Project Cost Overrun Causes, Consequences, and Investment Decisions

Cost overrun is common in public and private sector projects. Costs tend to grow, plans fail and financial problems follow, but how can we approve the right projects if we cannot estimate their true cost? This book, for academics in project management, management accounting and corporate finance, as well as for managers in the public and private sectors, offers a new way of thinking about the causes and consequences of cost overrun for firms and society. It demonstrates that there is a logic behind cost growth and overrun, identifies projects and situations that are more vulnerable, and examines the effects of increased costs. It further identifies the negative and positive consequences of cost overrun, analyses how and why preconditions for cost overrun differ when the logic governing private firms dominates versus the logic of the political sector, and explains why cost can sometimes be of lesser importance to decision makers.

1. Introduction; 2. Project planning, cost estimates and deviations in major projects; 3. The consequences of cost overrun; 4. A model of cost overrun and growth; 5. The logic of economics versus the logic politics; 6. Explaining cost overrun, summary and conclusions.

Esbjörn Segelod is Professor in Business Administration at Mälardalen University, and was previously at Göteborgs Universitet, Sweden and Uppsala Universitet, Sweden. Most of his research has focused on the appraisals, assessments and processes associated with investments in major firms, entrepreneurship, the economic aspects of software development and accounting history. He has previously published nine books, four as editor.