Tuesday, July 14, 2015

Mega-projects and cost over-runs

Excellent analysis by Bent Flyvbjerg (via Project Syndicate) of mega-projects, which, at $6-9 trillion or 8% of global GDP, is described as being ruled by an iron law of mega projects,
Over budget, over time, over and over again.
He finds that nine out of ten megaprojects (more than a billion dollar projects) suffer cost over-runs and under-estimation of costs and over-estimation of benefits are commonplace.
Most often, if not always, mega projects are driven by political economy considerations. Governments and vainglorious leaders see them as aspirational symbols and start the project without the availability of adequate financing. Given the size of these projects and the business they bring, corporate stakeholders - developers, financiers, contractors, etc - play ball with governments to get the project off the ground. The difficulties and real costs surface once construction begins. 

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