Adjustments for Optimism Bias may be reduced over time as more reliable estimates of relevant costs are developed and project specific risk work is undertaken. As it becomes possible to better quantify and value risks, it should also be possible to better capture the factors that contribute to appraisal optimism within the risk management process. Accordingly, as risk analysis improves as the scheme develops, we would expect that, on average, the risk adjusted scheme cost estimate will increase, while the applicable level of Optimism Bias will decrease. Optimism Bias will, therefore, be highest at the Strategic Outline Business Case stage of a transport project and then decrease over time through the Outline Business Case and Final Business Case stages.
As a scheme progresses through these stages, there are techniques for reducing Optimism Bias uplifts through increased certainty on cost estimates, the use of mitigation measures, and independent reviews of Risk and Optimism Bias. Any reductions in the Optimism Bias adjustments from the recommended values should be clearly justified and documented for auditing purposes.
