"For the budget over time, again and again," it appears that the slogan for the large, complex infrastructure projects. This article explains why the cost, benefits, and time projections for such projects are systematically over-optimistic in the planning stage. The main reasons for the prediction errors are grouped into three categories: delusions or honest error, fraud, or strategic manipulation of information or processes, or bad luck. Misleading and cheating each were considered in the management literature before, but here they are considered together for the first time. They are specifically applicable to the infrastructure problems in a way that not only allows researchers and practitioners to understand and implement the proposed corrective procedures. The article provides a framework for analyzing the relative explanatory power of delusion and deception. It also offers a simplified framework for analyzing complex principal-agent relationships that are involved in the approval and construction of major infrastructure projects, which can be used to improve forecasts. Finally, the article illustrates the reference class forecasting, exterior de-displacement technique that has proven effective in overcoming both errors and fraud in private and public investment decisions. "Hide
by Bent Flyvbjerg, Massimo Garbuio, Dan Lovallo Source: California Management Review 26 pages. Publication Date: February 1, 2009. Prod. #: CMR423-PDF-ENG
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