Question

The article under required readings entitled “Progress, Pain for Vikings Stadium in 2015” describes the construction progress of the U.S. Bank Stadium in Minneapolis, Minnesota as of a point in time. One of the items highlighted in the article is the cost—there were some staggering numbers cited by the author in terms of cost overruns! For example, the author states in one year, the project costs had increased by $65 million for a total cost increase from $1.026 billion to $1.091 billion. Since there are public monies being utilized for approximately half of the cost of the facility, there is an entity overseeing the construction on behalf of the public.

The board of this entity approved budget increases at 10 out of 12 meetings in a 12-month span of time. The remaining cost is being funded by the NFL franchise, the Minnesota Vikings. Even though the Minnesota Vikings have absorbed a large amount of the cost overruns, it is likely possible that state and city taxpayers are concerned that such a large project with a relatively short construction window (31 months) given its size could have been under-budgeted to this degree.

This is a commonly debated issue in the media, so whether you are a sports fan/music lover/theater buff/monster truck-motocross muddy fan, it’s your turn to weigh in! Use this discussion board as a debate for one side or the other…does the Minnesota Sports Facility Authority (and any other jurisdiction’s construction oversight organization) have an ethical obligation to the taxpayers to keep the project on budget even if it means that the brand new publicly funded entertainment facility that would last 15-20 years have to go without or have lesser quality features, or should they strive for world class status with the anticipation of those features attracting larger and better future events to stimulate the local economy regardless of the current costs? Please be respectful with your comments. Everyone is entitled to their opinions!

Your initial posting should be 250-500 words

Answer 1

The cost overrun in public projects is a common problem. Two questions arise from this problem. First, whether to allow the cost overrun or not. Second, what can be done to avoid this problem.

Starting with the first question, we must understand that any public project, such as U.S. Bank Stadium in Minneapolis, aims to provide certain services to the general public. For these services to be effective, they must meet a certain quantity and quality standards. If the project (say U.S. Bank Stadium in Minneapolis) was planned to provide any service to the general public, compromising on any of its parameters may greatly reduce its utility to the people.

In fact, sacrificing quantity or quality may mean wasting the money already spent on the project. Therefore, not allowing cost overrun may be a bad way to solve the problem. For example, if not allowing cost overrun of $65 million lower the utility of $1.026 billion project by half, then saving $65 million will be a bad choice. Moreover, not allowing cost overrun does not solve the reasons for cost overrun.

There are several reasons for such a problem. Sometimes, it is the result of the inefficiency of the public authorities. Other times, it is due to the genuine reasons which may be out of their control such as procedural delays in starting the project and underestimation of costs at the initial level. For example, the cost estimates of the project may be based on the expectation that the work will start in 6 months. However, the approval and other necessary permission may take 2 years.

If the problem is the inefficiency of the public authorities, then they must be held responsible and necessary actions should be taken against them. If the problem is due to procedural or other similar issues, then the solution lies in correcting such administrative problems.