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Cost overrun example?

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Is cost overrun the amount that the project incurs above the budgeted cost? Please explain through a an example with relevance to construction projects.
asked 10 years ago by anonymous

1 Answer

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Yes, a cost overrun is any increase of the cost over the initial planned cost. Almost 90% of construction projects experience cost overruns.

There are 3 very known projects with considerable cost overruns:

- The Sydney Opera House (budget: $7 million, real cost: $100 million)
- The Montreal Olympic Stadium (budget: $134 million, real cost: $264 million)
- Denver International Airport  (budget: $2.8 billion, real cost: $4.8 billion)

A simple example of a cost overrun is the following. Let's say you are constructing a residential tower, your planned cost (budget) for the tower is $10 million, but as the project progressed, you started noticing that it will definitely cost you more, mainly because you (the construction project manager) failed to estimate costs properly. By the end of the project, the total costs are $15 million, which means that your cost overrun is $5 million ($15 million - $10 million).
answered 10 years ago by TheManager (6,220 points)

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