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Published

15th May 2019

Knowledge Type

Data & Statistics Guidance

Organisation

, Institution of Civil Engineers

Major Project

N/A

Of Interest To

Consultants Contractors Investors Private sector clients Public sector clients

Reducing the gap between cost estimates and outturns for major projects and programmes

Summary

Major infrastructure projects and programmes suffer from a tendency to cost more or take longer than initial estimates outline. The reasons for this are complex. Projects are themselves complicated undertakings, spanning a development time of years or decades, with unique requirements, bringing together multiple stakeholders and a disparate workforce that spans the entire supply chain. The nature of major projects and programmes means that their estimation of cost and schedule often carries limited accuracy. The uncertainties prevalent in such large activities and an inability to predict the future, be that changing economic or political circumstances, the availability of materials or labour, or the realities of the location, all work against achieving certainty. Estimation takes place against the backdrop of cost envelopes, risk allocation, and probability calculations. As such, there will always be things which cannot be foreseen or do not go as planned. The challenge of squaring realistic estimates with a procurement process that may favour those who bid the least only adds to the problem. Scrutiny is too often focused on lowest capital cost whilst the whole life benefit of a project is often discarded. A sentiment which, perhaps surprisingly, is not shared by the British public. Indeed, YouGov polling conducted for ICE shows that only 3% of the public view a low overall cost of construction as the most important factor in determining the success of major infrastructure projects. Meanwhile 74% agree that politicians should talk more about the benefits, rather than the costs, of major infrastructure projects. None of this is to say that steps cannot be taken to reduce the gap between estimates and outturn. Many in the sector are taking steps to move away from a transactional arrangement to an enterprise model, with seven early adopters forming part of the Infrastructure Client Group’s Project 13. More collaborative working, better governance, better data-led frameworks and sharing of best practice could all support improvements in project delivery.