Recent research by the Grattan Institute challenges the conventional wisdom that scope changes are the main reason for cost overruns on infrastructure projects.2 Its analysis suggests that, for transport infrastructure projects, only 11 per cent of the cost overruns are attributable to scope changes, and the remaining 89 per cent of cost overruns are due to other causes. It found the biggest culprit to be premature announcement - when a politician promises to build a road or rail line at a particular costs, often in the lead-up to an election, and in a marginal electorate.
Indeed, the analysis reveals more than one-third of cost overruns occur between the time a politician announces the estimated cost of a project, and the time it receives a formal funding commitment.
The elimination of premature announcements would improve cost outcomes across all government infrastructure projects, not just PPPs.
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2 Marion Terrill, Cost overruns in transport infrastructure, Grattan Institute, 2016.