How (In)Accurate Are Demand Forecasts in Public Works Projects? The Case of Transportation

Abstract

This article presents results from the first statistically significant study of traffic forecasts in transportation infrastructure projects. The sample used is the largest of its kind, covering 210 projects in 14 nations worth US$59 billion. The study shows with very high statistical significance that forecasters generally do a poor job of estimating the demand for transportation infrastructure projects. For 9 out of 10 rail projects, passenger forecasts are overestimated; the average overestimation is 106%. For half of all road projects, the difference between actual and forecasted traffic is more than ±20%. The result is substantial financial risks, which are typically ignored or downplayed by planners and decision makers to the detriment of social and economic welfare. The data also show that forecasts have not become more accurate over the 30-year period studied, despite claims to the contrary by forecasters. The causes of inaccuracy in forecasts are different for rail and road projects, with deliberately slanted forecasts playing a larger role for rail than for road. The cure is transparency, accountability, and new forecasting methods. The challenge is to change the governance structures for forecasting and project development. The article shows how planners may help achieve this.

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