Mega-Projects' Cost Performance and Lock-In: Problems and Solutions

Hugo Priemus and Bert van Wee, eds., International Handbook on Mega-Projects, Cheltenham, Uk and Northampton, MA: Edward Elgar, 2013

27 Pages Posted: 16 Jun 2014 Last revised: 9 Jan 2016

See all articles by Chantal Cantarelli

Chantal Cantarelli

University of Oxford - Said Business School

Bent Flyvbjerg

University of Oxford - Said Business School

Date Written: May 1, 2013

Abstract

A major problem in the planning of mega-projects is the high level of misinformation about costs (and benefits) that decision-makers face in deciding whether to build and the high risks such misinformation generates. The inaccuracy of construction cost estimates is typically measured as the size of cost overrun. There are many well-known mega-projects with major cost overruns. One of the most famous ‘project disasters’ in this respect is the Channel Tunnel. This undersea rail tunnel linking the United Kingdom and France is the longest of its kind in Europe with a length of about 50 km. Construction costs increased from £2600 million to £4650 million (1985 prices), which is 80 per cent higher than the forecasted costs (Flyvbjerg et al., 2003a). Another well-known mega-project failure is the Central Artery/Tunnel project in Boston, USA, also known as the ‘Big Dig’ or Big Dug’ due to persistent tunnel leaks. This large and complex underground highway project suffered a cost overrun of US $11 billion or 275 per cent (Flyvbjerg, 2007). Bangkok’s underground subway was 67per cent over budget. Many other examples of projects with cost overruns exist, for example, the Great Belt link in Denmark (54 per cent overrun),the Humber Bridge in the UK (175 per cent overrun) and the Paris Nord TGV in France (25 per cent overrun) (Flyvbjerg et al., 2003a). Cost overruns appear to be a global phenomenon, existing across 20 nations on five continents (Flyvbjerg et al., 2003b).

Suggested Citation

Cantarelli, Chantal and Flyvbjerg, Bent, Mega-Projects' Cost Performance and Lock-In: Problems and Solutions (May 1, 2013). Hugo Priemus and Bert van Wee, eds., International Handbook on Mega-Projects, Cheltenham, Uk and Northampton, MA: Edward Elgar, 2013. Available at SSRN: https://ssrn.com/abstract=2446947

Chantal Cantarelli

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

Bent Flyvbjerg (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

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