People & Skills
Thinking Fast and Slow, Public Sector Procurement and Projects

Daniel Kahneman’s book, Thinking Fast and Slow, is essential reading for anyone interested in how we think, human behaviour and motivation. It contains material that is relevant to everyone’s lives, both business and personal. It has many aspects that have relevance to procurement people. We are currently writing a briefing paper which will cover this, but another thought struck me during the writing of that paper and re-reading the book.

Kahneman tells the story of a group of academics, including him, who were asked to develop a major new academic syllabus by the Israeli government. After the first year or so of meetings and preparatory work, they sat down to talk about how long they thought it would take to develop the syllabus and produce a textbook. About two years, was the average of the estimates from the team members.

Then Kahneman asked one of the group who was an expert in curriculum development to think about all the similar groups and exercises he had seen over his career. So what did he think – was two years feasible and reasonable? Did it fit with past experience?

He thought for a while, and then said that actually, he could not think of a single example that had taken less than seven years, some as much as ten, and in fact, 40% of the projects had been abandoned before they succeeded. The rest of the group listened. And then, despite those comments, and after a little debate, they simply carried on with their two-year plan as if nothing had happened!

Kahneman uses this as an example of the way we fail to apply logical thinking and end up with various biases and mistakes affecting our thought process. He sees this story as an example of the “planning fallacy”, and “irrational perseverance”, and we might add “optimism bias” to that list. Even though the group had the evidence that this might take a lot longer, they were still certain that they were different from the previous groups who had been through very similar circumstances.

We see this very frequently in public projects, programmes and procurement exercises. An IT system can be built in two years, we predict, even though all the evidence is that previous systems took five or more. A procurement exercise can be run in 3 months – or “we should be able to evaluate the tenders in a week”. But of course it takes three, as it always does. Indeed, it would be fascinating to know how many major procurement exercises actually arrive at the contract award date that is the exactly that given in the original plan. Quite a low percentage, we suspect.

Kahneman suggests that this is not conscious or malicious behaviour, but rather an in-built natural optimism that is part of human behaviour.

“Most of us view the world as more benign than it really is, our own attributes as more favorable than they truly are, and the goals we adopt as more achievable than they are likely to be. We also tend to exaggerate our ability to forecast the future, which fosters optimistic overconfidence. In terms of its consequences for decisions, your optimistic bias may well be the most significant of the cognitive biases.”

How can we counter this? Well, being conscious of it is a good start. Forcing ourselves to look rationally at the evidence about past experience is a good start. We need to create realistic plans, assessing resource that is needed and making sure we have appropriate checkpoints. We should understand that no, we are NOT special, we are pretty much the same as everyone else who has been through this before. If everyone else has had a particular experience, then the likelihood is that the same will apply to us and our team.

And what happened in Kahneman’s example? Producing the syllabus and the book took eight years in the end, by which time the government had lost interest, and it was never used. Now that also sounds like many public sector projects, programmes, initiatives and policies we can think of!