The sky city bailout: it is common for private sector mega-projects to fail

Well this is timely given the Sky City blow out dogging the Government. My message is still the same, flip the bird to Sky City and walk away Steven Joyce (and Auckland Council as well in regards to operation subsidies).

Never before has Left, Centre, Right, Liberal, Conservative and Libertarian been so united against Sky City in this instance. Well done Sky City for that dubious and rare feat.

Now I see the average cost of blow outs backed up by some good evidence is mentioned. So I link this old but goodie:

Those Fallacy posts for the CRL served as a warning so we can avoid such blow outs like the disaster of the motorway tunnel construction in Seattle.

I note the average rail cost blow out was 44.7% with ranges between 0-100%. This would put it close to my 1.5x or 50% blow out potential.

However, before someone complains about rail I point out that the Sydney Toll Roads have gone bust twice, the Brisbane Airport Toll Road once, and a few in America going bust….

Utopia - you are standing in it!

SkyCity is sniffing around the New Zealand government for a $130 million bailout. The initial project estimate was $402 million for a convention centre and enlarged casino.

SkyCity was very clear when the convention centre deal was announced that it would be at no cost to either taxpayers or Auckland ratepayers.

The literature on mega-projects suggests that large engineering projects frequently fail to achieve their intended financial and operating objectives. Nine out of ten mega-projects have cost-over runs:

  1. Miller and Lessard (2000) studied 60 large engineering projects with an average size of $1 billion. Almost 40% of the projects performed very badly and were abandoned totally or restructured after a financial crisis.
  2. Merrow et al. (1988) found that four of the 47 megaprojects they studied came in on budget – the average cost overrun was 88%. Of the 36 projects that had sufficient data, 26 failed to achieve…

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