Optimism bias in public sector projects is not a new phenomenon. But it is one that persists, frequently undermining projects’ value for money as time and cost are under estimated and benefits over estimated. This report uses our back catalogue to illustrate the consequences of over optimism. In doing so, we have identified some contributory factors – such as project complexity and an organisation’s culture of challenge.

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This report focuses on the difficulties caused for government projects by unrealistic expectations and over-optimism.

Initiating projects on the basis of unrealistic assumptions is widely recognised by public sector managers and covered in HM Treasury guidance.  It undermines value for money at best, and in the worst case leads to unviable projects.

This does not mean that government should shy away from doing innovative and risky things.  But decision-makers need to be confident that investment decisions are based on realistic estimates and assumptions, that there are clear plans for mitigating known risks and that matters about which there is inherent uncertainty have been identified.  With a greater level of understanding, government can be creative and seek innovative approaches to delivery.

Our back catalogue illustrates the consequences of over-optimism and we have identified some important contributory factors.  This document is intended to raise awareness of the issues and prompt discussion and action to address the underlying causes.

December 2013