2/23/2016 - 65% of Mega-Projects Fail
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The Three Gorges Dam Project

Project Management

There�s an excuse why Mega Projects are simply just called �MegaProjects.� Extremely large in scale with significant impacts on communities, environment and budgets, megaprojects attract a great deal of public attention and often are more expensive than 1 billion. For the grandiose, an excellent megaproject requires a lot of planning, responsibility and work. Likewise, the magnificence of such projects also results in a large margin to fail.

 Mega-projects include big expectations. But a project�s success is usually from the eye of the beholder

Despite their socio-economic significance mega-projects - delivering airports, railways, power plants, Olympic parks and other long-lived assets - have a very history of failure. It is thought that over optimism, over complexity, poor execution, and weakness in organizational design and capabilities will be the most common root reasons behind megaproject failure.

Blinded by enthusiasm for your project, individuals and organizations associated with megaprojects often miscalculate the complexness of the project. When a megaproject is pitched, its common for costs and timelines to be underestimated as the benefits of the project are overestimated. According Danish economist Bent Flyvbjerg, it is not unusual for project managers who're competing for funding to massage the data until it really is deemed affordable. In the end, revealing the genuine costs up front can make a job unappealing, he was quoted saying. Because of this, these projects are destined for failure.

For example, building new railways spanning multiple countries can be to be disastrous if plans are overly complex and over-optimized. A real large-scale project involves national and native governments, various environmental and health standards, a variety of skills and wages, private contractors, suppliers and consumers; therefore, one issue could finish the project. Such was the situation when two countries spent nearly a decade doing exercises diplomatic considerations while constructing a hydroelectric dam.

Programme Management

Complications and complexities of megaprojects have to be considered thoroughly before launch. One way to look at the nuances of an undertaking is through reference-class forecasting. This process forces decision makers to think about past cases that might reflect similar outcomes on their proposed megaproject.

Poor execution is also a grounds for failure in megaprojects. Because of the overoptimism and overcomplexity of the project, it�s feasible for project managers and decision makers to cut corners looking to maintain cost assumptions and protect returns. Project execution will then be overwhelmed by problems such as incomplete design, unclear scope, and mathematical errors in risk assessment and scheduling.

Researchers at McKinsey studied 48 struggling megaprojects determined that in 73 percent with the cases, poor execution was in charge of cost and time overruns. The other 27 percent ran into issues with politics for example new governments and laws.

Low productivity is another aspect of poor execution. Though trends reveal that manufacturing has nearly doubled its productivity within the last 20 years, construction productivity remains flat along with some instances has even declined. However, wages continue to increase with inflation, ultimately causing higher costs for similar results.

In accordance with McKinsey studies, efficiency in delivering infrastructure can help to eliminate total costs by 15 %. Efficiency gains in areas like approval, engineering, procurement and construction can lead to around 25 % of savings on new projects without compromising quality outcomes. This proves that planning before execution is worth how heavy it is in gold.

 We have a tendency to exaggerate the need for contracting procedure for project success or failure

Finally, weaknesses in organizational design and capabilities leads to failed megaprojects. As an example, organizational setups might have multiple layers and even the work director falls 4 or 5 levels below the top leadership. This may lead to problems because top tier in the organizational chain (by way of example, subcontractors, contractors and construction managers) usually target more work and more money even though the lower levels of the chain (as an example, owner�s representative and project sponsors) are dedicated to delivery schedules and budgets.

Likewise, a lack of capabilities proves to be a worry. Due to large-scaled, complex nature of megaprojects, you will find there's steep learning curve involved as well as the skills needed are scarce. Each of the problems of megaprojects are compounded through the speed of which projects are started. When starting from scratch, megaprojects may create organizations of lots of people within Twelve months. This scale of labor resembles the important operational and managerial challenge a brand new start-up might face.

Eventually, it seems that if organizations take time to thoroughly prepare and insurance policy for their megaprojects, problems like overcomplexity and overoptimism, poor execution, and weaknesses in organizational design and capabilities may be avoided. In fact, megaprojects are extremely large and too expensive to rush into.

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