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I was wondering why the costs involved in public infrastructure mega-projects often seem to rise way beyond the original estimates?
The reason might involve the following:
Not running the project correctly and allowing costs to rise
Not estimating the costs correctly during planning
A study by Bent Flyvbjerg – an economic geographer and urban planner, who presently holds the chair as BT Professor of Major Programme Management at Oxford University’s Saïd Business School and is Director of the University’s BT Centre for Major Programme Management, has some thoughts on the estimating part.

In 2002 his team performed the first statistically significant study of cost escalation in transportation infrastructure projects. The study was based on a sample of 258 transportation infrastructure projects worth US$90 billion and representing different project types, geographical regions, and historical periods.

Here are some of the findings:

First; think for a minute about Cost Estimation. Incorrect estimates can be grouped into four basic types:

1. Technical

(Imperfect techniques, inadequate data, honest mistakes, inherent problems in predicting the future, lack of experience on the part of forecasters, etc).

2. Economic

(Balancing project stakeholder’s self-interests against the general public interest. It obviously suits the project team to press ahead and overspend, than to have a project canceled before it begins due to an unacceptably high initial estimate).

3. Psychological

(Usually caused by a bias in the mental makeup of project promoters and forecasters. Politicians may like to build grand monuments, engineers like to build things, and local transportation officials sometimes like to build their empire with nice new infrastructure).

4. Political

(Are forecasts intentionally biased to serve the interests of project promoters in getting projects started?).

Let’s jump straight to the conclusion of the report:

“We conclude that the cost estimates used in public debates, media coverage, and decision making for transportation infrastructure development are highly, systematically, and significantly deceptive. So are the cost-benefit analysis into which cost estimates are routinely fed to calculate the viability and ranking of projects”.

Underestimation cannot be explained by error and is best explained by strategic misrepresentation; that is, lying.

And the key recommendation is that “You should not trust the cost estimates presented by infrastructure promoters and forecasters”.

This is one more example of the things we, as Project Managers, need to be aware.

Boeing recently announced that the first flight of the 787 Dreamliner will be postponed due to a need to reinforce an area within the side-of-body section of the aircraft, and then test it. The launch of this aircraft is now over two years late.

Does this all remind you of something else? Remember the delays to the Airbus A380 – also two years late?

Seems that we are dealing with very complex projects here, that might not follow the established laws of ‘normal’ projects. Perhaps some projects are too complex to be managed using conventional project management approaches?

An article by Remington & Pollack suggests some key skills needed by Project Managers when dealing with complex projects, as discovered during research:

• Very high level communication skills
• Ability to manage organisational politics
• Creative thinking
• Understanding of the importance of the project initiation and definition  phase
• Good team leadership skills
• Ability to foster positive relationships with other project managers and project director
• Ability to pay attention to what is happening around you; including paying attention to the rumors at work
• Skill with relationship management

Interestingly, the skills in the list above were ranked as more important than discipline specific knowledge or traditional project management skills – like planning and budgeting.

Perhaps it’s time to ensure that the right project manager is selected to run extraordinarily complex projects – like the creation of an entirely new passenger aircraft – as the required skills might be difficult to find in many project managers.