What Causes Cost Overrun in Transport Infrastructure Projects?"

TL;DR

This study analyzes the causes of cost overruns in transport infrastructure projects, highlighting the significant impact of project duration, size, and accountability type on cost escalation, based on a large sample of global projects.

Contribution

It provides the first statistically significant analysis of cost escalation causes in transport infrastructure, emphasizing the role of project duration and accountability over ownership type.

Findings

Longer implementation phases lead to higher cost escalation.

Larger projects, especially bridges and tunnels, tend to have greater percentage cost overruns.

Accountability type influences cost escalation more than ownership structure.

Abstract

This article presents results from the first statistically significant study of causes of cost escalation in transport infrastructure projects. The study is based on a sample of 258 rail, bridge, tunnel and road projects worth US$90 billion. The focus is on the dependence of cost escalation on (1) length of project implementation phase, (2) size of project and (3) type of project ownership. First, it is found with very high statistical significance that cost escalation is strongly dependent on length of implementation phase. The policy implications are clear: Decision makers and planners should be highly concerned about delays and long implementation phases because they translate into risks of substantial cost escalations. Second, it is found that projects have grown larger over time and that for bridges and tunnels larger projects have larger percentage cost escalations. Finally, by comparing cost escalation for three types of project ownership--private, state-owned enterprise and other public ownership--it is shown that the oft-seen claim that public ownership is problematic and private ownership effective in curbing cost escalation is an oversimplification. Type of accountability appears to matter more to cost escalation than type of ownership.