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The Weak Spot of Infrastructure BCA: Cost Overruns in Seven Road and Railway Construction Projects

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  • Nilsson, Jan-Eric

Abstract

This article describes the process from first proposals in the early 1990s to project completion many years later for seven large Swedish road and railway projects. The purpose is to find reasons for the massive cost overruns as well as explanations for why projects are brought to completion despite much higher costs than when the decision to build was made. Cost overruns are set in an institutional context to highlight the interplay among national, regional, and local policymakers. National investment programs are seen as promises by other parts of society, irrespective of whether project costs increase during the process toward procurement and implementation. Another aspect is that the infrastructure manager’s administrative framework currently makes it impossible to compare costs in contracts with final cost, meaning that there is no institutionalized learning process in place. Design preparations and the estimation of costs for new projects must therefore be done without an understanding of what has been working well in the implementation of previous projects. While Benefit-Cost Analysis (BCA) played no role in the planning of the seven projects, the article sends a stark warning that early cost estimates provide poor input for assessing project rate of return.

Suggested Citation

  • Nilsson, Jan-Eric, 2022. "The Weak Spot of Infrastructure BCA: Cost Overruns in Seven Road and Railway Construction Projects," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 13(2), pages 224-246, July.
  • Handle: RePEc:cup:jbcoan:v:13:y:2022:i:2:p:224-246_5
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    Cited by:

    1. Eliasson, Jonas, 2023. "Cost overruns in Swedish infrastructure projects," MPRA Paper 120340, University Library of Munich, Germany.
    2. Ridderstedt, Ivan & Nilsson, Jan-Eric, 2022. "Economies of scale versus the costs of bundling in the procurement of highway pavement replacement," Working Papers 2022:4, Swedish National Road & Transport Research Institute (VTI).
    3. Pyddoke, Roger, 2023. "Comparison of policies for increasing sustainable transport mode shares in Swedish cities," Working Papers 2023:9, Swedish National Road & Transport Research Institute (VTI).
    4. Ridderstedt, Ivan & Nilsson, Jan-Eric, 2023. "Economies of scale versus the costs of bundling: Evidence from procurements of highway pavement replacement," Transportation Research Part A: Policy and Practice, Elsevier, vol. 173(C).

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