Revisit of Reference Class Forecasting (RCF)

Estimating Costs of Infrastructure Projects



By Dr. Clifford Gray

Oregon, USA


Executive Summary

The majority of infrastructure projects funded by taxpayer dollars generally result in cost and schedule overruns.  Managers should revisit reference class forecasting (RCF) to focus on how its use improves forecast accuracy.  Key managerial actions supporting use of RCF are suggested.   Will your organization accept the challenge of reducing overruns?


The Boston Consulting Group estimates that $35 trillion to $40 trillion will be required by 2030 to satisfy the growing global need for infrastructure development. BCG also estimates that, at best, worldwide governments will be able to fund almost half the requirement, leaving a shortfall as large as $20 trillion to $25 trillion alone.1 The US alone will need 5.4 trillion to improve infrastructure of roads, rail, water, and electricity by 2030.2   Governments will fund most of these projects.   Given the magnitude of the numbers and their impact on governments and society, the historical problem of horrendous over spending needs to be addressed and changed. Taxpayers deserve better.

Unfortunately past cost overruns in megaprojects have resulted in scandalous errors with projects finishing significantly higher than original estimated budgets.  The literature abounds with examples. In general these studies agree that nine out of ten projects exceeded budget.  “Overruns of 50% are common; cost overruns over 50% are not uncommon.” 3   A few famous cost overruns are listed here: (1 ibid)

Lake Placid Winter Olympics                                 550 %
Boston Big-Dig Tunnel                                          220 %
Denver Airport                                                      200 %
Minneapolis Light Rail                                           190 %
Channel Tunnel                                                      80 %
Bangkok Metro line                                                 70 %                          

The cost overrun problem is very much alive today.  Why are original cost estimates so far from actual costs?  What are the causes of such large estimating errors? What can be done to make cost estimates more realistic?  Could rigorous use of reference class forecasting (RCF) and management changes reduce those errors and save billions of taxpayers’ money?


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About the Author

Dr. Clifford Gray

Oregon, USA



Cliff Gray
, emeritus professor from Oregon State University, has long been a project management advocate.  Cliff taught student and executive classes on all aspects of project management.  He has been active in the PMI organization for decades; he was one of two founders of the Portland, Oregon chapter.   He has published numerous research and applied management papers. Cliff has published three project management texts.  The latest book is, Project Management:  The Managerial Process, 7th Edition, coauthored with Erik Larson of Oregon State University and is printed in five languages.  The text presents a careful balance of the technical processes and the socio-cultural environment in which project managers operate.

Cliff can be contacted at [email protected].