The accuracy of risk-based cost estimation for water infrastructure projects: preliminary evidence from Australian projects

Infrastructure projects are still being plagued by cost overruns, delays and revenue shortfalls despite decades of practice and research. Risk-based estimating (RBE) is growing in popularity and has the potential to overcome the two main cost overrun factors—optimistic bias and strategic misrepresentation. Yet, little is known about the accuracy of RBE and its performance drivers. A comparison of water projects using RBE with a sample of construction projects using the conventional estimating approach shows that the projects estimated using RBE have better estimation accuracy than those estimated using more conventional approaches. In addition, the projects using RBE appear more likely to be under-budget while the ones using the conventional approach appear more likely to be over-budget. Further, through interviews and observations of the RBE process, three main performance drivers for the RBE method were identified to include outside view/collective experience, attention focusing and probabilistic, bottom-up modelling.