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February 23 2016


65% of Mega-Projects Fail

DBOX for CIM Group & Macklowe Properties
Project Journal

There�s a reason why Mega Projects are simply just called �MegaProjects.� Extremely large in scale with significant impacts on communities, environment and budgets, megaprojects attract a lot of public attention and frequently be more expensive than 1 billion. Due to its grandiose, an effective megaproject takes a lot of planning, responsibility and work. Likewise, the magnificence for these projects also results in a large margin to fail.

 Mega-projects feature big expectations. However a project�s success is often inside the eye with the beholder

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

Blinded by enthusiasm for your project, individuals and organizations included in megaprojects often miscalculate the complexity from the project. Every time a megaproject is pitched, its common for costs and timelines to become underestimated while the together with your project are overestimated. According Danish economist Bent Flyvbjerg, its not unusual for project managers who will be competing for funding to massage the information until it is deemed affordable. In fact, revealing the real costs beforehand can make an undertaking unappealing, he said. As a result, these projects are destined for failure.

Programme Management

By way of example, building new railways spanning multiple countries could prove being disastrous if plans are overly complex and over-optimized. This kind of large-scale project involves national and local governments, various environmental and health standards, a wide range of skills and wages, private contractors, suppliers and consumers; therefore, one issue could put an end to the project. Such was true when two countries spent nearly several years doing exercises diplomatic considerations while building a hydroelectric dam.

Complications and complexities of megaprojects should be considered thoroughly before launch. A great way to look at the nuances of a project is thru reference-class forecasting. This method forces decision makers to check out past cases that may reflect similar outcomes for their proposed megaproject.

Poor execution can be another grounds for failure in megaprojects. As a result of overoptimism and overcomplexity of the project, it�s feasible for project managers and decision makers to reduce corners looking to maintain cost assumptions and protect returns. Project execution will be overwhelmed by problems for example incomplete design, unclear scope, and mathematical errors in risk assessment and scheduling.

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

Low productivity is yet another aspect of poor execution. Despite the fact that trends reveal that manufacturing has nearly doubled its productivity over the last Two decades, construction productivity remains flat plus some instances has declined. However, wages continue to increase with inflation, resulting in higher costs for similar results.

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

 We usually exaggerate the importance of contracting method of project success or failure

Finally, weaknesses in organizational design and capabilities ends in failed megaprojects. As an example, organizational setups will surely have multiple layers and in many cases the project director falls 4 or 5 levels below the top leadership. This may lead to problems since the top tier of the organizational chain (as an example, subcontractors, contractors and construction managers) usually focus on more work plus much more money even though the 'abnormal' amounts from the chain (as an example, owner�s representative and project sponsors) are focused on delivery schedules and budgets.

Likewise, too little capabilities turns out to be an issue. As a result of large-scaled, complex nature of megaprojects, there is a steep learning curve involved along with the skills needed are scarce. Each of the problems of megaprojects are compounded through the speed of which projects are started. When beginning with scratch, megaprojects may create organizations of many people within 12 months. This scale at work is comparable to the important operational and managerial challenge a fresh start-up might face.

Eventually, it seems that if organizations spend some time to thoroughly prepare and arrange for their megaprojects, problems like overcomplexity and overoptimism, poor execution, and weaknesses in organizational design and capabilities might be avoided. In fact, megaprojects are so large and too expensive to rush into.

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