A study of 50 government projects over the last 20 years found those involving technical innovation and systems development historically ran over budget by up to 200% and over the original contract duration by 54%.
The study was commissioned by the Treasury and is the basis for an ‘optimism-bias’ calculation included in the draft Green Book that departments are advised to take into account when devising the business case and evaluating contracts.
‘There is an empirically observed, systematic tendency for appraisers to be over-optimistic in assessing projects,’ states the book. ‘Optimism-bias is caused by a failure to identify and effectively manage project risks.’
The study, which included the Inland Revenue’s current outsourcing deal with EDS, said the main cause of optimism-bias was the inadequacy of the business case.
The Treasury said the Green Book and the Office of Government Commerce will together provide a more robust framework for the appraisal and evaluation of public sector projects.
The OGC was set up to tackle the repeated failure and overrun of bungled IT projects that have cost the government over £1bn since 1997.
The draft Green Book is available on the Treasury’s web site and is open for public consultation until 18 October. A final version is planned before the end of the year, with government departments set to use it from 1 April 2003.
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