Programmatic cost risk analysis for highway megaprojects

Highway megaprojects (construction projects over $100 million) are fraught with uncertainty. These projects have historically experienced increases in project costs from the time that a project is first proposed or programmed until the time that they are completed. Persistent cost underestimation reflects poorly on the industry in general but more specifically on engineers. Traditional methods take a deterministic, conservative approach to project cost estimating and then add a contingency factor that varies depending on the stage of project definition, experience, and other factors. This approach falls short, and no industry standard stochastic estimating practice is currently available. This paper presents a methodology developed by the Washington State Department of Transportation (WSDOT) for its Cost Estimating Validation Process. Nine case studies, with a mean cumulative value of over $22 billion, are presented and analyzed. Programmatic risks are summarized as economic, environmental, third party, right-of-way, program management, geotechnical, design process, construction, and other minor risks. WSDOT is successfully using the range cost output from this procedure to convey project costs to management and the public.