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The planning fallacy is at play in projects when optimism bias and/or strategic misrepresentation are present. We examine the cost performance of approximately US$ 6.5 billion worth of social infrastructure projects that were procured in Hong Kong and specifically the differences between their final accounts and the various types of estimates that were prepared prior to construction. We focus on the (honest) planning fallacy and hence aim to determine whether estimates are more optimistic than actual costs. Our data shows that 43% of projects incurred a cost underrun from their contract award. We therefore infer that at best 57% of projects may be explained by the presence of the planning fallacy. Based on our findings, we argue that optimism and pessimism bias coexist. Likewise, the planning fallacy and competing explanations can simultaneously account for cost deviations in social infrastructure projects. We submit that the prevalence of the planning fallacy has been exaggerated and hence provide an explanation as to why this has occurred. We finally suggest there is a need for additional empirical work to test the claim that the planning fallacy is the underlying cause of cost overruns and thus the best “theory” to explain “how projects work.” [ABSTRACT FROM AUTHOR]

Highlights • Delivering transportation projects to their budget is a challenge for governments. • Real data on changing cost estimates and project's final account is now available. • The legitimacy of the Planning Fallacy is questioned. • A call for governments to reconsider their approaches to estimating/risk is made. Abstract Delivering transportation projects to their budgeted cost remains a challenge for many governments worldwide. An issue that has hindered progress being made to address this problem has been the availability of empirical data that reflects the changing nature of cost estimates and their difference from a project's final account. Using a homogenous dataset provided by a public sector authority in Hong Kong, we analyse the differences between the approved budget, pre-tender estimates, contract sum and final accounts for approximately HK$115 billion (≈US$14 billion) worth of transportation projects. We demonstrate that 47% (i.e. ≈ 5 out 10) of the projects deviate from their approved budget. In particular, when we consider the difference between the approved budget and the final contract sum, we reveal there are cases of both over and under estimating. We, therefore, question the Planning Fallacy as an appropriate explanation for describing 'how large infrastructure projects work'. The fallacy of the Planning Fallacy account revealed in this paper leads us to call upon those agencies that have actively embraced this theory to reconsider their approaches to cost estimating and risk analysis used to deliver their transportation infrastructure to ensure taxpayers are provided with better value for money. [ABSTRACT FROM AUTHOR]