The More Things Change, the More They Stay the Same

There is an old saying in French that translates as “the more things change, the more they stay the same.” This epigram is applicable to cost growth. Oxford professor Bent Flyvbjerg has studied cost overruns for cost overruns for a variety of projects, including bridge, roads, and tunnels. He has found that over the last 100 years, cost growth for these kinds of efforts is common, and relatively large on average. Norman Augustine, a former Army official and a former CEO of defense giant Lockheed Martin, found in the early 1980s that the average cost growth for Department of Defense development projects was 52%. He stated that you could take the planned development cost, multiply by 1.52 to get the expected actual cost. Augustine termed this the Las Vegas Factor of Program Planning Development. The graph below, reproduced from his classic project management book Augustine’s Laws, also illustrates that 90 percent of development projects experience cost overruns.

In 2010, I presented a paper at a conference that included the results of a cost overrun study I had conducted for 289 aerospace and defense projects. The average cost overrun was again 52%, the same value Augustine had found 30 years earlier. In 2018, I co-authored a paper with my friend and colleague Andy Prince, who had conducted a cost growth study of NASA. He found that the average cost growth was also approximately 50%. Large projects that cost in the billions of dollars, often called mega projects, get much of the headlines, but projects of all sizes experience cost growth. The graph below illustrates this effect.

Four different data sets, collected at different points in time and for a variety of projects, demonstrates that cost growth is an enduring phenomenon. The occurrence of growth of this amount indicates tremendous risk is inherent in these programs. Unfortunately, most projects do not pay enough attention to risk and uncertainty.

This issue is discussed at length in my forthcoming book Solving for Project Risk Management: Understanding the Critical Role of Uncertainty in Project Management. McGraw-Hill is planning to release the book on November 3rd, but it is now available for pre-order from Amazon and Barnes and Noble. You can read Chapter 1 here.