This article presents results from the first statistically significant study of cost escalation in transportation infrastructure projects. 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. Underestimation cannot be explained by error and is best explained by strategic misrepresentation, i.e., lying. The policy implications are clear: In debates and decision making on whether important transportation infrastructure should be built, those legislators, administrators, investors, media representatives, and members of the public who value honest numbers should not trust the cost estimates and cost-benefit analyses produced by project promoters and their analysts.

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He is founder and director of the university's research program on large-scale transportation infrastructure planning. His latest books are Megaprojects and Risk (Cambridge University Press, 2003; with Nils Bruzelius and Werner Rothengatter), Making Social Science Matter (Cambridge University Press, 2001), and Rationality and Power (University of Chicago Press, 1998). Mette K. Skamris Holm is a former assistant professor of planning at Aalborg University. She now works as a planner with Aalborg Municipality. Søren L. Buhl is associate professor of mathematics at Aalborg University. He is associate statistician with the university's research program on largescale transportation infrastructure planning.

This article presents results from the first statistically significant study of causes of cost escalation in transport infrastructure projects. 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) length of project implementation phase, (2) size of project and (3) type of project ownership. First, it is found with very high statistical significance that cost escalation is strongly dependent on length of 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, it is found that projects have grown larger over time and that for bridges and tunnels larger projects have larger percentage cost escalations. Finally, by comparing cost escalation for three types of project ownership--private, state-owned enterprise and other public ownership--it is shown that the oft-seen claim that public ownership is problematic and private ownership effective in curbing cost escalation is an oversimplification. Type of accountability appears to matter more to cost escalation than type of ownership.The present article is a companion paper to our article "How common and how large are cost overruns in transport infrastructure projects?", published in TRV 23(1), pp. [71][72][73][74][75][76][77][78][79][80][81][82][83][84][85][86][87][88] 2003. For a full description of the sample, data collection and methodology, we refer readers to the previously published article. Are sluggish projects more expensive?The Commission of the European Union recently observed that the 'inherent sluggishness' of the preparation, planning, authorisation and evaluation procedures for large infrastructure projects creates obstacles to the implementation of such projects (Commission of the European Union 1993: 76). There is a fear that obstacles in the planning and implementation phases translate into cost escalation, if they do not block projects altogether (Ardity, Akan and Gurdamar 1985, Morris and Hough 1987, Snow and Dinesen 1994, Chan and Kumaraswamy 1997.We decided to test whether such fear is corroborated by the empirical evidence.More specifically, we decided to test the thesis that projects with longer implementation phases tend to have larger cost escalations. We here define length of implementation phase as is common, i.e. as the time period from decision to build until construction is completed and operations have begun. Cost development is defined as the difference between actual and forecast construction costs in percentage of forecast construction costs.Information about length of implementation phase is available for 111 of the 258 rail, fixed link (bridges and tunnels) and road projects for which we have data on Challenges and Ways Forward Into the 21st Century. White Paper (Brussels:

This paper gives an overview of good and bad practice for understanding and curbing cost overrun in large capital investment projects, with a critique of Love and Ahiaga-Dagbui (2018) as point of departure. Good practice entails: (a) Consistent definition and measurement of overrun; in contrast to mixing inconsistent baselines, price levels, etc. (b) Data collection that includes all valid and reliable data; as opposed to including idiosyncratically sampled data, data with removed outliers, non-valid data from consultancies, etc. (c) Recognition that cost overrun is systemically fat-tailed; in contrast to understanding overrun in terms of error and randomness. (d) Acknowledgment that the root cause of cost overrun is behavioral bias; in contrast to explanations in terms of scope changes, complexity, etc. (e) De-biasing cost estimates with reference class forecasting or similar methods based in behavioral science; as opposed to conventional methods of estimation, with their century-long track record of inaccuracy and systemic bias. Bad practice is characterized by violating at least one of these five points. Love and Ahiaga-Dagbui violate all five. In so doing, they produce an exceptionally useful and comprehensive catalog of the many pitfalls that exist, and must be avoided, for properly understanding and curbing cost overrun. Five Key Questions about Cost Overrun Cost overrun in large capital investment projects can be hugely damaging, incurring outsize losses on investors and tax payers, compromising chief executives and their organizations, and even leading to bankruptcy (Flyvbjerg et al. 2009, Flyvbjerg and Budzier 2011). Accordingly, cost overrun receives substantial attention in both the professional literature and popular media. Yet it is not always clear how cost overrun is defined, why it happens, and how to best 1 All authors have co-authored or authored publications based on the data, theories, and methods commented on by Love and Ahiaga-Dagbui (2018).