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Underestimating Costs in Public Works Projects: Error or Lie?

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

Abstract

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.

Suggested Citation

  • Bent Flyvbjerg & Mette K. Skamris Holm & S{o}ren L. Buhl, 2013. "Underestimating Costs in Public Works Projects: Error or Lie?," Papers 1303.6604, arXiv.org.
    • Handle: RePEc:arx:papers:1303.6604
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    Cited by:

    1. Sergey Belev & Olga Boldareva & Ilya Sokolov & Anna Zolotareva, 2013. "Features of the Public Procurements of Innovation Products in Russian and the World," Published Papers 166, Gaidar Institute for Economic Policy, revised 2013.

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