Cost–benefit Analysis, Planning and Innovation
Edited by Hugo Priemus, Bent Flyvbjerg and Bert van Wee
Chapter 7: Public Planning of Mega-Projects: Overestimation of Demand and Underestimation of Costs
Bent Flyvbjerg 7.1 INTRODUCTION Despite the enormous sums of money being spent on transportation infrastructure, surprisingly little systematic knowledge exists about the costs, beneﬁts and risks involved. The literature lacks statistically valid answers to the central and self-evident question of whether transportation infrastructure projects perform as forecasted. When a project underperforms, this is often explained away as an isolated instance of unfortunate circumstance; it is typically not seen as the particular expression of a general pattern of underperformance in transportation infrastructure projects. Because knowledge is lacking in this area of research, until now it has been impossible to validly refute or conﬁrm whether underperformance is the exception or the rule. Knowledge about demand risk, cost risk and compound risk is crucial to planners and decision-makers when developing projects and deciding which to build and which not. For transportation infrastructure projects, the beneﬁts and costs involved often run into hundreds of millions of dollars, with risks being correspondingly high. Estimates of the ﬁnancial viability of projects are heavily dependent on the accuracy of traﬃc demand and construction cost forecasts (Pickrell, 1990; Richmond, 1998). Such forecasts are also the basis for socioeconomic and environmental appraisal of transportation infrastructure projects. According to the experiences gained with the accuracy of demand and cost forecasting in the transportation sector, there is evidence that such forecasting, despite all scientiﬁc progress in modelling, is a major source of uncertainty and risk in the development and management of large infrastructure projects (Van Wee,...
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