Procedures for Dealing with Optimism Bias in Transport Planning: Guidance Document

The UK Treasury (HM Treasury) has noted there is a demonstrated, systematic, tendency for project appraisers to be overly optimistic and that to redress this tendency appraisers should make explicit, empirically based adjustments to the estimates of a project's costs, benefits, and duration. HM Treasury recommends that these adjustments be based on data from past projects or similar projects elsewhere, and adjusted for the unique characteristics of the project in hand. In response to this, the UK Department for Transport (DfT), has produced the present Guidance Document. The main aims of the document are to provide empirically based optimism bias up-lifts for selected reference classes of transport infrastructure projects and provide guidance on using the established uplifts to produce more realistic forecasts for the individual project's capital expenditures. Furthermore, the underlying causes and institutional context for optimism bias in British transport projects are discussed and some possibilities for reducing optimism bias in project preparation and decision-making are identified.