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Why Construction Projects Always Cost More Than Estimated

Poor planning, bad timing and political considerations all make overruns practically a given.

Excavator on a construction site
David Kidd/Governing
Editor's Note: This article appears in Governing's Summer 2024 magazine. You can subscribe here.

Even before the recent phase of inflation, public construction projects often far surpassed their budgets. Why are cost overruns so common?

Problems with estimating infrastructure costs start at the very beginning, due to the often-complicated process of running cost estimates. The political pressure to keep costs low can result in unrealistic projections. More frequently, the agencies starting new projects, such as roads, train lines or school facilities, fail to account for all the variables in construction. Construction projects are unpredictable even in the best of circumstances — much more so when they involve large-scale excavation or butt up against homes and businesses.

Delays are also a major source of cost increases. Underground digging, for example, is notoriously unpredictable. But delays can also result from common factors including multilayered permitting, public engagement processes and lawsuits. There’s also often a gap between the time a budget is set — say, when voters approve a bond for school facility improvements — and when construction actually begins.

Cutting projects into phases to save costs often ends up achieving the opposite. With material and labor costs rising all the time, it’s often cheaper to build a project all at once than to stretch it out across years. Agencies’ desire to minimize disruptions to the public also leads to cost increases. Doing all the work on a road or train line at night stretches out the timeline and requires overtime pay for workers. And unnecessary customization adds to the expense. Why design two train stations when you could reuse the same design?

Agencies with more experience tend to have better luck keeping projects within their budgets. Growing school districts carrying out a 10-year improvement program often know what they’re doing by the third or fourth year, says Robert Chomiak, a vice president at Turner & Townsend, a project management firm that works with public agencies.

Some things, like pandemics, are impossible to plan for. But being careful about project planning and design can help agencies anticipate and account for growing costs. “A lot of overruns,” Chomiak says, “are somewhat self-imposed.”
Jared Brey is a senior staff writer for Governing. He can be found on Twitter at @jaredbrey.
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