Olympic Stadium - Take an estimate and double it
After speaking with the project manager responsible for the Olympic Stadium build project and one of the UKs foremost experts on major transport infrastructure projects, I was struck by the huge level of cost overrun even before any work had commenced.
Reacting to reports in the national press that the Olympic Stadium had actually come in way over its original estimate of 240m, I asked project manager Ian Crockford to explain how the planners had got things so wrong.
He said that the original estimate was just that, an estimate. The costing had been based on the information available at the time and before any in-depth site analysis had been carried out.
It was delivered last month on time, under budget at 486m.
A week later, while researching a piece for e-Project, I came across a similar explanation. In October 2010 the budget for Transport for Londons cable car project was set at 25m. Seven months later it was 50m. A 100% increase.
The reason, a TfL spokesperson said, was that this too had been a "preliminary estimate". But even factoring in for scope creep and other unforeseen consequences, why is there such a huge variance and why do organisations have so much difficulty calculating project budgets and sticking to them?
One explanation is that the reality of what it costs to build an 80,000-seat stadium or a link across the Thames is not something that senior management wants to hear. To push it through, it therefore makes sense for planners and promoters to disguise the actual costs. In other words set the costs purposely low in order to get the project approved.
But can this be right especially when taxpayers money is put at risk? And should this level of deliberate strategic misrepresentation be allowed to go unchecked?
The answer on both counts is no but dont hold your breath for a quick fix.
According to Professor Bent Flyvbjerg, Director of Oxford University's BT Centre for Major Programme Management, the same basic cost errors have been repeated for the last 70 years.
The golden rule, then, if you want to find out the true cost of a project: take an estimate and double it.