Researchers Find Major Flaws In Cost-Benefit Analysis Of Infrastructure Projects

“Engineering News-Record” reports, “A large new global study of [public infrastructure] project performance over 86 years confirms that ingrained optimism bias results in forecast-based cost-benefit analyses ‘so misleading as to be worse than worthless,’ say UK researchers. While construction technology and practice have developed over the decades, failures of cost-benefit analysis ‘seem universal across space and time,’ they add.” The researchers based their conclusions on data from over two thousand public infrastructure projects — many involving transportation facilities — on six continents, but mostly in the US and Europe. According to ENR, they found “‘strong and consistent’ biases led to cost overruns not being compensated by benefit overruns, ‘but quite the opposite, on average.’ In addition, projects with large average cost overruns ‘tend to have large average benefit shortfalls.’” “Cost forecasts were found to be highly inaccurate and biased with average overruns ranging from 24% for highways to 85% for dams.” (The findings were published today in a Cambridge University journal under the title, “The Cost-Benefit Fallacy: Why Cost-Benefit Analysis Is Broken and How to Fix It.”)