We Are So Bad At Managing Megaprojects.

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Written by: Gunn Ochaphan
Contact: gunnochaphan@gmail.com

Infrastructure megaprojects are crucial to the cities, states, and individual livelihoods. It's so important that keeps the cities running and our basic needs satisfied.

• Water-supply or transportation
• Some projects keep the country from drowning

• Panama Canal accounts for significant share of the country's GDP
• Dubai's international airport accounts for 27% of its GDP and 21% of Dubai's employment

But almost every megaprojects failed. they often go off the rails, either with time or budget - or both. All of them are expanding and at the same time running late. Bent Flyvbjerg, an expert in project management at Oxford’s business school, estimated that nine out of ten go over budget.

• Rail projects, for example, go over budget by an average of 44.7 percent, and their demand is overestimated by 51.4 percent.
• McKinsey has estimated that bridges and tunnels incur an average 35 percent cost overrun; for roads, it's 20 percent.

Why Projects go bad?

There's three main reasons

• Overoptimism and overcomplexity
• In order to justify a project, sometimes costs and timelines are systematically underestimated and benefits systematically overestimated.
• Project managers competing for funding massage the data until they come under the limit of what is deemed affordable; stating the real cost, he writes, would make a project unpalatable.
• Poor execution
• Having delivered an unrealistically low project budget makes it specially difficult for the engineering and construction firms to deliver project.
• There could be incomplete design, lack of clear scope, ill-advised shortcuts, or even mathematical errors in scheduling and risk assessment.
• Politics, such as new governments or laws.
• In part, its hard to execute well since the megaprojects are mostly very complex. Small problems can cause chain of more and more complicated problems.
• Weakness in organizational design and capabilities
• Multiple layers can cause conflict between layers of management. while top level managements focus on more work and more money, lower management layers focus more on getting the work delivered on time and budget.
• Sometimes there's not enough capabilities. Megaprojects are initiated by government or entreprenuer with bold aspirations. because each megaprojects are unique, the learning curve is steep every time

How to best increase chance of deliver megaprojects on promise?

Luckily, most problems are systematic errors and, hence, can be identified and addressed.

To the poor justification and need of projects, key is to first establish social and economic priorities and only then to consider what projects are best suited to deliver them.That requires developing independent and robust analyses on the true cost and benefits. The process for selecting projects needs to be fact based and transparent to ensure accountability.

• Singapore came close to achieving ideal. they have the Land Transport Authority to selects transport projects.
• South Korea's Public and Private Infrastructure Investment Management Center (PIMAC) gets accurate data on costs and benefits. they do feasibility study. So far, PIMAC has rejcted almost half the projects they reviewed. Before PIMAC, the rejection figure was 3 percent.

Lacking of adequate controls over the progress. This limits the partners’ ability to figure out how to accelerate project delivery and control cost overruns. A more sophisticated approach is to use real-time data that measures activity in the field, such as cubic meters of concrete poured or earth moved, relative to work plans and budgets. This differs from the usual approach, which is to track progress by measuring funds paid to contractors relative to budget. Measuring progress on the basis of cash flow, however, is less than ideal, because usually it takes more than 30 days to pay. That means the related data are out of date.

Do the engineering and risk analysis before starting construction. this is often stated but rarely followed. Most project-developments organizations are reluctant to spend a significant amount of money on early-stage engineering and design for three reasons

• They often lack that money in the first place.
• They're eager to break ground and start construction.
• They worry that the design will be modified once construction is under way and thus make the expenditure on up-front design pointless.

if project developers or project sponsors spend 3 to 5 percent of the capital cost of the project on early-stage engineering and design, it tends to produce far better results in on-time and on-budget delivery.

Streamline permitting and land acquisition. Best practices in issuing permits involve prioritizing projects, defining clear roles and responsibilities, and establishing time limits all along the way, including on public review. Providing “one stop shop” permitting can help.

Build a project team with the right mix of abilities. Without a well-resourced and qualified network of project managers, advisers, and controllers, projects will not deliver the best possible return on investment. At worst, they will fail.

Investors and owners need to take more active role in putting together a team. They need to create a detailed, practical approach to deal with such likely eventualities as managing quality risks, escalating contractor’s costs, or replacing a high-tech supplier. n experienced project manager is not enough; players must assemble a team that has all the requisite skills, including legal and technical expertise, contract management, project reporting, regulatory approval, stakeholder management, and government and community relations.