Project forecasters 'fools or liars', says expertby John Bambridge on Dec 11, 2012
An academic paper has delivered an outspoken criticism of forecasters, and demonstrated the inaccuracy of the front-end estimates of costs and benefits that are typically used to support decisions on projects.
“Estimates are commonly poor predictors of the actual value and viability of projects, and cannot be trusted as the basis for informed decision-making,” said Prof. Bent Flyvbjerg of the BT Centre for Major Programme Management at Oxford University's Saїd Business School.
“These forecasts frequently misinform decision-makers on projects instead of informing them. Some of the inaccuracy comes from genuine forecasting mistakes arising from over-optimism, but some estimates are deliberately misleading, designed to secure financial or political support.”
These "garbage" reports can often end up increasing rather than reducing project risk, said Flyvbjerg.
The scholar called for action to be taken by the sector to address the problem – arguing that clients should at the very least ask for their money back when they receive reports that later prove to be significantly inaccurate.
The paper continues that “some forecasts are so grossly misrepresented that we need to consider suing for the losses incurred as a result,” and that in actively deceptive circumstances “criminal penalties may be warranted”.
“This needs to be debated openly within the relevant professional organisations. Malpractice in project management should be taken as seriously as malpractice in other professions like medicine and law."
Flyvbjerg cites the PMI, APM, APA, RTPI in particular as parties that should use their codes of ethics to penalize and possibly exclude members who produce unethical forecasts.
His own research has shown a benchmarked performance can quickly reveal if forecasts are claiming to meet or exceed the average results of previous similar projects.
In validation of Flyvbjerg, the US General Accounting Office adopted this due diligence model in its decision to build a $98.5bn high-speed rail system in California - the most expensive civil construction project in US history.
The academic has also recently been invited to serve as an expert witness in a $150m class action suit against a forecaster in a case that may well set a precedent for holding forecasters to account.