Ten Percent Chance Honolulu Rail Costs Will Go Over $9.3 billion

BY CLIFF SLATER – At HonoluluTraffic.com, we have written a paper, “The probability of rail transit coming in on budget.” Here are some excerpts from it to tempt you into reading the two pages.

“Based on what we had learned from the Federal Transit Administration’s assessment of the probability of the New Jersey tunnel’s final cost (see our November 2 post), we surmised that such probabilities may have also been calculated for the Honolulu rail transit project.

“We therefore submitted a FOIA (Freedom of Information Act) request to FTA for any documents that discussed this issue. We received the documents this past Saturday, which showed the FTA’s calculations of the probabilities of Honolulu reaching its projected costs. These are revealed in their chart below. The chart is based on a $5.1 billion construction cost, which excludes their anticipated $0.4 billion in financing costs.

“Basically, the FTA’s risk assessment process is based on the fact that at the Pre-Preliminary Engineering (Pre PE) stage all costs are preliminary. The costs are further refined in the Preliminary Engineering, the Final Design (FD), and in the Full Funding Grant Agreement (FFGA) stages. As projects progress through these stages to actual construction, more often than not there will be an increase in projected costs as may be seen from Table 2.

“Today, the Honolulu Project is midway between the Pre-Preliminary Engineering (Pre PE) and Final Design (FD) stages. The chart tells us that the FTA’s estimation of probabilities is as follows:

* A 10 percent chance that the Project will come in under budget.

* A 50 percent chance that the Project will come in under $7.2 billion.

* A 90 percent probability that the Project will be built for less than $9.3 billion and, of course, a 10 percent chance that it will exceed that amount.”

You will need to read the whole two pages to really understand FTA’s logic.
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