Project teams can be subject to different kinds of cognitive biases, including: optimistic estimates of budgets and timelines, or social or political pressure to meet particular targets. This can lead to setting aside unrealistically low project contingencies, or allocations of budgetary or time resources in addition to the base estimate or schedule, to allow for inherent or contingent risks at the desired confidence level.
Cognitive bias can be defined as peoples’ deviation from rational judgement to draw illogical conclusions. In some cases, cognitive biases may lead to more effective decisions or actions, especially where speed is more important than accuracy (as demonstrated by heuristics in decision making).
Engineers may have an unconscious bias toward systems, processes and data as effective tools for problem solving. These tools are effective when problems are reasonably linear, but many problems are complex, especially those with a strong human element.
Therefore, it is important to select appropriate models and assumptions to simplify complex problems to assess risk in order to make the right decisions.
Lessening effect on project contingency setting
To improve project risk management and contingency calculations, project teams should be aware of possible cognitive biases that may affect decision making. The diagram below shows some common forms of cognitive bias.
Diagram courtesy of Pedram Danesh-Mand, Risk Engineering Society
Accuracy of contingency allowances can also be improved by identifying and assessing possible causes of cost or schedule overruns and holding regular review meetings.
The information on this page was primarily sourced from:
Edited by Nadine Cranenburgh