Explaining cost overruns in infrastructural projects: A new framework with applications to Sweden
AbstractThe first part of the article presents a new framework for analyzing cost overruns. It has a descriptive part in two dimensions: when during the process that the cost overrun arose and what part of the cost function was responsible (change in the product, change in quantities of the inputs and change in price of inputs. The explanatory part is a development of Flyvbjerg´s theories and identifies four possible explanations: political/strategic aspects, psychological aspects, competence related and bad luck. It is argued that Flyvbjerg´s technological explanation belongs to the descriptive part. The empirical part of the paper uses this framework to analyze cost overruns in infrastructure projects in Sweden, primarily based on a questionnaire to experienced project managers. The results is that most of the cost overruns occur in the planning stages up to the final design and are related to design changes and to increases in the amount of inputs needed because of technical and administrative problems. Of the explanatory factors there is most support for lack of competence and optimism bias.
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Bibliographic InfoPaper provided by Department of Real Estate and Construction Management & Centre for Banking and Finance (cefin), Royal Institute of Technology in its series Working Paper Series with number 14/1.
Length: 40 pages
Date of creation: 21 Mar 2014
Date of revision:
Contact details of provider:
Postal: Department of Real Estate and Construction Management, Royal Institute of Technology, Brinellvägen 1, 100 44 Stockholm, Sweden
Web page: http://www.kth.se/en/abe/inst/fob
More information through EDIRC
cost overrun; theoretical framework; infrastructure; Sweden;
Find related papers by JEL classification:
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
- L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-03-30 (All new papers)
- NEP-PPM-2014-03-30 (Project, Program & Portfolio Management)
- NEP-TRE-2014-03-30 (Transport Economics)
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.:
- Cantarelli, C.C. & Molin, E.J.E. & van Wee, B. & Flyvbjerg, B., 2012. "Characteristics of cost overruns for Dutch transport infrastructure projects and the importance of the decision to build and project phases," Transport Policy, Elsevier, vol. 22(C), pages 49-56.
- Chantal C. Cantarelli & Caspar G. Chorus & Scott W. Cunningham, 2013. "Explaining Cost Overruns of Large-Scale Transportation Infrastructure Projects using a Signalling Game," Papers 1307.2180, arXiv.org.
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