is instructive to simply follow the reported FTA cost estimates for GLX as it worked its way through the FTA New Starts approval process.[7] According to the FTA’s 2013 “Annual Report on Funding Recommendations: Fiscal Year 2014, Capital Investment Grant Program,” GLX’s total estimated project cost was $1.1158 billion. One year later, the FTA reported that the total project cost increased to $1.4288 billion. In 2015, the FTA approved GLX for a Full Funding Grant Agreement (FFGA), even though the total project cost had increased again: that year the MBTA reported that its projected cost was $1.992 billion, and that it sought $996 million from the FTA.[8] In the span of three years, GLX’s projected costs increased by nearly a billion dollars, or 79%. Massachusetts Secretary of Transportation Richard Davey explained that changes to the project’s scope, which now officially included a continuous pedestrian and bike path running alongside GLX, known as the Community Path; greater costs associated with building a new viaduct connecting GLX to the one-hundred-year-old Lechmere viaduct; and a 30% contingency explained the cost increase. Even with these additions, Davey exuded confidence when he told the media that the project would be on time and under budget: “I’m thinking it will be more along the lines of $1.6 billion” (Metzger 2014).

GLX alignment and phase map

figure 1. GLX alignment and phase map adapted from Green Line Extension Project presentation 2/27/2012

2015 should have been a moment of triumph for the GLX team. Even though Governor Patrick left office in January, that same month, the FTA agreed to contribute $996 million of the $1.992 billion project. While the project was still years from completion, this was, seemingly, the “irrevocable” commitment, to borrow a phrase from Representative Capuano, that assured GLX’s future.

During 2013 and 2014, however, it was clear that internal cost estimates from the PM/CM, HDR/Gilbane, and the CM/GC, the trio of J.F. White, Kiewit, and Skanska, were growing further apart, and that the five approved contracts were outpacing the projected costs underlying the FFGA and eating into the project’s contingency. While negotiating the sixth GLX contract, in August of 2015, the CM/GC cost estimate for 100% design came in at more than double the projected amount. At this point, it appeared that GLX would likely require $3 billion to complete. Rather than pushing ahead and accepting the higher costs, the MBTA suspended negotiations with the CM/GC, and, in December of 2015, the newly created Financial Management and Control Board (FMCB) resolved that unless the project’s costs could be reined in, it would cancel the project (Massachusetts Department of Transportation 2015).

Cancelling this version of GLX was an easy decision to make for several reasons. First, 2015 was an unusually challenging year for the MBTA. Beyond GLX’s steady budget creep, multiple snowstorms paralyzed the system, which led to a litany of operating nightmares, namely major service disruptions—including day-long outages and severe delays. As this drama was unfolding, Beverly Scott, the MBTA’s general manager, resigned. In the aftermath of the winter of 2015, the recently inaugurated Governor Charlie Baker convened a special panel to examine the agency’s finances, operations, and general health. This added scrutiny brought to light a number of problems within the agency, such as a $7 billion backlog in State of Good Repair projects. In this environment, spending more money on GLX was untenable, despite nearly $700 million in sunk costs.

Second, observers of GLX believed the project could be value engineered to deliver the core promise of GLX for the initial price tag. As one agency insider told us, “We took the view that this project has to get done…[and] there was no doubt we could do better” (Interview D 2020). In 2016, in an effort to do better, the MBTA hired Weston & Sampson, an engineering firm based in Massachusetts to take a fresh look at the project and see where it could reduce costs without jeopardizing the goals of GLX. The interim team brought down costs by paring back the largest cost centers, namely stations, bridges, the vehicle maintenance facility, and the quantity of retaining walls required. By the close of 2016, the MBTA hired John Dalton, an experienced capital construction manager who had worked in the public and private sectors, and managed projects in Dubai and Chicago, to manage the GLX reboot and build a capital construction team within the agency. By 2018, there were 83 full-time employees working on GLX. During the first iteration of GLX, as a point of comparison, it was reported that only four to six full-time MBTA employees managed the multibillion-dollar project.

In 2017, GLX Constructors, a joint venture led by Fluor was selected to build GLX by December of 2021. This time, GLX will be delivered via a Design-Build contract. The final estimated project cost is $2.3 billion, but GLX Constructors received a $954 million construction contract with an additional $127.5 million in contingency controlled by the MBTA.

2.2 Our Findings

Over the course of 45 interviews conducted over Zoom or the phone, hundreds of emails and text messages, and a review of relevant project-specific documents and media reports, we identified three core areas to help explain the trajectory of GLX.[9]

First, as GLX worked its way through the planning pipeline, it was passed back and forth from the MBTA to MassDOT and back to the MBTA. Staff at both agencies didn’t always agree or appreciate input from the other. In particular, we were told in three separate interviews that the MBTA, the transit experts, disengaged from the project as MassDOT took a greater role in its planning. MBTA staffers bristled as MassDOT planners with no experience planning or operating a transit system took charge and established GLX’s conceptual design and scope.

Despite objections from the MBTA’s staff about MassDOT planners’ involvement in GLX, the MBTA also lacked the expertise and experience to manage a multibillion-dollar subway or light rail project. From the 1960s to the 1980s, the MBTA developed its ability to plan and manage the construction of large-scale capital construction projects. With the election of William Weld as governor in 1990 that changed. Weld came to power with a mandate to slash the Commonwealth’s payroll by $1 billion and shed thousands of public employees. Under the supervision of his budget director Charlie Baker, Massachusetts cancelled transit expansion plans and contracted out functions that were previously done by the public sector. By 2005, on a day-to-day level, the MBTA no longer had the capacity to manage megaprojects like GLX because the most experienced construction managers had left the agency or retired decades earlier.

Even when planning and management responsibilities for GLX returned to the MBTA, MBTA staff committed the cardinal sin of expanding the budget and scope by calling for bigger and more expensive additions, such as the 8,733-square-meter vehicle maintenance facility, which was estimated to cost $195.5 million. As GLX design advanced and the project moved toward an FFGA, the MBTA hired HDR/Gilbane to manage the project. Internally there were only six MBTA staffers managing the project on a full-time basis, but HDR/Gilbane served as an extension of the MBTA and managed the project for the agency. Without the capacity to manage the project itself, the MBTA and MassDOT spent $212.99 million dollars on professional services to carry out this work. Even with the help of outside consultants, the agency struggled to stay on top of the volume of requests for information and requirements that accompanied a nearly $2 billion project. When GLX was redesigned and restarted, the MBTA hired more staff internally to manage the project, a sea change from the previous version of the project.

Second, the managers of GLX did little to discipline the budget. Thus, ideas from stakeholders were added to the project scope or studied even if impractical. In the early stages of planning, public members insisted that the consultant, VHB, study the feasibility of tunneling GLX. While there is nothing wrong with this suggestion on its face, as minimizing property takings and nuisance mitigation are valid concerns, an informed professional committed to keeping costs down should have immediately explained that, as GLX is a light rail extension operating in an existing right-of-way with active commuter rail, building a tunnel would be costly and redundant. After months of study, this is exactly what the consultant found. In reading through the studies of GLX, we see that the design and cost estimates of stations also changed dramatically in the span of five years. In 2005, stations were designed to be unstaffed, unembellished, and easy to construct. By 2010, the concept for GLX’s stations changed: “The design for each station is envisioned to provide a headhouse with automated fare lines, vending machines, an information booth, and restrooms. Entry to and exit from the platforms would be by elevators, escalators, and stairs” (Final Environmental Impact Report 2010).

Third, the more we spoke to people, the more we understood what was meant by the common refrain that “the politics of GLX are tricky” (Interview E, 2020). Because of the long delay of getting GLX built, the residents and elected officials from Somerville, Medford, and Cambridge were tired of being told to wait. Adding insult to injury, GLX, as proposed in the Final Environmental Analysis, wasn’t what had been promised in the “Beyond Lechmere” analysis. Instead of going to the Mystic Valley Parkway, GLX terminated at Tufts University/College Avenue, with the hope of extending it farther north in the future. The public aired its discontent at public meeting after public meeting. While people still supported GLX, they wanted more. The Community Path, a multi-use bicycle and pedestrian path, was a popular addition to GLX that was sold to the FTA as a station accessibility improvement, since none of the new stations along the Path would have automobile parking. In principle, the Path was a win-win: residents of Somerville got an extension of a grade-separated bicycle and pedestrian path that they had been trying to get built since at least 2001, and the MBTA and MassDOT built the community an amenity it wanted. In practice, the Community Path added costs to GLX and created tension between the Interim Project Management Team and the public as the Interim team tried to salvage GLX by scaling back the Path.

Even though we treat these three elements—project management and delivery, expensive design, and politics—as distinct subsections below, they overlap and interact in obvious ways.

Managing the Managers: Project Management and Delivery

From our interviews and a review of GLX-related documents, the combination of GLX’s moving deadline (first 2011, then 2014, 2015, 2019, and, now, 2021), the perception that capital construction projects in Massachusetts needed new delivery mechanisms to keep them on time and on budget, and the desire to get FTA money led to the adoption of a poorly calibrated version of CM/GC rather than the preferred Design-Build or the more traditional Design-Bid-Build. Even though the court-mandated deadlines for GLX continued to slip and the Commonwealth had been granted the flexibility to swap projects in and out of its State Implementation Plans (SIP) to achieve clean air compliance, the December 2014 deadline for opening GLX created an urgent need to get the project built. Furthermore, December 2014 marked the final full month of Governor Patrick’s second term in office, which, according to one senior person we interviewed meant that “figuring out how to get the FFGA done before 2014, meant not figuring out the project” (Interview D 2020).

Fundamentally, MBTA oversight was understaffed and stretched thin. Different experts that we interviewed who were involved with different aspects of the project put the number of in-house MBTA design review engineers at either five or six. With at most six people supervising the GLX project, little oversight was possible, leading to bottlenecks in signing off on orders and contracts. When GLX was finally rebooted in 2017, the MBTA addressed this deficiency by building a capital construction team with more than 100 MBTA staff. One senior person involved with the current GLX project told us “I would rather be overstaffed than understaffed” (Interview F 2020).

In an interview with someone who has worked in multiple transit agencies in the United States and abroad, we were told that the benefits of internal staffing and capacity extend to the operating side of the agency, too. (Interview, 2017) contrasted London’s overstaffed, right-hand-does-not-talk-to-left schedule planning favorably with New York’s understaffed planning—and indeed, London’s unit operating costs (Transport for London 2016) are about two-thirds those of New York (Federal Transit Administration N.D.).

Hiring more in-house planners is a challenge. Public-sector wages for office workers are not competitive. A project manager for capital construction at the MBTA earns $106,000 a year in base salary; the equivalent in the private sector in Boston is $140,000 in transportation, and more in other industries such as tech. An official with the MBTA office workers’ union, the Local 453, gave a number of additional examples: a director of asset management at the MBTA earns $120,000 per year, although similar positions in New York and Chicago pay $180,000–200,000; a climate resilience specialist took a $20,000 pay cut to come work for the MBTA; the MBTA’s energy efficiency manager earns $85,000 and could make twice as much in the private sector (according to the official, the manager is only staying to put in the number of years required to earn a full pension when they retire).

The current GLX project has to some extent fixed this, by hiring outside consultants as well as in-house supervisors, generally at a competitive wage. However, the competitive pay is restricted to senior management. Junior planners still earn well below market rate. There is fiscally conservative reticence to expand government spending in the long run, especially in light of stories in the Boston Globe shaming workers who, through overtime, earn atypically large wages, leaving the impression that those wages are common for the public sector (Rocheleau 2020).

But regardless of what the current GLX project does, it is clear that the original GLX project did not attempt to expand the MBTA’s institutional capacity to manage such a program. Decisions were made slowly, and there was much desire to limit risk. In contrast with transit agencies in Madrid or Istanbul, the MBTA was trying to limit its own risk. One contractor we spoke to complained of red tape that made contracting less flexible, saying “the T factor” or “the MTA factor” raised costs by about 10% (Interview G 2020). Despite this inflexibility, the MBTA wanted the contractor to take more risk, which the interview subject said just meant the contractor would find ways to mitigate their risk by charging extra if it ended up taking on additional costs.

This arrangement contrasts with Public-Private Partnership (PPP) structures in low-cost countries, which aim to minimize risk to the private contractor. Seoul, for example, built Line 9 cheaply using this type of partnership: rather than shifting the highest risk elements to the private sector, the PPP was designed so that the private sector would do the low-risk parts of the line, such as the tracks and systems.

We see the results of diminished internal capacity at the MBTA throughout the project. Even though public meetings started back in 2004 and the outline of a plan emerged in 2005, no one at the agency took ownership of the project and shepherded it to completion. Instead, planning and design moved from department to department, knocking off one requirement at a time, such as the Alternatives Analysis and the state-mandated Environmental Impact Report (EIR). This meant that even after six years, the project hadn’t moved out of the conceptual design stage.

In 2011, the MBTA hired HDR/Gilbane to draft a Design-Build procurement for GLX based on the design work VHB had done. As HDR/Gilbane did its due diligence, it realized there were still a number of unknowns, such as how to manage the elevated track work where the two branches of GLX converge by Lechmere Station, or how to address drainage problems in Somerville, and it determined that it would need to conduct its own studies rather than building on the existing work from VHB. With the agency short on time, spending more time studying the details of the project meant that it couldn’t reasonably pursue its preferred Design-Build procurement, because it still didn’t know what needed to be specified in the contract. Faced with uncertainty and a tight deadline, the MBTA and HDR/Gilbane latched on to the idea of building GLX using CM/GC, a project delivery mechanism that would allow them to hire a construction manager to provide input on the design, schedule, and costs. Once design was finalized, the construction manager would shift to the role of general contractor and build the project. Thus, the MBTA could hire the CM/GC before final design, which under a Design-Bid-Build procurement could take several additional years.

CM/GC is an integrated planning, design, and construction method. In principle this means that as the design develops, the CM/GC provides input on constructability, value engineering, scheduling, and costs. Proponents of CM/GC argue that this collaboration between designers, PM/CM, and the CM/GC, all of whom contract with the agency separately, leads to CM/GC-vetted designs, predictable schedules, and greater cost certainty, all of which is meant to limit agency risk while allowing for the designers and CM/GC to innovate. As designs develop under CM/GC, say from 60% design to 90%, the CM/GC and an Independent Cost Estimator (ICE) provide cost estimates for the project based on a shared project scope and unit of quantities.

In the case of GLX, the MBTA selected a CM/GC project delivery, but made four critical errors drafting and implementing the agreement. Each of these flaws on their own created conflicts, but in combination they ramified through the project and brought it to collapse in 2015.

First, the MBTA failed to require open-book accounting, which allowed the CM/GC to price its work without meaningful oversight from the MBTA or the ICE. With limited ability to decompose CM/GC cost estimates, it was difficult to check the assumptions of the CM/GC’s pricing.

Second, the MBTA hired the CM/GC too late—only after the design team had advanced the design from 30% to 60%. This sequencing meant that the CM/GC had zero input in this first phase of design work. In an interview with someone familiar with this stage of the project, we were told that the “whole philosophy [of CM/GC] is to get input from the contractor” (Interview H 2020). Thus, by starting the more advanced stages of design without CM/GC feedback, the design was not tailored to the CM/GC’s strengths and there was less time for the CM/GC to innovate. As one source who has worked on dozens of CM/GC projects explained, “In CM/GC versus [Design-Bid-Build], the GC has the time to figure out a better way to build the mouse trap” (Interview G 2020).

Third, even though the MBTA had a CM/GC handbook that explained what to do when cost estimates from the CM/GC eclipsed the ICE’s by more than 10%, the MBTA failed to manage these moments of conflict effectively until five contracts into the project. Rather than taking the final design and bidding it out via a Design-Bid-Build contract, it instead instructed the ICE and CM/GC to continue working on the bids until the CM/GC’s estimate was within 110% of the ICE’s estimate.[10]

And fourth, the MBTA’s management capacity, which was spread thin, limited its ability to intervene constructively when the PM/CM and CM/GC failed to agree on costs. The MBTA was also slow to respond to inquiries from the CM/GC and designers on issues like what systems would be installed in the stations, such as the CCTV or communications specifications. Without clear guidance from the agency, the CM/GC priced these elements higher than normal to avoid the risk of taking on greater costs when the agency finally made a decision.

*             *             *

Let’s take a closer look at how the lack of open-book accounting and the inability to hold the CM/GC to the 110% of ICE estimates interacted with and led to much higher than anticipated costs. Thanks to the “BRG Look Back Study” (2015) prepared by the Berkeley Research Group, we have a clear accounting of the summaries of the cost estimates for some portions of the project, referred to as Interim Guaranteed Maximum Price (IGMP) and Guaranteed Maximum Price (GMP). In a CM/GC, it is traditional to prepare multiple IGMPs through the preconstruction and design phase so that the agency and its program manager can track price throughout the design process and revise budgets and total project cost estimates prior to finalizing design. In this section of the case study, we take a closer look at IGMP 3 and IGMP 4.

Once the design reaches the 100% phase, final design, the CM/GC submits its final estimate, and if it falls within 110% of the ICE’s estimate, it becomes the GMP. The GMP, which takes effect before construction, serves as a cap on final costs. This provides certainty to the agency and shifts risk from the agency to the CM/GC. If things do not go according to plan, the CM/GC is supposed to take on the added costs. In the case of GLX, rather than having one GMP, the project was broken up into multiple contracts. One of the people we interviewed with extensive knowledge of project delivery in Massachusetts told us that this was another fatal flaw, because it made it difficult to hold the CM/GC accountable if its costs outpaced ICE estimates, and it allowed the CM/GC to recalibrate bids as construction progressed (Interview I, 2020). However, it is common for transit projects delivered with CM/GC to include multiple IGMPs. The broader issue with this version of CM/GC was the MBTA’s implementation of its own CM/GC guidelines. The MBTA proved unwilling to push back on the CM/GC and bid out the final designs using Design-Bid-Build even if it meant slowing down the project. In fairness to the MBTA, at this phase of the project, little construction had been completed, and internal staff believed that, over time, the CM/GC estimates would become more reasonable.

The scope of IGMP 3 included relocating commuter rail track; making significant drainage improvements under the Washington Street bridge, including installing new pump stations and larger-diameter pipes; and drilling viaduct shafts. The estimate for this phase of work, which was the basis of the FFGA, totaled $63 million. Disaggregated slightly, direct costs equaled $50.4 million, indirect costs $10 million, and the fee $2.6 million (Table 2).[11] At the 90% stage of design, the CM/GC estimated its direct costs of construction at $69,763,112. So before reaching final design, the CM/GC submitted a bid 10% greater than the FFGA estimate without accounting for indirect costs, estimated at 20% of direct costs in the FFGA, or the CM/GC’s 4.25% fee. At first glance, this seems like an obvious red flag, especially given that it was significantly higher that the PM/CM’s estimate, $34,695,229, and the ICE’s estimate, $35,832,193. We were told, however, that despite the name, sometimes 90% design doesn’t mean all facets of the design are 90% complete. In this particular phase of work, the drainage component was a bigger risk and required more monitoring and mitigation than initially anticipated, so perhaps the CM/GC was being excessively conservative.

Table 2

FFGA Estimate GMP 3 
Direct Costs50400000
Indirect Costs10000000
Fee2600000
TOTAL63000000
Reproduced from the “BRG Look Back Study.”

Once design was finalized, all three (CM/GM, PM/CM, and ICE) submitted a new round of estimates (Table 3). This time, the PM/CM estimated $49,257,908 for the direct costs plus the CM/GC’s contractually agreed to 4.25% fee. While the PM/CM did raise its estimate, the CM/GC increased its estimate, too. At this stage of the bid submission cycle, also known as the drop, the CM/GC hit the high watermark of $101,865,073. Again, the two sides were as far apart as could be, which fueled discord between them. The ICE’s estimate for the first drop grew to $70,753,609. Since the CM/GC estimate was greater than 110% of the ICE’s, the MBTA asked the two sides to resubmit bids. Since the PM/CM and CM/GC were more than 100% apart from the PM/CM’s estimate, and the relationship was already strained, the MBTA asked the PM/CM to stop participating in subsequent bids because the enmity between the two had become unproductive. One person we interviewed who participated in this stage of the project told us that “it was getting to the point where the [CM/GC] couldn’t be in the same room as the [PM/CM] (Interview H 2020).” Another person we interviewed with knowledge of this round of drops told us that in order to carry out the estimate reconciliation process, the ICE met with the PM/CM and CM/GC separately in order to avoid confrontations.

Table 3

90% Design Direct Costs100% Design #1 Direct Costs + Fees
PM/CM Estimate3469522949257908
ICE Estimate3583219370753609
CM/GC Estimate69763112101865073
Reproduced from the “BRG Look Back Study.”

After four more drops, which are detailed in Table 4, the two sides finally reconciled at a direct cost plus fee price of $88,704,746. When the indirect costs were added to this phase of work, the final contract came to $116,635,126. Looking back at the estimate included in the FFGA documentation, this final price was 85% greater than the estimated $63 million. Part of the problem with the initial estimate, we were told, is that once the CM/GC put the drainage work out to bid, even the lowest estimate from subcontractors put the total price tag of the work above the direct cost estimate prepared by the PM/CM. Additionally, the CM/GC’s indirect costs, which we were told “were off the charts” (Interview J 2020), were so much higher than anticipated because the CM/GC wanted to bring on more staff in preparation for the next phase of work, GMP 4. By bringing on more staff now, it argued, it would be able to move more quickly through the next phases of the project, which would save money. Despite this line of reasoning, as we will see next, indirect costs broke even higher off of the charts in the next phase of work.

Table 4

 100% Design #2 Direct Costs + Fees100% Design #3 Direct Costs + Fees
PM/CM EstimateN/AN/A
ICE Estimate8091414079744911
CM/GC Estimate9073286884940606
100% Design #4 Direct Costs + Fees100% Design #5 Direct Costs + Fees
PM/CM EstimateN/AN/A
ICE Estimate8341150783615247
CM/GC Estimate8895485488704746
Indirect Costs27930380
FINAL CONTRACT116635126

While market conditions certainly played a role in the cost escalation, the lack of open-book accounting allowed the CM/GC to price work without the pressure of detailing its true costs and verifying that its profit was capped at 4.25%. Furthermore, since the PM/CM developed the initial cost estimates, it was defensive when both the CM/GC and the ICE ended up exceeding its estimates from the FFGA.[12] In a few instances, during the negotiations, we were told, the CM/GC did provide quotes from subcontractors showing that the cost of drainage elements for the project exceeded the PM/CM cost estimate. Open-book accounting would have clarified the CM/GC’s assumptions, but the PM/CM needed to recognize that its estimates were also flawed, especially when faced with concrete evidence. Without more transparency, the PM/CM assumed the problem was the CM/GC rather than its own estimates.

This issue of flawed cost estimation is a much deeper problem that relates to the process of how the federal government reimburses project costs and the rush to get an FFGA. Because costs incurred on a project do not qualify for reimbursement until the preliminary engineering stage, agencies want to spend as little money as possible to get to preliminary engineering. Thus, consultants work up cost estimates by taking historical data from “similar projects” and adding an escalation rate. This back-of-the-envelope approach is reasonable at the outset, as decision-makers think about pursuing different projects. But, as we were told by cost estimators, risk assessors, and project leaders from consultancies, the cost estimation of a project that has been selected from an Alternatives Analysis needs to be based on the specific conditions of the project, and that takes time and money that no one wants to spend. Where historical data is valuable, we were told, is in estimating quantities required to build a viaduct or drill a shaft. From there, however, a good estimator will take into account market prices for materials and labor rather than applying an escalation rate to old data. Whether or not this kind of upfront investment would mitigate uncertainty is hard to know, but it is certainly something to investigate across cases.

As worrisome as this round of drops was, things only deteriorated as the PM/CM, ICE, and CM/GC submitted estimates for the largest contract to date, GMP 4, which included track work, retaining walls, three stations, viaduct work, and other key components of the overall program.

During GMP 4 negotiations, the MBTA put the project on hold to see if it was possible to salvage GLX within a budget it could afford. We were fortunate to access the cost estimates for GMP 4. We have reproduced a portion of the fourth and final drop in Table 5. Right away, we see that the CM/GC’s estimate is more than double the FFGA estimate of $387,588,371 (Tables 5 and 6). In fact, the CM/GC, PM/CM, and ICE all exceeded the FFGA estimate by at least 60%. The CM/GC’s total cost estimate was $869,214,343. The PM/CM estimate, unsurprisingly, was $250,000,000 less, at $619,009,838. The ICE’s estimate, after learning some of the logic of the CM/GC from the last round of negotiations, ended up at $732,810,425. Since the CM/GC’s estimate was more than 110% of the ICE’s, this contract was never finalized. After looking more closely at the line items in this estimate, we see vast discrepancies lie in the indirect costs estimated by the CM/GC.

Table 5

GMP 4 100% DesignCM/GCPM/CMICEDELTA CM/GC vs. ICE
DIRECT COSTS5723753964607148785345989520.0707
Indirect Labor10699753154327123703543380.5208
Indirect Expenses11840581965572205841993560.4063
CM/GC Exposure Items3600000013160219137830131.6119
INDIRECT COSTS2614033501330595471683367070.5529
FEES (fixed 4.25%)3543559725235413298747660.1861
TOTAL COSTS8692143436190098387328104250.1861
GMP 4 reproduced from authors’ data.

In negotiating GMP 4, the CM/GC estimated its indirect costs at $261,403,350. When we looked at the cost estimate for GMP 4, instead of finding line items broken out with hourly wages and quantities of materials, we found lump sums at the top of section headers, such as Indirect Labor, with no labor hours to accompany line items like Field Supervision, Engineering, or Construction Manager Staff.

What we do know is that the CM/GC believed that it would require 1,792,301 hours to complete the construction work of GMP 4 and an additional 995,820 hours to manage it. In our interviews with cost estimators, they said that the ratio of direct hours to indirect hours on large projects usually falls within a range of 2.5 to 3, that is, for every 2.5 or 3 craft laborers on the job there is also 1 supervisor or manager. In this GMP, the CM/GC proposed a ratio of 1.8, or 30% more indirect labor hours. If this GMP had followed convention, the number of indirect labor hours should have been closer to 700,000. Two people we interviewed who worked on the review of this phase of GLX specifically commented that there were two to three times more field supervisors on site than one would expect. The PM/CM, in stark contrast, estimated the indirect labor hours at 450,146 hours. The ICE, which had hewn closely to the CM/GC on the construction elements in the cost estimate, lost the thread when it concluded that GMP 4 would require 713,680 hours of indirect labor rather than the 995,820 proposed by the CM/GC.

When we compared the total indirect costs to the total direct costs, we found that the CM/GC’s indirect costs equaled 46% of direct costs. This is an extraordinary proportion. Throughout our study of GLX, we have seen indirect costs estimated at 20% of direct costs, as we saw in the estimate for GMP 3. The actual indirect cost percentage of GMP 3’s direct costs was 31%. In the FFGA estimate of GMP 4, the indirect costs estimate was 15% of $324,450,166 in direct costs. During negotiations for GMP 4, the ICE applied the same 31% from GMP 3, but still managed to miss the CM/GC’s indirect costs estimate by $93 million. In our interviews with cost estimators, capital construction veterans familiar with CM/GC, and transportation design and engineering consultants, some of whom worked on GLX, we were told that indirect costs usually fall within the 15–20% range of direct costs, but that in dense environments, such as Somerville, it was likely that those percentages could creep up to 30% because of the restrictive nature of work windows that limit the hours of construction and the difficulty of getting materials into and out of the construction site.

Clearly, CM/GC was not the silver bullet the MBTA believed it would be. Even after ten years of planning and multiple cost estimates, GLX still didn’t have a reliable budget as of 2015. The dull work of figuring out the best way to build the Green Line Extension and staffing up the project appropriately was stymied by the pressure of staying ahead of different court-ordered mandates to build GLX and a lack of leadership from different political administrations, and a race to win an FFGA.

Table 6: Contract Packages 1-7 for GLX

CM/GC IGMPStatusCM/GC $FFGA $Variance%
1Awarded322350062252883397061730.4308
2Awarded180427181245206055906580.449
3Awarded11663512662667946539671800.8612
4AAwarded3960011044688166-5088056-0.1139
4CancelledN/A387588371N/AN/A
5CancelledN/A391816547N/AN/A
6 + 7CancelledN/A143252063N/AN/A
Adapted from Green Line Extension Project FMCB Meeting 8/24/2015.
Big, Expensive Everything: Stations

As GLX was falling apart because of the inability of the CM/GC and ICE to find a workable price for GMP 4, the MBTA hired a new group of consultants to make sense of why GLX’s budget exploded. Many of the people we interviewed explained that while the structural problems of CM/GC were the primary culprit, these problems manifested themselves in overly ambitious plans that did not fall within the GLX’s strict purview: to build amenity-packed stations, to re-engineer the existing trench to fit the commuter rail and GLX tracks, to integrate the multiuse pedestrian and bicycle Community Path, and to repair dilapidated overpasses and remedy decades-old drainage problems in Somerville.[13] Internally, the MBTA also pushed for a bigger vehicle maintenance facility and transportation building and personnel rooms in the new stations. One person we interviewed who was involved with the look back process and redesign of GLX explained that the project suffered from “pushing the yes button” (Interview K 2020): whenever a request was made to add an element, rather than managing the budget and sticking to the core goal of GLX, providing rapid transit service connecting Medford with Cambridge, the MBTA simply said yes.

The initial concept for GLX, as sketched out in the Beyond Lechmere Alternatives Analysis called for generic open-air stations with ramps to ensure ADA compliance. Through the planning process, these simple stations morphed into bespoke neighborhood icons with headhouses, redundant elevators, escalators, personnel rooms, fare arrays, larger footprints, and additional landscaping and street grading extending beyond the stations. One planner we interviewed who participated in the public forums on station design and the project admitted to us that “we could have been stronger at holding the line on some stuff” (Interview L, 2020). Another observer of GLX, who sympathized with the instinct to “push the yes button,” explained, “Just because someone asks for something and it’s a good idea doesn’t mean it’s possible” (Interview M, 2020). The Interim Project Management Team, which was responsible for getting GLX back within its initial budget, estimated the cost of GLX’s seven stations at $409,500,000, more than 100 times more expensive than the estimate in Beyond Lechmere.

By looking at a specific station and the CM/GC’s cost estimate, we see how costs scale with amenities and size. The proposed Union Square station, which we have included an image and cost estimate of below (Figure 2; Table 7), was designed to occupy 1,387 square meters. The CM/GC estimated that it would cost $39,926,449, or $28,786/square meter, to build. For this specific station, the largest cost centers were steel, electrical systems, concrete, and site construction, which includes things like foundations, landscaping and irrigation, and site improvements.[14] In addition to these external elements, the station included a headhouse, bicycle storage, an entryway, a lobby, a concourse, two elevators, two escalators, two bathrooms, an employee lounge, fare vending, fare arrays, canopies, and mechanical rooms for all of the different systems. While elevators and escalators are expensive on their own—about $2 million in total in this instance—these amenities also require additional area dedicated to mechanical rooms, which means more concrete, steel, and electrical work. The cost of electrical work, in particular, is stable over multiple footprints. Based on the estimate reproduced below for the three stations included in GMP 4, the range of costs for the electrical work is a tight band of $5,217–$5,597 per square meter. In other words, as station area increases, the costs of wiring and communications systems push total costs higher. The costs of elevators and escalators, on the other hand, relative to the overall station budget, reduces, so long as the design of bigger stations includes the same number of elevators and escalators as the smaller ones.

Proposed Union Station Rendering

figure 2. Rendering of Proposed Union Square Station from 11/6/2014

Table 7: Union Square Station CMGC Cost Estimate

CategoryEstimate% of Total
General Requirements17735930.0444
Site Construction53418050.1338
Concrete52001330.1302
Masonry11267190.0282
Metal84463520.2115
Wood and Plastics1200500.003
Thermal and Moisture Control31382360.0786
Doors and Windows12655500.0317
Finishes19730090.0494
Specialties 5633970.0141
Furnishings263810.0007
Special Construction 1171860.0029
Conveying Equipment20618670.0516
Mechanical15082530.0378
Electrical72639180.1819
Total399264491
Adapted from 100% GMP 4 8/14/2015

As the Interim Project Management Team redesigned the project to get costs in line with the remaining budget, one of the first areas it attacked was the stations. The Interim design team slashed the estimated stations budget from $409.5 million to $121.2 million, or by 70%, by eliminating station amenities, namely iconic headhouses, personnel rooms, fare vending, escalators, and redundant elevators. By removing these items, the overall square footage of the seven stations shrunk by a staggering 9,959 square meters, or 91% of the previous plan. Based on our calculation of electrical work/square meter, we estimate that the bill for electrical work alone declined by more than $50 million. After GLX was redesigned, stations returned to their spartan origins: today’s stations will again be open air and have uniform materials, signage, and lighting so that there are both economies of scale when ordering materials and the same maintenance procedures at each station, which will reduce operating costs going forward (Figure 3).

Union Square Station design as of December 2018.

figure 3. Design as of December 2018 for Union Square Station. There are no elevators, escalators, personnel rooms, or fully enclosed public spaces.

Politics is the Project: The Community Path

Even though the Community Path, a three-kilometer shared bicycle and pedestrian path running alongside GLX’s Medford branch from the proposed Lowell Street Station to the new Lechmere Station in Cambridge, was not included in the Green Line Extension’s 2011 project scope, it had active supporters who fought for its inclusion by showing up to public meetings and lobbying elected officials. The Friends of the Community Path, an advocacy group based in Somerville, met regularly from 2001 to 2004 and again from 2010 to 2018. The City of Somerville prepared feasibility studies of the path dating back to 2006 and sought federal funding for it on its own.

In October 2011, MassDOT and the MBTA hosted a hearing on GLX designed to give the public the opportunity to comment on the planning and analysis that had been conducted to date. 34 different speakers voiced their opinions about GLX. The comments tended to focus on GLX’s delays, worries about the alignment being too short, and concerns about property and pollution. The specifics of each person’s testimony often reflected their location; Brickbottom residents voiced noise concerns and Somerville residents were concerned with diesel train emissions. However, when it came to the Community Path, 13 different people, or 38% of all speakers, called for its addition to GLX.

Despite the Community Path’s late entry into GLX’s project scope, the MBTA argued that the Path improved access to stations. Once construction was completed, people living adjacent to the four stations intersecting with the Community Path would be able to safely access them on bicycle or foot. Since these stations lacked automobile parking, the Path was pitched as a real benefit to the overall project. How real those benefits were is up for debate—after all, why was station access only emerging as a problem to solve after the Environmental Assessment, which more or less locked in the mandatory project elements? While the project managers, designers, and others we interviewed about the Community Path defended its merits, they also acknowledged that politics more than any technical consideration led to its adoption. Just as the scope of stations increased over time, the decision to enlarge the project scope and build the Community Path reflected a broader decision to appease the public and elected officials rather than maintain the project’s scope and budget.

Integrating the Community Path with GLX was always an expensive proposition that would cost at least tens of millions of dollars—though in the grand scheme of GLX, it was a drop in the bucket. The primary issue was one of either cutting the Community Path into the same trench as GLX or hoisting it above the tracks (Figure 4). Since GLX is in a constrained trench, the trench had to be widened to accommodate GLX’s tracks; thus, folding in the Community Path and keeping it in the same right-of-way required additional excavation, retaining walls, and, in the proposed portion by Lechmere Station, its own viaduct rising above street level. Just as we saw with the cost estimates from GMP 4, mundane elements, such as concrete, metals, and electrical works drive costs. In the case of the Community Path’s initial conceptual design and estimate from 2010, VHB projected that retaining walls and concrete would account for nearly 60% of the $22,329,000 budget. Since this was an early stage budget, it also included a 50% contingency to account for large changes to the plan. At this point in the design process, for instance, there were no plans to build a viaduct for the Community Path. By the end of 2015, the cost estimate, according to Grove (2016) had ballooned to $100 million, or $33 million per kilometer.[15]

Community Path

figure 4. Selection of a Community Path Section from the Interim Project Management Team Report: Green Line Extension Project (2016).

When the Interim team examined the Community Path, they approached it with the same ruthlessness as they had the stations and other elements in the project. One idea was to cut it from the project altogether. As noted throughout this section, however, the Community Path’s popularity made it impossible to scrap, especially after it was included in the FFGA. Rather than eliminate the Path, the Interim team decided to realign it and trim it from 3,000 to 2,150 meters. By reducing the costliest section of it, the viaduct connecting it to Lechmere Station, the Interim team estimated that it would cost $20 million to complete. Even after MassDOT and the MBTA revealed that GLX’s cost overruns jeopardized GLX’s realization, one attendee commented at a public meeting, “I think Somerville deserves a $100 million community path…. Somerville has sacrificed for everyone else’s transit convenience.” Another attendee stated their preference more plainly, “The path itself is at least as important to us as the Green Line” (Grove 2016). Today’s Community Path design includes the full three kilometers, but the new Design-Build team has stripped away amenities included in the previous design and narrowed it in places to keep costs low.

2.3 Conclusion

In our first case study, we have identified project management and delivery, design, and politics as three driving forces of costs. Understaffed agencies lacking experience with large capital construction projects struggle to manage consultants. In the aftermath of the first version of GLX, the MBTA committed to staffing up its capital construction team and streamlining its administrative processes so it can pay bills and respond to inquiries quickly. Once GLX is complete, it will be valuable to return to it and see what increasing internal capacity means in practice and if it made a difference. As of now, the projected construction costs are 43% of total project costs. By contrast, in Istanbul construction costs are often 75%–80% of total project costs.

We selected GLX as a case study because it is an extreme case with costs that defy global and even American averages for at-grade light-rail construction (Eno Center for Transportation N.D.). Rather than trying to understand the average case, which is also valuable, we studied GLX to identify specific areas of inquiry as key drivers of costs. Flyvbjerg (2006, p.13) highlights the value of extreme cases when he writes, “from both an understanding-oriented and an action-oriented perspective, it is often more important to clarify the deeper causes behind a given problem and its consequences than to describe the symptoms of the problem and how frequently they occur.”

As we complete more case studies, we will have a larger sample of project delivery mechanisms to compare and contrast. While GLX could be interpreted as a warning against CM/GC, we caution against that reading. Project delivery, like everything else, depends on the details. CM/GC as practiced in Massachusetts is different from CM/GC in Utah or Washington.

We are drawn to debates about alternative project delivery methods because it is an active area of policy debate in the United States. In New York, as part of a broader MTA transformation plan enacted in 2020, the agency must procure projects greater than $25 million via Design-Build (Slowey 2019). This concerns us because in Madrid, one of the lowest cost cities in the world to build subways, Metro de Madrid insists on Design-Bid-Build. We suspect the way they do Design-Bid-Build, using itemized lists leads to different outcomes than Design-Bid-Build with lump sum contracts, as it is practiced in New York. Our leading hypothesis, for now, is that internal capacity determines success or failure. The best designed project delivery can fail if implemented poorly. Conversely, Design-Bid-Build, Design-Build, Public-Private Partnerships, etc. can all work if the agency manages the project scope, budget, and relationships effectively. We have learned from international examples in Madrid, Istanbul, Milan, and Seoul that projects can be delivered at lower costs, relative to the United States, independent of delivery method.

Design, especially as it adds or subtracts materials and direct and indirect labor hours, has a significant impact on costs. In the case of GLX, we focused on stations because they were dramatically descoped during the redesign process. Along the existing Green Line, we see simple stations that resemble bus shelters with zero charms or comfort along Commonwealth Avenue. The proposed Union Square Station that has now been scrapped drew no inspiration from these utilitarian stations. Instead, it was designed to include a showpiece headhouse, spanning nearly 1,400 square meters, two levels, plazas, redundant elevators, escalators, and other amenities. In New York, Los Angeles, and Toronto, we have seen costs for transit projects increase as station designs have become more elaborate. One capital construction executive explained rising costs as the product of a mixed mandate: “We aren’t building transportation projects; we are building community” (Interview 2019). According to this executive, stations and the surrounding areas are no longer just places to wait for a train, but also places to meet up with friends and anchor neighborhood identity. As we shift our focus abroad, it will be interesting to see how station construction designs and methods in Madrid, Milan, Turin, and Istanbul differ from those in Massachusetts. These cities have figured out how to build uniform stations cheaply and quickly.

Disentangling the influence of politics on transit projects is challenging, but it doesn’t mean we should ignore its impact. We see politics interacting with projects in two distinct ways: first, there are the blatant alignment and program decisions made to appease politicians, advocates, and detractors, like the Community Path. In Ethan Elkind’s Railtown (2014), he describes the origins of the alignment of Los Angeles’ first subway as a “political negotiation.” Instead of serving the densest corridor along Wilshire Boulevard, early plans were designed to build a coalition of the many by serving “the primary power centers in the county” (p.20).

Second, in an attempt to “do no harm,” as Altshuler and Luberoff (2003) explain, projects are designed to avoid all controversy, real or perceived. As we saw with GLX, trying to satisfy Governor Patrick’s desire to get an FFGA before he left office and win over members of the public who favored the community path or complained about noise impacts drove decision making. First, siting GLX in an existing right-of-way was the politically safe decision because it minimized property takings and obviated the need to clear a new right-of-way. Second, the current Design-Build contract limits the construction work that can be completed between 10PM and 7AM, requires bridge work on College Avenue to keep traffic flowing by only allowing temporary lane closures, and is careful to protect commuter rail service during construction. These well-intended overtures end up extending construction timelines and adding costs, because laborers are less productive when they have to spend the first hour of their shift setting things up and the last hour breaking things down to mask the fact that there is a major construction project underway.

In our interviews with consultants and cost estimators who have worked on transit projects across the country, they all agreed that productivity levels in the Northeast were especially low compared to other parts of the country. In Philip Plotch’s Last Subway (2020, p.197), he recounts an interview with the former head of capital construction at the Metropolitan Transportation Authority, who described the challenge of minimizing disruptions while constructing Phase One of the Second Avenue Subway as “‘trying to ride a bike and change the tire at the same time.’”

By contrast, in Istanbul, transit construction projects run 24 hours a day, breaking down into three eight-hour shifts. It is no surprise that in the span of seven years, which is the expected duration of GLX construction, the Istanbul Metropolitan Municipality built M5, a 19.7-kilometer subway.

Since GLX is our first case, it informs what questions we will ask and which variables we will quantify in future cases so we can compare data more easily across countries and cities. We will continue to look closely at fine-grained cost data that allows us to compare the ratio of direct labor hours to indirect labor hours, the costs of stations per square meter, production rates, headcounts for key activities, and how indirect costs vary as a percentage of construction budgets.

In contrast with the failures in Boston, we hope that more cases will shed light on what success looks like. These should include very low-cost cities like Milan and Istanbul, but also medium-cost cities, which presumably have done some things right and other things wrong.

The ultimate goal of this research is to figure out how to bring down the costs of rail transit projects in the United States and other high-cost countries. We take a comparative approach to understand what drives costs, what reduces them, and how to build transit projects more efficiently so we can build more of them. In future studies, we intend to look at how other cities contend with the three issues we’ve identified as cost drivers here: project management and delivery, design and engineering, and politics. Is this everything? Definitely not. But it’s a start, and it should help us productively study more cities in the future.

[1] There is some controversy over the origins of this commitment and how much mitigation needed to be done because of the Big Dig; however, this is beyond the scope of this study. For more see Altshuler and Luberoff (2003) and former-Secretary of Transportation Fred Salvucci’s testimony at the Green Line Extension Hearing (2011).

[2] The first conceptual cost estimate dates back to at least the 2005 Beyond Lechmere Northwest Corridor Study.

[3] This project scope is compiled from multiple documents published by early 2011 rather than one document. The details differ from document to document and there is no reference to a Community Path.

[4] Project delivery is a critical element of transit-infrastructure projects. Throughout this case, we will discuss Design-Bid-Build, Design-Build, and CM/GC. While we suspect our readers have some idea of the different project delivery methods, it’s worth stating that traditionally, North American transit projects are delivered using Design-Bid-Build. In a Design-Bid-Build project, a transit agency will hire a design and engineering consultant to develop a detailed plan for a project. The agency will then take those plans and solicit bids from contractors to construct them. The key part of Design-Bid-Build for our purposes is that the design team differs from the construction team. In a Design-Build project, an agency will hire a single entity, usually a joint venture, to design and build the project. While the agency will not hire a designer to develop final designs, the agency will hire a consultant to specify the project and make sure that the Design-Build bidders have enough information to bid on a project. CM/GC sits between Design-Bid-Build and Design-Build. Rather than buying a final design and then putting it out to bid, as in Design-Bid-Build, or entrusting a Design-Build entity to design a project with minimal oversight from the agency, CM/GC enables the design team and the Construction Manager/General Contractor to work together on designs iteratively and ensure that they are constructable and match the strengths of the construction team.

[5] The MBTA also hired an Owner’s Representative and an Independent Cost Estimator.

[6] It is important to note that the design team was hired a full year before the general contractor. This means that as design advanced from 30% to 60%, there was no input from the general contractor as the design team committed to new plans and designs.

[7] We have also tracked other cost estimates that appeared in internal documents and the press.

[8] Each total project estimate excludes financing charges.

[9] While some of the people we spoke to were willing to be on the record, many were adamantly opposed to being on the record for fear of losing out on future business or promotions. Since GLX is still in the process of being built, we decided to anonymize everyone we interviewed. However, we can say that we spoke with planners and staff at the MBTA and MassDOT, transit agency staff at other agencies, current and former FTA employees, consultants from firms who worked on and continue to work on GLX, members of the public working groups, advocates, former Secretaries of Transportation, elected officials, professional cost estimators, risk assessors, members of the Interim Project Management Team, academics, lawyers specializing in project delivery, and historians of Massachusetts’ transit network.

[10] Two people we spoke with about CM/GC generally explained that 10% was too great a variance. The structure of CM/GC encourages the CM/GC to estimate its costs at the top end of the range. With a 10% window, a savvy CM/GC could underbid the initial procurement by claiming a too-good-to-be-true markup in order to secure the contract, and then make up the difference by maximizing the bid-on-work process. A smaller 5% window encourages the same behavior, but also incentivizes a more honest markup rate.

[11] Direct costs are the costs for building GLX, such as labor, materials, and subcontractors. Indirect costs are the costs required to manage the project, such as paying for office space, field supervision that ensures work matches blueprints, and contract administration.

[12] We were told that CM/GC best practice only included the CM/GC and ICE estimates for this reason.

[13] According to Hopkins (2015), it would cost $5 billion to address Somerville’s drainage problems.

[14] We include site improvements and landscaping because this station included two levels of exterior plazas with connecting ramps and outdoor seating and plantings.

[15] In our interviews, we received conflicting reports on the costs of the Community Path, but no one agreed that the Community Path added $100 million in costs. One designer we spoke with explained that if the Community Path had been built without GLX, perhaps it would cost $100 million, but in reality the extra retaining wall work extended existing retaining walls a few more feet rather than requiring new retaining walls. The viaduct portion in Lechmere, no matter what, was always going to be expensive.

2.1 Why the Green Line Extension?

Boston and its Green Line Extension (GLX) project form the first of six case studies that we are tackling in order to understand how one can build public transportation more efficiently and less expensively. When choosing cases, we looked for a number of different variables to avoid drawing general conclusions from sui generis examples. These included the following:

    • For the first American case, we wanted to avoid New York. The reason is that while American costs are generally high, New York’s are uniquely high, and therefore it is likely New York has an unusual set of failures not seen elsewhere in the country.
    • Capital construction costs in Massachusetts have exploded over the last 40 years. While there hasn’t been any expansion of the existing network since the 1980s, we see in Table 1 that even after adjusting for inflation, GLX is only 6% cheaper per kilometer than the Red Line extension to Alewife, which is entirely underground and has deep, cavernous stations. The Orange Line project may be a better comparison because the majority of the project was at-grade, with a short tunnel under the Charles; GLX, without any tunneling, is more than twice as expensive per kilometer.

Table 1: Capital Expansion Projects in Massachusetts

Capital Expansion ProjectStartEndLength in KMTunnel PercentageStationsCostReal CostCost/KM
Green Line Extension201220217.60722892289301.2
Red Line Extension to Alewife197819855.1145741641.7321.9
Orange Line Haymarket North196619778.60.1461801155.6134.4
      • We need excellent quantitative data in order to be able to see if there is a specific thing that went wrong. There is fairly uniform data reporting throughout the United States, but certain public-private partnerships like that of the Maryland Purple Line make it hard to disaggregate data.
      • We need excellent qualitative data, that is, access to many different experts and practitioners who could help us understand what is going on. For idiosyncratic reasons, we have better access to such sources in Boston than in the rest of the United States, save New York and California.
      • The history of GLX is dramatic: as we explain in more detail below, planning activities for GLX began in 2004 and continued through 2012. It underwent a cost explosion, and, in 2015, it was threatened with cancellation before it was rebooted with a new design, budget, and project delivery, leaving nearly $700 million of the old project’s budget as a sunk cost. Each of these periods in GLX’s story provide an opportunity to assess why costs diverged from expectations and how the MBTA salvaged GLX. Lessons learned here will provide avenues of inquiry as we pursue future cases.

References

Altshuler, Alan, Luberoff, David. Mega-Projects: The Changing Politics of Urban Public Investment. Washington D.C.: Brookings Institution Press, 2003.

Bencks, Jarret. “Green Line Begins Extension Project.” The Boston Globe, December 12, 2012. https://www.bostonglobe.com/metro/2012/12/12/green-line-extension-gets-underway-somerville/gL8GXvUXtTDuipBoxuhoiI/story.html.

Bunten, Devin. “Is the Rent Too High? Aggregate Implications of Local Land-Use Regulation.” FEDS Working Paper, June 2017, 1–44.

Burroughs, David. “Pandemic Fails to Slow China’s High-Speed Network Expansion.” International Railway Journal, August 2020. https://www.railjournal.com/in_depth/pandemic-fails-slow-chinas-high-speed-network-expansion.

De Weck, Joseph. “Germany Is Finally Ready to Spend.” Foreign Policy, June 22, 2020. https://foreignpolicy.com/2020/06/22/germany-covid19-pandemic-stimulus-spending-savings-glut-europe/.

Elkind, Ethan. Railtown: The Fight for the Los Angeles Metro Rail and the Future of the City. University of California Press, 2014.

Eno Center for Transportation. “Five Takeaways from Eno’s Transit Capital Construction Database.” Accessed April 1, 2021. https://www.enotrans.org/enotransitcapitalconstructiondatabase/.

Federal Transit Administration. “Annual Report on Funding Recommendations: Fiscal Year 2014 Capital Investment Grant Program,” 2013. https://www.transit.dot.gov/sites/fta.dot.gov/files/FY14_Annual_Report_on_Funding_Recommendations.pdf.

———. “National Transit Database.” Accessed April 1, 2021. https://www.transit.dot.gov/ntd.

Flyvbjerg, Bent. “Five Misunderstandings About Case-Study Research.” Qualitative Inquiry 12, no. 2 (April 2006): 219–45. https://doi.org/DOI: 10.1177/1077800405284363.

Green Line Extension Hearing (2011).

“Green Line Extension Project Advisory Group Meeting.” Somerville, MA, October 2007.

Grove, Josie. “MBTA Presents Redesigned Community Path Extension.” The Somerville Times, April 20, 2016. https://www.thesomervilletimes.com/archives/66788.

Hook, Walter. “Role of Nonmotorized Transportation and Public Transport in Japan’s Economic Success.” Transportation Research Record 1441 (1994): 108–15.

Hopkins, Emily. “Nowhere to Runoff: Somerville’s Flooding Problem.” Scout Somerville, November 18, 2015. https://scoutsomerville.com/nowhere-to-runoff-somervilles-flooding-problem/.

Hsieh, Chang-Tai, Moretti, Enrico. “Why Do Cities Matter? Local Growth and Aggregate Growth.” Kreisman Working Paper Series in Housing Law and Policy, Working Papers, 36 (2015).

Massachusetts Bay Transportation Authority. “Beyond Lechmere Northwest Corridor Study: Cambridge, Somerville, Medford, Massachusetts.” Major Investment Study/Alternatives Analysis, 2005.

———. “GLX CM/GC Procurement Manual,” November 20, 2012.

Massachusetts Department of Transportation. “BRG Look Back Study (Draft),” December 2015.

———. “Final Environmental Impact Report.” Massachusetts, 2010.

———. Resolution of Both Boards on the Green Line Extension (2015).

Metzger, Andy. “Green Line Extension Cost Is Going Up Several Million Dollars.” The Boston Globe, September 13, 2014. https://www.bostonglobe.com/metro/2014/09/12/green-line-extension-cost-going-several-billion-dollars/qdo8A4RwS6rFNcbOoiElKN/story.html.

Personal Interview, October 2017.

Personal Interview, December 2019.

Personal Interview A, May 2020.

Personal Interview B, May 2020.

Personal Interview C, November 2020.

Personal Interview D, June 2020.

Personal Interview E, August 2020.

Personal Interview F, September 2020.

Personal Interview G, December 2020.

Personal Interview H, November 2020.

Personal Interview I, November 2020.

Personal Interview J, May 2020.

Personal Interview K, July 2020.

Personal Interview L, July 2020.

Personal Interview M, June 2020.

Plotch, Philip. Last Subway: The Long Wait for the Next Train in New York City. Ithaca: Cornell University Press, 2020.

Rocheleau, Matt. “A List of the 100 Highest Paid MBTA Workers in 2019.” The Boston Globe, January 7, 2020. https://www.bostonglobe.com/2020/01/07/metro/list-100-highest-paid-mbta-workers-2019/.

Slowey, Kim. “NYC’s Transit Agency Transfers 430 Workers to Construction Division,” December 13, 2019. https://www.constructiondive.com/news/nycs-transit-agency-transfers-430-workers-to-construction-division/568976/.

Stern, Wendy. “Re: Green Line Extension to Medford Hillside and Union Square Somerville, Medford, and Cambridge,” November 6, 2007.

Tankersley, Jim. “Biden Details $2 Trillion Plan to Rebuild Infrastructure and Reshape the Economy.” The New York Times, March 31, 2021. https://www.nytimes.com/2021/03/31/business/economy/biden-infrastructure-plan.html.

Toronto Region Board of Trade. Maximizing Value in Infrastructure Construction, 2020. https://recoverysummits.trbot.ca/transportation-summit/.

Transit Costs Project. “Transit Costs Project.” Accessed April 1, 2021. www.transitcosts.com.

Transport for London. “International Benchmarking Report.” London. Accessed April 1, 2021. http://content.tfl.gov.uk/rup-20160224-part-1-item07-international-benchmarking-report.pdf.

Wanek-Libman, Mischa. “Acciona-Ghella JV Awarded C.$1.7 Billion Contract for Vancouver’s Broadway Subway Project.” Mass Trasnit, September 8, 2020. https://www.masstransitmag.com/rail/infrastructure/article/21153333/accionaghella-jv-awarded-c17-billion-contract-for-vancouvers-broadway-subway-project.

3. The Istanbul Case

Most recently updated on 06/18/22 with numeric corrections related to PPP conversions.

3.1 Introduction

In 2019, the International Public Transport Association (UITP) named Istanbul the world’s leading city in the total length of urban heavy rail under construction (İstanbul Büyükşehir Belediyesi [İBB] 2019). Within less than two decades, Istanbul went from commissioning its first metro line to managing 17 projects with a total length of 222 kilometers under construction. How had a city with little experience building subways become a leader in the global transit construction arena? This study explores rapid rail construction in the Turkish city of Istanbul, pinpointing the best practices that facilitate its efficiency in project delivery and how these processes developed over the years so that Turkish experts now design and engineer rail projects abroad.

In 1989, İstanbul Ulaşım,[1] under the Istanbul Metropolitan Municipality (IMM) commissioned Turkey’s first light rail transit (LRT) line. Now known as M1A, the line was 8.5 kilometers,[2] and from September when it opened until the end of the year, it carried almost 1 million passengers (Metro İstanbul n.d.-a). The construction of the first phase of M2, which was 7 kilometers long, took 8 years to build. It was the city’s first heavy rail line and connected some of the most important commercial, touristic, business and residential centers on the European side of Istanbul. The line started service in 2000. M1B has Istanbul’s first rapid rail tunnels mined by a Tunnel Boring Machine (TBM). The 5.5-kilometer light rail line features 4.35 kilometers of tunnels and began operations in 2013.

During these early years of building metros, there were only a handful of Turkish firms which were qualified to undertake heavy rail contracts that involved extensive tunneling. Track systems were imported and European experts were brought in to operate TBMs and train crews. As the city rapidly expanded its rail network over the following decades, the IMM, local contractors and consultants gained extensive experience. They adopted or developed new methods and technologies in construction, design and management; streamlined their project delivery processes; and raised the standards of occupational health and safety as well as environmental mitigation measures implemented. Today, Turkish agencies and contractors carry out metro projects from conception to construction of lines much larger than the M1B.

Since the 1950s, Turkey’s population grew from 21 million to 85 million, and from only 25% of the population living in its urban centers to over 75% today. The country was able to leverage urbanization to boost economic growth, through a number of economic and urban management policies (The World Bank 2015). A metropolitan municipality regime was adopted, which consolidated regions’ infrastructure and investment functions as well as granting greater power to cities over their planning decisions. The informal land rights were legalized, leading to household and public investment in dwellings and neighborhoods (Karpat 1976; Uzun, Çete, and Palancıoğlu 2010). Housing stock was expanded and demand was instigated through mortgage-based financing. National programs were adopted to support access to water, sanitation and other municipal services, the financial burden of which was shared between the municipal government and the private sector through Public-Private Partnerships (PPPs) (The World Bank 2015). The economic and urban management policies Turkey adopted to encourage urbanization attracted domestic and foreign investment into cities and eventually led to a construction boom starting in the early 2000s (Balaban 2011; Yeşilbağ 2016). Along with an explosion in the construction of new housing, many megaprojects have been realized through PPPs paid for by domestic and international loans through the guarantorship of the Turkish state.

Among the thousands of contractors that the country’s construction boom produced, a number of firms have gained global experience in projects of significant size and complexity; they employ experienced teams of architects, engineers and construction workers; and are able to mobilize quickly. With over 300 kilometers of rail tunnels including those that are under construction and a steady stream of urban rail projects built within the last decade, the city cultivated a rapidly growing, competitive rail construction market. This experience has enabled Turkish contractors to compete on a global scale: Doğuş has rail projects in Bulgaria, Georgia, Saudi Arabia and India; Gülermak builds in Sweden, Poland, India, and UAE; Yapı Merkezi in Qatar and Saudi Arabia; Prota has designed rail projects in Germany and Poland.

We selected Istanbul as one of our six cases because the lessons learned through years and several kilometers of rail building can help inform practices in other cities around the world. This report is the second in a series of case studies the Transit Costs Project research team has undertaken in an effort to understand how various urban centers and regions tackle building urban rapid rail infrastructure from planning, design, financing and procurement to construction and commissioning (Transit Costs Project n.d.). We highlight practices that help cities save money and time while delivering quality infrastructure to communities and ensuring high standards for health, safety, and environmental (HSE) impact policies throughout construction. Our research involves studying academic publications; government, trade and media documents; and conducting interviews with professionals from government agencies, contractor firms and consultants.

3.1.1 A Global Leader in Building Rapid Rail

Istanbul is the economic, financial, industrial and cultural activity center of modern Turkey. It has grown rapidly in the last three decades with its population doubling during that period to exceed 15 million inhabitants. Striving to meet its increasing travel demand, the city built a large network of public transit that includes buses, metros, trams, funiculars, bus rapid transit (BRT), ferries, sea buses, aerial trams as well as paratransit.[3] Nonetheless, as was the case with many urban centers globally, rapid urbanization brought rapid motorization and public transit planning fell short in providing widely accessible, sustainable mobility options to Istanbulites (Batur and Koç 2017).

Istanbul ranks as the fifth most congested city in the world (Tomtom n.d.) and to address this, IMM has committed to increasing the share of public transit ridership,[4] decreasing private car use and prioritizing the expansion of its rail network as one of its main transportation strategies.[5] The 2011 Transportation Master Plan outlined a maximum rail system network of 749 kilometers of which 227 kilometers were already in service, under construction or in the process of being tendered. The additional 522 kilometers of proposed lines were evaluated and 388 kilometers of these new lines were selected to be completed with a target of 37 lines in operation by 2023, including funiculars, trams, light rail, the Marmaray commuter line and metros.

Since the completion of the 2011 Transportation Master Plan, Istanbul commissioned the commuter rail line Marmaray with a submerged tunnel crossing the Bosphorus Strait, M6, the first phases of M3, M5, M7 and multiple phases of M2 and M4 along with new trams, funiculars and cable car lines. As of 2021, Istanbul has 17 rail lines measuring 253 kilometers; four of which are trams, two are aerial trams, two are funiculars, one is Marmaray and seven are heavy rail lines totaling 135 kilometers in length (See Figure 1 for the heavy rail lines). There are 15 ongoing heavy rail projects measuring 193 kilometers, and an additional 10 kilometers of trams (See Figure 1 for the heavy rail network targeted to be completed by 2024).

Within all modes of transportation in Istanbul, the share of private car use is 20%, public transit ridership is 28% and the remaining share of trips is split between walking and private shuttles (Beyazit-İnce et al. 2020). 18.6% of the public transit ridership is by rail, 77% is by rubber-tired vehicles and 4.3% by sea transport (İstanbul Elektrik Tramvay ve Tünel İşletmeleri [İETT] n.d.). With the addition of approximately 200 kilometers of rail including commuter lines, trams and funiculars, the city anticipates that the share of rail ridership within public transit will increase from 18.6% to 30% by 2024.[6] By 2029, the total length of the rail network is planned to reach 622 kilometers (Emlak Kulisi 2021). Figure 2 shows the timeline of Istanbul’s heavy rail construction.

figure 1. Istanbul’s rail network in 2000, 2014, 2021 and he network targeted to be completed after 2024.

figure 2. Timeline of Istanbul heavy rail projects.

Among Istanbul’s rapid rail lines, the average length per contract is 16 kilometers (9 miles), and the weighted average cost per kilometer of rail is $126 million PPP[7] (Figures 3 and 4). Even though a linear relationship does not exist between the length of a line and the duration of its construction, based on the total length of completed lines and the total time it took to build them, we can say that 1 kilometer of subway in Istanbul is built in 7 months on average.

Project Cost Chart

figure 3. figure 6. Project cost/kilometer, in order of starting year of construction of lines in Istanbul. Colors show the percentage of tunnel. Project costs that include the construction of a yard, oftentimes to be shared with other lines are M1A-B (at grade yard), M2 (at grade yard and 3 large parking lots), M3-P1 (at grade yard), M4-P1 (underground yard), M5 P1 (at grade yard, +2,750m connection tracks), M7 P1-P2 (at grade yard), M8 (at grade yard).

Project Length Chart

figure 4. Project length, in order of construction starting year of rapid rail lines in Istanbul. Colors show the percentage of tunnel.

3.1.2 Politics of Urban Rail Construction in Istanbul

Building urban rail in Istanbul is difficult due to the city’s unique geography, geology, rich archeological heritage and old building stock; yet, politics often breed the greatest challenges against rail construction in the city. Situated between the Black Sea in the north, the Marmara Sea in the south and the Bosphorus Strait bisecting the city, many construction sites are close to the water or under the water table, and often require diaphragm walls for structural stability and to keep water out. Thicker walls and heavier reinforcements are also necessary because the city is in an earthquake zone. Multiple archaeologically significant sites, some as old as eight thousand years have been unearthed while building the Istanbul Metro over the last two decades. The existing city is dense and the majority of the building stock is old, poorly reinforced or made of low-quality materials. On top of these challenges, the local and central governments might disagree on rail projects’ financing plans dependent on international loans, meddle in tenders and put pressure on the contractor to finish construction earlier for better publicity opportunities. All of these factors impact the construction processes, inevitably elevating project costs.

Politics play a major role in deciding what gets built, who builds it and how fast it is built. Until 2019, the IMM was run by the same political party as the central government, Justice and Development Party (AKP). Following the election of the current mayor Ekrem İmamoğlu from Republican People’s Party (CHP), the municipality and the central government have been in competition over building and commissioning rail projects (See Figure 8 for the timeline of key events and rail construction in Istanbul).[8] Even though such a race can seem to be a positive influence on the construction of metros in the city, the conflict between the two parties’ impacts metro projects negatively. Since the opposition party took over the Istanbul Municipality, not only did the central government refuse to guarantee international loans; but the public banks that were on good terms with AKP failed to provide loans to the municipality (Altaylı and Erkoyun 2019; Savaşkan 2020). Istanbul turned to European banks for loans to restart their rapid rail construction. The treasury under the central government still needed to approve these loans, which it delayed until Mayor İmamoğlu’s complaints were amplified by some left-wing media outlets (Güvemli 2020a, Cumhuriyet 2020a).

Local politics also influence construction processes and can create roadblocks in different stages of planning and building subways. Istanbul’s municipal parliament consists of members from both CHP and AKP, with the latter holding a majority of the seats. After the new mayor was elected, AKP members delayed the decision permitting new muck yards,[9] which became critical with the increasing number of underground metros being built in the city (Güvemli 2020b). Similarly, land acquisition is easier for the central government both because they have access to more disposable funds and can expedite legal processes which they are unwilling to do for the current municipal government. Hence IMM under İmamoğlu prefers utilizing municipally owned land when building surface structures, rather than waiting for approvals.

Central and local governments have undermined competition in Istanbul’s rail construction market by interfering with tender processes. The construction tenders of five heavy rail lines in the city were carried out on the same day in March 2017, in which the same group of contractors submitted separate bids to all five and each was awarded one project.[10] The resulting contract values were uncharacteristically higher than the estimated costs by the Rail Systems Department. Furthermore, the 21b law intended for extraordinary circumstances, that eliminates the request for qualifications (RFQ) stage in tenders started being used, through which the municipality could award tenders to contractors without public notices or following open tender procedures. Based on 21b, two airport connector metro lines were awarded to contractors known to be favored by the central government. Before the election of the new mayor, the local government also lowered the track record requirements to bid on rail construction tenders, which led to less experienced contractors with government connections winning some contracts.

Political pressure sometimes accelerates the construction of projects, which can facilitate earlier access to new transit lines for the public. There is always pressure on the local and central governments to complete projects within their terms. Opening rail projects are valuable publicity events for mayors and presidents, so towards the end of construction, usually after the initial deadline has already been extended due to delays, it is common for agencies to ask that opening dates of lines be rescheduled to coincide with a national or religious holiday. This requires rushing construction programs and often means a phased opening or completion of part of the work after revenue service starts. The Turkish contractors are accustomed to such rescheduling and often bear the risks and share the extra costs of an earlier opening with the agency. On the other hand, such changes in the program can raise costs and risk the quality of construction. Three senior level engineers with international experience in rail construction mentioned in our interviews that it is for this reason that such a concession would be unthinkable for a European contractor (Personal Interviews G, I 2020 and N 2021).

Despite these issues, there is sustained political will to build urban rail, a certain level of streamlining is built into the system, and agencies ease processes which allow Istanbul to build rapid rail cheaper than most cities in our database (Transit Costs Project n.d.). Below we present a summary of our takeaways from this study. In the next section, we provide an overview of how the agencies, contractors and consultants work together to bring down construction costs together with a detailed overview of cost information. Chapter 3 presents three projects studied in more detail. Our conclusion highlights the lessons that can be learned from Istanbul’s approach to building heavy rail infrastructure, and lays out the challenges the city still needs to overcome to improve its project delivery processes and quality of construction.

Istanbul Project Costs and Timeline

figure 5. Timeline and costs of Istanbul projects, changes in administration and legislation

3.1.3 Main Takeaways

Over the course of 36 interviews and a review of numerous documents, we identified four main factors that contribute to lowering costs and speeding up the construction of urban rapid rail projects in Istanbul. These are:

  • The cultivation of a rail construction ecosystem through the completion of 15 urban rail projects[11] within the last 3.5 decades which facilitate competition in the market as well as an increased know-how. Political will, being partly responsible for this steady stream of projects.
  • The established processes of project delivery that have been refined over the years.
  • The flexibility of the agency and the contractors in collaborating to overcome obstacles by accommodating design changes during the building process, stemming from the understanding that speed saves money.
  • The adoption of technology in design, management and construction through investment in software tools such as Building Information Modeling and expansion of equipment pools that involve purchasing new TBMs.

Agencies most commonly use a Design-Build (DB) project delivery method, but work with an initially procured, 60% design document that affords them a level of control over the project. While this design document is essential for estimating costs, conducting feasibility studies and evaluating construction bids; when working with the contractors, the agencies approach design change proposals with a level of flexibility that allows for innovation, which cuts down costs and saves time. In addition to this well-established practice of working with a design document while being adaptable to change, the city sustained a pipeline of rail projects within the last few decades (Figure 5) through which, the agencies, contractors and consultants gained experience and know-how. Availability of work encouraged an increase in the number of contractors in the city, and the competition soared. It became feasible for contractors to invest in technology and expand their capacities.

A streamlined procurement method that strengthens the agency’s hand, a collaborative and adaptable approach to changes, developing capacity and know-how owing to a steady stream of projects, and the rise of the rail construction market constitute lessons to learn for other cities wanting to bring down their rapid rail construction costs. Some other components of construction that Turkish teams allocate smaller budgets and time for, compared to the North American and European teams are more questionable. Low labor and professional service costs in Turkey bring with them substandard working conditions; HSE mitigation is well-enforced with legislation but lacks in execution resulting in higher numbers of fatal occupational accidents[12] and more disruptive environmental impact; and perfunctory community engagement along with minimal land acquisition can prevent conflict in order to save time and money, but the alignment of lines end up being suboptimal for the transportation of the city (Personal Interview C 2020).

Labor conditions, HSE and stakeholder management are critical issues that require control mechanisms, good planning and proper execution. However, it is worth taking a critical look at the resources allocated to deal with them both in Istanbul and other parts of the world. How much time and money cities spend on managing different aspects of construction should be considered in accordance with what is achieved, and the negative consequences when they are poorly executed.

3.2 Process Overview

In this section we present a process overview of how urban rail gets built in Istanbul. By examining Istanbul’s processes and how they have been refined over more than 30 years and the construction of more than 200 kilometers of urban rail, we can learn from Istanbul’s struggles and successes to develop best practices for subway construction. At the end of this section, we present cost information for labor, material and tunneling equipment as well as general cost estimates for metro lines in Istanbul.

3.2.1 Planning and the Internal Capacity

IMM and its agencies are responsible for transit planning and building the majority of rail infrastructure in Istanbul. They are bound by larger scale plans developed by the central government and need approvals from the central government at various points during the course of the planning of a rail project. The Ministry of Transit under the central government also builds rail infrastructure in the city, but only assumes projects of national significance such as the airport connectors and the commuter rail, Marmaray. As an exception, two additional urban rapid rail projects were taken on by the central government due to the financial difficulties IMM faced and the project’s contractor connections with the central government before the change of mayors in 2019. Thus, some projects in Istanbul are built by the IMM and others, by the Ministry of Transit, and each agency is responsible for securing funding for their own projects. The local and the central governments do not collaborate on projects.

The Transit Planning Branch Office (TPBO) under IMM appoints a team of 10 people to work on the transit demand and planning, together with coordination of intermodal transportation. Under IMM, the Rail Systems Department develops the preliminary rail projects in coordination with the TPBO and works on route designs based on the Integrated Urban Transportation Master Plan for Istanbul Metropolitan Area which is based on the City of Istanbul Environmental Plan developed by the Ministry of Environment and Urban Planning under the central government. This plan is dependent on the Strategic development plan prepared by the Presidency of Strategy and Budget (Figure 9).

The Integrated Urban Transportation Master Plan for Istanbul Metropolitan Area, the latest of which was issued in 2011, outlines the planned rail transit routes in Istanbul (İBB). The timeline for any project in the masterplan starts with the Rail System Projects Directorate under the IMM, or the General Directorate of Infrastructure Investments under the central government’s Ministry of Transit picking up the project. A group within a 35–40-person team carries out an alternatives analysis for the line internally (Personal Interview V 2021). The next step is to procure a final design document[13] at 60% design and a feasibility report. With these documents, the agency acquires a thorough understanding of the project prior to the construction tender, and, according to a project manager of an independent design firm that has completed several final designs and feasibility studies for the Istanbul metros, estimates costs with 90% confidence (Personal Interview A 2020).

Rail Planning Flowchart

figure 6. Rail planning and procurement flowchart

Next, a Project Promotion Document is prepared and the Environmental Impact Assessment (EIA) process is initiated. Metro projects are not directly subject to EIA (EIA or “ÇED Report” in Turkish), but fall in “the List of Projects Subject to Selection and Elimination Criteria”, hence, the owner agency applies to the Ministry of Environment and Urbanization, and upon evaluation, an “EIA Not Required” decision is issued. To obtain this waiver, a Project Promotion Document is prepared and an application is submitted to the Ministry of Environment and Urbanization. The preparation of this document takes about a month, and its approval process takes approximately two months.[14] This process has been streamlined in consideration of the net-positive environmental effects of urban rail projects. Compared to the US, where the average time it takes to obtain an Environmental Impact Statement is 4.5 years (Council on Environmental Quality [CEQ] 2018, 2020), the process in Turkey is extremely rapid.

The Rail System Projects Directorate under the Rail Systems Department of IMM was established in 2014, and is responsible for the preliminary planning phases of rail projects in Istanbul. Beside procuring the 60% design document before launching the construction tender, the responsibilities of the department include the initiation of land acquisition processes for the lines approved by the municipality’s Transportation Directorate; preparation or procurement of the feasibility analysis and tender documents for the design, construction management, construction and rolling stock tenders; conducting the EIA process; evaluation of the design revisions during construction; supervision of the operating agency’s technical and maintenance work for lines in revenue service; specifying the architectural materials to be utilized in rail projects; developing strategies that encourage the use of local resources in procurement; enforcing the use of Building Information Modeling (BIM) technology; coordination with utility companies during construction and keeping record of the communications among all parties throughout the construction of rail projects.

The directorate typically carries out three more tenders after obtaining the EIA waiver, one for the construction management (CM), one for the construction work and one for the rolling stock. In the early years of metro construction, the tender package for construction used to include the rolling stock procurement as well. The agency did not have the capacity to procure the rolling stock on their own, however, transferring the risk to the contractor consequently increased the costs of procurement. Today, the agency carries out procurement tenders for rolling stock on their own.

The operating agency Metro İstanbul is consulted during the design process, but IMM’s Rail System Projects Directorate is more influential so Metro İstanbul does not demand significant changes. During construction, an 8–10-person team from the Rail Systems Department supervises the project on site. It is common to have 10 people on the agency side while a team of 60 people work on the project from the CM, which the agency considers their representative.

3.2.2 Financing

As part of the planning stage, the owner agency submits the feasibility report to the Presidency of Strategy and Budget for approval, in order for the project to go into the National Investment Program. This step is crucial when seeking financing options; once a project is included in the National Investment Program, the central government can act as a guarantor for the agency to obtain international loans with low interest rates; and even if not, the central government’s approval is still required for loan agreements or the issuance of bonds to finance projects. The construction cost estimates on the feasibility study reports are kept 10-20% higher than the actual estimated costs in order to account for possible overruns (Personal Interview C 2020).

Different financing options are evaluated in the feasibility reports. These include scenarios of 100% self funding, 75% self funding with 25% funding by commercial or export loans, 50% self funding with 50% funding by commercial or export loans, 25% self funding with 75% commercial or export loans, and also, 100% funding by commercial and/or export loans. Export loans indicate loans obtained from Turkish banks and commercial loans are those that are granted by international institutions such as the European Investment Bank, the European Bank for Reconstruction and Development, the World Bank, the Islamic Bank and Japanese International Cooperation Agency. In the feasibility reports, financial analyses explore different payment plans for the loans, interest rates and fees over specified payback periods as well as expected fare and advertising revenues.

Typically, the feasibility studies find a combination of 55-60% commercial and 40-45% export loans to fund 100% of a project’s costs to be the most advantageous. The interest rates are calculated based on the EURIBOR or LIBOR[15] rates, with an added 0.75 – 3.5%. A 0.6% commitment fee for both types of loans and a 1.27% commission fee for the commercial loans also apply. Grace periods of 1-4 years after the starting date of construction, payback periods of 10-14 years for the commercial loans and 20-24 years for the export loans are considered.

Even though projected ridership numbers and therefore the expected fare revenues utilized in the feasibility studies are considered to be optimistic, the projects are found to be financially infeasible (Personal Interviews F, I and J 2020). On the other hand, the economic feasibility analyses that take into account the travel time saved by commuters switching from different modes of transit; the savings realized by the reduction in crashes, maintenance and operating costs of rubber-tired vehicles and the upkeep and expansion of road infrastructure; as well as the environmental impact benefits show that the economic benefits of rail projects outweigh the financial costs. Hence these studies generally conclude that the projects are feasible to build when considered in terms of their economic benefits.

Foreign entities make decisions to grant loans for rail projects based on the credit rating of the owner agency (the municipality or the central government). Once major international investment agencies agree to provide loans, smaller banks also get involved through consortia. A single loan granting institution rarely finances 100% of the projects, their loans usually cover 20% or 30% of the costs. When foreign investors finance a project, they demand that the agency works with prominent designers and CMs, and also require reports to guarantee that stakeholder engagement plans are made; occupational health, safety and environmental impact standards are high. They visit the site and do quality control every six months.

There is a political side to the foreign financing mechanisms. When a financing institution agrees to provide a loan, it is common that they require a percentage (i.e., 30%) of the budget to be spent on procurement from the loan granting institution’s country of origin. For example, for the Marmaray Commuter Rail’s Bosphorus Crossing Phase, the Japanese Investment Bank which financed the project allowed for only a specific group of countries to bid on the construction tender, and the Japanese-Turkish consortium Taisei-Gama&Nurol (TGN) was awarded the contract.[16]

Politics between the local and central governments play an important role in the financing of rail projects as well. Most of the rapid rail lines in Istanbul are built by the local government, however, construction of some including the airport connectors M11 and M4’s airport extension as well as M3’s phases two and three are conducted by the Ministry of Transit under the central government. Due to congestion and a dire need for public transit infrastructure in the city, it is a matter of pride and prestige for both administrations to build rapid rail lines, and now that the local government has been run by the main opposition party since 2019, the two administrations race over who builds more rail infrastructure. Thus, the central government does not provide funding for municipally run projects; the municipalities find funding on their own. Among the rail projects that are owned by the Ministry, those from cities run by the same political party as the central government receive disproportionately more funding (Savaşkan 2020).[17]

3.2.3 Procurement

For the procurement of urban rail infrastructure, IMM utilizes a method that was modeled after the FIDIC Red Book Design-Bid-Build contract template, but evolved into what resembles a Design-Build method over the years.[18] The agency adopted a working relationship with its contractors, which meant that it was open to revisions coming from the contractor’s designer, if it found them to be reasonable and believed that they would save time and money. Examples include changes in the tunneling method, i.e., from using TBMs to building by NATM, the conditions of which are predefined in the contracts, or modifications in structural design, as was done in one case by replacing diaphragm walls with bored pile walls to make use of the contractor’s abundantly available piling machines (Personal Interview E 2020). The Public-Private Partnership (PPP) scheme is not preferred for the procurement of rapid rail lines in Istanbul due to the projects’ feasibility mainly being dependent on their economic rather than the financial benefits.

The pricing model of the construction contract is based on an itemized list of quantities for the civil and finishing works, which constitute about 65% of the items. The rest of the work such as tunnel ventilation system design, drainage system design, power and traction power design, training services and station common spaces environmental control systems or station sewer system for each station are also added to the itemized list but are priced as lump sum “sets.” The cost estimate, not announced before the bidding is complete, is carried out by compiling the list of quantities, quotes for services and lump sum items, then adding 25% on top of the total to amount for overheads, profit and contingency. Prepared by the Rail System Projects Directorate, the list of quantities for each project is provided to the tender applicants together with the final design documents, and is required to be filled out and submitted as part of the bids. The proposed prices are expected to be based on a standardized unit cost schedule that is annually issued by the Ministry of Environment and Urbanization for labor, equipment and materials, but can vary across bids.[19]

Usually, the procurement of construction works is carried out through a restricted procedure which is a two-phased tendering process; first an RFQ is issued to shortlist applicants, who submit offers to the later announced request for proposals (RFP). Construction tenders are evaluated based on the lowest bid, however, a minimum limit value is calculated dependent on the estimated value and the average of the proposed bids. Any bids under this limit are disqualified. A minimum of three and a maximum of ten bidders are shortlisted and invited to the second stage. If the number of qualifying firms is fewer than three, the tender is canceled. As opposed to the construction tender, the design and CM bids are evaluated based 70-90% (usually 80%) on the technical score and 10-30% (usually 20%) on the bid price (Directorate of Presidential Administrative Affairs, General Directorate of Law and Legislation [DPA] 2009).[20]

The scope of the construction contract generally includes tunneling, the civil and the finishing works of the stations and support facilities, the procurement and installation of the electromechanical systems, training of the operating staff and commissioning of the metro line.[21] This is a turnkey project delivery method; however, the agency and the contractor collaborate regularly throughout construction. The agency approves design and implementation decisions at several stages but also provides assistance to the contractor in third party relationships. For example, the electromechanical systems that make up approximately 25% of the contractor’s direct costs are often subcontracted to foreign firms such as Siemens, Thales and Alstom over which the agency has some leverage as a long-term customer when negotiating on prices. The agency helps the contractor in these negotiations and they both benefit (Personal Interview J 2020). The agency also aids the contractor regarding utility replacements by providing excavation permits and utility blueprints.[22]

Some construction tenders require the contractor to partner with a credit granting institution and their credit offer is evaluated as part of their bid. The contractor doesn’t owe or guarantee the money but, in those cases, arranges for the financing.

Landscaping design at the site of the cut and cover stations, station entrances and exits are within the scope of construction contracts. Sidewalks, signage, vegetation, water drainage are included but the designs are kept at minimum. Bridges, over and underpasses are built or renovated within the scopes of the contracts.[23] Contracts also include maintenance of the whole system for 2 years (or other predefined duration), including all elevators, escalators, pumps, vents and other systems. The contractor procures the maintenance work from the suppliers and subcontractors.

The electromechanics systems of extension projects are usually purchased from the same provider that installed the systems of the initial phase and hence are expected to be a little costlier. However, in some instances as was the case for M2, the agency may choose to go with a completely new system, requiring for the first section to be re-wired. In M2, the initial phase was built by Alstom, but because the agency found their offer for the second phase overpriced, the agency decided to switch the whole system to Siemens.

Agencies building rapid rail in Istanbul specify very short timelines for projects when compared to average durations of construction globally,[24] but multiply the number of TBMs required in the contracts, specifying schedules for mining different sections of lines simultaneously. Despite the implementation of these work programs, such timelines play out to be unrealistic and the contractors almost always negotiate for time extensions.

3.2.4 Average Cost Breakdowns

In this section, we summarize cost information from 17 rail projects in Istanbul between 2012-2018 (Figure 10). We examined government presentations, public procurement results, feasibility studies and trade news. A majority of this information is based on early estimates that are likely to change over the course of construction of a project and interviews with multiple engineers and project managers working in Istanbul, who are comfortable making estimates for projects based on a few inputs like length of a line and tunnel percentage. We also provide a walk through of a cost estimator’s process of estimating the costs of a project in Istanbul. It is important to note that these estimates do not account for ground conditions, archeology and financial difficulties hindering timely payments which also change the real costs and their breakdowns.

Excluding rolling stock, the majority of a project’s budget is spent on construction; and since agencies in Turkey prefer contracting infrastructure projects in a single package rather than breaking them up into several contracts, this 65-70% of the budget goes directly to the contractor. Soft costs, the majority of which are the financing charges, but also include the preliminary design, construction management and the preconstruction costs that are expenses related to obtaining the environmental assessment report, make up an average of 25-30% of the total budget. Utility replacements, remedial work, and mitigation costs are usually less than 5%.

When we look at the general breakdown of the contractor’s expenses for Istanbul rapid rail lines, we see 65 to 75% is spent on the direct costs (Table 1), which comprise all labor, material and equipment utilized in the construction. 3 to 5% is allocated to professional services such as the design and construction documentation; 5% to setting up and maintaining the construction sites; 2% to contract fees, insurance and securities; 1 to 2% to the head office costs; up to 7% to contingencies and the remaining 5 to 15% to profit.

Cost Breakdowns Istanbul

figure 7. Breakdown of average capital costs of a heavy rail line in Istanbul

The most striking difference between the overall cost breakdowns of Istanbul rapid rail lines with those of an estimate recently made for the US subway projects, is the professional services costs constituting 15 to 20% or less, and the utility relocations, 5% or less within the overall budget in Istanbul. Instead, the construction costs make up 65 to 75%, which is 10 to 20% higher than in the US projects (Table 2). Within the direct costs, the US spends double to 2.5 times the proportion of the construction budget on labor, less than half the percentage on the permanent material, and 10-12% less of the budget on the equipment (Table 3).

Table 1. Turkey construction cost breakdowns.

Contractor’s Fee: Total of construction and electromechanics contract valuesPercentage within the total
(based on Personal Interview B 2020, and consultation with colleagues)
Direct construction costs (labor, material, equipment)65-75%
Design, construction documents etc.3-5%
Contract, financing, securities, bonds0.02
Site spending0.05
Central office costs1-2%
Contingencies0-7%
Profit5-15%

Table 2. US vs Turkey construction cost breakdowns. US values from “Why Tunnels in The US Cost Much More Than Anywhere Else in The World” (Tunnel Business 2020).

Overall Project Costs BreakdownUSIstanbul
(based on Personal Interview B 2020, and consultation with colleagues)
Soft costs
(includes owner’s costs, preconstruction costs including EIS/EA, feasibility studies, program management consultant, design consultant, construction management, right of way easement, permits, insurance, finance, bonding, etc.)
35% 25-35% 
Third party costs
(includes utility diversions, remedial work, and stakeholders’ commitments)
10% Up to 5%
Construction costs
(excludes the rolling stock but includes the installation of all related systems and the commissioning.)
0.5565-75%

Table 3. Cost distribution of labor, material, equipment in Turkey vs the US. (Tunnel Business 2020).

Breakdown of the Construction CostsUSTURKEY
(based on interviews)
Labor 40% to 50%20%
Permanent material 15% to 18%40%
Construction material, temporary works, consumables, etc.10% to 12%10%
Contractor construction equipment, TBM, etc.18% to 20%30%

According to a contractor’s design director with experience working on urban rapid rail projects in Istanbul, the costs of a 10–12-kilometer twin bored tunnel project can be estimated as in Table 4 (Personal Interview G 2020). These costs include 10%-15% contractor’s profit and contingency, 10% indirect costs which account for 2-3% design and 7-8% overheads, without issues regarding surface structures and with easy ground conditions. All values have been PPP adjusted for 2020.

Table 4. Turkey construction cost breakdowns

WorkPPP $
Tunnels and stations$1,800-$2,070 million
Track$70-$90 million
Power and traction$145-$165 million
Signaling$70-$90 million
CCTV, SCADA, ECS (communications, control, environmental control systems, support facilities)$215-$250 million
Total$2,300-$2,665 million
For the above estimate
Number of stations2022-06-12 00:00:00
Tunnel cost per kilometer, including tracks and finishings$18-$45 million
Per station cost with finishings$120-$290 million
  • $150-$200 million/kilometer can be estimated for tunnels + stations: deep, tube or cut and cover. If constructed closer to the surface, the price can go up 30-100%. A regular TBM tunnel of 6-meter diameter costs approximately $30 million PPP per kilometer. If tunnels are close to the surface as was in Marmaray, an additional 10-20% will be spent on mitigation for noise and vibration. The threshold is about 2x the tunnel radius below the basement level of buildings, so if the tunnel is twice its radius below the basement level, these costs will be minimal. The cost of an NATM tunnel of similar radius can go as low as 60% of a TBM tunnel, however, if the ground conditions are challenging, it can go up to 150% of the TBM costs. This is true even if the ground is hard rock that can be blast drilled, despite the excavation reinforcement requirements being less, since the permitted work hours and mitigation increases the costs.
  • A cut-and-cover structure that is 30 meters deep is exponentially more expensive than a 15 meter deep cut and cover one. This is due to a change in the reinforcement design required.
  • Signaling costs should be about $7-9 million PPP/kilometer for lines under 15 kilometers, unless it is a very complicated line. Change is rare in electromechanics costs across projects. The cost differences between projects are mostly due to the tunnel and civil works.
  • Depot and maintenance areas cost roughly between one to two times that of one station’s costs, depending on their size.

In Istanbul, even though project cost estimates are made by adding a 25% profit on top of the total costs, according to multiple sources, contractors give up a large part of this amount to be able to compete in tenders, and end up bidding with approximately a 3%-5% profit margin, that can go as low as 2% (Personal Interview P 2021). For the same reason, a minimum proportion of the budgets are allocated to contingency and risk management. As the majority of risk is on the contractor, this minimal profit margin strains the contractors more than it would in cities of other countries such as Germany where the larger proportion of the risk is taken on by the owner agencies.

3.2.5 Professional Services, Staffing, Labor, Equipment and Material

The budget breakdowns of rail projects differ significantly between Istanbul and the US. More importantly, the overall costs are much lower in Istanbul and that is because professional services, labor and equipment cost remarkably less. Material and consumable prices do not show significant differences across most countries, but the speed and duration of construction inevitably influence their dent in the project budgets. Here we give an overview of costs for each of these components in the Istanbul rail projects and comparisons with the US and other countries to provide a context for the case studies we present in the next section.

Professional services costs in Turkey are low due to small teams and low wages. White collar jobs are more than twice as expensive in the US as in Turkey (Personal Interview I 2020); a junior engineer in Turkey is paid a net amount of $2,000 to $2,500 PPP a month, whereas in the US, this number is closer to $5,500 (WPI 2020). The case is similar when Turkish white-collar wages are compared to those of Canada and a number of European countries. Below are the average costs for the most commonly outsourced professional services in metro construction in Turkey.

  • The initially procured preliminary design contract which sometimes includes a feasibility study, on average, costs $26 million PPP or 1.2% of the total of construction and design costs. (Based on 5 projects).
  • The average fee the contractor pays their own designer is $20 million PPP or 0.9% of the total costs (Based on 5 projects).
  • The CM contracts cost, on average, is $49 million PPP or 2.3% of the total costs (Based on 14 projects).

Typically, professional service teams of Istanbul metro projects have the following staff numbers. A practice that keeps the teams smaller, is that the professional services and construction staff perform a variety of different tasks as part of their jobs, rather than being dedicated to a single task that is specified in their contracts. For example, it is possible to hire the same person as the head of technical office and the deputy project manager.

  • Contractor’s designer’s team has 4-5 supervisors on the construction site, full time. 1 project manager and 7-8 team leaders work full time from the beginning to the end of the project. In addition to that, there are 15-20 people who jump on and off so in total, about 30 people are involved from the designer team’s office throughout the construction, approximately 15 full time staff being dedicated to the project.
  • The CM has about 10-12 people full time on the project and about 50 working on it on and off.
  • On the agency side, 10-15 people work on one project full time.
  • The contractor firm assigns 150-200 people for each project, excluding the laborers. 30 to 40 of these are management staff at the central office and 100-150 on the site all of which are white collar workers that are the full-time employees of the contractor. Additionally, 10-15 service staff are allocated on the construction sites. The construction workers and the rest of the service staff are employees of the subcontractors (Personal Interview M 2021).

One of the key factors that keep construction costs low in Istanbul is the low labor costs in Turkey. Tunneling staff are the highest paid workers in rail construction, and in the States or countries where labor costs are high, tunneling staff wages, benefits and fees can account for a considerable percentage of the construction costs. The size and efficiency of the teams are also influential. One way Turkey cuts down on labor costs is that skilled laborers perform a variety of different tasks on the construction site on top of the specific jobs they are hired to complete. The national social security system standardizes health benefits for all workers and costs an additional 30-35% of the net wages to the employer. 90% of workers are accommodated on the site in temporary structures. In total, accommodation, food and insurance add 40% to the wages as contractor’s labor expenses.

The main reason for the low labor costs of Istanbul projects are the wages. If we compare the wages of tunnel workers in Istanbul and New York, a city that is known to have high labor costs and influential labor unions, the differences are astounding. In January 2021, Istanbul tunnel workers earned $100-$125 PPP per day working 12-hour shifts and had a gross compensation of $140 to $175 PPP when including social security and taxes bringing their hourly gross compensation to a range between $11.6-$14.6 PPP. In New York, in 2010, tunnel workers earned on average $350 per day, working 8-hour shifts and had a gross compensation of $700 dollars when including additional benefits (Personal Correspondence A 2021). So, their hourly gross compensation came to $87.5 exclusive of overtime. What is interesting is, the 6.7-fold difference is not parallel to the difference between wages in general. The minimum hourly wage in New York is slightly higher than twice the minimum hourly wage in Turkey and the minimum monthly wage, only 60% higher than in Turkey (Table 5).

Table 5. Turkey Minimum Wages

2021Turkey (₺)Turkey (PPP $)US ($)
Monthly gross minimum wage357816532640
Daily gross minimum wage12055120

Below we provide wages and costs of tunnel workers calculated based on four recent rapid rail projects in Istanbul and for two TBMs working simultaneously on site (Table 6). This team saves on staff and equipment through coordinating resources between the two TBMs.[25] Working in two twelve hour shifts per day, a total of 81 TBM personnel and 92 surface crew members are employed to run two TBMs simultaneously. The total cost of this team, including wages and benefits add up to $493,000 PPP per month.

Table 6. Summary of monthly wages of workers in a 2 TBM rail construction team in Istanbul

Summary Table2 TBMs Tunnel Crew 2 TBMs 2 TBMs2 TBMs
(total for 2x12 hour shifts, $)Surface Crew
(total for 2x12 hour shifts, $)
Tunnel and Surface TBM Crew Total
(total for 2x12 hour shifts, $)
Tunnel and Surface TBM Crew Total
(total for 2x12 hour shifts, PPP $)
Crew Size8192173173
Total Monthly Costs
(wages *1.4: includes insurance, accommodation, food)
7546074760149380492954

For comparison, a New York team working with a single TBM employs a total of 60 TBM workers, 78 support crew members and 44 management staff who split work in three shifts of 8 hours (Table 7). The labor costs of this team including wages, benefits and union fees total $593,000 per month. This number is higher than the monthly operating costs of a two-TBM operation in Istanbul with each TBM being expected to mine at a speed of up to 24 meters per day. In the construction of New York’s Second Avenue Subway’s first phase, the average speed was 12-15 meters per day. Based on these numbers, a conservative estimate says that Istanbul could build almost 18 times the length of TBM-mined tunnels that New York builds, with the money New York spends in a month:
$593,000 x 4.3 = $2,550,000 (NY team monthly cost)
13.5 meters x 22 (work days a month) = 297 meters/month (NY team mining speed)
$493,000 (Istanbul team monthly cost)
20 meters x 2 TBMs x 6 days x 4.3 weeks = 1,028 meters/month (Istanbul team mining speed)
($2,550,000/$493,000) x 1028 = 5,317 meters/month (Istanbul can build with NY money)
5,317/297 = 17.9 times (Istanbul builds 17.9 times as NY with the same money spent per month.)

Table 7. Summary of weekly wages of workers in a single TBM rail construction team in New York

Summary Table1 TBM Tunnel Crew 
(total for 3x8 hour shifts, $)
1 TBM
Support Gang
(total for 3x8 hour shifts, $)
1 TBM
Management Staff
(total for 3x8 hour shifts, $)
1 TBM
Tunnel and Surface TBM Crew Total
(total for 3x8 hour shifts, $)
Crew Size607844182
Total Weekly Costs 221000270000102000593000

On the down side, labor conditions in Turkey, in general, are inferior when compared to those in the Western world. Most teams work 8-hour shifts and TBM teams operate 2×12 hour shifts which is comparable to the shifts in Europe, but workers only take one day off every 14 days, staggering their off days in order not to slow down construction. In comparison, tunnel workers in New York are not allowed to work more than eight hours a day, unless they work 10 hours x 4 days a week (State of New York Department of Labor [SNYDL] n.d.).
According to a contractor’s engineer who has worked with French teams in Africa, the French and Turkish laborers, even when working on the same project, work under significantly different conditions. The French are hired by contracts that cover their travel expenses on top of insurance and accommodation (Personal Interview N 2021), cannot work more than six days in a row and 39 hours/week, they are paid 25% more than the base rate until the 43rd hour and 50% more after 44 hours, and can have extra days off in compensation (Personal Correspondence B 2021). The ratio of a Turkish laborer’s versus a French laborer’s monthly cost to the contractor, including food, benefits and accommodation is 11 to 18 (Personal Interview N 2021). Also, Turkish workers are rarely compensated for overtime (Personal Interview O 2021).
Tunnel excavations with a TBM costs $11-$12 million PPP/kilometer (Table 8) to the contractor, for which they will most likely bid for $13.5 to $15 million PPP/kilometer. The contractor’s tunneling costs for a twin bore line with 7-kilometer tunnels (in total 14,000 meters) are presented in Table 8.

Table 8. TBM tunneling costs from two Istanbul metro projects in 2020

 Per Meter Cost
(PPP $)
Depreciated Costs
(due to equipment share with another project)
2 TBMs19701280
Machinery Equipment
(cranes, conveyor belts, concrete and welding stations)
1075690
TBM consumption (fuel, oil etc.)1180
TBM Staff 1130
Concrete Segments3735
Grout195
Customs and Delivery570
Electrical Equipment6012
Power2100
TOTAL1201510892

Including contingency costs, shipping one cubic meter of excavated earth to a dumping ground costs $15 PPP. Based on the costs for four lines recently constructed, an average of 40.5 cubic meters of earth is excavated per meter length of TBM tunneling, the costs of which come to $600,000 PPP per kilometer of tunnel.
Turkey produces good quality cement for a low cost; January 2021 cost is $160 PPP per ton (Table 9). The cost of steel in Turkey is similar to other countries but these rates vary very little globally (Personal Interviews I and J 2020).
Unlike costs of labor and material, energy prices in Turkey are high. Electricity costs $0.5 PPP per kilowatt which is 40% more expensive than in Italy and almost 9 times more expensive than in the US. Diesel fuel, which is used for earth moving trucks, is also costly in Turkey. It is $3.08 PPP/liter, and gas (fuel) costs (as of November, 2020) $3 PPP/liter whereas it costs $0.6 PPP/liter in the US.
In Turkey, social security, income taxes, VAT and customs taxes do not constitute a serious burden on the contractor that results in a premium for project costs. The corporate taxes are 22.5%, and the VAT is 18%. For comparison, the corporate taxes in the US are 35%.

Table 9. Cement costs by country

 Cost 
(per ton)
CurrencyYearPPPReal Cost 
(PPP $)
Source
Turkey320TRY20200.5160Contractor’s cost sheet
China443CNY20210.24106(Sunsirs n.d.)
Korea75000KRW20190.00175(Tamotia 2019)
India6307INR20190.047296(Directorate of Economics and Statistics Government of Andhra Pradesh [DESGAP] 2019)
Italy108EUR20201.3140(Colacem 2016)
Spain101EUR20201.6161.6(El Instituto Nacional de Estadística n.d.)
Sweden800SEK20100.180(Fagerlund 2011)
UK124.8GDP20191.5192.6(Department for Business, Energy and Industrial Strategy (UK) [DBEIS] 2020) 
USA128USD20211128(IBISWorld n.d.)

3.2.6 Cost Overruns

The price of a project can increase based on the changes throughout its construction. This increase, however, is limited to 20% of the contract value by Turkish procurement law, otherwise it is required to be approved by the cabinet of ministers.[26] This is a lengthy process, therefore to avoid it, if a project is estimated not to be completed within the contract budget, or if the contractor foresees losing money, it finishes what it can submitting change orders totaling no more than 20% and terminates the contract in mutual understanding with the agency.[27] This usually happens gradually with the agency tracking costs through progress payments. Change orders are quickly assessed and approved because all contracts are based on itemized costs. Following the decision to terminate the initial contract, the agency opens a new completion tender. In some cases, as in the case for M4, subcontractors are rehired by the new contractor when a new company or consortium is awarded the completion tender.
In 2016, Turkey started mandating contracts and all business transactions to be carried out in the Turkish currency, TRY. This is counterproductive, because Turkey imports a significant amount of the material and equipment which make up 70-80% of the project construction costs, so the changes in exchange rates increase the costs drastically in the Turkish currency. State issued yearly inflation rates remain below the currency exchange rate increases, therefore the price adjustments the contractors are permitted to make based on these yearly inflation rates do not cover the increased costs of material and equipment.[28] This is why there is almost always a 20% change order – even though contracts specify that the exchange rates cannot be shown as a reason for change orders.
Due to recent rapid devaluations of the Turkish Lira, it is difficult for a contractor to profit from a contract based in the currency and, according to a senior engineer with international and local experience in the field, the only reason contractors undertake projects in these conditions is to gain political favor (Personal Interview I 2020). Once a contractor completes a government owned project, it is likely to establish a positive relationship and get other, more profitable jobs in the future. But if a contractor’s losses exceed 15% of the contract value due to inflation or currency exchange rate increases, because this percentage already exceeds the profit + contingency margin, the contractor will likely request the termination of the contract, finish the portion of the work they can within the budget and the 20% increase, and the remaining work will be re-tendered.

3.3 Cases

Through three case studies, we have explored existing practices and lessons learned by the Istanbul Metropolitan Municipality and the Turkish Ministry of Transportation and Infrastructure over 3.5 decades of building urban rapid rail in the city.

We selected the M4 Kadıköy-Kartal line to highlight how early projects in Istanbul struggled. M4 suffered from a chaotic preliminary design process conducted by an IMM that lacked internal capacity and experience. Major project scope revisions after the start of construction led to significant budget increases. Presenting the IMM with these challenges, the project laid the groundwork for better optimized planning phases and design outcomes in future projects.

BC1, the Bosphorus Crossing section of the 76-kilometer Marmaray commuter line, was chosen as a project with extraordinary risks which unlike other rail projects in Istanbul, was carried out with a contract based on the FIDIC Silver Book, built by an international consortium and completed after significant delays and cost overruns.[29] With capital costs only slightly higher than the average cost per kilometer among the 600+ projects in our database, Marmaray exemplifies a learning process within the lifetime of a project that steadily improved the productivity and collaboration between the multiple stakeholders involved.

M9 is a more recent line with lower rider capacity than M4 and BC1, but is considered better optimized in terms of design and construction by experts in the field, while falling within the cheapest 10% of rail projects in our database. By the time IMM started working on the line, it was armed with experience from decades of rail construction and had streamlined its planning, procurement and management processes. IMM also benefited from the advantage of working within an efficient ecosystem of industry experts in the city.

Some overarching themes we explore within these three cases are, the improvement of the internal organization and know-how in the agencies, evolution of the procurement methods, optimization of the final designs, cultivation of the rail construction industry in the city, flexibility during the stages of construction as well as the use of technology in design, management and construction.

3.3.1 M4, an Early Example

Overview

M4 is a fully underground, double track urban rapid rail line on the Asian side of Istanbul, with Kadıköy as the western terminus, a residential and commercial district along the southern coast of the city that provides important transit connections to the European side via ferries, the Eurasia tunnel and an interchange station with the Marmaray commuter line (Figure 11). Once the line reaches Acıbadem, it follows the D100 (E5) highway and was planned to reduce the heavy motor vehicle traffic load of this busy transit route.[30] As part of its fourth phase of construction, the line is currently being extended to the Sabiha Gökçen Airport which is a hub for domestic flights on the east side of the city. Our study focuses on the first phase terminating at Kartal and includes 16 stations in the span of 21.7 kilometers. With 180m long platforms, the maximum capacity of the system was planned as 70,000 passengers per hour per direction.

We studied M4 to understand the planning and management processes during the early years of rapid rail construction in Istanbul. Additionally, M4 is unique in that it saw extensive changes to its project scope, normally a red flag. The agency and contractors, however, managed these changes and major technical challenges all while keeping the new budget below the 20% allowable cost increase limit following a second construction contract.

Istanbul M4 Map

figure 11. M4 Phase 1, Kadıköy – Kartal Metro Line

The first of the key lessons from M4 is that, the role of the planning and design process preceding the construction tender is critical for equipping the agency with the necessary information to manage the project effectively throughout construction. Without a well-established preliminary design process that would allow the IMM in later projects to develop a thorough understanding of the design, produce a well specified construction tender package and keep contractors in check, M4 ended up with over-designed elements and a massive increase in its budget. We also saw that the later re-organization of the IMM through the establishment of the Rail System Projects Directorate, and the streamlining of the initial design process were pivotal in increasing the agency’s productivity in the many years of rail building to follow. Lastly, the flexibility and collaboration between the agency and contractor during construction, which for M4 facilitated the decision to drill and blast tunnels that were initially planned to be built by TBMs, are aspects that we would like to highlight as beneficial to Istanbul projects, as they speed up processes and consequently, reduce costs.

Timeline and Financing

M4 was initially conceived as a tram line during Erdoğan’s term as mayor of Istanbul, between 1994 and 1998 (Table 10). A 22 kilometer right of way was planned which would run from Harem through Kadıköy, and follow the D100 (E5) highway all the way to Tuzla, a district in the southeast of Istanbul. The section between Acıbadem and Kartal was to be constructed at-grade in the highway’s median. However, due to D100 being the only highway serving the international highways network in Istanbul until the TEM highway was built to relieve its traffic, D100’s right of way belonged to the central government. In 2002, the General Directorate of Highways handed over the right of way to IMM, removing a key obstacle to building M4.

In 2004, Mayor Topbaş announced that the IMM had considered asking the Ministry of Transportation under the central government to run the project, but IMM changed its mind and decided to build it through a PPP in order to speed up the process, also mentioning that it was considering making it an elevated line (Türkiye Gazetesi 2004; Wowturkey n.d.). All major deviations from the initial conceptions regarding the line, no official plans were disclosed for any of these statements in the days to follow.

Plans changed again as M4’s terminal was shifted from Harem to Kadıköy to integrate it with the Marmaray Commuter Rail line at Soğütlüçeşme. Following this decision, M4 was planned as a light rail with the Acıbadem-Kartal section at-grade, as was initially conceived, with 3.3 kilometers of bored and 2.5 kilometers of cut-and-cover tunnels from Kadıköy to Acıbadem (Ocak 2006). The tender was announced in December, 2004, and within one month, the contract was awarded to Yapı Merkezi-Doğuş-Yüksel-Yenigün-Belen İnşaat consortium (the “Anadoluray Group”), for $225 million PPP. Construction began in February 2005.

Construction projects move quickly in Istanbul. It’s common for construction to begin within a couple of weeks to three months after awarding the contract, even as the contractor’s design process is underway.[30] This overlapping process of design and construction can lead to missteps that require revisions during construction. During the construction of M5, the contractor had already bored the piles for one of the stations when the agency decided that the station needed to be one story smaller, so the station was built with deeper piles than necessary (Personal Interview G 2020). In the case of M4, the nature and number of changes that followed the start of construction were drastic.

Table 10. M4 Timeline (Metro İstanbul n.d.). Contract values retrieved from various media

DateItem
1994-1998An early study of the route is carried out during the office of Mayor Erdoğan. The central government owning the right of way of the central traffic island between Acıbadem and Kartal poses a problem for the at-grade section to be constructed by the IMM. 
2002Protocol signed between IMM and the General Directorate of Highways handing over the central traffic island between Acıbadem and Kartal to IMM. 
2004-04-01Kadir Topbaş becomes Mayor.
2004-12-30First tender with a scope of 5.6 kilometers underground and 16 kilometers at grade light-rail line.
2005-01-28Contract signed with Yapı Merkezi-Doğuş-Yüksel-Yenigün-Belen İnşaat consortium for $225 million PPP.
2005-02-11Construction works start.
2008-01-14Tender for the completion of Kadıköy-Kozyatağı section, the construction of Kozyatağı-Kartal section both fully underground and electromechanical works of the whole metro line. 3 offers received. Best offer by Astaldi–Makyol–Gülermak ($1.6 billion PPP).
2008-03-06New contract signed with Astaldi–Makyol–Gülermak. Deadline: 1460 days (4 years).
2008-03-21New contractor starts construction.
2008-05-05Tender for rolling stock of metro line. 30 sets, each with 4 cars, 120 cars in total. Delivery in 1200 days.
2008-06-30Agreement for the funding of the 1.6 billion PPP construction fee was finalized between the IMM and a group of local and international financial institutions led by Fortis, SACE, and WestLB.
2009-07-142 offers to rolling stock tender, CAF and Alstom. Best offer by CAF ($330 million PPP).
2009-09-09CAF is awarded the rolling stock contract.
2022-03-12Signaling is completed on the line.
2012-04-06Total number of cars increased by 20%, reaching 144 in total.
2012-05-08Test runs start.
2012-08-17Service starts (the second construction contract was closed at $1.9 billion PPP, with a 20% increase).
2012-08-3The delivery of all 36 train sets completed.

After M4’s construction began, the owner agency Istanbul Electric Tramway and Tunnel Establishments (İETT), made a decision to upgrade the line to a fully underground, heavy-rail line. IETT believed that managing D100’s traffic during construction, an international freeway at the time, would cause congestion, create conflicts with local residents, and delay construction, and lead to major cost overruns. Once construction was completed, the planned LRT was slated to use one of the highway’s travel lanes, which would reduce the road’s vehicular capacity and exacerbate the already congested conditions. Additionally, a heavy-rail system which the travel demand analyses justified, would provide a capacity of 60,000 to 70,000 ppl/hr/direction, more than three times that of an LRT’s 20,000 ppl/hr/direction (Ocak 2006).[32]

The scope of the first contract had involved a 21.6-kilometer LRT line with 16 kilometers of its length at grade, while the new plan was to build a fully underground line with heavy rail capacity. This enormous scope change meant that a considerable increase in the budget was inevitable. A law that had gone into effect in 2003 required that any cost overrun for public projects greater than 20% of the contract value would have to be approved by the central government. While the budget for the new project would far exceed the 20% limit, the central government’s approval process was feared to be burdensome and lengthy. Instead, it was decided to keep the initial contractor doing part of the work while opening a new tender to complete the sections of the construction that would remain.

The initial contractor, Anadoluray Group re-submitted an estimate of $288 million PPP and redefined their scope; it would only cover the nine kilometers section of the tunnels from Kadıköy to Kozyatağı and the civil works for seven deep-tunnel stations. The work was completed slightly under budget in 2010. In the meantime, the new tender carried out in January 2008 for the remaining works was won by Astaldi–Makyol–Gülermak (the “Avrasya Consult”), for $1.6 billion PPP, in March.[33] The tunnels were completed in October 2011, the signaling system installation in March 2012, test runs were carried out in May 2012, and the line started service in August 2012. The second contractor completed their work with a cost increase that was just under the permitted 20%.

The IMM secured the funds to finance M4’s second construction contract of 1.6 billion PPP through a funding package agreement finalized in June 2008. Led by the international financial institution Fortis, the Italian Export Agency SACE and the German Bank WestLB, the group of funders included Calyon, Dexia/Deniz Bank, Vakıfbank, Depfa Bank, ABN AMRO, Societe Generale, Unicredit Corporate Banking, Black Sea Trade and Development Bank, Mcc- Mediocredito Centrale (Globe Newswire 2008). $1.1 billion PPP of the sum was provided in the form of commercial credits (international loans) to be paid back with a 2.2 + Euribor interest rate in seven years after a three-year grace period. The $490 million PPP was loaned as export credits (local) and would be paid back in 10 years following a grace period of four years (Arkitera 2008).[34]

The indecisions in the planning and management persisted until the second construction contract was signed in 2008, and extended the duration of the project by three years. The following four-year timeframe within which a majority of the construction was completed was a very fast-paced construction process.

Scope and Contracts

The two contracts involved the construction of a fully underground, 21.7-kilometer line from Kadıköy to Kartal with 16 stations, each having cut and cover mezzanines and tunneled platforms, as well as an underground maintenance and storage yard. A third tender was opened for the completion of the Ayrılıkçeşmesi station, part of which had been built within the scope of the connecting line, Marmaray’s construction. The total cost of the line ended up $2.2 billion PPP or $102 million PPP/kilometer. Tables 11 and 12 show the details of the scope and contracts.

Table 11. M4 Scope. (İBB n.d.; Uysal 2016; Railway Gazette 2012; Rail Turkey En 2012; Indian Railway Stations Development Corporation Limited [IRSDC] N.D).

ELEMENTSCOPE FEATURES
Guideway• M4 new rapid transit line• Single line
• Completely underground system
Track• 21.7 kilometers double track + additional tracks for depot and maintenance area connections• 54 kilo/meter UIC 54 (54E1)
• 1,435 mm gauge
• Switches: 42 main line, 12 depot and workshop, 3 rail crossings
Switch Type: R: 300 m 1 / 9 type (Main line), R: 100 m 1 / 6 type (Workshop and Warehouse)
• Gradient: 4%
• Lucchini and Voestalpine rails
• Pandol fastenings
• ABB switchgear and transformers 
New Stations• Kadıköy
• Ayrılık Çeşmesi
• Acıbadem (100% Deep tunnel)
• Ünalan
• Göztepe
• Yenisahra
• Kozyatağı
• Bostancı
• Küçükyalı
• Maltepe
• Huzurevi
• Gülsuyu
• Esenkent
• Hastane-Adliye
• Soğanlık
• Kartal
• 16 new underground stations
• All platforms are 180 meter long, for 8 car operation and built with side platforms.
• Bostanci Station: Additional track with 2 side platforms
• Maltepe Station: Depot and maintenance area constructed as two parallel tunnel structures.
• Esenkent Station: Main control center
• Total entrances: 52
• 264 escalators
• 70 elevators
• 315 turnstiles (29 wheelchair accessible)
• A minimum of 90,000 cubic meter excavation was done for each station
Tunnels• 21.7 kilometers main line twin tunnels and station tunnels constructed using TBM and NATM techniques• 6.30-meter diameter, and 5.70-meter inner diameter (as in majority of lines in Istanbul).
• Total Single Line Tunnel Length: 43,326 m
• 2 EPB-TBMs: Kadıköy - Kozyatağı 
• 2 TBMs: Kozyatağı - Kartal
• NATM: Station tunnels (2 or 3 x 240-meter platform tunnels), connection and crossover caverns of 13 kilometers length.
• Max. Depth: 40 meters (Bostancı ve Huzurevi Stations)
• Min. Depth: 28 meters (Ayrılıkçeşme ve Hastane – Adliye Stations)
Systems• Overhead Catenary
• CCTV
• Thales SelTrac® CBTC (Communications-Based Train Control) and ICS (Integrated Communication and Control systems).
• The main control center (OCC)
• 1,500 V DC
• 1,281 camera system
• Moving block system signalization
• Driverless operation
•  Includes traffic and storage, SCADA and ECS, communication, and supervisor sessions.
Support Facilities• Maintenance and depot• Maltepe Station (between Maltepe and Huzurevi stations):
- Heavy maintenance area capacity: 2 sets of 4 cars
-Maintenance area capacity: 2 sets of 4 cars
-Depot area capacity: 9 sets of 4 cars
-Additional depot area capacity: 4 sets of 4 cars
-Total: Capacity for 17 sets of 4 cars.
Vehicles• (36) x 4• DC Supply (Battery): 110 V DC
• Traction Motors: 4 pole AC motors
• Train Length: 90 meters (trains run as single sets of 4 cars or in double sets of 8)
• Vehicle Height: 3.5 m
• Vehicle Width: 3 m
Planning, Design and Management Issues

The first phase of M4 encountered several setbacks early on in its timeline due to the lack of a well-developed preliminary design document. This had to do with the ongoing restructuring process of the managing authority of the rail projects in the city, and the nonexistence of a streamlined and established procurement process. The line went from an initial design of a light rail with the majority of its length at-grade, to a 100% underground heavy-rail project. Additional contractors were hired, the timeline almost doubled, and the budget increased by 900%. Moreover, both the stations and the tunnels were over-designed with larger technical spaces than those in later heavy-rail projects, built after the agency started procuring the final design documents from prominent design and engineering firms.

M4’s phase one was completed before the Rail System Projects Directorate under IMM was established in 2014. The initial planning and construction works of the line were managed by the owner agency İETT, a department under IMM that was charged with running Istanbul’s large bus network and building and maintaining trams and funicular lines.[35] By the time the decision was made to convert M4 to a fully underground heavy rail line, the Rail Systems Directorate under the Transportation Department of IMM had taken over the project, which later in 2012, would be reorganized as a separate department under the IMM. Only in 2014 would the department dedicate a team to the preliminary planning and management of the procurement processes for the rail lines, structured as the Rail Systems Projects Directorate.

Without a dedicated team conducting M4’s early planning, a detailed final design document was not available to the agency when preparing for either of the construction tenders.[36] Avrasya Consult, which was awarded the second contract after the major scope revision, hired experienced design firms to design the stations, the local Prota, and the tunnels, the Italian Geodata. However, without a binding final design through which the agency would oversee the contractor’s design decisions, M4’s stations ended up with a generous allocation of spaces and tunnels that were over-reinforced, inevitably increasing material and labor costs. Once established, the Rail System Projects Directorate would start procuring preliminary design documents at 60% design from professional design offices through tenders. Referred to as “final project for application”, these documents have informed feasibility studies and afforded the agency better control over projects to this day (Personal Interviews A, C, D 2020 and Y 2021).

Station design was a major cost driver in M4’s Kadıköy-Kartal phase. When we compare M4 with more recent lines, we can see how stations have been optimized through the size and configurations of mechanical spaces. In M4, the fan rooms and the additional mechanical spaces organized around them are located in cut and cover structures above the platform levels. Starting with M5 Üsküdar-Çekmeköy’s stations, the fan rooms were located in between the platform tubes at the platform level within shorter NATM tunnels. In M5, this configuration applied to 11 stations saved $14,2 million PPP on construction and $72 million PPP in land acquisition costs, as well as an estimated year of going through the more onerous land acquisition processes that would have been required for the larger cut-and-cover structures (Namlı 2017). The fan rooms, generally constituting the largest technical spaces in station structures, were as big as 200 to 240 square meters in M4, whereas they shrunk down to 80 to 140 square meters in the newer projects. Moreover, we see bespoke designs for each station in M4, rather than the almost identical configuration of these spaces in more recent stations. Such an established, repeating design implies a faster design process, which presumably saves additional time and money.

Rapid rail designs have evolved over time to have more generic stations and better customized tunnels in Istanbul. However, İstanbul has not approached the level of optimization achieved in Copenhagen and German cities that have opted for a performance-based design approach that allows them to reduce the number and capacity of ventilation fans, and scale down the associated mechanical spaces based on performance tests (Personal Interviews R and S 2021).[37] Turkey, similar to the US, follows a prescriptive process, where legislation and contract specifications determine the material, size and configuration requirements of spaces that will ensure safety in case of emergencies such as fire and earthquakes. What is more limiting and expensive, from a capital cost perspective, for Istanbul is that it has not managed to reduce station volumes by building shorter platforms, like Copenhagen, Milan, Turin, or Brescia.  In these cities, by contrast, they maintain high passenger volumes in smaller stations by increasing service frequencies, such as trains every 90 seconds during the peak period. Istanbul, on the other hand, builds stations with long platforms to accommodate longer trains to meet growing travel demand. M4, like the rest of the lines Istanbul groups as Metro 1, has 180-meter-long platforms.[38] Hence station designs cannot be optimized to the extent that shorter platforms would allow.

Similarly with most subway stations in Istanbul, M4 stations can be considered bare-bones in terms of architectural features and finishing works. Architects who have worked on rail projects in Dubai and Warsaw point out the contrast between the embellishment and craftsmanship visible in rail stations in those cities with the blandness of Istanbul’s (Personal Interviews P and X 2021). This is a conscious choice on the agencies’ part, however; IMM and the Ministry of Transit prioritize building more lines, faster and more cheaply ahead of spending money on star architects or expensive art work like in New York and Naples. They utilize a standardized set of plain finishing materials in stations, and designate wall spaces for generic art.

Construction

The primary takeaway from M4’s construction is that speed saves money. Due to the challenges in the initial planning and contracting phase which began in 2005, M4’s construction progressed slowly until March 2008. Nevertheless, the 21.7-kilometer line was completed within the following four years, hence M4 has one of the fastest construction timelines in the history of urban rapid rail construction in Turkey (Figure 5). While certain forgiving working conditions contributed to speeding up construction, the key element that facilitated the rapid completion of the line was the mutual openness and adaptability to change exhibited by the IMM and the contractors. By changing the alignment and modifying tunneling methods, the contractors had to reallocate labor, material, equipment and work schedules.

With construction already delayed due to major design modifications, the agency wanted to proceed as swiftly as possible after the second construction contract was finalized. Three key decisions made in collaboration with the contractor over the months to follow, saved the project a total of 11 months (Sabuncuoğlu 2011). First, in the time that the contractors were waiting for the TBMs to arrive from Germany, they started building the tunnels by drilling and blasting (or the NATM method). Second, they changed the construction schedule to employ the NATM method more extensively, including in segments that were initially planned to be built by TBMs, even after the TBMs arrived (Table 13). Third, they utilized as many as 13 shafts and excavated at up to 17 locations simultaneously within the eastern 14 kilometers of the line in order to surpass TBM speeds and complete the construction quickly.

Table 12. M4 Contract Costs

ContractorScopeCostYearPPP $Total with Overruns
Yapı Merkezi-Doğuş-Yüksel-Yenigün-Belen İnşaatKadıköy-Kozyatağı tunnels and civil works for the 7 deep tunnel station structures.$140 M2005$225 M$288 M
Astaldi–Makyol–GülermakKadıköy-Kartal construction and electromechanics tender.€750 M2008$1.6 B$1.9 B
Haydar SezerAyrılık Çeşmesi Station completion tender (Kadıköy-Kartal phase).₺19.5 M2012$19 M
CAFRolling Stock €138 M2009$330 M
(30 sets of 4 cars)
Total Construction$ 2,2 B PPP
Total Rolling Stock$330 M PPP

Circumstances favored the strategies used to speed up construction after the second contract went into effect, but the agency and the contractors also deserve credit for making the right calls. Blast drilling can be a rapid tunnel excavation technique when the soil conditions are right, but a major concern is its environmental impact such as the noise, vibration and dust along the alignment. The current law in Turkey requires permits for the blasts, and mandates a work window of 8am-11pm which restricts construction schedules, but this was not the case during M4’s construction; moreover, M4’s construction took places adjacent to residential neighborhoods. The agency and the contractor informed the public and managed the PR successfully so work continued day and night without facing serious opposition from local residents (Personal Interview M 2021). Interviewees with international experience noted that this kind of flexibility was unique to Turkey (Personal Interview D 2020 and AB 2022).

The flexible and collaborative approach adopted by the agency and the contractor during M4’s construction remains a strength of the Turkish rail industry to this day, but the most significant improvement in construction speeds came from the rapid adoption of technology and increased knowledge of tunneling techniques in the years to follow.

Today, TBM tunneling is preferred over NATM due to the easier access and declining costs of TBMs as well as their faster excavation rates.[39] This improvement was possible thanks to a steady pipeline of projects in Istanbul and Turkish firms’ rapid adaptation to new technology. In the early years of tunneling, the TBM personnel learned from the Italian, German and Danish supervisors that were hired to train TBM operators. But within the next decade and a half, they gained extensive experience through several rapid rail projects built in the city, with an average length of 15 kilometers and more than 99% of their length tunneled. Commonly, with the exception of stations, platforms and switch tunnels, all subway tunnels in Istanbul are built by TBMs while platforms and switch tunnels are built using NATM. Since Istanbul has hilly terrain, most stations in the city end up 30-50m deep, making stations with tunneled platforms cheaper and more practical than completely cut and cover stations, which require costly excavation support and backfilling.

Similarly with other areas of rail construction in Istanbul, there has been a learning curve in the way contractors procure and operate TBMs. In the construction of the 12-kilometer M1B line which was the first rail line built using TBMs, and which started tunneling in 2006, the contractors were recommended to use a specific type of TBM from the German manufacturer Herrenknecht. These machines required cutter head changes every 6 kilometers, as that first section of the soil was sand/silt clay and the remaining was limestone. The contractors later learned that they could use mixed-design cutterheads suitable for both soil types under such conditions and have adopted these in their recent projects instead. In addition to Herrenknecht, Turkey has purchased TBMs from Terratech, CRCHI, Lovsuns Tunneling and Robbins. Furthermore, they have adopted more efficient TBM-related logistics by embracing multi-service vehicles (MSVs) and belt systems to deliver injection material and remove spoils rather than using train systems.

In the last 10 years, 15 rapid rail construction contracts have been awarded to firms in Istanbul alone, and a majority of these to consortia of two or more contractors, which makes it profitable to invest in expensive technology such as purchasing TBMs. With the exception of the Bosphorus crossing, all lines are designed for standardized external tunnel diameters of 6.3 meters, so that the same TBMs can be used across projects. Most tender specifications require firms to acquire four, six or more TBMs, and longer lines mean going through multiple soil conditions so construction firms prefer to buy TBMs suitable for all types of geology found in Istanbul.

Turkish contractors bring down TBM costs by purchasing second hand machines and rebuilding them,[40] as well as utilizing the same TBMs in concurrent projects. The cost for each rebuilt TBM in a recently constructed twin bore rapid rail tunnel project was $21 million PPP (Personal Interview T 2021) whereas if these were bought new from Herrenknecht, they would cost $40 million PPP. According to a tunneling engineer we spoke to, the complementary parts, such as the gantry, pipes or cuffs, can be used second hand without the risk of compromising speed, safety or quality of work, while it is preferable for the main gearbox that rotates the cutterhead to be new (Personal Interview T 2021). TBM motors could be reset at the manufacturing company with a 100% warranty, and cost $5.5 million PPP for a $22 million PPP TBM. Costs of equipment can also be shared across projects. One contractor who is simultaneously running two rapid rail projects in Istanbul saved 35% on TBM purchasing costs; 40% on machinery equipment like conveyor belts, gantry cranes, concrete and welding stations and 80% on the costs of electrical equipment (Table 8).

While the TBMs became much more accessible, the market for other construction equipment also grew in Istanbul since the construction of M4. One of the challenges in the construction of M4 was building the Kadıköy Station. The structure was designed with cut and cover mezzanines and tunnel platforms that are 32 meters below ground. It was located under a late Ottoman era historic building used by the Kadıköy Municipality. The geology at the excavation site was difficult to work with, having a variety of soil types: sand, sandy clay, highly weathered rock and rock. Along with three shafts that had to be built to speed up the construction, diaphragm walls were required to keep the water out, as the station was very close to the sea. At the time of the cut and cover section’s construction in 2009, equipment used to build diaphragm walls were scarce, so the contractor had only two options for where to obtain them (Personal Interview B 2020). Nowadays, this equipment is easily available and so the costs have come down.

Lessons Learned

M4 suffered from major cost increases and delays due to serious design changes in the early years of its construction. Nevertheless, at $102 million PPP/kilometer, the line ended up among the cheaper lines in the history of Istanbul’s heavy rail construction.[41] While the project benefited from both the agency’s and the contractor’s flexibility to adapt rapidly to changes, saving time and money, we can tell that costs could have been even lower, if the overdesign of the stations and tunnels were avoided. Our understanding is that the setbacks during the planning phase, the inexperience of the agency and the relatively recent establishment of the rail construction industry in the city took away from what could have been a much more efficient and cheaper project delivery process. As the agency re-organized, expanded and gained experience over the following years, robust preliminary design processes were established, helping to avoid cost increases due to overdesign and extensive design changes.

In hindsight, experts from the agency and design firms realized that the station-technical spaces were too large and the tunnels were over reinforced. These elements of over design have been attributed to the agency’s inexperience with rapid-rail transit procurement and project management. A preliminary design document was not procured, the alignment decisions in the internally prepared design were based on limited information regarding geology and station locations had to be revised after the tender.

The tender documents were also underdeveloped; they lacked sections and specifications that were to be added in the documents of the later projects. The missing sections include an attached geotechnical report based on ground surveys and lab tests, and those concerning public content and safety, rain and ground water drainage systems, testing and protection of existing buildings within the impact area, geomonitoring equipment requirements as well as protection of existing greenery and landscape design. Our understanding is that the costs incurred from additional work required to make up for the errors or shortcomings resulting from the lack of information on these issues were avoided in the later projects through the addition of these specifications.

Preliminary design, planning and tender processes improved and project designs were better optimized in the years that followed M4’s construction. Specifically, the Rail Systems Department, tasked with planning, procuring, and managing construction became independent from the İETT. Then it was split into European and Asian side regional departments, and later, a new Projects Directorate office was created to manage preliminary planning. By revamping the Rail Systems Department based on experiences in the field and a growing pipeline of projects, it found the right balance between inhouse and outsourced capacity. More experts were hired under these new administrations, and the total headcount grew to 251 staff members today, with 117 at the Asian side branch office, 107 at the European side branch office, and 27 at the Projects Directorate (Personal Correspondence C 2022). From these offices, IMM now appoints an on-site control team of approximately 10 experts for each project, consisting of architects, engineers (civil, mechanical, electrical, mining, geological, geophysical, signalization), and, where needed, archeologists. The Rail Systems Department has also established specialized teams for design and procurement as well as for BIM.

The agency made up for lost time in the earlier phases of M4 by being flexible and allowing the contractors to pursue their preferred means and methods, such as switching from TBM to NATM tunneling methods to speed up construction. Ultimately, this approach saved both time and money. While the planning challenges in the early stages of the project led to a slow start, once the final decision was made to build a subway rather than an at-grade LRT, tunneling progressed rapidly between 2008-2012, and the 21.7-kilometer line was completed at a record rate. This was also possible due to a lack of restrictions for blast drilling near residential and commercial zones at the time. Mitigation measures have grown more restrictive over the years.

3.3.2 Marmaray, the Perfect Storm

Overview
Marmaray Map

figure 12. Marmaray Commuter Line’s Bosphorus Crossing Phase

To this day, Marmaray is recognized as one of the most ambitious transit projects in the history of Turkish rail construction. While the complete 76-kilometer rail line was designed to accommodate commuter, high speed, main line and freight service, in this case we focus on the 13.6-kilometer Bosphorus Crossing Phase (BC1) (Figure 12). The project presented extraordinary challenges; the scope included a 58-meter-deep immersed tube tunnel to be assembled under the seabed, the right of way was situated in a seismic zone and extensive archeological sites were uncovered at all four of the station sites, some going back as much as eight thousand years. We selected Marmaray’s BC1 because at $228 million PPP/kilometer, its cost remains lower than 30% of the projects in our database despite the state-of-the-art technology implemented in its construction, the multiple challenges that were faced and archeologically-driven schedule delays that doubled its timeline.[42]

Politics played a key role in structuring the project-delivery design of this megaproject. The Japanese financiers required the project be delivered using the FIDIC Silver Book (a lump sum, turnkey, Engineering, Procurement and Construction contract template) and the selection of a Turkish-Japanese consortium as the contractor. Unlike the Design-Build contracts utilized in the procurement of most of the rapid rail lines in Istanbul, BC1s’s contract specified stringent HSE and quality standards and transferred a greater responsibility and risk to the contractor. The contract set high standards and predefined management solutions that benefitted the project in the long run, but also raised the costs significantly. On the other hand, unlike most metro lines in Istanbul that are owned by the IMM, Marmaray was owned by the General Directorate of Railways, Ports and Airports Construction (DLH) under the Ministry of Transportation of the central government.[43] This meant that the budget increase and time extension approvals could be expedited and the project wasn’t subject to conflicts between the local and central governments.

The archeological discoveries made during the excavations of the project changed the known history of Istanbul, but also more than doubled the construction timeline of the complete Marmaray project. The initial schedule of BC1 entailed completing a 1.4-kilometer immersed tube, 10.1 kilometers of twin bore TBM tunnels and four underground stations by 2009. The project was completed in 2014. The works for the remaining 63-kilometer section separately contracted as CR1 was to be completed by 2012, and included converting two existing commuter lines Halkali-Sirkeci and Haydarpasa-Gebze from 2 to 3 tracks, with the new one to serve high-speed intercity trains. CR1’s contractor, a joint venture between Alstom, Marubeni, and Doğuş, terminated their contract due to delays in the handing over of the site, likely as a result of complications related to archeology (Personal Interview H), and disagreements with DLH, which led to an arbitration process that finalized with the contractors losing approximately 50% of their bank guarantees (Alstom 2019). This section was re-contracted as CR3 to the joint venture between OHL and Dimetronic, and started service in 2019, with a seven-year delay in the initial timeline.

The mix of traffic along the line makes its signaling more difficult than a regular urban rapid-rail line. The line’s three tracks throughout the right of way merge into two along the 13.6-kilometer BC1 section. The commuter trains have 8- and 15-minute headways, and serve 142 trips a day in each direction adding up to 285 trips a day in total. As of August 2021, the high-speed rail service runs seven trains in each direction between Halkalı (European side of Istanbul) and Ankara, and three in each direction between Halkalı and Konya daily. The rest of the high-speed trains stop at Söğütlüçeşme on the Asian side, where a connection is available to Söğütlüçeşme Marmaray service for crossing to the European side. The freight trains have been operating on the line since May 2020.

Lessons learned from this project concern the power of political will, the management of archeological discoveries during underground rail system construction and the importance of selecting contractors and consultants based on their experience with the chosen contracting method:

  • First, because the central government championed Marmaray BC1 as a nationally important project that would have a positive impact on congestion, elected officials supported the project even as costs and timelines doubled. This highlights the significance of support from policymakers.
  • Second, the lack of a detailed survey of the station sites prior to the construction tender impeded preliminary planning that could prevent delays caused by the archeological remains discovered during the excavations. The station designs and even the right of way could have been redesigned to avoid conflicts with archeology.
  • Third, the contractor’s outstanding efforts to communicate with the conservation committee regarding the management of archeology helped expedite the processes and make up for some of the delays.
  • Finally, as we saw in our Green Line Extension case, due to the lack of experience with the contracting method, in this case the FIDIC Silver Book, both the agency and the contractor were slowed down following specific procedures, consequently increasing costs. Ideally, the contractor, and if not, the consultants should be knowledgeable about the specific type of contract intended to be utilized in construction projects.
Timeline and Financing

Marmaray’s history goes back to the later years of the Ottoman Empire. In 1892, Sultan Abdülmecid II hired French engineers to design a tunnel connecting the two banks of Istanbul (TCDD Taşımacılık n.d.). While the project was never completed, the plan proposed building a tunnel supported by columns driven into the seafloor (Figure 13). Nearly 100 years later, in 1987, President Turgut Özal commissioned the first feasibility study which analyzed alternatives and determined the current right of way.

Early depiction of the Marmaray Tunnel

figure 13. One of the earliest depictions of a tunnel crossing the Bosphorus (Marmaray Hakkında n.d.)

The project was put back on the agenda in 1999, when an advance loan agreement was signed between the Turkish Undersecretariat of Treasury and Japan Bank for International Cooperation (JBIC) for $234 million PPP (¥12.5 billion), $63 million PPP (¥3.371 billion) of which was to be spent on the CM contract and $171 million PPP (¥9.093 billion) on building the Bosphorus Crossing (Table 14). This agreement required that the CM and construction contracts of BC1 follow rules established by the Japan International Cooperation Agency (JICA). This meant that only firms from countries on Japan’s list of Official Development Assistance Countries were permitted to bid on these two tenders and all critical stages of the tender and the contracts were to be overseen by JBIC.[44]
Also, the maintenance and operation of the line following the completion of the project was to be carried out by a Project Implementation Unit created by the Ministry of Transport, Maritime and Communications (Turkish Ministry of Transport, Maritime and Communications [TMTMC] 2013).

A CM contract worth $66 million PPP (¥5.5 billion)[45]
was signed with Avrasya Consult consisting of Oriental Consultants from Japan, Yüksel Proje and Japan Railway Tech Service on March 14th, 2002, after which specifications, contract drafts, feasibility studies and tender documents were prepared. After the CM contract was signed, deep water drilling for tests began. On June 6th, 2003, BC1 tender documents were delivered to the pre-qualifying contractors and their offers were received on October 3rd. The contract was awarded to the Japanese-Turkish joint venture TGN on May 9th, 2004.

Table 13. Planned vs actually employed NATM and TBM/EPB tunneling methods for the section starting from the 13.7th kilometers to the end, studied by Öz (2012)

 TBM (all values indicate twin boring)NATM
Initially Planned Km 3+820 - Km 8+ 520 (4,7 km EPB)
Km 8+520 - Km 21+690 (13,17 km TBM)
Remaining tunnels except for a few cut and cover station sections 
Actual ConstructionKm 3+620 - Km 8+450 EPB/TBM (4,8 km)Remaining tunnel sections except for the platform tunnels which were built with cut and cover. (16,9 km - C&C sections)

Initial excavations for the archeological surveys started in June, 2004, at the Üsküdar station site. In February 2005, the negotiations between the Treasury and JBIC on an Official Development Assistance (ODA) loan was finalized and a 40 year-term, 0.75% interest rated loan of $1.4 billion PPP (¥98.7 billion) was granted to Turkey for the Marmaray Project (TMTMC 2013).

Soon after the beginning of excavations, remains of houses and market gardens from the Ottoman and Byzantine periods were revealed. The most stunning discovery however, was the 58,000-square-meter archeological site uncovered in Yenikapı which had been designated for the construction of both the underground stations of Marmaray and M2 metro line’s extension between Taksim and Yenikapı. By the time the Marmaray excavations were completed in June 2009, 34 shipwrecks dating back to the 11th century confirmed the theory that the area had been a Port of Theodosius in the Byzantine Empire. An early Byzantine church and part of Constantinople’s first city walls had also been discovered (Boninin Baraldi et al. 2019). The tunnel excavations could not begin until December 2009. M2’s excavations had also revealed a Neolithic-period village dating back to 6000 B.C and the station construction couldn’t start until June 2012.

By April 2009, which marked the end of the initial 56 months, there had been serious increases in material and equipment costs due to inflation as archeological discoveries had delayed work schedules extensively. Within this timespan, only the immersed tunnels had come close to being completed. The Japanese contractor Taisei wanted out unless the contract was amended or renewed. In January 2010, a cost escalation executive order was passed by the approval of the prime minister, a first in Turkey. The contractors added a percentage to all item costs and through this, could retract several of their claims. The Chief Representative of JICA, who had been involved in the project since 2001, emphasized the significance of this decision for the project and issued the following statement, “If the Turkish parliament had not approved the increased construction contract amount to accompany delays from the historical ruins survey, construction might have been interrupted” (JICA 2014).

In November 2010, a third loan agreement of $783 million PPP (¥42.08 billion) was signed with JICA with the same interest rate and payment conditions as the previous agreements; with a 40-year payback timeline, a 10-year grace period and a 0.75% yearly interest rate. Our estimate for the total cost of financing including the interest and fees for the BC1 loans from JICA add up to 20% of the total loans or $430 million PPP, based on the evaluation of the loan conditions by a financial expert specializing in international infrastructure investments (Personal Interview W 2021).

CR3 was financed by the European Investment Bank (EIB) with a €650 million loan granted in two installments: $447 PPP in 2004 and $958 million PPP in 2006. An additional loan of $472 million PPP was granted by the Council of Europe Development Bank (CEB) in 2008. Later, the total value of loans granted by CEB to the project reached $1.7 billion PPP (Council of Europe Development Bank [CEB] n.d.).

Scope and Contracts

DLH, under the Ministry of Transportation, awarded the construction contract to the TGN consortium through a tender. GN built the stations and the Yedikule (Kazlıçeşme) -Yenikapı 2.2-kilometer twin tunnels using a single EPB TBM, Taisei undertook the rest of the tunnel construction including two 8-kilometer twin-bore tunnels built by two slurry TBMs, as well as the immersed tube tunnel of 1.4 kilometers crossing the Bosphorus Strait (Figure 14). Ayrılıkçeşme station was partially constructed within this project’s scope, and partially through the M4 Kadıköy-Kartal line’s contract. The signaling system was within the scope of the CR3 Commuter Rail Infrastructure and Systems Contract, and together with the Automatic Train Protection systems cost $470 million PPP. Undertaken by Invensys Rail Dimetronic, CR3 also included the systems for the 63-kilometer commuter tracks (See Tables 15 and 16 for BC1s scope and contracts).

Marmaray Tunnels Drawing

figure 14. BC1 tunnels drawing from Emergency Ventilation Systems Cold Flow & Cold Smoke Tests (Tabarra and Özince 2015)

Even though a lump sum pricing model requires the contractors to bid high to be able to bear the general risks, due to BC1 being a project of national significance, a standardized, Engineering Procurement and Construction contract template outlined in the FIDIC Silver Book was utilized to ensure a smooth project delivery. However, this was a first for the use of a FIDIC Silver Book based template, and it wasn’t utilized afterwards, due to the extensive risks placed on the contractor and the increased costs arising from the contract requirements. An example of these risks that the Silver Book assigns to the contractor is unforeseeable ground conditions. In the case of Marmaray BC1, DLH was the responsible party for the costs related to the archeological findings which were the primary reason for severe delays and cost increases. Nevertheless, the contractor lost between $180 and $280 million PPP due to the contract protecting the agency against the majority of the risks including cost increases arising from delays and other complications (Personal Interviews K 2020, and M 2021).

The use of FIDIC standards was mandated by the credit-granting institution, JICA, and FIDIC standards called for the implementation of a number of measures that we do not see in any other rapid rail project in Istanbul. Firstly, the HSE mitigation measures as well as Quality Assurance and Quality Control (QA/QC) processes were implemented at a very high standard. Secondly, an independent design verification engineer was hired by the contractor reporting directly to the agency. This was a separate entity from the CM and was a consortium of Turkish and foreign firms. Thirdly, a dispute adjudication board (DAB) was established, the $9 million PPP cost of which was covered 50%-50% by the contractor and the agency. Due to the technical requirements brought on by an immersed tunnel and a mix of commuter, high speed and freight traffic planned on the line, the unit costs in this project were higher than the national standard unit costs utilized in subway projects.

Both the timeline and the costs of the project almost doubled. The construction contract was initially 56 months, at the end of which the contractor was granted an extension for 42 months, and then another for 37 months. Following this final extension, the contractors completed construction within 12 months, not using the remaining 25 months they had, making the total duration of construction 110 months (56+42+12). The first contract cost $1.4 billion PPP and the extension of 42 months for the completion was granted through a supplementary agreement approved by the central government that was worth $780 million PPP. With the addition of price adjustments, change orders and claims, the final price tag of the construction contract reached $2.7 billion PPP, excluding the commuter rail phase, rolling stock, systems contracts and financing costs (Figure 15).

figure 15. Capital Costs Breakdown of Marmaray

Table 14. Marmaray’s timeline

DateItem
1999-09-17First loan agreement between JICA and Treasury for $234 million PPP. $63 million PPP for the CM contract and $171 million PPP on BC1.
2002-03-14CM Contract signed with Avrasya Consult.
2004-05-09BC1 Bosphorus Crossing Contract signed with Taisei - Gama - Nurol (56-month period).
2022-10-04BC1 construction starts.
2005-02-18Second loan agreement with JICA and Treasury for $1.4 billion PPP.
2005Archeological artifacts unearthed
2006-12-21TBMs start tunneling Ayrılıkçeşme and Yedikule tunnels
2022-04-09First contract period is up, project seriously behind schedule. Taisei wanted out as they would be losing money due to inflation.
2022-01-10A cost escalation executive order was passed by the approval of the prime minister, a first in Turkey. 
2010-11-22Third loan agreement with JICA for $783 million PPP.
2013-08-04First test run through Marmaray tunnel
2013-10-29Service starts between Ayrılıkçeşme-Kazlıçeşme through the Bosphorus tunnel.
2014Construction completed.
2019-03-21First international trains run through Marmaray. The passenger train set that’ll run between Baku and Ankara departed from Halkalı, passed through Marmaray tunnel and continued to Baku.

Table 15. Marmaray’s Scope

ELEMENTSCOPEFEATURES
Guideway• Immersed tunnel going under the Bosphorus and TBM tunnels to connect the existing commuter lines of Gebze- Haydarpasa and Sirkeci-Halkali •100% Underground elements
• Partially shared corridor with high-speed rail
Track2 new LVT tracks to be shared between high speed, commuter and freight trains.
New Stations3 new underground stations (100,000 m2 total)
• Yenikapı
• Sirkeci
• Üsküdar
Partial work on the at-grade Kazlıçeşme and Ayrılıkçeşme stations. Ayrılıkçeşme (Ibrahimaga) station was within the scope of the M4 line.  
(CR3 includes 35 existing surface stations to be renovated)
• Yenikapı Tube Station: 245m long, 24 m deep 
• Sirkeci Station: 225m long, 60m deep and 22m wide
• Üsküdar station: 300m long, 30m deep, 30m wide
• Ventilation shafts of 25,000 m2 in total:
- Yedikule ventilation shaft: 90 m long and 14 m deep
- Yenikapı ventilation shaft: 135 m long and 20 m deep
- Ayrılıkçeşme ventilation shaft: 80 m long and 20 m deep 
Tunnels• Total of 9.7-kilometer twin-bore tunnels
• 1.4-kilometer immersed tunnel (Dept: 58 m)
• 444m of NATM tunnels
• 1080m of out of the track route
Track Route Tunnels:
• TBM 1 (EPB): 2.2-kilometer tunnel bw Kazlıçeşme and Yenikapı
• TBMs 2 & 3 (SLURRY): 3.3-kilometer tunnel bw Yenikapı and Sirkeci
• TBMs 4 & 5 (SLURRY): 4.6-kilometer bw Üsküdar and Söğütlüçeşme
• Cut and cover tunnels: Yenikapı and Üsküdar station tunnels
• NATM tunnels: Sirkeci station and Üsküdar crossover tunnels
Tunnels Out of the Track Routes: 
• TBM: 120
• NATM: 960
Bridge Structures2000m of at grade and C&C bridge structures• 28 m span Yedikule steel railway bridge structure
• 19 m span Ayrılıkçeşme steel railway bridge structure
• 22m span Yedikule highway bridge: pre-stressed precast
• Kosuyolu highway bridge
• Dr. Eyup Aksoy intersection arrangement (2 overpasses and one grade road repair)
Systems• Traction power supply system
• Overhead catenary system
• SIRIUS CBTC, ERTMS signaling systems
• Telecommunication system
• SCADA system
• Operation control and administrative centers
• Electrical distribution system
Support Facilities• Depots
• Stabling yards for the intercity and commuter rails
• Workshops

Unprecedented Challenges

Many aspects of Marmaray demanded unique planning and management solutions, on top of which, archeological discoveries brought on immense unanticipated challenges for the contractors and DLH. The environmental impact assessment (EIA) process was longer, mitigation measures mandated by the contract were much more stringent and the management scheme had more layers of oversight and approval than that of a regular metro project. In addition to the JV, CM, and DLH, there was also a Dispute Adjudication Board, an Independent Design Verification Engineer, and a separate Technical Assistance Team. Furthermore, the Museums Directorate became almost as significant a stakeholder as DLH in the project. These led to cost increases and delays, but most importantly revealed the shortcomings in legislation and organization of the agencies involved in the management of infrastructure projects. Some of the negative consequences such as the coordination problems with the Museums Directorate in regards to the management of archaeological discoveries were overcome within the timeline of the project; solutions such as the requirement of a more specific geomonitoring plan prior to the start of construction was adopted in later rail construction contracts; while some including the lack of a framework for dealing with archeology during infrastructure construction still persist to this day.

The EIA process was unlike that of a standard metro line, as the scale, scope, contract and implementation of the project varied greatly from a metro project. The initial feasibility and EIA studies were conducted in 1998 (Personal Interviews Z and AA 2021) and the construction contract was awarded in 2004, which is a long timeline for the planning of a rapid rail line in Istanbul. While we do not have the exact dates of the EIA process or whether an environmental impact statement was issued, the mitigation measures implemented during construction reveal that these processes were not expedited, as is done for metro lines in Istanbul, but involved meticulous study.

The geotechnical planning of Marmaray also differed from metro projects at the time. IMM started requiring geological analysis reports regarding the impact of planned construction to surface structures from metro contractors only after 2014. Before that, this was not mandatory and rather than detailed preliminary surveys and the reinforcement of buildings before construction, repair costs were paid if a building was damaged during construction. For Marmaray, on the other hand, despite being a project that pre-dates this regulation by a decade, the contract required a Risk Assessment Mitigation Plan covering HSE mitigation measures from the contractor. It was determined through this analysis that the TBM tunnels were in close proximity to 158 old buildings in structurally problematic conditions. The combined risks posed by Istanbul being in the earthquake zone and the impact of ground vibration to be generated by the TBMs on these buildings required preliminary tests that would determine whether to demolish or reinforce them.

The dispute adjudication board (DAB) which had been set up as a requirement of the FIDIC Silver Book was helpful in resolving disagreements between the agency and the contractor, but often ended up bringing on unanticipated costs and delays to both parties. The disputes arose from the agency initially presuming that all costs be accounted for in the lump sum bid and wanting to charge all risk to the contractor. Later, as they came to a mutual agreement on getting the project done, such conflicts were overcome. Nevertheless, the disputes cost the contractors about $45-75 million PPP and more importantly, lost them time (Personal Interview M 2021).[46]

One costly and time-consuming disagreement was in regards to the 158 buildings that the Risk Assessment Analysis found to be within the impact area of the BC1 corridor. The contractor claimed that the costs related to the protection or demolition and rebuilding of these should be borne by the agency. The DAB referred to the Silver Book and concluded that if after the contractor carried out a structural analysis and determined that a building was near-collapse and that it should be demolished, the agency would pay for the demolition. If, on the other hand, a building could be supported, the contractor would be responsible for its reinforcement. Gama-Nurol spent $5.2 million PPP to reinforce or repair buildings between Yedikule and Yenikapı and relocate residents during construction. Additionally, they had to run on-site simulations and install extra layers of window panels to the hotel rooms around the Sirkeci and Yenikapı station sites for noise mitigation.

Today, geomonitoring of the buildings that fall within the impact boundaries by a rail line construction is a requirement for all projects. The contractor’s designer provides a geomonitoring plan and, before starting construction, the contractor visits all buildings under risk with a notary and records existing damage to avoid conflicts later. Allowable settlement limits are determined by the monitoring design, so it varies across projects, sites and buildings. Once the construction starts, the damage risk is on the contractor.[47]
More demanding mitigation measures and inexperience with the Silver Book contract undoubtedly burdened both the DLH and the TGN, but the main reason behind the doubling of costs and construction timeline was the discovery of archaeologically sensitive sites at the station locations. With the heavy construction equipment on site, ready to start excavations, the overhead costs kept adding up while waiting for the completion of the archeological work. These time-distributed costs increased by more than 200%, from around $100 million PPP to $310 million PPP. $120 million of this increase was due to the price adjustment applied to make up for the cost increases resulting from inflation through the long delays in the construction schedule.

Major design revisions were required due to archeological findings at all station sites. Station layouts including the entrance locations had to change to protect archaeological remains that were to be conserved on site rather than removed. The longest archeological digs which were at Sirkeci and Yenikapı Station sites lasted 76 months. They took six months at Ayrılıkçeşme, 37 months at Üsküdar and four months at Yedikule-Kazlıçeşme (Personal Interview K 2020). During the excavations, construction at the site stopped, and as the digs were completed section by section, the teams could go back in and continue construction. Hence the station excavations slowed down drastically.

The archeological excavations were outsourced to TGN by the Ministry of Transit.[48] So even though TGN was compensated for the overheads, profits, and roughly a 22% commission for the indirect costs of aiding the archeological work, the unanticipated schedule delay that resulted from this work ended up eroding TGN’s profits. An example was the job of purchasing for the archeological team, including materials from office supplies to trowels, brushes and spoons (Personal Interview M 2021) which was cumbersome; no matter the scale of the purchase, three quotes were required for every item with the lowest bid selected as required by the contract. Total costs for archaeology were $120 million PPP, but ultimately the work ended up costing the contractors much more when accounting for increased overheads due to delays. One senior manager who directed the QA/QC for the project explained: “If you spend $10 on archeology, you will most likely get $3-4 back with claims. It is very difficult to plan for archeology. Losing time means losing money: you pay $100,000/month for a tower crane, once you’ve leased it, you keep paying for it even if construction has to stop” (Personal Interview M 2021).

Throughout the archaeological excavations on the project site, the contractors were required to present reports to the project committee at the Museums Directorate and wait for their approval before proceeding with work. This process would take three to four months during which construction had to wait. The contractor eventually adopted a different approach to expedite the processes that involved coordination with the committee. They hired academic experts to help them prepare for the meetings and visited the committee offices regularly to avoid missing necessary procedures and better understand their concerns. These meetings guided their work and reports, ultimately preventing delays. The contractor also made the archeological team’s life easier by purchasing its material and tools without waiting for approvals from the agency, even if this meant that sometimes the items wouldn’t be fully reimbursed by DLH. Our interviewee concluded that the contractor spending an extra $5,000 to $10,000 to make these arrangements possible, ultimately saved them months of delays, and consequently, a lot more money than those extra costs (Personal Interview M 2021).

The delays caused by the archaeology extended to the CR3 work as well. Haydarpaşa Terminal’s depot area to be used for Marmaray’s rolling stock is still being renovated as of 2022. The archeological remains found at only 50 cm below the surface are from four different time periods; late Roman, Byzantine, Ottoman and early Turkish Republic. These excavations have been going on for over four years. It is not unusual to uncover archeological heritage during infrastructure construction in a city like Istanbul; Kabataş and Beşiktaş metro excavations also revealed remains. Despite the numerous examples of unearthing archaeologically significant sites during excavation, which drive delays and costs, there is no standard framework for managing construction at these sensitive sites.

The city of Rome’s approach to dealing with the archeology that is discovered during excavations of rail construction is a good example that Istanbul, and other cities which need to manage historical heritage alongside infrastructure work, can benefit from. The Roman protection agency, Sovrintendenza ai Beni Archeologici, came up with a set of guidelines Prontuario Archeologico around 2010-2011 to manage the archeological excavations for remains discovered during metro construction projects. These guidelines, agreed upon by all the stakeholders at the time they were being compiled, provide directions to devise practical handbooks for how to deal with stations, shafts and ways to proceed in case of major findings. In a city like Istanbul where it is common to discover archeological remains during metro excavations, such a guidebook would be invaluable.

Another management challenge that Marmaray’s contractors and the DLH faced was political pressure from the central government, which also led to cost increases. The ministry demanded that the BC1 be completed in time for the celebrations of the 90th anniversary of the Turkish Republic, on October 29, 2013, and indeed, the line opened to revenue service on the date. The east shaft of Sirkeci station was not complete at the time of opening; the fans in this section were installed and the ventilation system tests were completed in 2014. While this, together with the phased opening of the line as BC1 and CR3 was considered a safety issue by some trade unions, a tunnel ventilation expert we interviewed stated that the incomplete tests and certification only concerned the freight operations, which wouldn’t go into service until 2019 (Personal Interview AA 2021).[49] The majority of the additional costs incurred paid for the construction of a temporary command center at the Üsküdar station, which enabled the BC1 section to operate before the 65-kilometer commuter section was complete, and was later transferred to the commuter line’s Maltepe station.[50]

The DLH concluded at the completion of BC1 that had it worked with a contractor who had experience with navigating archeology, DLH could have avoided such a large cost increase (Personal Interview M 2021). On the other hand, a study of the management scheme of the archeological excavations reveals that ad-hoc approach to managing these events; the lack of legislation on protection of archeology discovered during infrastructure excavations, combined with the extreme centralization within the Ministry of Culture and Tourism prohibited the hiring of temporary staff by the Museums Directorate and this led to a “multi-layered outsourcing approach” to deliver human and financial resources in the Marmaray (and M2) archeological excavations (Bonini Baraldi et al. 2019). This inevitably “increased the overall complexity, cost, and level of conflict within the system” (p.439)”

Everything Cost More

At the time of its construction BC1 was the deepest immersed tunnel project in the world among 150 similar projects, including BART, Hampton Road, Baytown, Baltimore Channel, Parana and Tama Tunnels (Personal Interview K 2020). Additionally, the water current speeds at the upper layers of the Bosphorus Strait were 2.5m/sec and 1m/sec at lower layers, in opposite directions. From the costs of tunneling and ventilation to the tracks installed, multiple components of the Marmaray project were more expensive than that of a regular subway (see Figure 15). The line had larger diameter tunnels, longer platforms and had to be resistant to higher temperatures in case of freight fires as it would serve mixed traffic. Moreover, the tunnels came close to the surface around residential neighborhoods and track vibration had to be minimized to prevent noise pollution. To make up for the extensive delays in the schedule due to archaeology, work had to be expedited which also increased costs.

Marmaray’s tunnels were more expensive due to their diameter and passive fire resistance requirements. Since they were designed to accommodate freight as well as high-speed and metro trains, the tunnels have 8-meter external diameters, which is larger than the 6.3-meter wide (5.7-meter internal diameter) metro tunnels in Istanbul. Freight trains demanded the design of the system for higher intensity fire risk and also necessitated larger evacuation corridors. As a result, the TBM tunnels cost approximately $60 million PPP/kilometer, almost double the cost of standard metro tunnels in Istanbul.

The concrete used was required to have the same specifications as the Öresund bridge in Denmark: it had to have a useful life of 100+ years and no early age cracking. This level of specification was uncommon and expensive. Gama-Nurol set up a $5.2 million PPP concrete testing lab at Istanbul Technical University. Marmaray was the first project in Turkey where concrete temperature monitoring and cooling was implemented. Although Taisei initially planned to manufacture its own concrete, it ended up using the concrete manufactured by GN for the immersed tube tunnels as this concrete performed better in tests. Having acquired the experience, Turkish contractors now undertake immersed tube tunnel projects around the world.

Another reason for costlier construction was the urgency with which the contractors had to operate in, to avoid further delays after the discovery of the archeological remains. To facilitate faster drilling of the tunnels, the contractors used a 12-bar slurry TBM, and instead of sand-grout, an AB component system based on sodium silicate in spite of higher costs (Personal Interview N 2021). This system is not utilized in other metro tunnels in Istanbul. The fire proofing material which consisted of panels for the immersed tunnels and was sprayed on for the others which are usually $155 PPP/square meter, cost over $220 PPP/square meter to facilitate speedier construction.

BC1’s unique ventilation and fire protection design was a result of a number of specifications mandated by the contract on top of those mandated by Turkish rail construction standards. The differences in this aspect between projects in countries that use similar standards such as the NFPA 130 occur, because of the additional and unique technical specifications each administration requires that a project satisfies (Personal Interviews R and S 2021). The differences between projects in the US and Turkey, for instance, are an example of this. Even though both utilize NFPA 130 standards, the emergency ventilation and egress systems are designed for more stringent measures in the US. Similarly, Marmaray was different from regular metro projects in Istanbul due to its contract’s particular specifications. The fire-resistant tunnel coating and the high capacity of the ventilation required by the contract led to unique and cost intensive fire protection and ventilation design solutions.

First, additional tunnel coating for passive fire protection was required due to the addition of overnight freight trips. Moreover, the ventilation fans needed to be designed to maintain operations in temperatures as high as 250℃, or 482℉. The tunnel’s coating was designed to provide a minimum of four hours of resistance for 100 Mw fire. Istanbul’s other metro tunnels are designed to withstand 23 Mw or lower fires. Thus, for BC1, the specifications called for concrete that would stay intact at oil-burning temperatures that are four times hotter than the fires subway concrete is designed to resist. This extra fire-resistant coating was one of the major cost drivers for Marmaray and is not utilized in subway projects since concrete itself is known to be resistant to regular subway fires. However, the technique implemented in Marmaray’s construction was later applied in the Eurasia road tunnel as well as other projects across Turkey.

Second, BC1’s 225-meter long platforms added costs by increasing station-box volumes and the capacity of station MEP finishes. The longest metro platforms in Istanbul are 180 meters. BC1’s 25%-longer platforms meant longer construction times and more earth needed to be excavated and disposed off, all of which added costs. The inclusion of high-speed rail and less frequent service plan, with minimum headways going from 90 to 128 seconds, the platforms had to be widened to accommodate the increased volume of passengers waiting on the platforms (Personal Interview M 2021). Additionally, the larger diameter of the tunnels compared to regular subways increased their volume by 60%. This meant that each BC1 station needed four to eight tunnel ventilation fans, whereas most Istanbul metro stations have four, and large shafts to house station technical spaces that connect to freestanding surface ancillary structures (Figures 16-17).[51]

Third, the contract required the ventilation system to be designed to operate at the minimum air temperature of -20℃ for which the ventilation capacity had to increase even further, due to air getting heavier at lower temperatures. According to a tunnel ventilation engineer who worked on the project, this additional capacity was uncalled for, as air temperatures in Istanbul almost never reach such extreme lows (Personal Interview AA 2021). Nevertheless, the agency could not be convinced to change what the consultants had specified in the contract early on.

Sirkeci Station East Ventilation Shaft

figure 16. Marmaray’s Sirkeci Station east ventilation shaft (Google Maps a).

Sirkeci Station West Ventilation Shaft

figure 17. Marmaray’s Sirkeci Station west ventilation shaft (Google Maps b).

Some unique components of the line being implemented for the first time in Turkey or even in the world, were also major cost drivers. The 1.4-kilometer-long immersed tunnels 58 meters under water cost $450 million PPP. Track construction was also expensive because low vibration tracks (LVT) were preferred throughout the line due to some sections’ proximity to the surface. They also had to be compatible with freight, high-speed rail, and metro trains. They cost $45 million PPP.

Land Acquisition

In Istanbul, agencies dislike allocating time and resources to land acquisition processes which are carried out prior to the construction tender, and this played a role in further complicating the construction process of Marmaray’s Sirkeci station. Generally, in Turkey, the agency buys the land from the owner at market value. If the parties cannot agree, they go to court, which can take at least two years to resolve. This is also the kind of conflict that will likely receive media attention, which both the agency and the contractors want to avoid. Because Istanbul is densely built and several lines are being constructed at the same time, avoiding land acquisition is a priority in designing the right of way and selecting station locations. This does speed up the initial phases but is not ideal; stations are often built-in parks, gardens or other empty land where they become harder to access from major residential or job centers, thus reducing the efficiency of transit systems.[52]

During the construction of the entrance and ventilation shaft structures of the Sirkeci deep tunnel station, an archeological site could have been avoided by acquiring a few nearby buildings, but the building owners objected strongly, which meant the process would be costly and time consuming. Rather than embarking on a contentious condemnation process, the agency and contractors preferred to deal with the costs and delays posed by archeology (Personal Interview M). All of this could have been avoided, had a more extensive initial survey of the site been conducted prior to the construction tender and the alignment been revised, or a framework addressing the management of archeological sites during infrastructure projects was available that also addressed land acquisition conflicts.

Another lesson that the Marmaray Project taught the agencies building rail in Istanbul was that the private contractors do not have the leverage the state has when it comes to land acquisition. In the Commuter Rail Phase (CR3) of the project, which involves 63 kilometers of at-grade commuter rail rehabilitation and addition of a third track to the system, acquiring land was initially a part of the construction contract. According to a senior engineer we interviewed, the arduousness of this task was one of the reasons why the contract had to be canceled and re-awarded to different contractor teams twice (Personal Interview I 2020). Eventually, the agency took the expropriation job on themselves.

Staffing and Internal Capacity

Unlike the standard metro projects in Turkey that are known to employ smaller management teams compared to the teams of rail projects abroad, Marmaray’s construction was managed by a number of larger teams.[53] This was both a requirement of the FIDIC Silver Book, and the complexity and prominence of the project necessitating a bigger management team.

For the BC1 Phase, the Ministry of Transit allocated between 30-50 staff members to DLH including everyone from cleaning staff to regional directors. Avrasya Consult hired as the CM employed 50-100 people, which would be considered high for a metro project of the same length but was necessary because they were managing and coordinating three contracts at the same time.[54]

Between 2004 and 2009, a separate Technical Assistance Team (TAT) of 5-10 people were hired to manage the DLH’s relations with the CM and the contractor. At the end of the first 56 months, the TAT was dissolved, since the agency felt that they had enough experience to handle the operations internally.

The contractor was responsible for their own QA/QC team, and additionally they appointed a Verification Engineer for every major work group like construction or electromechanics who made sure production was carried out in accordance with the design. The contractor also required a minimum of one HSE staff and one QC supervisor from large subcontractors, so in total, 30 HSE staff worked on the project.

Quality Standards, Contingency and Profit

There has been a paradigm shift in Turkey over time: cultural heritage and environment are valued highly and mitigation measures are taken more seriously. As a megaproject, Marmaray was a milestone in terms of raising standards and dealing with these issues during infrastructure construction. According to the contractor’s QA/QC manager, the contractor developed an internal quality-control method to catch and address any construction irregularities (Personal Interview M 2021). For example, both a tunneling and a TBM expert were on site weekly to provide oversight and open nonconformance reports (NCRs), that are normally filed by CMs to document deviation of work from design specifications. They were opened by the contractor’s own quality control staff to prevent the CM from opening them. This was preferred as it would take longer to close the NCRs opened by the CM, which meant the progress payments and consequently, the construction would be delayed. None of these are common practices in Istanbul’s metro construction processes.

Turkey still spends less time and money on environmental impact analysis and mitigation, occupational health and safety measures and community engagement than the United States and Europe. Putting aside Marmaray as an exception, local experts in the field agree that the agencies should do a better job enforcing protective regulations, CMs should put more pressure on contractors and contractors should make more of an effort on these fronts. On the other hand, avoiding unnecessary delays through easing bureaucracy seems to be a strength of Turkish agencies, which contractors we spoke to appreciate especially when comparing their experiences in Istanbul to those abroad.

According to our interviews, when bidding on contracts, contractors will often propose contingencies less than 10% so they can submit more competitive bids. In the case of an immersed tube project, contingency and risk should account for at least 10% of the contract value. As these items cannot be explicitly shown in the itemized costs, risk is added as 10% and profit as 3% onto each item. In the case of BC1 an additional 5-10% was added on top of claims, change orders and archeological spending for contingency and profit, as this work constituted a serious burden to the contractor. Experts estimate that a total of 15% profit was gained from Marmaray and this is considered a high percentage when compared with the profit margins of rail projects in Turkey today. In total, 13% profit is considered good, but this number can go down to 4-5% depending on contingencies.

Lessons Learned

The design, planning, management of the HSE conditions as well as the QA/QC processes were carried out to an exceptionally high standard in the construction of Marmaray; which enabled this immensely challenging project to be completed without major technical flaws. On the other hand, lack of experience and established mechanisms to manage archeological discoveries during rail construction projects proved to be costly and led to extensive delays. Ultimately, despite all the significant cost drivers, Marmaray BC1’s construction costs remain only 14% above the average PPP $210 million/kilometer among the projects in our urban rapid rail costs database.

Legislation regarding HSE impact mitigation changed in 2012, during Marmaray BC1’s construction, but since the project had adopted a higher standard from the outset, no changes needed to be made. The contractor required and made sure that subcontractors abided by their occupational health and safety standards. We understand from our interviews with the senior management staff of the contractor that these measures were costly but paid off as the BC1 phase was completed with no fatal occupational accidents and set an example for other projects in the city in terms of HSE and QA/QC management (Personal Interviews K and M 2020).

BC1’s construction involved managing several teams with large numbers of staff, which was carried out meticulously. Engineers who were hired to do constructability reviews of the design were graduates of top engineering programs in Turkey. Designer team’s representatives were required to go to the site once a week. QC and site engineers were not permitted to become close acquaintances. The contractor paid bonuses at milestones to lower turnover and increase efficiency, as there was a lot of construction work available at that time, not only in Turkey, but all over the world. The contractor also required the subcontractors to keep their staff turnovers below 5-10% to save training time. 30 occupational safety and health engineers worked on Marmaray unlike regular subway projects in Turkey, which employ 10 or fewer HSE staff.

The management of construction alongside extensive archeological excavations was one of the toughest challenges dealt with in Marmaray’s BC1 Phase. Clever coordination with the Museums Directorate proved to be key in saving time and money; however, legislative and administrations’ organizational shortcomings in managing archeological excavations alongside the construction of a mega-infrastructure project in Turkey led to an increase in the complexity of operations; thus, delays and cost overruns were inevitable.

The cost of professional services like surveying, design and engineering together with mitigation in Marmaray (See Figure 15) were very high compared to other infrastructure projects in Turkey; they made up 9% of the contractor’s costs. But according to a design director who worked with both contractors of Marmaray’s BC1 phase and who also has experience working in metro construction projects abroad, the level of risk taken versus the time and money spent on HSE mitigation measures as well as quality control in the Marmaray project was optimal (Personal Interview G 2020). Moreover, the engineers and experts having worked on this and other rapid rail projects in Istanbul whom we have interviewed agree that Marmaray is an example of best practices in terms of developing a good final design, planning for HSE mitigation, applying quality standards and adopting competent technical and managerial expertise.

3.3.4 M9 Ataköy-İkitelli as a Recent Project

Overview
M9 Map

figure 18. M9 Ataköy – İkitelli Metro Line.

M9 Ataköy-İkitelli is an under construction 13.4-kilometer-long, 12-station line on the European side of Istanbul, connecting the city’s rapid rail network (Figure 18). Transfers are planned with Marmaray, M1A, M1B, M2, M3 and M7 metro lines. The right of way passes M3’s İkitelli station near the İkitelli Industrial Park, follows the Basın Ekspres Highway that connects the TEM and D100 highways, and ends at Ataköy Station. The route goes through both commercially and residentially dense neighborhoods, and aims to relieve congestion on the Basın Ekspres corridor, TEM and the D100 highways. The owner agency is IMM.

As our final case, M9 demonstrates how after years of agencies, contractors and consultants muddling through rail-construction projects, they now know what they need to do and have established mechanisms to efficiently build rail lines at a fraction of the cost of their international counterparts.

We selected M9 for a number of reasons, first, it is on track to cost $95 million PPP/kilometer.[55] Second, it is a contemporary project. Construction began in 2016 and as of May 2021, it was 70% complete. Additionally, all preliminary planning, procurement and supervision of the final project, management of the consultants and coordination with third parties have been carried out by the Rail System Projects Directorate; an experienced department with improved internal capacity.[56] Furthermore, it was one of the first rail projects in Turkey to integrate BIM into all stages of planning and construction.

This project exemplifies the benefits of cultivating a rail construction eco-system for a city and the effective use of technology in dealing with technical challenges during the planning and design stages of a rail project. Despite the contractor’s lack of experience building rail projects, a national economic crisis that started in 2018 and a change of municipal government resulting in a slowdown of construction for 11 months; the work on M9 rapidly resumed and the line partially opened to revenue service in mid 2021 without foreseeable cost overruns.[57] We believe that the expertise and know-how acquired by the municipality as well as the designers, consultants and subcontractors working in the field through the last 20+ years of urban rail construction made it possible for the Ataköy-İkitelli project to stay on track. Also, the full integration of BIM in all processes of the design and construction helped resolve technical problems, especially those related to integration with other lines avoiding cost overruns and further delays.

Timeline and Financing

The initial idea for M9 Ataköy-İkitelli, which was included in the 2011 Urban Transportation Master Plan, called for a 12.2-kilometer line between İkitelli to Yenibosna (İBB). In this plan, M9 was envisioned as a “Metro 2,” a 4-car operation serving stations with 90-meter platforms similar to most north-south lines in Istanbul’s urban rail network. The maximum planned capacity was 36,000 passengers per hour per direction.

In September 2014, 36 lots along the right of way were identified for acquisition (European Investment Bank [EIB] 2016) (Table 17). Two thirds of these were privately owned but none were developed; thus, no demolition or resettlements were required. However, the land acquisition process was not completed until November 2016, when an urgent expropriation decision was issued (DPA 2016). Construction was already underway at this time. This delay is most likely due to the revisions that had to be made by the contractor’s designer.

Table 16. Marmaray Contract Cost

ContractorScopeCostYearUSD
with PPP
Oriental Consultants (Japan), Yüksel Proje, Japan Railway Tech Service• Control/supervision, engineering and consulting¥ 5,500,000,000.00200266000000
(we estimate a 100% increase, thus a $130 million final price tag, due to the doubled timeline)
Taisei (Japan) - Gama (Turkey) - Nurol(Turkey) Joint VentureBC1 - Bosphorus Crossing
Engineering/design, procurement and construction of 13.6-kilometer railway and related structures:
• 9.4-kilometer twin bore tunnels
• 1.4 immersed tunnel
• Underground and surface stations with cut-and-cover and NATM tunnels
• Bridges
¥ 102,372,748,108.002003$2,400,000,000.00 ($2,7 million after the claims, variation orders and price escalations)
Invensys Rail DimetronicSignaling and Automatic Train Protection systems. (Within the scope of the CR3 contract)1950000002011407000000
Hyundai/Rotem (S.Korea)CR2 - Rolling Stock Contract Engineering/design, manufacture and delivery of 440 rail cars:
•  Testing and commissioning of the new rolling stock,
• Training of the Employer’s staff in train operation,
•  Provision of spare parts and maintenance of railcars for defined periods.
54300000020081302000000

IMM procured the final project (“final project for application”) and feasibility studies for M9 from Istanbul Ulaşım, the public-benefit corporation owned by IMM which operated the rail lines of Istanbul as well as providing maintenance, engineering and consulting services locally and abroad. In January 2015, Istanbul Ulaşım issued an 86-page feasibility report, including travel projections, demand analyses and operation plans, economic and financial feasibility studies as well as financing schedule alternatives (Demircan 2015). This document put the first detailed cost estimate at $1.9 billion PPP including the rolling stock, based on the following breakdown (Table 18).[58]

Table 17. M9 Timeline (Cumhuriyet 2020b, EBRD 2021, EIB 2016)

DateItem
2022-09-14Expropriation decision published for 36 lands
2015-01-26Feasibility study issued
2015-03-19“EIA not required” decision issued
2016-02-02Construction contract awarded to AGA for $911 million PPP 
2016-04-08CM contract awarded to Emay Engineering for $29 million PPP 
2022-05-16Ground breaking at Çobançeşme Station site
2022-12-16Environmental and Social Due Diligence prepared to apply to European Bank for Reconstruction and Development (EBRD)
2016-12-22EIB approves $600 million PPP loan to the Istanbul Metropolitan Municipality for the project.
2017-01-11EBRD approves $262 million PPP loan to the Istanbul Metropolitan Municipality for the project.
2018-08-09Aga laid off 700 workers, the works slowed down or entirely stopped on some sites.
Mar-19 to Jul-19Construction stopped due to ground conditions at certain locations. The new municipality states that 36% had been completed by 2019. 
2020-05-20Rail installation starts
2020-07-08TBM tunneling completed (61% of the overall construction) 
2022-05-21Masko and Bahariye Stations open, connecting to and extending M3’s Otogar-İkitelli branch to Bahariye. 70% of the construction is complete. 
2023Planned completion date

The environmental impact screening process started soon after, and the Ministry of Environment and Urbanism issued an “EIS not required” certificate in March 2015.[60] The construction contract was awarded to Aga Enerji for $910 million PPP in February 2016 and the CM contract to Emay Engineering for $29 million PPP the following April. Construction was planned to take 38 months. Aga had submitted the lowest bid among 13 construction companies. Emay, on the other hand, won the tender as the fourth most expensive bidder among the 10 CM firms who submitted bids, as technical qualifications factor into the CM selection process.

As commonly seen in the decision processes involving transit infrastructure investments in Turkey, conflict arises as soon as the government and the opposition get involved. In the case of M9, the municipal parliament run by AKP at the time approved the decision to apply for international loans to fully finance the $911 million PPP construction in March 2016. The members from CHP voted against this plan, suggesting that at least a small percentage of the project should be self-funded by the municipality to minimize the debts that would be incurred from interest payments. AKP argued that there were five rail lines under construction, hence the municipality could not finance new projects relying on their own resources, and that investing in M9 would pay off in the long run. The decision passed, with the majority of votes coming from AKP members (Ocak 2016).

In May 2016, Aga Enerji broke ground at the site of the Çobançeşme Station, and within a few weeks, at the sites of Bahariye and Masko Stations. Çobançeşme was selected as the launch box location for all four TBMs, which proceeded in pairs digging north and south (Figures 19 and 20). In November, the cabinet of ministers issued a decision for the urgent expropriation of lands in the Bakırköy, Bahçelievler, Bağcılar, Küçükçekmece and Başakşehir districts (DPA 2016). By then, work was underway at Evren Mahallesi, Kuyumcukent and Yenibosna Stations as well. Mimar Sinan and Malazgirt, which are two main roads providing connection to the Basin Ekspres Highway were closed to traffic in December 2016, for two years. In January 2017, two of the four TBMs were delivered to the Çobançeşme site. By February, there was active construction at 8 separate locations (Wowturkey 2017). TBMs began tunneling in May. The TBMs maintained a 150-meter buffer between them to ensure they were operated safely and that vibrations from one TBM didn’t impact the progress of the other.[61]

No ground water was encountered at the Çobançeşme site, which enabled construction to start smoothly. However, at the time when the first TBM started mining towards İkitelli Station in the north, its conveyor-belt system was still being installed; therefore, it could only proceed six meters a day. Nevertheless, the contractors preferred starting the work, rather than waiting until the installation was complete. The second TBM began digging in the same direction in early June. In August 2017, Mayor Topbaş attended the welding ceremony as part of the installation of the 3rd and 4th TBMs. He reaffirmed that the line would be completed on schedule, by 2019.

The first two TBMs reached Kuyumcukent station in October, 2017. By mid-December, 2017, the TBMs mining towards İkitelli had completed 1312 and 999 meters, and the two digging towards Ataköy were at 1107 and 654 meters (Wowturkey 2017) with an average advance rate greater than 20 meters per day. While the TBMs worked in both directions from the Çobançeşme station, the NATM method was used to excavate the tunnels starting from İkitelli, the northernmost station, to Halkalı. By July 2018, 50% of excavations had been completed.

In September 2017, which was a few months after M9’s TBMs started tunneling, mayor Topbaş resigned and Mevlüt Uysal was appointed mayor. Both mayors were backed by the central government, yet media sources speculated that AKP forced Topbaş to resign to stop his spending on transportation projects, a large portion of which was allocated to metro constructions (Büyükşahin 2017; BBC Türkçe 2021). When Mevlüt Uysal became mayor, he suspended several metro lines, but M9 was spared. Nevertheless, the municipality failed to make progress payments to the line’s contractor Aga, which led to mass layoffs and the effective suspension of construction at most of the M9 sites.

M9 excavation methods map

figure 19. M9’s tunnel excavation methods.

Rail tenders accepting bids in Dollars or Euros was common practice when M9’s construction tender was done. With the Turkish currency steadily losing value against the Euro, this meant that the initial ₺1.2 billion contract value had gone up to ₺2.2 billion in by August 2018 (Toker 2018). Even though a new law had been passed in November 2016 prohibiting the tenders and contracts for public works to be executed in any currency other than the Turkish Lira, it excluded contracts that were already in effect.

The works on M9 construction sites slowed down significantly on August 9, 2018, when Aga Enerji (Bayburt Group which owns Aga) laid off 700 workers without notice. No explanation was given to the workers, their insurance plans were terminated and they were asked to sign an agreement forgoing any additional compensation. The Construction and Building Workers Union (İYİ-SEN) provided them with legal advice. Aga claimed, and professionals we have interviewed in the field later confirmed that the reason behind the mass layoff was delayed payments from IMM. This was likely due to nationwide financial challenges and the contract having been denominated in Euros. Additionally, the IMM’s debt had grown at a rate that even the central government did not approve, even though the municipal government was still run by the AKP.

M9’s case presents an extreme example in terms of the scale and severity of the layoff conditions, yet the Turkish construction industry is known for its mixed labor standards. A very small percentage of construction workers are unionized in Turkey. This is partly due to the work being seasonal for most workers who move from construction site to construction site in different cities, and return to other jobs in their hometown once work is completed. The other reason is that unionization has never been supported by legislation and collective bargaining is not a well-established practice in the country. Only 10% of workers are unionized, and among construction workers, less than 3% are employed under collective contracts (Confederation of Progressive Trade Unions of Turkey [CPTUT] 2019).

As was the case in M9, the use of third-party trade labor is very common in rail construction, and in the Turkish construction sector generally. Stations or diaphragm walls can be built with turnkey subcontracts given that the construction documents are supplied to the subcontractors. If construction was not subcontracted out, one line would require 1100 on-site workers, and if excavated earth shipping is included, this number would go up to 1300. In the beginning, contractors of Istanbul metros tried building with minimal subcontracting, but they found that the most risk-averse way of managing projects this large, is to subcontract jobs and distribute some of the risk. However, oftentimes, construction work ends up being subcontracted several times. This lowers the wages significantly and offloads responsibility to smaller and smaller contractors that are harder to keep accountable (Personal Interview O 2021). Hence, it was easier for Aga, the main contractor of M9, to terminate contracts with a few subcontractors than dealing with hundreds of workers, when the payments stopped coming.

TBMs stopped working in September 2018 and remaining works slowed down to the extent that most of the sites were abandoned completely. IMM declared that 30% of construction was complete and updated the planned date of revenue service to 2020. In January 2019, the agency pushed the opening back to 2021, but denied the termination of any construction work (Wowturkey 2019). At the time of the election of the new mayor in June 2019, only 36% of works were complete, but later, construction sped up again.

While the M9 project was never officially suspended, the construction of M1BX, M3-P3, M5-P2 + M13, M7-P3, M10+M4-P4 and M12, stopped in early phases when the 2018 financial crisis hit. The municipal government had failed to secure funds for these rapid rail projects prior to their tender in March 2017 and within a few months after signing their construction contracts, the works came to a stop due to the inability of the municipal government to make timely payments. In August 2018, the Ministry of Finance passed an executive order that allowed contractors to extend their delivery schedules or transfer their contracts. IMM signed protocols with all of the contractors to extend their work schedules. This allowed the contractors to make price adjustments based on Turkey’s producer price index (ÜFE).[62] This only partially covered the losses of the contractors, as ÜFE had increased by 60% while the US dollar had almost doubled since 2017 (₺3.65 at the time of tender in March 2017 and ₺6.8 as of August 2018). The construction of these projects could only resume once the new mayor secured loan agreements with European funders.

In the case of M9, loan agreements had been signed with EIB and European Bank for Reconstruction and Development (EBRD) in 2016, early on in the project timeline, but the municipal government under mayor Topbaş failed to provide securities required to receive the payments from the loan-granting institutions, which delayed construction (Personal Interview Z 2021).[63]

In March 2019, İmamoğlu was elected mayor and promptly made financial plans and secured funds to restart all the suspended rail projects. He issued municipal bonds, a first in the history of Istanbul, to finance some of the projects that were suspended (Railly News 2021). In July, 2020, at M9’s TBM Excavation Completion Ceremony, the mayor announced that the first 2.1-kilometer, two-station section of the line from İkitelli to Bahariye would be commissioned in early 2021, and full length of the line, in 2022.[64] He also mentioned that construction had briefly stopped in March 2019 due to unanticipated ground conditions and in a later press conference, that much of the progress had been made in 2020. 61% of works had been completed by July 2020. On May 29, 2021, the İkitelli-Bahariye section started revenue service.

TBM welding ceremony photo

figure 20. Image by IMM, Mayor Topbaş attending the TBM welding ceremony at the Cobancesme launch box.

Scope and Contracts

M9 provides a cross-over connection with M3 at the İkitelli Station, so the trains will continue up north from İkitelli to Olimpiyat which was part of M3 but will now be operated as M9 (Figure 21). M9’s scope included integrating the existing M3 signaling systems with the newly built stations, Masko and Bahariye, that were commissioned on May 29, 2021, with the remaining stations to be completed in 2022[65] (See Tables 19 and 20 for scope and contract details). This integration also allowed for the existing M3 storage yard to be shared obviating the need to build a new facility.

figure 21. M3-M9 map by IMM. Olimpiyat, Ziya Gökalp and İkitelli Stations used to be operated under M3, but now belong to M9.

Table 18. M9 initial cost estimates

 ItemUnitQuantityUnit Cost
(in Million $ PPP)
Cost
(in Million $ PPP)
ConstructionLine (Including track work)km13.428376
Stations#1258700
Electrical and Mechanical SystemsElevators and Escalators#1440.457
Power Supply and Tractionkm13.410136
Signalingkm13.47.8104
Communication Systems-18383
Environmental Control Systems-1104104
Station Support Systems[59]-14949
Rolling Stock#723.7270
TOTAL1880

Competition

Istanbul rail construction tenders are often subject to intense competition, with six, eight or even ten contractor teams vying for the lowest bid. Bidders are required to secure bid bonds with a value of 3% of their bids, to be submitted with their offers, and performance bonds with the value of 6% of their bids at time of signing the contract, if they are awarded the tender. Additionally, they use “construction all risk insurance” which covers liabilities re: emergency events like fire, flooding etc.[66] These extra costs, and the qualification requirements at the RFQ stage act as barriers against smaller contractors, however, smaller contractors can bid in tenders by forming joint ventures with larger firms. This increases the overall competition for these contracts and has resulted in fierce competition in the rail construction industry.

There are over 450,000 contractors in Turkey (Balbay 2020), and while the number of firms that have the capacity and know-how to undertake rapid rail projects is small, it is large enough to increase competition and lower the bids. Many sources mentioned that the level of competition is very high in Turkey, and in some instances becomes unfair. In one instance, 17 bidders qualified for a tramway construction tender.[67] When there are too many bidders, prices go too low and so the 20% cost increase cannot be avoided.

Since construction contracts are awarded based on the lowest-bid criterion, a comparison of the project cost estimates obtained by the agency and the contract values can provide a sense of how low construction firms are willing to bid, in order to win contracts. The estimated values are not revealed prior to the tender, but since an itemized list of quantities is provided to bidders as part of the tender documents, and a majority of the material, equipment and labor are priced based on standardized cost lists, the contractors have the information they need to attain similar estimates.

Looking at the differences between the estimates and contract costs of 16 lines, we see that save for five projects that were tendered in March 2017, the contract values go as low as 35% below the estimated costs (Table 21).[68] In fact, in the case of M9, the contract was awarded to Aga Enerji at a value that is 31% lower than the project’s estimated cost, which can be attributed to the increased number of firms that qualified to bid, due to the lowering of the qualification requirements in the tender call.

A comparison of the call for tenders of M5 (06-28-11) and M7-P1-2 (12-18-13) reveal the change in qualifications requirements in the tender calls. In the earlier M5’s call, work under either of the following three groups of work areas qualified: G-I) Railway, Rail Systems, A-III) Foundation-Tunnel, Closed Drainage, Gallery (and Shaft) Works D-IV) Electromechanical Works, Rail Systems Electrification Works; while in M7-P1-P2’s call, work under either of the following two groups qualified: A-VI) Railway Works (Infra+Superstructure) or D-VI) Electric Transit Vehicle Technology Works. The latter included Electromechanical works, Rail Systems Electrification, Rubber Tired Transit Electrification, Cable Transit Electrification and Electric Vehicle Charging Station Works. This meant that a contractor who had built an Electric Vehicle charging station could bid for a rail tender that involved several kilometers of tunneling.

This change in the qualification requirements applied to all rapid-rail tenders opened after M7, and allowed smaller firms with little to no experience in rail construction to enter and win tenders. For Aga Enerji, known to be “good friends” with the AKP government, it meant winning the bids for both M3-P3 and M9, without having to form joint ventures with larger, more established construction firms.

Senior managers who have worked for contractor firms in Turkey and abroad mentioned that the level of competition lowers costs to the extent that contingencies are not planned for and quality of construction is risked especially after the qualification conditions were lowered to allow for inexperienced contractors to bid on rail projects (Personal Interviews I and J). However, supporting evidence is hard to track down; many of these lines are new, if not still under construction. Maintenance and downtime costs over several years should be considered and possibly compared with other systems around the world for a conclusive verdict. On the other hand, based on our interview with industry experts, the agencies IMM and AYGM, the designers, the CMs and the subcontractors have gained a level of experience and know-how that can make up for the shortcomings of the contractor, guaranteeing an acceptable level of construction quality.

Table 19. M9’s Scope

ELEMENTSCOPEFEATURES
Guideway• 13,39 kilometers guideway• Single line
• Completely underground system
Track• Twin tracks 
New Stations10 new stations + finishing and electromechanical
• (İkitelli Guney Sanayi)works of Masko station. İkitelli station had previously been completed as part of M3 construction starting service in 2012. 
• Masko
• Bahariye
• Atatürk Mahallesi 
• Halkalı Cad (212)
• Evren Mah
• Mimar Sinan 
• Doğu Sanayi
• Kuyumcukent
• Çobançeşme
• Yenibosna
• Ataköy
• Masko: deep tunnel and C&C construction, 26 meters deep
 (Civil works had been completed previously)
• Bahariye: deep tunnel and C&C construction, 18 meters deep
• Atatürk Mahallesi: deep tunnel and C&C construction, 22 meters deep, transfers to M7.
•  Halkalı Cad: deep tunnel and C&C construction, 25 meters deep
• Evren Mah (15 Temmuz): deep tunnel and C&C construction, 30 meters deep
• Mimar Sinan: deep tunnel and C&C construction, transfers to M1 at concourse level
• Doğu Sanayii: deep tunnel and C&C construction, 25 meters deep
• Kuyumcukent: deep tunnel and C&C construction, 36 meters deep
• Çobançeşme: C&C construction, 21 meters deep, planned transfer to Sefakoy Incirli
• Yenibosna: deep tunnel and C&C construction, 22 meters deep, transfers to M1 at concourse level
• Ataköy: C&C construction, 21 meters deep, transfer to Marmaray
Tunnels• 13.39 kilometers twin bore tunnels• 4 TBMs utilized for 11 kilometers of tunnels. All were launched from Çobançeşme
• Tunnels between İkitelli and Halkalı were built with NATM.station, each pair mining in opposite directions (North - South).
Systems• Traction power supply system
• Overhead catenary system
• Signaling systems
• Telecommunication system
• SCADA system
• Operation control and administrative centers
• Electrical distribution system
• Elevators and escalators 
• Signaling Grade of Automation: 2
• ThyssenKrupp: 25 elevators and 116 escalators.
Support Facilities• The line will share M3’s yard at Olimpiyat Station for maintenance and storage.• Control center and offices will be located in a structure to be constructed on top of the existing M3 maintenance yard.
Challenges and Technological Approaches

Coordination, not only between multiple engineering and design teams but also with the ministries and the military during M9’s construction was critical in avoiding potential conflicts. The line was designed to integrate with six other metro lines and the right of way intersected with the Ayamama stream, a NATO oil pipeline, and an international telecommunications line. Several parts of the route went through weak soil and in some sections of the line through silt-clay (AASHTO classification A5)[69] that required extra support using umbrella arches and frequent braces which was costly (Personal Interview H 2020). Moreover, the line went through dense settlements with low quality building stock, necessitating extensive geotechnical planning and monitoring during construction. Like most north-south metro lines in Istanbul, the stations have 90-meter platforms and are smaller than their east-west counterparts, requiring meticulous coordination to integrate mechanical and electrical systems inside smaller spaces.

The designers hired by the contractor addressed some of these issues using Building Information Modeling (BIM) technology during different phases of the construction. BIM is a technological innovation on the software side of rapid-rail design, management, and construction that allows three-dimensional architectural and structural models of built assets to be linked with multidisciplinary information including labor, material, equipment, cost and scheduling data. In Istanbul, BIM has been used in rail projects’ design since 2013 and has been added to contracts as a requirement from the contractors since 2014, starting with M7’s construction tender. Having detailed BIM specifications in the construction contracts allows for seamless coordination across teams at every stage of a project, from planning to construction. This emphasis on BIM in Istanbul has been acknowledged globally; local firms have won multiple BIM design awards for the successful implementation of BIM solutions in rail projects.[70]

M9’s designers working with the contractor used BIM models to determine the shaft and station locations of the line, while avoiding existing buildings and infrastructure (Figures 22-24). While building the BIM model, they laser-scanned the sites and used point cloud technology. Construction progress was updated in real time on these models and shared with all teams, coordinated by the design team and approved by a BIM manager appointed by the CM or the agency. Tunnel excavation and final lining process work program verification was done through 4d models integrating time as a component in the 3d models which prevented the TBM schedules from conflicting with the construction schedules of station components, which is critical to keeping phased construction on schedule and from preventing mishaps. Integration of the line with the existing transfer stations also benefitted from laser scanned point cloud models. QR codes were utilized in technical rooms providing instant access to Room Data Sheets which helped staff monitor construction (Personal Interview Y 2021).

figure 22. BIM Model of M9 Platform tunnel. Courtesy of Prota Engineering.

Station BIM model

figure 23. Yenibosna Station BIM model and existing site conditions (laser scan) integration. Image courtesy of Prota Engineering and Aga Energy.

Site laser scan model

figure 24. Doğu Sanayi Station: Existing site conditions (laser scan) integration. Image courtesy of Prota Engineering and Aga Energy.

M9 is seen as a pioneer among Turkey’s rail infrastructure projects in terms of the level of integration of BIM technology in its construction processes along with M8 Dudullu-Bostancı. M9 was an infrastructure category finalist in both of Autodesk’s 2018 and 2020 AEC Excellence Awards that honor the innovative applications of “technology for collaboration, prefabrication, and design automation” in the building industry (Autodesk n.d.). Both the Rail Systems Department under IMM and the Ministry of Transit under the central government value investing in the integration of BIM technology in their infrastructure construction processes. Following her appointment as the head of Rail Systems Department of IMM by the new mayor İmamoğlu, Dr. Alpkökin initiated the establishment of a new BIM team within the directorate. Also, the Ministry of Transit issued new BIM specifications for infrastructure contracts in 2021.

Lessons Learned

We believe that M9’s relatively steady progress, following the 2018 economic crisis, can be attributed to a number of factors, most of which are consequences of the competitive construction market, as well as years of accumulated experience within IMM’s Rail Systems Department and the city’s rail infrastructure construction sector. Despite Aga Enerji’s own lack of experience, it had access to engineers, consultants and subcontractors in the market who had gained expertise through decades of building rail in the city. Moreover, by the time work started on M9, the IMM had overseen 100 kilometers of rapid-rail construction with another 135 kilometers in progress. During this period of intense rapid-rail construction, the agency reorganized itself, established working relationships with competent consultants and contractors, refined its procurement process, and improved standards to enhance working conditions and manage nuisances. Aside from the delays due to financing issues, M9’s construction proceeded without major setbacks and the line is expected to be completed by 2023 with minimal to no cost overruns.

By the time of M9’s construction, the Rail Systems Department had established mechanisms to manage the contractor more effectively. One example of this was the geotechnical planning specifications in the project’s contract. Rigorous geotechnical monitoring and relevant mitigation measures had been adopted by the agency after the establishment of the Rail System Projects Directorate under the department. Specifications for a ground settlement monitoring plan and monitoring-system equipment were provided in the contract. The geomonitoring implemented for the construction of M9 involved hourly readings from sensors at multiple locations, through which any surface deformation was reported to the NATM and TBM teams, the CM, and the agency. The scope of the monitoring was specified in the contract in detail, and involved the definition of an impact zone which would cover all locations where a ground settlement over 1 cm (0.4 inches) was expected.

Aga Enerji, which had only built highways and was known as an excavation subcontractor when it won M9’s construction tender, benefitted from its collaboration with Prota Engineering, whom it hired as its designer. Prota had designed several rapid-rail lines in Istanbul and other cities in Turkey, including Istanbul’s M4, the CR3 phase of Marmaray and a light rail line in Izmir as well as having experience in Europe, designing Warsaw’s line II. It had worked with both the IMM and the AYGM under the Ministry of Transit in Istanbul. Prota was also the driving force behind the adoption of BIM in the infrastructure sector, which the municipality adopted and mandated in 2015. So even though Aga Enerji lacked experience, it worked with experts in the field and invested in developing the expertise to build rail in the future.

Mismanagement of M9’s project financing was the major culprit behind the delays over the life of the project (Personal Interview V 2021). Even though agreements with European grantors had been signed early on, resources to be declared as securities to receive the payments had not been allocated, hence the agency missed payments to the contractor. Works on M9’s construction sites slowed down and wouldn’t pick up for a year. Istanbul’s newly elected governor İmamoğlu was well aware of the urgency of the city’s transit infrastructure needs, so soon after taking office in 2019, he secured new resources to fund M9 and all the metro projects that had stopped construction because of the 2018 financial crisis.

3.4 Conclusion

3.4.1 What is There to Learn from Istanbul?

Based on our study of Turkish rail construction, we found that there were four primary factors that kept construction costs low and the processes efficient. First, there was an ongoing political commitment spanning different administrations to build an extensive rail network. Second, through years of construction experience, initially learning from foreign experts brought in to consult and train the Turkish teams, and later collaborating with Turkish contractors and consultants who were now building rail all over the world, the agencies gained the capacity to streamline processes and manage projects efficiently. Third, market competition encouraged contractors and consultants to lower their costs, while developing their technical and technological capacities. Fourth, all parties involved quickly learned that speed saved money, and refined their processes to avoid unnecessary delays. Ultimately, these conditions cultivated a competitive, agile and competent rail sector.

Throughout the last 20 years, the IMM has developed know-how and optimized its procurement processes to better manage rail construction projects. On the other hand, the AYGM under the central government has recently hired former IMM personnel as AYGM has begun to manage more projects in Istanbul. Since 2014, the IMM has utilized “final design for application” projects that are at 60% design, which has helped it go to construction tenders with more detailed information and better control over projects. In the earlier projects where the agency was still figuring out how to build subways, they would go to tenders with an underdeveloped preliminary design, leading to higher costs due to overdesign overseen by the contractors, as was the case for M4 and earlier projects. By the time the agency started working on M5, it knew enough to specify better optimized station and tunnel designs. The contractors we interviewed agreed that this was one of the major changes that improved rail-construction processes; over the last 15 years, the agency has learned to spend more time on the design, working with experienced design consultants, prior to the construction tender.

Developing a good working relationship between public agencies and contractors has been critical to Istanbul’s success building more than 300 kilometers of heavy rail between 1989 and 2030. The agencies and contractors have struck this balance by tendering based on itemized costs and procuring the construction through as few contract packages as possible, which help the agency keep the process and costs under control. Additionally, agencies have expedited approvals and paperwork that allows for construction to start and advance quickly once the contract is signed. With the agency and contractor working together, the preliminary designs can be altered and innovative solutions can be developed quickly. While the costs are locked in through the contract, since the contracts are based on itemized costs, increases are allowed based on changes. However, the total increase is limited to 20% of the contract value. Increases beyond 20% need cabinet approval, which is almost always avoided to prevent delays. Nevertheless, through regular progress reports and payments, spending is kept under control by the agency. Additionally, multiple people whom we interviewed including one senior agency executive concluded that distributing risk among multiple contracts and contractors is unnecessary, and Istanbul saves money and time by avoiding breaking the work into multiple contracts (Personal Interviews G, J, L 2020 and P, V 2021).

It is not uncommon for a metro construction tender with a scope involving over 10 kilometers of tunnels to receive six or more bids, even when there are several lines under construction at the same time. The intense competition for metro construction encouraged contractors to innovate and bring their prices down. Contractors are motivated to win bids because there is a clear pipeline of new metro projects and many have invested in technology and expanded their equipment pools. Since 2014, Building Information Modeling (BIM) has been used in design, planning and management of construction, and it has been mandated through the agency’s contract specifications. Design consultants, construction managers and contractors rapidly adapted to the new requirements and all attribute their improved coordination and more efficient management of projects to BIM solutions. In addition to greater competition amongst general contractors, it is also now easier for contractors to buy or rent construction equipment, which reduces costs. Many contractors own TBMs, and keep costs low by utilizing the same machine on multiple projects. They also understand the specifications of the equipment better, and therefore can buy TBMs suitable for different soil conditions rather than changing cutter heads during construction, which slows down the pace of tunneling and adds costs.

The agencies, contractors and consultants understand that speed saves money. The Environmental Impact Statement (EIS) certification and preliminary approval processes are rapid, and the contractor starts excavating as soon as the project’s rough boundaries, such as station exits and entrances, are determined. The contractors obtain pre-approval to start excavating before the designs are 100% complete and break ground, even though this sometimes means needing to do revisions. A senior manager we spoke to attributed Istanbul’s speed and lower costs to the Turkish teams’ ability to think outside the box (Personal Interview I 2020). The contractor and the agency develop quick solutions for problems that come up and find ways to work within the plans, standards and regulations. So, the project ends up changing a great deal throughout the construction process, but is completed within the planned budget, or with the 20% allowable cost increase, and fast, relative to other countries in our database.

A steady stream of projects, competition between the IMM and the Central Government’s Ministry of Transportation, as well as a robust pool of contractors vying for work has cultivated a productive rail-construction ecosystem in Istanbul. This benefits the city, even in cases where a contractor lacks experience, the agency, consultants, subcontractors with years of experience in the field along with the now established procurement mechanisms can make up for these shortcomings by helping the contractor learn on the job and deliver projects with minimal delays and cost overruns.

3.4.2 Is There Room for Improvement

While Istanbul has managed to expand its rail network rapidly and at a fraction of the cost compared to cities in Europe and North America, a number of issues remain unresolved in the rail-construction industry. The agencies and the contractors building rail in Istanbul know that speed saves money, yet rushing through certain stages, especially the preliminary planning processes can bring on challenges later, during construction. Health, safety and environment (HSE) mitigation budgets are small and without a prevailing culture of community engagement related to infrastructure projects, environmental disruptions can be overlooked. Low labor and white-collar wages bring down labor and professional service costs, but at the cost of unionization and precarious labor conditions, which are susceptible to the will of the contractors. Local and national politics help boost rail projects, but political conflicts also delay schedules and lead to cost overruns. Archeology remains a challenge for tunnel excavation in Istanbul, and the city lacks a guiding framework defining the principles of managing an infrastructure project in the presence of archeological discoveries.

Even though many practices and conditions have improved over the years, especially after the establishment of the Rail System Projects Directorate under the IMM; experts who have long been involved in rapid rail construction in Turkey agree that there is still room for improvement on the following issues:

  • Speed can sometimes come at the cost of quality. Supervision is not always strict and intervention is minimal to keep construction going, so the end product may not last as long. The British say their new lines will last 120 years.  In Istanbul, many new lines will likely need to be replaced/repaired in less than 100, according to a few sources who expect this to reflect on the maintenance costs in the future (Personal Interviews G, I 2020 and T 2021). However, maintenance costs are a problem for rail infrastructure in many countries we have studied, and it is also difficult to make comparative projections for which system will require costly maintenance earlier in their useful life.
  • Mitigation and preliminary planning budgets are low, so, even though there has been greater emphasis on HSE mitigation measures, they are not as well planned and prepared for as in European and North American countries. One senior quality engineer explained that the agencies could save 5-10% by spending 2-3% more on the preliminary design as well as HSE mitigation measures; by which he implied that Turkish teams were generally not good at this, and lost money in the later phases of construction having to do repairs related to environmental damage and design revisions that could be avoided with more rigorous planning early on in the project (Personal Interview M 2021).
  • Labor is cheap and teams work around the clock. TBMs operate 24 hours a day, and teams take one Friday off every two weeks. The agency and the general contractor lack sufficient control over the work conditions of subcontractors. In terms of the quality of production, this has less influence on the tasks that require expertise, such as TBM tunneling, because local teams need to compete with international teams and so are required to provide high quality services (Personal Interview AB 2022).
  • Professional staff are paid too little. Engineers, designers and CMs receive a fraction of the contractor’s fees or what their counterparts would be paid in Europe and North America. This impacts the time and effort spent on design, planning, quality assurance/quality control (QA/QC) and mitigation. Turnover rates at consultant firms are also high, meaning, experienced teams do not remain together for long.
  • The RFQ standards have been lowered, which is one reason for increased competition. The other reason is that Turkey has over 450,000 contractors. This also means less experienced contractors can be awarded large subway projects.
  • Politics are very much a part of how rail systems are planned and constructed in Turkey. The central government and the local municipalities run projects separately and the central administration does not pay for municipally run projects. Political pressure can speed up construction but may also hinder QA/QC processes by rushing the commissioning dates. Conflicts between the local and central governments can delay permits and increase third-party costs. Also, changes in political administration can result in mass firings and hirings, which means the agency may be unable to retain experienced personnel, as was the case when the İmamoğlu administration beat AKP in municipal elections. However, several of these experienced staff members were hired by the central government which currently oversees more than 80 kilometers of rapid-rail construction projects in the city.
  • Archaeology has and will continue to be an issue in rapid-rail construction. Therefore, it is important to develop guidelines on how to manage rail-construction projects in archaeologically-rich environments, similar to those we saw in Rome.

Istanbul, having started building its rapid-rail infrastructure in the late 1980s, has come a long way within three decades, owing to sustained political will, a steady pipeline of new projects, evolution of the owner agencies, streamlined procurement processes, and the cultivation of expertise in its rail industry leading to competition between contractors and the lowering of costs. On the other hand, rail construction in the city suffers from the impact of political squabbles between the central and local governments, inadequacies in the implementation of HSE mitigation measures, substandard labor conditions and corruption. Produced as part of a series of case studies from around the world within the scope of the Transit Costs Project, this report argues that based on Istanbul’s positive and negative experiences other agencies can bring down construction costs through efficient management while maintaining standards for labor, mitigation and the quality of construction.

[1] The transit agency “Istanbul Ulaşım [Istanbul Transit]” under the Municipality was established in 1988 and was responsible for the rapid rail system of the city. It was renamed “Metro İstanbul” in 2016.

[2] The 6.5 kilometers section was commissioned in September and an additional 2 kilometers, in December of 1989.

[3] Consisting of mini buses and dolmuş which are 8 passenger mini buses.

[4] See Appendix A for ridership numbers.

[5] According to a recent study based on interviews with officials from the Istanbul Metropolitan Municipality (IMM) officials and surveyed 21 reports and plans, 10 of which were approved by the IMM Council, expanding the railway network is stated as a main priority for IMM in “IMM’s Strategic Plan for 2020-2024”, “Istanbul Climate Action Plan, 2018”, “Istanbul Metropolitan Municipality Transportation Master Plan, 2011” and “Istanbul Development of Public Transport Strategies Master Plan Report, 2019” (Beyazit-Ince et al. 2020).

[6] The initial target of 388 kilometers for the year 2023 in the 2011 Master Plan was revised.

[7] We use Purchasing Power Parity adjustments based on data from the World Bank (World Bank n.d.)

[8] AKP is the right wing, conservative and populist political party that has been in power in Turkey since 2003. CHP is left wing and the main opposition in the parliament.

[9] Muck yard refers to the land that the city designates for the unloading of excavated earth.

[10] Public consensus is that this was facilitated through each bidder submitting the lowest bid for a different line, bringing to mind a possible pre-arrangement among bidders, possibly in coordination with the agency. In Istanbul, construction tenders are awarded based on the lowest bid criterion at the end of a two-staged tender process involving a Request for Qualifications and a Request for Proposals.

[11] 7 metro lines, 4 trams, 3 funiculars and the Marmaray commuter line.

[12] Some senior managers of contractor firms pointed out that restricted timelines demanded by the agencies in Turkey compromise HSE mitigation standards; Turkey has a higher rate of occupational fatal accidents than Europe and the US. According to the International Labor Organization’s statistics, Turkey had 7.4 occupational fatalities per 100,000 workers (in 2016) while the US had 5.3 (in 2018), Italy, 2.4 (in 2015), Sweden, 1 (2016) and the U.K, 0.8 (in 2015) (International Labor Organization [ILO] n.d.). However, it is hard to draw a direct link between the speed of construction and the quality of HSE.

[13] The direct translation of the title of this document would be “final design for application project”.

[14] To learn more about what the EIA process entails for projects subject to EIA, see Appendix D.

[15] EURIBOR (Euro Interbank Offered Rate), LIBOR (London Interbank Offered Rate) are average interest rates which leading Eurozone and London banks estimate that they would be charged when borrowing from other banks. These rates are updated daily.

[16] For the line M5+M13, Deutsche Bank provided a loan covering 15% of the costs and did not have such a requirement, however an executive level engineer of a contractor stated that if the financing was to be extended, it would very likely require the procurement of the catenary system, electrification and telecommunication systems from Siemens (Personal Interview J 2020). This credit agreement was arranged by the IMM.

[17] ₺5 billion and ₺7 billion was spent on projects in Istanbul and Ankara but only ₺30,000 on projects in Izmir (Savaşkan 2020).

[18] FIDIC (the International Federation of Consulting Engineers) is a standards institution best known for their contract templates. FIDIC Red Book Design-Bid-Build contract template recommends a balanced division of risk between the contractor and the agency.

[19] Issued in Turkish and recently also in English and Russian (Turkish Ministry of Environment and Urbanization [TMEU] n.d.)

[20] 80%-20% ratio have been utilized in the tenders of: M5 Üsküdar-Ümraniye-Çekmeköy, M4 P2 Kartal Kaynarca, M7 Mecidiyeköy-Mahmutbey, M8 Dudullu-Bostancı, M5-P2-M13 Çekmeköy-Sancaktepe-Sultanbeyli and Sarıgazi (Hastane)-Taşdelen-Yenidoğan lines.

[21] Electromechanical systems include: power supply & traction power system, signaling, communication and control system, environmental control systems and supplementary station facilities.

[22] See Appendix C for more detail on utility replacement work in Istanbul projects.

[23] Most metro lines in Istanbul are 100% underground, with the exception of short sections and the at grade commuter line CR3, thus they don’t require a lot of superstructures.

[24] The average timeline specified in the contracts of seven recent rapid rail lines with an average of 14.85 kilometers in length is 1063 days, which means that one kilometer of rail is expected to be completed in 2.5 months. The actual duration of completion for one kilometer of rail line in Istanbul is 7 months on average.

[25] See Appendix B for a detailed list of wages for the TBM staff in Istanbul and New York.

[26] The 20% limit started to be applied in 2008 and excludes price adjustments based on inflation and the costs of CM consultants who charge based on man hours even after their initial contract value is overrun.

[27] There are examples of the ministers’ granting approval for change orders exceeding 20%. For M2’s 4. Levent – Darüşşafaka section, a 31% increase was approved in 2012.

[28] Most of the recently built Istanbul metros are system-integration level 4, fully unattended (driverless) systems which are procured from foreign firms like Alstom (formerly Bombardier), Thales and Siemens. This means the increases in Dollar or Euro exchange rates have a great impact on the contractor’s costs. Price adjustments allowed by the contracts used to pay for currency exchange rate increases before, but were unable to since 2018 as the Turkish Lira lost over 50% of its value against the dollar.

[29] FIDIC (the International Federation of Consulting Engineers) Silver Book used for the Marmaray project is a template for a lump sum, turnkey, Engineering, Procurement and Construction contract which transfers the majority of the responsibility and risk onto the contractor.

[30] See Ocak’s 2006 paper for public and private motor vehicle passenger counts performed on the route in 2005.

[31] The contractor also orders TBMs soon after they sign the contract. A TBM is ready to be shipped in a minimum of 10 months, it is delivered in a month and tested on site for another, hence the contractor has at least 12 months to start TBM tunneling after they are awarded the construction contract. This is enough time to complete a station box that can double as a launch box for the TBM(s), and to start drilling the tunnels.

[32] Istanbul Technical University’s Department of Transport Engineering was commissioned to carry out an analysis with results supporting the decision in April 2005 and later the Transportation Coordination Center (UKOME) was notified and issued their approval in June. UKOME is a municipal agency responsible for the coordination between the metropolitan municipality, national and local public institution’s transportation departments and the district administrations under the city.

[33] Even though we were not able to uncover any details regarding the approval process of the new contract’s budget that was more than 9 times that of the original one, Istanbul’s mayor being a member of AKP, the ruling party of the central government, was likely an easing factor.

[34] The EURIBOR value that was used in the financing fee estimates of more recent lines are 0.6, allowing for a 3.2% yearly interest rate. At the time of Kadıköy-Kartal’s contract, EURIBOR values averaged around 4.4, taking up the interest rates to 6.6, more than double of what we calculate for more recent loans. This may be the reason for the more recent loans having longer payback periods such as 30 years; the lower interest rates make it feasible to extend the repayment schedules.

[35] İETT is responsible for managing Istanbul’s bus and BRT network today.

[36] A national law passed in 2003 already required the procurement of a final design document before launching construction tenders for infrastructure projects, however, these documents were prepared by the public enterprise İstanbul Ulaşım A.Ş. (later renamed Metro İstanbul) until 2014 and used to be underdeveloped.

[37] A tunnel ventilation expert we interviewed explained that Copenhagen’s City Ringen (M3) had minimalist, simplified stations in terms of aerodynamics, with fewer articulations and openings so that ventilation loads could be minimized. Openings of the station such as escalators and entrances would act as shortcuts for the air, weakening the suction required for ventilation, which would reduce the aerodynamic efficiency and require fan capacities to be increased (Personal Interview R 2021).

[38] Marmaray’s platforms are 225 meters; M11’s, 180 and M5’s, 140. Metro 2 lines linking these higher capacity Metro 1 lines operate half the number of trains in traction and so have smaller platforms: M8 and M12 stations are 100m long; and M9, 90m.

[39] In Turkish projects, NATM tunneling speeds vary between 1-2 meters/day depending on the quality of team management. With TBMs, the speed goes up to 24 meters or 16 segment rings/day.

[40] These TBMs are called “rebuilt”, not “refurbished”, as some parts are new and some are second hand.

[41] M4’s Phase 2 cost $79 million PPP/kilometer. Phases 3 and 4, the construction of which are still ongoing, were contracted for $68 million and 81 million PPP/kilometer respectively. M5’s Phase 1 cost $101 million PPP/kilometer and M6, $76 million PPP/kilometer. M9 and M11, the airport connector’s Phases 1 and 2 were awarded at $95 million, $90 million and $95 million PPP/kilometer respectively.

[42] However, the signaling is outside of the contract because the system had to be integrated with the remaining 63 kilometers of the commuter line and was contracted separately.

[43] DLH was restructured as AYGM (General Directorate of Infrastructure Investments) in 2011.

[44] See (Ministry of Foreign Affairs of Japan n.d.) for countries.

[45] We do not have access to the specific conditions of this contract, but assume that the costs approximately doubled by the time of closing (Figure 15).

[46] For example, they lost four months just for bureaucratic procedures waiting for a permit on a section of the tunnels around Sirkeci. They lost another five months due to miscommunication regarding discovered archeological structures; the Museums Directorate didn’t want to remove them, but they eventually had to be removed for the guideway. The findings were documented in 3d, the contractor also did a structural analysis, which the board didn’t initially require but requested later, nevertheless, the structural analysis had to be re-done.

[47] In 2018, a sinkhole that opened up during the excavations of the M8 line caused the death of two security personnel working at a nearby residence. The following lawsuit charged 9 staff members of the contractor and the subcontractor including project directors, deputy directors, and chiefs of the geotechnical, tunneling and depot construction crews, with 6 years and 8 months of imprisonment (Çekmeköy Haber 2018).

[48] Similarly, the archeological excavations at the adjacent site of M2 were outsourced to the project’s contractor by the IMM. This was necessary because the responsible entity Istanbul Archaeology Museum only had 30 archeologists on staff, no budget and no authority to hire temporary staff. The contractors hired subcontractors, who hired freelance archeologists, conservators, unskilled workmen and specialists (between 260 to 380 people) as well as setting up labs and hiring equipment for the sites (Bonini Baraldi et al. 2019).

[49] The Union of Chambers of Turkish Engineers and Architects declared that early opening compromised safety of operations due to the phased opening of the line and incomplete certification process (Sendika.org 2013).

[50] Media sources speculated that the command center cost $22 million PPP.

[51] Marmaray’s ventilation scheme is very different from what is commonly implemented in Istanbul. In regular lines, even the Metro 1 type, 180 meter-platform stations, there are 4 tunnel ventilation fans (TVF) in addition to 4 station exhaust and inlet fans. 2 shafts connect the fan rooms to the surface, one at each end of the station, and each circular shaft is divided into two with the larger portion dedicated to the TVFs and the smaller, to the platform ventilation. The tunnel and station ventilation fans are horizontally configured and the grates of the shafts open to public land or road sides, flush with the ground. No at-grade structures are necessary, these shafts are built as part of the station structures and are 100% underground, which satisfies the NFPA regulations. Some “shaft” type stations designed by the Italian designer Geodata have their fan rooms in the large, central shafts.

[52] An agency planner expressed his concern on the issue: “We should prioritize better route design and acquire land where necessary. Construction of a line planned to take 4 years takes 6-8 years in any case, so why not utilize this time better?” (Personal interview C 2020).

[53] According to senior managers at contractor firms that build rail in Turkey and abroad, at every stage of the life of a rail project, Turkish teams are smaller compared to those in other countries including US, Canada, Poland and Qatar.

[54] In addition to Gama-Nurol and Taisei’s contracts, a contract was made with BEM, Taisei’s Electrical and Mechanical department operating as a separate entity.

[55] We use PPP based on 2020 as the mid-year of construction.

[56] As also mentioned earlier on in this document, this directorate was established under the Rail Systems Department and the General Secretariat of the Metropolitan Municipality of Istanbul in 2014, and started procuring final design documents at 60% design to facilitate accurate cost estimates and tendering the construction of rail lines with itemized costs.

[57] Note that this line’s contract value was agreed upon in € currency which became an advantage for the contractor as the Turkish Lira lost up to 70% of its value against the € since the contract date (as of September 2021). Contracting with foreign currencies was prohibited by legislation later in 2016.

[58] The earliest cost estimate for this line from the 2011 Transportation Master Plan is $ 1.5 billion PPP for a 12.2 km right of way.

[59] Includes drainage, fire control and protection, AG power distribution, lighting, clean and wastewater systems.

[60] See Appendix D for information on the EIS process in Turkey.

[61] TBMs digging in parallel in the same direction require at least 150m distance between them due to the ground vibration they create, so before the second one starts tunneling, the first needs to have advanced at least 150m.

[62] ÜFE is an index based on products in farming, fishing, mining, energy and production sectors.

[63] Securities that the municipalities present to receive loans can be in the form of deposits on hold, receivable assets or mortgages.

[64] Upon request for information in September 2021, the Rail Systems Department declared the planned date of completion as 2023.

[65] Currently slated to open in 2023.

[66] This is very different from the US where insurance is required to cover 100% of the costs.

[67] 17 firms were shortlisted, 6 of them submitted bids (Rayhaber 2020).

[68] These five lines’s tendering processes were heavily criticized for interfering with competition and for political corruption. The contracts were awarded to five different consortia on the same day, and each of them had bid for all 5 projects, strategically winning only one.

[69] Meaning 35% or more of the material would pass through a 0.075mm sieve (Jamal 2019).

[70] Designer firm Yüksel Proje won Autodesk’s AEC excellence awards in 2019, in both the large and medium scale project categories, for the BIM project of M12 line and their “Istanbul Rail Systems Design Services” for other Istanbul metro projects they have utilized BIM. Prota Engineering was shortlisted for the same awards in 2020 with their BIM projects for the Istanbul M9 and Mersin Metro lines.

The Italian Case: Turin, Milan, Rome and Naples

Most recently updated on 15/09/2022.

4.1 Introduction

In this in-depth case study of Italian rail rapid transit projects, we investigate how Italian construction costs have changed over time and distill lessons learned to understand how design, procurement, and policy drive costs. We begin with an analysis of a systematic country-level database encompassing 93% of transit projects, as measured by total kilometers built and expected to be completed in Italy between the postwar years through the end of the 2020s. The first section illustrates the overall institutional framework, the various planning and delivery practices of transit projects and their evolution over time, as well as the tools that have been put in place to curb construction costs and improve procurement practices, notably since the 1990s. The second section of the report focuses on four city-level cases: Turin, Milan, Rome, and Naples. Thanks to the analytic study of the history, politics, context, delivery, and design choices, the cases highlight important factors that contribute to the variation of construction costs among the different cases. Finally, the different takeaways derived from this multi-level in-depth analysis of the Italian cases has been summarized in ten main lessons identifying the fundamentals of a cost-sensitive approach to building urban rail infrastructure.

The data collected in the general Transit Costs database situate Italy as a medium-to-low cost country for metro rail construction, with an average cost of $159 million per kilometer compared to an overall average of $280 million per kilometer globally.[1] The Italy-specific database encompasses 50 metro rail projects accounting for 307 km or 93% of metro rail mileage built in Italy since the 1940s, currently under construction, or entirely funded and to be completed by the end of the 2020s. The analysis of this expanded country-focused database highlights a generally lower average value ($120 million/km) and a high variability between projects and cities, as well as over time: from as little as $22 million/km for Milan’s M2 at-grade suburban extension built in the early 2000s, a cost on par with mainline double track rail, up to the $645 million/km for Naples’s line 1 central segment, the most expensive section of metro ever built in Italy. This variability, which will be analysed in greater detail in section 2, is the result of both historic trends, differences in local capacity, and Italy’s unique urban morphology.

Section 3 examines the institutional planning framework, funding, procuring and delivering of transit projects that contribute to an average construction cost generally lower than our global averages, especially in North America, albeit with some notable exceptions. The evolution of the Italian project-delivery framework offers a few fascinating lessons, both positive and negative ones, for countries that wants to tackle the upward spiral of transit capital costs. A growing concern for cost control since the 1990s facilitated the implementation of mechanisms, tools and institutions designed to curb waste, and avoid mismanagement and corruption-prone practices in public-works delivery. In the aftermath of these reforms, three main innovations revamped transit project delivery in Italy. First, a new anti-corruption authority (ANAC) was established to clean up public procurement practices. Second, Italy adopted official reference unit-price lists (Prezziari delle Opere Pubbliche) to determine the benchmark cost of procurement and the bid ceiling. Third, the bidding process was overhauled to incorporate technical scores when assessing a bid rather than focusing exclusively on costs. On the other hand, it is worth noting that, despite a planning and approval process managed by the civil service and less prone to external lawsuits and NYMBY-induced design, the Italian institutional framework suffers from important veto points and political meddling than can increase the cost of delivering infrastructure in particular contexts, notably historic city centers subject to strict heritage protection.

The four in-depth cases presented in the second part of this report examine metro projects built in Turin, Milan, Rome, and Naples over the last twenty years. We rely on interviews with public officials, engineers and experts; [2] the analysis of official documents and data provided by transit agencies, as well as reports from national supervising authorities and articles from the specialized transportation press to reconstruct the key factors that drove costs in specific projects. Each city offers insight into the benefits and challenges of different delivery methods, differences in local capacity, urban contexts, and diverse financing structures. What is clear across all of these cases, however, is the importance of building and maintaining in-house technical capacity to procure and manage projects effectively. Furthermore, the cases illustrate how environmental constraints, such as the unique urban and geological conditions of old and dense city centers, and contextual factors, such as political fickleness, bureaucratic veto points, and uncertainties over funding and schedules, can result in overdesign, trigger costly design choices and scope changes, and promote poorly conceived delivery schemes, that hinder public oversight capacity.

4.2 Urban rail construction in Italy: a general overview

4.2.1 A latecomer to urban rail construction

Unlike other European countries that began building urban rail in the 19th and early 20th Centuries, Italy opened its first line after World War II. Despite several attempts in the interwar period to develop metro rail networks in Rome, Milan, Genoa and Naples, the first proper metro line opened only in the mid 1950s. Metro construction finally gained momentum during the postwar years, characterized by fast urbanization and dramatic economic growth, but was hindered by the lack of a national transit policy, which finally emerged in the late 1980s, and by an essentially car-oriented transport policy. Below we identify three critical periods in the history of rail-based urban transit in Italy:

  • 1950s – 1970s. For at least three decades after the war, Rome and Milan were the only cities building heavy urban rail infrastructure. Rome, after the opening of the first section of line B in 1955, initiated the construction of line A in the 1960s. Those were the only urban transit projects financially supported by central government funds, as a 1920s law identified transit infrastructure in the Capital as a matter of national relevance, while considering it a local government responsibility elsewhere. In the 1930s, the city of Milan had already developed a plan for a three-line radial network, but the implementation was delayed by the onset of WWII, and the city only started construction on the first two lines in the mid 1950s. Unlike Rome, the metros were built with local funds, in the form of municipally granted bonds, and were delivered through “Metropolitana Milanese” (MM), a municipally-owned special-purpose concessionaire. In the mid-1970s, Naples was the third Italian city to develop a modern metro system, initially with municipal funds only.
  • 1980s – early 1990s. The period starting in the 1980s saw growing central government involvement in the planning and financing of mass transit infrastructure in large cities. This was a response to growing congestion and the untenable challenges created by rapid urbanization and a dramatic increase in motorization during the previous three decades. Legislative and governmental efforts tried to address growing congestion in major urban areas, while planners popularized the idea of “Iron Therapy” (cura del ferro) to highlight the need to develop frequent and reliable rail-based transit in the largest urban areas to “heal” cities from chronic automobile congestion and pollution. This resulted in a boost for transit projects in Rome, Naples and Milan, and in the tentative development of light metros in Genoa and Catania. Overall, these efforts weren’t part of a coherent national policy, and the projects initiated during this period are characterized by the use of non-competitive procurement formulas, such as the privately negotiated “concession of sole construction” scheme used in Naples, Genoa and Rome, where metro development was awarded to private consortia without a competitive tender. These opaque delivery schemes were at the epicenter of the vast web of systemic corruption around public procurement that emerged in the far-reaching scandals of the late 1980s known collectively as Tangentopoli (Bribe-burg). The sweeping investigation and the following trial, dubbed Mani Pulite (Clean Hands), prompted a period of political turmoil during the early 1990s and, ultimately, the collapse of the major parties that dominated the government during most of the postwar period.
  • Late 1990s -2020s. The 1990s and the early 2000s are characterized by a slowdown in metro openings as a consequence of fewer project starts in the years following Tangentopoli, and because of austerity measures prompted by the 1992 public debt crisis and efforts to curb the deficit within the Maastricht’s treaty limits.[3] Later, Italy experienced a dramatic surge in the new urban rail starts, especially in the 2010s and 2020s. New dedicated national grants for transit construction in 1992, 2001, 2016 help explain this recent resurgence in transit projects. At the same time, the adoption of cheaper automated light metro technologies and unattended automated operations, that has become the de facto standard for the newer lines opened since the early 2000s, made metro technology viable in smaller metro areas and lower demand corridors. Today, the seven metro systems operating across the country total 222.7 km and support an estimated 2.74 million unlinked daily trips.[4]
Italy kilometers of metro rail opened in Italy by decade

figure 1. New kilometers of metro rail opened in Italy by decade and city. For the decade 2020 – 2029 only the projects currently under construction, or fully funded and having a completion date set before 2029 are included.

4.2.2 Average costs and patterns in the historic variation of constructions costs

figure 2 shows the actualized cost per km of almost all urban rail projects built in Italy since the 1950s, except for a few metro extensions of lines M1 and M2 built in Milan from the late 1970s to the 1980s and the initial section of Catania’s metro, as it was impossible to retrieve trustworthy figures on these projects. Data have been collected from several official sources and, in three cases where official data were not available, from press releases or other sources.[5] Nominal Cost figures derived from official documents and agency’s data have been actualized to €2020 (henceforth referred to as “nominal value” or “nominal cost”) using the mid-year of construction as the base year and then converted to US dollar PPP values using a 1.3 coefficient. All numbers in the report expressed in “dollar’ or simplified as “$” are in 2020 PPP USD dollar real terms. However, it is important to point out that for projects built during the inflationary 1970-80s, characterized by double digit year-over-year inflation, even a minor shift in the identification of the mid-year of construction might lead to a notable difference in the actualization coefficient. With those caveats in mind, we identified a revealing pattern in the variation of construction cost over time.

The cost of most metro projects falls within the $ 50-200 million per kilometer range, with a few outliers, mostly located in Naples, Milan and Rome. Out of the 332 route-km collected in the database, 243 km (72 %) are tunneled while the remainder are at grade or elevated. The average nominal cost per kilometer of projects with more than 50% of the alignment tunneled is €115 million ($149 million), while projects with less than 50% tunneled the average cost is €29 million ($38 million, see figure 3). Interestingly, there is not a direct correlation between the length of platforms and the average costs: the 201.3km of route (66% tunneled) that are classified as heavy metros (platforms of 110 or 150m) have an average cost of $122 million per kilometer, while the 72.3km of new generation automated light metros (platforms of 40-55m) have an average cost of $118 million per kilometer. It is worth noting that this might be related to the fact that the light-metro trackage has a much higher percentage of route-km tunneled compared to heavy metro. The less expensive typology on a per kilometer basis, at $88 million, is the first generation of light metros with 80m-long platform, modelled after LRT and Stadtbahn systems and initiated in the 1980s in Naples (line 6), Genoa, and Catania. Catania’s very low figures ($ 61 million/km), due to particularly favorable local soil conditions, contributes to driving the overall average down.

Historically, we see a spike in construction costs from the late 1970s through the mid-1990s and a reduction in costs after, albeit with two notable exceptions. Almost all the high-cost projects of the 1970s-1990s era, such as Milan’s M3 initial segment, Rome’s MB extension to Rebibbia and the initial section of Naples’s line 1, were connected to the corruption scandals of Tangentopoli.[6] The reduction in costs observed from the late 1990s is most likely due to a combination of factors:

  • A major reform of the Public Works Code in 1994, the Merloni law (109/94), the first of a series of measures gradually implemented and refined over the following decades to contain costs, improve the transparency of the procurement process through measures like reference-unit costs, unit-price contracts and the technical scoring of bids, and greater competition with European-wide procurement (see section 4).
  • The widespread adoption of new automation technologies allowed for high-capacity rail transit with narrower and shorter trains running more frequently, which resulted in a new generation of automated light metros with lower upfront capital in fixed infrastructure, built in Turin, Brescia, and Milan starting in the early 2000s (see figure 4).
  • Actualized construction costs in Euros and USD PPP by year of construction (middle year of the construction period) and city.
  • Construction costs by year of construction (middle year of the construction period) and percentage of tunneled alignment.
  • Construction costs by year of construction (middle year of the construction period) and size of platforms.
  • Metro systems currently in operation in Italy and their technical characteristics.

4.2.3 General considerations about the construction sector in Italy and input costs

In order to better understand the analysis of transit projects within the general framework of the construction sector in Italy, this section provides some information about labor-related issues, general capacity of the construction sector and a few references about input costs comparing Italy and the US.

A sample of recent Requests for Proposal (RFP)[7] for construction projects shows that the proportion of costs allocated to labor comprised of between 19-31%. This percentage appears to be lower than what is generally considered as conventional in the United States, which is believed to be around 50% (cf. New York case 2022). This might be both the result of lower labor costs in Italy, but also lower productivity in the American construction sector, especially considering that infrastructure contractors are less likely to use light and heavy prefabrication as compared to Italy. However, those observations are derived from anecdotal evidence and need a more thorough investigation to better understand the impact of wages and productivity on the cost divide between Italy and other countries, notably the US.

Labor costs in Italy are regulated by National Bargains, that are normally negotiated between the most important national sectoral labor organizations (FILLEA CGIL, FILCA, FeNEAL, etc.) and the national association of construction entrepreneurs (ANCE – Associazione Nazionale dei Costruttori Edili). Beginning in the 1990s, the National Government began facilitating these negotiations following a praxis called Concertazione (literally, Orchestration) to ease a historically combative relationship between unions and employers. Once terms are agreed to, terms that include salary, working hours, benefits, they are made public and apply to all workers regardless of whether or not they are part of a union.[8]

Finally, it is worth noting that Italy has a well-developed local industrial expertise in tunneling, that dates back to the construction of the national railway network starting from the mid-19th century. This expertise has been improved over time, stimulated by the growth of the road and motorway network, the modernization of the rail network, the more recent development of a High-Speed Rail system, and the construction of urban rail systems. The Italian Tunneling Association (ITA – SIG, Società Italiana Gallerie) claims that Italy ranks second in the world after China for the combined length of road and rail tunnels, at around 2,100 km[9], ahead of Japan, Norway, and Switzerland. As a result, there are several contractors and consultants who specialize in underground structures and who have pioneered new tunneling techniques, such as ADECO-RS.

The following table highlights a few typical input costs for labor, materials, and energy as of 2021 as derived from official sources and compared to New York City. Labor cost tend to be lower in Italy than in most US jurisdictions, common materials used in large infrastructure, such as Portland cement and steel for rebar have a comparable price, while energy cost are significantly higher in Italy than in the US.

Table 1. Typical input cost for the construction sector in Italy (2020-21)

  € - Euros$ PPP
(1.3 conversion rate)
NYC (avg.)
Labor1
FOR ITALY. Labor cost includes: gross salary and other salary-related costs, contractor-side taxes (payroll, IRAP), severance pay, retirement contributions, insurance, etc. as par the National Bargain Contract. It does not include: 12-13 % general contractor’s expenses for labor management.
FOR USA. Labor costs for construction workers are derived from prevailing wages in New York for the generic “laborer” position. For professional services, data are derived from: “U.S. Bureau of Labor Statistics. Producer Price Index - Engineering and Architectural Services.” The amount includes wages and supplemental benefits.
Skilled construction worker31.4 €/hour40.9 $/hour92.5 $/hour
Unskilled construction worker25.1 €/hour32.6 $/hour70.5 $/hour
Professional services (senior)50.0 €/hour65.0 $/hour179.9 $/hour
Professional services (junior)34.8 €/hour45.3 $/houraverage
Professional services (draughtsman)26.8 €/hour34.8 $/hour
Materials1
Portland cement
(32.5 R - 42.5 R)
bulk (silos)105-112 €/tonne2 135-145 $/tonne
125- 132 $/ton
128 $/ton
packed122-129 €/tonne 158-167 $/tonne
143- 151 $/ton
Steel rebar (B450C)420-445 €/tonne545-580 $/tonne
495- 527 $/ton
720-740 $/ton
Plywood for falseworks (27mm)14.5 €/m318.8 $/m3
1.7 $/sq ft
n.d.
Energy
Electricity (2019 average)0.27 €/kW30.35 $/KW0.06 $/KW4
Fuel (2020 average)1.43 €/liter51.86 $/liter
7.02 $/gallon
2.17 $/gallon6
Notes
1. for Italy: data derived from the “Prezziari Regionali delle Opere Pubbliche” of Lombardy and Campania. For the U.S. : https://www.bls.gov/regions/mid-atlantic/data/producerpriceindexengineering_us_table.htm
2. metric tonne = 1,000 kg. 1 metric tonne = 1.10 short tons (US)
3. data from ARERA, referred to industrial prices for consumers using less than 20 MWh/a: https://www.arera.it/it/dati/eepcfr2.htm#
4. data from EIA: https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a
5. data from the Ministry of energy database: https://dgsaie.mise.gov.it/prezzi-annuali-carburanti
6. data from EIA: https://www.eia.gov/todayinenergy/detail.php?id=46356

4.3 The planning and legal framework of urban transit projects

To better understand the four in-depth cases presented in this report, it is important to appreciate them within the evolving context of the planning and legal framework of urban transit projects and of public works in general. Notably, we will present the implementation of tools introduced through a number of legislative reforms that have played a role in the reduction of construction costs that we observe starting in the second half of the 1990s. Those reforms happened in the context of the strong emotional public response to Tangentopoli (Bribe-town) scandals and a growing awareness among policymakers of the necessity to curb costs and improve public spending effectiveness in the context of continuous fiscal consolidation that characterizes Italian public finances since the early 1990s.

As a general remark, it is worth noting that the Italian administrative system is regulated by a juridic rationality that is in part different from the one observed in the US or Canada. It is less adversarial and more similar to the so-called Bureaucratic Legalism, based on the Napoleonic tradition of Administrative Law and on the principle that the State and its operational machine, the Public Administration, are responsible for pursuing the Public Interest. Hence, appeals against decisions of public agencies and authorities, like environmental approval, public contract awarding, expropriation decrees, etc., are dealt with by separate Administrative Tribunals.

4.3.1 The institutional framework of transit projects

Italy is a Parliamentary Republic and a Unitary State, with forms of devolution of legislative power to Regional Governments[10] and local authorities[11], especially in the urban and transit planning domain. Taxation powers are mostly concentrated in the hands of the National Government, and local authorities mainly rely upon a mix of property taxes, fees and transfers of funds from the Treasury, with a limited leverage on local fiscal resources and constrained borrowing powers.

Over time, the framework for the planning and delivery of transit projects has shifted from one of local financing and planning to one of shared responsibility between the National Government and the lower levels of government. Today, the National Government bears the largest share of capital funds for new projects, sets very general policy directives, and provides baseline funds for operations through the National Transit Fund. The lower levels of government (Regions, Metropolitan Cities and Municipalities) are in charge of the regional and local level of transit planning and co-funds transit capital projects and operations. In particular:

National Government. Infrastructure spending, including transit, is mainly managed by an Inter-Ministerial Committee for Economic Development (CIPESSComitato Interministeriale per la Programmazione Economica e lo Sviluppo Sostenibile) under the responsibility of the President of the Council of Ministries (i.e. the head of government). CIPES includes, among others, the Ministry of Infrastructure and Sustainable Mobility (MIMS) and the Ministry of Finance and Treasury (MEF). The CIPES is responsible for the final approval of local transit capital projects that applies for national grants, in agreement with the State-Region Conference, a mostly consultative body that gained importance after the 2001 devolution reform, and now works as a de facto negotiation chamber between the Central Government and the Regions. The ministry of Energy and Environment is charged with the evaluation and approval of the Environmental Impact Reviews (VIA – Valutazione di Impatto Ambientale), a techno-bureaucratic process mostly focused narrowly on ecological impacts (noise, pollution, etc.) rather than community impacts at large. Moreover, most transit projects are not automatically subject to the full national VIA procedure as other large infrastructure projects. Instead, a pre-screening procedure at the regional level determines if a transit project has a potentially relevant environment impact and whether it should undergo a lighter regional VIA procedure managed by the Regional Environmental Agency (ARPA – Agenzia Regionale per la Protezione dell’Ambiente) or no environmental evaluation at all, replaced with just a list of recommendations to be addressed in the final design phase.

Regional Governments. Since the 2001 devolution reform, Regions have gained greater control over transit. They are responsible for transit planning and funding at the regional scale–notably for regional rail–and for setting the overall framework for transit operations (fares, levels of service and subsidies) within the region or between regions through ad hoc agreements. Regions can contribute to transit capital programs with their own funds, especially because they manage the European Regional Development Fund (ERDF/FESR in Italian) and the European Social Fund (ESF/FSE in Italian).[12] ERDF and ESF are an important source of funding for transit projects since the late 1980s, especially in the southern, less-developed regions that receive a higher per-capita contribution.[13] Regions are also involved in the approval process of transit projects in the preliminary evaluation of the environmental relevance of infrastructure projects, that determines whether a project must undergo national or regional EIR/VIA or is exempted.

Municipal Governments and Metropolitan Cities. Municipal governments and, more recently, Metropolitan Cities are the main actors of urban transit policies. They are responsible for local transit planning. They devise and approve the local Sustainable Urban Mobility Plans (PUMS), select and propose projects for national grants, and act as the delivery authority of most urban transit projects, either directly or by delegating the project management to transit agencies or, more commonly, to ad hoc capital project delivery agencies. Municipalities and Metropolitan Cities normally contribute matching funds to capital projects, mostly through borrowing from banks or from the public lending authority, Cassa Depositi e Prestiti (CDP).

4.3.2 Planning, design, approval, oversight, and management

The way in which large infrastructure projects have been planned, funded, approved, designed, and delivered has changed considerably over time. Successive reforms have refined the definition and scope of planning and design phases, set clearer criteria to identify viable projects, and established increasingly tighter regulations to foster transparency and competition. We will go into greater detail about the evolution of public procurement practices in the following section (3.3). Here, we will illustrate the general framework as it has developed in the last twenty years, even though this matter remains subject to continuous reforms and legislative adjustments. In particular, we will present the main planning and design steps, and the main actors charged with oversight and delivery management functions.

Planning and Design steps

Large transit projects go through four main iterations of planning and design, with the first one being a relatively recent innovation (early 2010s): i) Sustainable Urban Mobility Plans (PUMS); ii) Technical and Economical Feasibility Project (PFTE); iii) Final Design (PD); iv) Executive Design (PE).

Sustainable Urban Mobility Plan (SUMP/PUMS – Piano Urbano della Mobilità Sostenibile). This is the initial and fundamental planning document for transit projects. PUMSs are 15-year horizon plans, ideally elaborated at the Metropolitan City level, that encompass all aspects of urban mobility, including both people and goods, and set sustainability goals linked to European and national goals of GHG emission, modal shifts, etc. PUMS, as the mandatory cornerstone of local mobility planning, are a relatively recent requirement for cities (since the early 2010s). Many cities, though, already had comprehensive masterplans or strategic plans for transit development linked to the general “Urban Planning and Land Use” Plan (PRG – Piano Regolatore Generale) since the 1970s. Moreover “Traffic Management Plans” (PGTU- Piano Generale del Traffico Urbano), that were introduced in the early 1990s, normally had a transit component mostly framed as a congestion reduction measure, but they had a weak connection to the capital funding process. During the PUMS’s elaboration process, that normally takes two or three years, transit capital projects are evaluated within comprehensive short and mid-term scenarios, in terms of overall efficacy and congruence with the main sustainability goals and are rated through cost/benefit ratios and parametric cost evaluations. General alignment and mode are normally decided at this level of regional network-wide planning. Public participation is mostly done at the SUMP/PUMS phase in a variety of forms[14], even though public outreach can continue in the following phases.

Technical and Economical Feasability Project (PFTE – Progetto di Fattibilità Tecnica ed Economica). Formerly called Preliminary Project (PP – Progetto Preliminary), the PFTE represents a level of design that encompasses some elements of preliminary planning (evaluation of local alignment alternatives and selection of the preferred alternative), early design (up to a level of detail corresponding to 30-50% design in the US system[15]) a complete business case and service plan, including a more detailed Cost/Benefit analysis, and preliminary cost estimates based on a more refined but still parametric evaluation of construction costs. National grants and approval from the CIPE committee are granted based on the PFTE level of design. Delivery schemes corresponding to the Design-Build definition (such as the General Contractor for MC in Rome and the PPP scheme used for M4 and M5 in Milan) normally base their Requests for Proposals (RFP) on a PFTE/PP, even though this is not possible anymore since the 2016 reform of the public works code, that privileges RFP based on Final Design. The environmental pre-screening at the regional level, that determines whether the project will undergo a full EIR/VIA procedure, is also based on the PFTE.

Final Design (PD – Progetto Definitivo). This stage corresponds to a level of design where all the technical aspects of the project have been solved in detail. It corresponds approximately to the 90% design or a Construction Document Phase in the US context. All the necessary approvals and recommendations from concerned authorities (for example, monument and landscape protection, fire departments, structural and earthquake compliance, etc.) are secured during the approval process of the PD. Since the late 1990s Public Service reform, those approvals and recommendations are acquired through a joint authorization committee composed by representatives from all the concerned authorities, called Conferenza dei Servizi[16][16]. The PD level of design has sufficient detail to be used for a thorough estimation of costs based on the official regional reference unit price lists (see section 3.6). For example, it involves extensive geological sampling, advanced engineering, and the elaboration of the Design Specifications (Capitolato Speciale d’Appalto). PDs include all the elements necessary for devising an RFP in case of a delivery scheme called “Integrated Delivery Contract” (Appalto Integrato), that is a procedure used for the joint procurement of Detailed Engineering Design services and construction.

Detailed Engineering Design (PE – Progetto Esecutivo). The PE is the most advanced level of design, where all the construction documents and detailed technical drawing are prepared based on the PD. It’s the most expensive and labor-intensive phase of design, even though it implies no major design choices compared to the previous phases. RFPs based on a PE are less common in large transit projects procurements, even though there are cases of “traditional” procurement where the agency procure separately the PE and the construction. Unlike the PD, the labor-intensive nature of PE makes it unlikely to be done in-house by public agencies, but there are exceptions, as we will see in the detailed cases.

Management and overview responsibilities.

Italian public project delivery practices involve three important complementary supervising functions that are different from what is normally encountered in the North American context: i) Chief Project Manager (RUP); ii) High Supervision (AS); and iii) Work Supervision (DL).

Chief Project Manager (RUP – Responsabile Unico del Procedimento). The 1994 and 1999 reforms of the Public Administration Code requires that project delivery authorities identify a general manager for each project, normally an executive official within the local administration or the delivery agency. That figure is the person solely responsible for the project, both legally and bureaucratically. The introduction of the RUP role, technically an in-house project manager appointed by the contracting authority (i.e. the municipality), might seem trivial, but has proven to be a major positive innovation. The RUP concentrates decision-making powers in the hands of a career civil servant. This arrangement protects the design team from excessive interference from elected officials, such as councilmembers, and from political micro-management of the planning, design and delivery activities of the project.

High Supervision (AS – Alta Sorveglianza). The AS function is exclusively encountered in public works. The AS is responsible for supervising the correct execution of the contract. It has a final say about all major changes in the project that involves cost or scope variations and has the ultimate power to accept or refuse the payment to the contractors based on progress, quality of work and contract adherence. The AS function can be assumed directly by the Contracting Authority in-house or by another public agency, but cannot be contracted out to a private firm.

Work Supervision (DL – Direzione Lavori). This function encompasses the control and supervision tasks that are typical of Construction Management, such as frequent worksite inspections, validation of minor change orders and quick fixes requested by the contractor that don’t require significant cost or design changes, as major ones must be agreed upon by the AS. This labor-intensive activity is directly related to ensuring the execution of the Detailed Engineering Design, can be outsourced to a private firm. In case of projects delivered through a General Contractor formula, this task is entrusted to an independent firm contracted directly by the GC itself.[17] Moreover, the limit and the respective responsibilities between the role of High Supervision and Work Supervisor is blurred, and it depends on the interpretation that the contracting authority gives of its role, as we will see in the detailed study cases, as those functions have been performed differently, and with different outcomes.

4.3.3 The planning and funding process and its evolution over time

The planning and funding process for mass transit projects has changed multiple times since the first metro line opened in the 1950s. Nevertheless, it is possible to identify four major periods regarding how urban rail transit in Italy was conceived, financed, and delivered, defining a trend characterized by a growing financial involvement by the National Government and an increasingly structured planning and legal framework. In particular, major changes occurred after the approval of the 1994 reform of public works, devised as a response to the late 1980s-early 1990s Tangentopoli corruption scandals that involved, among others, the metro projects in Milan, Rome and Naples. As we will see in the four detailed cases, financing metro rail projects has come from a variety of sources and most of the time has been a major influence on delivery methods, project organization, phasing and, ultimately, engineering choices with a non-negligible impact on projects costs.

Early development: municipal and state ad hoc funding

Since 1925 transit has been considered a local matter.[18] Rome, as the capital city, has received funding from the national government to develop a transit network because it is considered to be of national importance, and is tied up with a wider urban renewal program to transform Rome into the “grandiose imperial capital” of Fascist Italy. Financing new transit lines outside of Rome remained the exclusive domain of local jurisdictions until after World War Two.[19] Thus, the first two lines of Milan’s metro network were financed via municipal bonds and other local sources,[20] while Rome’s lines MA and MB were funded by ad hoc appropriations from the national budget via recurrent dedicated laws.[21] This principle continued into the 1980s, even if lobbying from local governments resulted in occasional funding for selected projects tied to the budget law or other specific legislation, as it happened for example with the post-1980s Irpinia earthquake relief grants being used for Naples’s line 1.[22]

Local authorities were also expected to develop network-wide plans within the wider urban planning process. In Milan, where the first three lines were part of a 1942 network plan, the last of several tentative plans proposed during the previous decades,[23] and, for Rome, where the overall network design was developed over time, notably with a 1942 masterplan and, later, within the 1964 urban masterplan (P.R.G. 1964). Nevertheless, those plans were rudimentary, mostly no more than a generic network scheme with no delivery horizon nor thorough economic analysis.

The 1992 Mass Transit Funding law

The 211/92 mass transit law was the first attempt to organize funding for mass transit projects on the national level within a coherent long-term framework. The 211/92 law and the connected financing decrees appropriated the equivalent of €8.5 billion over a multi-year period (1992 to 2006 circa) to fund mass transit projects proposed by local authorities.[24] Funded projects were to have “mass transit characteristics”, in terms of capacity, frequency, reliability, commercial speed and dedicated rights-of-way. through their own funds or long-term bonds mostly granted by the public lending authority (Cassa Depositi e Prestiti – CdP) and guaranteed by the central government. Over 15 years, the 211/92 law funded 76 tramways, metro, and BRT projects including some of the detailed case studies covered in this report. The law has proven to have several shortcomings in the financing methods, from the excessive slowness of implementation to its weak connection with planning tools.

The 2001 “Legge Obiettivo” funding law: a megaproject approach.

In 2001, Silvio Berlusconi’s center-right coalition overhauled the financing process for infrastructure projects. The law 443/01, commonly known as “Legge Obiettivo” (Target Law) was designed to boost infrastructure building at the national level after the de facto freeze on projects during the 1990s. The law 433/01 mandated the government, notably the CIPESS inter-ministerial committee, to designate a list of large infrastructure projects of national importance (emphatically called Great Works, Grandi Opere) to be financed by the Treasury. The National Government’s share could cover up to 100% of capital cost for national projects (such as mainline rail, energy and water management) or up to 60% of the capital cost for urban transit, with the remainder being provided by local governments (Regions, Provinces and Municipalities) or, eventually, the private sector, as the law actively sought greater involvement from private operators in both the funding and delivery, notably through Public-Private Partnerships.

The list of “strategic megaprojects” (Grandi Opere Strategiche) to be financed under the “Legge Obiettivowas essentially politically motivated. The list was compiled by cherrypicking projects developed at the local and regional level rather than assessing their merits, value, and benefits. Over time, the list has expanded to include the planning priorities of regional governments, as well as politically motivated pet-projects independent of any planning tool but sponsored by members of the parliament or the cabinet and supported by local interest groups. As a result, the list of strategic projects ballooned while funding remained constant. The list-based mechanism proved ineffective because it failed to provide a methodology for evaluating projects.[25] Furthermore, during a period of austerity, local authorities were unable to provide matching funds needed to get projects built, as their borrowing capacity was capped by the “internal stability pact.” This approach was progressively abandoned in the early 2010s, through adjustments made by several governments of different political orientations. In 2016, it was finally replaced with a mechanism to allocate national funds better tied to local and national planning and accompanied by another major reform of the public works procurement process.

The 2016 Mass Rapid Transit fund and the Sustainable Urban Mobility Plans

During the 2010s a consensus among policymakers emerged that the strategic planning of transit infrastructure and the approval and funding for individual transit projects had to be better integrated. Within the context of the European Agenda for Sustainable Mobility, novel, more integrated planning and financing tools have been developed. Since the mid-2010s, Metropolitan Cities and larger municipalities have been required to develop and approve a Sustainable Urban Mobility Plan (SUMP, or PUMS in Italian – see section 3.2).

Since 2017, mass transit projects have been mostly financed through a dedicated Mass Rapid Transit Fund (Fondo per il Trasporto Rapido di Massa, or Fondo TRM) of approximately €2.5 to 3 billion per year for ten years. Transit capital projects can access national grants only if they comply with an approved local SUMP, have a positive Cost/Benefit (C/B) ratio, help achieve the SUMP’s sustainability goals, and follow evaluation standards established by the Ministry of Infrastructure and Sustainable Mobility (MIMS). The C/B ratio, the quality of SUMPs and a set of sustainability and efficacy criteria, such as modal shift or increased coverage, that are rated by a ministerial commission, are taken into account to determine the ranking of financeable projects and the amount of national grants for each project. The National Fund can cover up to 100% of the capital costs, including most hard and soft costs, as well as the rolling stock. So far, three rounds of grants have been awarded using that method, in 2018, 2019 and 2021. Even though the TRM fund is poised to become the dominant source of capital funding from the central government, individual projects can also be funded through different ad hoc appropriations in the general budget, through EU regional cohesion funds as well as other local or national sources.

Good Practice focus: grants supporting design.

The 2017 reform also instituted a dedicated grant system, called Fondo Progettazione Enti Locali intended to cover up to 80% of the costs sustained by the local governments of large cities and major metro areas to plan and design mass transit projects. The fund was deemed necessary because, as the then minister lamented several times, many local administrations had struggled to submit good quality projects because of a lack of in-house expertise and constrained budgets. The fund has since been replenished twice: €90 million for the 2019-2021 and €116 million for 2021-2023 periods. Money is allocated based on a fixed formula with a light non-competitive application. Unused funds are redistributed to the other recipients. Cassa Depositi e Prestiti, the public bank that has among its mandates to support local governments, is charged with administering the fund, and also providing technical support and staffing for municipalities to manage projects and to streamline the process, such as cashflow and financial management. The fund has been generally considered a success by experts and practitioners, as it has sparked a new wave of good-quality transit projects.

Planning and funding process chart

figure 6. A simplified summary of the planning and funding process of transit capital projects after the 2016 reform.

4.3.4      A great variety of delivery methods: the evolution of bidding and contracting practices.

The Italian case showcases a variety of delivery methods for urban rail construction. The framework for public works has evolved dramatically over time. These changes are partially tied to the overall trajectory of the economic policies at the national and EU levels and to the political history of the country. Until the 1990s, most public works were carried out in a loose regulatory framework first established in the 1890s[26] and only minimally adjusted over time with partial reforms to address specific issues or sectors. Traditionally, low-bid procurement was used with the concession schemes, to delegate to the private sector the construction and maintenance of key national infrastructures, similar to the rapid development of the national motorway network in the 1950s. However, this happened in a context where the public sector was greatly involved in economic life via large publicly-owned corporations operating in several industrial and financial sectors and reassembled under the Istituto per la Ricostruzione Industriale (I.R.I.) conglomerate.[27] In this context, the construction of the first metro lines until at least the 1970s was mostly delivered through publicly-owned special-purpose companies, with the involvement of the private sector only in the construction phase, mainly through traditional bidding procedures awarded to the lowest bidder. In 1955, Metroroma spa was established in Rome by the I.R.I. to build metro line A. The same year, the city of Milan established a municipally-owned concessionaire, Metropolitana Milanese spa (MM), that issued municipally-backed bonds to build the first two lines and managed all aspects of project delivery, from planning to design, while actual construction was contracted out to private-sector firms.

During the second half of the 1970s and through the early 1980s, the delivery of new metro projects grew more reliant on various Design-Build (D-B) concession schemes, in theory modeled after what was considered the successful attempt of MM in Milan to build and consolidate in-house expertise in metro construction. But unlike Milan, those later D-B concessions were directly awarded without public competitive bidding to consortia of public and private firms or even only private ones, based on the claim that local authorities lacked proper in-house expertise in metro construction.[28] Those schemes were called “Concessions of sole construction,” that is a non-competitive, loosely defined D-B scheme awarded on the basis of a preliminary transit expansion masterplan. These schemes were used in Naples, with the creation of Metropolitana di Napoli spa (MN) and for the E-W LRT (today’s line 6), and in Genoa for the construction of its first line in the late 1980s. These opaque concession schemes, often based on a simple general development masterplan for a future metro network supported by a general concept, preliminary cost estimates lacking clearly defined quantities and methods and without a defined schedule, proved to be a fertile ground for corruption and cost-escalation that characterized public works during the last fifteen years of the First Republic, and eventually led to the collapse of the political system swept away by Tangentopoli in the early 1990s.

The 1994 public works reform.

The 1994 public works reform, also known as the Merloni law (109/94) was the first major comprehensive legislative reform about public works since the original Royal Decree 350/1895 approved almost a century before. It came in the wake of the early 1990s scandals, and it was inspired by the principles of transparency, quality of public works, and open and fair competition between contractors. It represented the translation into the Italian legislation of several EU directives targeted at creating a pan-European open market. The implementation of several aspects of the law were postponed for political reasons or even openly reverted for a short period in the early 2000s. Nevertheless, many key innovative procurement practices were refined and implemented in the years following the Merloni law and are now an integral part of the 2016 Public Procurement Code. A few elements stand out as significant improvements to contracting practices brought by the 1994 reform:

  • It established oversight authorities to ensure the appropriate application of procurement practices by contracting agencies, notably the National Authority for the Oversight of Public Procurement, more recently renamed the Anti-Corruption Authority (ANAC).
  • It strictly prohibits Design-Build concession schemes used in the previous decade for metro construction in Naples, Rome and Genoa. Public infrastructure can either be delivered through separate public contracts (Appalti) for design and construction (similar to Design-Bid-Build) or with joint-procurement contracts (appalto Integrato). Contractors must be selected through fully open RFPs (gara pubblica), shortlisting (gara a inviti), or public two-step design competitions (consorso-appalto).
  • It established that, in principle, planning and design of Public Works is the responsibility of the Public Administration and must be carried out in-house by the contracting authorities. Part of the design work can be contracted out to private firms in case of insufficient expertise. This principle has been only partially applied because local authorities have been unable to expand their payrolls since the late 1990s because of austerity measures. Furthermore, since 2002, there has been a greater emphasis on including the private sector in the design phase as a strategy to reduce public spending.
  • It defined a low threshold for non-competitive bidding (it has varied over time between €75,000 and €150,000) and a further threshold (between approximately €2 to €5 million depending on the domain and type of procurement) above which pan-European open RFPs are mandatory.
  • It required that all bids’ estimates be based on official reference lists of benchmark unit prices (see section 6) updated annually.
  • It capped the size of claims a contractor can make for input cost variations based on a threshold linked to the inflation rate and prohibits changes to the unit costs agreed to in the contract. It established a framework to resolve conflicts between contractors and the state through arbitration rather than lengthier judicial proceedings.
  • It introduced the Best-Value-for-Money criteria (offerta economicamente più vantaggiosa) to evaluate bids. Proposals are scored according to technical quality, costs, and schedule. The relative percentages assigned to each category can vary, but technical quality typically represents 50% or more of the overall score. This approach is de facto mandatory for larger procurements, which includes all transit projects. Lowest bidder procurement is still used for smaller, more straightforward procurements based on the Detailed Engineering Design (PE).

Even though many innovative aspects of the 1994 reform were watered down in the following 2002 partial reform (law 166/2002) that pushed for greater involvement of the private sector and introduced project delivery mechanisms, like the General Contractor, that limits the oversight capacity of the contracting authority and outsources important design tasks, the 1994 law and the following amendments established a number of practices and principles that have proven effective in containing costs and improving project delivery.

4.3.5 Constraints and veto points: the issue of historic buildings and archeology

Italian cities boast historically layered, dense and relatively large urban cores that continue to have a central role in the urban economy, thanks in part to longstanding dedicated policies and a robust urban tradition. Thus, most metro rail projects have cut their way through narrow winding streets to serve the dense historic cores.

Italy has a particularly strict and complex set of national and regional laws enforcing the protection of archeology, historic buildings and ensembles, and landscape. The 1948 Republican Constitution specifies the importance of safeguarding heritage in one of its twelve fundamental principles.[29] But heritage protection laws date back to the construction of the post-unitary State. Since 1907, historic buildings and landscape protection falls mostly under the authority of the so-called Soprintendenze (Superintendencies). These are territorial authorities that are under the auspices of the Ministry of Culture and Heritage (MIBACT) and are staffed by career civil servants, mostly having backgrounds in archeology, architecture, history of arts or Beni Culturali (heritage studies). Moreover, the city of Rome has a locally controlled Superintendency (Sovrintendenza Capitolina), a special body within the Municipal administration, first established in 1872 to protect and manage the Archaeological Park of the Imperial Fora, the Aurelian walls, and in general the archeological heritage of ancient Rome. Despite being part of the city’s administration, it enjoys greater autonomy than other agencies and departments.

Thanks to laws that have expanded their powers continuously since the 1930s[30], the Heritage Superintendencies have de facto veto power over any project that may affect an area or a building that is under their jurisdiction, that is most historic city centers and several landscape protection areas. As we will see in the detailed case studies, the severe constraints imposed by the Heritage protection bodies play a significant role in project design and costs, especially in the central areas of Rome, Naples and Milan.

4.3.6 The use of benchmark unit costs: the Prezziari Regionali delle Opere Pubbliche

The use of official unit costs in public works has proven to be a fundamental tool to improve public procurement and stabilize costs. Known as “Prezziari”, these official price lists have been implemented over time[31] and are modeled on what was already a common tool in the private construction sector, where the provincial Chambers of Commerce already published yearly updated reference itemized costs largely used in the private sector since the late 1960s.

In the late 1970s, detailed benchmark unit costs were introduced as the principal tool for determining the base cost of public contracts, but only for specific forms of procurement.[32] Benchmark unit costs became mandatory after the 1994 reform of the general public procurement law,[33] refined following the 2006 public procurement code,[34] notably with the introduction of a homogeneous mechanism for the mid-year revision of the benchmark cost of materials. Furthermore, in the following years, the task to maintain and update the official lists of benchmark unit cost was transferred from single agencies to Regional Governments, in an effort to rationalize the process, facilitate the task and avoid inconsistencies between multiple agencies. Since the late 2000s, Regional Governments publish an annual unit cost list called Prezziario Regionale delle Opere Pubbliche (Prezziari OOPP).

The Prezziari OOPP are detailed lists of itemized benchmark prices for units of finished work, that is, prices that include all the foreseeable input costs to achieve a given quantity of finished work. For example: the cost of one square meter of road paving, one cubic meter of poured concrete with given mechanical characteristics, one linear meter of a sidewalk curb, one linear meter of embedded rail tracks, one converter for an electrical substation at a given voltage, one standard pole of a certain height for an Overhead Line Equipment (OHLE), etc. These prices, called Prezzi Unitari (see figure 7), are expressed in consistent units (square meters, cubic meters, linear meters, piece, etc.) for a given quantity of finished work, and are calculated by factoring in all the relative input cost of materials, labor, theoretical rent costs of tools and machines, as well as transportation costs for the delivery of materials to the construction site and the disposal of waste from demolitions. A fixed percentage is added to account for the general expenses of the contractor (normally around 12-13%) and for the contractor’s anticipated “fair” profit (10%).

How benchmark unit prices are defined

figure 7. A simplified scheme illustrating how benchmark unit prices (Prezzo unitario) are defined.

Reference prices also include disaggregated input costs that can be used by contracting authorities to calculate specific non-standard works and work conditions, such as night work, constrained working space, reduced working hours for noise mitigation, etc. The official list of unit prices is public and freely accessible. They are officially approved and updated yearly by the Regional Governments through a technical commission that includes civil servants and technical experts.[35] Moreover, the Ministry of Infrastructures (MIMS) carries out a mid-year revision of the input cost of raw materials. If during the first six months of the current year the cost of a given raw material has increased or decreased more than 10%[36] over the previous year’s average, contractors can claim direct compensation from the contracting agency for up to half of the increase exceeding the 10% threshold. That compensation can be covered by contingencies.

Reference prices are not price controls. Instead, they are used to set reasonable parameters for bids. By injecting greater transparency into the process, reference prices help weed out anomalously low/ high bids and are used to avoid bidders who submit very low lump sum bids and then seek large change orders to compensate for the low bid after the contract is secured[37]. In fact, bidders must submit their offers by single itemized costs and not by a lump sum in most cases.[38] Eventual change orders will thus be based on the unit price submitted by the contractor for the specific item and cannot be renegotiated except for major changes to the project scope and design or changes that are considered unfair or disruptive for the contractor’s workflow.

Reference Prices and the rule of exclusion for “anomalous bids” have worked well because they have been combined with the “rule of the best value-for-money” (regola dell’offerta economicamente più vantaggiosa) scoring criteria. Best value-for-money contracting scores bids according to a combination of cost (~20-40% of scores), technical quality (~50-80%) and time savings (~0-10%). All contracts greater than €2 million must be assessed via best value-for-money,[39] while low-bid contracting is still used for smaller works. Lump sum contracts are now illegal except for very small contracts or in case of very specific procurements of proprietary technology (that is the case, for example, of the VAL system, as we will see in Turin’s case, but also of proprietary CBTC installed in M1 in Milan).

Finally, reference unit prices work as a tool to set a minimum threshold for labor productivity, as they implicitly define the “reasonable” level of manpower needed to achieve a certain amount of finished work. Better performing contractors that make more efficient use of their resources can achieve a lower bid or larger profit through economies of scale, better construction techniques (that are also accounted for in the technical score of the bidding), etc. On the other hand, it is important to note that reference prices can indirectly incentivize an abuse of sub-contracting, if the contractor tries to reduce labor costs by sub-contracting to small companies or individual free-lancers who are not subject to the or even black market labor through long chains of sub-contracting. For that reason, the use of subcontracting has been more tightly scrutinized after each iteration of the 1994 Code of Public Works.

4.3.7 The “riserve” mechanism: the unsolved problem of extra cost claims

Unlike in the US, allocations for contingencies within the project budget tend to be minimal, on the order of a few percentage points (normally less than 5%) and they can be only used to cover change orders validated by the DL or minor input cost variations accounted for by the official “prezziari’ regular updates and thus granted by the contract (see sections 3.4 and 3.7). Over time, legislation and court decisions have discouraged the use of large contingencies intended to cover any extra-cost claims coming from the contractors during construction, as it can create incentives for post-bid cost increase as funds are already allocated in the budget. Hence, additional claims made by contractors during construction are normally accounted for in the project’s bookkeeping through a mechanism called “riserve.” This system, rooted in the original RD 350/1895 public works Royal Decree and modified several times since,[40] allows a contractor to accept payments from a contracting authority con riserva (literally: conditionally, hence the name) in the project’s official accounts, while advancing claims for unforeseen costs that have not been approved by the DL through an official change order or are not part of the contract provision.

Those extra claims are normally linked to an increase in input costs for the contractors caused by circumstances beyond their control, such as archaeological findings or unexpected geological conditions, cascading delays from other contractors’ work, postponements caused by delayed bureaucratic decisions, etc. The reasons must be detailed by the claimant and quantified in terms of loss caused by a suboptimal use of the contractor’s own resources (for example, the TBM equipment sitting idle or misallocation of labor force). Based on the juridically enshrined principle of “fair compensation” of public suppliers, the contractor can ask for additional compensation of those costs incurred independently, subject to arbitration or, eventually, to a legal decision.

This mechanism has proven to be an unresolved bug in the current procurement process as it can cause lengthy legal proceedings between the contracting agency and the contractors that stall projects for months, and that often continue for several years after the end of construction. The riserve has been used as a tool for contractors to increase their margins and recover ex-post part of the discount offered to win the bid. As this mechanism is used to put pressure on the contracting agency, it is also common for contractors to exaggerate claims accounted for as riserve during the construction phase, even though normally final negotiations result in additional compensation being as low as 10-20% of the claim or around 1-3% of the initial contract for simpler works (like surface rail transit), up to 5-8 %, or even 10% in a few cases, for riskier projects like tunneled metro construction in complex urban contexts.[41] As we will see in Rome’s case, the riserve mechanism remains an unsolved problem that can cause uncontrolled cost escalation, especially when procurement is based on poorly defined project scopes and the contracting authority lacks sufficient supervision capacity.

4.4 Four in-depth cases: Turin, Milan, Rome and Naples

4.4.1 The selected projects

In the second part of the report, we investigate in greater detail five metro projects built during the last two decades, under construction or in advanced stages of planning. The selected projects, located in Turin, Milan, Rome and Naples, total approximately 66 km of new service and 90 stations, accounting for an investment of €9.5 billion in nominal terms or $13.5 billion in 2020 PPP real terms. The selected projects have different technical characteristics, delivery schemes and varying construction costs. Thus, they provide multiple insights into the drivers of construction costs. In particular:

Turin. In In the late 1990s, the capital of Piedmont started to plan its first metro line, the first automated light metro in Italy, based on the VAL 208 rubber-tired technology already deployed in numerous projects in France during the 1980s and 1990s. Turin’s case helps us understand the benefits and drawbacks of traditional Design-Bid-Build project delivery, how it is possible to develop in-house expertise quickly, the importance of standardized station design, and the design and cost implications of adopting light-automated metros, at the time a new technology for Italy, while still delivering high-capacity transit.

Milan. The capital of Lombardy boasts by far the largest metro network in Italy and is undergoing a major expansion with several new lines and extensions recently opened, under construction and planned. Our analysis focuses mainly on line M5, a fully automated light metro line opened between 2013-15 and delivered through a Public-Private Partnership Design-Build Finance-Operate-Maintain (PPP DBFOM) scheme. The construction costs were low, the project experienced limited cost escalation and it was delivered on-time. Line M4, another fully automated light metro currently under construction and poised to open in stages between 2022-23, and a short suburban extension of M1, a heavy metro currently in the early procurement phase, will be briefly discussed too. Milan’s case will mainly highlight the importance of longstanding in-house expertise, emphasizing the role of the municipally owned engineering firm Metropolitana Milanese Spa and how it has retained and leveraged critical in-house technical capacity regardless of the delivery formula.

Rome. The capital of Italy is currently developing its third metro line, MC, that will eventually cross the city from West to North via the heart of the old city core. That project has been selected because of a relevant difference in cost between the outer section (T4-T5) and the city center one (T3) and also because of the use of the “General Contractor” delivery formula, a form of Design-Build. The in-depth analysis of those elements highlights the interplay of external constraints, such as archeology and heritage, with political uncertainties and management issues as mutually reinforcing drivers of cost escalation. Line MB1 has been selected for a direct in-case comparison: built during the same period of MC’s T4-T5, it was instead delivered through Design-Bid-Build at a lower cost.

Naples. The central section of Naples’s line 1 (linea 1 – tratta bassa) has been selected as a relevant case because it represents the most expensive metro project ever built in Italy. The dense urban context and poor geology, the unique delivery scheme inherited from the 1970s, and the customized design choices, particularly for stations, make it an instructive contrast to the other cases.

4.4.2 Cost variation among projects: a quick comparison

Construction costs vary widely among the selected projects, from as low as $116.8 million per km for the Northern Section (Lotto 1) of M5 in Milan to as much as $635 million per km of the city center section of Naples’s line 1, an almost sixfold difference. The in-depth analysis of these projects will illustrate how local circumstances, design choices, delivery formula, and political decisions contributed to these differences despite a common national institutional framework.

Yet, the preliminary analysis of the main cost categories across these projects, which local agencies shared with us, allows us to draw some general conclusions about a few main cost drivers. For the purpose of this analysis, the data have been reorganized into two macro categories and several sub-categories:[42]

  1. Hard costs
  • It includes all civil works; finishings; Mechanical, Electrical Plumbing (MEP) – mechanical (lifts, escalators, and ventilation), non-system electrical, plumbing (fire-extinguishers, sprinklers); eventual costs for the monitoring and reinforcement of the adjacent structures during construction. In three projects (M4, M5 and M1 in Milan) it also includes the cost of civil structures, finishings and MEPs for the Operation & Maintenance (O&M) facilities, that were included in the projects’ scope.
  • It includes civil works and outfitting (e.g., bottom filling, catwalks, emergency lights) for tunnels and shafts built for emergency exits, ventilation, and TBM launching; eventual costs for monitoring and reinforcement of the adjacent structures during construction.
  • It includes tracks, traction, OHLE/third rail, signaling and/or automation, Supervisory Control And Data Acquistion (SCADA), telecommunications, faregates, platform screen doors.
  • It includes all items not directly linked to the construction of the line, such as archeological excavations, park & ride facilities, on-site utilities relocation executed by the contractor, monument conservation, and, in some cases, surface remediation.
  • It includes expenses for safety equipment. Italian procurement law mandates a separate costed out project-tailored “work safety plan,” as they are not subject to bidding.
  •  
  1. Soft cost
  • General Soft Cost. It includes planning, design and management cost, land acquisition, contingencies, utilities relocation executed by third parties, such as private or municipal utilities companies. It also includes transactions for the settlement of contractor’s compensable claims for projects that have been concluded.
  • A.T. It includes the Value-Added Tax (VAT or IVA in Italian) on construction (10%) and professional services (20-22%). A few transit projects done as PPP, such as M5 in Milan, have been exempted from paying V.A.T. for a short period of time.

The proportion of the different categories varies widely between projects, as shown in figure 8, as does the absolute cost per km of the different categories, shown in figure 9.

Relative incidence of hard and soft costs. Hard costs vary between 58.2% and 88.9% of overall project costs. This wide variation depends in part on the delivery formula used in the different projects but also the way soft cost are accounted for within individual projects, as a uniform way of reporting costs didn’t emerge until the mid-2000s. As we will see in greater detail in the related chapters, most of Naples’s line 1 soft cost’s are “hidden” as part of the hard cost, due to the outdated concession formula used to deliver that project, while the very high incidence of soft cost on the Bologna – Conca d’Oro section of line B is the result of particularly high compensable claims due to a change in the environmental classification of TBM excavated ground intervened during construction. If we exclude the aforementioned outliers, the range of soft costs is between 18-32% of total project costs, with most of the projects being in the mid-20s%. The Value-Added Tax accounts for 10-12% of projects’ total costs. It is worth noting that, unlike in many , such as Montréal’s blue line, Seattle’s Sound Transit 3 and New York’s Second Avenue Subway, land acquisition accounts for a very minor fraction, 0.9 % of the total cost on average and never more than 2.9 %. This is both the result of expropriation laws less favorable to private owners and, mostly, to the minimization of land acquisition.

Hard costs. Fully automated light metros have a higher incidence of system-related costs on the overall cost, at between 15.4% for M4 in Milan and 32.4% in Turin’s M1 phases 1 & 2. System’s cost on a per km basis (figure 9) is also notably higher in automated metros, accounting for between $21.5 million/km and $49.6 million/km, while it can be as low as $9.4 million/km in heavy metros with traditional signaling, like MB1 in Rome. The rubber-tired VAL 208 system used in Turin explains the M1 premium over the already costlier Hitachi Rail steel-on-steel system used in the other automated metros (M4, M5, MC). The very high costs ($ 45.8 million/km) of Naples’s line 1 is due to the implementation of a new signaling and communication system on the whole line being applied to.

Cost categories of selected projects.

figure 8. Incidence of the different categories on the overall capital cost of the selected projects.

 

Selected projects cost/km, adjusted for PPP

figure 9. Actualized cost per km in $ PPP 2020 for the selected projects and related cost/km or cost/station of the most relevant categories of hard cost.

 

Focus on stations. Among the seven projects we have obtained detailed cost breakdowns for, the civil works, finishing and MEPs of stations and O&M centers represent between 23 to 62% of the hard costs. The wide variation across the cases studied depends on a combination of lower costs for civil structures due to smaller station footprints for light automated metros, partially compensated by the fact that the analyzed light metros tend to have more closely spaced stations (740 m on average) than heavy metros (1,050 meters). Light automated metros show a consistent average cost per station between $14.5 million (M5 – Lotto 1) and $31.2 million (M1 – Phase 4), while heavy metros have a wider range.

The analysis of the individual construction cost of 82 underground stations across six of the selected projects [43] (figure 10, figure 11, figure 12) highlights a remarkable range in cost and a clear divide between metro typologies. The median station cost in $PPP 2020 is $36.9 million, with the lowest being $7.8 million (Isola on Milan’s M5) and the highest being $283.5 million (Municipio on Naples’s line 1) (figure 10). Considering platform length, light metro systems (50-55 m) have a much lower median cost per station, at $17.2 million, while heavy metros (110-150 m platforms) have a median of $62.9 million (figure 11). Moreover, 11 out of the 15 costliest stations in the database are situated within historic cores[44] and were built as part of heavy metro lines 1 (Naples) and MC (Rome), with a median cost of $147.1 million (figure 12). Finally, station cost are positively correlated with depth when controlling for platform length.[45] Station costs per cubic meter based on the station’s “gross volume”[46] is also positively correlated with depth, suggesting that relative costs do not increase linearly as they are built deeper.

Total station hard costs vs. depth per project.

figure 10. Metro station costs by project. Total hard construction costs of each station by project in relation to the station’s depth, as measured at track level. Costs are actualized to $ PPP 2020 (n=82).

 

Stations costs vs. dephs of heavy and light metro projects.

figure 10. Metro station costs by project. Total hard construction costs of each station by project in relation to the station’s depth, as measured at track level. Costs are actualized to $ PPP 2020 (n=82).

 

Distribuion of hard costs for stations vs. depth

figure 12. Metro station cost by location. Distribution of hard costs for station construction based on the station’s depth, as measured at track level. Costs are actualized to $ PPP 2020

[1] This data is derived from our own database that can be retrieved at transitcosts.com

[2]A total of 24 interviews has been conducted between November 2020 and April 2022.

[3] The Maastricht treaty (1993), that institutes the single currency, required that the EU countries that wanted to join the monetary union needed to have a public deficit lower than 3% of their GDP and a shrinking public debt tending to 60% of GDP or lower. In 1993, the deficit/GDP ratio was 10% and the debt/GDP one at 115%

[4] Spinosa (2019), processing data from transit agencies for 2019.

[5] For older projects in Milan, data come from the 1959, 1970, and 1975 budgets published by Metropolitana Milanese. For Rome’s lines MA and MB, data come from several appropriation laws (1145/1959, 285/1968, 82/1970, 396/1971, 374/1974, 19/1978, and 19/1978) that have financed the early developments. Costs for projects realized after the mid-1990s are mostly derived from the House of Deputies official database of infrastructure projects (SILOS, 2021), and the official report of the Court of Auditors (Corte dei Conti – CdC) tracing the spending linked to the 211/92 transit fund law (CdC, 2017b).

[6] See among others: Calise (2021).

[7] Since 2016, RFPs for public works must explicitly state the incidence of labor on the overall hard costs.

[8] The terms of the national Contract of Construction workers can be consulted here: https://www.filleacgil.net/edilizia/15155-industria.html

[9] SIG, Società Italiana Gallerie: http://www.societaitalianagallerie.it/notizia/1551/presentazione/

[10] The Regional level of government comprises 15 Ordinary Regions, 4 Regions with Special Statute (Sicily, Sardinia, Valle d’Aosta and Friuli Venezia Giulia) and 2 Autonomous Provinces (Bolzano/Bozen and Trento). This level corresponds, to a certain extent, to States in the US (albeit with less autonomy) and Régions in France.

[11] Until 2015, there were two sub-Regional levels of elective government: Provinces (that correspond roughly to the County level in the US and Départments in France) and Municipalities. Since 2015, Provincial governments have been de facto abolished and their responsibilities have been uploaded to Regions or, for the 14 largest urban areas, to newly established Metropolitan Cities, whose executive council is composed by the mayors of the member municipalities and is normally led by the mayor of the largest city.

[12] Funds are allocated by regions through a 5-year program called POR-FESR.

[13] Calise (2021).

[14] Italy does not have a single national framework defining participatory processes, unlike, for example, the Débat Public process in France. Some Regions have their own legislation that defines the forms and limits of public participation. Cities may have their own bodies devoted to participatory practices.

[15] In particular, early design includes preliminary geological and hydrological investigations, archeological pre-scoping (evaluation of the archeological risk), and environmental components assessment (air, soil and water pollutant, noise, vibrations, etc.).

[16] Actual approval processes might vary depending on Regions, as many matters have been regionalized and are thus subjects to slightly different local legislations and procedures, albeit with a general common national framework.

[17] As we will see in the case of Rome’s MC, this is a recipe for a hard to manage conflict of interest, as the General Contractor is, at the same time, the controller and the controlled.

[18]Palma (1972).

[19] This law was only amended in 1970 and the first government contributions to metro construction arrived only during the late 1970s with ad hoc legislation.

[20]Minici (2018).

[21] Notably: laws 1145/1959, 285/1968, 82/1970, 396/1971, 374/1974, and 19/1978.

[22] Calise (2021).

[23] Mai (2009); Metropolitana Milanese spa (1980); Minici (2018).

[24] A detailed account of appropriations and spending related to the 211/92 law is available in a report published by the Court of Auditors – Corte dei Conti (CdC, 2017b).

[25] For more detail about the problems of law 443/01 see: Beria (2007).

[26] Regio Decreto 350/1895.

[27] The I.R.I. – Istituto per la Ricostruzione Industriale (Institute for the Industrial Reconstruction) was established in the 1930s after the nationalization of several large industries, insurances and banks bankrupted by the Great Recession.

[28] Calise (2021); CdC (2017a).

[29] Article 9: “The Republic promotes the development of culture and of scientific and technical research. It safeguards natural landscape and the historical and artistic heritage of the Nation.”

[30] Notably, the 1089/1939 (heritage and archeology), the “Galasso law” 431/1985 (landscape) and the following Dlgs. 42/2004, establishing an organic Code for the protection of Heritage and Landscape (Codice dei Beni Culturali e del Paesaggio).

[31] The first attempts to introduce itemized costs in public works was done in the early 1970s (law 14/1973) as a way to promote procurement practices based on unit prices instead of lump sum contracts. It had a limited impact because it left to each contracting agency the burden of elaboration its own reference lists and deciding how to apply it. The obligation for contracting agencies to devise their own reference price lists was first introduced with the so-called “Merloni” reform (law 109/1994), but only slowly implemented over time as the law left undefined how to technically elaborate those reference prices. With the devolution of many legislative matters to regions after 2001 and further refinements of the public works law in 2006 and 2010, the competence for the definition of the official reference price lists was finally transferred to Regions and the regional Prezziari has become the official reference for bidding prices in public works. Nevertheless, large agencies like RFI and ANAS, which had strong in-house engineering and design capacity, implemented them already starting from the mid-1990s.

[32] The so-called “concorso-appalto” or a form of RFP procedure involving a shortlisting process.

[33] article 26, law n. 109/1994

[34] article 133, Legislative Decree n. 163, 12 april 2006

[35] Regional Governments are not the only ones determining official list. Major national agencies involved in large public works, like RFI (national rail network manager), ANAS (national road agency), or even local transit agencies with specific needs (for example, Turin’s GTT and Milan’s ATM for tramway equipment construction and maintenance) have their own Prezziari that are fully elaborated in-house based on a consolidated experience.

[36] Since 2018, the threshold has been lowered to 8%.

[37] See for example: https://la.curbed.com/2017/1/27/14416120/metro-purple-line-contractor-tutor-perini

[38] The threshold for lump sum contracts varies depending on the type of works, but lump sum contracts are limited to small public works.

[39] Those thresholds are set by EU regulations, and they vary depending on the sector of public procurement and its relevance for the common market, as all bidding process higher than a certain value must be open to all EU contractors.

[40] For example, see the DPR 207/2010 and the D.Lgs. 50/2016

[41]Those numbers are mostly derived from interviews with officials and sectorial publications.

[42]There are several minor and a few major inconsistencies between projects that depends on how different elements are accounted for in the documents. The major inconsistencies that result in more pronounced differences will be treated in greater detail in each project’s specific chapter.

[43] Milan’s M4 has not been included in this evaluation as only the cumulative cost of all the open-air civil works, which includes stations and the storage, operation and maintenance facility, has been provided by the agency.

[44] Historic cores are defined as the area comprised within the widest walled area a city covered in its history.
[45] The coefficient of correlation is +0.60 for light metros (n=46) and +0.64 for heavy metros (n=35).
[46] The gross volume metric used in this comparison should be taken as an indicative metric of a station’s scale, not the effective volume of excavation. Station’s volumes have been calculated using station’s major dimensions from project’s drawings. For stations not completely excavated from above, a “theoretical’ volume (footprint on the surface multiplied by the depth) has been used instead. Depth = tracks depth from the surface plus 4 meters, to account for the bottom slab.
[47] As the first capital city of Italy, Turin was selected as the main venue for the celebration of the 150th anniversary of the Italian Unification of 1861.
[48] Ansaldobreda’s steel-on-steel light metro was under development at the time and going to be deployed in Copenhagen.
[49] See: https://www.infrato.it/the-company/
[50] The reconstruction of Corso Francia wasn’t part of the M1 capital budget but was paid for directly by the city.
[51] According to numbers derived from cost estimations for line M2, the jet grouting injection for water proofing of a station’s bottom can add up to € 2-3 million to the overall cost.
[52] For the importance of the role of the R.U.P. (Responsabile Unico del Progetto) as the chief manager and the figure that insulate the technical team from political interference see chapter 3.2.
[53] Bernard Kohn et associés: https://www.bernardkohn.org/fr/architecte/projets/ligne-1-metro-turin.html
[54] As one responded pointed out, the RUP carried out its role of High Supervision in a very proactive manner, participating in all the important decisions taken during construction throughout the different phases of the project.
[54] As a comparison: Los Angeles purple and red lines (heavy metro) have a ridership per km of 4,600, while the LRT lines have 1,100; Atlanta’s MARTA (heavy metro) has 2,700; Seattle’s light rail has 2,450 (Spieler 2021).
[55] Siemens, that purchased the VAL patent from Matra in the late 1990s, has discontinued the commercialization of the VAL 208 in the 2000s, replacing it with an incompatible system called Neo-VAL.
[56] Ridership data are from Spinosa (2019).
[57] Most pre-1990s data are from Metropolitana Milanese spa’s fact sheets and reports published as part of the company’s budgets and reports to the shareholders. The high volatility of the Italian Lira from the late 1960s through most of the 1970s, with double digit inflation rate topping at 20% annually, makes accurate actualization difficult for projects that last over several years.
[58] That number is derived from various non-official sources, all of them referring to an original 1992 investigation carried out in the frame of the Tangentopoli scandal. Unfortunately, it has been impossible to retrieve the original source.
[59] Cost estimates for the 3.6km, 3 station extension of M1 to Baggio, that is currently in final design, are derived from the detailed estimations made for the final (90%) design and publicly accessible bidding documents.
[60] See : https://www.mmspa.eu/wps/portal/mmspa/en/home/the-company/who-we-are
[66] See : MM Spa, Bilancio d’Esercizio 2020
[62] Spinosa (2019).
[63] Zara station was built using ADECO-NATM for platforms in a space adjacent to the existing mezzanine of M3 metro station that ensure seamless transfer within faregate area.
[64] Tre Torri station was built as part of the City Life redevelopment scheme and it’s directly accessible from a sunken pedestrian plaza at the center of the area.
[65] ADECO is a tunneling method for incoherent soils developed mostly in Italy since the 1990s that involves a continuous monitoring of the excavation front combined with a targeted consolidation of it using various types of jet-grouting or freezing techniques in water rich soils. See for example: https://www.rocksoil.com/documents/ADECO_english.pdf
[66] For more details, see also
[67] M5 factsheet: http://allegati.comune.milano.it/trasportiambiente/SportelloUnicoMobilita/LINEAM5.pdf
[68] The full concession contract is accessible here: https://www.metro4milano.it/wordpress/wp-content/uploads/2016/09/Testo-Convenzione-di-Concessione.pdf
[69] For the value of the IRR see: https://www.metro4milano.it/la-giunta-approva-delibera-per-m4-si-tratta-di-un-provvedimento-necessario-per-la-realizzazione-dell-opera/
[70] Spinosa (2019).
[71] For a complete reconstruction of Rome’s line A history see: Palma (1972).
[72] RM (2021b).
[73] Detailed construction costs have been provided by Roma Metropolitane.
[74] This is somehow a misuse of the established accounting principles that has been sanctioned by both the Court od Auditors and the ANAC, since the extra claims made by the contractors using the riserve system should not be settled before the end of the contract the way it has been done with an extracontractual transaction in 2012.
[76] That amount does not include the preventive archeological excavations and the preparatory studies that are accounted for in the soft costs borne by the General Contractor, that is estimated at around €7 million.
[77] Station volume has been calculated using design drawings provided by Roma Metropolitane and simplifying more complex station layouts as simpler equivalent parallelepiped.

4.5 Turin

4.5.1 Introduction

Turin (850,000 inhabitants in the city proper, 1.8 million in the metro area) is the capital city of Piedmont, in Northwestern Italy. The city has had plans to build underground urban rail since the beginning of the 20th century. During the 1930s, a short city-center tunnel was built as part of an urban renewal program, but it was never used for regular service. Further plans were made during the 1960s, when the city was booming as the Italian automotive capital, but they never materialized into anything concrete.

During the early 1990s the city secured an initial grant from the central government, thanks to law 211/92, and a second one was granted as part of the financial support for hosting the 2006 Winter Olympics, allowing for the construction of phases 1 and 2 to take place simultaneously. Ground was finally broken at the end of 2000 for phase 1 and the following year for phase 2, both of which were completed respectively in 2006 and 2007. Funds for phase 3 were secured in anticipation of the celebration of 150 years of National Unification,[47] and phase 3 opened in March 2011. A further extension (phase 4) toward the South went into revenue service in April 2021 and an extension toward the West (phase 5) is under construction, with opening expected in early 2024. Funds for an initial section of line M2 were secured in 2019 with ground-breaking planned in 2023-24. In 2019, the metro carried approximately 150,000 daily riders, running at two-minute intervals during the peak period. In addition to the metro, the city has a 91.7-km tramway network that serves 180,000 daily riders and a suburban rail network (SFM) using the North-South rail link completed in the early 2010s as its central spine.

Map of Line M1, Turin

figure 13. Map of line M1 highlighting the different construction phases.

4.5.2 Line M1: project overview

As of 2021, Turin’s first metro line, which is fully underground, extends for 15.1 kms and has 21 stations, running from West to South via the two main railway stations where it connects with long distance trains and suburban service. M1 uses the same VAL 208 automated rubber-tired light metro technology first experimented with in Lille, France in the late 1980s and then deployed in Toulouse and Rennes. Unlike those cities, Turin opted for longer 52-m trainsets comprised of two 26-m trains instead of only one, to accommodate higher than expected demand. Another characteristic of VAL 208 is its narrowness, as trains are , much less than the 2.85 m standard of postwar heavy metros. chose VAL because it was the only proven light metro automated technology available in the early 1990s.[48] At the same time, Matra, the developer of the VAL system, was also briefly owned by FIAT during the 1990s before being sold to Siemens, and that factor is said to have possibly influenced Turin’s choice to select a domestic supplier.

The project was initially managed by the city’s transit agency, GTT (formerly SATTI), that was mandated by the municipality to plan, design, and deliver the project. In 2010, the city transferred the ownership of the line and the task of supervising and delivering the new extensions and other mass transit projects from GTT to a newly established municipally-owned company, named InfraTo,[49] in order to separate the infrastructure ownership from operations, as required by the EU rules to open up the transit operations market.

[]

The Sweden Case

Most recently updated on 9/9/2022.

5.1 Introduction

Stockholm County is a region of 2.5 million people. Despite its modest size, it has one of Europe’s busiest urban rail networks: in 2019, on the eve of the corona crisis, the 104 km Stockholm Metro (Tunnelbana or T-bana) network carried 1,265,900 riders on an average weekday and including the region’s commuter and light rail networks the system carried 1,892,300, representing comparable ridership per capita to large, established European transit cities like Paris and Berlin. The modal split for all trips in 2019 was 40% car, 30% public transport, 28% biking and walking (SL Annual Report 2019), representing one of the highest shares for public transport in Europe. The system is currently in the middle of a large expansion wave: the commuter rail tunnel Citybana opened in 2016 and the system is currently carrying 410,300 passengers a day, while the T-bana is currently building about 19 kilometers’ worth of extensions, collectively called Nya Tunnelbanan.

The urban rail expansion program in Stockholm is an instructive case. The construction costs remain fairly low. Citybanan cost SEK 16.8 billion in 2007 terms, or about $2.4 billion in 2020 purchasing power parity (PPP) terms, averaging $320 million/kilometer; this is slightly more expensive than the global median, but Citybanan was an unusually complex project, built entirely underneath city center, with two large station caverns mined under older T-bana platforms. Nya Tunnelbanan is currently projected to cost SEK 32 billion, about $190 million/km, well under the global median. Alongside the other Nordic countries and perhaps Switzerland, Sweden is the only country among the world’s very wealthiest with construction costs this low: other low-cost countries such as those detailed in the reports about Italy and Turkey are on the economic periphery of the developed world.

The quality of in-house designs under the civil service system is high. The Swedish Traffic Administration, or Trafikverket, has a generations-long tradition of apolitical engineering, and decisions about the construction of small road projects are undertaken on the basis of benefit-cost analysis. Rail megaprojects like Citybanan and Nya Tunnelbanan cannot be so reduced – they cost so much that the elected national government must approve the final plans, and yet it has not politicized those plans. The in-house expertise of Trafikverket cascades down to the regional level and incorporates a procurement strategy that centers public-sector expertise; designs are traditionally done by the public sector, with the assistance of private consulting firms, and are subsequently owned publicly and bid out to private construction firms.

And yet, there is danger that the low Nordic costs are rising. Nya Tunnelbanan has had a large cost overrun, from SEK 23 to 32 billion. The cost of Helsinki’s West Metro (or Länsimetro), opened 2017, was only $130 million/km in 2020 terms, but this was more than double the cost when the project was approved in 2007, and the second phase of the West Metro is costing $230 million/km. Oslo’s under-construction Fornebubanen with its deep-mined stations is projected to cost $300 million/km (2020 PPP terms), triple the cost of Lørenbanen, which opened 2016.

Moreover, the Nordic civil service is showing long-term interest in changes in procurement in a direction more akin to what is found in the English-speaking world. Academic and gray literature within the Nordic world, and not just Sweden, speaks favorably of reforms that reduce public-sector involvement; Trafikverket’s new strategy is that it should become “a pure client” and implement a system that centers private-sector expertise and innovation.

The long-term changes are unlikely to be positive. The one-time increase in cost of Nya Tunnelbanan appears permanent: future metro expansion is likely to have similar per-km cost to Nya Tunnelbanan, Fornebubanen, and the second phase of the West Metro, rather than to the original budget for Nya Tunnelbanan or the actual cost of Lørenbanen or the first phase of the West Metro. The English-speaking world has high construction costs, and yet the academic and gray literature out of the Nordic world looks up to it and ignores low-cost construction within Southern Europe, which Northern Europe looks down on.

Nonetheless, construction costs in Sweden, Norway, and Finland, remain well below the world average; nowhere else in Northern Europe are construction costs so low save perhaps Switzerland, and costs in Germany, the Netherlands, and the United Kingdom are a multiple of those of Sweden.

5.2 Sweden and the Nordic Region

The Nordic countries are expanding their urban and intercity rail offerings, including metro extensions in their capitals, investments in regional rail, and intercity rail that in some cases includes high-speed rail.

Those countries are institutionally similar: their legal and political systems are all similar to one another, and they make efforts to learn from one another. Nordic or Scandinavian law is based on collaboration among Denmark, Sweden, and Norway going back to the 1880s, with Finland joining after independence in 1917; Nordic contract law was harmonized in 1915 (Bernitz 2007), and when reforms were needed in the late 20th century, they largely happened in parallel across all Nordic states. In comparative law, Nordic law is treated as a primary global category, alongside French civil law, German civil law, and English common law (Siems 2022).

Politically, too, there are strong parallels among the four mainland Nordic states, and early intergovernmental cooperation under the Nordic Council. The party systems in Sweden, Norway, and Denmark are similar, and to some extent so are those of Finland and Iceland, with extensive ties between each Nordic party and its counterparts in other Nordic states.

It is common in each Nordic country to compare its performance on topical issues to the other Nordic states. For examples:

  • Norwegian politicians comment on immigration to Denmark (Moe and Kagge 2021) and the media comments on immigration to Sweden (Andreassen 2014).
  • Critiques of education in Sweden heavily employ comparisons to Finland with its higher PISA test scores – see for example Boman (2022) but also multiple personal conversations with Swedes in academia and political advocacy.
  • Sweden’s approach to corona drew comparisons to the rest of the Nordic world above all; within Sweden, defenders of the approach, including public health chief Anders Tegnell, compared Sweden’s death toll with that of the United States or the European average, in which case Sweden would come out above average, whereas critics would compare it with that of Norway, Denmark, and Finland, all of which had far lower death rates.

Diplomatically, there is greater divergence – Norway and Iceland are not in the EU, and Sweden and Finland had no interest in joining NATO until the Russian invasion of Ukraine – but there is enough of a concept of Nordicity that all five Nordic states built their post-unification embassies to Germany in the same complex.

The concept of Nordicity applies throughout the social, economic, and political spheres, and so it should not be a surprise that public transport planning follows similar broad trend across Scandinavia. In the interviews we have conducted with Norwegian and Finnish planners, their descriptions of project procurement, management, and construction techniques are similar to the ones we have in Sweden. Therefore, we expect that this report has bearing not just on the case study from Stockholm but also on how the rest of Scandinavia engages in planning.

The similarities across Scandinavia also lead to extensive comparisons between the different Nordic countries, focusing on differences between them. The academic literature compares the impact of benefit-cost analysis in Sweden and in Norway, finding it is much more significant in Sweden (Eliasson et al. 2015). Other examples may compare countries with non-Nordic countries, but usually several Nordic countries will be included as well, for example in the Finnish Ministry of Transport’s review of rail transport in Finland (Ministry of Transport and Communications 2003) or in Smith et al. (2018) on Mobility as a Service developments.

Although the social context of metro rail investment across Scandinavia is parallel, many of the physical characteristics of public transport across the four main Nordic capitals (omitting Reykjavík as it is far smaller) differ, as do their histories:

  • Stockholm has a metro system consisting on three lines (Red, Blue, and Green) each with two to three branches; it has removed its historic tram network, converting some lines to metro branches. Its metro system has always been supplemented by various commuter rail lines, of which those using mainline rail service are called Pendeltåg and those operating as isolated systems, generally connecting to an outlying metro station, are called Lokalbana if longer-distance or Spårväg or tram is shorter-distance. The Pendeltåg system ran through the same two-track tunnel through Central Stockholm until Citybanan opened, giving it a dedicated tunnel to permit for more commuter rail as well as longer-distance regional and intercity rail capacity.
  • Copenhagen has a metro system with two main lines with branches, of which one forms a circle, but the system only opened in 2002, later than in nearly all other European cities of comparable size. The Copenhagen Metro is driverless and runs short trains at high frequency, as is common in some smaller Italian cities. In contrast, Copenhagen has long had a dedicated commuter rail tunnel, opening in 1917 and running high-frequency urban electric rail service since 1934 under the name S-tog, borrowed from the German S-Bahn. The city also makes extensive use of bikes: within the city proper, consisting of about a quarter of the metro area, bikes have a 62% modal split (City of Copenhagen 2019).
  • Helsinki has a metro system consisting of one line branching in two in the east, together with a large urban tramway network and a regional rail system running from suburbs and secondary cities to the north of Helsinki to a stub-end city center terminal. The region is expanding all three modes, with a western extension of the metro (West Metro), a large expansion program for the tramways, and a proposed loop tunnel under city center to permit commuter trains to run in and out without reversing direction.
  • Oslo combines a subway system, a tramway network, and commuter rail, like Helsinki. Its subway system consists of a Common Tunnel with four to five branches on each side, generally on the surface but with some tunneled urban sections. Its commuter rail system has a common trunk carrying mostly commuter traffic but also some longer-distance trains and is oriented toward farther-away suburbs than in the other Nordic capitals.

Despite the differences in characteristics and modal choice within public transport, all four Nordic capitals maintain a high modal split for non-automobile traffic; in Copenhagen this comprises high usage of both bikes and trains, whereas in the other capitals, public transport predominates, and bikes have a secondary role.

The construction costs in Sweden, Norway, and Finland look broadly similar. This includes ex ante and ex post costs for metro tunnels, regional rail tunnels, proposed high-speed rail, and conventional rail upgrades. Danish costs are somewhat higher, but the costs in Sweden, Norway, and Finland are converging to Danish levels. A report on the Copenhagen Metro is in preparation for the construction costs project at the Eno Center (Aevaz et al. 2021) and is beyond the scope of this case study, but it appears from Eno’s existing work that Copenhagen has always used the procurement and regulation package that the other Nordic countries are moving to.

5.3 Case Selection

In preparing this report, both urban rail extensions in Stockholm – Citybanan (built 2007-16) and Nya Tunnelbanan (built 2020-30) – are considered. In the same period in question, going back to the early 2000s, Sweden has had two additional urban rail megaprojects: Malmö’s Citytunneln, and Gothenburg’s under-construction West Link, or Västlänken.

Citytunneln, built 2005-10 for SEK 8.45 billion ($1.37 billion in 2021 PPP terms), is outside the scope of this analysis. It is a connecting railway on the Malmö side of the Öresund Bridge, with new stations including under city center, but much of the planning was done in the 1990s, and most of the length of the 17 km project is surface connections, not an urban tunnel.

The West Link, in contrast, is a valuable sanity check for the analysis of this report. It is contemporary with Nya Tunnelbanan, with construction expected to take place over 2018-26. It is a regional rail tunnel for Gothenburg, more akin to Citybanan than to Nya Tunnelbanan albeit without the need for deep-mined city center stations, and like Citybanan the lead agency is state transport administration Trafikverket as it is a mainline rail project; Nya Tunnelbanan is led by Stockholm County, often still abbreviated by its old name SLL, and its transport arm SL (Storstockholms Lokaltrafik)

5.4 Stockholm Metro History

The system to the 1990s

In the 1940s, Stockholm was a small city; the county’s population in 1940 was 880,000, rising to 1.1 million by 1950. At the time, the city’s tramway network already included grade-separated segments, including a tunnel running north-south through Södermalm, called Södertunneln, opened 1933. When the city made the decision to build the metro in 1941, it was the smallest in Europe with such plans; Rome opened its metro a few years later than Stockholm, with a municipal population of 2 million.

Construction began in 1944, and the first section, an upgrade of Södertunneln to metro standards, opened in 1950. By 1965, there were two lines, the Green and Red Lines, and a plan was proposed for further expansion including the construction of what is now the Blue Line and further extensions, and some of those extensions are now being built as part of Nya Tunnelbanan.

Throughout this construction scheme, the T-bana took over peripheral radial lines constructed as tramways or local trains, converting them to metro standards in the process. At some places, such takeovers did not happen, creating the modern Spårväg and Lokalbana lines terminating at a T-bana station with a transfer for onward trips to city center.

The Green and Red Lines were designed as a coordinated system from the start. They meet in city center at three stations: T-Centralen, Gamla Stan, and Slussen; each of the two lines has dedicated tracks through this shared segment. Moreover, all three stations are set up for cross-platform interchanges, between same-direction (northbound or southbound) trains at Gamla Stan and Slussen and opposite-direction trains at T-Centralen. This way, same-direction transfers can be done cross-platform, and opposite-direction transfers between the Red Line to the northeast and the Green Line to the northwest can be done cross-platform at T-Centralen; only opposite-direction transfers between the Red Line to the southwest and the Green Line to the south require the inconvenience of walking between platforms at Slussen, or else staying on the train two extra stops for the interchange at T-Centralen.

The T-bana was integrated with urban planning from shortly after opening. While the 1946 city plan centered auto-centric development and city center urban renewal, the 1952 city plan took a different route. It took inspiration from Copenhagen’s contemporary Finger Plan, for what would today be called transit-oriented development around the branches of the S-tog; with a just-opened subway system, the plan called for the construction of modernist neighborhoods facing the stations, with neighborhood centers and high-density housing close to the stations and lower-density housing at greater distance.

The first major suburb based on this plan, Vällingby, grew rapidly in the 1950s. Soon thereafter, the nationwide Million Program constructed a million units of social housing in 1965-75; in the Stockholm region, those projects tended to be oriented around the T-bana like Vällingby before them. The 1952 plan envisioned a polycentric region with communities with both housing and jobs (“ABC,” where A stands for jobs, B for housing, and C for center), but in practice they turned into bedroom communities for Stockholm jobs. To this day, urban studies literature considers Stockholm an example of monocentric transit city development (Söderström et al. 2015; Cats et al. 2015; Spasov 2017); where there is polycentricity, it is often radial along the rail lines, with high modal split (Cervero 1995).

A recent study by Börjesson et al. (2014) finds that the benefit-cost ratio for the system built so far is 6 without taking agglomeration and labor market benefits into account; if they are taken into account, the ratio rises to 8.5. This comes from a combination of high ridership and low construction costs: the 104 km system cost SEK 5 billion in 1975 prices, corresponding to $3.3 billion in PPP 2021 dollars, or $2,600 per workday trip;[1] even taking into account that only 57 km of this system is underground, this is an extraordinarily low cost, not achieved on contemporary lines such as those of London, Milan, or Rome.

But then expansion cooled. The Million Program was over by 1975. The Blue Line opened in the same year, and T-bana growth thereafter was slow; the most recent expansion, a short extension of the Green Line Skarpnäck branch, opened in 1994.

Sweden metro construction in kilometers chart

figure 1. Stockholm Metro kilometers built per five-year period per year

Between the 1980s and 2000s, Stockholm was characterized by stability. Population growth slowed down, as the working class had already settled in in the Million Program projects. Swedish economic growth was weak, culminating in the financial crisis of the early 1990s, also affecting the rest of Scandinavia. Most of the T-bana lines planned in 1965 had been built already, and the metro region had already shaped itself along what had been built.

Planning since the 2000s

Stockholm has continued growing in the last 30 years. Recovery from the financial crisis has been rapid: from 1990, the earliest year with current World Bank PPP (2017) calculations, to 2019, the eve of the corona crisis, Sweden’s GDP per capita grew a cumulative total of 55%; in the developed world as conceived at the time, without newer entrants like South Korea, only two countries have posted faster growth, Australia at 59% and the Netherlands at 56%, and the US near-tied Sweden. This growth has attracted immigrants, and, moreover, Sweden has maintained long-term openness to labor and humanitarian migration, leading to high population growth.

The monocentric character of the city and its population and economic growth led to escalating urban rail ridership. Long-term growth in Stockholm commuter rail traffic led to concerns about capacity saturation; there were only two railway tracks through Stockholm, which had to carry both the county’s commuter rail system and intercity rail to points south and west, where the vast majority of the rest of Sweden’s population lives. On the eve of the opening of Citybanan, those two tracks, called the wasp’s waist, carried 24 trains per hour at the peak, including 16 commuter trains and 8 regional and intercity trains.

Moreover, all projections called for further growth. In the 1990s and 2000s, Stockholm County’s population averaged 1.1% annual growth; this rate accelerated in the 2010s as immigration levels have increased, raising the county’s annual growth rate to 1.5% over the decade. In 2005-6, Trafikverket contracted with the consultancy Transek, now owned by WSP, to project future demand through 2060 and perform a benefit-cost analysis (Transek 2006).

The Transek report projected a rapid exhaustion of capacity. Under a high-growth assumption, a no-build option would have traffic reaching the wasp’s waist’s capacity by 2011, before any project could be completed. A surface track option investing in the system without a new tunnel could raise capacity in the limit to 32 trains per hour of which 18 were commuter trains, but traffic would reach that level by 2014. Citybanan would suffice through 2020, and even a second step for Citybanan, with a theoretical capacity of 30 trains per hour in the tunnel rather than the current 24, would only last until 2032. A more conservative assumption of low growth had the no-build option lasting until 2018, the surface option until 2021, Citybanan until 2043, and a second-step Citybanan until 2075.

At the same time, the benefit-cost analysis was unfavorable. All investment options had negative social rate of return, but the surface option had a more negative rate of return than the Citybanan options, which cost more but were far more beneficial for the region. The project was decided then because of the need for further increases in capacity in the Stockholm region; wider benefits are not always directly measured,[2] and official analyses can omit them, making projects that by broad consensus are beneficial look weak.

Nya Tunnelbanan comes out of similar plans for long-term capacity. The population growth projections in Stockholm require large quantities of new housing, to be developed on greenfield and brownfield sites outside city center; in Stockholm, as is typical for growing European cities, housing redevelopment is done on non-residential sites, with no replacement of historic low-rise apartment buildings with bigger ones.

To permit this growth, SLL concentrates on three growth regions: Nacka, Barkarby, and the Arenastaden area in Solna. Planning for all three extensions was done in coordination with local and regional growth plans.

The Nacka extension plan was explicitly done with a housing growth target in mind for the municipalities served (SLL 2018a); a branch of the same extension is to take over a Green Line branch, to reduce the Green Line’s southern section from three branches to two in order to both increase frequency on all branches and permit redevelopment of brownfield industrial sites.

Once the overall direction was decided, SLL looked at many different options for alignments:

Nacka extension study map

figure 2. Studied deep-mined routes for the Nacka extension

Plans for the extension to Barkarby followed a standard four-step process, to ascertain such a high-cost megaproject is truly necessary for the region (SLL 2014):

  1. “What if?”: this includes measures that manage transportation demand, such as reducing parking.
  2. Optimization: this includes using existing infrastructure more efficiently, for example encouraging carpooling to use road lanes more efficiently, increasing public transport frequency to effect modal shift, and improving the bus network.
  3. Rebuilding: this includes minor infrastructure improvements in conjunction, such as running more surface commuter rail service to non-city center destinations (since city center is already full, hence Citybanan and long-term plans for Citybanan step 2) and rearranging bus infrastructure for higher priority, including transit signal priority.
  4. New construction: only after steps 1-3 are exhausted is fully new infrastructure to be considered. The report looks at many modes of public transport, such as BRT and a gondola, but finds that they are not as good as a subway extension, and further finds that the best place for an extension to Barkarby is from Akalla.

Arenastaden had the most complex history of planning (SLL 2018b). It originates in plans for expanding public transport capacity to Karolinska, located in Solna just to the north of the present-day Green Line. Multiple options were considered, including bus service expansion, a tram, a branch of the Green Line, and an entirely new subway line.

The metro option was deprecated at first due to its cost and complexity; some of the early plans called for rebuilding Odenplan, which proved too difficult. Eventually it was bundled with parallel plans for Nacka and Barkarby to form what is now Nya Tunnelbanan.

The choice of brand even recalls this history of the Arenastaden branch: it is called the Yellow Line and portrayed as such on maps, even though it is still a branch of the Green Line. Thus, maps show the Yellow and Green Lines as two separate branches to the north and northwest, but then as a single line from Odenplan south, with the southern branches carrying both Green and Yellow Line trains.

5.5 Project decision process

As in most of the Nordic world, Swedish politics is traditionally bipolar between two blocs, with regular alternation between them, albeit with more frequent left governments and less frequent center-right ones than elsewhere. The party situation in Sweden is important for understanding budget priorities, and Sweden displays large variations in broad policy according to which bloc is in power, but little in the way of political influence over technical matters or over alignments. This is in contrast with frequent interference in North America – for example, as we explain in more detail in the New York case, there was partisan politics in the decision to build Second Avenue Subway, which in the late 1990s was seen as a Democratic city project in opposition to commuter rail to Republican suburbs.

Politics and priorities

The center-left bloc is led by the Social Democrats (S), who were dominant in the middle of the 20th century, and consists also of the Green Party (Mp) and the farther-left Left Party (V); it is currently called Red-Green, and is dominated by S, with Mp as a minor partner and V at most an outside supporter of the coalition, mainstream enough to participate in some political institutions but not enough to enter the government. S and Mp are aligned on practically all issues; a joke among S members is that Mp exists as a thinktank for S’s environmental policies, and with little daylight between them, Mp support has dwindled in recent years.

The other bloc, formed by the center and center-right parties and known since 2004 as the Alliance for Sweden, is a four-party bloc consisting of the mainline center-right Moderates (M), the Liberals (L or Fp), the historically agrarian Center (C), and the Christian Democrats (KD). Its situation is in flux, and the Alliance proper was dissolved in 2019, due to differences over the role of the far-right Sweden Democrats (SD), who supported the Alliance from outside in 2010-4 but grew more vocal subsequently; currently, C and L support the S-led government with tensions with V over budgetary and regulatory issues such as rent control (Steensig 2021) while M and KD do not and are willing to govern with the support of SD. The future of this system is in flux, but the entire history of planning in Sweden so far has been with the traditional two-bloc system, long before the center-right called itself the Alliance.

On transport-related issues, there are large differences between the two blocs over priorities, owing to the role of public transport as a green alternative to the car. There was intense disagreement over the issue of congestion pricing in Stockholm in the 2000s, and right now, there is debate over a high-speed railway connecting Stockholm with Gothenburg and Malmö, which the Red-Greens support and the Alliance does not, preferring investment in electric cars instead (Eliasson 2014; Hårsman and Quigley 2011; Personal Interview B 2021; Personal Interview G 2021).

Both Citybanan and Nya Tunnelbanan faced some Alliance opposition, both on fiscally conservative grounds: as explained above in the section on Stockholm Metro history, the alternatives analyses for both programs projected negative rates of return. Nonetheless, the plans for growth and extra capacity required the construction of those projects, and so they were not canceled, and the Alliance assented to both in its 2006-14 coalition.

A culture of consensus

The guiding principle within Swedish culture is consensus (Personal Interview E 2021). This occurs at the levels of politics (Bengtsson 2013), office culture (Altinkaya 2006; Salminen-Karlsson 2013; Ullman 2017), and local empowerment.

Whereas in business, consensus means slowing down process until everyone agrees, in politics it means accepting a large interpartisan difference in political agendas. There is little sniping involved: Alliance governments do not cancel projects begun under the Social Democrats, and vice versa, and projects that are so controversial there is risk of such sniping are not chosen for going through (Personal Interview E 2021).

This has implications for the use of Stockholm’s congestion pricing revenues. In the 2000s, the Social Democrats and Greens called for using them to fund investments in public transport, whereas the Alliance, having formerly opposed the scheme, promised to instead divert the money to roads. The compromise under the Alliance government of 2006-14 under Frederik Reinfeldt was that congestion pricing money would go toward building new motorway tunnels in and around Stockholm, but also to some extent Nya Tunnelbanan, which was planned in the same era.

The same culture of consensus applies to labor and to other conflicts. Swedish and other Nordic unions go on strike often if their demands for higher wages, benefits, or labor standards are not met. Consensus may be achieved at tripartite meetings between the government, union representatives, and business-group representatives, but there is recognition that there is conflict between workers and bosses and overall the system does not empower groups to act as veto points.

There is likewise a right to sue within Sweden, which interview subjects who discussed this issue treat as a normal part of the democratic process (Personal Interview F 2021). However, in practice, lawsuits are rare, and no group chose to sue Citybanan or Nya Tunnelbanan. Informally, there is great effort made not just at community level but also at the level of conflict between public agencies and private contractors to avoid going to court; see below on procurement.

Local-national interface

Sweden’s unitary state is tempered by a large degree of devolution of planning to county and municipal governments. Rail megaprojects come from regional growth plans: Citytunneln was planned locally and likewise the West Link in Gothenburg is planned by the county, Västra Götaland, which comprises the entire metropolitan area plus additional rural hinterland.

This devolution applies not just to megaprojects but also local transit planning. In Gotland, an island of 59,000 whose main city is Visby, a county-level civil servant handling public transport is connected to all other important officials within the county, enabling rapid coordination, in contrast with top-down unitary systems such as that of the United Kingdom (Personal Interview C 2021).

The Swedish state has extensive fiscal devolution: local and county taxes are 16% of Swedish GDP, the second highest figure in the OECD after Australia’s, and among the highest figures as a proportion of total government revenue; moreover, there is near-complete discretion by local governments about how much to charge, as opposed to central taxation at a uniform rate that is then distributed to localities by formula (OECD 2020). However, megaprojects remain beyond the capability of a county, even one as big and urbanized as Västra Götaland, and therefore project funding comes from a combination of regional and state sources. The West Link is funded about 50% by the Swedish state, 41% by Gothenburg congestion pricing revenues, 7% by city and county funds, and 2% by land sales (Personal Interview E 2021).

To resolve the issue of multiple funding sources for one project, Sweden employs competitive grants given by Trafikverket to regions that have the strongest proposals. If a county or municipality has demands in excess of the minimum required to execute a project, such as additional tunneling to avoid the impact of above-ground intercity rail service, the local government is required to fund the excess costs; this prevents local areas from treating state infrastructure money as a free lunch for unrelated priorities.

Stockholm is nationally unique in the size and importance of the city and its projects. As a result, state involvement is unavoidable, and both Citybanan and Nya Tunnelbanan are planned and funded jointly between the state and county budgets. Citybanan may be a mainline rail project planned primarily by Trafikverket and SL, but funding came from multiple sources (Tihinen 2017):

SEK 10.3 billion: state loans.

SEK 5.1 billion: Stockholm County and the municipality.

SEK 2.3 billion: municipalities in adjoining counties benefiting from regional rail service.

SEK 1.6 billion: state appropriations.

In this way, Stockholm and Gothenburg are similar: megaprojects are funded by negotiation between the state, the county, and municipalities. However, unlike in Gothenburg, the planning for the need for Citybanan came not from the county, but from Trafikverket, which projected both regional and national rail traffic trends; Citybanan was deemed a project of national importance, and therefore the county was less involved in its planning and municipalities even less so.

Civil service role

Interviewees from the civil service as well as external organizations confirm that decisions on planning originate in the civil service, and not in politics. In the 1950s, Sweden imitated the American road planning system that produced the Interstates (Personal Interview B 2021), which was insulated from political interference through strong civil service norms under Thomas MacDonald and a lockbox on road funding such that federal funding was not subject to regular congressional control. Unlike in the United States, in Sweden the system was also designed to remove local infighting and prevent regions for jockeying for funding; competition between different regions for funding is handled through apolitical mechanisms.

This system has persisted through changes in the organizational chart. Swedish Railways (SJ), nationalized in 1888, developed internal planning capacity, and modernized throughout the postwar era, running both commuter and intercity rail. In 1988, SJ was split, and the responsibility for infrastructure was transferred to the new Swedish Rail Administration, which through mergers in the 2000s combined with the Road Administration to form modern Trafikverket in 2010.

Trafikverket retains extensive planning power, even with growing privatization of operations, such as the contracting out of Stockholm commuter rail to the MTR. At the regional and local levels, there are parallel civil service systems, and there is porosity between Trafikverket and SL: many of the planners responsible for Nya Tunnelbanan worked on Citybanan previously.

Swedish norms of civil service independence are such that it’s fair for civil servants to frankly criticize common wisdom. As detailed below in the section on functional procurement, a growing trend in Nordic procurement is to have loosely-specified functional contracts, with support from Trafikverket and independent research, but a civil servant with experience in both Citybanan and Nya Tunnelbanan openly criticized this trend in an interview (Personal Interview 2021), in much more straightforward language than observed in interviews with American, Canadian, or British civil servants.

Nonetheless, politicians remain the top authority when it comes to the biggest investment decisions. While both Citybanan and Nya Tunnelbanan were planned by civil servants, the decision to proceed was political. The budgets for both projects are so large relative to the size of Sweden that it was unavoidable that they should be debated as part of the national budget.

While road investment decisions in Sweden are decided by benefit-cost analysis whereas those in Norway are not, in neither country is there politicization of route choice (Eliasson et al. 2015). Political influence boils down to a yes-no decision, perhaps with loose guidelines over the level of investment. To the extent there is any evidence of politicization of priorities, it is again loose, consisting only of decisions of whether to prioritize urban or rural infrastructure, or, in the Stockholm region, modal conflict between road and public transport investments.

Cost and ridership

Predicting the ridership of an urban rail project ex ante is imperfect. Nonetheless, we can look at the ridership of recently-opened lines to gauge whether the value proposition of Nordic urban rail construction is positive.

Citybanan provides a ready example: ridership in 2019 was 410,300 on a winter workday (SL 2019). The project’s overall cost, SEK 16.8 billion in 2007 terms or $2.4 billion in PPP 2020 dollars, is $5,850 per weekday trip, among the lowest costs for urban rail lines in the Transit Costs Project for which there are definitive ridership figures and not just costs. Recently-opened and under-construction lines in Europe usually cost $15,000-40,000 per weekday trip. This is especially positive for Citybanan as its business case relies on estimates of continued growth in the coming decades, whereas the ridership figure is only two years after it opened.

Even if the ridership of Citybanan nets out the previous commuter rail ridership, 324,800 per weekday in 2016 (SL 2016), the case remains solid: it would mean that Citybanan generated enough ridership to lower the cost per new rider to $28,000 within two years, and will lower it further in coming years due to continued growth in this region, where typically metro and commuter rail tunnel projects cost within this range when considering all riders and not just new riders.

The $5,850/rider figure is especially extraordinary when compared with the existing T-bana network. Its construction costs over the decades amount to $3.3 billion in 2020 dollars, for a total of $2,600 per trip, a cost figure that like the $5,850 figure does not net out the ridership of older lines, such as the now-closed historic tramway system. But Sweden today has 2.6 times the GDP per capita that it had in the early 1960s (Maddison 2020)[3], midway through the opening of the T-bana; the affordability of Citybanan relative to ridership is higher than that of the T-bana.

The combination of benefit-cost ratios for the original T-bana and Citybanan is a puzzle. The benefits of the T-bana scale with ridership, and practically all of them come from the value of time, which scales with income; some analyses even disaggregate the value of time by class or income (Teulings et al. 2018). If $2,600 per trip results in a benefit-cost ratio of 6 in a Sweden with a GDP per capita of $17,239, then, in a Sweden with a GDP per capita of $45,193, a $5,850/rider project should have a benefit-cost ratio of about 7, and even netting out the entire 2016 ridership of Stockholm commuter trains, the resulting $28,000/rider project should have a benefit-cost ratio of 1.46 without taking into account future ridership growth. And yet, the projected benefit-cost ratio was lower than 1.

Elsewhere in Scandinavia, costs per rider for recently-opened lines have not been high either:

  • Helsinki had 92.6 million metro trips in 2019 (HKL 2019), compared with 64.1 million in 2016 (HKL 2016), on the eve of the opening of West Metro. The difference, 28.5 million annual trips, is about comparable to 95,000 on an average weekday, in line with the projection of 100,000/weekday (Railway Gazette 2017), which makes the project cost about $18,000 per new weekday trip, only two years after opening.
  • Lørenbanen has 8,000 boardings at the single station that opened (Sporveien 2016), which corresponds to 16,000 trips; this makes the cost of the project $10,000 per weekday trip, new or diverted from other lines.

It is likely that the contrast between low or medium costs per rider and low benefit-cost ratios reported in prior analysis is why the decision to build Citybanan was undertaken, even in a fiscally conservative Alliance government.

Transit-Oriented Development

Historically, the T-bana was built together with suburban social housing, from Vällingby to the Million Program. The connection between housing construction and public transport infrastructure remains strong with Nya Tunnelbanan, and so the extensions to both Nacka and Barkarby are bundled with regional housing growth plans.

This is because housing is sorely needed in the Stockholm region. In 1987, as an environmental and anti-sprawl measure, Sweden passed the Plans and Constructions Act (Plan- och Bygglag, or PBL), requiring community consultation for development. Housing growth remained healthy in the run up to the financial crisis of the early 1990s, but after the crisis it crashed to a minimum of about 12,000 units a year in a country of 9 million people, compared with 110,000 in the peak years of the Million Program (Statistics Sweden 2022b).

Weak housing growth even as the economy was recovering from the crisis and growing fast led to rapidly rising housing costs; the rise in rents in the late-1980s bubble was not erased after the bubble popped but instead became permanent, and rents kept rising further (Statistics Sweden 2021). By the 2010s, the housing bubble returned (Dermani et al. 2016; Asal 2019), as on the eve of the global financial crisis house prices were 60% above 1990 levels and by 2015 they had risen to twice 1990 levels. Apartment prices, for which the index only goes back to 2005, rose even faster over the period with available data, a nominal rise of 138% compared with 71% for detached houses.

Starting in the 2000s, plans for housing growth became part of the Stockholm region’s growth projections. In 2007, the advocate group YIMBY was founded in Stockholm, calling for a repeal of the PBL and acceleration of housing construction in urban areas, where there is the most demand; YIMBY asserts that it wants Stockholm to grow “both in width and in height,” that is through taller construction in or near city center but also the construction of new high-density neighborhoods on urban rail lines to be built (YIMBY Stockholm 2022; Personal Interview J 2022).

The further-reaching demands of YIMBY are far from met. However, in the 2014 election, the political parties competed by promising to build more housing, as both rents and prices reached record levels, and waitlists for rent-controlled apartments in Stockholm reached decades. Prices are now high enough that even with extensive local role in development, municipalities are more likely to approve new housing as they expect the new residents to be wealthy enough to be net contributors to local taxes. In the mid-2010s, the rate of construction of housing accelerated to about 55,000 annual completions Sweden-wide (Statistics Sweden 2022b), with 15,000 net completions in Stockholm County, or about 6 per 1,000 people. The municipality where Barkarby is located, Järfälla, built 780 net new dwellings a year over the same period, or 10 per 1,000 people (Statistics Sweden 2022a).

The coordination between housing construction plans and urban rail infrastructure is one of the contributing factors to high public transport usage in Stockholm. The main threat to this model is that there is substantial lag between housing demand and housing supply: the infrastructure development plans of the 2000s were designed for a population not much higher than that of the 2000s, but thanks to economic growth and immigration Stockholm has surpassed the projections, leading to a state of permanent housing crisis; the delays in the opening of Nya Tunnelbanan are likely to magnify this crisis.

5.6 Project delivery

Project scoring

When receiving bids, Sweden uses a combination of the lowest-bid and best-value methods for picking the contractor.

Lowest-bid contracts, awarded purely on the basis of price, are used for less complex public procurement, for example access tunnels. In addition, Swedish contracts may be decided on the basis of cost rather than price (Swedish Public Procurement Act 2016), in which case the entire lifecycle cost can be considered, including in the case of public transport operations and maintenance.

However, complex projects are awarded on the basis of best value. The main contracts of Nya Tunnelbanan and Citybanan were both best-value, with Nya Tunnelbanan using the ratio of 75% price to 25% quality and Citybanan using a 50-50 ratio. Going forward, the 50-50 ratio is the most common for the most complex project, whereas 25% quality is intended for intermediate projects, which Nya Tunnelbanan was not.

Benefits for technical purposes are assessed based on a pre-published schedule of monetary values, collecting in the ASEK manual, of which the current version is 7.0 (Personal Interview G 2021); the external costs and benefits are compared across the Nordic countries, and there is substantial variation, but also interest in sensitivity analysis to ensure that project selection does not hinge on arbitrary values (Nordic Council of Ministers 2021).

Competition

Sweden has a large and growing ecosystem of engineering and construction firms. Some are international in scope and well-known for getting contracts abroad, most notably Skanska; others are more regional, such as NCC, the Finnish conglomerate YIT, the Swiss tunneling firm Implenia, and the Czech firm Subterra/SBT.

Contracts are awarded on a competitive basis. In an analysis of 41 contracts let between 2018 and 2021 for Nya Tunnelbanan, only two received just a single bid, both small contracts for work access tunnels, and eight more received just two bids. The median number of bidders is four. In Gothenburg, a major contract worth SEK 820 million had to be rebid because the first tender received only one bid and it was over budget (Reynolds 2018); it is a general rule in Sweden that if there’s only one bid and its price is not as expected, the contract must be relet (Interview D 2021).

Moreover, the market is large enough that it is not the same four firms bidding on all contracts. An analysis of both the winning bids and all bids on some contracts (Siljevall 2021) shows the following list of contractors for tunneling projects:

  • Skanska
  • NCC
  • YIT
  • Implenia
  • Subterra
  • Obrascón Huarte Lain
  • China Railway Tunnel Group
  • Gülermak
  • Itinera
  • Sacyr Construcción/Serneke
  • Comsa/Soner Temel Mühendislik (STM)
  • Züblin
  • Peab

The Swedish market is open to international entrants, such as CRTG and multiple Turkish contractors.

However, Turkish contractors report that they are informally required to partner with longstanding Swedish or otherwise European firms. The above list includes one such partnership: STM is a Turkish firm bidding on Nya Tunnelbanan contracts together with the Spanish contractor Comsa. Such partnerships are not restricted to Turkish groups – Sacyr is Spanish and bids together with Swedish Serneke. But Turkish contractors who were interviewed for this project say that Swedes are culturally more comfortable with a partnership than with hiring a purely Turkish firm. In one interview, a Turkish contracting manager held up an Android phone and said, “If a Swede says this is an iPhone, then this is an iPhone, and if I say this is an iPhone, they will check” (Personal Interview 2021).

While openness to Turkey remains uncertain, openness across Europe is much more complete. The list of contractors includes multiple from Southern and Eastern Europe, and some of the firms are relatively new entrants to the market (Serneke was founded in 2002).

Build contracts

The typical contract for infrastructure in Sweden is done as design-bid-build. The design is done in-house with the assistance of private consultants, and is owned by the lead agency, for example SLL; the construction contractors only bid for the build contract, and as a result, in domestic Swedish parlance, design-bid-build contracts are called build contracts (Personal Interview D 2021; SLL 2021).

There has been a long-term shift in the Nordic countries toward the design-build method, which is viewed as more modern and efficient (Andersen 2018). At the same time, Osipova (2008) finds that the design-build method’s attractiveness in offloading cost escalation risk to the private sector means that bidders increase the price to compensate, leading overall to higher profit margins. It is notable that the method that is viewed as more modern and cooperative between the client and contractor nonetheless is associated with higher costs and higher uncertainty.

Part of the issue concerns familiarity to the contractors. Although design-build is not yet common in the countries the contractors come from, the separation between design and construction works differently. In particular, the Nordic build contract has relatively little flexibility for the contractor to suggest changes.

An interview in Oslo (Personal Interview A 2020) revealed that in this model, the standard for risk allocation is that the designer bears all risk in case the builder follows the exact specification, but otherwise the builder and the client bear the risk. As a result, builders do not deviate from the design based on meter-scale geology, and designers compensate with defensive design, including more options than is required to avoid liability. The Oslo case is that of the Fornebu Line, built for about $300 million per km (in 2020 PPP terms) with underwater tunneling and deep-mined stations in imperfect geology; to avoid water intrusion, the designers recommended waterproof concrete throughout the project, whereas a building contractor with more flexibility would decide whether to use such concrete based on local conditions as discovered while tunneling.

The Nordic style of design-bid-build then contrasts with other styles. Turkey uses two contracts, but splits them differently: one contract goes up to 60% design, another combines going up to 100% design with construction; this provides builders with the flexibility needed to make small changes, and even then, builders can redo some of the work in the 60% design contract if they need to. The Spanish system of design-bid-build emphasizes the flexibility to make small changes based on conditions as well, as detailed by former Madrid Metro CEO Manuel Melis Maynar (Melis 2003).

Because of this difference, Turkish and other international contractors in Sweden find the local design-bid-build system cumbersome. This has led to a tendency to use design-build more often, but so far the contracts for Nya Tunnelbanan remain largely build contracts, as was the case for Citybanan.

Fixed price, but with itemization

Contracts in Stockholm, as in the rest of Scandinavia, vary between contracts let on the basis of fixed price (lump sum), and itemized contracts. Itemized contracts come in multiple flavors; for the most complex projects, including Nya Tunnelbanan and Citybanan, they tend to use the cost-plus model, as recommended by Nilsson (2011). In this model, instead of a single price for the contract, the contractor and client compute the total itemized costs in the contractor’s proposal and apply a fixed rate of profit; this is a common method in low-cost countries, and Melis (2003) credits it with Madrid’s easy process of change orders, which contrasts with the contentious process in fixed-price American cities.

Nya Tunnelbanan uses some fixed-price contracts in addition, but more common is a hybrid method based on fixed prices but still with itemization, in case modifications are needed; this is called fixed-price with adjustable quantities, or fixed-price with bill of quantity, which begins with a fixed price but itemizes a portion of the budget to shift some of the risk from the contractor to the client.

Under the Swedish Public Procurement Act (2016), change orders do not require redoing the bid if the cost overrun is less than 50% and the change is necessary for the completion of the contract, or if the overrun is less than 15%.

Interviews with civil servants involved with procurement did not reveal any contentious process for change orders (Personal Interview D 2021). If the modifications are itemized in the contract already then it is easier, but even if they are not and renegotiation is required, both sides aim to avoid litigation, and the courts prevent the contractor from walking away from risk that it assumed.

In contrast, contractor interviews portray a more complex process (Personal Interview I 2021). There are pre-agreed itemized rates, but not for everything, and sometimes there is conflict, leading to a back-and-forth in which the client rejects a design multiple times due to disagreements about quality control, although even then there is no litigation so far for Nya Tunnelbanan or the West Link. For change orders, the builder can propose modifications but needs the approval of checkers, who are external consultants and are insulated from civil service pressure; only the general manager of Trafikverket can overrule them, and otherwise the builders have to communicate with the checkers via the client.

Within the Nordic countries there is demand from the private contractors to be given more control, in the form of not just design-build contracts but also a transition to lump-sum contracts, as investigated by senior civil servants at not just Trafikverket but also peer agencies in the entire region (Andersen 2018). This is justified on the grounds of private-sector innovation, in which fixed-price contracts permit contractors to do what they know best.

Functional procurement

Sweden is transitioning to a new form of procurement aiming at greater flexibility, called functional procurement (Personal Interview B 2021). Under functional procurement, the agency does not specify what it wants, but only the function of what it wants. If it needs a bridge, it only specifies the type of bridge (road or rail), the required capacity and speed, and operating and maintenance standards. This contrasts with the more conventional approach, retrospectively called product procurement, in which the agency gives more details about what product it wishes to buy.

The Swedish state’s overall procurement strategy talks of transitioning from product to functional procurement in order to improve the competitiveness and dynamism of the market (Ministry of Finance 2016): “Requesting by function can promote competition in public procurements by enabling more companies and organizations to participate and submit tenders, to the benefit of small and medium-sized enterprises.”

Trafikverket participates fully in this transition to functional procurement, which is among the reforms with which it hopes to boost construction productivity – but see below on ongoing reforms.

However, in practice, the effect of functional procurement may be limited in the rail sector. A civil servant responsible for procurement (Personal Interview D, 2021) said they “can’t say it makes it easier.” In practice, a lot of technical detail has to be filled in to ensure backward compatibility with other systems, and railways must follow UIC and national regulations.

Ongoing reforms and the West Link

Trafikverket is slowly transitioning toward greater use of design-build. Its procurement strategy for the West Link (Trafikverket 2014) speaks favorably of the increase in the proportion of Swedish infrastructure contracts that use design-build, citing contractors who prefer it to design-bid-build. Trafikverket’s slogan toward this is “pure client”: Trafikverket, in this view, should not be doing designs by itself but rather outsourcing this aspect to the contractors.

The major theme in the strategy is internationalization. The Nordic market is too small, hence the invitation of international players. Trafikverket surveyed the contractors about their preferred contract size, and received answers ranging from SEK 500 million for national firms to SEK 3-4 billion for large multinationals:

Foreign contractors require sizable contracts since it is otherwise difficult for them to be competitive with smaller procurements. The specified size is needed in order for it to be worth them coming with their own construction vehicle fleets, own sub-contractors and designers, to move personnel and learn Swedish practice and Swedish regulations.

The West Link is accordingly divided into six contracts, of which four are in the SEK 3-4 billion range and two are smaller. In addition to sizing contracts for multinationals and using design-build, Sweden is putting out more information in English and proposing greater use of English as a business language for infrastructure.

The design-build variant proposed is called Early Contractor Involvement, or ECI. Under ECI, the client and contractor work together to define the project and its needs, so that the contractor and client jointly plan the scope and design. This is intended to increase flexibility as well as provide international contractors with a more familiar procurement environment.

However, while some of the literature in Scandinavia speaks favorably of lump sum contracts, justified on similar grounds as design-build, Trafikverket takes a more measured approach. It views the question of lump sum contracts versus itemization as dependent on the complexity of the contract, and prefers to maintain itemization for the more complex West Link civil infrastructure contracts, using lump sum only for the systems contract and for the smallest civil contract.

Broader reforms: discussion

There is extensive published literature in Sweden, some peer-reviewed and some gray, concerning procurement and construction productivity. The work done is largely on roads, because there are many road projects in the country of various sizes, permitting large-n studies, whereas rail megaprojects are rare, and the only four urban rail tunnel projects in Sweden in this century so far have been Malmö’s Citytunneln, Citybanan, Nya Tunnelbanan, and the West Link. For example, the comparison of the use of benefit-cost analysis in Sweden and Norway concerns road projects (Eliasson et al. 2015), and Mandell and Nilsson (2010) compare different procurement mechanisms for roads as well. Trafikverket’s document about the procurement strategy for the West Link suggests that some of this work is leading to changes in rail megaproject procurement as well.

Nilsson and Nyström (2014) additionally compare track maintenance, claiming 12% reductions in cost from Sweden’s practice of contracting out maintenance to private firms. Nonetheless, they compare Sweden with Finland and the Netherlands, and explicitly say Sweden should imitate their practices of imposing more risk on the contractor relative to the client; the overall systems in Finland and Sweden are similar, but Finland’s model of fixed price with adjustable quantities adjusts fewer quantities than Sweden’s.

In this schema, there are two ways to do procurement, of which one is viewed as more traditional and the other as more globalized or modern:

Table 1

TraditionalGlobalized
Design-bid-buildDesign-build
Itemized contracts (unit prices, cost-plus)Lump sum contracts (fixed-price)
Smaller contracts (hundreds of millions of SEK)Larger contracts (billions of SEK)
Product procurementFunctional procurement
Public client riskPrivate contractor risk

In practice, the five items on the table can be mixed-and-matched. For example, American practice has long favored lump sum contracts with no itemization, but only recently have American transit agencies begun to transition from design-bid-build to design-build. The traditional Nordic system of risk assumption has also been a hybrid of public and private, as detailed in the section on build contracts, and coexists with design-bid-build.

The justification for moving from the so-called traditional to the so-called globalized system, which is most complete in the United Kingdom, is to permit more private-sector innovation. Thus, a European benchmarking survey by Trafikverket (2016) says,

One advantage of DBB contracts is that a competent and experienced client more easily can ensure that they get the quality they want by specifying the design in detail (Cheung et al., 2001). When a certain level of quality (or safety) is critical, DBB-contracts may be preferable if the client has sufficient expertise and experience to know what he wants and how to achieve this. A disadvantage is that the client’s detailed specification reduces the contractors’ opportunities for innovation; there are simply not that many technical aspects to develop.

In the 1980-2007 period, construction labor productivity in Sweden grew only 0.8% per year, whereas economy-wide the figure was 2.6%, rising to 4.7% in sectors subject to international competition (Mandell and Nilsson 2010); Trafikverket’s procurement strategy as detailed for the West Link aims to boost annual construction productivity growth to the 2-3% range. However, in the United States, construction productivity over the same period fell per the work of Teicholz (2013)[4] and Stevens (2014), and Swedish infrastructure construction costs remain far below those of the target countries referenced positively by Trafikverket’s benchmarking report, the UK and the Netherlands.

It is also notable that while the Swedish government’s official procurement strategy speaks of openness to small- and medium-size enterprises, Trafikverket’s procurement strategy in the context of the West Link justifies its decision about project size in the opposite way: the main West Link contracts are scaled at SEK 3-4 billion in order to be more open to large international firms, while it’s the smaller domestic contractors that prefer smaller contract size.

It is equally notable that the academic and gray literature on infrastructure investment in Sweden is heavy on comparisons not just to the other Nordic countries but also to Germany, the Netherlands, and Britain, but never to Southern Europe, Turkey, or France. The way Scandinavia builds infrastructure – the traditional procurement procedure, some of the engineering decisions (such as the Copenhagen Metro technology), and the EU-wide labor force – has similarities to the systems detailed in the chapters on Italy and even Turkey, much more so than to the high-cost American examples, and yet direct comparisons with Southern Europe appear very uncommon in Sweden as well as elsewhere in Northern Europe.

Finally, while the literature in Sweden recommends many practices that center private-sector innovation and aim to imitate British and American procurement, it does not oppose the use of best-value contracts. The literature on procurement is mostly silent on the issue of whether contracts should be decided by lowest bid or by a combination of lowest bid and a technical score. Trafikverket’s benchmarking report treats the combined best-value system as the most modern, alongside early contractor involvement in bids, and the pan-Nordic report on design-build speaks favorably of best-value contracts too.

5.7 Engineering

Unlike the great majority of modern metro tunnels, the Stockholm Metro and commuter rail tunnels are built using drill-and-blast; no tunnel-boring machines (TBMs) are used, though there is discussion of using TBMs for the next tranche of construction in Stockholm after Nya Tunnelbanan, an extension to Älvsjö (Personal Interview F 2021). The West Link uses a combination of methods; through hard rock it uses drill-and-blast tunnels, but through softer ground it uses cut-and-cover, and the stations are cut-and-cover as well.

This choice of tunneling method comes from Stockholm’s hard gneiss geology; Gothenburg is a combination of gneiss and granite. Stockholm’s rock forms a natural arch, and therefore it is not necessary to line the tunnel with concrete as is done with a typical TBM. In most cases, there is no need for further sealing to prevent water intrusion, but in some it is necessary to use grout.

The upshot is that it is difficult to make direct engineering comparisons to urban rail projects that use the more conventional method of TBMs for the tunnels and cut-and-cover stations. It is also difficult to make direct comparisons with stations, because the dig volumes as mentioned in the reports for New York, Milan, and Istanbul can be given purely for stations, whereas in both Stockholm and Gothenburg it is common to combine stations and tunnels in citing volumes and even give contracts that do both at once.

Tunnel drilling

There are three kinds of tunnel used for Nya Tunnelbanan: access tunnels, single-track tunnels, and double-track tunnels.

figure 3. Tunnel cross-sections

In practice, with access tunnels, the total length of single-track tunneling for Nya Tunnelbanan is far greater than 39 km, twice the route-length of the project. A service tunnel is required alongside all lines, regardless of whether they are built as twin single-track tunnels or as double-track tunnels; in addition, work tunnels for station access add to the dig volume, such that the planned tunnel between Söderstadion and Sockenplan allowing a connection from the Blue Line to take over the Green Line branch to Hagsätra, a distance of about 1.7 km, has 270,000 m3 of total dig.

Station construction

Underground stations in Stockholm are mined. However, the entry halls may be built with cut-and-cover, with escalator and elevator connections to the main cavern.

Station construction plans make an effort to reduce disruption. In residential areas, it is forbidden to truck muck out of the access tunnel overnight after 10 pm or before 7 am (Personal Interview F 2021); because the combination of drill-and-blast and mined stations does not rely on 24/7 construction, it is possible to pause the works overnight, and no additional infrastructure is needed to accommodate any overnight accumulation.

To further reduce disruption, stations are staged from off-street sites, to reduce street closures. When street closures are required, the priority is to keep the sidewalks open to the public and close the roadway, as part of Sweden’s strategy of feminist planning: women walk more than men whereas men drive more than women, and so, in conjunction with sidewalk prioritization for snow removal in winter, sidewalks are prioritized during underground disruption.

But most of the time, no street closure is required. Entry halls in developed areas are staged in public plazas and parks or mined via sideways access tunnels. Most stations for Nya Tunnelbanan are located in outlying areas and therefore can be built more easily, in open land near land to be redeveloped or Million Program projects with suitable open space to be used for construction. However, some of Nya Tunnelbanan’s stations are in the urban core of Central Stockholm, as are both of the stations of Citybanan, and yet their costs remain moderate.

The access tunnels are especially elaborate at Sofia, just outside city center. Sofia, built 100 meters below ground, is near the intersection of Folkungagatan, a 23 m wide street, and Renstirnas Gata, a 17 m wide street, but the station is offset to the east of the intersection and access for workers and materials is via service tunnels connecting the cavern to nearby arterial roads. Passenger entry is built in a park.

At Sofia, the access tunnels also double as evacuation routes. The station is so deep that it has no escalator access, only elevator access, but regulations still require timely evacuation of two full trains in an emergency (SLL 2016), to be provided by the elevators themselves in conjunction with emergency stairways and the access tunnels.

The cost of stations is not large. Sofia was a SEK 1 billion contract (Tunnel 2021), despite its depth. The stations for Citybanan, in more central areas underneath older T-bana stations, were not much more expensive; Implenia (2015) reports that a combined contract for the construction of Odenplan and a 2 km tunnel cost €147 million (about SEK 1.3 billion), and the cost of Stockholm City, built in city center beneath the surface intercity station and the two-level T-Centralen metro stop, was estimated at SEK 1.5-2 billion, as was that of Odenplan (Personal Interview D 2021).

One possible explanation for the relatively low cost of complex central stations is the limited dig volume. Odenplan is 250 m long, 25 m wide, and 14 m tall from floor to roof (Mas Ivars et al. 2016), and Implenia (2015) reports the cross-sectional area as 337 m², a total of about 85,000 cubic meters. There is little spare volume: the longest Pendeltåg trains are 214 m. With no cut-and-cover, the total dig volume is substantially lower than it would be if construction had to be done top-down, which would increase the total depth of the dig by a factor of about 2.5. This is related to the hard gneiss rock of Stockholm, which permits cheap mined stations; in Oslo, in contrast, the switch from building Løren cut-and-cover to deep-mining the stations of Fornebubanen is one of the reasons for the higher cost per kilometer of the latter project (Personal Interview A 2020).

This volume is sufficient for future upgrade to four tracks. Currently, Odenplan is a two-track station, matching Citybanan’s two-track capacity. However, in the future, there are plans to expand it to four tracks, so that each tunneled approach track splits into two station tracks, to permit higher capacity in case rush hour dwell times are too long; Stockholm City is already a four-track station.

It is notable that the two stations built for Citybanan only total about SEK 3 billion, less than a fifth of the total value of the project. Interviewees at Trafikverket and SLL instead explain the cost in terms of high additional design costs (2 billion) and a complex underwater tunnel built as an immersed tube in sections, also at 2 billion.

Labor and Wages

SEKO Tidingen, a newspaper published by the 72,000-strong union for railway, communications, and other service workers, profiled the tunnel workers building Nya Tunnelbanan (Lindgren Strömbäck 2021). The worker in focus, Micke Vilhelmsson, lives in Hagfors, an industrial town of 10,000 located 260 km from Stockholm; none of the tunnel workers building the system is a native Stockholmer, and it’s common enough to work abroad that Vilhelmsson spent six years in Norway. EU migration rules are creating an EU-wide labor market, and contractors have explained in a private interview that there’s a growing number of tunnel workers from Eastern European countries, who are subject to the same stringent labor laws as native Swedes when they come to work on Swedish projects. Slovakia and Poland are popular countries of origin for workers.

To house a mobile international and domestic migrant workforce, infrastructure builders provide temporary worker housing; this is also the case for maintenance workers, who are nationally mobile as they may work on track renewal projects anywhere within the country.

The difficult, skilled work leads to very high working-class wages. Stockholm tunnel workers earn SEK 70,000 a month before taxes (Personal Interview F 2021), or about $98,000 a year in PPP terms; the overall cost to the employer is twice that, including social security contributions (amounting to 31.42% of the payroll), temporary worker housing, overheads, and a profit margin on the cost-plus basis used for contracts.

The combination of high wages and a pan-European mobile workforce creates migrant labor dynamics that are not always healthy. A report by LO covering abuses in the 2000s on Citytunneln, Citybanan, and a road tunnel in Stockholm complains about regulatory arbitrage to suppress wages and avoid paying benefits (Jonsson et al. 2014). The report goes into the possibilities for bringing such migrant workers into the union, with a brief comparison to the situation in Oslo (where 40% of unionized building trades workers are Polish or Baltic) and Copenhagen (where it is only 3%).

And yet, the wages quoted are not low: in the 2000s, building workers in Stockholm averaged 190 SEK/hour; migrant workers building infrastructure, who are 45% of the workforce across those three projects, earn somewhat less, 100-150 SEK, but then specialists earn SEK 180-270/hour, the higher figure going to mining workers. Inflation over the last 15 years has not been high, but SEK 270/hour in 2007, when much of LO’s data comes from, corresponds to 320/hour in 2021 price levels, and with economic growth since then, the figure is not far from the SEK 70,000/month quoted to us by a civil servant. LO goes over the quality of housing benefits, and those scale with the class of worker; one worker complained about housing quality and got better housing, and was only fired later after he wanted to join a union.

Doing an exact comparison of labor productivity is difficult because Stockholm uses drill-and-blast for tunnels rather than the globally more common TBMs. However, Sweden has high labor efficiency, as a way of saving money while still spending about $200,000 a year per mining worker. At a given time, there are about 6-8 workers inside the tunnel head in Sweden, and the ratio of white-collar supervisors to line workers is low (per LO, the workforce splits as 70% blue-collar, 30% white-collar); one contractor said that TBMs require more labor-intensive maintenance than drill-and-blast, at least in the context of Stockholm’s rock (Personal Interview F, 2021; Personal Interview I, 2021). Overall, the LO report estimates that the share of labor costs in the contract for Citybanan is 23%, a comparable figure to what we have found in the reports on Istanbul and Italy despite much higher wages paid in Sweden.

5.9 The Nya Tunnelbanan cost overrun

While the absolute cost of Nya Tunnelbanan per kilometer is well below the global median for underground construction, there has been a substantial overrun from the budget. The current budget, SEK 32 billion, is higher than its original budget of 23 billion; this is not common in Sweden, where the retrospective lists of rail and road projects provided by Trafikverket (2017; 2019) show small or no overruns, even on big projects.

Unlike absolute costs of urban rail construction, cost overruns are well-studied in the literature. Flyvbjerg et al. (2003) identify strategic misrepresentation (that is, lying by civil servants and politicians) and optimism bias as underlying causes. Love et al. (2015; 2016; 2018) criticize Flyvbjerg, first arguing that cost overruns properly counted are much lower than Flyvbjerg finds, and second focusing on concrete causes in lieu of abstract issues of lying. Cantarelli et al. (2010; 2022) focus on the problem of early commitment, in which a political commitment to an incompletely designed project incentivizes overdesign and sticking with projects that turn out to be bad (high-cost or low-value) after further work. As a result, Sweden has taken great care to understanding its cost overruns for Nya Tunnelbana, much more so than the absolute costs.

As megaprojects are hotly politically debated, when we inquired regarding the ongoing cost overruns on the Nya Tunnelbana project, there was already a report explaining, written for EU reporting needs. A project progress report from 2021 lists the following changes in costs, in million SEK at 2016 price levels, between 2013 and 2021 (Personal Interview H 2021):

Table 2

SectionCost (2013)Cost (2021)Increase
(based on interviews)
Kungsträdgården-Sofia 230838130.652
Sofia-Sockenplan438668570.563
Sofia-Nacka.7733102140.321
Odenplan-Hagastaden242427050.116
Hagastaden-Arenastaden230829380.273
Barkarby334752860.579
Total22506318130.414

One reason is that the negotiations with stakeholders took longer than expected, leading to delays; in addition, two of the contracts went to court due to lawsuits by bidders, creating further delay.

However, much of the reason has to do with mid-project changes in environmental regulations. In SLL’s report to the European Investment Bank and in interviews with experts and contractors, the following mid-project revisions were all mentioned as significant delay and cost factors:

  • A regulation requiring contractors to dispose of waste rock, which they’ve had to truck to specific sites at high expense.
  • A change in the maximum permitted level of water infiltration, which had direct and indirect impact on engineering, and was difficult to communicate with the client and is still leading to slowdowns in tunneling productivity.

A safety requirement for a third service tunnel parallel to the two track tunnels, increasing the amount of tunneling work to be done by almost 50%.

[1] Imputed from 1,265,900 daily riders on a winter workday, from SL 2019, pp. 51, 67.

[2] This point is also made in the retrospective analysis in Börjesson et al. (2014).

[3] In 2017, the year that Citybanan opened, Sweden’s GDP per capita was $45,193 in 2011 PPP dollars. The most comparable year for the analysis in Börjesson, Jonsson, and Lundberg is 1965, the year of opening of the midpoint of the present T-bana network by length, when Sweden’s GDP per capita was $17,239.

[4] See also the coverage of Teicholz’s paper in Garcia 2014.