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Report details how to capture cost savings for locks, damsReport details how to capture cost savings for locks, dams

Predictable funding could shorten construction timeline and reduce costs, according to Soy Transportation Coalition report.

Jacqui Fatka

April 16, 2018

4 Min Read
Report details how to capture cost savings for locks, dams
Army Corps of Engineers

With growing levels of cargo and congestion occurring on the nation’s inland waterway system, there is increasing concern that the funding levels for this system of locks and dams is insufficient to meet future freight demand. If allowed to continue, international competitiveness of U.S. soybean and grain farmers will decline, according to a new report from Texas A&M University.

Over the years, the Soy Transportation Coalition (STC) has routinely conveyed the argument that “how you allocate money is just as important as how much money you allocate.” Improving the nation’s inventory of locks and dams is not solely a function of increased funding; more efficient allocation of funding is also essential. STC commissioned the recent Texas A&M study in an effort to detail the cost escalations and project delays resulting from the current system.

Researchers compared a hypothetical lock and dam project constructed via the current unpredictable, piecemeal funding approach with one potentially constructed with predictable and reliable funding. The current approach the Army Corps of Engineers uses to fund the nation’s lock and dam infrastructure typically requires the authorization (i.e., establishment, continuation or modification of an activity) and appropriations (i.e., provision of budget authority to an agency for specified purposes) by Congress. Authorization of a project can occur years before funds are appropriated.

The poster child for delayed projects is the Olmsted Locks & Dams project near the confluence of the Ohio and Mississippi rivers. The Olmsted project is currently slated to open in October 2018 and be fully functional — 30 years after construction first began.

The report highlights how a lock and dam project with a five-year construction timeline and a $500 million initial cost estimate would be completed on time and within budget provided predictable and reliable funding from Congress.

In contrast, the same project with the same initial cost estimate and construction timeline would ultimately cost $573 million and take eight years to complete under the current unpredictable and piecemeal funding approach employed by Congress. The same project with the same price tag can have entirely different outcomes – not because of more appropriated funding but simply due to funding being provided in a more reliable manner.

When funding is provided in a piecemeal approach, the amount of funding available for the actual construction effort is eroded from three sources: inflation, mobilization costs and making incremental purchases versus bulk purchases.

Delays from one funding allocation to another exposes the project to inflationary costs. Because funding is often unpredictable, the construction effort can be subject to interruption until funding to resume work on the project is available once again. The workers, equipment and materials to construct a lock and dam project are initially mobilized, then demobilized, then remobilized, then demobilized once again. Each time the effort must be remobilized, a cost is incurred.

Finally, it is more economical to make bulk purchases of steel, concrete and the other materials and inputs necessary to complete such large construction projects. Unfortunately, the unpredictable and piecemeal funding approach currently employed results in such purchases being made in smaller, more expensive increments.

“If I were to design a funding approach that would result in guaranteed cost overruns and construction delays, I would design the system we have in place,” STC executive director Mike Steenhoek explained. “These cost overruns and construction delays of locks and dams we frequently witness should not be regarded as unintended consequences. Rather, they should be regarded as predictable outcomes. We will continue to see resources wasted and benefits of these important projects delayed until we are able to adopt an approach that provides funding in a predictable and reliable manner.”

The report concluded that “overall, reliable and predictable funding, coupled with integrated, asset-focused approaches to improve life-cycle investment decisions, can help to improve the useful life of the nation’s inland waterway system.”

Last year, 97.2 million tons of soybeans and grain were transported via the system, which connects farmers with international customers. A high percentage of the nation’s navigable rivers require a system of locks and dams to cost-effectively and efficiently provide the linkage between soybean and grain production regions and export facilities. Many of these locks and dams have been allowed to degrade and, as a result, no longer provide confidence that soybean and grain shipments via the inland waterways will be transported reliably.

The report identifies potential best practices that, if implemented, will enhance the likelihood of lock and dam construction and rehabilitation efforts being completed on time and within budget. “Doing so will not only save taxpayer dollars, but the accelerated completion of these projects will provide accelerated benefits to agriculture and other industries utilizing the inland waterway system,” STC said.

About the Author(s)

Jacqui Fatka

Policy editor, Farm Futures

Jacqui Fatka grew up on a diversified livestock and grain farm in southwest Iowa and graduated from Iowa State University with a bachelor’s degree in journalism and mass communications, with a minor in agriculture education, in 2003. She’s been writing for agricultural audiences ever since. In college, she interned with Wallaces Farmer and cultivated her love of ag policy during an internship with the Iowa Pork Producers Association, working in Sen. Chuck Grassley’s Capitol Hill press office. In 2003, she started full time for Farm Progress companies’ state and regional publications as the e-content editor, and became Farm Futures’ policy editor in 2004. A few years later, she began covering grain and biofuels markets for the weekly newspaper Feedstuffs. As the current policy editor for Farm Progress, she covers the ongoing developments in ag policy, trade, regulations and court rulings. Fatka also serves as the interim executive secretary-treasurer for the North American Agricultural Journalists. She lives on a small acreage in central Ohio with her husband and three children.

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