Crime and Punishment at the Court of Truth and Reconciliation
A Boyce, FaberMaunsell, UK
A (humourous) exploration of the reasons for optimism bias in traffic forecasting for private finance projects and the consequences for the forecasters, concessionaires and funders.
This is a cautionary tale. It has been shown that, for nearly all privately financed projects, the outturn traffic is lower than that forecast by the company winning the concession. There are a number of reasons why this is the case including technical errors, unrealisitic assumptions (pure optimism bias) and external pressure. For reasons of commercial confidentially, the facts on individual projects rarely emerge. This paper dispenses with the facts by taking a ficticious completed project and examining why a number of organisations produced unreliable forecasts. It is set in a courtroom with the presiding judge Mr Justice Urts. All witnesses are compelled to tell the truth (which is a novelty for some of them), and a reconciliation is made between their forecasts and the outturn traffic.
Despite the lack of facts, the situations described are realistic (though sometimes exaggerated) in that similar situations have been observed in real projects. The witnesses represent organisations who make characteristic forecasts.
Wright Answers who always produce right answers;
Ball, Supp and Blunder who make technical errors;
Crook Brothers (Nick and Rob) who are competent but not strictly honest (except in this court);
Timelord Enterprises who can visit the future to see what actually happens before submitting a bid;
Bright and Sunny who are optimistic; and
The Compliant Bid Company who always comply with the wishes of their employers.
Though the companies are caricatures, the paper will demonstrate the numerous factors serving to inflate forecasts and the lack of countervailing factors.
The paper concludes by considering how the various parties have been punished (or otherwise) for their crimes. As companies will avoid behaviour that is punished and repeat behaviour that is rewarded, the paper concludes that great care should be exercised in interpreting the forecasts.
Association for European Transport