Major projects are notorious for their cost overrun, delays in completion and attachment to politics. Examples in the metros sector are Channel Tunnel - 80% overrun, Jubilee Line Extension - 50% overrun, and the most recent Crossrail – anyone’s guess. Yet the phenomenon is not limited to the UK, and is the same throughout the world. Interestingly, regardless of how notorious they are, or how much research has been done, their cost performance has shown little improvement over the past few decades.This makes people wonder – is cost overrun a failure in the delivery, or just a part of their nature?
From the project sponsor’s point of view, these major projects are risky, complex, costly and often irreversible, because they are so much fundamentally affected by external context such as political, social and economic conditions, which are well beyond the control of the project sponsor. This can lead to unexpected setbacks, as well as opportunities. In practice, many risks or issues are often overlooked or inadequately addressed. For example, the construction is often disjointed with the operational phase, and early project and strategic risk identification, risk analysis and mitigation often gets insufficient attention.
More information can be found here:
https://www.ice.org.uk/knowledge-and-resources/best-practice/new-approaches-to-risk-management
However, I raise two the critical issues from completely new angles:
1, What are major projects really?
There is a general lack of understanding that major projects are a special kind of projects. Conventional projects are chosen and defined – you have a demand for a new project, then you define its scope, then you study a few options and then choose the best one and then procure it. The process is ‘static’.
Major projects are evolved and shaped. Major projects are super-long term commitments – they typically take decades to go through the planning and construction phase, which means their scope inevitably evolves during this process. Major projects will probably only see their use by the next generation down the line. It is extremely difficult to forecast what people will need by then. Therefore the demand for major projects are usually visionary and strategic, and their real demand is usually so difficult to prove by science in advance, i.e. by evidence-based decision-making. It usually takes a lot of convincing to get a go-ahead, which is why politicians often have to be involved. Since politicians are involved, they wield major projects to their advantage, to achieve their own political goals. In this way, politicians shape the development of major projects. They start from a vision or strategy, and find the best way out. Major projects are also so big, that they both shape and get shaped by the environmental, economic, political and social context they are situated within. Their development path requires a large amount of interaction with others. Their development process is ‘dynamic’.
The project sponsor for a major project should not take a ‘static’ approach by merely choosing the best option, implement it and wait for the benefit to happen; instead, project sponsor should be proactive in steering the project into the preferred development path, and improvise and adapt as the context changes. The development of the project during the front-end phase is a time-dependent, non-linear, and iterative process, during which the project was formulated, tested, challenged, and reformulated through a series of episodes. Major projects at early stages should be developed and designed as an ‘open’ system, which means the overarching strategy remains firm and intact, whereas the specific option to deliver the strategic goals, and project-specific objectives, are kept contingent, flexible and adaptive. At the upfront stages of project development, project sponsor should devise a strategy that best exploit opportunities. Have positive contingencies to prepare for emergence of positive opportunities. The project sponsor should proactively shape the context and stakeholders, to steer them into development paths that are favourable to the project sponsor. This depends on the project sponsor having appropriate competence and capability, which is another major topic for further blogs.
2, Do cost-overruns even matter?
A more comprehensive guide for the front-end phase of major projects, produced by the Risk Group members, which I am part of. The Risk Group is jointly formed by members from the Institution of Civil Engineers and Institute and Faculty of Actuaries, with specific interest in studying risks for major civil engineering projects. The document is linked here:
So - Should major projects be measured on cost/time performance? In war, an army can have ‘tactical retreat’, or ‘fake loss’, in order to lure the enemy out of its advantageous position, and achieve a strategic success. Major projects are the same. The success criteria can be at 1, tactical level (cost-time-quality, namely the ‘iron triangle’), which means how well you have delivered what you are asked to deliver; or 2, strategic level (operational value, symbolistic value, strategic value), which basically means how much long term or strategic value the project has. A project can be successful on all fronts including cost, time and quality, but fail on strategic level, such as little/no usage, or failing to serve as a critical link in a strategy. The appraisal of strategic success depends on the time horizon (temporal boundary). A project can be a success within a relatively small period of time but a failure under consideration of a broader time scale.
So - Should major projects be measured on cost/time performance? In war, an army can have ‘tactical retreat’, or ‘fake loss’, in order to lure the enemy out of its advantageous position, and achieve a strategic success. Major projects are the same. The success criteria can be at 1, tactical level (cost-time-quality, namely the ‘iron triangle’), which means how well you have delivered what you are asked to deliver; or 2, strategic level (operational value, symbolist value, strategic value), which basically means how much long term or strategic value the project has. A project can be successful on all fronts including cost, time and quality, but fail on strategic level, such as little/no usage, or failing to serve as a critical link in a strategy. The appraisal of strategic success depends on the time horizon (temporal boundary). A project can be a success within a relatively small period of time but a failure under consideration of a broader time scale.
A more comprehensive guide for the front-end phase of major projects, produced by the Risk Group members, which I am part of. The Risk Group is jointly formed by members from the Institution of Civil Engineers and Insitute and Faculty of Actuaries, with specific interest in studying risks for major civil engineering projects. The document is linked here:
https://www.ice.org.uk/knowledge-and-resources/best-practice/tackling-key-front-end-issues-major-infrastructure
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