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Characteristics of cost overruns for Dutch transport infrastructure projects and the importance of the decision to build and project phases

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  • Cantarelli, C.C.
  • Molin, E.J.E.
  • van Wee, B.
  • Flyvbjerg, B.

Abstract

Using a methodology similar to that used the in the worldwide research, the cost performance of Dutch large-scale transport infrastructure projects is determined. In the Netherlands, cost overruns are as common as cost underruns but because cost overruns are larger than cost underruns projects on average have a cost overrun of 16.5%. The focus on one country further enabled to consider cost overruns during different project development phases. It turned out that in the Netherlands the majority of the cost overrun occurs in the pre-construction phase (the period between the formal decision to build and the start of construction). The frequency as well as the magnitude of pre-construction cost overrun is significantly higher than in the construction phase. The used methodology of calculating cost overruns does however not take lock-in into account. This phenomenon shows that the real decision to build was taken much earlier in the decision-making process. Since estimated costs are usually lower during these earlier stages, the cost overruns based on this real decision to build are likely to be much higher. Cost overruns presented in studies are therefore often underestimated and the problem of cost overruns is much larger than we think.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:trapol:v:22:y:2012:i:c:p:49-56
    DOI: 10.1016/j.tranpol.2012.04.001
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    References listed on IDEAS

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    1. Mackie, Peter & Preston, John, 1998. "Twenty-one sources of error and bias in transport project appraisal," Transport Policy, Elsevier, vol. 5(1), pages 1-7, January.
    2. Bert van Wee, 2007. "Large infrastructure projects: a review of the quality of demand forecasts and cost estimations," Environment and Planning B: Planning and Design, Pion Ltd, London, vol. 34(4), pages 611-625, July.
    3. Chantal C Cantarelli & Bent Flyvbjerg & Bert van Wee & Eric J E Molin, 2010. "Lock-in and its influence on the project performance of large-scale transportation infrastructure projects: investigating the way in which lock-in can emerge and affect cost overruns," Environment and Planning B: Planning and Design, Pion Ltd, London, vol. 37(5), pages 792-807, September.
    4. Bent Flyvbjerg & Mette K. Skamris holm & Søren L. Buhl, 2003. "How common and how large are cost overruns in transport infrastructure projects?," Transport Reviews, Taylor & Francis Journals, vol. 23(1), pages 71-88, January.
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    6. Odeck, James, 2004. "Cost overruns in road construction--what are their sizes and determinants?," Transport Policy, Elsevier, vol. 11(1), pages 43-53, January.
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    Citations

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    Cited by:

    1. Brunes, Fredrik & Lind, Hans, 2014. "Explaining cost overruns in infrastructural projects: A new framework with applications to Sweden," Working Paper Series 14/1, Royal Institute of Technology, Department of Real Estate and Construction Management & Centre for Banking and Finance (cefin).
    2. Miller, Michael & Szimba, Eckhard, 2015. "How to avoid unrealistic appraisal results? A concept to reflect the occurrence of risk in the appraisal of transport infrastructure projects," Research in Transportation Economics, Elsevier, vol. 49(C), pages 65-75.
    3. Asplund, Disa & Eliasson, Jonas, 2016. "Does uncertainty make cost-benefit analyses pointless?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 92(C), pages 195-205.
    4. Morten Skou Nicolaisen & Patrick A. Driscoll, 2016. "An International Review of Ex-Post Project Evaluation Schemes in the Transport Sector," Journal of Environmental Assessment Policy and Management (JEAPM), World Scientific Publishing Co. Pte. Ltd., vol. 18(01), pages 1-33, March.
    5. Makovšek, Dejan, 2014. "Systematic construction risk, cost estimation mechanism and unit price movements," Transport Policy, Elsevier, vol. 35(C), pages 135-145.
    6. Miranda Sarmento, J.J., 2014. "Public private partnerships," Other publications TiSEM c7d4c978-234c-4f88-83ed-1, Tilburg University, School of Economics and Management.
    7. Love, Peter E.D. & Ahiaga-Dagbui, Dominic D. & Irani, Zahir, 2016. "Cost overruns in transportation infrastructure projects: Sowing the seeds for a probabilistic theory of causation," Transportation Research Part A: Policy and Practice, Elsevier, vol. 92(C), pages 184-194.
    8. Awojobi, Omotola & Jenkins, Glenn P., 2016. "Managing the cost overrun risks of hydroelectric dams: An application of reference class forecasting techniques," Renewable and Sustainable Energy Reviews, Elsevier, vol. 63(C), pages 19-32.
    9. Verweij, Stefan & van Meerkerk, Ingmar & Korthagen, Iris A., 2015. "Reasons for contract changes in implementing Dutch transportation infrastructure projects: An empirical exploration," Transport Policy, Elsevier, vol. 37(C), pages 195-202.
    10. repec:eee:transa:v:99:y:2017:i:c:p:14-29 is not listed on IDEAS
    11. Chong, Uven & Hopkins, Omar, 2016. "An international experience on the evolution of road costs during the project life cycle," Transport Policy, Elsevier, vol. 48(C), pages 60-66.
    12. Odeck, James, 2014. "Do reforms reduce the magnitudes of cost overruns in road projects? Statistical evidence from Norway," Transportation Research Part A: Policy and Practice, Elsevier, vol. 65(C), pages 68-79.

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