Underestimating Costs in Public Works Projects: Error or Lie?

The paper above by Flyvbjerg et al. (2002) entitled “Underestimating Costs in Public Works Projects: Error or Lie?” presents a statistical analysis of cost escalation (overruns) on a large number of transportation infrastructure projects.

The authors assert that the analysis proves “with overwhelming statistical significance” that the cost overruns cannot be due to errors (by chance), but is best explained by “strategic misrepresentation”, simply, “lying”, and conclude that it must be deliberate deception on the part of the project promoters.

If project cost overruns are errors due to chance (happening with some probability), then these cost overruns represent risks; if cost overruns are due to lies, then risk is not an issue because it will happen no matter what.

REQUIREMENTS:

1. Read the attached paper carefully.
2. CLEARLY STATE IF YOU: Agree. Explain “why” in your report, OR Disagree. Explain “why not” in your report.
3. Submit a report (up to four pages, in Word or PDF) with your answers to the two questions below.
   • Question 1: (30 points) Indicate your position chosen in the survey and defend your position with your own experience, logic, and analysis.
   • Question 2: (30 points) Based on your diagnosis of the cost overrun problem, propose a solution that can be implemented in individual projects in to minimize cost overruns in the public works projects.