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I was happy to see the author mention optimism bias. One part I didn’t see is how project managers may deliberately underestimate to take advantage of the sink

by bumby 4y ago

I was happy to see the author mention optimism bias. One part I didn’t see is how project managers may deliberately underestimate to take advantage of the sink cost bias. If competing for funds, a PM may intentionally low-ball an estimate to get their project selected, knowing it’s easier to continually ask for more money later rather than a larger sum upfront. I would have also liked to see more discussion about joint probabilities. If one sub-discipline goes over budget, it may other disciplines (particularly commissioning) exceed their initial estimate as well. Change orders beget change orders.

abduhl 4y ago
This is the Willie Brown approach: “News that the Transbay Terminal is something like $300 million over budget should not come as a shock to anyone. We always knew the initial estimate was way under the real cost. Just like we never had a real cost for the Central Subway or the Bay Bridge or any other massive construction project. So get off it. In the world of civic projects, the first budget is really just a down payment. If people knew the real cost from the start, nothing would ever be approved. The idea is to get going. Start digging a hole and make it so big, there's no alternative to coming up with the money to fill it in.”
- bumby 4y ago
  Unfortunately, public projects also have to manage public perception. Just like you wouldn't appreciate, say, a roofing estimate to be later called a "down payment," the public in general doesn't like that approach either. "We don't know how much it'll cost but just trust us and let's just get started" isn't a particularly palatable sales pitch, especially in domains with a long history of corruption.
  - asdff 4y ago
    At the same time, you gotta give people the medicine they need. They have no concept of what a fair price on the market is for a subway line being build in your city with all the local considerations you have. No one does, that's the whole trick of it. At some point though, people need subways, they need sewers, they need bridges, and if we give them the shot to just turn their nose at anything good that seems expensive, we'd probably still be dumping our buckets out onto the street at night versus requiring plumbing.
    - deleted 4y ago
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    - deleted 4y ago
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    - lazide 4y ago
      That sounds like the justification I hear from scammers and con artists. No joke.
ghaff 4y ago
In my experience project managers can often be fairly realistic. But everyone up the management chain (understandably) wants projects to cost less and take less time. So a lot of pencil sharpening happens to take slack out of the system. Then deliveries are late, Joe is out with the flu for a week, v arious unexpected problems are encountered, etc. And before you know it you're overbudget and late.
- kevviiinn 4y ago
  Almost like we shouldn't be listening to MBAs who don't know the intricacies and expect everything to turn out perfect in order to pinch pennies
  - ghaff 4y ago
    I've had plenty of pushback from managers (and customers) who didn't have MBAs. The difference is usually between how long things "should" take everything going well and how long things often do take. On a small/personal scale, you can (and I do) sandbag to a certain degree. But it's hard on a large project when everyone and their brother is looking to trim any fat out of the estimates.
    - kevviiinn 4y ago
      And how do they know how long anything should take, especially when they don't understand the details of the process? Sometimes "trimming fat" just isn't realistic or even possible
      - asdff 4y ago
        All that matters is that you get the contract. Sunk cost fallacy keeps your customers. It probably also helps that everyone operates like this, so its typical to expect things to come in late and overbudget to a degree.
    - bumby 4y ago
      The counterargument on large projects is there's so much coordination between different groups that the location of the "fat" becomes opaque and difficult to identify.
jack_riminton 4y ago
This is exactly it, the optimism bias is usually more likely to come from the client, especially if there's politics involved. What makes it worse is that once the project is underway there's a political tendency to increase the scope. Prime example is the Scottish Parliament building, first estimate was for £50m. By the time all of the politicians were done with it the project's scope was unrecognisable and it cost well over £500m.
- notahacker 4y ago
  And there's one of the biggest differences between public and private sector scope changes. When the private sector decides to massively revise what they're doing on a project most of the decisions take place behind closed doors and the guy with the most impact on the scope creep probably puts in on his CV as successfully scaling up operations. When the public sector project balloons it's people's tax dollars and there's an opposition party and lots of journalists pointing out the original budget.
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by bumby 4y ago

abduhl 4y ago

This is the Willie Brown approach: “News that the Transbay Terminal is something like $300 million over budget should not come as a shock to anyone. We always knew the initial estimate was way under the real cost. Just like we never had a real cost for the Central Subway or the Bay Bridge or any other massive construction project. So get off it. In the world of civic projects, the first budget is really just a down payment. If people knew the real cost from the start, nothing would ever be approved. The idea is to get going. Start digging a hole and make it so big, there's no alternative to coming up with the money to fill it in.”

bumby 4y ago
Unfortunately, public projects also have to manage public perception. Just like you wouldn't appreciate, say, a roofing estimate to be later called a "down payment," the public in general doesn't like that approach either. "We don't know how much it'll cost but just trust us and let's just get started" isn't a particularly palatable sales pitch, especially in domains with a long history of corruption.
- asdff 4y ago
  At the same time, you gotta give people the medicine they need. They have no concept of what a fair price on the market is for a subway line being build in your city with all the local considerations you have. No one does, that's the whole trick of it. At some point though, people need subways, they need sewers, they need bridges, and if we give them the shot to just turn their nose at anything good that seems expensive, we'd probably still be dumping our buckets out onto the street at night versus requiring plumbing.
  - deleted 4y ago
    [deleted]
  - deleted 4y ago
    [deleted]
  - lazide 4y ago
    That sounds like the justification I hear from scammers and con artists. No joke.

ghaff 4y ago

In my experience project managers can often be fairly realistic. But everyone up the management chain (understandably) wants projects to cost less and take less time. So a lot of pencil sharpening happens to take slack out of the system. Then deliveries are late, Joe is out with the flu for a week, v arious unexpected problems are encountered, etc. And before you know it you're overbudget and late.

kevviiinn 4y ago
Almost like we shouldn't be listening to MBAs who don't know the intricacies and expect everything to turn out perfect in order to pinch pennies
- ghaff 4y ago
  I've had plenty of pushback from managers (and customers) who didn't have MBAs. The difference is usually between how long things "should" take everything going well and how long things often do take. On a small/personal scale, you can (and I do) sandbag to a certain degree. But it's hard on a large project when everyone and their brother is looking to trim any fat out of the estimates.
  - kevviiinn 4y ago
    And how do they know how long anything should take, especially when they don't understand the details of the process? Sometimes "trimming fat" just isn't realistic or even possible
    - asdff 4y ago
      All that matters is that you get the contract. Sunk cost fallacy keeps your customers. It probably also helps that everyone operates like this, so its typical to expect things to come in late and overbudget to a degree.
  - bumby 4y ago
    The counterargument on large projects is there's so much coordination between different groups that the location of the "fat" becomes opaque and difficult to identify.

jack_riminton 4y ago

This is exactly it, the optimism bias is usually more likely to come from the client, especially if there's politics involved. What makes it worse is that once the project is underway there's a political tendency to increase the scope. Prime example is the Scottish Parliament building, first estimate was for £50m. By the time all of the politicians were done with it the project's scope was unrecognisable and it cost well over £500m.

notahacker 4y ago
And there's one of the biggest differences between public and private sector scope changes. When the private sector decides to massively revise what they're doing on a project most of the decisions take place behind closed doors and the guy with the most impact on the scope creep probably puts in on his CV as successfully scaling up operations. When the public sector project balloons it's people's tax dollars and there's an opposition party and lots of journalists pointing out the original budget.

deleted 4y ago

[deleted]