The fundamental flaw in project planning – The Planning Fallacy


Economy Politics

Why do projects rarely get done on time? How come that paper you set 3 hours aside for more often than not take you 8? Why are mega-infrastructure projects almost always over budget and still nowhere near complete on projected completion dates? Picture Melamchi, a project envisioned in the late 90s and scheduled to be completed by 2007. 11 years later in 2018, we are still facing the inconveniences of dug up roads for pipelines, the benefits yet to be reaped.

For a long time, we’ve blamed systemic corruption, lack of coordination and motivation in our government for failed projects. While this is definitely a factor, the issue may also be arising from the fact that our planners are like us, just human. This is where the Planning Fallacy comes in. We as human beings tend to underestimate the required resources (time, monetary and otherwise) to complete our projects. This stems from many issues, one essential element being the optimism bias.

People commonly operate from a position that paints a rosy picture of the future. So when setting deadlines or budgets, they tend to be more optimistic than they are realistic. This bias can thus be measured by the gap between intention and behavior. Another aspect of the planning fallacy is overconfidence. Since we often reward overconfidence, people unconsciously and sometimes even deceitfully present aggressive estimates. One such relevant example is contractors for infrastructure projects submitting their quotes. They know that being realistic will never get them the deal. Therefore, when we see that projects are not completed in time, it is quite possible that the deadline/budget was not realistic to start with and they were destined to fail. Neglecting the challenges of coordination within numerous teams in large projects and procrastination are also leading reasons for delays. After all, how do we expect to finish something on time, when it did not start on time? Furthermore, in this day and age, digital distraction and resulting information overload pose a severe threat as well. In the United States, this is estimated to cause a loss of 1 trillion dollars a year.

The iron law of mega-projects is very real – mega projects will 9 out of 10 times be over-budget, over-time and under-benefits. However, even when such a pattern is realized, it is in the best interest of politicians to always make exaggerated promises. Since long-term projects take years to fulfill, they will easily be able to kick the can down the road until it becomes someone else’s problem. Newly elected individuals then need to choose to either scrap the project or pour in more time and finances out of their resources for its successful completion.

So how do we overcome the Planning Fallacy?

Reference class forecasting and algorithms! When planning for any project, the project in hand should actually be ignored, and schedules and budgets of previous similar projects should instead be considered. The % of errors faced in those projects should then be accounted for in any ongoing planning. Another effective way is to use algorithms and eliminate human biases altogether. Successful implementation of algorithms is the exceedingly efficient fulfillment in Amazon. Both of these tried and tested methods require data. Be it manual referencing or feeding numbers into mathematical algorithms, extensive record keeping of past projects will be extremely helpful when accurately forecasting for future projects.

The lack of proper data and record keeping is a serious problem that has been highlighted time and again in our government offices in Nepal. It is therefore imperative to address this issue in all levels of our governments if we want to build better, more efficient plans moving forward. Further, publishing project results publicly will not only help reduce the perils of the Planning Fallacy but also bring about a much-needed improvement in transparency and accountability in the country.