WLI 2025 Final Project: Addressing Cost Overruns in Water Infrastructure Projects

Each year the final project is a major part of the Water Leadership Institute. The WLI 2025 cohorts wrote articles on turning challenges into strengths through resilient leadership.

In every water infrastructure project, someone is bound to be frustrated. Whether it's the owner, the contractor, the consultant, or the community, the sentiment is often the same: "We set the budget years ago, and now it doesn't match the project scope." This frustration stems from a series of systemic issues that plague water infrastructure projects, leading to cost overruns, labor shortages, and structural decisions that can make or break a project.

So what can leaders in this industry do to mitigate these issues? Our group of water professionals explored the theme of cost overruns by calling on personal experiences and interviewing colleagues and industry leaders to provide insight into strategies for cost management.

Busting Budgets

One of the primary issues is the mismatch between the initial budget and the project's scope. Budgets are often set years in advance, and risks are not always taken seriously. Low bids to win contracts can lead to financial strain due to rising labor and material costs. Additionally, lack of consultation with stakeholders can result in assets that do not serve their intended purpose.

Cost overruns are a systemic issue in the water infrastructure sector. Early-stage designs are often too shallow to provide accurate estimates, relying on outdated data and siloed approaches. This is further exacerbated by optimism bias, where risks are underestimated, leading to the belief that "this time it'll be different, that risk won't materialize and therefore that contingency can be ignored."

Throughout our research we’ve found that effective communication is key to preventing early-phase budgets from becoming major headaches. In one instance, a rough $15 million estimate was produced for a city's transmission main upgrades with minimal information and with about 30 minutes of actual effort. This scenario seems to be common with work deemed to be more routine (i.e. pipelines, and pumpstations); however, for more niche projects, there is typically more effort given to reaching out to industry peers for insights on potential costs. If this same effort was given for “routine” projects to reach out to a wider network for insights, we believe the accuracy of early phase budgets can greatly improve.

Acknowledging and adjusting budgets as costs grow is also crucial. "Bad news doesn’t get better with age. If costs grow, acknowledge it, have the conversation, and adjust." Taking a proactive approach ensures that owners and teams can manage new realities effectively.

Impact of Project Delivery Methods

Traditional project delivery methods like Design-Bid-Build (DBB) have been known to result in cost increases during the build phase due to change orders and unforeseen conditions. The DBB process involves hiring engineers to complete a detailed design that results in a complete set of drawings and specifications which are translated to a cost before construction even begins. General contractors submit their fixed price bids based on those design documents, and the least expensive qualified bidder is typically selected. Cost increases on traditional DBB projects are observed through change orders, unforeseen site conditions, and design errors.

Collaborative methods like Design-Build and Construction Manager at Risk (CMaR) offer a different approach through early engagement and shared accountability. These methods bring together owners, engineers, and contractors early in the process, leading to faster decisions, smarter risk-sharing, and early cost realizations.

However, choosing a collaborative method when it's not the right fit for the project can ironically result in gold plating and send costs soaring to pay for expertise that isn't needed. Throughout our research, we have found that an investment in training is critical in order to know the right place and time to implement collaborative delivery methods. Identifying the right tools - for example an Owner’s Advisor- can be essential to execute collaborative methods and guide owners through the process.

Building a Strong Workforce

Labor shortages and rising wages also impact construction costs. The aging workforce, retirements, and reliance on immigrant labor contribute to the shortage. This "silver tsunami" leads to a decline in experience levels, causing inefficiencies and delays. As experienced workers retire, knowledge and skills gaps emerge, resulting in decision-making challenges and potential rework. Additionally, rising wages in other industries make it difficult to retain skilled construction workers. For instance, concrete providers struggle to keep Commercial Drivers License (CDL) drivers, as comparable trucking jobs offer similar pay with less labor, leading to service delays and increased costs.

To address these issues, increasing inflow and retention, helping staff grow, and addressing policy-driven obstacles like immigration reform are necessary. Initiatives like Hampton Road Sanitation District's SWIFT program, which integrates outreach into partner contracts, demonstrates the impact of a coordinated approach. Having a community commitment plan that integrates engagement with partner contracts and brings everyone together quarterly to share lessons learned can result in a measurable impact on businesses, individuals, and communities. This type of leadership sends the message that you care about people, not just water.

Conclusion

Choosing the right delivery methods, effective communication, and a strong workforce are just three essential components for controlling costs, avoiding delays, and ensuring the success of construction projects. We are calling on the future leaders in the water industry to step up to the challenge, embracing these obstacles for innovation and driving a more resilient, forward-thinking sector.

Authors: Mike Hess, Jordan Lewis, Nick Lewis, Jackie Kingdom, Riese Rubin, Lisa Mace