Optimism Bias (Definition)

Defined by the HM Treasury Green Book ( as ‘the demonstrated systematic tendency for appraisers to be over-optimistic about key project parameters, including capital costs, operating costs, works duration and benefits delivery. To address this, adjustments should be made to the estimates of program and project costs, benefits and works duration based on empirical data.’ Standard adjustments are included in the HM Treasury Green Book (HM Treasury, 2003a) and on the HMT website*

Last Reviewed: 10 January 2018