This was the heading of an article in the magazine “New Civil Engineer”, published on 14 November. Metric Views looks at the effect of removing optimism bias on the estimate of the cost of road traffic sign conversion prepared by the UK Department for Transport in 2005.
The article begins:
“Infrastructure clients are planning to ditch Treasury-backed rules for calculating the contingency budgets of major infrastructure projects.
They have produced a report which concludes that using the Treasury optimism bias mechanism to anticipate cost overruns is costing billions of pounds.
The proposal has been made by the Infrastructure Risk Group, an industry-led group with representatives from major infrastructure clients.”
The article concludes:
“It (scrapping optimism bias) would also lead to the earlier identification of specific risks, avoiding fear of the unknown being priced into optimism bias.”
Readers may wish to be reminded how optimism bias was included in the estimate of the cost of converting speed, directional and distance signs prepared by the UK Department of Transport (DfT) in November 2005.
The sums (reference 1) looked like this (amounts in £ million):
Cost of conversion (England only) 241
Extra 10% for number of signs increased 24
Disposal costs @ £10 per sq m 4
Plus extra 16% for rest of UK 312
Plus supervision, preparation & design @ 25% 390
Plus optimism bias @ 45 – 65% 565 – 644
Preparatory work 100
Publicity 10 – 15
Project management 10
Total 680 – 760
This related to the DfT’s estimate of a total number of signs in England of 417 000, increased by 16% for the rest of the UK, giving a cost of about £1500 per sign. This compared unfavourably with the average actual cost of converting speed limit signs in the Republic of Ireland in January 2005 of £100 per sign (reference 2).
Removing optimism bias reduces the total to £510 – 515 million or about £1060 per sign – still astonishing, and showing just how much the DfT calculations lack credibility.
Reference 1. The DfT’s estimate is available in the National Archives at:
with the detailed numbers at:
Reference 2. “Metric signs ahead”, published by UKMA in 2006, paragraph 6.10. Available as a free download on UKMA’s web site: www.ukma.org.uk