Reference Class Forecasting
Taking the 'outside view' in project planning has been proven crucial in avoiding overconfident projections and unrealistic future cash flow patterns. Using a reference class of similar past projects and their performance can assist in performing quality control and due diligence for the project in hand. Reference Class Forecasting can help your organisation deal with:
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Over-Optimism (delusion)
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Strategic Misrepresentation (deception)
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Survive 'one-off' projects
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Dramatically reduce cost and time overruns
Over-Optimistic Forecasts
Over-Optimism is a human trait. When it infests project planning it results in the best-looking projects with positivistic thinking taking over, instead of looking how other similar projects have performed in the past.
Usually, the projects that get the green light are the ones which look the best from a planning perspective, resulting in cost and time overruns over and over again.
One-off Projects
Often, organisations embark onto new, large projects that are 'one-off' and the performance of which have the power to affect the organisation's own existence.
Looking into similar projects' historical performance can assist an organisation in dealing with the challeges of project planning.
For more information contact us.
Strategic Misrepresentation
When dealing with a complex project that involves a multitude of stakeholders, each one with their own 'secret agenda', strategic misrepresentation may occur.
Deception is often one of the reasons for a major programme to fail in meeting its predefined targets and practically get derailed.
Cost & Time Overruns
Most large projects are expected to run over budget and over time. Often, a distress fund is set up to help with unforeseen difficulties along the way. Such funds are seen as 'red meat' by subcontractors and are usually consumed very quickly, leaving the rest of the project unprotected to other mishaps.
Looking at a reference class can help project planning better assess the probabilities of cost and time overruns and perform quality control and due diligence.