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Underestimating Costs in Public Works Projects: Error or Lie?

  • Bent Flyvbjerg
  • Mette K. Skamris Holm
  • S{\o}ren L. Buhl

This article presents results from the first statistically significant study of cost escalation in transportation infrastructure projects. Based on a sample of 258 transportation infrastructure projects worth US$90 billion and representing different project types, geographical regions, and historical periods, it is found with overwhelming statistical significance that the cost estimates used to decide whether such projects should be built are highly and systematically misleading. Underestimation cannot be explained by error and is best explained by strategic misrepresentation, that is, lying. The policy implications are clear: legislators, administrators, investors, media representatives, and members of the public who value honest numbers should not trust cost estimates and cost-benefit analyses produced by project promoters and their analysts.

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File URL: http://arxiv.org/pdf/1303.6604
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Paper provided by arXiv.org in its series Papers with number 1303.6604.

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Date of creation: Mar 2013
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Publication status: Published in Bent Flyvbjerg, Mette K. Skamris Holm, S{\o}ren L. Buhl, "Underestimating Costs in Public Works Projects: Error or Lie?" Journal of the American Planning Association, vol. 68, no. 3, Summer 2002, pp. 279-295
Handle: RePEc:arx:papers:1303.6604
Contact details of provider: Web page: http://arxiv.org/

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  1. Leavitt, Dan & Ennis, Sean & McGovern, Pat, 1993. "The Cost Escalation of Rail Projects: Using Previous Experience to Re-Evaluate the CalSpeed Estimates," University of California Transportation Center, Working Papers qt2rt1w7xj, University of California Transportation Center.
  2. Maynard M. Hufschmidt & Jacques Gerin, 1970. "Systematic Errors in Cost Estimates for Public Investment Projects," NBER Chapters, in: The Analysis of Public Output, pages 267-315 National Bureau of Economic Research, Inc.
  3. 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.
  4. Henderson, P D, 1977. "Two British Errors: Their Probable Size and Some Possible Lessons," Oxford Economic Papers, Oxford University Press, vol. 29(2), pages 159-205, July.
  5. Skamris, Mette K. & Flyvbjerg, Bent, 1997. "Inaccuracy of traffic forecasts and cost estimates on large transport projects," Transport Policy, Elsevier, vol. 4(3), pages 141-146, July.
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