Quality Control and Due Diligence in Project Management: Getting Decisions Right by Taking the Outside View

International Journal of Project Management, vol. 31, no. 5, pp. 760-774, DOI: 10.1016/j.ijproman.2012.10.007

35 Pages Posted: 14 Mar 2013 Last revised: 6 Jan 2016

See all articles by Bent Flyvbjerg

Bent Flyvbjerg

University of Oxford - Said Business School

Date Written: July 1, 2013

Abstract

This paper explores how theories of the planning fallacy and the outside view may be used to conduct quality control and due diligence in project management. First, a much-neglected issue in project management is identified, namely that the front-end estimates of costs and benefits -- used in the business cases, cost-benefit analyses, and social and environmental impact assessments that typically support decisions on projects -- are typically significantly different from actual ex post costs and benefits, and are therefore poor predictors of the actual value and viability of projects. Second, it is discussed how Kahneman and Tversky's theories of the planning fallacy and the outside view may help explain and remedy this situation through quality control of decisions. Third, it is described what quality control and due diligence are in the context of project management, and an eight-step procedure is outlined for due diligence based on the outside view. Fourth, the procedure is tested on a real-life, multibillion-dollar project, organized as a public-private partnership. Finally, Akerlof and Shiller's recent discussion in economics of "firing the forecaster" is discussed together with its relevance to project management. In sum, the paper demonstrates the need, the theoretical basis, a practical methodology, and a real-life example for how to de-bias project management using quality control and due diligence based on the outside view.

Keywords: Quality control, Due diligence, Front-end management, Planning fallacy, Outside view, Forecasting, Cost–benefit analysis, Ex-post analysis, Daniel Kahneman

Suggested Citation

Flyvbjerg, Bent, Quality Control and Due Diligence in Project Management: Getting Decisions Right by Taking the Outside View (July 1, 2013). International Journal of Project Management, vol. 31, no. 5, pp. 760-774, DOI: 10.1016/j.ijproman.2012.10.007. Available at SSRN: https://ssrn.com/abstract=2229700

Bent Flyvbjerg (Contact Author)

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

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