What Is a Budget Overrun? And Why 43% of Projects Experience One
The independent reference for project budget overruns. Real data, cited sources, a working EVM calculator, and no vendor agenda.
Definition
A budget overrun occurs when the actual cost of a project exceeds the approved budget. It is measured as the difference between Actual Cost (AC) and Budget at Completion (BAC), expressed as an absolute figure or a percentage of the original budget.
Budget overrun vs cost escalation: These are commonly confused. A budget overrun is unexpected -- the project costs more than planned due to poor estimation, scope changes, or execution failures. Cost escalation refers to anticipated cost growth, such as inflation adjustments written into contracts. Most overruns combine elements of both, but the distinction matters for contract law and accountability.
For a deeper treatment of what causes overruns, see causes of budget overruns. For EVM-based forecasting, see the EVM guide.
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Industry Overrun Rates at a Glance
| Industry | % Projects Overrun | Avg Overrun % | Source |
|---|---|---|---|
| Construction (global) | 85% | 28% | Flyvbjerg 2024 |
| IT / Software | 66% | 45% | Standish CHAOS 2020 |
| Government (US federal) | 70%+ | 53% | McKinsey 2021 |
| Infrastructure / Megaprojects | 98% | 80% | Oxford/McKinsey 2022 |
| Healthcare systems | 45% | 32% | PMI 2023 |
Full statistics with methodology notes, trend data and regional breakdowns
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Frequently Asked Questions
What is a budget overrun?
A budget overrun occurs when the actual cost of a project exceeds the approved budget. It is measured as the difference between actual cost (AC) and the original budget (BAC). Unlike cost escalation, which refers to anticipated increases such as inflation, a budget overrun is unexpected and indicates the project is performing below plan.
What percentage of projects go over budget?
According to PMI's Pulse of the Profession, 43% of projects exceed their original budget. The rate varies significantly by sector: construction projects overrun 85% of the time (Flyvbjerg, 2024), IT projects fail or partially fail 66% of the time (Standish CHAOS Report 2020), and megaprojects overrun 98% of the time with an average overrun of 80%.
What is the difference between cost overrun and cost escalation?
A cost overrun is unexpected: the project costs more than planned due to poor estimation, scope creep, or execution problems. Cost escalation is anticipated growth in cost, such as known inflation adjustments or agreed scope additions. In contracts, escalation clauses may allow cost adjustments for inflation; overruns beyond those clauses are the contractor's or project's problem.
How do you calculate budget overrun?
Simple calculation: Budget Overrun = Actual Cost (AC) minus Budget at Completion (BAC). As a percentage: Overrun % = (AC - BAC) / BAC x 100. For a forward-looking forecast using Earned Value Management: EAC = BAC / CPI, where CPI = Earned Value / Actual Cost. A CPI below 1.0 means you are over budget for the value delivered. Use our free EVM calculator.
What is earned value management (EVM)?
Earned Value Management (EVM) is a project performance measurement method that integrates scope, schedule, and cost. The three core values are Planned Value (PV: work scheduled to be done), Earned Value (EV: work actually completed, valued at the budget rate), and Actual Cost (AC: what you spent). From these, you calculate CPI, SPI, EAC, VAC, and TCPI. See our complete EVM guide for formulas and worked examples.