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On the magnitude of cost overruns throughout the project life-cycle: An assessment for the Italian transport infrastructure projects

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  • Cavalieri, Marina
  • Cristaudo, Rossana
  • Guccio, Calogero

Abstract

The cost performance of infrastructure projects is a serious problem worldwide. This paper aims to analyse the generating process of cost overruns along the various phases of the project life-cycle. To this purpose, we employ a large dataset of Italian transport infrastructure projects for roads, started and completed during the period 2000–2013. Applying the same methodology used by the construction management research, we breakdown the various phases of the project life-cycle as well as the related cost items (estimated or actual) to analyse empirically the role of each phase in the overall evolution of cost overruns. Specifically, we pay particular attention to the costs for the physical execution of the work, distinguishing them from all other costs. The results show that Italian public infrastructure works suffer from significant cost overruns in the execution phase. However, the Italian contracting authorities seem to systematically overestimate the size of the final costs for the physical realization of the work. This risk aversion attitude is more relevant when considering financial coverage (rather than budget) and it is likely to leave room for opportunistic behaviours in the execution phase. In terms of policy implications, our results suggest the adoption of more stringent (and objective) criteria to assess the project budget and to provide its financial coverage.

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  • Cavalieri, Marina & Cristaudo, Rossana & Guccio, Calogero, 2019. "On the magnitude of cost overruns throughout the project life-cycle: An assessment for the Italian transport infrastructure projects," Transport Policy, Elsevier, vol. 79(C), pages 21-36.
    • Handle: RePEc:eee:trapol:v:79:y:2019:i:c:p:21-36
    DOI: 10.1016/j.tranpol.2019.04.001
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    3. Massimo Finocchiaro Castroa & Calogero Guccio & Ilde Rizzo, 2023. "How 'one-size-fits-all' public works contract does it better? An assessment of infrastructure provision in Italy," Papers 2304.10776, arXiv.org.
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    6. Abeysekara, Baudhi & Perera, Piyaruwan & Chhipi Shrestha, Gyan Kumar & Gunaruwan, Lalithasiri & Kumarage, Amal & Sadiq, Rehan & Hewage, Kasun, 2021. "Improving the capital deployment efficiency: An infrastructure investment planning process in transportation project," Research in Transportation Economics, Elsevier, vol. 88(C).
    7. Jarosław Górecki & Manuel Díaz-Madroñero, 2020. "Who Risks and Wins?—Simulated Cost Variance in Sustainable Construction Projects," Sustainability, MDPI, vol. 12(8), pages 1-31, April.
    8. Love, Peter E.D. & Ika, Lavagnon A., 2021. "The ‘context’ of transport project cost performance: Insights from contract award to final construction costs," Research in Transportation Economics, Elsevier, vol. 90(C).

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    More about this item

    Keywords

    Cost overruns; Project life-cycle; Transport infrastructure; Roads; Italy;
    All these keywords.

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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