The $450 Million Price Tag for Riker’s Island Project – Is it Criminal?

Construction costs for new housing in New York City remain the highest in the nation–and that includes inmate housing on Riker’s Island which is paid for with taxpayer dollars.

The estimated cost of a 1,500-bed detention center on Riker’s Island, as stated in the Request for Proposal, is $450 million. This translates into $300,000 per bed, substantially higher than other areas of the country. In South Carolina, for instance, a new 1,500 bed prison facility would cost approximately $73,000 per bed for a total cost $109.5 million if constructed this fiscal year, according to Sharon E. Scott, Manager for Architectural/Engineering Services at the Department of Corrections in South Carolina.

Higher construction costs in New York are partly attributable to obvious factors such as the price of land and the cost of labor, but other factors such as wasteful local regulations and government policies, inefficiencies created by poor project planning and management and stringent environmental mitigation standards also play a role, according to a report by the New York Building Congress and the New York Building Foundation.

There is no need to purchase land for the Riker’s Island project, however, the plan does call for the demolition of 50 temporary housing units on the site which would contribute to the cost of the project. The differential still seems astronomical and costly, with the prospect of escalating costs a near certainty, based on historical patterns in the construction industry when dealing with government contracts.

The recent spate of contract award scandals should be cause for concern for a project of this size. Think CityTime where costs escalated from the original $63 million to $760 million ten years later due mainly to various forms of corruption and fraud.

While the higher cost of union labor has been well publicized, other related factors such as the union’s strong lobbying efforts in New York deter more cost effective non-union entities from participating in the bidding process. “The high union influence in the state keeps us from bidding on projects there” says Karin Demler, Director of Investor Relations for Corrections Corporation of America. “Their lobbying efforts are strong and they contribute to campaigns. This is the situation in a number of states. Private companies do best in right-to-work states.”

Karin says that location, the price of land and labor influence the cost on a project. “On average, the private sector cost for building a facility is between $55,000 and $65,000 per bed. We recently built 1,100 beds in Nevada where land was higher and labor was higher, so the cost was $71,000 per bed. That includes land, construction costs, environmental studies, etc.”

Another cost-reducing option that is available in some prison systems around the country is inmate labor tied to apprentice programs where certification in the construction industry is awarded to inmate participants upon completion. The length of stay at Riker’s Island is typically less than six months and could last as long as a year, but it’s not enough time to implement this type of program utilizing the inmate population there, but a similar program could work using inmates from other facilities in the region, as is the case in North Carolina.

North Carolina has one of the oldest inmate labor programs in the country dating back to the late 1800’s, but in 1993 the North Carolina Inmate Construction Program was formalized and tied to vocational training. “Our apprentice program requires 480 hours of classroom training and 4,000 – 6,000 hours of on-the-job training, so it’s a three and a half to five year commitment,” says Bill Stovall, Director of Engineering at the North Carolina Department of Corrections. Inmate labor is currently being used to construct a series of facilities in North Carolina totaling 2,700 beds at a cost of approximately $82.7 million, all of which are planned for completion by 2012.

The North Carolina example equates to a cost savings of about twenty-five percent versus non-inmate labor. If the same percentage reduction could be achieved on the Riker’s Island project, the dollar amount saved would be $112.5 million.

Cost overruns in the prison construction industry are common, so the $450 million price tag for the Riker’s Island project can escalate as the project progresses. The best way to prevent any added costs to the city taxpayers is to secure contracts where the contractor is responsible for cost overruns, not the city.

The New York Department of Design and Construction is the city’s primary capital construction project manager and issued the Request for Proposal for the Riker’s Island Project. Anthony Romeo, Program Director and an architect by training, spoke with us about the management of the project, including stringent oversight and the department’s commitment to keep the project on track and on budget.

“We have our normal checks and balances in place,” says Romeo. “We estimate the project from the very beginning, then do the schematic design. Then when the architects and consultants get involved they go into construction documents, and we do another cost estimate. We consistently estimate the project along the way according to market pricing. At the same time, we also make sure it’s at least 10% – 15% under what our budget is.”

In regard to the integrity of the contractors hired to do the work, Romeo says, “All the contractors that submit to work for New York City are screened through the Vendex System. They are investigated and thoroughly reviewed, including their past experience. It’s like submitting a resume. It’s not as simple as just being the low bidder. Your really have to show a track record. We have a very strict evaluation system.”

There may be a silver lining to the financial crisis that has driven many municipalities to the brink. It has brought about scrutiny by elected officials and the American tax payer regarding how the government, unions and contractors carry out their business. The dialogue that is unfolding in cities and states around the country may be a catalyst for change that is long overdue in America.