Link to thesis. - Concept - NTNU

3330 %Difference (%) from the proposed estimate25 %20 %15 %10 %5 %0 %-5 %-10 %-15 %-20 %-25 %-30 %Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08Month of presented reportFigure 6 The difference between the project’s proposal and the revised estimate from theexternal consultant, N=61 (Magnussen 2009b)Figure 6 essentially shows that the experts responsible for external review recommend budgetincreases in two-thirds of the cases analyzed. As shown, a significant part of the differences inrelative terms suggest that for all practical purposes, the estimates are equal (the differences inestimates observed in 30 projects are within the ±5 % range). A few exceptions show thatdifferences in estimates experienced in single projects may be significant, but the averagedifference is 3.4 %. It is assumed that the observed discrepancies in estimates are real. However,the quantitative evidence is insufficient to reveal any possible underlying causes.In paper 9, Magnussen (2009a) analyzed the cost development from the early stages of definitionto the actual outcome of 28 major transportation infrastructure projects subjected to aninstitutionalized framework for up-front assessment and quality assurance. He found that thedevelopment of costs in the early stages of a project has the most significant impact on total cost.This illustrates that a cost control measure introduced at the time of decision to build has littleimpact on project’s budgeted cost. Comparison of estimates with actual outcomes show that costestimates may be more reliable, but that observed cost reductions are negligible, if costs at theearly stages of definition are taken into account. A sub-sample of the 61 projects for which costdata are obtainable, namely 28 transportation infrastructure projects under the Norwegian PublicRoads Administration (NPRA), is examined. In addition to the comparison of estimates made bythe project organization and the external consultant prior to the decision to build, this paper alsoincluded estimates prepared at the early stages of definition. Due to extensive redrafts of projectconcepts, estimates in 14 projects that could be said to be related to comparable projectalternatives, were used to trace the cost development from the earliest stages of definition todecision to build. Estimates were normalized to the same price level and comparisons ofestimates were prepared by the NPRA, the budgets were recommended by the external analyst,and the budgets were set at the times that decisions to build were made. The early estimates mostlikely are inaccurate (typically a ±40 % accuracy level). Consequently, it might be argued thatthese early estimates cannot be compared with later ones. Deviations from the early estimatesmay be characterized as ”tolerated inefficiencies”. Nonetheless, as frequently observed, estimates,despite their high levels of uncertainty, are used to prioritize between projects and even to finalize