The Bath Pilot study20 included 60 projects (mainly new build) completed between 1993 and 1998 with a combined value exceeding £500 m. Each project had a minimum value of £1 m. Cost estimate risk contingencies were excluded from only a quarter of the projects.
The Bath Stage Two study21, on the other hand, included 66 projects (building and infrastructure, new build and refurbishment) with a combined value of £500 m. The values of the projects ranged between £0.2 m and £100 m.
In order to compare like-for-like, the 'percentage construction cost increase from budget' measured in the two Bath studies were compared to the capital expenditure optimism bias levels measured during the Mott MacDonald study. The 'percentage construction programme increase from pre-tender estimate' measured in the Bath studies were also compared to the works duration optimism bias levels measured during the Mott MacDonald study. Table 10 shows the results for each study:
Table 10 Comparison of Bath and MM Studies
Study Name | Project life-cycle stage | Median Capital Expenditure Optimism Bias (%) | Median Works Duration Optimism Bias (%) |
Bath Pilot | Approval | 6 | 6 |
Bath Stage Two | Pre-tender | 1 | 12 |
Mott MacDonald* | Outline Business Case | 19 | 7 |
* Optimism bias based on average over all projects for which information was available = 38% for CAPEX and 15% for works duration | |||
There is a difference between the optimism bias measured in the Mott MacDonald study and that of the Bath studies, especially for capital expenditure. This may be due to the following:
• The Mott MacDonald study included some projects that were at the forefront of project procurement as well as some projects that were innovative in construction and design. These project types tend to have high optimism bias levels.
• The initial estimated NPC capital expenditures quoted in the Mott MacDonald study do not include risk contingencies whereas a large proportion of the Bath study projects included risk contingencies. The Bath studies' inclusion of risk contingencies within the initial capital expenditure estimates will reduce the optimism bias measured. Where known, the Mott MacDonald study has excluded risk contingencies from the initial cost estimates because the guidance for optimism bias in the Green Book will be used to estimate the risk of capital expenditure overrun related to the initial cost estimate.
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20 'Constructing the Best Government Client. Pilot Benchmarking Study'. University of Bath, October 1998
21 'Constructing the Best Government Client. Pilot Benchmarking the Government Client Stage Two Study'. University of Bath, December 1999