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What Causes Cost Overrun in Transport Infrastructure Projects?

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  • BENT FLYVBJERG
  • METTE K. SKAMRIS HOLM
  • SØREN L. BUHL

Abstract

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.

Suggested Citation

  • Bent Flyvbjerg & Mette K. Skamris Holm & Søren L. Buhl, 2003. "What Causes Cost Overrun in Transport Infrastructure Projects?," Transport Reviews, Taylor & Francis Journals, vol. 24(1), pages 3-18, January.
    • Handle: RePEc:taf:transr:v:24:y:2003:i:1:p:3-18
    DOI: 10.1080/0144164032000080494a
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    References listed on IDEAS

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    1. Elizabeth E. Bailey & Janet Rothenberg Pack (ed.), 1995. "The Political Economy Of Privatization And Deregulation," Books, Edward Elgar Publishing, number 528, December.
    2. Flyvbjerg,Bent & Bruzelius,Nils & Rothengatter,Werner, 2003. "Megaprojects and Risk," Cambridge Books, Cambridge University Press, number 9780521009461, November.
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    Cited by:

    1. Nicole Adler & Chris Nash & Eric Pels, 2008. "High-Speed Rail & Air Transport Competition," Tinbergen Institute Discussion Papers 08-103/3, Tinbergen Institute.
    2. Ofelia Betancor & Gerard Llobet, 2015. "Contabilidad Financiera y Social de la Alta Velocidad en Espana," Studies on the Spanish Economy eee2015-08, FEDEA.
    3. Daniel Gurara & Mr. Kangni R Kpodar & Mr. Andrea F Presbitero & Dawit Tessema, 2020. "On the Capacity to Absorb Public Investment: How Much is Too Much?," IMF Working Papers 2020/048, International Monetary Fund.
    4. Gurara, Daniel & Kpodar, Kangni & Presbitero, Andrea F. & Tessema, Dawit, 2021. "On the capacity to absorb public investment: How much is too much?☆," World Development, Elsevier, vol. 145(C).
    5. de Rus, Gines, 2006. "Infraestructuras: más iniciativa privada y mejor sector público [Infrastructure: more private participation and better public sector]," MPRA Paper 12000, University Library of Munich, Germany.
    6. Ginés De Rus, 2007. "Economic Evaluation and Incentives in Transport Infrastructure Investment," Chapters, in: Massimo Florio (ed.), Cost–Benefit Analysis and Incentives in Evaluation, chapter 6, Edward Elgar Publishing.
    7. Campos, Javier & de Rus, Ginés, 2009. "Some stylized facts about high-speed rail: A review of HSR experiences around the world," Transport Policy, Elsevier, vol. 16(1), pages 19-28, January.
    8. Joseph Sturm & Mashrur Chowdhury & Anne Dunning & Jennifer Ogle, 2011. "Analysis of cost estimation disclosure in environmental impact statements for surface transportation projects," Transportation, Springer, vol. 38(3), pages 525-544, May.
    9. Adler, Nicole & Pels, Eric & Nash, Chris, 2010. "High-speed rail and air transport competition: Game engineering as tool for cost-benefit analysis," Transportation Research Part B: Methodological, Elsevier, vol. 44(7), pages 812-833, August.
    10. Adriana Gómez-Cabrera & Amalia Sanz-Benlloch & Laura Montalban-Domingo & Jose Luis Ponz-Tienda & Eugenio Pellicer, 2020. "Identification of Factors Affecting the Performance of Rural Road Projects in Colombia," Sustainability, MDPI, vol. 12(18), pages 1-18, September.
    11. de Rus, Gines & Nash, C.A., 2007. "In what circumstances is investment in HSR worthwhile?," MPRA Paper 8044, University Library of Munich, Germany.

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