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Cost escalations in the front-end of projects – empirical evidence from Norwegian road projects

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  • Morten Welde
  • James Odeck

Abstract

This paper investigates an issue largely ignored in the transport literature on cost overruns, namely, cost increases in the early project phase, long before the decision to build is made. This is the phase of project planning that is referred to as the front-end phase in the literature. The rationale of the study is that unless cost estimates during the front-end phase are relatively accurate, the wrong projects may be selected for further development. We first argue for why it is important to address cost escalation during the front-end phase of project planning. We then use Norwegian data to demonstrate the magnitude of cost escalations during the front-end phase of projects and in comparison to the implementation phase. We find that even in a sample of projects with relatively small cost overruns as in the case of Norway, there are substantial cost increases before the formal decision to build was made. This raises the issue of whether decisions and priorities taken at the early stages of project development are based on false information and whether this may lead to the wrong project concepts being selected.

Suggested Citation

  • Morten Welde & James Odeck, 2017. "Cost escalations in the front-end of projects – empirical evidence from Norwegian road projects," Transport Reviews, Taylor & Francis Journals, vol. 37(5), pages 612-630, September.
    • Handle: RePEc:taf:transr:v:37:y:2017:i:5:p:612-630
    DOI: 10.1080/01441647.2016.1278285
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    Citations

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    Cited by:

    1. Eliasson, Jonas, 2023. "Cost overruns in Swedish infrastructure projects," MPRA Paper 120340, University Library of Munich, Germany.
    2. Odeck, James & Kjerkreit, Anne, 2019. "The accuracy of benefit-cost analyses (BCAs) in transportation: An ex-post evaluation of road projects," Transportation Research Part A: Policy and Practice, Elsevier, vol. 120(C), pages 277-294.
    3. 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.
    4. Halse, Askill Harkjerr & Fridstrøm, Lasse, 2019. "Explaining low economic return on road investments. New evidence from Norway," MPRA Paper 94389, University Library of Munich, Germany.
    5. Flyvbjerg, Bent & Ansar, Atif & Budzier, Alexander & Buhl, Søren & Cantarelli, Chantal & Garbuio, Massimo & Glenting, Carsten & Holm, Mette Skamris & Lovallo, Dan & Lunn, Daniel & Molin, Eric & Rønnes, 2018. "Five things you should know about cost overrun," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 174-190.
    6. James Odeck, 2019. "Variation in cost overruns of transportation projects: an econometric meta-regression analysis of studies reported in the literature," Transportation, Springer, vol. 46(4), pages 1345-1368, August.
    7. Love, Peter E.D. & Sing, Michael C.P. & Ika, Lavagnon A. & Newton, Sidney, 2019. "The cost performance of transportation projects: The fallacy of the Planning Fallacy account," Transportation Research Part A: Policy and Practice, Elsevier, vol. 122(C), pages 1-20.
    8. Bardal, Kjersti Granås, 2020. "Contradictory outcomes of cost-benefit analyses – Findings from Norwegian public-investment projects," Research in Transportation Economics, Elsevier, vol. 82(C).
    9. 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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