Cost overruns and delays in infrastructure projects: the case of Stuttgart 21

Bertram I. Steininger, Martin Groth and Brigitte L. Weber

Journal of Property Investment & Finance, 2020, vol. 39, issue 3, 256-282

Abstract: Purpose - We investigate causes for the cost overrun and delay of the railway project Stuttgart 21. Besides, we try to forecast the actual costs and completion date at an early stage. Design/methodology/approach - The results of exploratory research show the causes for the cost overrun and delay of Stuttgart 21; we compare our findings with other railway projects. To estimate the costs at an early stage, the reference class forecasting (RCF) model is applied; to estimate the time, we apply an OLS regression. Findings - We find that the following causes are relevant for the cost overrun and delay of Stuttgart 21: scope changes, geological conditions, high risk-taking propensity, extended implementation, price overshoot, conflict of interests and lack of citizens' participation. The current estimated costs are within our 95% confidence interval based on RCF; our time forecast underestimates or substantially overestimates the duration actually required. Research limitations/implications - A limitation of our approach is the low number of comparable projects which are available. Practical implications - The use of hyperbolic function or stepwise exponential discount function can help to give a clearer picture of the costs and benefits. The straightforward use of the RFC for costs and OLS for time should motivate more decision-makers to estimate the actual costs and time which are necessary in the light of the rising demand for democratic participation amongst citizens. Social implications - More realistic estimates can help to reduce the significant distortion at the beginning of infrastructure projects. Originality/value - We are among the first who use the RCF to estimate the costs in Germany. Furthermore, the hyperbolic discounting function is added as a further theoretical explanation for cost underestimation.

Keywords: Cost overrun; Time overrun; Infrastructure; Reference class forecasting; Hyperbolic discounting; Principal-agent theory; H54; O18; R42 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:jpifpp:jpif-11-2019-0144

DOI: 10.1108/JPIF-11-2019-0144

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