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Paper 2Magnussen, Ole M., and Nils O. E. Olsson. 2006. Comparative Analysis of Cost Estimates ofMajor Public Investment Projects. International Journal of Project Management 24 (4):281-288.
International Journal of Project Management 24 (2006) 281–288INTERNATIONAL JOURNAL OFPROJECTMANAGEMENTwww.elsevier.com/locate/ijpromanComparative analysis of cost estimates of major publicinvestment projectsOle M. Magnussen a, *, Nils O.E. Olsson a,b,1a The Norwegian University of Science and Technology, Department of Civil and Transport Engineering, N-7491 Trondheim, Norwayb SINTEF Technology and Society, N-7465 Trondheim, NorwayReceived 24 May 2005; received in revised form 11 October 2005; accepted 11 November 2005AbstractThis paper reports findings from a study of cost estimates of 31 major public investment projects in Norway. It is aimed at analysingthe development of cost estimates before the decision to execute the projects and in what way the scheme of mandatory quality assuranceinfluences this process. Two important results are highlighted and discussed: The differences in the proposed cost estimates appear tohave decreased systematically since the introduction of the quality assurance and the project owners rely to a large extent directly uponthe cost estimates from the quality assurance when the decision to execute the project is taken.Ó 2005 Elsevier Ltd and IPMA. All rights reserved.Keywords: Managing projects; Design and appraisal1. IntroductionTo meet the demand for better management and controlof major public investment projects, an arrangement forexternal Quality-at-entry analyses of all public investmentsin Norway with an expected budget larger than NOK 500million (EUR 60 million) 2 has been established. This socalledQuality-at-entry Regime became operative from year2000 and was the result of an initiative from the NorwegianMinistry of Finance. The main factors leading to the establishmentof a mandatory external assessment of publicmulti-million projects were the poor performance of manysuch projects especially in terms of cost. The introduction* Corresponding author. Tel.: +47 73 59 52 07/46 40; fax: +47 73 59 7021.E-mail address: ole.magnussen@ntnu.no (O.M. Magnussen).1 Tel.: +47 977 13 628/47 73 59 46 40; fax: +47 73 59 70 21.2 EUR 1 = NOK 8. Expected budget > NOK 500 million is the generalrule. This general rule does not prevent the possibility for a Quality-atentryanalysis carried out on projects with expected budget less than NOK500 million.of the Regime was, among other factors, an attempt toavoid and control cost overruns [1].This paper is the first attempt to analyse the developmentof cost estimates in the early stages of the qualityassured projects. Very few of the projects have yet reachedcompletion, which explains why studies of actual costs donot constitute a part of the present research. The objectiveis to develop an understanding of the current Quality-atentryRegime and to point out its relevance and impacton the cost estimation process and how it could contributeto more realistic budgets. The paper is thus concerned withimpacts of quality assurance concerning the efficiency issue,i.e., focus on the cost criterion. In a broader perspective,however, it also concerns the more substantial issues ofproject viability and long term effects since the end resultof inaccurate estimates could be that nonviable projectsare prioritized (a central perspective in [2,3] for example).2. The scope of the paperThe scope of this paper is to consider the relevance andsignificance of the current Quality-at-entry Regime on costestimation in major public projects. Our preconception is0263-7863/$30.00 Ó 2005 Elsevier Ltd and IPMA. All rights reserved.doi:10.1016/j.ijproman.2005.11.011
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3PrefaceThe research presented in t
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5Table of contentsPART 1 ..........
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7Summary/abstractThe work reported
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101 IntroductionProjects are increa
Page 10: collection and interpretation of th
Page 13 and 14: 15normative agendas, in other words
Page 15 and 16: 17world of projects. The choice of
Page 17 and 18: 19Figure 3 Sources and dataThe proj
Page 19 and 20: 21In line with Flyvbjerg (2006b), t
Page 21 and 22: 233 Concepts and constructs of thep
Page 23 and 24: 25by most BOKs and textbooks in pro
Page 25 and 26: 274 Main topics covered by the rese
Page 27 and 28: 294.2 Empirical indications from ex
Page 29 and 30: 31Budget proposed by the Norwegian
Page 31 and 32: 3330 %Difference (%) from the propo
Page 33 and 34: 3520 00018 000Cost development from
Page 35 and 36: 37In paper 9 (Magnussen 2009a) an a
Page 37 and 38: 395 Conclusions and directions for
Page 39 and 40: 41estimates must be implemented at
Page 41 and 42: 43Klakegg, Ole Jonny, Terry William
Page 43 and 44: 45List of government documents 11Fi
Page 45 and 46: 47Part 2 - Papers1. Magnussen, Ole
Page 47 and 48: Paper 1Magnussen, Ole Morten, and K
Page 49 and 50: AbstractCost overruns and delays ar
Page 51 and 52: Cost effectiveness considerations:
Page 53 and 54: demonstrates another fundamental is
Page 55 and 56: Figure 1 The Extended Quality Assur
Page 57 and 58: Expected effects of the revised qua
Page 59: ReferencesBerg, Peder, Kilde, Halva
Page 63 and 64: O.M. Magnussen, N.O.E. Olsson / Int
Page 69 and 70: Paper 3Magnussen, Ole M., and Nils
Page 71 and 72: MANAGING THE FRONT-END OF PROJECTS:
Page 73 and 74: Olsson, Samset, Austeng and Lädre
Page 75 and 76: 1995; Packendorff, 1995), mainly cr
Page 77 and 78: to a better way of managing the fro
Page 79 and 80: Figure 1 Basic structure of the ind
Page 81 and 82: from empirical investigations has b
Page 83 and 84: among organizations, not individual
Page 85 and 86: actors, the relationships are repro
Page 87 and 88: the network approach has been used
Page 89 and 90: established based on the views of i
Page 91 and 92: IHFJKGAELDMBCA - The focal projectB
Page 93 and 94: the NDEA. The communication strateg
Page 95 and 96: Directorate for Cultural Heritage (
Page 97 and 98: the project. The basic activity was
Page 99 and 100: assumed to be more important than o
Page 101 and 102: Another interesting observation was
Page 103 and 104: REFERENCESEngwall, Mats. 2003. No p
Page 105 and 106: Söderlund, Jonas. 2002. On the dev
Page 107 and 108: Flexibility at Different Stages in
Page 109 and 110: Reproduced with permission of the c
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Reproduced with permission of the c
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Reproduced with permission of the c
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Paper 5Olsson, Nils O. E., and Ole
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PAPERSGovernance Frameworks for Pub
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supporting setting of and achieving
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The study proceeded as follows:•
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y the Chief of Defence Materiel, he
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(within MoD but independent of thep
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Norway U.K. (MoD) U.K. (OGC)Charact
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from the external consultants was s
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governance. International StudiesRe
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Paper 7Williams, Terry, Ole Jonny K
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The development of the frameworksUK
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notable characteristic of the Norwe
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Office to the National Audit Office
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highly complex and changing decisio
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ARTICLE IN PRESSAvailable online at
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ARTICLE IN PRESST. Williams et al.
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Paper submitted to the Internationa
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One constraint is that actual costs
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In other words, the QA scheme is a
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author, there apparently are no stu
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20,0 %15,0 %10,0 %5,0 %0,0 %P50 est
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The pre-eminent result is that the
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Results from the analysis of the de
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more fundamental assessments of pro
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Paper 10Magnussen, Ole M. 2009. Exp
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Explaining cost estimate difference
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changes and external factors. Facto
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30 %Difference (%) from the propose
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Table 2 Areas associated with expla
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agency. In this case, the observed
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ReferencesFlyvbjerg, B., Holm, M.K.
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