From Nobel Prize to project management
getting risks right
In 2005, the American Planning Association (APA) endorsed the use of a new forecasting method called reference class forecasting (RCF), a method developed through a study--involving this author and two others--on the inaccuracy of demand forecasts used for public works projects, a method that offers an outside view--as opposed to the traditional inside view--of forecasting, a view that bypasses human biases by cutting directly to outcomes. This paper examines the first case of using RCF in relation to project management, a case involving the planning of the Edinburgh (Scotland) Tram Line 2. In doing so, it reviews the field's literature on the inaccuracy of project forecasting, comparing transportation project cost data from the past 70 years and describing conventional forecasting's psychological and political problems--optimism bias and strategic misrepresentation.