Five things you should know about cost overrun
This paper gives an overview of good and bad practice for understanding and curbing cost overrun in large capital investment projects, with a critique of Love and Ahiaga-Dagbui (2018) as point of departure. Good practice entails: (a) Consistent definition and measurement of overrun; in contrast to mixing inconsistent baselines, price levels, etc. (b) Data collection that includes all valid and reliable data; as opposed to including idiosyncratically sampled data, data with removed outliers, non-valid data from consultancies, etc. (c) Recognition that cost overrun is systemically fat-tailed; in contrast to understanding overrun in terms of error and randomness. (d) Acknowledgment that the root cause of cost overrun is behavioral bias; in contrast to explanations in terms of scope changes, complexity, etc. (e) De-biasing cost estimates with reference class forecasting or similar methods based in behavioral science; as opposed to conventional methods of estimation, with their century-long track record of inaccuracy and systemic bias. Bad practice is characterized by violating at least one of these five points. Love and Ahiaga-Dagbui violate all five. In so doing, they produce an exceptionally useful and comprehensive catalog of the many pitfalls that exist, and must be avoided, for properly understanding and curbing cost overrun.
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Availability:
- Find a library where document is available. Order URL: http://worldcat.org/issn/09658564
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Supplemental Notes:
- © 2018 Elsevier Ltd. All rights reserved. Abstract reprinted with permission of Elsevier.
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Authors:
- Flyvbjerg, Bent
- Ansar, Atif
- Budzier, Alexander
- Buhl, Søren
- Cantarelli, Chantal
- Garbuio, Massimo
- Glenting, Carsten
- Holm, Mette Skamris
- Lovallo, Dan
- Lunn, Daniel
- Molin, Eric
- Rønnest, Arne
- Stewart, Allison
- van Wee, Bert
- Publication Date: 2018-12
Language
- English
Media Info
- Media Type: Web
- Features: References; Tables;
- Pagination: pp 174-190
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Serial:
- Transportation Research Part A: Policy and Practice
- Volume: 118
- Issue Number: 0
- Publisher: Elsevier
- ISSN: 0965-8564
- Serial URL: http://www.sciencedirect.com/science/journal/09658564
Subject/Index Terms
- TRT Terms: Behavior; Capital investments; Cost estimating; Cost overruns; Data collection
- Uncontrolled Terms: Behavioral science
- Subject Areas: Administration and Management; Finance; Transportation (General);
Filing Info
- Accession Number: 01682613
- Record Type: Publication
- Files: TRIS
- Created Date: Oct 2 2018 5:20PM