The public sector is over optimistic when evaluating costs and time scales for government IT projects, according to a draft revision of the Treasury's project appraisal 'Green Book'.
A study of 50 government projects over the past 20 years found that those involving technical innovation and systems development historically ran over budget by up to 200 per cent, and overran the original contract duration by up to 54 per cent.
The study was commissioned by the Treasury and forms the basis of an 'optimism bias' calculation 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," it said. "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, explained that the main cause of optimism bias was the inadequacy of the business case.
The Treasury maintained that the Green Book and the Office of Government Commerce (OGC) 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 IT projects that have cost the taxpayer over £1bn since 1997.
The draft Green Book is available on the Treasury's website 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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