Optimism Bias in Bidding: Contractors’ Horizontally Biased Estimating Behavior

In the construction management literature, it is not an ultimately settled matter that optimism bias is one of the undisputed factors or reasons affecting cost underestimation and cost overrun. This study tried to answer whether bidders—usually legal entities, not natural persons—would exhibit optimism bias-like behavior when bidding for construction projects and whether financial ramifications would follow. Two hundred eighty-six projects delivered to the Ohio Department of Transportation between 2011 and 2020 were analyzed to test the proposed hypothesis. It was observed that bidders were more optimistically biased when bidding for long-duration projects than short-duration projects. The observation strengthens the causal nature between optimism bias and cost underestimation and encourages stakeholders to develop internal or external monitoring systems that call out optimism bias at the organizational level.