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In the past decade, infrastructure‐related legislation in the United States has consistently emphasized the need to measure the variation associated with infrastructure project cost estimates. Such cost variability is best viewed from the perspective of the project development phases and how the project cost estimate changes as it evolves across these phases. The article first identifies a few gaps in the cost overrun literature. Then it introduces a methodology that uses risk‐based multinomial models and Monte Carlo simulation involving random draws to predict the probability that a project will follow a particular cost escalation pathway across its development phases and that it will incur a given level of cost deviation severity. The article then uses historical data to demonstrate how infrastructure agencies could apply the proposed methodology. Statistical models are developed to estimate the probability that a highway …