Puggings Flashcards
According to Flyvbjerg’s what are the 3 main causes of cost overrun?
Random error or mistake: There is no systematic reasons for the overruns, just coincidentachappenstances which are unlikely to repeat. Statistical distribution for relative cost overrun is centred on zero and is symmetric.
Optimism bias/cognitive bias: Causes the cost estimator to unintentionally underestimate the project cost. Statistical distribution for relative cost overrun will have a positive mean and positive skewness. The mean is not time-invariant, the further into the project the mean is expected to convere towards zero.
Strategic misreporting: The cost estimate is deliberatelyunderreported for economic or political reasons. Statistical distribution for relative cost overrun will have a positive mean and positive skewness. The mean is expected to be time-invariant.
What are the four considerations when choosing a cost estimation method?
- data availability
- Accuracy
- Constraints
- Credibility
