Can project managers stem cost overruns?

Wednesday, July 31st, 2013 By Jack Nevison

You've seen stories like this one before.

Last week, the San Francisco Chronicle reported that the Transbay Transit Center—a massive transportation hub often referred to as the "Grand Central Station of the West"—will cost $300 million more than expected.

In response, Steve Heminger, executive director of the Metropolitan Transportation Commission, told the news source that the final cost overrun may be even greater.

"We may not have seen the end of it," he said. "This is a very costly project."

Major infrastructure project cost overruns are a major source of irritation—if not outrage—for local residents, who must put up with the double-whammy of disruption caused by the project and additional requests for taxpayer funds.

A recent article in The Atlantic magazine cited the work of University of Oxford scholar Bent Flyvbjerg, who analyzed 258 such projects and found that nearly all of them cost an average of about 28 percent more than originally predicted.

Flyvbjerg suggested that planners understate the initial cost of projects to build public support. But The Atlantic suggested something simpler.

"From a psychological standpoint, people are saddled with a cognitive bias that causes them to be unjustifiably upbeat (some might say delusional) about the prospects of their own plans," the article read. "So they do whatever it takes to get them approved—certain that whatever problems have plagued others in the past will be avoided."

This is why New Leaf Project Management offers its white paper, "Bad Biases and Good Estimates," as well as its QPM series of games, both of which allow managers to hone their estimating skills while earning PDUs to maintain their PMP certification. Readers who have read the white paper or tried QPM will be much less likely to make these mistakes.

"PMI," PMP," and "PMBOK" are registered marks of the Project Management Institute, Inc. All rights reserved.

"QPM" is a registered mark of New Leaf Project Management. All rights reserved.

Categories Large Project Management | Tags:

Social Networks: Facebook, Twitter, Google Bookmarks, del.icio.us, StumbleUpon, Digg, Reddit, Posterous.

You can follow any follow up comments to this entry through the RSS 2.0 feed.