Nested Rationality: The Foundations of the Fifth Hand Explanation of Infrastructure Project Cost Mis-Performance

The Fifth Hand explains infrastructure project cost mis-performance as the outcome of behavioural and institutional interactions across a project's lifecycle. Yet the ecological rationality underpinning these interactions has not been made explicit. Our paper addresses that gap by integrating two complementary traditions of ecological rationality-Gigerenzer's cognitive (mind ↔ environment) and Smith's institutional (institution ↔ environment) perspectives-to explain the nested rationality architecture through which infrastructure decisions unfold. Making this integration explicit strengthens the Fifth Hand by providing a clearer behavioural-institutional foundation for explaining why cost mis-performance arises, including in contexts where estimation techniques, modelling approaches, and project controls are increasingly sophisticated. Rather than attributing outcomes primarily to forecasting error or individual bias, the analysis demonstrates how institutional settings shape cue salience, assumption retention, and disclosure incentives during delivery. Expounding these ecological foundations identifies decision-environment and governance leverage points-conditions under which institutional arrangements can be redesigned to support adaptive judgement under uncertainty. Implications include staged commitments linked to information maturity, assumption registers and trigger-based re-estimation practices, and assurance routines that prioritize assumption testing over preserving the originally approved cost and scope baselines.