Underestimating Costs in Public Works Projects: Error or Lie?
Journal of the American Planning Association, Vol. 68, No. 3, pp. 279-295
40 Pages Posted: 15 Jun 2013 Last revised: 6 Jan 2014
Date Written: June 1, 2002
This article presents results from the first statistically significant study of cost escalation in transportation infrastructure projects. Based on a sample of 258 transportation infrastructure projects worth US$90 billion and representing different project types, geographical regions, and historical periods, it is found with overwhelming statistical significance that the cost estimates used to decide whether such projects should be built are highly and systematically misleading. Underestimation cannot be explained by error and is best explained by strategic misrepresentation, that is, lying. The policy implications are clear: legislators, administrators, investors, media representatives, and members of the public who value honest numbers should not trust cost estimates and cost-benefit analyses produced by project promoters and their analysts.
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