Primetime 9-5-2005: Roads Infrastructure Cost Underestimation

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Erith

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I heard a preview of the show on the radio this morning, it sounds like a fascinating investigation into the phenomenon of 'over-spend' on roads projects in Ireland.

A Danish expert was interviewed who conducted a study on over-spend in 20 countries, over 5 continents and 70 years. The average cost these countries' respective publics had to pay in excess to the original accepted bid amont was 20%. In Ireland it is 86%.

Apparently, project managers get rewarded here for running over budget as they are on a fixed precentage of the final cost. Sounds about right.

They will also examine the hard-touted myth that tolls are a better deal for the public.
 
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Re: Primetime tonight

I also heard the "puff piece" for primetime on morning Ireland this am. (While driving on the truly marvelous M7, thanks NRA !)

I think it more a case of systematic under estimation of road transport infrastructure than of over spend. The culture in the 70s and 80s and right into the 90's was to reject proposals which were too expensive resulting in systematic under estimation of costs.

Personally I would have rathered if the red cow roundabout had been 200% over estimate but had been build as a proper grade seperated juncion as orignially planned.

ajapale
 
Re: Primetime tonight

When the construction spokesman dude was asked how come the figure they gave the government was so wrong and he was asked did they mislead the government his answer was "No, we didn't mislead them, they misunderstood"!!!
 
Re: Primetime tonight

legend99 said:
When the construction spokesman dude was asked how come the figure they gave the government was so wrong and he was asked did they mislead the government his answer was "No, we didn't mislead them, they misunderstood"!!!
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This isn't as crazy as it might seem. Any cost estimate given in the very early days is a high-level ballpark estimate. Until the exact route is confirmed and all the surveys are done and the exact spec is confirmed, it's not possible to give an exact price. If the buyer keeps changing his mind about important features (e.g. height of tunnel), the price will keep changing.
 
Re: Primetime tonight

Good point rainyday, we must also remember that delays due to legal issues cost millions and delay projects by years. This also increases the actual cost of construction due to everything from higher insurance costs, higher labour costs and higher prices paid for the compulsory purchase of land.
 
Re: Primetime tonight

RainyDay said:
This isn't as crazy as it might seem. Any cost estimate given in the very early days is a high-level ballpark estimate. Until the exact route is confirmed and all the surveys are done and the exact spec is confirmed, it's not possible to give an exact price. If the buyer keeps changing his mind about important features (e.g. height of tunnel), the price will keep changing.
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Yes, this excuse was made already. Along with the excuse that the NRA was relatively inexperienced. However, this would lead you to expect a fair share of over-estimates too. This was not the case, th underestimates were described as systematic in the industry.
 
Re: Primetime tonight

It was a Dutch guy who studies and compares the management of public projects around the world that suggested this point.
The point being made was, that if the error in estimating cost was down to the inexperience of those charged with coming up with a figure then the law of averages would suggest that there would be over-estimates as well as under-estimates.
The fact that there were no over-estimates indicates a policy of deliberate under-estimation of cost.

NRA inexperience was put forward as one of the main reason that costs were underestimated. The programme makers felt there was more to it than this
 
Re: Primetime tonight

I watched the program aswell and I have to say I am very impressed with some of the exposes primetime has done in the last 2 years. They are now really doing their homework and research into the areas they cover. I am especially impressed by the way they now use international experts to show up the gombeenism and bullshit that we are thrown about by politicians and also by high ranking public servants. It is significant that none of the politicians involved were prepared to go on air and defend the decisions they made.
 
Re: Primetime tonight

The fact that there were no over-estimates indicates a policy of deliberate under-estimation of cost
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This is hardly the case for EVERY project?? I remember hearing recently of one major public project that was completed well within budget. (I can't remember which one it was but I will report back if it comes to me.)
 
Re: Primetime tonight

soy said:
It was a Dutch guy who studies and compares the management of public projects around the world that suggested this point.
The point being made was, that if the error in estimating cost was down to the inexperience of those charged with coming up with a figure then the law of averages would suggest that there would be over-estimates as well as under-estimates.
The fact that there were no over-estimates indicates a policy of deliberate under-estimation of cost.
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There seems to be an assumption here that the cause of the error in the estimates was random. If it was not random, then there is no reason to expect an even spread of the errors.
 
Re: Primetime tonight

RainyDay said:
There seems to be an assumption here that the cause of the error in the estimates was random. If it was not random, then there is no reason to expect an even spread of the errors.
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The assumption is that the errors are not random.
 
Re: Primetime tonight

Erith said:
The assumption is that the errors are not random.
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So why would you expect an even spread of under-estimates & over-estimates?
 
Re: Primetime tonight

I heard Pat Rabbit on RTE radio this morning and asides from the fact that he was allowed to go on a bit of a party political broadcast I think he spoke well and made some good points. He said that there has been a lot of lessons learned (all be it expensive ones) in the NRA. He also said that there was no government minister in charge of the national development plan and that this allowed a lot of political book passing. I think that these are fair points and that they should be looked at before anyone starts jumping up and down about grand conspiracies.
 
Re: Primetime tonight

RainyDay said:
So why would you expect an even spread of under-estimates & over-estimates?
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???????????????

The assumption that they are not random is based on the fact that there is a uniform skew in favour of underestimation. Do you have a point?
 
Re: Primetime tonight

ajapale said:
I think it more a case of systematic under estimation of road transport infrastructure than of over spend. The culture in the 70s and 80s and right into the 90's was to reject proposals which were too expensive resulting in systematic under estimation of costs.
ajapale
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In the second post in this thread I asserted that there was systematic under estimation. There was absolutely no insentive to over estimate.
ajapale
 
Re: Primetime tonight

ajapale said:
There was absolutely no insentive to over estimate.
ajapale
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Of course not, but honesty would be an incentive to simply estimate. or some fear of consequence in a parallel universe Ireland.
 
Re: Primetime tonight

RainyDay said:
How do you come to this conclusion?
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The law of Averages implies that accross a wide enough spread that you would expect both sides of the coins to come up the same number of times. So if you flip a coin 3 times you might get 3 heads. but if you flip a coin 3 million times you would expect a very close to 50:50%.

therefore, on close to say 50 road projects, you would expect something close to 50:50, at most it should be 60:40 in favour of one or the other, on over budget/under budget.
it should not be 100:0

i thought another interesting aspect to the thing was the fact that they were boasting about the fact they were now getting stuff done on budget. That shouldn't be a boast, it should be an expected norm.
 
The road company will tender within the terms of reference provided by the NRA for the project. The NRA will set out time lines etc and factor in what they consider reasonable and likely delays due to planning issues, CPO's, archaeological concerns etc. Most of the current projects were priced before the huge construction industry inflation of the late 90's and early 2000's. The amount and duration of legal challenges was not foreseen either. I don't think it's fair to blame the NRA for not foreseeing these factors as no one saw them coming.
I heard a spokesperson for the NRA on the radio a few months back pointing out that the actual construction phase of nearly all road projects was on time and within budget. In other words they were where they should be on the factors that they could control.
 
Hi Legend,

The "law of averages" as you term it cannot apply in this case since it is a non random event.

I'm reapeating my self here but there was systematic underestimation of infrastructure costs in the 1980's and 1990's

ajapale
 
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