Reference Class Forecasting Calculator
Reference class forecasting (RCF) is the only forecasting method with documented evidence of reducing optimism bias in megaprojects. The UK Treasury and Department for Transport have made it mandatory since 2003. Use the calculator below to apply the official Green Book uplift to your estimate, then read the method underneath.
Reference Class Forecasting calculator
Uplifts your base estimate using the empirical overrun for its reference class, the method Flyvbjerg and the UK Treasury recommend to correct optimism bias.
New build, standard design, greenfield. Flyvbjerg 'Buildings' mean: +62%.
The Green Book applies the full upper-bound uplift at the outline-business-case stage, then reduces it as the contributory risk factors are actively identified and mitigated. Set this to how much of that risk work you have genuinely done, not how confident you feel.
Uplift percentages: HM Treasury Supplementary Green Book Guidance on Optimism Bias (Mott MacDonald, 2002), Table 1, capital expenditure upper and lower bounds. Cross-check base rates: Flyvbjerg & Gardner, How Big Things Get Done (2023).
The five steps
- Identify the reference class. Find past projects that are genuinely comparable in scope, technology, scale, and delivery model. Not "similar in name", similar in structure.
- Establish the distribution of outcomes. For each reference project, calculate the cost overrun against its original approved budget (not against any later re-baseline). Build a distribution.
- Compare your project to the distribution. Identify any structural reasons your project should sit lower (proven technology, smaller scope) or higher (less mature supply chain, first-of-a-kind) than the reference class.
- Pick a target percentile. A 50th-percentile uplift accepts a 50/50 chance of overrun. An 80th-percentile uplift gives roughly 80% confidence of staying within budget. UK Treasury Green Book defaults to the 80th percentile for high-stakes projects.
- Apply the uplift. Add the percentile-derived uplift to the bottom-up budget. Document the assumptions; the uplift is a forecasting tool, not a slush fund.
Worked example: a UK light-rail project
Suppose you are forecasting the cost of a 12-mile urban light-rail extension. Bottom-up estimate is 800M GBP.
Reference class: 60 urban rail extension projects in OECD countries, 1990 to 2020, with original budgets between 300M and 2bn GBP equivalent. From the Flyvbjerg dataset:
| Percentile | Cost overrun (real terms) | Uplift to apply |
|---|---|---|
| 50th (median) | +45% | 1.45x = 1,160M |
| 70th | +68% | 1.68x = 1,344M |
| 80th | +90% | 1.90x = 1,520M |
| 90th | +150% | 2.50x = 2,000M |
At the UK Green Book default 80th percentile, the RCF-adjusted budget is roughly 1.5bn GBP, not 800M. Sponsors who want to publish the 800M figure are choosing to accept roughly 80% probability of overrun.
Frequently asked questions
What is reference class forecasting?
Reference class forecasting (RCF) corrects optimism bias by basing a project's budget on the actual outcomes of a class of similar completed projects, rather than on a bottom-up estimate that assumes everything goes to plan. You identify a reference class of comparable projects, build the distribution of their cost overruns, pick a confidence percentile, and apply the corresponding uplift. It is the only forecasting method with documented evidence of reducing megaproject overruns, and the UK Treasury and Department for Transport have required it since 2003.
What uplift should I apply for optimism bias?
The HM Treasury Supplementary Green Book Guidance on Optimism Bias (Mott MacDonald, 2002) publishes upper-bound capital-expenditure uplifts by project type: standard buildings 24%, non-standard buildings 51%, standard civil engineering 44%, non-standard civil engineering 66%, and equipment/development including IT and software 200%. These upper bounds apply at outline-business-case stage and reduce toward the lower bound (2% to 10% depending on type) as project-specific risk is identified and mitigated. The calculator above applies these figures directly.
Is there a free reference class forecasting calculator?
Yes, the calculator at the top of this page. It applies the Green Book optimism-bias uplift for your selected project type to your base estimate, adjusted by how much project-specific risk you have mitigated, and cross-checks the result against the Flyvbjerg & Gardner (2023) mean overrun for the nearest reference class. It is free, requires no signup, and runs entirely in your browser.
Sources
- HM Treasury Green Book, supplementary guidance on optimism bias
- Flyvbjerg B. (2008). Curbing optimism bias and strategic misrepresentation in planning: reference class forecasting in practice. European Planning Studies 16(1).
- Kahneman D., Tversky A. (1979). Intuitive prediction: biases and corrective procedures. Management Science 12.