Eli5: why are estimated budgets for big construction projects always wrong and end up spending more than expected? Why can’t we get better at these estimates?
In: Economics
Basically how most of these projects work is that there are bids. Companies will give their plan and their budget and then the client chooses which one they want.
The two big issues this leads to is
1. People underestimate the budget so that they are more likely to win the bid. They want the client to choose their cheap option and by the time they have to go over budget, it’s too late to switch. The budgets are usually somewhat accurate but don’t take into account some smaller factors or are built off the idea of no mistakes, which is unrealistic
2. They have to put together these plans quickly and generally most of the people that bid on something don’t get the job, so it’s hours of work for no pay. They often kinda rush through the plan and if they win they come back and refine it. As you take into account more factors, it rarely decreases the projected costs
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