Public Planning of Mega-Projects: Overestimating of Demand and Underestimating of Costs

This paper presents evidence that forecasters generally do a bad job in estimating travel demand and construction costs for new transportation infrastructure. For travel demand, in nine out of ten rail projects passenger forecasts are overestimated: actual ridership is on average 51 percent less than that forecasted. In 50 percent of road highway projects the difference between actual and forecasted traffic is more than +/- 20 per cent; for 25 per cent or highways the difference is greater than +/- 40 per cent. For construction costs, nine out ten projects have underestimated costs and cost overruns. Forecasting inaccuracy appears to be constant over time and space. Estimates of travel demand have not improved for over 30 years, cost estimates and overruns not for 70 years. Measures developed to improve this sorry state of affairs include improved governance structure with incentives that better reward valid estimates of demand, costs and risks, and punish deceptive estimates. Measures also include better forecasting methods such as the use of “reference class forecasting,” based on the theories of decision-making under uncertainty.

Language

  • English

Media Info

  • Media Type: Print
  • Features: Figures; References; Tables;
  • Pagination: pp 120-144
  • Monograph Title: Decision-Making on Mega Projects. Cost-Benefit Analysis, Planning and Innovation

Subject/Index Terms

Filing Info

  • Accession Number: 01141788
  • Record Type: Publication
  • ISBN: 9781845427375
  • Files: TRIS
  • Created Date: Oct 14 2009 12:23PM