Friday, March 21, 2014

(Related update): Edwards's Law of Government Cost Overruns

Related update: Seems Edwards's Law of Government Cost Overruns applies to government projects outside the US as well.  In a recent post at Cato-@-Liberty, Edwards discusses the results of a study of 245 dam infrastructure projects across the globe and their performances in terms of expected vs. actual financial outlays.  Here's Edwards:
The projects had a “dismal track record” in terms of sticking to their promised budgets. The “actual construction costs of large dams are globally on average 96 percent higher than their budgets,” say Flyvbjerg and Ansar. That means a doubling, which is right in line with Edwards’ Law.
Like the original post below, the article is very interesting but very aggravating as well.  Nevertheless, it's definitely worth the time.

Original post (2/7/14):  The government almost always underestimates the costs of the sundry projects it involves itself in, and not by a little, either.  This fact has prompted Chris Edwards, an expert in the field at the Cato Institute, to formulate his Law of Government Cost Overruns.  Basically, take the claimed cost of any government project and multiply by 2 and you'll be near the final cost, though most likely still below the final cost.  In this post from Cato-@-Liberty, Edwards asks,
What is the hidden force behind Edwards’ Law? Are governments simply inept, or do they deliberately low-ball initial cost estimates in order to get projects approved? After reading about dozens—probably hundreds—of such incidents over the years, I think the answer is both.
Click here to read the rest of this fun, yet aggravating, post!