How large are software cost overruns? A review of the 1994 CHAOS report

The Standish Group reported in 1994 that the average cost overrun of software projects was as high as 189%. This cost overrun number is used as input in recent governmental reports on software development and as benchmark for several recent projects’ estimation performances. It is therefore important that we can trust this number. More recent cost overrun results reported by the Standish Group and others, however, show much lower cost overrun. Does this mean that software companies have improved their estimation ability strongly the last 10 years? In this paper we argue that there are reasons to doubt the validity of the Standish Group’s 1994 cost overrun results and that a continued use of these results may hinder progress.