Cost overrun

A cost overrun, also known as a cost increase or budget overrun, involves unexpected incurred costs. When these costs are in excess of budgeted amounts due to a value engineering underestimation of the actual cost during budgeting, they are known by these terms.

Cost overruns are common in infrastructure, building, and technology projects. For IT projects, a 2004 industry study by the Standish Group found an average cost overrun of 43 percent; 71 percent of projects came in over budget, exceeded time estimates, and had estimated too narrow a scope; and total waste was estimated at $55 billion per year in the US alone. Other studies concluded that costs for it projects are overrun by an average of 33 to 34 percent.

Many major construction projects have incurred cost overruns; cost estimates used to decide whether important transportation infrastructure should be built can mislead grossly and systematically.

Cost overrun is distinguished from cost escalation, which is an anticipated growth in a budgeted cost due to factors such as inflation.