Cost overruns of major government projects

Key findings

In an analysis of 10 recent and in-progress UK major government projects, overruns have grown to a total of 32.7 years and £17.2 billion, or £624 per UK household1.

The £17.2 billion accumulated overrun could have paid for seven of the 10 projects at their initial cost estimates, with £4 billion leftover.

Out of the 10 projects, the modernisation of the Great Western railway, Carrier Strike, and the Emergency Services Network programme incurred the most significant cost overruns at a combined £10.8 billion.

Both internationally and in the UK, major project forecasts have been shown to be consistently optimistic in terms of both cost and time to completion and almost always take longer and cost more than expected.

Multiple studies have suggested costs are intentionally underestimated to secure project approval, which means the potential for costs to overrun dramatically are greatly increased.

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Introduction

The whole life cost of ongoing major government projects is currently £442 billion2. £210 billion of this will go towards infrastructure and construction, £138 billion towards military capabilities, £84 billion towards transformation and service delivery, and £10 billion on ICT infrastructure3. Yet when it comes to major projects, government has a troubling record: between 2013 and 2019 the number of major projects deemed at least “probable of a successful delivery” by the Infrastructure and Projects Authority, has fallen steeply from 48 per cent in 2013 to just 17 per cent in 20194.

Nor does government have a pre-existing positive reputation when it comes to major projects. In 2009, the TaxPayers’ Alliance discovered that 240 UK capital projects had seen costs overrun by a total of £19 billion5. Meanwhile, high profile projects like HS2 face bitter opposition amongst both the public and in parliament, whilst Crossrail has been delayed by up to 27 months, and has seen costs run £3 billion over its 2010 budget.

This paper makes it clear that overruns remain a major problem for government and for taxpayers. Projects have frequently gained approval based on flawed estimates that sometimes fall billions of pounds short of the final cost. Furthermore they have taken years longer to complete. When projects are not finished on time, it is not just a matter of paying for labourers and equipment for a longer period, but often one of opportunity cost. Every month that Crossrail is delayed is another month that taxpayers are not benefiting from it, and Transport for London is not collecting anticipated revenue. As the Astute submarine programme has gradually slipped back ever further, the risk has increased that the Dreadnought submarine programme will be delayed due to shortages of shipyard space. This means current submarines must be kept at sea for longer, and the Royal Navy’s ability to conduct operations is put at risk.

This report first explores why major government projects so frequently go over-budget. It then examines 10 ongoing or recently completed projects that have experienced overruns in order to illustrate the significant costs that result from flawed forecasting.

Click here to read the research paper.


 

Calculation based on ONS Families and households data. ONS, Families and households, Office for National Statistics, 7 August 2019, table 5: Households by size.

Infrastructure and Projects Authority, Annual Report on Major Projects 2018-19, 18 July 2019, p.5.

3 Ibid

Ibid, p.19.

O’Connell, J., Out of Control: How the Government overspends on capital project, TaxPayers’ Alliance, 20 November 2009.