Reviews literature on cost-estimation errors in weapons acquisition by the Department of Defense and in large public works and construction projects, and analyzes cost-estimation practices in the chemical and process industries. The report inquires into the causes of large estimation errors found in energy process plants, e.g., coal gasification and liquefaction, oil shale, and tar sands. Principal factors in estimation errors common to all types of systems examined include the degree of system definition when the estimates were made, scope and system changes, and the level of technological innovation embodied in the system. The results of this review have formed part of the basis for an empirical investigation of cost-estimation errors and performance problems in new process plants for the Department of Energy.
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