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By Rodrigo Santos Andrade
Cost overruns aren’t just due to incompetence, bureaucracy and bad faith
visibility comment0 event October 27, 2026 timer 09:22
Cost overruns on major projects do not stem from incompetence alone. Above all, they reveal inadequate management of uncertainty, which turned into a premature public promise.
Nine out of ten major transportation projects go over their initial budget. This isn’t always because of incompetence.
In many cases, a specific dollar figure for the project is announced too early, when there are still a lot of uncertain variables. But shaky assumptions soon become public promises, after which the cost overrun — though predictable — becomes a scandal. People look for a simple explanation or sometimes a scapegoat.
In reality, cost overruns can stem from a wide variety of causes. Some result from external factors, such as rising costs of materials, labour shortages, changing regulations or an economic downturn. Other overruns are the result of limitations or errors in the initial estimate: data was missing, studies were too preliminary or the project was not defined well enough. Optimism also plays a role: without necessarily having bad intentions, teams and decision-makers underestimate the difficulties they’ll face.
Added to this are weaknesses in governance. Responsibilities are unclear, decisions are delayed and co-ordination is lacking. There are also sometimes inadequate controls. Finally, some underestimates are strategic. In these cases, decision-makers present an artificially favourable estimate to make it easier to get political, social or financial acceptance of the project.
These reasons may occur simultaneously. But they leave a key question unanswered: How does an uncertain estimate become a benchmark figure and then a public promise?
Making promises despite uncertainty
Research confirms the scale of the problem: cost overruns are not isolated incidents. They are a recurring phenomenon. The work of Bent Flyvbjerg, a Danish researcher, illustrates this. In a study of 258 major transportation infrastructure projects, nearly nine out of 10 projects had actual costs that were higher than the initial estimate.
Cost overruns, therefore, don’t always begin with rising bills. They can take root earlier, when the technical, economic or regulatory uncertainties still surrounding the project gradually disappear from communications. A preliminary estimate, based on shaky assumptions, is then presented as a figure solid enough to support a decision and, subsequently, a public commitment.
In other words, the problem lies not just in the quality of the political decision but also in the change in status accorded to the figure: it goes from being a conditional estimate to a seemingly certain public promise.
As a lecturer in integrated risk management at HEC Montréal, I work with my co-author — a faculty lecturer in management at the same university — on project risk management, particularly in environments where decisions must be made with incomplete information. Seen from this perspective, a cost overrun isn’t just a problem of budget control but also of managing uncertainty.
The pitfall of specific numbers
A publicly announced budget suggests precision. A project is estimated at $2 billion, $5 billion or $10 billion, and after that the figure becomes a benchmark in communications, public debates, political approvals and investment decisions.
However, at the start of a major project, this figure may have been based on preliminary studies. Maybe the route hasn’t been finalized or market conditions change. The ground may hold surprises. Regulatory requirements may evolve. The design is not complete. Not every source of uncertainty is even visible.
Take, for example, the project for a new Québec bridge announced with a $2.759 billion pricetag. This precision to the nearest tenth of a million creates an impression of certainty that the project’s actual maturity does not always justify.
The public then accepts this figure as the project’s cost, even though it may still be based on an evolving project scope, market assumptions, unfinalized technical choices or other risks that haven’t yet been fully understood.
If the cost subsequently rises to $3 billion or $3.5 billion, the public’s anger is understandable. But we must distinguish between several issues.
Does the final cost merely exceed the announced amount? Or does it also exceed what a reasonable estimate — based on the information and uncertainties available at the time of the decision — would have allowed us to anticipate? Does the discrepancy remain within the budgetary risk tolerance accepted by decision-makers — that is, within the variation deemed acceptable around the target — before intervention or a reassessment of the project becomes necessary?
Finally, are the scope, quality and benefits achieved still in line with what was originally announced?
A cost overrun relative to the initial figure doesn’t necessarily mean the the project has cost more than could reasonably have been anticipated, given the information and uncertainties at the time of the decision. Conversely, a project can stay within budget while delivering less value than expected.
It’s essential to assess whether the original budget accurately accounted for both established facts and remaining uncertainties. Yet, the level of confidence in meeting budget projections is rarely explained..
Error, optimism, underestimation
Among these various causes, three realities are often confused.
The first relates to the limitations or errors of the initial estimate. A preliminary estimate is often based on incomplete data and assumptions that are still shaky. However, subsequent changes in conditions don’t automatically constitute an error unless they were reasonably foreseeable and should have been taken into account.
The second is optimism bias. Teams and decision-makers may believe that their project will go more smoothly than other, comparable projects. As a result, difficulties, delays, co-ordination costs and unforeseen events are underestimated.
The third is strategic underestimation. In this case, figures are presented in an overly favourable light because a more realistic cost could jeopardize the project’s potential for political, social or financial acceptance.
Making an accurate estimate requires better data, explicit assumptions and a more accurate representation of uncertainty. Optimism bias makes comparisons with similar projects important. Strategic underestimation requires mechanisms for transparency, auditing and accountability.
3 ways to do better
Preventing and managing cost overruns better doesn’t mean announcing vague budgets or avoiding commitments. It means presenting what remains uncertain more honestly, and specifying the level of confidence associated with the announced budgets.
Three practices can help:
Present budgets as ranges associated with confidence levels;
Compare estimates to the results of similar projects already completed;
Document, test and monitor critical assumptions as explicit sources of risk.
The first practice is incorporated, in various forms, into certain public frameworks in Norway, the United States, the United Kingdom and Australia.
Cost overruns shouldn’t be trivialized — they can reveal errors, questionable decisions or weaknesses in governance. But they also reveal our collective difficulty in accepting that a major project is never fully understood at the time it’s announced.
The real democratic issue, therefore, is not merely whether a project exceeds its budget. It’s whether the public was honestly informed of the degree of uncertainty at the time the project was approved.
Hicham Rahali is a member of the Ordre des Ingénieurs du Québec and a member of the Project Management Institute (PMI). Miguel Hernandez est membre de Project Management Institute (PMI).
Tags: Academic Journalism, The Conversation, The Conversation Academic News
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