Escalating project costs and the Gumbel distribution

Cost overruns are a pervasive phenomenon for many construction and engineering projects. Common experience is that the larger and more complex the project, the larger the potential overrun. In the case of London Crossrail – one of the most ambitious infrastructure projects ever undertaken in the UK – overruns on just three stages of the project have been found to range from 70% – 358%. Intervening cost hikes, correspondingly, can be shown to conform to a Gumbel distribution. The latter discovery enables realistic overrun probabilities to be computed – vital to effective contingency planning.