“Cost overruns in the order of 50 percent in real terms are common for major infrastructure, and overruns above 100 percent are not uncommon,” Bent Flyvbjerg, a professor of major program management at the University of Oxford’s Said Business School, writes in the Oxford Review of Economic Policy. “Demand and benefit forecasts that are wrong by 20-70 percent compared with actual development are common.”Read the complete [ungated] article [Virginia Postrel's Blog] here.
To draw these conclusions, Flyvbjerg analyzed results from 258 projects in 20 countries over 70 years, the largest such database ever compiled. Like the “stars without makeup” features in celebrity tabloids, his research provides a disillusioning reality check. “It is not the best projects that get implemented, but the projects that look best on paper,” Flyvbjerg writes. “And the projects that look best on paper are the projects with the largest cost underestimates and benefit overestimates, other things being equal.”
Saturday, July 9, 2011
Government Infrastructure Projects Grossly Understate Costs And Overstate Benefits
From Bloomberg, "Too Many Public Works Built on Rosy Scenarios" by Virginia Postrel:
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The bottom line of this article should read, "So when it creating additional layers of beauracracy every a good thing in the long term? It takes longer to get things done...at greater expense to the people at large."
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