Dams, dam costs and damnable cost overruns

Major restructuring including commercialisation of the water authorities in Australia during the past several decades has resulted in the loss of much valuable information on dam infrastructure costs. This paper sets out to provide an Australian perspective on dam costs and dam cost overruns, examine patterns of dam costs and cost overruns, and develop a good predictor of costs and cost overruns for the Australian situation. Several cost metrics, dam costs and related data, were collated for 98 dams constructed across Australia since 1888. Dam costs, operation and maintenance (O&M) costs, and construction overrun costs were related to independent variables including dam site terrain characteristics and catchment and climate attributes. Each metric was related through multiple regression to mainly physical and climate attributes associated with the dam. Multiple correlation coefficients account for between 50% and 80% of the variance in the dependent variable. The exceedance range (defined as 75% exceedance to 25% exceedance) of final dam costs (2016 AUD) (98 dams) is from 393 per ML of reservoir storage to 2040 per ML. Annual O&M costs (33 dams), expressed as a % of final dam cost, varies from 0. 14% to 0. 35%, though these O&M costs do not include major upgrades. The results of this study of Australian dams are in keeping with international studies that have found the estimated costs of large infrastructure projects are systematically biased downwards. In this study the median and mean cost overruns (40 dams), expressed as a percentage of the dam cost estimated immediately prior to construction, are 49% and 120% respectively with the smallest and largest cost overrun values being −48% and 825% respectively. Based on the available data dam cost overruns appear to be more prevalent in sedimentary rock than hard rock (e. g. igneous and metamorphic rocks) settings. The strong likelihood of dam cost overruns occurring has implications to forecasted benefit-cost ratios, and supports assertions that large dam cost and contingency estimates should be checked at pre-feasibility and feasibility stages by an independent organisation and by persons highly experienced in dam design, construction and costing. Keywords: Operation and maintenance cost, ANCOLD, Water resource management, Reservoir yield, Multiple regression, Water supply