Error and inaccuracy in major projects: the example of infrastructure projects

Many major projects encounter delays, run over budget and fail to deliver the expected benefits that were projected at the planning stage.

In this section, you will explore why this happens and explore some examples which demonstrate how often this occurs.

One of the key problems with managing major transportation infrastructure projects is that the actual costs involved (ie the real/final construction costs) are often very different from the budgeted costs (ie the cost estimation). Professor Bent Flyvbjerg (2006), a prominent academic in the field, has noted that the costs forecast in projects to build new railways, roads, bridges and tunnels are often particularly inaccurate.

His data shows the average rate of inaccuracy for different infrastructure types:

• For rail projects, the average inaccuracy is 44.7%.

• For bridges and tunnels, the average is 33.8%.

• For road construction, there is an average of 20.4%.

Moreover, the accuracy of forecasting costs in these types of projects has not improved over the seventy year period for which we have data.

How public projects perform in respect of their cost estimation is summarised by Locatelli, (2017). As you can see from the table below, the results are very poor and major projects are very often over budget.

Estimating project benefits

Additionally, it is difficult to estimate the benefits the new project will create.

In transportation projects, one difficulty is forecasting the number of passengers and traffic a new project will be able to accommodate.

On the whole, forecasts predicting passenger usage tend to be very inaccurate. Flyvbjerg has found that around 84% of all rail projects overestimate how many passengers will use the new line: the difference between the actual and estimated usage is usually more than 20%.

The forecast for roads is similarly inaccurate, with an average inaccuracy of 9.5% and with half of all road projects being more than 20% inaccurate in their projected usage of the new road. These types of projects are not exceptions. Many infrastructure projects fail to provide accurate estimations of costs and benefits.

Following Professor Flyvbjerg's narrative, around 9/10 projects have overruns in terms of budget. This figure is based on data from 20 nations across five different continents: so, this is a widespread problem. Secondly, around 9 out of 10 rail projects tend to overestimate the traffic that the new railway will cater for. On average, the shortfall in traffic in comparison with the expected traffic is around 51.4%. This is a common issue and for the last 30 years this type of inaccuracy has been a problem.

There are notable examples of poor projects: one of them is the Channel Tunnel.

The Channel Tunnel is a 50.45 km rail tunnel linking Folkestone, Kent, in the United Kingdom, with Coquelles, Pas-de-Calais, near Calais in northern France. It runs beneath the English Channel. The tunnel carries high-speed Eurostar passenger trains. Eurotunnel, who organised the project, began construction in 1988 and opened in 1994. At £5.5 billion (in 1985) at the time it was the most expensive construction project ever proposed. The cost finally came in at £9 billion ($21 billion), well over its predicted budget. Since its construction, the tunnel has faced a few mechanical problems. Both fires and cold weather have temporarily disrupted its operation. A well-known paper (Anguera 2006, p.291) concluded that “ The British economy would have been better off had the tunnel never been constructed.”

Please refer to the glossary to check any terminology you are unfamiliar with: Glossary of Project Management Terms

Coming up...

In the following video, you will hear about the cost and time performance of major projects. You will also be introduced to the key causes of cost escalation. If you would like to learn more about the materials discussed in the lecture you can read the paper Ansar, A. et al. 2014. Should We Build More Large Dams? The Actual Costs of Hydropower Megaproject Development Energy Policy 69, pp.43-56.