Large and systematic cost increases in government infrastructure investments
The Swedish Transport Administration systematically underestimates the costs of new infrastructure. However, despite the fact that the cost increases are very large, the Government rarely reconsiders its investment decisions, and neither the Government nor the Swedish Transport Administration report on how much costs change, according to an audit by the Swedish National Audit Office (Swedish NAO).
PHOTO: STILRENTFOTO
Every year central government invests more than SEK 30 billion on various infrastructure projects. In several large infrastructure projects, the costs have been considerably higher than planning has shown from the start. The Swedish NAO has therefore audited the Swedish Transport Administration’s cost estimates.
The audit shows that the Swedish Transport Administration systematically underestimates the costs of proposed investment projects. For the 142 investment projects in the latest revision of the national plan, the average cost increase was 39 per cent in just four years, totalling SEK 58 billion.
“It is above all during the planning phase that systematic cost increases occur. During the construction phase of the project, we find no systematic cost deviations," says Magnus Landergren, project leader for the audit.
The Swedish National Audit Office also notes that the Government rarely reconsiders investment decisions when the cost turns out to be higher. This is despite the fact that the planning system contains two additional checkpoints specifically to enable reassessment when new information is added.
“The Government therefore prioritises on the basis of early cost bases that are highly uncertain and underestimate costs. If the Government more often reassessed its investment decisions when it receives new information, central government investments in infrastructure would probably be more economically effective," says Auditor General Helena Lindberg.
The audit also shows that the Transport Administration’s work on cost estimates has a number of deficiencies. For example, the Transport Administration does not conduct an ongoing evaluation of what is causing the identified cost increases, which makes it very difficult to prevent similar events in the future.
Neither the Government nor the Transport Administration communicates the cost increases that arise in the course of a project, either for individual projects or overall for the entire national infrastructure plan.
“Infrastructure planning is a complex task that includes very large sums of money. Confidence in the Government’s efforts in the area would benefit from increased transparency both in relation to the Riksdag and the public," says Auditor General Helena Lindberg.
Recommendations
The Swedish NAO recommends that the Government reassess its decision on an infrastructure project in a national plan when significant cost increases take place. This reassessment should include a decision on whether the project should be discontinued.
Recommendations to the Swedish Transport Administration
- Conduct more systematic work to map the causes of cost increases and how these can be prevented.
- In connection with proposals for the national plan, compile and publish the changes made to cost assessments, benefits and content of the projects since the previous plan.
- Inform the Government of significant cost increases in a national plan project.
National plan
The National Transport Infrastructure Plan describes how central government infrastructure is to be maintained and developed. The plan is for twelve years, but is renewed every fourth year. The Riksdag decides on the financial framework, the Swedish Transport Administration draws up a proposal, then the Government decides. The National Plan includes:
- investments and fine-tuning measures on state-owned railways and national trunk roads
- operation and maintenance and targeted environmental measures throughout the national road network
- co-financing to municipalities through urban environment agreements
- investments in shipping (fairways and locks)
- central government co-financing for county plans.
Press contact: Olle Castelius, phone: +46 8-5171 40 04.
Presskontakt: Olle Castelius , telefon: 08-5171 42 06.
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