Nested rationality: the ecological foundations of the Fifth Hand theory of infrastructure project cost mis-performance

The Fifth Hand is an emerging behavioural–institutional theory of project behaviour that explains infrastructure project cost mis-performance through interactions among individual decisions, organisational dynamics, and institutional logics. However, the ecological rationality underpinning these interactions has remained implicit, limiting understanding of why cost mis-performance in infrastructure projects arises in volatile, uncertain, complex, and ambiguous conditions. Our paper addresses this gap by integrating Gigerenzer’s cognitive (mind ↔ environment) and Smith’s institutional (institution ↔ environment) traditions of ecological rationality to develop what we term nested rationality. This integration establishes the ecological foundations of the Fifth Hand, explaining how organisational and institutional environments influence reasoning strategies and the interpretation and treatment of recognised cost pressures under uncertainty. Our paper extends the Fifth Hand by providing an ecological explanation of infrastructure cost mis-performance and identifying principles for improving decision-making throughout an infrastructure project’s pre-and-post contract phases.