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(CSC-1842) Cost Increases in the Front-End of Road Projects

Primary Author: Mr Morten Welde
Co-Author(s): Mr James Odeck; Mr Geir Saxebol

Audience Focus: Basic
Application Type: Research
Venue: 2015 AACE International Annual Meeting, Las Vegas, NV, USA

Abstract: Large public investment projects and transport projects in particular, rely on a long pre-sanctioning phases where the business case, project strategy and technical options are selected and developed. A critical parameter in this phase of project development is the accuracy of cost estimates. It is at this stage that the overall decision to proceed planning and eventual implementation of projects are made; all which may depend on the cost estimates made at this stage. The literature on cost estimates and their subsequent cost overruns have ignored the front-end phase and have only considered the implementation phase. The paper investigates the development of costs in in the front-end phase of Norwegian road projects. The results show that while the average cost overrun in the implementation phase is negligible, the average cost increase in the front-end phase is in the order of 30-50 %. The policy implication of our results is that quality assurance of cost estimates should be focused early estimates i.e., front-end estimates which often are the most crucial to project approval and implementation.