Should we build more large dams? The actual costs of hydropower megaproject development

A brisk building boom of hydropower mega-dams is underway from China to Brazil. Whether benefits of new dams will outweigh costs remains unresolved despite contentious debates. We investigate this question with the "outside view" or "reference class forecasting" based on literature on decision-making under uncertainty in psychology. We find overwhelming evidence that budgets are systematically biased below actual costs of large hydropower dams - excluding inflation, substantial debt servicing, environmental, and social costs. Using the largest and most reliable reference data of its kind and multilevel statistical techniques applied to large dams for the first time, we were successful in fitting parsimonious models to predict cost and schedule overruns. The outside view suggests that in most countries large hydropower dams will be too costly in absolute terms and take too long to build to deliver a positive risk-adjusted return unless suitable risk management measures outlined in this paper can be affordably provided. Policymakers, particularly in developing countries, are advised to prefer agile energy alternatives that can be built over shorter time horizons to energy megaprojects

An Empirical Analysis of DoD Construction Task Order Performance

Cost and schedule overrun plague over 50 of all construction projects, engendering diminished available funding that leads to deferred maintenance and impaired award ability for needed projects. Though existing research attempts to identify overruns sources, the results are inconclusive and frequently differ. Accordingly, this research reviews DoD construction contract data from the past ten years to identify the contract attributes of 79,894 projects that correlate with superior performance for use in future project execution. This research starts with creating a database that houses the largest single source of construction contract information. The research then evaluates the data to determine if differences in project performance exist when comparing contracting agents, funding agents, and award months. Next, the research utilizes stepwise logistic regression to determine the significant contract attributes and predict future projects overrun likelihoods. Model accuracy for predicting the likelihood of cost and schedule overrun is 65% and 75%, respectively. Finally, this research concludes by providing insights into efforts that could improve modeling accuracies, thereby informing better risk management practices. This research is expected to support public and private sector planners in their ongoing efforts to execute construction projects more cost-effectively and better utilize requested funds

Predicting over Target Baseline (OTB) Acquisition Contracts

Cost estimators use a variety of methods to develop estimates at completion (EACs) and new methods continue to be developed. Research has shown there is no best method for computing EACs for all acquisition contracts. However, some methods perform better under specific circumstances. In 2009, Captain Trahan investigated the use of a Gompertz growth model for developing EACs. She found that this method is more reliable for Over Target Baseline (OTB) contracts than the standard indexed based approaches. Captain Trahan’s model is an excellent model to use for OTB contracts or contracts with a high likelihood of becoming an OTB contract. In this study, we attempt to develop a model that predicts whether an acquisition contract is likely to become an OTB. By identifying contracts that are likely to become OTB, we can apply the Gompertz growth model to develop better EACs. Furthermore, an OTB, by definition, recognizes a cost overrun. Therefore, the ability to predict OTBs would allow us to understand what may cause cost overruns. However, our models indicate that we are unable to predict an OTB. This indicates that the OTB process may be used randomly which leads us to question the benefits of OTBs

Detail Engineering Completion Rating Index System (DECRIS) for Optimal Initiation of Construction Works to Improve Contractors' Schedule-Cost Performance for Offshore Oil and Gas EPC Projects

Engineering, Procurement, and Construction (EPC) contractors with lump-sum turnkey contracts have recently been suffering massive profit losses due to re-works and schedule delays in offshore oil and gas EPC megaprojects. The main objective of this research is to develop and implement a detail engineering completion rating index system (DECRIS) to assist EPC contractors to optimize fabrication and construction works schedules while minimizing potential re-work/re-order. This is achieved through adequate detail design development and results in minimizing schedule delays and potential liquidated damages (i.e., delay penalties). The developed DECRIS was based on findings from an extensive review of existing literature, industry-led studies, expert surveys, and expert workshops. The DECRIS model is an evolution, and improvement of existing tools such as the project definition raking index (PDRI) and front-end loading (FEL) developed specifically for the early stage of engineering maturity assessment (i.e., planning, basic design, and front-end engineering design (FEED)), prior to EPC projects. The DECRIS was evaluated and validated with thirteen sample as-built offshore megaprojects completed recently. When the DECRIS was applied to the completed projects post-hoc, a correlation (R-squared 0.71) was found between DECRIS scores and schedule/cost performances. This is much superior to the PDRI-Industrial model's correlation (R-squared 0.04), which was primarily devised for owners' basic engineering or FEED completion assessment. Finally, as a means of further validation, project schedule and cost performance of an ongoing project was predicted based on the correlations found on the thirteen completed projects. The resultant predicted schedule and cost performance was well matched with the current project performance status. Based on the accuracy of the DECRIS model found in the validation, said model is an effective prospective tool for EPC contractors to manage their engineering and procurement/construction risks during the initial detail design stages.11sciessciscopu

Cost Estimating and Forecasting for Highway Work in Kentucky (Study KYSPR-94-158)

Starting 1 July 1992, KRS45.245 granted the Interim Joint Committee on Transportation oversight of the biennial highway plan, including a review of all authorized highway project phases that exceed their estimates by 15%. Estimates developed using current methods were not sufficiently accurate to preclude cost overruns in excess of 15%. Estimates were prepared before design began in order for the project to be included in the six-year plan. These estimates were not revised after a more detailed scope was available. There were 562 overruns \u3e15% at a cost of approximately $265 million during the period 7/1/92-7/1/98. All overruns were approved for the necessary additional funding. The requirement for review of overruns \u3e 15% was canceled by the General Assembly (HB655) effective 1 July 1998. There was a need for better cost estimating and forecasting for highway work in the Commonwealth of Kentucky. This research effort studied the causes of the 562 cost overruns \u3e 15% and attempted to improve the conceptual estimating process. A computerized conceptual estimating model, KYEstimate, was developed to assist estimators in preparing and justifying conceptual estimates that must be made prior to detailing seeping of projects. Recommendations and conclusions are presented

Cost Estimating and Forecasting for Highway Work in Kentucky [1997]

There is a need for better cost estimating and forecasting for highway work in the Commonwealth of Kentucky. KRS45.245 grants the Interim Joint Committee on Transportation oversight of the biennial highway plan, including a review of all authorized highway project phases that exceed their estimates by 15%. Estimates developed using current methods are not sufficiently accurate to preclude cost overruns in excess of 15%. Estimates are prepared before design is begun so that a project may be included in the six year plan. The estimates are not revised after a more detailed scope of the project is developed during design and after design is completed. Consequently, there have been 455 overruns since 1992. All have been approved for the necessary additional funding. Causes of cost overruns for the 455 overruns during the past five years were studies. The development of a conceptual estimating model, KYEstimate, was continued and reported on. Recommendations and conclusions are presented

A Forecast Model for the Level of Engineering Maturity Impact on Contractor's Procurement and Construction Costs for Offshore EPC Megaprojects

This paper focuses on the influence of detailed engineering maturities on offshore engineering, procurement, and construction (EPC) project procurement and construction cost performance. The authors propose a detailed engineering completion rating index system (DECRIS) to estimate the engineering maturities, from contract award to beginning of construction or steel cutting. The DECRIS is supplemented in this study with an artificial neural network methodology (ANN) to forecast procurement and construction cost performances. The study shows that R-2 and mean error values using ANN functions are 20.2% higher and 19.7% lower, respectively, than cost performance estimations using linear regressions. The DECRIS cutoff score at each gate and DECRIS forecasting performance of total cost impact were validated through the results of fifteen historical offshore EPC South Korean mega-projects, which contain over 300 procurement cost performance data points in total. Finally, based on the DECRIS and ANN findings and a trade-off optimization using a Monte-Carlo simulation with a genetic algorithm, the authors propose a cost mitigation plan for potential project risks based on optimizing the engineering resources. This research aids both owners and EPC contractors to mitigate cost overrun risks, which could be continuously monitored at the key engineering gates, and engineering resources could be adjusted per optimization results.11Ysciescopu

Influence of Human Behavior on Success of Complex Public Infrastructural Megaprojects in Kenya

The main objective of this study was to investigate the influence of human behavior on the success of public infrastructural megaprojects in Kenya. The need for this study arose from the thesis that complexity due to human behavior is the main cause of waste and failure that results in infrastructural megaprojects being delivered over budget, behind schedule, with benefit shortfalls, over and over again. The study was designed as multiple-method research, based on virtual constructionist ontology recognizing that complexity is the mid-point between order and disorder. A cross-sectional census survey of 27 completed public infrastructural megaprojects was conducted using two interlinked questionnaires assessing human behavior constructs and project success. A total of 108 respondents made up of project managers, team members and organizational sponsors, participated in this study. Using both descriptive and inferential analysis, the results of this study have confirmed that human behavior significantly influences success of public infrastructural megaprojects. Optimism bias remains the main individual behavior that leads to cost and schedule underperformance in infrastructural megaprojects but loss aversion is the most occurring cognitive bias. In light of this finding, the study recommends that implementing organizations adopt structures that allow for continued business justification, focus on products and give project managers sufficient authority over project resources in line with the postulations of the structural contingency theory