Do reforms reduce the magnitudes of cost overruns in road projects? Statistical evidence from Norway

Abstract

Although governments often respond to the prevalent cost overruns of transportation projects by reforming the agencies charged with overseeing the construction of projects, the transportation research literature has not provided statistical evidence as to whether such reforms assist in reducing cost overruns. This paper provides such evidence using the Norwegian road sector as a case study. The agency in question was reformed twice, from a monopolistic to a semi-monopolistic organization, and finally, to a fully competitive organization in which road construction was divided out into a separate company and privatized. In this work, we use statistical inferences to explore the related issues. The data set is composed of 1045 projects evenly distributed across the three organizational forms. The results demonstrate that the impact of the reforms has not been equal. The most important impact occurred in the final reform of full competition in which both the cost overruns and delays in construction among larger projects were greatly reduced. The second reform appears to have had a contrasting impact. For transportation research in general, we call for additional studies that will reveal the extent to which efforts carried out by governments (such as reforms) improve the efficiency of these sectors.