Doesn't technological progress mean being able to make things more cheaply?

In almost every economics textbook I've seen, the hallmark of technological progress is increased productivity. That is, the ability to produce more stuff with the same amount of resources.

So, if we've really undergone a century of unprecedented technological and economic progress, full of productivity gains across the boards, then why the heck is the ARC tunnel (and it's successors) so darn expensive?

Just to recap--right now, all heavy rail traffic goes through two bores built over a century ago. They may not be perfect, but we've done pretty well with them over those 100+ years, right? We still send trains through them every few minutes now, and the opponents of a new tunnel are content to do so indefinitely. So in looking for new tunnels we don't need a better product, just additional bores to get more trains through, or maybe a replacement tunnel for when the existing one finally does reach its retirement age, right?

Given all the advancement we've seen over the past hundred years, I would have thought that we should be able build an identical tunnel at significantly lower cost. But the price tag for the ARC project (originally 8.7 billion, rose to 11 billion) and it's successor, the Gateway project, are significantly higher than the tunnels that have preceded it. For example, the PATH tunnels to midtown, built in 1908, cost about $1 billion in current dollars. The Holland Tunnel, built in the 1920's, entailed $48 million in construction costs, which is well under $1 billion in 2010 dollars. I can't find too much about the original tunnel, but this article makes it seem like the 1904 cost was $2.5 million, which is-again-less than $1 billion in today's terms (and, of course, my belated condolences to the grieving, inverted Mrs. Sea Cow).

The problem, then, isn't that transportation infrastructure is innately too expensive--it's that for a variety of reasons, transportation projects have become more expensive, despite improvements in technology.

I find this trend disheartening, and a little puzzling. Several explanations offer themselves: rising real estate costs make eminent domain more expensive; labor costs have risen above productivity gains; it's always cheaper to build the first tunnel (which claimed the most direct routes) than those that follow (especially if existing infrastructure needs to be reconfigured); the costs of interrupting activity in the city are much larger in the modern economy; new regulations and standards have drastically increased the costs of doing business. Some of these obstacles have no real justification--what's the point of new regulation if we were content with the previous outcomes? But others seem to be innate to the task of modifying well-established urban areas, and finding ways to overcome those hurdles will be one of the great challenges of the urban renewal age, which is finally in full swing.

Update: Did I mention lack of competition as a potential problem? I reckon I should have.