ACCA Strategic Professional · Strategic Business Leader · Leading and managing projects
Vantor Pharma is planning a drug-packaging automation project. Its previous three similar projects each overran budget by 25-35%, yet the new business case assumes delivery on budget because the team is 'more experienced this time'. A reviewer proposes basing the estimate on the outcomes of comparable past projects and adding a contingency derived from them. Which concept does this proposal address and what does it imply?
This is reference class forecasting, used to counter optimism bias. Instead of relying on the team's confidence, the estimate is adjusted using the actual overruns of comparable past projects, producing an evidence-based contingency. It is an outside-view technique applied at planning, not during execution.
- ACritical chain buffering, which removes padding from individual tasks
- BReference class forecasting to counter optimism bias, adjusting the estimate using historical outcomesCorrect
- CEarned value analysis, which measures progress against baseline during execution
- DGold plating, which controls unnecessary extra features
Explanation
Using the actual outcomes of similar past projects to adjust estimates and add evidence-based uplift is reference class forecasting, a recognised remedy for optimism bias (the 'inside view'). Earned value operates during execution, not initial estimating.
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