Cable car project puts taxpayers' money at risk, says leading academic

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Posted by APM on 3rd May 2011

A leading academic has chastised Transport for London (TfL) for undercutting true project costs, a problem that he believes has infected transport ventures for the last 70 years.

Professor Bent Flyvbjerg, Director of Oxford University's BT Centre for Major Programme Management, believes that budgets for transport projects are set so early that they can’t be accurate, resulting in the taxpayers picking up the pieces when the spend has to increase.

This comes as costs for TfL’s cable car link across The Thames has more than doubled in the space of seven months.

Original estimates put the 1.1km scheme between London’s O2 Arena and ExCel centre at £25 million when it was announced in July 2010. Now the cost stands at over £50 million.

He said: “This is a problem because it places taxpayers at risk. On the one hand the government says investments like these must document value for money, yet with the other hand they rush through something like the cable car project with a huge cost overrun even before construction has started. This is not credible governance.”

To aid the quick delivery of project in time for next summer’s Olympic Games TfL is set to provide ‘upfront funding’ and seek to recoup its costs through private sponsorship and ticketing. But, it has not ruled out using public money to make up the short fall.

A spokesman said the initial costing had been a "preliminary estimate" and that the £50.5million contract included operational running costs of £5.5million for up to three years.

"The cable car will play a vital role in the once-in-a-lifetime regeneration of east London and provide a much-needed additional river crossing in this area of the city. It remains the intention that TfL will seek to recoup as much of the cost as possible through a number of sources including advertising, sponsorship and fare revenue."

According to Professor Flyvbjerg the same basic errors in costing have been repeated over the past 70 years – a combination of deliberate strategic misrepresentation and human optimism bias.

He said: “People are hard-wired to be optimistic but this can result in the misrepresentation of the forecast cost of a future project.”

By implementing Reference Class Forecasting and better incentives to stay on budget across all major projects, Professor Flyvbjerg believes costs should be more accurate by predicting the outcome of the planned action based on similar project outcomes.
 
 

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