Phase 1: Project Identification

Strategic misrepresentation of cost estimates at identification stage

Cost estimates are strategically understated or overstated during project identification to secure approval, with expectations of recovering profits later through variations, claims, or renegotiations.

Red Flags & Indicators

  • Cost, benefit, and schedule estimates lack clear data sources, assumptions, or sensitivity tests.
  • Forecasts and schedules are overly optimistic, with limited benchmarking.
  • Operation and maintenance costs are not adequately taken into consideration.
  • Baseline estimates are revised repeatedly and managed informally, without explanation or an audit trail.
  • Terms of reference narrow the analysis or exclude credible alternatives.
  • Independent technical review is missing, rushed, or limited.
  • Large gaps appear between internal and external estimates without reconciliation.

Stakeholder Guidance

Stakeholder Exposure

Exposure includes relying on unrealistic baseline assumptions, which can lead to later disputes and raise both compliance; and reputational risks.

Decision Point

Before early engagement and bid/no‑bid decision, ensure that project assumptions and estimates are transparent and defensible. Proceed only if they are evidence-based and benchmarked.

Mitigation Actions

• Use standard estimating methods and transparent data sources
• Refuse pressure to tailor evidence to a predetermined option
• Maintain calculation files and benchmarking/reference-class checks with assumptions and data‑sources
• Present estimates as a range with stated confidence (e.g., P50/P80) and a clear contingency rationale
• Request internal sign-off for optimism-sensitive assumptions and any departures from estimating standards
• Request or commission independent peer review for key parameters (demand, costs, benefits) when estimates deviate from benchmarking
• Use internal compliance escalation processes and whistleblower channels, where available, to flag concerns and avoid certifying unreliable estimates

Mitigation Resources

Evaluate the assumptions, quantities, costs, benefits, and scenarios underpinning the cost estimate package; benchmark and challenge estimates where unsupported assumptions, weak data, or departures from standard estimating methods make the estimate unreliable.

Appraisal and cost-estimate assurance — https://toolbox.infrastructuretransparency.org/resource/appraisal-and-cost-estimate-assurance/

Identify fraud risks in the cost estimate package; define preventive and detective controls, assign internal responsibilities, and track incidents, escalations, and corrective actions relating to unreliable or manipulated estimates.

Fraud risk assessment and response — https://toolbox.infrastructuretransparency.org/resource/fraud-risk-assessment-and-response/