Cost Overruns and the Proposed Panay-Guimaras-Negros Inter-Island Bridge Project, Philippines

Studies have shown that mega transportation infrastructure projects underperform when the actual cost and benefits are compared to the forecasts utilized in the project proposals. The projected costs have been shown to be commonly underestimated while forecasted demand, overestimated. In this research, a database of transportation projects from the Philippines was assembled to look into the distribution of cost forecast inaccuracies. An ambitious project in the Western Visayas Region in the Philippines is assessed. The Panay-Guimaras-Negros (PGN) Bridge Project intends to connect the islands of Panay, Guimaras, and Negros via inter-island bridges that span a length of approximately 23 km. In this study, the PGN project is placed in the distribution of previously completed projects of the same scale and lessons are drawn from their experience. Moreover, the Reference Class Forecasting (RCF), as devised by Flyvbjerg, is tackled in order to improve risk assessment in transportation infrastructure project proposals. If the proposed PGN project were placed in the distribution of previously completed projects based on the databases established, a 23% to 55% cost escalation is to be expected when considering only a 20% risk of cost overrun. This translates to a 25% to approximately 33% allotment from the total national public works budget to the PGN proposal. Since the Philippines does not have the recipe for success for this kind of project, caution should be exercised in handling this proposal.