Where a building or civil engineering project has significant standard and non-standard elements that can not be physically separated it is considered a combined project (where one of the elements is not significant the project should be identified according to its dominant project type characteristics). To calculate the appropriate upper bound values for combined projects the following approach is recommended:
(a) Determine the percentage split for standard and non-standard the parts of the capital value of the building or civil engineering project (in accordance with the project type descriptions in Section 2.1.2 -use best judgement).
(b) Identify the upper bound values for the standard and non-standard parts.
(c) Multiply each percentage of CAPEX by the appropriate upper bound optimism bias.
(d) Add the OB contributions together to determine the resultant optimism bias percentage.
The following table shows a worked example of the calculated resultant upper bound optimism bias level for capital expenditure for a combined building project:
Project Type | Percentage of CAPEX (%) | Upper bound OB (%) | OB Contribution (%) | Resultant OB (%) |
Non-standard building | 30 | 51 | 15.3 | - |
Standard building | 70 | 24 | 16.8 | - |
Combined building | 100 | - | - | 32.1 |
The works duration optimism bias can be determine in the same way. The following table shows a worked example of the calculated resultant upper bound optimism bias level for works duration for a combined building project:
Project Type | Percentage of Works Duration (%) | Upper bound OB (%) | OB Contribution (%) | Resultant OB (%) |
Non-standard building | 30 | 39 | 11.7 | - |
Standard building | 70 | 4 | 2.8 | - |
Combined building | 100 | - | - | 14.5 |
Experienced appraisers can use their best judgment.