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Department of Real Estate and Construction Management & Centre for Banking and Finance (cefin), Royal Institute of Technology Working Paper Series, Department of Real Estate and Construction Management & Centre for Banking and Finance (cefin), Royal Institute of Technology

No 14/6:
Policies to avoid cost overruns: Critical evaluation and recommendations

Fredrik Brunes () and Hans Lind ()

Abstract: Many infrastructural projects have cost overruns and there has been a lot of research both on why these cost overruns occur and what can be done to reduce cost overruns. Bent Flyvbjerg is the leading researcher in the area and in this article his proposals are also the starting point. Beside a literature review a questionnaire was also sent out to experienced Swedish project managers to find out what they thought could reduce cost overruns. This has been the foundation for the proposals formulated in this article. Proposals concerns three areas 1. Organizational macro-structure, e.g. using more PPPprojects but also decentralization of budgets where cost-overruns in one project in a region leads to less other projects in the specific region. 2. Organizational quality: It should be easy to see when and where cost overruns occur and who was responsible. There should be an well-developed knowledge management system in the organization and an organization culture of openness and a focus on improvements. 3. Organizational processes, e.g. a systematic use of external reviewers in different stages of a project.

Keywords: Cost-overruns; infrastructural projects; policy measures; (follow links to similar papers)

JEL-Codes: H41; H44; H54; L38; (follow links to similar papers)

16 pages, August 7, 2014

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