WHAT IS OPTIMISM BIAS?

Optimism bias is the tendency for a project's costs and duration to be underestimated and/or benefits to be overestimated. It is expressed as the percentage difference between the estimate at appraisal and the final outturn. The average optimism bias levels recorded by the Mott MacDonald study for projects procured conventionally are shown in Table 1. Table 3 in Section 2.3.2 provides a breakdown of the optimism bias levels recorded for each project type (described in Section 2.1.2). The study results clearly show that historically there has been a tendency for project estimates to be highly optimistic.

Table 1  Recorded Average Optimism Bias for Traditional Procurement