Addressing the why, when, and how to use Reference Class Forecasting (RCF) as a method to predict uncertainty in major project planning and delivery. The key reason behind cost and schedule overrun is underestimation of risks, and the root causes of underestimation are optimism and political bias. This webinar was held on Wednesday 18 October 2023.
Oxford Global Projects has vast experience of working on the risk assessment of complex and uncertain major capital projects. Our research shows that these projects are more likely to experience overruns in time and cost than underruns, and that the potential magnitude of overruns is likely to be greater than the magnitude of underruns.
Thus, for large capital projects, the norm is over budget, over time, under benefits, over and over again, The founder of OGP, Professor Bent Flyvbjerg, has named this the “iron law of megaprojects” - and we argue that it is crucial to build a strong evidence base to de-bias cost, schedule, and benefit estimates to derive clear, actionable recommendations for de-risking capital project delivery.
RCF is a method for systematically taking an outside-view on planned actions. The method is used to make explicit, empirically based adjustments to estimates that prevent estimation biases such as optimism bias. To be accurate, these adjustments should be based on data from past and similar projects calibrated for the unique characteristics of the project at hand.
The basic idea of RCF is that we answer the questions:
- What was the actual cost and schedule performance of past similar projects?
How risky were they in terms of how much their cost and schedule changed in comparison to their original estimates?
- How do the cost and schedule performance of past relevant projects compare to your project, and what is your project’s risk of overrun?
- What contingency is required to provide the level of certainty you require that your project will not overrun?
The talk highlighted typical misconceptions about RCF, and put them to bed. Challenges, causes, and cures for major project performance will be illustrated with case studies from the transport, energy, and the built environment sectors. The talk concluded with a Q&A session and an open discussion on how RCF is potentially more important than ever, in relation to addressing our impact on the environment.
Speaker: Dr Michala Techau
Head of Resilience and Sustainability, Oxford Global Projects
Michala is an experienced resilience and sustainability consultant with a background in technology transfer. Throughout her 15 years as a consultant, she has led many projects within the energy sectors as well as supported on built environment and transport sector projects.
Michala is well versed in linking academic research to industry application and comes from a technical healthcare background. She is passionate about resilience and sustainability and how governmental and corporate goals are best translated into executable business strategy.
Michala has very kindly allowed her presented material to be made available for viewing. The slides on Slideshare and the webinar recording on YouTube is now available in our APM resources area and also embedded below for reference.
Questions raised during the recording are being reviewed and will hopefully be published with the speaker responses in the next few days.
This webinar was suitable for professionals with an intermediate and advanced level of experience.
3.1.1 Business Case
3.1.6 Stakeholder management
3.2.1 Benefits Management
3.3.6 Continuing Professional Development (CPD)
3.4 Financial and Cost Management
3.5 Risk Management