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
We can get better at the estimates if you wanted a better estimate you could get one. But these projects are nearly always build public money and the way most places award these contracts the cheapest wins. So companies are forced to underestimate and use the cheapest materials and ways to win the contract. They also dont budget for any problems that might occure. So these budgets nearly never work out in the end. If you were to ask these companies for the amount of money they would need to build it the right way and not to worry about winning a contract they would 95% of the time give you a nearly correct estimate.
Now ofcourse unforseable things can always happen that will make projects more expensive. But that is not the norm and this can be seen in that if you have privatly build things they arent nearly as often over budget.
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