If history is any indication, the $3.7 billion projected price tag for Honolulu's commuter rail system could climb before the project is finished in 2017.

That's because rail construction projects across the country typically cost more than planned, according to various recent studies.

While the city may not have much experience with railroads, taxpayers already know public works projects can cost much more than advertised.

City officials hope to avoid a repeat of history by including a $1 billion buffer in the price tag for Honolulu's planned 20-mile commuter rail system. That should reduce the risk of cost overruns, said Toru Hamayasu, chief of the city's transportation planning division.

However, the actual cost of Honolulu's rail project could still vary widely from preliminary estimates, according to an October 2006 report by project consultant Parsons Brinckerhoff. The consultant warned that the then $3.6 billion cost estimate could be anywhere from 30 percent too low to 25 percent too high.

Honolulu taxpayers are expected to bear about $3 billion of the project's costs via a half-percentage point excise tax surcharge that expires in 2022. They could be asked to pay more, if the project's cost exceeds expectations.

Such risks should not prevent the city from proceeding with plans to break ground late next year, Hamayasu said.

On "any big project there is that risk," he said. "So that means what? You cannot do anything? That risk goes with anything we build."

The first segment of rail is scheduled to start service between East Kapolei and Leeward Community College in 2012.

The transit system won't prevent traffic along the busy H-1 Freeway commuter corridor from worsening, but it is expected to give commuters an alternative to increasingly congested highways while reducing urban sprawl.

LEARNING FROM OTHERS

A September 2007 study by the Federal Transit Administration found that 21 primarily rail construction projects built between 1990 and 2002 exceeded initial cost estimates by an average of nearly 21 percent.

Under federal guidelines all of these projects built in allowances for cost overruns. Still, 16 went overbudget by 3 percent to 72 percent. Five projects cost less than planned by between 2 percent and 28 percent, according to the FTA.

The FTA study isn't alone. Cost overruns averaged 30 percent on 16 rail projects completed after 1994, according to a 2006 paper co-written by two Northeastern University researchers in Boston and an employee of McLean, Va.-based Booz Allen Hamilton Inc.

Changes in project scope, and unanticipated price inflation and construction problems were cited as key factors in cost overruns. Both studies suggested that the problem may be declining over time.

On O'ahu, recent examples of cost overruns on public works projects range from the $1.3 billion H-3 Freeway, which was projected to cost $250 million, to the $75 million Kalaheo Avenue sewer project in Kailua, which was supposed to cost $19 million.

'CONFIDENT' OF OVERRUN

Cost-estimating techniques can reduce overruns, said Amarjit Singh, an associate professor of civil and environmental engineering at the University of Hawai'i who specializes in cost estimating.

"The trouble is we don't apply all of the techniques that are available to us with the best professionalism, the best conscience, the best dedication (and) with the best interests at heart," he said. "I am fully convinced that this project will end up costing even more than the $3.7 billion we're seeing now ... even though they're putting in all these contingencies. Look at what happened to H-3. It's virtually impossible to make an accurate estimate of a large project the size of a rail-transit program."

PREDICTING IS TRICKY

Much of the difficulty comes from trying to predict what will happen with the economy, material prices, inflation and labor productivity a decade or more into the future.

Unanticipated cost increases took a toll on the recently completed 10-mile Lynx light rail line in Charlotte, N.C. The project cost nearly $463 million when it opened in November, which was more than double its initial $227 million price tag.

"We bid construction contracts at a time when steel and cement prices across the world were spiking and that greatly increased our costs, and a lot of construction projects in other cities have been impacted by that," explained Ron Tober, former chief executive of the Charlotte Area Transit System.

Whether Honolulu can avoid similar problems will depend on a variety of factors, said Tober, who recently chaired a transit technology selection panel for the city.

"I think it will actually be a question of the folks that are actually involved in the design, incorporating things into their design process to provide for some contingencies and be looking for ways to value-engineer the project to keep costs down," he said.

PRESSURE TO GO LOW

Other factors that contribute to transit construction cost overruns include a federal funding process that rewards cities that keep cost estimates low, said Brian Taylor, director for the Institute of Transportation Studies at the University of California at Los Angeles.

"In this sort of process you're often competing with other areas for projects so there is a race to show that your proposed project is more effective than the others," he said. "There's enormous pressure to come up with the most optimistic projection that you can.

"We can almost predict that the rail projects tend to come in overbudget with fewer riders than forecast and the road projects come in overbudget with more drivers than projected. It's a natural outcome of this compounded optimism with these projects," Taylor said.

FTA'S EFFORTS

The Federal Transit Administration, which decides which rail projects get federal funds, has tried to standardize cost and ridership estimation guidelines to prevent overruns, Taylor said.

"The FTA has worked very hard to try and standardize the procedures that are followed in developing a lot of these forecasts to bring some more consistency to the process," he said. "Even with some of these improvements, the costs still tend to overrun."

Planners for Honolulu's rail project said they developed a realistic cost estimate in full compliance with federal guidelines. That $3.7 billion estimate includes a 29 percent, or $1 billion, buffer, which accounts for possible design, construction and professional services and other cost overruns, said the transportation planning division's Hamayasu. That plan was approved by several outside peers, he said.

"They all came back with the same results," Hamayasu said. "This is reasonable."

Reach Sean Hao at shao@honoluluadvertiser.com.