Government Cost Overruns

People tend not to spend other people's money as carefully as they spend their own. In governments, policymakers and administrators deal with large amounts of other people's money, and so wasteful spending is a big problem. One manifestation is the pattern of cost overruns on procurement and large government projects — projects that begin with a price tag of $1 billion often end up costing $2 billion. Federal cost overruns are chronic in budget areas such transportation, energy, defense, and technology.
The problem of cost overruns is widely recognized, but policymakers seem unable or unwilling to stop it. This essay provides examples of the problem and suggests reasons why it occurs. A table at the end includes a sampling of cost overruns on large federal projects. Cost overruns are illustrative of the persistent failures of federal management and provide one justification to downsize the government.

Chronic Problem Areas

Transportation. Large cost overruns are routine on federally funded transportation projects. A good example was the Springfield, Virginia, highway interchange project. When initiated, Virginia officials claimed that the project would cost $241 million, but it ended up costing $676 million by the time it was completed in 2007.¹ To add insult to injury, Virginia officials said that the project was finished "on time and under budget," but the Washington Post correctly pointed out that "the final cost was nearly three times what was first projected."²
The most infamous budget buster in highway history was probably Boston's "Big Dig," or Central Artery project. In 1985, government officials claimed that the Big Dig would cost $2.6 billion and that it would be completed by 1998. The project's cost ballooned to $14.6 billion and it was finally completed in 2005.³ The federal share of the cost was $8.5 billion.

Read more: http://www.downsizinggovernment.org/government-cost-overruns