4.3  Example 2 (Part 1) - Works Duration

A similar process as in the example of section 4.1 can be performed to calculate works duration optimism bias levels at outline business case for our non-standard building, where the upper bound works duration optimism bias value for a non-standard building project is 39 %. Suppose the estimated works duration is 28 months.

If project risk areas are not effectively managed, the estimated works duration taking into account optimism bias, is calculated as follows:

28 months + (39 % x 28 months) 38.9 months (a delay of approximately 11 months)

If now apply the same risk management strategies as in the 4.1 Example 1 (Part 1) for each of the project risk areas listed in the table below. Note that, once again, the '% Contribution to Optimism Bias' values in the table below have been taken from Table 15 and the mitigation factor represents the degree to which the project risks within the project risk areas are managed.

The resultant works duration optimism bias (i.e. the upper bound optimism bias minus the managed optimism bias contribution) is approximately 30%, calculated as follows:

Managed optimism bias contribution = Reduction in optimism bias = 5 + 2 + (22 * 0.4) + 5 + 3 = 23.8 %

Resultant works duration optimism bias = (100 % - 23.8 %) * 39 29.7 %

Therefore, the estimated works duration, for this example taking into account optimism bias, is approximately 36.3 months, calculated as follows:

28 months + (29.7 % x 28 months) 36.3 months

This figure for the works duration after implementing risk management strategies is lower than the 39 month duration calculated if project risk areas are not effectively managed.

This method of assessment can be applied throughout the project life-cycle for a project (e.g. strategic outline case, outline business case and full business case).