Hundreds of Years of Pain, With Minimal Gain: Capital Project Cost Overruns, the Past, Present, and Optimistic Future

Abstract

The cost overrun phenomenon plagues capital projects worldwide. While policymakers and practitioners are aware of the potential for cost overruns to occur while procuring their projects, they have struggled to mitigate them. This article takes the stock of cost overrun research and suggests two major periods stand out. First, it focuses on the period from 1960 to 2002 and briefly reviews studies examining issues influencing cost estimation accuracy. Then, we look at the present period (2002–2022), where the Planning Fallacy theory has been championed and identified as the best way to explain why cost overruns occur. While the Planning Fallacy has filled the theoretical void in the literature, we question its legitimacy as it has been unable to effectively address the cost overrun phenomenon. Moving forward, we suggest a line of inquiry based on the theoretical polyphony of the “Fifth Hand” principle, which offers a new framing to remedy cost overruns in capital projects.