This Guest paper was offered for publication in August 2021.
It is copyright to Gianluca di Castri.
Published here February 2022

Introduction | The Strait of Messina Bridge | Controlling Costs
Scope of This Paper | Historic Cost Perspectives | Reliability of a Cost Calculation

Reliability of a Cost Calculation

For example, in the case of the Sagrada Familia in Barcelona, in 1882 it was impossible to make any assumption about time and cost because the design was quite undefined. In reality there was only the willingness to build a cathedral.

Just as in medieval cathedrals, design was modified again and again during construction. Parts were added or removed, and dimensions modified. Even now, when the cathedral is already consecrated (in business terms, we can say that it is in operation), the project continues to be subject to variations.

The reliability of a life cycle cost calculation for so long time a period is based on the assumption that no major change happens either in the world as a whole, or in the structure of the economic system. The same would apply to sensitivity analysis, which makes sense for variations of 10% to 20%, but would be flawed if we took into consideration variations of 50% or maybe 100%.

A long-term project whose scope is quite defined can still be kept under control, with proper methods. This can be done from time to time by adjusting the parameters to the actual change of the economic system as well as of the project itself. However, it is necessary that all those involved in the construction are well aware of the cost restrictions being imposed.

Indeed, an undefined project or program, whose scope is not fully defined, can also be kept under control if this is applied section by section, and if the division into sections makes sense. A good example is in the case of new railway or motorway systems, or of the space exploration like sending a man to Mars. That is when every section can be managed as a fully independent project. Together they would represent a comprehensive program.

If none of this applies, then the very idea of controlling the whole endeavor makes no sense at all.

Historic Cost Perspectives  Historic Cost Perspectives

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