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 |
|---|---|---|---|
| Transportation infrastructure | ~86% (9 in 10) | 28% | Flyvbjerg, Holm & Buhl 2002 |
| IT / Software | 69% | 45% (large IT) | Standish CHAOS 2020 / McKinsey 2012 |
| Government IT (public sector) | ~50% | ~3x private sector | McKinsey 2020 |
| Construction megaprojects (>$1B) | 98% | 80% | McKinsey 2015 |
| All project types (16,000+ projects) | 91.5% miss budget or schedule | 52% miss budget | Flyvbjerg database 2023 |
Full statistics with methodology notes, trend data and regional breakdowns
Famous Budget Overruns
James Webb Space Telescope
Sydney Opera House
Boston Big Dig
Explore the Reference Library
EVM Calculator
CPI, EAC, VAC, TCPI, SPI. Full Earned Value toolkit.
Cost Overrun Formula
Calculate overrun in dollars and percent, plus which baseline to use.
Statistics Hub
Comprehensive overrun data by industry, project size, and region.
Construction
9 in 10 infrastructure projects overrun. Phase-by-phase risk and contract types.
IT Projects
Large IT projects: 45% over budget. Cloud cost overruns, agile EVM.
Government
Why public projects always cost more. HS2, Crossrail, US federal IT.
Prevention
12 proven strategies from reference class forecasting to EVM monitoring.
Legal Consequences
Who pays when projects overrun. Contract types, variation claims, disputes.
Free Templates
Budget tracker, EVM status report, change order log. No signup.
Source-Cited Reference Pages
The landmark studies
Standish CHAOS Report
Source for the 69% IT failure stat
McKinsey-Oxford 2012
45% over budget, 56% less value
PMI Pulse of the Profession
Source for 43% over budget figure
Flyvbjerg Project Database
Only 0.5% of 16,000+ projects deliver in full
NASA Requirements Curve
5-10% vs 20% effort effect on overrun
"53,000 tech projects, 63%"
Source trace: the viral stat with no study behind it
By industry
Defense projects
GAO MDAP data: F-35, Sentinel, Columbia
Healthcare IT
EHR rollouts: NHS NPfIT, VA Cerner
Olympic Games
Every Games since 1960 over budget
Movie productions
Hollywood overruns: Cleopatra to Marvels
Infrastructure megaprojects
Per-mode rail, road, bridge, tunnel data
Energy projects
Nuclear, oil & gas, solar, wind overrun rates
Aerospace projects
NASA missions: JWST, SLS, Mars Sample Return
Methods to prevent overruns
Reference class forecasting calculator
Apply Green Book optimism-bias uplifts to your estimate
Three-point estimation (PERT)
O / M / P formula with worked example
Monte Carlo simulation
P50, P80, P95 cost-risk modelling
Contingency calculator
Type-A vs type-B contingency sizing
Cone of Uncertainty
Boehm's original curve, narrowed
Case studies
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 (2018), 43% of projects exceed their original budget. The rate varies significantly by sector: transportation infrastructure projects overrun almost 9 times out of 10 (Flyvbjerg, Holm & Buhl 2002), IT projects are challenged or fail 69% of the time (Standish CHAOS Report 2020), and 98% of construction megaprojects overrun by more than 30%, with an average overrun of 80% (McKinsey 2015).
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. See the cost overrun formula with worked examples, or 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.