Article2015

Low estimates – high stakes: underestimation of costs at the front-end of projects

Bjørn Sørskot Andersen · Knut Samset · Morten Welde

58 citations0/0 files storedInternational Journal of Managing Projects in Business

No readable copy stored yet — this record is metadata only.

No open-access location is known for this record yet.

Literature note Cite in a project Citation map

Construction Project Management and Performance Accounting and Organizational Management Capital Investment and Risk Analysis

Abstract

Purpose – The purpose of this paper is to adopt an in-depth perspective on cost estimation, from the development of the initial idea until the budget is agreed, to obtain new insights into issues of underestimation at the front-end. Design/methodology/approach – The study uses a small sample of projects with exceptional increases in cost estimates during the front-end phase. The authors analyzed the magnitude of cost increases and possible reasons for them. Findings – The paper concludes that underestimation in the front-end phase was significant in the sample and poses a serious problem in that suboptimal projects are approved. The causes of underestimation include underestimating risk, overestimating opportunities, inadequate estimation methods and skills, reliance on weak information, and strategic/deliberate scope creep and division of projects. Research limitations/implications – The study builds on a small sample, and hence further studies should be undertaken to verify whether the findings are generalizable. Practical implications – The sample shows that the projects with the most unrealistic early estimates have disputable relevance. The paper suggests a number of recommendations that might help to counter the problem of unrealistic early cost estimates, which in turn, might allow suboptimal projects to be funded. Originality/value – The underestimation of costs at the front-end is grossly neglected in the literature compared with whether costs comply with the budget. While cost overruns are an indication of failure in terms of the project’s tactical performance, the contention is that the up-front underestimation of costs might result in an inferior project being selected and thus affect the strategic performance of the project.

Paper brief

Loading…

Cite this work

Citation unavailable for this work.

BibTeX RIS CSL-JSON

No public copy is stored for this record, so only the metadata is cited.

Citations in this library

Citation map →

Stored only when both papers are in the corpus — 58 citations exist upstream.

References

2002Underestimating Costs in Public Works Projects: Error or Lie?1982Intuitive prediction: Biases and corrective procedures 2003How common and how large are cost overruns in transport infrastructure projects?1999The need for new paradigms for complex projects 1988The Anatomy of Major Projects: A Study of the Reality of Project Management 2009Survival of the unfittest: why the worst infrastructure gets built--and what we can do about it 2003Cost overruns in road construction—what are their sizes and determinants?2003Delusions of Success

Cited by

2019Factors affecting transaction costs and collaboration in projects 2019On the magnitude of cost overruns throughout the project life-cycle: An assessment for the Italian transport infrastructure projects 2021Communication breakdowns during business process change projects – Insights from a sociotechnical case study 2019Integrating services into solution offerings in the sales work of project-based firms 2018Decision-making and cost deviation in new product development projects

Explore the map →

Papers that cite the same references — the relational fallback while embeddings are still backfilling.

Imported from OpenAlex (CC0) — nothing here is generated.