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Funny story: in "Design by Deception," analysis of megaproject cost overruns, the hero is... Frank Gehry

Let's take a step back. For one thing, the concept of "value engineering," bandied about yesterday in discussions of architect Frank Gehry's apparent receding role in Atlantic Yards, is hardly unusual, as this essay explains.

Brooklyn Borough President Marty Markowitz, on WNYC yesterday, said (in an interview perhaps incorrectly transcribed): "There is some economies value engineering as they call it, which is a good thing because you shouldn't be wasting money on a design or services that are not relevant."

Well, as NoLandGrab's Eric McClure pointed out, Markowitz has pivoted, last year touting the "exciting" evolution of Gehry’s designs: "With each new concept, we’ve seen creative possibilities for a thriving, gleaming city center like no other.” Markowitz can pretty much be counted on to express confidence in the developer, no matter what happens.

Frank Gehry, value engineer

For another, Gehry, in at least one account (but hardly all), is responsible for making sure projects come in on budget. Then again, if that applied to Atlantic Yards, then why did Gehry's Brooklyn arena balloon from $435 million to $637.2 million to $950 million? And why didn't developer Forest City Ratner let Gehry try to deliver the arena on budget instead of (apparently) letting the architect recede? Mysteries remain.

In Design by Deception: The Politics of Megaproject Approval, an article in the Spring/Summer 2005 issue of Harvard Design Magazine, Bent Flyvbjerg described how large construction projects, including public works, defense, and aerospace, around the world inevitably came in way over budget.

He wrote:
Which large projects get built? My research associates and I found it isn't necessarily the best ones, but instead those for which proponents best succeed in designing—deliberately or not—a fantasy world of underestimated costs, overestimated revenues, overvalued local development effects, and underestimated environmental impacts. Project approval in most cases depended on these factors....

Many project proponents don't hesitate to use this approach, even if it means misleading lawmakers, the public, and the media about the true costs and benefits of projects. This results is an inverted Darwinism—an unhealthy "survival of the unfittest"—for large public works and other construction projects.

His analysis sounds a lot like... Atlantic Yards:
Every large construction project does not follow the pattern of understated costs and overstated benefits, needless to say. But most do. Nine times out of ten, in the projects we studied, costs begin to soar after projects have been approved, leaving taxpayers or investors to pick up bills of hundreds of millions of dollars.

Note that the current discussion about AY concerns solely the announced costs of construction, not the public spending (and tax breaks) compared with the potential benefits. Still, increased costs of construction can drive additional public subsidies, such as for that murky term, "extraordinary infrastructure costs," which DDDB has called "a blank check."

Cost overrun worth it?

Flyvbjerg addressed the question of whether some terrific projects, including the Brooklyn Bridge and the Sydney Opera House, designed by Jorn Utzon, would've been built had their true costs been known. However, he declared, delusion is not necessary for action.

He wrote:
It seems to me, however, that one does Utzon and other architects a disservice if one indicates that their work could be built only through deception or wishful thinking, while similarly iconic and complex designs did not require this, for instance Frank Gehry's Guggenheim Bilbao Museum, which was built on time and budget and makes a lot more money than projected.

Gehry's record

Beyond Bilbao, where does Gehry fit? The record is murky.

Boston Globe architecture critic Robert Campbell dismissed cost overruns at MIT's Stata Center as being irrelevant, because "MIT kept adding new features" and "the job was bid at the worst possible time." Of course, MIT later sued Gehry, charging that design errors produced costly problems.

The New York Times reported 9/19/06 that Gehry's Grand Avenue project in downtown Los Angeles was "facing substantial cost overruns, and... Gehry, is working feverishly to bring them into line."

The cost increase, though, was not out of line with construction cost increases in the area. (That hasn't been the case with the AY arena, where the price tag exceeded cost increases.)

The management school at Case Western Reserve University, according to the Chronicle of Higher Education, was first supposed to cost $25 million, then, with Gehry on board, $40 million. The contractor and architects pledged it wouldn't go above $48.8 million. It cost some $61.7 million. One graduate thinks it's all worth it.

The "organization of the artist"

Flyvbjerg compared the monuments in Bilbao and in Sydney:
Frank Gehry has a reputation for building on time and budget, even for large, complex, and innovative structures. I asked Gehry how he and his associates do it. Gehry explained that the first step is to ensure that what he calls "the organization of the artists" prevails during construction. According to Gehry, the goal is to prevent political and business interests from interfering with design and thus to arrive an outcome as close as possible to the original design drawings. Gehry explains:

"One of the great failings in these public projects is public clients, that is, clients that are involved with politics and business interests. These clients often eliminate good architecture because they don't understand it, and they're wary of it, and they're unable to imagine that somebody who looks like an artist could possibly be responsible. There's a tendency to marginalize and treat the creative people like women are treated, 'sweetie, us big business guys know how to do this, just give us the design and we'll take it from there.' That is the worst thing that can happen. It requires the organization of the artist to prevail so that the end product is as close as possible to the object of desire that both the client and architect have come to agree on."

(Emphasis added)

It doesn't look like Forest City Ratner is letting "the organization of the artist" prevail in this case. If you read New York Times architecture critic Nicolai Ouroussoff, this battle has been occurring since mid-2006. Gehry was quoted as saying he had enough juice to get his vision across with clients: "They have to meet me as an equal." But the subtitle of the piece pointed out how little influence architects have with developers.

Realistic costs

Flyvbjerg wrote:
Once the design has been agreed on and the organization of the artist-architect set up, the next step in building on time and budget is to get a realistic cost estimate and control it. Gehry explains the difficulty of this:

"Building costs are not as controllable as people make them sound... You might have a project that you believe is budgeted property and has been assessed by other responsible assessors to be within budget, a change in the market throws it all out of whack right in the middle of your process, so there is no guarantee. The only way to control these things is to not proceed with the building until you have all the drawings complete, you have everything the way you want it, you've done your due diligence on cost analysis. Then it's a negotiation from there on with contractors and sub-contractors to keep them within your budget."

Finally, technology and continuing relationships with the individual building trades are important ingredients in keeping within budgets, says Gehry. He and his associates have pioneered the use of digital design models that greatly facilitate production of the data needed for arriving at accurate budgets. Here, Gehry also argues that construction should not start until it has been established that a project is indeed within the client's budget.

"In our practice we don't allow the client to start construction until we are sure we are doing a building that's within their budget and meets their requirements. We use all the technology available to us to quantify in a most precise way the elements of the building. This fact alone allows us to demystify for the construction people the elements of the building so there's not a lot of guessing. When there's guessing, money is added. We found that precision in documentation and continuing relationships with the individual building trades is a necessary process to keep buildings within the limits of the client's budget."

Well, construction sure hasn't started, so there's room to develop those numbers.

"The Lying Game"

Flyvbjerg, in a section titled "The Lying Game," mused on whether it was common for project proponents to mislead people:
And is Frank Gehry's approach, as described above, the exception? Such questions are rarely asked. Maybe because in an uncomfortable number of cases the answer is "Yes."

...But what's most disturbing is not deceptive individual project estimates, it's the massive extent to which rent-seeking behavior by stakeholders has hijacked and replaced the pursuit of public good in this important and expensive policy area and the high costs this behavior imposes on society. Deceptive cost-benefit analyses keeps critical scrutiny (by lawmakers, the public, and the media), accountability, and good governance at bay until it's too late, that is, until the sunk costs for a project are so high that its point of no return has been reached and construction must be completed.

A good deal of money has been spent on the Atlantic Yards project. But construction has not begun.

What to do?

Flyvbjerg concluded:
The key weapons in the war on deception is accountability and critical questioning. The professional expertise of planners, architects, engineers, economists, and administrators is certainly indispensable to constructing the buildings and infrastructures that make society work. Our studies show, however, that the claims about costs and benefits made by these groups usually cannot be trusted and should be carefully examined by independent specialists and organizations. The same holds for claims made by project-promoting politicians and officials. Institutional checks and balances--including financial, professional, or even criminal penalties for consistent and unjustified biases in claims and estimates of costs and benefits--should be developed and employed.

What does that mean in the case of Atlantic Yards? It means, I think, that, when the Empire State Development Corporation touted Gehry's Atlantic Yards designs when the project was approved, the design timeline and cost should have been realistic.

More importantly, it means that Brooklyn Borough President Marty Markowitz should be held accountable for his statement, when the project was announced, that Mayor Mike Bloomberg "made it clear, over and over again, the mayor, this city has no money, no money to provide in any way at all. This is all incremental funds."

And Bloomberg should be held accountable for his January 2004 statement that "any city monies of any meaningful size will be debt issues financed by the extra tax revenues that come from this."

And all of those (like City Council Member Bill deBlasio and many others, including Sen. Chuck Schumer, Public Advocate Betsy Gotbaum, Rep. Ed Towns, then-Assemblyman Roger Green, Assemblyman Joseph Lentol, then-State Sen. Carl Andrews, State Sen. Kevin Parker, State Sen. Carl Kruger, Council Member James Sanders, Council Member Lew Fidler, Council Member Erik Martin Dilan, and Council Member Michael Nelson) who sent letters, parrotting Forest City Ratner boilerplate and the $6 billion lie, should not be let off the hook.

(Interestingly, not every pol sending a letter to the MTA in 2005 blindly endorsed the developer's specious $6 billion figure. City Comptroller William Thompson more cautiously used the term "millions of dollars in revenue." Maybe he actually read what he was supposed to sign.)


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