3. Major Infrastructure Projects
• “megaprojects”
• high-profile projects
– Long term and often
fraught with schedule
delays & high cost –
”mini” projects can
become mega
– Stadiums, olympic
venues, Sydney Opera
House; Transport
examples: New road &
rail construction,
extensions; bridges
5. Cost Estimates:
Overruns on Average - International
• 9 out of 10 projects have overruns
study based on 20 nations over a 70 year
period; estimates have not improved over
time
Flyvbjerg 2009, p. 350;
B. Flyvbjerg, 2007
5
6. Forecasts of
Projected Facility Use
84% of rail passenger & 50% of road traffic
forecasts wrong by approx 20%
Result:
“…costs are underestimated and
benefits overestimated”
Flyvbjerg 2009, p. 350
Directly from Flybjerg, Concept Report, 2007
7. 1) Optimism Bias
underestimation of cost and time for projects (initial
research by D. Kahneman et al)
2) Strategic Misrepresentation
inaccurate reporting of project budgets and/or travel
demand forecasts (Flyvbjerg -- deception)
6 Root Issues to Consider
7
8. 3) Transaction Costs
§ often the unreported and underestimated costs
throughout project lifecycle
§ Examples:
§ Financing, on-going legal and staff costs (ex:
associated with change orders), legislative
hearings
§ Years of pre-planning/design work such as
engineering and environmental that may not
factor into construction costs– additional
commissioned studies
8
9. 4) Lock in & Path Dependence
§ Lock-in: “escalating commitment of decision makers
to an ineffective course of action”; sunk costs;
inflexibility
§ Occurs at:
§ the decision-making level -- before the decision to
build
§ the project level -- after the decision to build &
during process
9
(Cantarelli et al, 2010)
10. Indicators of Lock-in:
• Sunk costs -- in terms of both time and money
(ex: funds have already been set aside or
spent)
• The on-going need for justification, escalating
commitment
• Inflexibility and closure of alternatives
10
11. “…is about repeated experiences of
awe and wonder,
often tinged with an element of
terror,
which people have had when
confronted
with particular natural sites,
architectural forms
and technological achievements.”
David Nye
5) Technological Sublime
11
13. 6) Policy Windows of Opportunity &
Problem Definition
Policy windows of opportunity—focusing events—
crises, natural or other disasters/hazards, evolving
policy circumstances that allow other related to quasi-
related issues to connect to the main policy issue
How problems are defined sets the stage for pathways
followed in search of solutions
16. 1) Cost Estimating
§ transaction cost analysis – long term – before & after
construction
§ full public disclosure and discussion on tradeoffs with
financing – often only capital & some support costs
published; opportunity costs/benefits with financing
one project over others
16
17. (Cost Estimating)
§ rigorous risk analysis and reference class forecasting
(“outside view”) – cost and schedule uplift; including
sufficient contingency budget—include resiliency needs;
lifecycle operations & maintenance costs too
§ Provide ranges for cost estimates and schedule instead
of specific numbers (ex. $1.436 billion) to remove
appearance of precision and manage expectations given
history of poor cost estimating
17
18. 2) Project Management & Delivery from the Onset
§ Institute better REGULAR external oversight and
independent peer review BEFORE the project begins
§ Increase public sector capacity to oversee projects so it
does not just rely on contracted third-party assistance
§ Ex: improve skills and understanding with contract
writing, oversight and finance; change orders
§ Look for and critically assess successes within government
so we can learn from these on which the megaproject
scholarship is sparse
18
19. Also a “schedule bias uplift” to manage
expectations about project completion
KTF 2008 in Flyvbjerg et al
20. 3) Process and Project History
§ Project sponsors need to consider path dependence and
project histories and social and structural inequities
§ Include space for the technological sublime and consider the
legitimacy and role that public funds play in aesthetics and
“amenities”
§ one day’s amenities may be a future generation’s perceived
necessities
§ Build in time for collaborative public processes on problem
definition and direct focus on structural inequities and justice
§ On-going multi-way communications is key (one of the 7C’s)
20