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We’re prone to optimism bias in projects, especially when we have a vested interest in their sucess.
We’re prone to optimism bias in projects, especially when we have a vested interest in their sucess.

Mega projects don’t need mega optimism

Original content by ChangeDriver

Is your organization’s success undermined by optimism bias?

We’re particularly prone to being overly optimistic about project outcomes when we have a vested interest in them and play a big role in their planning.

Take the Muskrat Falls hydroelectric dam project in Newfoundland and Labrador, Canada. It was originally expected to cost $6.2 billion to complete. Costs have now run to over $12 billion – almost twice the original estimate.

The provincial government launched a commission of inquiry. The first expert to testify was Oxford University economics professor Bent Flyvbjerg, one of the world’s most knowledgeable scholars in mega-project planning and management. 

Flyvbjerg also delivered a report to the inquiry, citing optimism bias as one of the root causes of high cost overruns.

In the Muskrat Falls project, managers underestimated costs, completion times and the risks of their decisions. They also overestimated the benefits. According to the report, hydroelectric dam projects are high-risk, with an average cost overrun of 96 per cent and an average schedule overrun of 42 per cent.

Muskrat Falls is expected to start operation in 2019, with full power distribution beginning in 2020. The dam on the lower Churchill River will send power to Newfoundland and later Nova Scotia through subsea cables.       

The result will likely be very high electricity costs for residents of Newfoundland and Labrador. The bill will be handed to a province of just 530,000 people, fewer than the City of Brampton, Ontario.  

The Muskrat Falls dam is yet another billion-dollar boondoggle – where optimism bias contributed to costly overruns and delays.

Has your organization taken into account the risks of optimism bias when planning major projects and initiatives?

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