From Nobel Prize to Project Management: Getting Risks Right
By Bent Flyvbjerg. arXiv.org, 2006
454 citations recorded by the source corpus.
A major source of risk in project management is inaccurate forecasts of project costs, demand, and other impacts. The paper presents a promising new approach to mitigating such risk based on theories of decision-making under uncertainty, which won the 2002 Nobel Prize in economics. First, the paper documents inaccuracy and risk in project management. Second, it explains inaccuracy in terms of optimism bias and strategic misrepresentation. Third, the theoretical basis is presented for a promising new method called “reference class forecasting,” which achieves accuracy by basing forecasts on actual performance in a reference class of comparable projects and thereby bypassing both optimism bias and strategic misrepresentation. Fourth, the paper presents the first instance of practical reference class forecasting, which concerns cost forecasts for large transportation infrastructure projects. Finally, potentials for and barriers to reference class forecasting are assessed.
Subfields: Management Science and Operations Research
View Paper: https://www.semanticscholar.org/paper/a5d07ded44f53c0c694c7364c18af559a8504c89
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Management Science and Operations Research
- A. Ansar
- Daniel Lunn
- Alexander Budzier
- Giorgio Locatelli
- Mauro Mancini
- N. Todeschini
- Bent Flyvbjerg
- Bert van Wee
Citations in the corpus
- Top Ten Behavioral Biases in Project Management: An Overview (2021, methodology): “This was the object of later publications (Flyvbjerg, 2006; Flyvbjerg, 2013; Flyvbjerg et al., 2004; Flyvbjerg et al., 2009; Flyvbjerg et al., 2016).”
- Generation IV nuclear reactors: Current status and future prospects (2013, background): “Temporal delays (Flyvbjerg, 2006).”
- Power plants as megaprojects: Using empirics to shape policy, planning, and construction management (2015, unknown): “The few large-scale statistical analyses of megaproject performance that have been undertaken (Flyvbjerg 2006; Merrow 2011) highlight different issues.”
- What you Should Know about Megaprojects and Why: An Overview (2014, background): “And with a better understanding of causes a better grasp of cures has followed, from front-end management (Williams & Samset, 2010) to reference class forecasting (Kahneman, 2011, pp 243–254; Flyvbjerg, 2006) to institutional design for better accountability (Scott, 2012; Bruzelius et al., 1998).”
- Quality Control and Due Diligence in Project Management: Getting Decisions Right by Taking the Outside View (2013, background): “So was reference class forecasting (Flyvbjerg, 2006; Flyvbjerg, et al., 2005), which has been officially endorsed by the American Planning Association (2005) and mademandatory by government in the UK, Denmark, and Switzerland (Danish Ministry for Transport, 2008; Swiss Association of Road and Transp”
- Should We Build More Large Dams? The Actual Costs of Hydropower Megaproject Development (2014, background): “The suggested practice is that a reference class ought to be broad and large enough to be statistically meaningful but narrow enough to be comparable (Kahneman and Tversky, 1979b; Kahneman and Lovallo, 1993; Flyvbjerg, 2006).”