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dc.contributor.authorLove, Peter
dc.contributor.authorIka, L.A.
dc.contributor.authorMatthews, Jane
dc.contributor.authorFang, Weili
dc.identifier.citationLove, P.E.D. and Ika, L.A. and Matthews, J. and Fang, W. 2021. Risk and Uncertainty in the Cost Contingency of Transport Projects: Accommodating Bias or Heuristics, or Both?. IEEE Transactions on Engineering Management.

Transport projects are regularly subjected to cost misperformance. The contingency set aside to cover any increases in cost due to risk and uncertainty issues is often insufficient. We review approaches that have been used to estimate a cost contingency. We show that some approaches such as reference class forecasting, which underpins the planning fallacy theory, take a biased view to formulate a contingency. Indeed, there is a perception that the risks and uncertainties that form the parts of a cost contingency cannot be accurately assessed using heuristics. The absence of an overarching theory to support the use of heuristics has resulted in them often being downplayed in a project's investment decision-making process. This article fills this void and provides the theoretical backdrop to support the use of heuristics to formulate a cost contingency. We make a clarion call to reconcile the duality of the bias and heuristic approaches, propose a balanced framework for developing a cost contingency, and suggest the use of uplifts to derisk cost estimates is redundant. We hope our advocacy for a balanced approach will stimulate debate and question the legitimacy of uplifts to solely debias cost estimates.

dc.titleRisk and Uncertainty in the Cost Contingency of Transport Projects: Accommodating Bias or Heuristics, or Both?
dc.typeJournal Article
dcterms.source.titleIEEE Transactions on Engineering Management
curtin.departmentSchool of Civil and Mechanical Engineering
curtin.departmentSchool of Design and the Built Environment
curtin.accessStatusOpen access
curtin.facultyFaculty of Science and Engineering
curtin.facultyFaculty of Humanities
curtin.contributor.orcidLove, Peter [0000-0002-3239-1304]
curtin.contributor.orcidMatthews, Jane [0000-0003-3367-9278]
curtin.contributor.orcidFang, Weili [0000-0002-2072-1177]
curtin.contributor.researcheridLove, Peter [D-7418-2017]
curtin.contributor.researcheridMatthews, Jane [M-6968-2017]
curtin.contributor.scopusauthoridLove, Peter [7101960035]
curtin.contributor.scopusauthoridMatthews, Jane [7402836944]

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