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Characteristics of Cost Overruns for Dutch Transport Infrastructure Projects and the Importance of the Decision to Build and Project Phases

Chantal C. Cantarelli, Eric J. E. Molin, Bert van Wee and Bent Flyvbjerg

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Abstract: Using a methodology similar to that used the in the worldwide research, the cost performance of Dutch large-scale transport infrastructure projects is determined. In the Netherlands, cost overruns are as common as cost underruns but because cost overruns are larger than cost underruns projects on average have a cost overrun of 16.5%. The focus on one country further enabled to consider cost overruns during different project development phases. It turned out that in the Netherlands the majority of the cost overrun occurs in the pre-construction phase (the period between the formal decision to build and the start of construction). The frequency as well as the magnitude of pre-construction cost overrun is significantly higher than in the construction phase. The used methodology of calculating cost overruns does however not take lock-in into account. This phenomenon shows that the real decision to build was taken much earlier in the decision-making process. Since estimated costs are usually lower during these earlier stages, the cost overruns based on this real decision to build are likely to be much higher. Cost overruns presented in studies are therefore often underestimated and the problem of cost overruns is much larger than we think.

New Economics Papers: this item is included in nep-nps, nep-ppm, nep-tre and nep-ure
Date: 2013-07, Revised 2015-01
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Published in Transport Policy, vol. 22, July 2012, 49-56

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