Measuring cost and time overruns: median-based metrics, reform effect, and simultaneous estimation

James Odeck

Transportation Research Part A: Policy and Practice, 2025, vol. 199, issue C

Abstract: This paper addresses three key gaps in transportation research on cost and time overruns: (1) the overuse of Mean Percentage Error (MPE), despite the Median Percentage Error (MdnPE) being more appropriate for skewed data; (2) limited evaluation of government interventions aimed at reducing overruns; and (3) the failure to account for the interdependence between cost and time overruns, leading to biased estimates. Using a dataset of 2,228 Norwegian road projects (1993–2016), we assess overruns using both MdnPE and MPE, evaluate the effects of major organizational reforms, and apply a Three-Stage Least Squares (3SLS) estimation to correct for endogeneity between cost and time overruns. Unlike some studies, we rely solely on statistically observable factors and avoid subjective explanations such as the planning fallacy or strategic misrepresentation.

Keywords: Cost and time overruns; Median percentage error; Impact of government interventions; The endogeneity problem; Simultaneous equation estimations (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1016/j.tra.2025.104587

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