Characteristics of Cost Overruns for Dutch Transport Infrastructure Projects and the Importance of the Decision to Build and Project Phases

TL;DR

This study analyzes Dutch transport infrastructure projects, revealing that most cost overruns occur before construction begins, and emphasizes that underestimating early-stage costs leads to a larger actual problem.

Contribution

It provides a detailed analysis of cost overruns in Dutch projects, highlighting the significance of the decision to build and early project phases, and introduces the impact of lock-in on cost overrun estimates.

Findings

Majority of cost overruns occur in pre-construction phase

Pre-construction cost overrun is significantly higher than during construction

Cost overruns are often underestimated due to early-stage cost estimates

Abstract

Using a methodology similar to that used the in the worldwide research, the cost performance of Dutch large-scale transport infrastructure projects is determined. In the Netherlands, cost overruns are as common as cost underruns but because cost overruns are larger than cost underruns projects on average have a cost overrun of 16.5%. The focus on one country further enabled to consider cost overruns during different project development phases. It turned out that in the Netherlands the majority of the cost overrun occurs in the pre-construction phase (the period between the formal decision to build and the start of construction). The frequency as well as the magnitude of pre-construction cost overrun is significantly higher than in the construction phase. The used methodology of calculating cost overruns does however not take lock-in into account. This phenomenon shows that the real decision to build was taken much earlier in the decision-making process. Since estimated costs are usually lower during these earlier stages, the cost overruns based on this real decision to build are likely to be much higher. Cost overruns presented in studies are therefore often underestimated and the problem of cost overruns is much larger than we think.