Some examples.
Space transportation is not immune to this phenomenon, in either theory or history, which is why Ares I would likely have cost even more than current projections, which have already grown since it was first proposed.
4 thoughts on “Cost Overruns In Government Transportation”
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I wonder if there’s enough information at the start of a government project to make a fair guess (say +/- 25%) as to its final cost?
Egad. The numbers in the chart show that on average, these projects ended up costing about 5.6 times what they were originally projected to cost.
The most dismaying aspect of this information, at least to me, is that no one seems to be held accountable for obscene differences between estimated and actual costs.
Using the ‘Big Dig’ as an example, how did that project end up costing nearly ten times the original estimate?
– Did someone completely blow the engineering estimates?
– Was it due to badly estimated public support and the associated legal costs necessary to complete the right of ways?
– Did they discover miles of underground public utilities needing to be relocated?
– Were the inflationary costs of labor and materials not factored in?
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I will be the first to admit that the sum total of my career project management experiences are dwarfed by a project of that magnitude, but how the heck do you blow an estimate by nearly a whole order of magnitude?
Back in the 1980s, the USAF used an interesting formula in training procurement officers. In a competitive procurement for cost-plus contracts, the winning best-and-final offer would come in 20% below the initial proposal. At the end of the program, cost overruns would bring the total to exactly what the winner had bid initially.
This was apparently based on a lot of historical data, and had less than 1% uncertainty built in. But the Small ICBM procurement — a fixed price development program — blew the model to hell, and it has never recovered.
It’s called lowballing. Most of these projects would never have been funded if the planners had been balanced and honest about possible costs. Government planners and potential contractors greatly profit from lowballing. That’s why you shouldn’t trust a cost estimate from anybody with a prospect of landing a fat NASA contract, no matter what hypothetical “commerce” they claim they would be doing. For space projects, the wishful thinking of many space activists also plays a big role. Space-X also lowballed their launch costs, without any big pecuniary motivations to do so. Musk himself, investing based on his own estimates, must have believed it: self-deception. Granted, this is pretty small potatoes compared to NASA lowballing, and as long as it’s their own money it’s their own business.
What happens when you combine wishful thinking with governmernt lowballing? The ISS is a good example. The table by using a 1990s estimate and starting date for counting costs greatly underestimates the total money gap: the total cost from its inception in the early 1980s through this decade is really well over $100 billion, although some of that was funded by foreign governments. The original promised cost in the early 1980s was about $10 billion. Furthermore, the great boom in space manufacturing that the ISS was supposed to trigger has completely failed to materialize. And it was sold as infrastructure that would be a waystation to the moon, but Constellation ended up bypassing it. NASA was even recently prepared to let the thing plunge into the Pacific without ever doing a >1 year long-duration test of astronauts in microgravity needed to do the Mars mission they are allegedly supposed to be working towards. What a cynical business NASA is in, exploiting wishful thinking, letting busy people forget, and then moving on to the next generation of suckers.
Another example: the Shuttle was promised to be an RLV that would dramatically lower launch costs to $100/lb. It actually ended up costing, with both amortized R&D and operations, over $20,000/lb.
Don’t be a sucker. Don’t forget.