The cost performance of transportation projects: The fallacy of the Planning Fallacy account

Peter E.D. Love, Michael C.P. Sing, Lavagnon A. Ika and Sidney Newton

Transportation Research Part A: Policy and Practice, 2019, vol. 122, issue C, 1-20

Abstract: Delivering transportation projects to their budgeted cost remains a challenge for many governments worldwide. An issue that has hindered progress being made to address this problem has been the availability of empirical data that reflects the changing nature of cost estimates and their difference from a project’s final account. Using a homogenous dataset provided by a public sector authority in Hong Kong, we analyse the differences between the approved budget, pre-tender estimates, contract sum and final accounts for approximately HK$115 billion (≈US$14 billion) worth of transportation projects. We demonstrate that 47% (i.e. ≈ 5 out 10) of the projects deviate from their approved budget. In particular, when we consider the difference between the approved budget and the final contract sum, we reveal there are cases of both over and under estimating. We, therefore, question the Planning Fallacy as an appropriate explanation for describing ‘how large infrastructure projects work’. The fallacy of the Planning Fallacy account revealed in this paper leads us to call upon those agencies that have actively embraced this theory to reconsider their approaches to cost estimating and risk analysis used to deliver their transportation infrastructure to ensure taxpayers are provided with better value for money.

Keywords: Cost performance; Estimates; Optimism; Pessimism; Planning Fallacy (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (6)

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DOI: 10.1016/j.tra.2019.02.004

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