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 (email@example.com)