2604.00485 Incorporating AI-Specific and Public Sector Failure Modes into Government AI Investment Appraisal: A Monte Carlo Simulation Framework Applied to Tax and Municipal Services
Government AI investment projections typically use deterministic ROI calculations that ignore both standard public sector risks and AI-specific technical risks. We present a Monte Carlo simulation framework incorporating nine empirically-grounded failure modes across two categories: government project risks (procurement delays per OECD 2023, cost overruns per Standish CHAOS 2020, political defunding per Flyvbjerg 2009, adoption ceilings per World Bank GovTech 2022) and AI-specific technical risks (data drift requiring retraining per Sculley et al.