Risk Assessment in Public Investment Projects: Impact of Empirically-grounded Methodology on Measured Values of Intangible Obligations in Lithuania

In the previous paper (Jasiukevicius & Vasiliauskaite, 2015) we have provided the empirically-grounded probability distributions (PDs) and their parameters best enable to assess the investment cost overrun risk (ICOR) in public investment projects (PIPs). From the beginning of 2015, this statistics has been officially applied for ICOR assessment in the public sector of Lithuania as well as development of the former ICOR assessment methodology (Methodology) (CPVA, 2014) theretofore based solely on the theoretical assumptions. This resulted in changes of the estimating values of not only ICOR estimates, but also therewith related intangible obligations (IOs) of the public sector. The purpose of this paper was to provide the assessment of impact of the empirically-grounded ICOR methodology on the values of the IOs previously estimated under the theoretical assumptions. For this purpose a comparative analysis of both theoretically-based and empirically-grounded ICOR estimates was performed. The results disclosed the values of ICOR estimates of land, real estate, construction and equipment as being lower and the estimates of services as being higher in the case of application of empirically-grounded statistics. Respectively, this revealed over- and underestimation of appropriate IOs prevailed in the past.