I don't think government projects being more expensive than private projects simply is an impression created by the media. Sure, private project failures aren't bandied about as much (though sometimes they still are, especially if a failure simply is too spectacular not to be talked about), simply because they often aren't interesting to the general public. However, save for downright cover-ups project failures are usually known to the stakeholders.

Government projects starting with too low an estimate is a well-known but deeply unethical practice. Everyone involved knows that the finished project will be above budget yet there's a silent agreement to not say anything because once the public realises there's a problem it's already too late to cancel the project and the project has to continue whatever the final costs may be. That's the common argument anyway. It's a bit like the 'too big to fail' fallacy. So, we keep throwing good money after bad because we're afraid of the consequences of admitting failure. It's exactly that kind of unethical behaviour that should be punishable by disciplinary action in order to disincentivise civil servants from going down that road in the first place.

Finally, I suppose the larger the organisation the more lack of accountability becomes a problem. You see that with larger companies where projects often regularly are over time and budget as well. However, I still think that those in leadership positions in larger private organisations are more accountable. While there are misaligned incentives in these organisations, too (like CEOs getting a bonus or a generous severance package even though they performed badly) there are two crucial differences here: A company goes out of business if it runs out of money. It's also much easier to hold you both civilly and criminally liable if you overstepped your boundaries.

When was the last time a state or city went out of business due to lack of funds? When was the last time a politician actually did time for embezzling and deliberately wasting tax money?

The problem is time an materials - when the contractor is ethical - is the cheapest option. Anything else means that someone needs to overbid and make "excessive profits", or risk they underbid and have to make up millions of dollars to finish the contract. However ethical is a key part of this, and we know from experience that not everyone is ethical and we have no way of knowing who will be until it is too late.

They get around this by carefully fixing the work to be done - which seems like a great idea, but in construction there are always something you don't know about until you get there. What happens is they bid for standard dirt work and when they start moving the dirt they go back and say "We bid to dig down 3 feet as standard, but there is a sink hole here: do you want us to complete the job as bid knowing the road will collapse there within a week of of finishing or pay extra to fix the sinkhole" (there are millions of variations of this). Of course the only sane thing to do is pay for the design change so it is done right.

I don't understand why we don't negotiate a fixed rate and spec for each project, with financial incentives for early completion. The contractor takes some risk, but the risk can be mitigated with better research and uncertainty factored into the bid.

As for low-balling estimates, what if there were a contract penalty for going over by some %? Moreover, what if you took some of that penalty and gave it to whichever contractor had bid closest to the true cost, incentivizing contractors to bid what they think it will cost, even if they have no intent of taking the job. This could act as a sort of information market, where you could get a sense of what people think the true cost would be.

Here's what I don't understand. Why on earth do they get paid more than their estimate? That's rediculous. They should get paid precisely the amount they estimated and not a penny more. This would get rid of ALLL the underbidding.

It would probably get rid of all bidding period, and it would create an unnecessarily adversarial relationship between parties who need to work together productively across multiple projects.

Also, if you follow this logic through to it's conclusion, you end up with a bankrupt contractor, a project that's still unfinished, and embarrassed politicians. It's usually still a better deal (within reason) for the person already doing the work to be the one to finish the work.

It seems like you could include penalties if project goals are not met, and then open up a re-bidding process. If it's true (as I think it generally is) that it's "usually still a better deal [..] for the person already doing the work to be the one to finish the work" then they can presumably bid lower than the rest at that next phase - but it's not just free money.

What good does a penalty do if the entity who owes it declares bankruptcy?

You'd presumably have to require a bond. Otherwise, yeah.

Still probably an improvement over handing them additional money with no competition, though...

> Do you think the CEO of GE is really more afraid of the shareholders than the mayor of some city in Kansas? Politicians are plenty accountable.

This actually suggests the opposite - that both politicians and CEOs are not accountable enough!

> Do you think the CEO of GE is really more afraid of the shareholders than the mayor of some city in Kansas?

But CEOs are motivated to perform because their options will be worth more, and they might have vested shares that will disappear if the board fires them. What motivation does a mayor have?

You'd think being president of the US came with a end of term bonus to incentivize good performance. How much would that really cost? Say the payout is $100million * national approval percentage. That'd be enough to motivate most everyone who isn't a billionaire.

> What motivation does a mayor have?

Re-election.

Can you cite some of those articles and studies?

> Do you think the CEO of GE is really more afraid of the shareholders than the mayor of some city in Kansas?

Maybe not, but then again I wouldn't consider the CEO of GE as somebody leading a private entity in the sense of the argument.

You're conflating public sector vs private sector (Government vs Non-Government) with publicly traded vs privately held.

GE is in the private sector, but publicly traded.

Yes, thank you, I understand that. My point is that a publicly traded company is not necessarily able to provide accountability in the sense of the parent comments, more so than a governmental organisation. It is not 'private' enough. (Which is logical, since the control by the state runs deep into it.)

When speaking of public vs. private in the government vs. not-government sense, the CEO of GE would definitely fall into the private category. That's what's under discussion here. In what sense do you mean private?

I mean 'private' in a very strict sense. I think this is important here, if we want to reach a meaningful distinction between 'public' and 'private.'

The free market and personal responsibility can very well drive prices down and maximise efficiency. But a CEO of a public traded company is operating with other people's money and he is strongly regulated by a government. Both factors that hinder the optimisation by the above mentioned forces.

'Private' would mean at least that every penny wasted is out of the personal pocket of the people doing the work; in a very direct sense.

> 'Private' would mean at least that every penny wasted is out of the personal pocket of the people doing the work; in a very direct sense.

That is an odd sense of the word. It's a state that basically doesn't exist anywhere except in your back yard when working on DIY projects. Even in startups, the people doing the work only lose a fraction of a penny for every penny wasted, according to their share of ownership and liquidation preferences.

It's not a useful concept for talking about issues like infrastructure projects, because there will never be a case where the people doing the work are the ones who suffer 100% of the consequences of loss, or even close to it. I would suggest you stick to the generally understood meaning of the word when having conversations with other people, but I'm an internet commenter, not a cop, so do what pleases you.

You are making assertions that may or may not be true. That aside, the point that I am trying to argue during the whole thread is two-fold.

First I do agree with matt4077 that the difference in accountability between the CEO and the mayor is not big enough to warrant a distinction in the context of the discussion. I also agree with BjoernKW that accountability is one of the root-problems here.

Second, I do want to say that a public traded company is not a form where the CEO is personally accountable enough to call it 'prvate' in the sense of BjoernKW's comment and therefore dismissing matt4077 example as a valid example for what BjoernKW was hinting at.

I do think that others have very well understood what I was trying to convey, see for example the comments from paulddraper or cmurf.

In that sense, the kid mowing your yard with your mower for you is a public entity.

This is an extremely different use of the word than I'm familiar with, and doesn't really do us much good when trying to discuss government projects vs. non-government projects.

I have to disagree. My point was that the difference in accountability that a publicly traded company provides vs a governmental organisation is to big enough to support the parent's point. I suggest the reason is because the state is too heavily involved in the governance of these entities for the to be truly private.

Yes, I understand that public traded companies are not state-owned.

That's sole proprietorship or partnership vs a publicly traded company.

There are a number of examples on Wall Street, e.g. Goldman Sachs, where when they were partnerships, the partners were personally liable for company losses and the firm provably was taking fewer risks than once it became a publicly traded company. The organizational make up of a company can affect the distribution of liability, and that can lead to the company making different choices than it otherwise would.

I think the word you are actually searching for is employee-owned