Author
Vaughan S.
Vaughan Stemmett

Major infrastructure projects are increasingly complex, relying on contractors with specialised skills to deliver on time and within budget. Limited workforce capacity and evolving project risks mean that delays and cost overruns are a constant challenge. Identifying and managing risks early helps project teams keep projects on track, protect budgets, and ensure infrastructure delivers on intended outcomes.  

In this blog, we outline the main causes of cost overruns and identify strategies to prevent them.  

What drives budget overruns? 

Insufficient early-stage planning and cost estimation 

Underdeveloped business cases, limited market testing, and optimistic assumptions can result in budgets that do not reflect actual delivery costs. Poorly defined project scope and narrow risk assessment can also lead to significant changes during project delivery. 

Entities should set realistic budgets by assessing the full cost of a project, aligning budgets with contractor or consultant agreements, and using past project costs as benchmarks. Budgets should be confirmed in writing, with early notification if overruns are likely. 

Before investing in an asset, entities should prepare a business case that aligns with their strategic objectives and demonstrates how value for money will be achieved. They should evaluate options thoroughly, consider whole-of-life costs and benefits, and determine an acceptable level of risk. 

Queensland Government frameworks, including Queensland Treasury’s Project Assessment Framework, support consistent and thorough project assessment, from initial need through to final delivery. 

Weak project controls and governance 

Without systems to track expenditure, monitor milestones, and escalate emerging issues, small variances can accumulate into a significant overspend. Reliance on outdated financial information or delayed reporting can prevent timely intervention.  

Our report Contract management for new infrastructure (Report 16: 2021–22) highlighted projects where a lack of oversight affected project budgets and timelines. 

Contract misalignment and variation risk  

Budgets are vulnerable when contracts do not clearly define deliverables, pricing structures, or mechanisms for controlling variations.  

Scope changes are sometimes beneficial, allowing entities to address unforeseen risks or opportunities, but frequent or poorly managed variations often indicate issues such as inadequate stakeholder consultation or unclear contract deliverables. Clearly defining deliverables before awarding contracts can reduce unnecessary variations. 

In our report Contract management for new infrastructure (Report 16: 2021–22), we identified issues with how contract variations were approved, including internal control weaknesses, limited oversight and insufficient guidance. Some project teams varied contracts without required approvals, and in some cases, approvals were granted only after work had begun.    

When contract management is rushed or overlooked, avoidable contract variations can occur, contributing to cost and schedule overruns. 

External factors  

Market volatility, supply chain disruptions, and workforce shortages can quickly increase project costs. While this is often beyond an entity’s control, inadequate risk management can magnify the impact. 

Effective risk-management processes are critical to planning and decision making throughout a project’s life cycle. In our report Contract management for new infrastructure (Report 16: 2021–22), some entities had not clearly established internal risk frameworks, meaning emerging cost pressures were not always detected early, increasing the risk of overruns. 

Strategies to prevent cost overruns 

Preventing cost overruns requires strong planning, oversight, and monitoring throughout a project’s life. Key strategies, drawn from Major projects 2024 (Report 9: 2024–25) and Transport: 2018–19 results of financial audits (Report 5: 2019–20), include: 

Governance and oversight  

Effective governance ensures clear accountability for project delivery. Committees and governance groups need defined roles and responsibilities, supported by aligned risk-assessment processes across entities and partners.   

They must have the authority to test assumptions, require complete and accurate reporting, and act when costs, timelines, quality, or scope deviate from plan. Governance arrangements should support coordination across all levels of government and adapt as projects move through planning, construction, and completion. 

Disciplined financial monitoring 

Regularly updated budgets and clear reporting that integrates financial and non-financial performance help prevent unexpected cost pressures. Transparent reporting that highlights variances early, explains their causes, and informs decisions about project changes, support sound budget management. 

Managing budgets, timelines, and contingencies helps ensure projects remain within approved funding and meet community expectations. 

Managing project timelines 

Strong timeline management optimises resources and limits cost and scope changes. Long-term infrastructure projects face fixed completion dates and evolving challenges, including technological developments, regulatory changes, and shifting stakeholder expectations. 

Ineffective timeline management can compress schedules, leading to higher costs, rushed decisions, and infrastructure that does not meet intended outcomes. 

Conclusion 

Applying these strategies throughout a project’s life cycle helps entities identify risks early, make informed decisions, and keep projects on track.  

Clear governance, disciplined financial monitoring, and proactive timeline management work together to reduce the likelihood of cost overruns, improve accountability, and ensure infrastructure delivers its intended outcomes within budget and to the community’s expectations. 

Resources 

Reports to parliament 

 Blogs