A Predictable Cost Overrun — And How to Avoid the Next One
Guernsey’s education sector has been dealt another financial blow. The cost of building the new sixth form centre and sports facilities at Les Ozouets has now soared to £40–50 million, more than double the original £24 million estimate from just a few years ago1.
Education vice-president Sam Haskins attributed the sharp increase to rising material and staffing costs, inflation, and the failure to include contingency for “optimism bias” in the original figures. He also blamed the States Assembly’s decision to split the project into two phases — a move that increased inefficiencies and further drove up costs.
With only the £1 million foundations currently under way, the rest of the project is now on hold. Students will relocate to La Mare de Carteret in the interim, and the future of the Les Ozouets site depends on whether the next Assembly — due to be elected in June — decides to release the necessary funds.
But should we really be surprised?
According to renowned academics Bent Flyvbjerg, Nils Bruzelius, and Werner Rothengatter, what’s happened in Guernsey is not an exception — it’s the rule. In their work Megaprojects and Risk: An Anatomy of Ambition, they argue that project promoters systematically underestimate costs and overestimate benefits in order to get approval. Once a project is partially funded, the sunk cost fallacy kicks in, making it psychologically and politically difficult to abandon — even as costs spiral out of control.
This is why Flyvbjerg and colleagues developed a method called Reference Class Forecasting (RCF). Instead of relying on a project’s internal assumptions and best-case scenarios (what they call the “inside view”), RCF uses an “outside view.” It compares the proposed project to a database — or “reference class” — of similar past projects to establish what actually happened in real life.
RCF consists of three key steps:
- Identify a relevant reference class (e.g. other school construction projects);
- Establish a probability distribution of outcomes (cost overruns, delays, etc.);
- Position the current project within that distribution to produce a more realistic forecast.
This approach has been adopted by major institutions including the UK Treasury. It is also taught and supported by Oxford Global Projects, a research and advisory group co-founded by Flyvbjerg, which aims to improve the accuracy of project planning worldwide.
Had this methodology been applied to the Les Ozouets project at the outset, it’s likely the real cost estimate would have been flagged as overly optimistic — giving the States a chance to plan more robustly, or reconsider the scope before committing public funds.
RCF won’t eliminate overruns entirely, but it can make them less frequent, less severe, and far less surprising. Perhaps it is time for Guernsey to embrace such evidence-based methods: they could be a key to restoring public trust and spending wisely.