How reliable are estimates of infrastructure costs? A comparative analysis
AbstractAlthough the economic importance of adequate infrastructure is generally recognised, in practice decision-makers - faced with the judgement of new large infrastructure projects - are hesitant to approve such new projects because of the uncertainty in the related cost estimates. It is often argued by them that expost the actual costs of new infrastructure appear to be usually underestimated. Sometimes even the term 'strategic underestimation ' is used. This paper investigates the causes of misjudgement of infrastructure costs by distinguishing systematically various classes of miscalculations and misrepresentations of costs. Based on a comparative analysis of cost estimates of infrastructure projects in the Netherlands and Finland, the interesting conclusion is found that in general cost estimates tend to be rather reliable. Underestimations are - in addition to inflationary backgrounds caused by the delay of projects over a long time span - mainly the result of additional political wishes in the form of adjustments or extensions imposed during the preparation and implementation stage of projects and which lead to excessive cost rises.
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Bibliographic InfoPaper provided by VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics in its series Serie Research Memoranda with number 0029.
Date of creation: 1998
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Find related papers by JEL classification:
- L98 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Government Policy
- M41 - Business Administration and Business Economics; Marketing; Accounting - - Accounting - - - Accounting
- R53 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Public Facility Location Analysis; Public Investment and Capital Stock
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-03-14 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nijkamp, Peter & Rienstra, Sytze A, 1995. "Private Sector Involvement in Financing and Operating Transport Infrastructure," The Annals of Regional Science, Springer, vol. 29(2), pages 221-35, May.
- Julien Brunel, 2004. "Stochastic Risk vs. Policy Oriented Uncertainties: The Case of the Alpine Crossings," Post-Print halshs-00095852, HAL.
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