
One of the many problems contributing to cost overruns in the highway project known as Boston's "Big Dig" was a sequence of delays in determining the design of the Charles River Crossing. Once this decision-making overran its schedule, very serious problems developed later in the project, in both management and engineering and construction. As in the private sector, the early focus of scrutiny has been on the engineering and construction rather than on management, in part because we measure them more carefully. Pictured is the Leonard P. Zakim Bunker Hill Bridge in a later construction phase, as it emerges from the Thomas P. "Tip" O'Neill Jr. Tunnel to cross the Charles River. This particular crossing is very near the one referred to as "two if by sea," in the poem, "The Midnight Ride of Paul Revere", by Longfellow (1860). Photo courtesy Massachusetts Turnpike Authority.
When people estimate how long a piece of work will take — or how much it will cost — their estimates are fairly reliable if they've done lots of similar work before. But if the work is unfamiliar, or if there are significant unknowns associated with the work, estimates of cost and schedule tend to be far less accurate, even when all we asked for was a "rough estimate." And the inaccuracies are almost always of a certain kind: final costs tend to exceed estimates, and deliveries are often late.
Why does this happen?
Last time, I explored three important contributors to this pattern — the planning fallacy, self-serving bias, and organizational politics. But in addition to these sources of systematic errors, there are two conceptual errors that are a bit mathematical in nature. One is a general misunderstanding of the term "rough estimate," and the second is a misconception about the shape of probability distributions of costs and schedules for unfamiliar projects.
- Misunderstanding the term "rough estimate"
- Rough estimates can be useful if we understand the true meaning of "rough." Technically, a rough estimate is an estimate that has a relatively wide margin of error. Every estimated value has a band of values that corresponds to, say, 95% confidence, and a mean or average that corresponds to a point within that band. If the width of the 95% confidence band is W, and the mean is M, then there is a ratio R equal to W/M. The "rougher" the estimate is, the greater is R.
- To be safe, users of rough estimates need to use the value at the top end of the band for estimated values in which larger is worse, or the value at the low end of the band for estimated values in which smaller is worse. Too often, people just use M. They can be forgiven, of course, when the estimator provides M alone, without reference to a 95% confidence band.
- There are clear reasons for this. In my experience, many consumers of estimates — the decision-makers, as they're often called — are uncomfortable with any estimate that includes an uncertainty band. I've actually heard reports about decision-makers' responses to estimates of the form, say, 8.7 million +/- 1.5 million, that go like this: "Don't give me this +/- stuff! If you don't know how much it will cost, just admit it! Now give me an estimate! Exactly what will this cost?"
- In fairness, Rough estimates can be useful
if we understand the true
meaning of "rough"many estimators lack sufficient information needed to compute a 95% confidence band. Others aren't sure how to calculate it. Others are intimidated by decision-makers who reject the "+/- stuff," and still others aren't intimidated, but just don't want to fight with resistant decision-makers. Whatever the case, estimates without 95% confidence bands are common, and because the estimates lack these bands, overruns are defined as "less favorable than the so-called estimate," which makes overruns very likely. - The shape of probability distributions of costs and schedules
- Another source of estimation error is our human intuition about the shape of the probability distributions of costs and schedules. We tend to think of these distributions as fairly symmetrical around some average, or mean. And we also like to believe that the mean of, say, the cost distribution, is fairly close to the most likely value of that distribution.
- We base this intuition on our experience with familiar efforts. And as it happens, for familiar efforts, our experience is a useful guide. That is, the distribution of cost or schedule outcomes for familiar efforts is fairly symmetric around some average value.
- But for unfamiliar efforts, our intuition is misleading — sometimes grossly misleading. And this comes about for reasons that are easy to understand intellectually, but difficult to incorporate into our intuition.
- With unfamiliar efforts, or efforts that are subject to significant unknowns, the probability distributions for costs and schedules aren't symmetric about their means. In fact, they're wildly asymmetric. While there are some pretty hard limits on how quickly or cheaply things can happen, there are no analogous limits on how slowly or expensively things can happen. For example, no matter how hard you try, you probably cannot get to the conference room in the other building in less than 45 seconds — even if you run. But without trying to dawdle, it can sometimes take you 20 minutes to get there, even though it's only a five-minute walk, depending on the weather, who you run into on the way over, and whether or not you have to go back to pick up something you forgot.
- For unfamiliar projects, or projects subject to significant unknowns, the probability distributions for costs and schedules tend to have long "tails" corresponding to unanticipated costs and delays. These tails cause the distributions to have average values that can be much greater than their most likely values. And that's what throws off our intuitions. When we estimate, we tend to estimate the most likely value. And when the average value is much greater than the most likely value, our estimates tend to fall crazily short. The situation is even worse when we stack one task or project after another in a long train, because the uncertainty bands stack up.
Next time you make or receive an estimate without a 95% confidence band, ask yourself, "What are the lowest and highest values that wouldn't shock me totally senseless beyond all reason?" That should give you some idea of what 95% confidence means. Top
Next Issue
Projects never go quite as planned. We expect that, but we don't expect disaster. How can we get better at spotting disaster when there's still time to prevent it? How to Spot a Troubled Project Before the Trouble Starts is filled with tips for executives, senior managers, managers of project managers, and sponsors of projects in project-oriented organizations. It helps readers learn the subtle cues that indicate that a project is at risk for wreckage in time to do something about it. It's an ebook, but it's about 15% larger than "Who Moved My Cheese?" Just . Order Now! .
Your comments are welcome
Would you like to see your comments posted here? rbrenhZLYrRMtUnyjppRsner@ChacotqZAFalhYTBMgJWoCanyon.comSend me your comments by email, or by Web form.About Point Lookout
Thank you for reading this article. I hope you enjoyed it and found it useful, and that you'll consider recommending it to a friend.
Point Lookout is a free weekly email newsletter. Browse the archive of past issues. Subscribe for free.
Support Point Lookout by joining the Friends of Point Lookout, as an individual or as an organization.
Do you face a complex interpersonal situation? Send it in, anonymously if you like, and I'll give you my two cents.
Related articles
More articles on Project Management:
Beyond Our Control
- When bad things happen, despite our plans and our best efforts, we sometimes feel responsible. We failed.
We could have done more. But is that really true? Aren't some things beyond our control?
Guidelines for Sharing "Resources"
- Often, team members belong to several different teams. The leaders of teams whose members have divided
responsibilities must sometimes contend with each other for the efforts and energies of the people they
share. Here are some suggestions for sharing people effectively.
When Change Is Hard: II
- When organizational change is difficult, we sometimes blame poor leadership or "resistance."
But even when we believe we have good leadership and the most cooperative populations, we can still
encounter trouble. Why is change so hard so often?
Design Errors and Groupthink
- Design errors cause losses, lost opportunities, accidents, and injuries. Not all design errors are one-offs,
because their causes can be fundamental. Here's a first installment of an exploration of some fundamental
causes of design errors.
On the Risk of Undetected Issues: I
- In complex projects, things might have gone wrong long before we notice them. Noticing them as early
as possible — and addressing them — is almost always advantageous. How can we reduce the
incidence of undetected issues?
See also Project Management and Personal, Team, and Organizational Effectiveness for more related articles.
Forthcoming issues of Point Lookout
Coming January 27: Cost Concerns: Comparisons
- When we assess the costs of different options for solving a problem, we must take care not to commit a variety of errors in approach. These errors can lead to flawed decisions. One activity at risk for error is comparing the costs of two options. Available here and by RSS on January 27.
And on February 3: Cost Concerns: Bias
- When we consider the costs of problem solutions too early in the problem-solving process, the results of comparing alternatives might be unreliable. Deferring cost concerns until we fully understand the problem can yield more options and better decisions. Available here and by RSS on February 3.
Coaching services
I offer email and telephone coaching at both corporate and individual rates. Contact Rick for details at rbrenhZLYrRMtUnyjppRsner@ChacotqZAFalhYTBMgJWoCanyon.com or (650) 787-6475, or toll-free in the continental US at (866) 378-5470.
Get the ebook!
Past issues of Point Lookout are available in six ebooks:
- Get 2001-2 in Geese Don't Land on Twigs (PDF, )
- Get 2003-4 in Why Dogs Wag (PDF, )
- Get 2005-6 in Loopy Things We Do (PDF, )
- Get 2007-8 in Things We Believe That Maybe Aren't So True (PDF, )
- Get 2009-10 in The Questions Not Asked (PDF, )
- Get all of the first twelve years (2001-2012) in The Collected Issues of Point Lookout (PDF, )
Are you a writer, editor or publisher on deadline? Are you looking for an article that will get people talking and get compliments flying your way? You can have 500-1000 words in your inbox in one hour. License any article from this Web site. More info
Public seminars
- The Power Affect: How We Express Our Personal Power
Many
people who possess real organizational power have a characteristic demeanor. It's the way they project their presence. I call this the power affect. Some people — call them power pretenders — adopt the power affect well before they attain significant organizational power. Unfortunately for their colleagues, and for their organizations, power pretenders can attain organizational power out of proportion to their merit or abilities. Understanding the power affect is therefore important for anyone who aims to attain power, or anyone who works with power pretenders. Read more about this program.
- A recording of a program presented June 29, 2017, Monthly
Webinar, sponsored by Technobility
Webinar Series. PMI members can earn 1.0 Category 'A' PDU by viewing this program. View this program now.
- A recording of a program presented June 29, 2017, Monthly
Webinar, sponsored by Technobility
Webinar Series. PMI members can earn 1.0 Category 'A' PDU by viewing this program. View this program now.
- A recording of a program presented June 29, 2017, Monthly
Webinar, sponsored by Technobility
Webinar Series. PMI members can earn 1.0 Category 'A' PDU by viewing this program. View this program now.
- Bullet Points: Mastery or Madness?
Decis
ion-makers in modern organizations commonly demand briefings in the form of bullet points or a series of series of bullet points. But this form of presentation has limited value for complex decisions. We need something more. We actually need to think. Briefers who combine the bullet-point format with a variety of persuasion techniques can mislead decision-makers, guiding them into making poor decisions. Read more about this program.
- A recording of a program presented June 24, 2020, Monthly
Webinar, sponsored by Technobility
Webinar Series. PMI members can earn 1.0 Category 'A' PDU by viewing this program. View this program now.
- A recording of a program presented June 24, 2020, Monthly
Webinar, sponsored by Technobility
Webinar Series. PMI members can earn 1.0 Category 'A' PDU by viewing this program. View this program now.
- A recording of a program presented June 24, 2020, Monthly
Webinar, sponsored by Technobility
Webinar Series. PMI members can earn 1.0 Category 'A' PDU by viewing this program. View this program now.
Follow Rick





Recommend this issue to a friend
Send an email message to a friend
rbrenhZLYrRMtUnyjppRsner@ChacotqZAFalhYTBMgJWoCanyon.comSend a message to Rick
A Tip A Day feed
Point Lookout weekly feed
