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Successful Control of Major Project Budgets

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  • Steen Lichtenberg

    (Lichtenberg & Partners, Baneskellet 16, Vedbæk DK-2950, Denmark)

Abstract

This paper differs from scientific papers describing current research. In line with the theme of this special issue, it challenges conventional risk management practice against the background of former research results successfully finished decades ago. It is well-known that conventional practice frequently results in budget overruns of large projects. International reviews document that. Severe delays of schedules are also well-known. This paper describes successful research results from almost three decades ago, which successfully challenges this severe problem and has led to new practices. The research involved is an unusual mix: Scandinavian researchers from psychology, statistical theory and engineering economy. The resulting procedure has been widely used since around 1990 and challenges conventional procedures. The procedure is documented to be able to yield statistically correct prognoses, when the “rules of the game” have been correctly followed. After a short summary of the basic situation, this paper summarizes the research, followed by some resulting experiences, focusing on two recent studies each of 40 infrastructures and other major projects. In both sets, the actual final cost largely equaled the expected project cost. This result is a marked change from international past and present experience. Finally, the need for further research and progress is discussed.

Suggested Citation

  • Steen Lichtenberg, 2016. "Successful Control of Major Project Budgets," Administrative Sciences, MDPI, vol. 6(3), pages 1-14, July.
    • Handle: RePEc:gam:jadmsc:v:6:y:2016:i:3:p:8-:d:73549
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    References listed on IDEAS

    as
    1. 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.
    2. Odeck, James, 2004. "Cost overruns in road construction--what are their sizes and determinants?," Transport Policy, Elsevier, vol. 11(1), pages 43-53, January.
    3. Brun, Wibecke & Teigen, Karl Halvor, 1988. "Verbal probabilities: Ambiguous, context-dependent, or both?," Organizational Behavior and Human Decision Processes, Elsevier, vol. 41(3), pages 390-404, June.
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    Cited by:

    1. Ole Jonny Klakegg, 2016. "Project Risk Management: Challenge Established Practice," Administrative Sciences, MDPI, vol. 6(4), pages 1-3, December.

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