HYPERION ECONOMIC JOURNAL

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HYPERION ECONOMIC JOURNAL

December 2024
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Avoiding Unexpected Costs in Public Projects

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Authors:
  • Adrian Eugen DINU, PhD. Student, Affiliation: Valahia University of Targoviste, Romania;
  • Constantin POPESCU, PhD., Associate Professor, Affiliation: Valahia University of Targoviste, Romania;
Pages:  65 : 72
Abstract:

In a constantly changing environment, projects face many challenges. In most public projects, unforeseen events occur that increase costs beyond initial estimates. If some of the estimates are exceeded, the estimates are too high and the estimation method must be revised. Altough it is often impossible to predict which activities will cost more than expected, it is safe to assume that some activities will cost more. Assesing the likelihood of such an event occurring is part of the project management task of event occurrence risk analysis. Avoiding unexpected costs in public projects depends on the skills of the project manager. Rather than overestimating all cost, funds are budgeted to cover unplanned but statistically predictable cost increases. Funds allocated for this purpose are called contingency reserves.  If this funding is sufficient to cover unplanned expenses, the project will be completed on budget. Considering these facts and focusing on the investment project model, this document aims to avoid unforeseen and the purpose is to explore cost alternatives.

JEL classification: H400

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H400