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

In Commonwealth Secretariat, ed., Commonwealth Governance Handbook 2012/13: Democracy, Development, and Public Administration, London: Commonwealth Secretariat, pp. 145-157

11 Pages Posted: 24 Apr 2013 Last revised: 29 Jun 2014

See all articles by Alexander Budzier

Alexander Budzier

University of Oxford - Saïd Business School

Bent Flyvbjerg

University of Oxford - Said Business School

Date Written: December 1, 2012

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.

Listed on SSRN's Top Ten download lists for the following two ejournals: (1) Public Sector Organizations: Project & Program Management and (2) Types of Organizations & Organizational Behavior

Keywords: Public Sector, IT Project, Risk, Project Failure, Black Swans

Suggested Citation

Budzier, Alexander and Flyvbjerg, Bent, Overspend? Late? Failure? What the Data Say about IT Project Risk in the Public Sector (December 1, 2012). In Commonwealth Secretariat, ed., Commonwealth Governance Handbook 2012/13: Democracy, Development, and Public Administration, London: Commonwealth Secretariat, pp. 145-157. Available at SSRN: https://ssrn.com/abstract=2255544

Alexander Budzier (Contact Author)

University of Oxford - Saïd Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Bent Flyvbjerg

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

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