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Large Infrastructure Projects: A Review of the Quality of Demand Forecasts and Cost Estimations

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  • Bert van Wee

    (Delft University of Technology, PO Box 5015, 2600 GA Delft, The Netherlands)

Abstract

Decision making with respect to large infrastructure projects is at least partly based on ex ante evaluations of costs and impacts. Impacts include economic, environmental, and social impacts, sometimes aggregated in a cost-benefit analysis (CBA). For such ex ante evaluations the quality of the related demand and costs forecasts is very important. This paper aims to answer four questions: (1) What is the quality of demand forecasts for large infrastructure projects? (2) What is the quality of cost forecasts for these projects? (3) How can current practices with respect to assessing the demand and cost forecasts be improved? (4) Which implications do the insights have for practice, and which challenges for future research can be derived from the findings? A literature review is used to answer the first three questions. It is concluded that the quality of transport demand and costs forecasts is often very poor, especially for rail projects. This is not so much a lack of adequate forecasting techniques or a matter of insight into the factors determining costs, but more the strategic behaviour of some actors. Improvements therefore should not only be looked for in the area of transport demand and cost-estimation methodologies, but should also focus on the question of how strategic behaviour can be avoided or at least limited. These conclusions are very important for CBA because cost underestimations and demand overestimations have a major impact on the cost-benefit ratio and decrease the potentially positive impact of CBA on the quality of decision making. The paper discusses several challenges for related future research.

Suggested Citation

  • Bert van Wee, 2007. "Large Infrastructure Projects: A Review of the Quality of Demand Forecasts and Cost Estimations," Environment and Planning B, , vol. 34(4), pages 611-625, August.
    • Handle: RePEc:sae:envirb:v:34:y:2007:i:4:p:611-625
    DOI: 10.1068/b32110
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    References listed on IDEAS

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    1. Skamris, Mette K. & Flyvbjerg, Bent, 1997. "Inaccuracy of traffic forecasts and cost estimates on large transport projects," Transport Policy, Elsevier, vol. 4(3), pages 141-146, July.
    2. Odeck, James, 2004. "Cost overruns in road construction--what are their sizes and determinants?," Transport Policy, Elsevier, vol. 11(1), pages 43-53, January.
    3. Bent Flyvbjerg, 2007. "Policy and Planning for Large-Infrastructure Projects: Problems, Causes, Cures," Environment and Planning B, , vol. 34(4), pages 578-597, August.
    4. Trujillo, Lourdes & Quinet, Emile & Estache, Antonio, 2002. "Dealing with demand forecasting games in transport privatization," Transport Policy, Elsevier, vol. 9(4), pages 325-334, October.
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    Cited by:

    1. Van Wee, Bert & Molin, Eric, 2012. "Transport and ethics: Dilemmas for CBA researchers. An interview-based study from the Netherlands," Transport Policy, Elsevier, vol. 24(C), pages 30-36.
    2. West, Jens & Börjesson, Maria & Engelson, Leonid, 2016. "Accuracy of the Gothenburg congestion charges forecast," Transportation Research Part A: Policy and Practice, Elsevier, vol. 94(C), pages 266-277.
    3. Volden, Gro Holst, 2018. "Public project success as seen in a broad perspective," Evaluation and Program Planning, Elsevier, vol. 69(C), pages 109-117.
    4. Cantarelli, C.C. & Molin, E.J.E. & van Wee, B. & Flyvbjerg, B., 2012. "Characteristics of cost overruns for Dutch transport infrastructure projects and the importance of the decision to build and project phases," Transport Policy, Elsevier, vol. 22(C), pages 49-56.
    5. Brookes, Naomi J. & Locatelli, Giorgio, 2015. "Power plants as megaprojects: Using empirics to shape policy, planning, and construction management," Utilities Policy, Elsevier, vol. 36(C), pages 57-66.
    6. James Odeck, 2019. "Variation in cost overruns of transportation projects: an econometric meta-regression analysis of studies reported in the literature," Transportation, Springer, vol. 46(4), pages 1345-1368, August.
    7. Alpkokin, Pelin & Topuz Kiremitci, Sabahat & Black, John Andrew & Cetinavci, Sukru, 2016. "LRT and street tram policies and implementation in turkish cities," Journal of Transport Geography, Elsevier, vol. 54(C), pages 476-487.
    8. Bert van Wee & Jan Anne Annema & Hugo Priemus, 2013. "Model building for infrastructure initiatives," Chapters, in: Peter Karl Kresl & Jaime Sobrino (ed.), Handbook of Research Methods and Applications in Urban Economies, chapter 17, pages 423-441, Edward Elgar Publishing.
    9. Locatelli, Giorgio & Invernizzi, Diletta Colette & Brookes, Naomi J., 2017. "Project characteristics and performance in Europe: An empirical analysis for large transport infrastructure projects," Transportation Research Part A: Policy and Practice, Elsevier, vol. 98(C), pages 108-122.
    10. Beria, Paolo & Grimaldi, Raffaele & Albalate, Daniel & Bel, Germà, 2018. "Delusions of success: Costs and demand of high-speed rail in Italy and Spain," Transport Policy, Elsevier, vol. 68(C), pages 63-79.
    11. Alpkokin, Pelin & Capar, Murat Samil, 2019. "Dispute boards in Turkey for infrastructure projects," Utilities Policy, Elsevier, vol. 60(C), pages 1-1.
    12. Kerkman, Kasper & Martens, Karel & Meurs, Henk, 2018. "Predicting travel flows with spatially explicit aggregate models," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 68-88.

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