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Overspend? Late? Failure? What the Data Say About IT Project Risk in the Public Sector

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  • Alexander Budzier
  • Bent Flyvbjerg

Abstract

Implementing large-scale information and communication technology (IT) projects carries large risks and easily might disrupt operations, waste taxpayers' money, and create negative publicity. Because of the high risks it is important that government leaders manage the attendant risks. We analysed a sample of 1,355 public sector IT projects. The sample included large-scale projects, on average the actual expenditure was $130 million and the average duration was 35 months. Our findings showed that the typical project had no cost overruns and took on average 24% longer than initially expected. However, comparing the risk distribution with the normative model of a thin-tailed distribution, projects' actual costs should fall within -30% and +25% of the budget in nearly 99 out of 100 projects. The data showed, however, that a staggering 18% of all projects are outliers with cost overruns >25%. Tests showed that the risk of outliers is even higher for standard software (24%) as well as in certain project types, e.g., data management (41%), office management (23%), eGovernment (21%) and management information systems (20%). Analysis showed also that projects duration adds risk: every additional year of project duration increases the average cost risk by 4.2 percentage points. Lastly, we suggest four solutions that public sector organization can take: (1) benchmark your organization to know where you are, (2) de-bias your IT project decision-making, (3) reduce the complexities of your IT projects, and (4) develop Masterbuilders to learn from the best in the field.

Suggested Citation

  • Alexander Budzier & Bent Flyvbjerg, 2013. "Overspend? Late? Failure? What the Data Say About IT Project Risk in the Public Sector," Papers 1304.4525, arXiv.org, revised Jun 2013.
  • Handle: RePEc:arx:papers:1304.4525
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    Cited by:

    1. Bianchi, Mattia & Marzi, Giacomo & Guerini, Massimiliano, 2020. "Agile, Stage-Gate and their combination: Exploring how they relate to performance in software development," Journal of Business Research, Elsevier, vol. 110(C), pages 538-553.

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