Cost overruns in transportation infrastructure projects: Sowing the seeds for a probabilistic theory of causation

Abstract

CitationLove PED, Ahiaga-Dagbui DD and Irani Z (2016) Cost overruns in transportation infrastructure projects: Sowing the seeds for a probabilistic theory of causation. Transportation Research Part A: Policy and Practice. 92: 184-194. RightsAbstract: Understanding the cause of cost overruns in transportation infrastructure projects has been a topic that has 4 received considerable attention from academics and the popular press. Despite studies providing the essential building 5 blocks and frameworks for cost overrun mitigation and containment, the problem still remains a pervasive issue for 6 Governments worldwide. The interdependency that exists between 'causes' that lead to cost overruns materializing 7 have largely been ignored when considering the likelihood and impact of their occurrence. The vast majority of the 8 cost overrun literature has tended to adopt a deterministic approach in examining the occurrence of the phenomenon; 9 in this paper a shift towards the adoption of pluralistic probabilistic approach to cost overrun causation is proposed. 10The establishment of probabilistic theory incorporates the ability to consider the interdependencies of causes so to 11 provide Governments with a holistic understanding of the uncertainties and risks that may derail the delivery and 12 increase the cost of transportation infrastructure projects. This will further assist in the design of effective mitigation 13 and containment strategies that will ensure future transportation infrastructure projects meet their expected costs as 14 well as the need of taxpayers. 15 16 17 18 20growing needs of an increasing population, as well as to sustain a competitive advantage in the 21 global marketplace. For an economy to position itself to capitalize on growth and increased 22 investment due to a burgeoning population and increasing international demand for goods and 23 services, greater investment in transportation infrastructure is needed. In Australia, for example, 24it has been forecasted that over the next two decades the number of trucks on its roads will increase 25 by 50%, rail freight by two-thirds and shipping containers through ports will double; international 26 and domestic travel through capital city airports will double; and technology will play a significant 27 role in meeting the needs of transport, while also improving safety (Australian Federal 28 Government, 2014a). Yet history explicitly indicates the capital expenditure (CAPEX) of 29 transportation infrastructure projects routinely overrun their initial cost estimates leaving asset 30 owners, financiers, contractors and the public dissatisfied (Flyvbjerg et al., 2005; Flyvbjerg, 2007; 31 Love et al., 2015). This is not an unusual situation for infrastructure projects, as it has been 32 observed that on average, 48% of them fail to meet their baseline time, cost and quality objectives 33 2 (Caravel Group, 2013). Well-known Australian projects that have attracted the attention of the 34 popular press due to cost overruns include the Melbourne's Southern ...

Cost performance of public infrastructure projects: the nemesis and nirvana of change-orders

“…The disparity between the reported magnitude of cost overruns that have been experienced arises due to the 'point of reference' from where they are determined in a project's development process (Siemiatycki, 2009;Love et al 2016). A review of the literature reveals cost overruns have been typically determined between the: (1) initial forecasted budget (i.e.…”

The Effects of Design Information on Reliability of Progress and Cost Estimates of Construction Projects: The Case of Two Civil Engineering Projects

“…Some have even argued that most researchers have wrongly concluded that cost overrun, escalation and growth are the same. Almost all publications in this area acknowledged that the problem of rework still remains an inescapable issue and common occurrence for Governments internationally [34,35,36,31,37,38,39,40,41,42]. Most studies have it that incongruous design information contributes to this menacing problem.…”

Future-proofing ‘Next Generation’ infrastructure assets

“…Yet the research that has been undertaken has tended to develop new policies and frameworks that have been simply superimposed on top of existing processes that are unable to cope with the complexities and nuances needed to provide resilient and adaptive assets. The upshot in this instance is that there is an increasingly likelihood for infrastructure assets to be delivered unsuccessfully, as cost and schedule growth are experienced which may also lead to safety and environmental issues occurring (Love et al, 2016), not to speak of benefit shortfalls.…”

“…The absence of a theory, for example, that explains 'Why' and 'How' infrastructure projects experience cost overruns has contributed to thwarting the construction industry's adeptness to change (Love et al, 2016). There has been an overreliance in explaining the cause of cost overruns as 'independent' rather than 'interdependent' causal influences and as such the views of those participants involved in the chain of events that lead to their occurrence are generally limited to specific issues at certain points in time.…”

“…Cost overruns seldom occur as a result of a stand-alone cause (Love et al, 2016). Even though they may superficially appear to be different, the causes of poor performance in infrastructure projects are interwoven and form a complex network.…”