12. The Treasury introduced the concept of optimism bias into its Green Book guidance on appraisal and evaluation in 2003.114 Its rationale drew directly on the work on Flyvberg. Since 2003, it has been standard practice to apply an uplift to estimated costs to take account of optimism bias.
13. To provide an estimate of how high such uplifts should be, the Treasury commissioned Mott MacDonald to undertake a review of optimism bias in public infrastructure projects in the UK.115 Mott MacDonald found optimism bias to be a prevalent phenomenon in public sector procurement, and provided estimates of optimism bias by sector.
14. The Treasury advises public authorities to generate their own estimates of optimism bias based on their own experience, and sector specific studies. For example, the Department for Transport engaged Flyvberg to undertake a sector specific study on optimism bias in Transport infrastructure projects.116 But where public authorities do not have access to such data, the Treasury advises them to use the generic estimates produced by Mott MacDonald.
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114 The Green Book on Appraisal and Evaluation in Central Government, Treasury, 2003, http://www.hm-treasury.gov.uk/data_greenbook_index.htm
115 Review of Large Public Procurement in the UK. http://www.hm-reasury.gov.uk/d/7(3).pdf. Mott MacDonald describes itself as a worldwide management, engineering and development consultancy
116 The British Department for Transport, Procedures for Dealing with Optimism Bias in Transport Planning, Guidance Document, Bent Flyvberg in association with COWI, June 2004, commissioned and used by the Department for Transport.