Journal ArticleDOI
Optimism Bias in Bidding: Contractors’ Horizontally Biased Estimating Behavior
TLDR
In this article , the authors tried to answer whether bidders exhibit optimism bias-like behavior when bidding for construction projects and whether financial ramifications would follow, and they found that optimistic bias is one of the undisputed factors or reasons affecting cost underestimation and cost overrun.Abstract:
In the construction management literature, it is not an ultimately settled matter that optimism bias is one of the undisputed factors or reasons affecting cost underestimation and cost overrun. This study tried to answer whether bidders—usually legal entities, not natural persons—would exhibit optimism bias-like behavior when bidding for construction projects and whether financial ramifications would follow. Two hundred eighty-six projects delivered to the Ohio Department of Transportation between 2011 and 2020 were analyzed to test the proposed hypothesis. It was observed that bidders were more optimistically biased when bidding for long-duration projects than short-duration projects. The observation strengthens the causal nature between optimism bias and cost underestimation and encourages stakeholders to develop internal or external monitoring systems that call out optimism bias at the organizational level. read more
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Journal ArticleDOI
Unrealistic optimism about future life events
TL;DR: In this article, the authors investigated the tendency of people to be unrealistically optimistic about future life events and found that degree of desirability, perceived probability, personal experience, perceived controllability, and stereotype saliency would influence the amount of optimistic bias evoked by different events.
Journal ArticleDOI
Underestimating Costs in Public Works Projects: Error or Lie?
TL;DR: In this paper, the authors present results from the first statistically significant study of cost escalation in transportation infrastructure projects and find that the cost estimates used to decide whether such projects should be built are highly and systematically misleading.
Book
The Optimism Bias
TL;DR: Humans exhibit a pervasive and surprising bias when it comes to predicting what will happen to us tomorrow, next week, or fifty years from now, which is one of the most consistent, prevalent, and robust biases documented in psychology and behavioral economics.
Journal ArticleDOI
From Nobel Prize to project management: Getting risks right
TL;DR: Reference class forecasting as discussed by the authors is a promising new approach to mitigating risk in project management based on theories of decision-making under uncertainty, which won the 2002 Nobel Prize in economics, and it achieves accuracy by basing forecasts on actual performance in a reference class of comparable projects and bypassing both optimism bias and strategic misrepresentation.
BookDOI
Over Budget, Over Time, Over and Over Again
TL;DR: The root cause of underperformance is the fact that project planners tend to systematically underestimate or even ignore risks of complexity, scope changes, etc. during project development and decision-making as mentioned in this paper.