What Causes Cost Overrun in Transport Infrastructure Projects?

By Bent Flyvbjerg, Mette K. Skamris holm, Søren L. Buhl. 2004

705 citations recorded by the source corpus.

Results from the first statistically significant study of the causes of cost escalation in transport infrastructure projects are presented. The study is based on a sample of 258 rail, bridge, tunnel and road projects worth US$90 billion. The focus is on the dependence of cost escalation on: (1) the length of the project‐implementation phase, (2) the size of the project and (3) the type of project ownership. First, it was found, with very high statistical significance, that cost escalation was strongly dependent on the length of the implementation phase. The policy implications are clear: decision‐makers and planners should be highly concerned about delays and long implementation phases because they translate into risks of substantial cost escalations. Second, projects have grown larger over time, and for bridges and tunnels larger projects have larger percentage cost escalations. Finally, by comparing the cost escalation for three types of project ownership—private, state‐owned enterprise and other public ownership—it was shown that the oft‐seen claim that public ownership is problematic and private ownership effective in curbing cost escalation is an oversimplification. The type of accountability appears to matter more to cost escalation than type of ownership.

Subfields: Management Science and Operations Research, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/f6b91050e1cf85929b868bdd8c007a44080af87e

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In Management Science and Operations Research

In Strategy and Management

Citations in the corpus

Large Infrastructure Projects: A Review of the Quality of Demand Forecasts and Cost Estimations (2007, positive): “Based on the database as described above, Flyvbjerg et al (2004) analysed the causes of cost escalations.”
Policy and Planning for Large-Infrastructure Projects: Problems, Causes, Cures (2005, neutral): “…study, my colleagues and I demonstrated that delays in transportation-infrastructure implementation are very costly, increasing the percentage construction-cost overrun measured in constant prices by 4.64% per year of delay incurred after the time of decision to build (Flyvbjerg et al, 2004).”
Inaccuracy in Traffic Forecasts (2006, neutral): “The present authors have shown elsewhere that the massive overestimation of traffic and revenues documented above for rail goes hand in hand with an equally massive underestimation of costs (Flyvbjerg et al., 2002, 2004).”
Cost Overruns and Demand Shortfalls in Urban Rail and Other Infrastructure (2007, background): “The reader is referred to Flyvbjerg, Holm and Buhl (2002, 2004, 2005) , Flyvbjerg, Bruzelius and Rothengatter (2003) and Flyvbjerg and COWI (2004) for answers to these questions and for further references.”
A review of HSR experiences around the world (2007, background): “The reason for this latter exclusion is that, at this stage, deviation over planned costs is often substantial, as pointed out in the literature (see Flyvbjerg et al., 2003, for example).”
Curbing Optimism Bias and Strategic Misrepresentation in Planning: Reference Class Forecasting in Practice (2008, background): “Inaccuracy is measured in percentages as (actual outcome/forecast outcome – 1) 100.”
Risk, innovation, electricity infrastructure and construction cost overruns: Testing six hypotheses (2014, background): “[10] wrote that “both the research literature and media occasionally claim that the track record is poorer for larger projects than for smaller ones, and that cost escalations for large projects are particularly common and especially large.”
Analysis of cost and schedule performance of international development projects (2010, background): “Literature identifies development projects as well-known for over-running cost and schedule budgets [21–23].”
Delusion and Deception in Large Infrastructure Projects: Two Models for Explaining and Preventing Executive Disaster (2009, background): “In fact, whereas a standard election term is 4 years, the average length of the time from the start of planning to start of operations for a large infrastructure project is commonly 10-15 years.(36)”
Rethinking Construction Cost Overruns: Cognition, Learning and Estimation (2014, background): “Flyvbjerg et al. (2004) report that nine out 10 infrastructure projects overrun their budgets and that infrastructure projects have an 86% likelihood of exceeding their budgets.”