External quality assurance of cost estimates in major public projects: empirical evidence on cost performance

Abstract

Purpose

Value creation for society from public projects requires that the overall benefits exceed the use of taxpayers' money. At the same time, cost overruns in public projects are a well-documented feature in the literature, but practical guidance on reducing the extent and magnitude of overruns is rare. In 2000, Norway introduced a governance regime that includes mandatory external quality assurance (QA) of cost estimates for major public projects. This paper compares the cost performance of public projects on each side of this QA scheme.

Design/methodology/approach

We use an original dataset covering 1,704 projects from 2000 to 2021, reported first-hand from Norwegian public agencies. We apply quantitative methods in the form of descriptive statistics, regression models, and statistical testing of hypotheses to answer our research questions.

Findings

The mean cost overrun across projects in our dataset is smaller than several previous international studies have reported. We find no statistical support for different cost performances between QA and non-QA projects. Secondly, cost overruns seem to vary between different public sectors. A third finding is a small development with lower cost overruns over time for the non-QA projects, and we raise the question of whether the QA scheme has contributed to overall learning effects. The fourth finding is that cost deviations are quite independent of project size.

Originality/value

The paper offers novel insights for decision-makers and researchers on the effects of external quality assurance on cost performance in public projects.