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The accuracy of risk-based cost estimation for water infrastructure projects: preliminary evidence from Australian projects

Author

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  • Li Liu
  • Zigrid Napier

Abstract

Infrastructure projects are still being plagued by cost overruns, delays and revenue shortfalls despite decades of practice and research. Risk-based estimating (RBE) is growing in popularity and has the potential to overcome the two main cost overrun factors—optimistic bias and strategic misrepresentation. Yet, little is known about the accuracy of RBE and its performance drivers. A comparison of water projects using RBE with a sample of construction projects using the conventional estimating approach shows that the projects estimated using RBE have better estimation accuracy than those estimated using more conventional approaches. In addition, the projects using RBE appear more likely to be under-budget while the ones using the conventional approach appear more likely to be over-budget. Further, through interviews and observations of the RBE process, three main performance drivers for the RBE method were identified to include outside view/collective experience, attention focusing and probabilistic, bottom-up modelling.

Suggested Citation

  • Li Liu & Zigrid Napier, 2010. "The accuracy of risk-based cost estimation for water infrastructure projects: preliminary evidence from Australian projects," Construction Management and Economics, Taylor & Francis Journals, vol. 28(1), pages 89-100.
    • Handle: RePEc:taf:conmgt:v:28:y:2010:i:1:p:89-100
    DOI: 10.1080/01446190903431525
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    Cited by:

    1. Flyvbjerg, Bent & Bester, Dirk W., 2021. "The Cost-Benefit Fallacy: Why Cost-Benefit Analysis Is Broken and How to Fix It," Journal of Benefit-Cost Analysis, Cambridge University Press, vol. 12(3), pages 395-419, October.
    2. Bent Flyvbjerg & Chi-keung Hon & Wing Huen Fok, 2017. "Reference Class Forecasting for Hong Kong's Major Roadworks Projects," Papers 1710.09419, arXiv.org.
    3. Flyvbjerg, Bent & Ansar, Atif & Budzier, Alexander & Buhl, Søren & Cantarelli, Chantal & Garbuio, Massimo & Glenting, Carsten & Holm, Mette Skamris & Lovallo, Dan & Lunn, Daniel & Molin, Eric & Rønnes, 2018. "Five things you should know about cost overrun," Transportation Research Part A: Policy and Practice, Elsevier, vol. 118(C), pages 174-190.
    4. Love, Peter E.D. & Sing, Michael C.P. & Ika, Lavagnon A. & Newton, Sidney, 2019. "The cost performance of transportation projects: The fallacy of the Planning Fallacy account," Transportation Research Part A: Policy and Practice, Elsevier, vol. 122(C), pages 1-20.
    5. Love, Peter E.D. & Ahiaga-Dagbui, Dominic D., 2018. "Debunking fake news in a post-truth era: The plausible untruths of cost underestimation in transport infrastructure projects," Transportation Research Part A: Policy and Practice, Elsevier, vol. 113(C), pages 357-368.

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