Cost Overruns on Infrastructure Projects: Patterns, Causes, and Cures

This paper is part of the IMFG Perspectives Papers series. For a full list of papers, please visit http://bit.ly/2ylAa2D.Cost overruns and schedule delays on infrastructure megaprojects are a common news story in the media, in Canada and around the world. The outcomes include government budget deficits and a loss of public confidence that the government can meet its commitments. The three main explanations for cost overruns and delays are technical challenges, over-optimism, and strategic misrepresentations. International best practices suggest at least five remedies for these problems. First, improved performance monitoring, reporting, and information sharing is a feasible option in a world in which data management is becoming increasingly sophisticated. Second, governments can track and reward the best-performing companies and contractors to ensure more predictable outcomes. Third, staff overseeing megaprojects can be better trained in management skills such as enforcing contracts and resolving disputes. Fourth, governments can draw on more precise forecasting techniques based on data about previous projects. And finally, public-private partnerships can make it easier to control costs and enforce deadlines. Some governments are already using these approaches. Yet there are barriers to their wider adoption. For one thing, the expense required for skills training, better data collection, and state-of-the-art forecasting technology may hold governments back. For another, many of the parties involved may prefer to obscure the frequency and magnitude of cost overruns to evade accountability for project failures. Time will tell if there is a will to implement these strategies at the municipal level in Ontario.Institute on Municipal Finance and Governanc