The entanglement of time and cost deviations in public projects

Abstract

AbstractThere is growing concern regarding cost and time overruns in public projects. However, despite the extensive literature on the subject, there is relatively little research on the impact of time overruns on cost overruns. This study assesses whether larger time deviations can lead to larger cost deviations. Our hypothesis is that a project with a time overrun is more likely to also have a cost overrun. The authors used a sample of 208 projects in Portugal, with data collected from the Portuguese Court of Auditors. Using the data, a number of econometric models were developed: Ordinary Least Squares, Generalized Linear Model, Tobit, and Probit. The instrumented variables and structural equation modelling techniques were applied to address potential endogeneity in the data. The analysis was controlled for factors such as political, governance, economic, and project variables. The results suggest that larger time deviations are associated with larger cost deviations. The inference is that projects that take longer to complete also tend to suffer from cost overruns.