Agencies tend to select projects that, once constructed, do not generate ridership levels that warrant their construction. In short, many project projects are overbuilt and a less costly alternative would satisfy the project need. The selection of capital-intensive projects contributes to cost overruns and can lead to the reputation of infrastructure projects as mismanaged, wasteful investments. A variety of political, financial, and accounting incentives support the construction of projects whose capacities far exceed demand. These incentives include political preference for large, splashy projects that generate media attention, financing structures that favor capital intensive projects, and accounting structures that inaccurately predict future benefits.
Forecasting models used to calculate future ridership levels rarely correspond with actual travel behavior. This distorts the benefits attributed to a project in cost/benefit analysis and biases decision-making in favor of projects whose full benefits will not be realized. Current modeling practices typically forecast travel patterns for a 30 year time period, making it challenging to accurately incorporate changes to local economies that affect travel patterns. Adjusting the forecast year closer to the present reduces the uncertainty of inputs that affect future travel.
Improve cost estimation
Underestimating the cost of capital projects reduces the effectiveness of cost/benefit analysis used in project selection. Many approaches can improve cost estimates, such as conducting extensive engineering studies before deciding on a preferred alternative to better understand costs associated with each alternative, relying on cost estimate data from previous projects to more accurately predict costs, increase project transparency to generate stakeholder support and avoid costly changes later in the project development, and establish a clearly defined scope and schedule to minimize uncertainty and delay.
- TCRP Research Results Digest 78: Managing Capital Costs of Major Federally Funded Public Transportation Projects. 2006. The Transit Cooperative Research Program, sponsored by the Federal Transit Administration, conducted a study on "Managing Capital Costs of Major Federally Funded Transportation Projects." The report contains strategies to better manage costs at all stages of project development.
- Pickrell, D. "A Desire Named Streetcar." 1992.