The Institute for Municipal Finance and Governance (IMFG) at the University of Toronto has released a new paper on better planning for major infrastructure projects. According to the report, every year unexpected cost overruns costs the government hundreds of millions of dollars a year. The causes of these overruns are not merely technical, however, there are political, psychological and economic factors that lead to this phenomenon.
…the all-too-human tendency to underestimate the costs and time required to complete a project means that megaprojects are well-nigh guaranteed to exceed their budgets and schedules. At the same time, promoters of megaprojects may deliberately misrepresent the budget and schedule to ensure approval of projects from which they will gain – financially, professionally, or politically.
The report suggests that there are five remedies that can help to prevent such overruns:
- Use big data to monitor projects and report on cost overruns
- Draw on past experience to award contracts to the best-performing firms
- Invest in training programs for government staff
- Use data from previous projects to create more precise cost estimates
- Take advantage of public-private partnerships for the largest projects
Read the report: