The $9.5 billion road to a sea of red ink

If you've ever wondered how the US government budget plunged into a sea of red ink, one project helps tell part of the story. It's a project that like many others began small and grew big.

In 1965, Congress voted to build 2,390 miles of two-lane roads through the mountainous counties of Appalachia. Part of the War on Poverty, the roads program aimed at improving the transportation and, therefore, the economy in nine Eastern states.

Planners said the roads would cost $805 million over several years, a relatively modest amount by federal standards. As is common with new government projects, the supporters made their first cost estimate low, knowing the final price tag would be higher.

But no one could have suspected how far off the mark the estimate would be.

Almost 20 years later, the Appalachian Regional Commission predicts that the road system, if completed as now designed, would cost $9.5 billion. That is a cost jump of more than 1,000 percent.

If the figures seem startling, the Appalachian Commission is hardly alone in the galaxy of federal programs. A recent US General Accounting Office (GAO) study of 802 major federal acquisitions found cost projections had jumped $317 billion over initial estimates.

The Navy, for example, lists a submarine detector device called Surtass as costing $863 million. The original price tag was $19 million. Overall, costs for major weaponry projects have gone up 132 percent over initial projections, says the GAO study.

Among nondefense programs, the Tennessee Valley Authority has 10 major projects expected to cost $16.4 billion. When first presented to Congress, the projects had a price tag of only $3.6 billion.

Because such federal projects take years to complete, the cost increases do not hit the US Treasury all at once. But they add billions of dollars to the US budget each year. Sen. William V. Roth Jr. (R) of Delaware has labeled cost overruns as a ''critical problem, spinning wildly out of control.''

Inflation, project changes, and poor cost estimates explain many of the rises. And so does politics.

The Appalachian roads project has been a victim of all these factors. First it was hit by politics. States that were left out of the original plan wanted to be included, and soon even Mississippi, a state notable for its flat delta, had a piece of the Appalachian roadway pie. So Congress added it and three other new states and 700 miles to the plan.

Also, says Dennis W. Boyd, federal budget officer for the Appalachian Commission, supporters underestimated the cost to ensure approval of the roads project. ''The original estimate was too low,'' he says. ''Almost everyone who worked on the (Appalachian roads) act recognized it was too low to complete the system.''

Next came the ecology movement, demanding environmental studies and forcing the roads to go around sensitive areas. Then came new safety standards and a decision to build four-lane instead of two-lane roads. And finally came inflation, which hit road construction especially hard.

The Appalachian Commission reported to members of Congress each year on increased cost estimates, but ''generally most of them prefer not to hear,'' says Mr. Boyd, because ''most of the time it's their pet project.''

Senator Roth concludes that ''you have to blame both'' Congress and government agencies for letting expenses get out of hand. ''It is a conspiracy to get a project passed, to get the nose of the camel under the tent'' by underestimating costs, he says.

''In the past there was a lack of concern about finances because people always knew there was more money,'' says Roth. ''Now it's different.''

Roth has proposed a bill to require all agencies to keep careful records of cost increases. If costs exceed a 25 percent increase, discounting inflation, a project would be halted until Congress passed special legislation to reauthorize it.

A similar provision now in effect for the Department of Defense has not ended cost overruns there, Roth concedes. But his bill would at least require civilian agencies to provide more exact records and open the door for closer congressional scrutiny. Roth is optimistic that his bill will move in the Senate.

The US Senate itself has hardly earned a spotless record for keeping project costs down. The new Hart Senate Office Building, a marble structure on Capitol Hill that resembles nothing so much as a luxury hotel, was estimated to cost $68 million in 1974. Later the Senate decided to increase the size by 50 percent, and as the building nears completion, the cost has shot up to $140 million.

Meanwhile, the Appalachian Commission may yet work out a happy ending for its roads project. The current austerity drive has persuaded governors from the Appalachian states to agree to cutting 1,000 miles out of the planned system. With some 1,800 miles already built and $2.8 billion of federal money spent, the governors now are asking for $2.2 billion more to finish the roads by 1990.

Still, the $5 billion total is a long way from the original estimate of $800 million.