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Why costs overrun: risk, optimism and uncertainty in budgeting for the London 2012 Olympic Games

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  • Will Jennings

Abstract

The systematic under-estimation of costs in budgeting for large-scale projects raises the vexing question of why there are such incongruities between the projections made at initial stages and the eventual outturn cost. As a first step to understanding the sources of such budgeting overruns in the context of the Olympics, this research note outlines how the costs of the London 2012 Olympic Games were under-estimated in a series of budget forecasts, identifying sources of error and categorizing these according to the effects on budgeting of: (1) inattention to risk inside government; (2) biases in decision-making in the evaluation and use of information; and (3) uncertainty in project management and administration. These factors are accentuated through the planning and budgeting context, as estimates at different stages of the process serve alternative purposes and entail varying levels of knowledge and scrutiny.

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  • Will Jennings, 2012. "Why costs overrun: risk, optimism and uncertainty in budgeting for the London 2012 Olympic Games," Construction Management and Economics, Taylor & Francis Journals, vol. 30(6), pages 455-462, February.
    • Handle: RePEc:taf:conmgt:v:30:y:2012:i:6:p:455-462
    DOI: 10.1080/01446193.2012.668200
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    Cited by:

    1. Bent Flyvbjerg & Allison Stewart & Alexander Budzier, 2016. "The Oxford Olympics Study 2016: Cost and Cost Overrun at the Games," Papers 1607.04484, arXiv.org.
    2. Huimin Liu & Canhui Jiang & Yan Liu & Marcel Hertogh & Xue Lyu, 2018. "Optimism Bias Evaluation and Decision-Making Risk Forecast on Bridge Project Cost Based on Reference Class Forecasting: Evidence from China," Sustainability, MDPI, vol. 10(11), pages 1-29, October.
    3. Rubina Canesi & Beatrice Gallo, 2023. "Risk Assessment in Sustainable Infrastructure Development Projects: A Tool for Mitigating Cost Overruns," Land, MDPI, vol. 13(1), pages 1-24, December.
    4. Bent Flyvbjerg & Alexander Budzier & Daniel Lunn, 2021. "Regression to the tail: Why the Olympics blow up," Environment and Planning A, , vol. 53(2), pages 233-260, March.
    5. Thordur Vikingur FRIDGEIRSSON, 2016. "Reference Class Forecasting In Icelandic Transport Infrastructure Projects," Transport Problems, Silesian University of Technology, Faculty of Transport, vol. 11(2), pages 103-115, June.
    6. Butzin Anna & Rehfeld Dieter, 2013. "The balance of change and continuity in the German construction sector’s development path," ZFW – Advances in Economic Geography, De Gruyter, vol. 57(1-2), pages 15-26, October.

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