[jlmorton]

Another way to avoid this is with a Design-Build-Operate contract.

The transit agency is on the hook for the agreed construction cost, and for ridership estimates and minimums. If ridership does not develop, then the contracting agency is responsible for making the operator whole.

The contractor is on the hook for the design, build and operation of the system for N years.

The worst possible way to design a large, complex system is the way most US transit agencies do it: the agency operates as the prime contractor, and it issues an initial design subcontractor, which submits an alignment and maybe a 20% design. Then the agency issues bids for each segment, and the new contractor completes the design.

[magduf]

>The transit agency is on the hook for the agreed construction cost, and for ridership estimates and minimums. If ridership does not develop, then the contracting agency is responsible for making the operator whole.

> The contractor is on the hook for the design, build and operation of the system for N years.

This won't work: the contractor will just declare bankruptcy when things don't work out that great. But the owners will have bags full of money by then.

[jlmorton]

This is not an idea I just dreamed up. It works and is in practice around the world.

For a successful example, look to the Canada Line in Vancouver.

https://en.wikipedia.org/wiki/Canada_Line

[adrianN]

Make suitable insurance for the case of bankruptcy a prerequisite then.

[rstuart4133]

From https://www.abc.net.au/radionational/programs/backgroundbrie...

> In the early 2000s after the collapse of insurance giant HIH, NSW and Victoria abolished some classes of builders' warranty insurance. The governments said it was to try and stabilise the industry and ensure its viability. > > So if you're in a new apartment building of more than three storeys, instead of making a claim with an insurer, it's now you versus the builder. You've still got a warranty, but you may need a lawyer.

The rational was builders of that size and above would avoid being put out of business by insurance claims. It had been true up until that point. But from https://www.abc.net.au/news/8403744 :

> Then, in February this year, almost three years after the owners commenced legal action, the developer, Payce Properties, announced that it was being placed into administration. > > The parent company, Payce Consolidated, is still trading, and has plans to roll out more than 7,000 more apartments in the next five years.

Surprise, surprise, there has been a rash of shoddily built large buildings with arguments about was footing the bill every since.

[Reason077]

> "Another way to avoid this is with a Design-Build-Operate contract."

The linked PDF seems to argue for the opposite. It suggests that "design & build" contracts tend to inflate costs, and countries with lower subway construction costs tend to separate design contracts from construction contracts.