Posted by: ThePMOView | July 14, 2012

The James River Canal Mega Project

Seattle, WA in the United States has started a major tunnel project along the waterfront (for more information click here). The estimated cost for this is $2 Billion. However, given the track record of other ‘mega’ projects like this, it would be a pleasant surprise it the actual cost comes anywhere near this amount.

Under bidding and selling poor projects to the tax payers is nothing new. As a comparison to today’s mega projects, like Seattle’s, here is one that many may not know about. All the information contained here comes from the excellent book, History of the James River and Kanawha Company by Wayland Fuller Dunaway published in 1922.

The James River Canal was originally projected to link up the James River in Virginia to the Ohio River as a method to help settle the western parts of the US at the time. This was the vision of George Washington who helped found the company and was its first President. Construction on the canal began in 1796. The Virginia legislature authorized the formation of the James River Company to construct and operate the canal.

However soon after construction started, the crews started running into issues that were not expected (sound familiar). This of course expended the funds available and more had to be raised, which the State of Virginia did. The first tolls were charged in 1794 but full tolls had to wait until 1806 as that is when the first section of the canal was completed.

All told, the canal reached a length of 197.5 miles, including a branch canal to the Ravenna River. The total cost for all three stages of the canal was a whopping $8,259,184 in 1851 dollars no less. Many times the company had to return to the Virginia government for bond guarantees and funding. After the Civil War, the company switched to applying for monies from the Federal government to help them out.

When no more money was forthcoming due to the rising interest in railroads, further construction was halted, including a canal tunnel that was almost half done. On March 5, 1880, the canal was sold to the Buchannan and Clifton Forge Railway for $500,000 so the railroad could acquire the rights to build a rail line along the canal’s right of way as that was the best slope for a rail line to reach the Appalachian Mountains.  What a deal.

The point of this story was to showcase that even with all the advances we have had since 1796, large-scale projects are still being managed and estimated as if it still was 1796. These projects still need additional funding from taxpaying sources (i.e. local and federal governments). Furthermore, when technology advances (like railroads in this case) cause these projects to become obsolete, we still end up paying for these projects even though they are now worthless as shown by the canal’s selling price in 1880.

The timeline for ROI on these Mega Projects, like the Big Dig in Boston and the English Channel tunnel in Europe, is 30 years (or more). So in 15 more years of technology advancement from now, what could take the place of cars? If the Jetson’s dream ever came true or personal jet packs were widely available and safe to operate, what value would these projects have then? While decisions must be made under current conditions, a forward-looking Program/Project Manager should have raised these issues as possible risks (abet very low ones)  in order to make sure that the people involved understood that it was possible that the investment that was made could have a value of zero, before the payback schedule had been completed.

Before anyone thinks this is too farfetched, think about the following.

  • The first railroad began operation in 1825.
  • The first car was used in 1888 (a 63 year difference)
  • The first plane in 1903 (only a 15 year difference)
  • The first space craft was launched in 1957 (a 54 year difference)

Given these trends of about every 60 years, what will be the upcoming new mode of transportation for the world in around 2020, which is only eight years from now? If whatever it is starts to replace the auto as the primary means of transportation, what will these tunnels be used for then? And more importantly, what will they end up being worth? If the James River Canal is any indication of these tunnel’s net worth, not much at all. ‘Psst, hey want to buy a tunnel? I can get one for you cheap!’

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