the public sector has three types of policy instruments at its disposal, which in practice means regulation, economic means, and information. It is important that these instruments, in policy form, are based on sound theory as well as be practical to implement. This presentation will discuss the key principles and implementation of the Department of Infrastructure, Transport, Cities and Regional Development’s cost estimation policy. It will also provide a practical example through an explanation of development of the Department’s escalation policy, the aim of which is to ensure that the Outturn costs of proposed projects being considered for Australian Government funding are defensible and estimated on a consistent basis.