Reports and reference guides
26 November 2007
26 Nov 2007
Cost Underestimation in Public Works Projects
Journal of the American Planning Association
Based on a sample of 258 transportation infrastructure projects worth $90 billion (U.S.), it is found with overwhelming statistical significance that the cost estimates used to decide whether important infrastructure should be built are highly and systematically misleading. The result is continuous cost escalation of billions of dollars.
The sample used in the study is the largest of its kind, allowing for the first time statistically valid conclusions regarding questions of cost underestimation and escalation for different project types, different geographical regions, and different historical periods. Four kinds of explanation of cost underestimation are examined: technical, economic, psychological, and political.
This article presents results from the first statistically significant study of cost escalation in transportation infrastructure projects.