While
wandering the internet, pondering the differences between Vancouver 2010 and Sochi 2014,
I came across an article in the New Yorker about construction fraud.
Author James
Surowiecki, specifically looking at the $51 billion spent to turn Sochi into an
Olympic host city, argues that the reported financial misdoings were to be
expected. He contends that, by its
nature, construction is prone to fraud, bribery, and other illegal
activities.
He puts
forth three reasons to support his thesis.
First, major construction is often done by government. Second, the amounts of money spent are is
often huge, making a bribe only a rounding error in the overall construction
costs. Third, many major construction projects
are unique, so cost guidelines and past construction cost histories are of
limited value.
I disagree
with his first point, having watched corporations be equally inept at
construction management as governments, but concur with his latter two.
Nor is the
risk of illegal activity limited to actual construction itself. As a former New Jersey mayor describes, the scarcity
of land and the nature of the land development approval process often opens the door to bribes and other
misconduct.
Obviously,
financial misconduct isn’t good for any kind of land use, whether walkable
urban or drivable suburban, because it adds costs that must be absorbed by the ultimate
user. But are there particular implications
for urbanism?
Previously,
I’ve argued that urbanism is better done in small chunks, something I’ll call “organic
urbanism”, than in large expanses, which I’ll call “mass-produced urbanism”.
My reason
was organic urbanism, because each new, smaller project can learn from the
experience of earlier projects, is more likely to find market sweet spots. It also creates the fine-grain that Jane
Jacobs argues is necessary for later regeneration. In comparison, mass-produced urbanism doesn’t take advantage of marketplace trial-and-error. Also, it wears out uniformly, inhibiting incremental
reinvestment.
Following on
the logic put forth by Surowiecki , it would seem the organic, small-scale
urbanism is less prone to financial misdeeds.
The reasons that he noted for fraud scale sharply with project
size. If tens, or even hundreds, of small
projects were built instead of a single mega-project, there would be more opportunities
for honest, untainted projects to be completed, setting fair marketplace values. Furthermore, a small project is more easily understood
by a single project manager, with less confusion arising from a babble of construction
committees.
So, do the
benefits of smaller projects mean that we encourage small projects? No, it’s pretty much the reverse. Looking as an example at land use approval costs,
large projects cost more to entitle than small projects, but the costs don’t
scale linearly with the project size. If
a 100-acre site costs ten times more to entitle than a one-acre, the
entitlement cost per acre or per residential unit is one-tenth for the larger
project, which is a sizable market advantage.
I understand
why the entitlement of larger projects cost less on a unit basis. There are fixed costs to a project approval,
especially as the process is governed by the California Environmental Quality
Act (CEQA), and smaller projects have fewer units over which to divide those fixed
costs.
But we still
end up with a conundrum. Smaller,
organic urbanist projects are less prone to construction fraud and lead in the
long-term to healthier, regenerating cities, but we continue to maintain an
entitlement system that offer advantages to larger, mass-produced projects.
I don’t have
an easy solution to propose. But it’s a
situation that needs a solution.
As always,
your questions or comments will be appreciated.
Please comment below or email me.
And thanks for reading. - Dave Alden (davealden53@comcast.net)
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