Date posted: March 8, 2013; Last revised: June 12, 2013
Bent Flyvbjerg
University of Oxford - Said Business School
Massimo Garbuio
University of Sydney
Dan Lovallo
University of Sydney
February 2009
California Management Review, vol. 51, no. 2, pp. 170-193
Abstract:
"Over budget, over time, over and over again" appears
to be an appropriate slogan for large, complex infrastructure projects.
This article explains why cost, benefits, and time forecasts for such
projects are systematically over-optimistic in the planning phase. The
underlying reasons for forecasting errors are grouped into three
categories: delusions or honest mistakes; deceptions or strategic
manipulation of information or processes; or bad luck. Delusion and
deception have each been addressed in the management literature before,
but here they are jointly considered for the first time. They are
specifically applied to infrastructure problems in a manner that allows
both academics and practitioners to understand and implement the
suggested corrective procedures. The article provides a framework for
analyzing the relative explanatory power of delusion and deception. It
also suggests a simplified framework for analyzing the complex
principal-agent relationships that are involved in the approval and
construction of large infrastructure projects, which can be used to
improve forecasts. Finally, the article illustrates reference class
forecasting, an outside view de-biasing technique that has proven
successful in overcoming both delusion and deception in private and
public investment decisions.
Number of Pages in PDF File: 25Keywords: Project management, forecasting, cost control, strategic planning
Accepted Paper Series
Download This Paper