Study Finds Steady Overruns in Public Projects
When predicting the expenses of transportation projects, economic forecasters and project promoters in the United States, Europe and elsewhere have made underestimates costing the public hundreds of billions of dollars, said Bent Flyvbjerg, a professor at Aalborg University in Denmark who wrote the study.

Project estimates between 1910 and 1998 were short of the final costs an average of 28 percent, the study found. The biggest errors were in rail projects, which ran, on average, 45 percent over estimated costs. Bridges and tunnels were 34 percent over; roads, 20 percent. Nine of 10 estimates were low, the study said.

The study also noted that estimates are no more accurate now than they were 90 years ago.

Alan Altshuler, a professor of urban policy and planning at the John F. Kennedy School of Government at Harvard University, applauded the study — while stopping short of branding contractors as liars.

"The whole structure of incentives is extremely strong to underestimate costs," he said. "The temptation is very strong to take the most optimistic view because it's helpful in getting the project approved."

Martin Wachs, a professor of city and regional planning at the University of California at Berkeley, agreed that large projects were particularly vulnerable to underestimates. "You have to make some assumptions of the future in preparing a forecast," he said. "Why not develop a forecast that supports a particular position?"

Public awareness of underestimated costs remains low, the study found, in part because news coverage is inconsistent, Mr. Altshuler said. The time between the first estimate and project completion — up to 20 years in some cases — can span generations in some newsrooms.
http://www.nytimes.com/2002/07/11/national/11MEGA.html