Väg-ra kostnadsöverskridning i trafikinfrastruktur
(2020) NEKH01 20201Department of Economics
- Abstract
- During the 21’st century a lot of support has been found by economists that megaprojects all over the world become more expensive than planned. One type of project well known for cost-escalations is traffic infrastructure. The most common theory for this phenomenon is that benefits and costs for these projects suffers from optimism bias, where the former is exaggerated, and the latter is understated, caused by planning-fallacy or principal-agent problems in the planning phase. This paper analyses contracts regarding Swedish traffic infrastructure and finds that 83% go over-budget and the average contract has a cost overrun of 23%. Many characteristics of the contract can affect the quality of the forecasted cost. Railway contracts overrun... (More)
- During the 21’st century a lot of support has been found by economists that megaprojects all over the world become more expensive than planned. One type of project well known for cost-escalations is traffic infrastructure. The most common theory for this phenomenon is that benefits and costs for these projects suffers from optimism bias, where the former is exaggerated, and the latter is understated, caused by planning-fallacy or principal-agent problems in the planning phase. This paper analyses contracts regarding Swedish traffic infrastructure and finds that 83% go over-budget and the average contract has a cost overrun of 23%. Many characteristics of the contract can affect the quality of the forecasted cost. Railway contracts overrun their budget 11% more than road contracts, the overruns are smaller for the more common type of work regarding investment or maintenance for both rail and road and the overrun increases by 3% if the agreed cost of the contract grows by 1% and by 4,5% if the contract takes one more year to finish. Contracts to build infrastructure are made between The Swedish Transport Administration “Trafikverket” and private contractor. It matters how the contractor is compensated. Railway contracts show 13% lower overruns and all contracts show lower increases by time to finish and size if the compensation is in a fixed price instead of unit price. The conclusion states that the planning of contracts does suffer from optimism bias where both planning-fallacy and principal-agent problems are reasonable parts of the explanation. Trafikverket can use their budget more efficiently and the problem can be countered by stronger incentives to make a correctly planned budget. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9027697
- author
- Lindholm, Lucas LU
- supervisor
- organization
- course
- NEKH01 20201
- year
- 2020
- type
- M2 - Bachelor Degree
- subject
- keywords
- Kostnadsöverskridning, Principal-agent problem, Optimism Bias, Trafikinfrastruktur
- language
- Swedish
- id
- 9027697
- date added to LUP
- 2021-01-19 15:22:23
- date last changed
- 2021-01-19 15:22:23
@misc{9027697,
abstract = {{During the 21’st century a lot of support has been found by economists that megaprojects all over the world become more expensive than planned. One type of project well known for cost-escalations is traffic infrastructure. The most common theory for this phenomenon is that benefits and costs for these projects suffers from optimism bias, where the former is exaggerated, and the latter is understated, caused by planning-fallacy or principal-agent problems in the planning phase. This paper analyses contracts regarding Swedish traffic infrastructure and finds that 83% go over-budget and the average contract has a cost overrun of 23%. Many characteristics of the contract can affect the quality of the forecasted cost. Railway contracts overrun their budget 11% more than road contracts, the overruns are smaller for the more common type of work regarding investment or maintenance for both rail and road and the overrun increases by 3% if the agreed cost of the contract grows by 1% and by 4,5% if the contract takes one more year to finish. Contracts to build infrastructure are made between The Swedish Transport Administration “Trafikverket” and private contractor. It matters how the contractor is compensated. Railway contracts show 13% lower overruns and all contracts show lower increases by time to finish and size if the compensation is in a fixed price instead of unit price. The conclusion states that the planning of contracts does suffer from optimism bias where both planning-fallacy and principal-agent problems are reasonable parts of the explanation. Trafikverket can use their budget more efficiently and the problem can be countered by stronger incentives to make a correctly planned budget.}},
author = {{Lindholm, Lucas}},
language = {{swe}},
note = {{Student Paper}},
title = {{Väg-ra kostnadsöverskridning i trafikinfrastruktur}},
year = {{2020}},
}