Keywords
Citation
(1999), "Capital projects: wishful thinking and worse!", The Bottom Line, Vol. 12 No. 2. https://doi.org/10.1108/bl.1999.17012baf.010
Publisher
:Emerald Group Publishing Limited
Copyright © 1999, MCB UP Limited
Capital projects: wishful thinking and worse!
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Capital projects: wishful thinking and worse!
P. Prendergast in Management Accounting (UK), Nov. 1998 Vol. 76 No. 10: p. 41 (2 pages)
Cites some disastrously wrong forecasts for large capital projects and argues that behavioural aspects play an important part in gaining approval for bad or unrealistic projects. Criticizes the bureaucratic "layers of approval" process used in most large businesses and refers to research findings to show the huge proportion of projects which are over budget and/or late in both the public and private sectors. Reports an Irish survey of large organization unit managers to explore reasons for the overforecasting of revenues/underforecasting of costs, quoting respondents to illustrate the factors encouraging manipulation of the figures and the information deficit between accountants and operating managers. Suggests that non-executive directors or independent consultants could be used to inject more realism and objectivity into key stages of the project approval process.
Subject(s): Capital budgeting, Forecasting, Individual behaviour
Style: Survey, Comparative/evaluation
Reference: 28AA396 (1 credit)