Under-estimating project times

There is a book which explores mega-projects, by two professors of management, Bent Flyvbjerg and Dan Gardner, on how we underestimate costs, and are overly ambitious in working out how long projects will take to complete (2023). 

The book takes us on a fascinating tour of how we budget large projects, using an international database containing projected public works budgets mapped to final costs. Gathering data from other researchers and consultants such as McKinsey, the authors have now gathered "16,000 projects from 20-plus different fields in 136 countries on all continents except Antarctica, and it continues to grow" (Flybjerg & Gardner, 2023, 4%).

The book clearly shows the average global underestimated project time and cost is 62% (Flybjerg & Gardner, 2023). The average. If we are not that flash at budgeting or costing, our projects will come in much higher than that. All too often we seem to have our time optimism glasses on, in addition to being amazingly bad at costing (read more here). This has resulted in what Flyvbjerg calls the "Iron Law of Megaprojects", a probabilistic rule that planned projects will come in "over budget, over time, under benefits, over and over again" (Flybjerg & Gardner, 2023, 4%), because they are too optimistically planned, where the budgets are trimmed so they will be approved, where the job goes to the lowest tender, and where the payoff or benefits are inflated so that the infrastructure gets the go-ahead. So "a miniscule [number of projects] 0.5 percent nail cost, time, and benefits. Or to put that another way, 91.5 percent of projects go over budget, over schedule, or both" (Flybjerg & Gardner, 2023, 4%). And - as a result - projects end up being 62% under-costed. 62% later than expected.

However, some nations seem to do this stuff better than others; generally Scandinavian nations. Of course, they too get thing wrong, but they seem - to me - to start from a more honest base.  

It is important to collect such data. Interestingly I found from my own business experience that - when quoting for consultancy work - I know I will underestimate the hours by 66%. I have my quote records, and can compare quote to actual, so I know I will be out by a factor of three. The results of this book do not surprise me in the slightest; and I know that I am slightly worse than the average Flyvbjerg and Gardner found in their data (2023). As a result of my own data, when I quote for a job, I still carefully work out how many hours I think it will take, but then I treble my first estimate of hours, before passing the quote to the client. My final clean-up invoice will then be within cooee of the quote. 

Do try the book: it is a highly entertaining read.

Sam

References:

Flyvbjerg, B., & Gardner, D. (2023). How Big Things Get Done: The Surprising Factors that Determine the Fate of Every Project, from Home Renovations to Space Exploration and Everything in Between. Signal.