The capital expenditure optimism bias provides a measure of the relative increase in capital expenditure from what was estimated at outline business case (and also at contract award) to the actual capital expenditure. The optimism bias is often partly due to the variations in tender price index (prior to contact award) and construction cost index (post contract award). In order to remove the influence of indices, the project costs (i.e. estimated and actual expenditures) were indexed to a common year.
For PFI projects the capital expenditure is provided through private finance. From the client's point of view, there is no capital expenditure. However during works implementation, the public sector may have to make up front capital payments as a result of the occurrence of risks that had not been transferred to the private sector. In this case the relatively small capital expenditure made by the client is expressed as a percentage of the contract price.