Proofing against unforeseen loss and overruns

We hear all too often about major projects in both the public and the private sectors being plagued by substantial overruns.
The negative consequences and knock-on effects are serious and can even be commercially fatal to a company.

Incredible as it sounds, but amongst the several hundred projects which have been correctly analysed according to this principle in the last 25 years, not a single report of failure has been received. Analysis of a future end result is naturally beset with uncertainty. The analysis results therefore show both the average and the standard deviation of the result. This allows those with responsibility for the project to adopt a budget with the appropriate safeguard against overruns. In Norway, where the principle is in widespread use, project budgets are often chosen at an 80% degree of safety.

It can be particularly beneficial to perform such analyses in the very early stages of a project, as the procedure is highly robust even with insufficiently detailed data.