What You Should Know About Megaprojects and Why: an Overview, in the April/ May 2014 Project Management Journal

What You Should Know About Megaprojects and Why: an Overview, in the April/ May 2014 Project Management Journal

I just finished reading the lead article, What You Should Know About Megaprojects and Why: an Overview, in the April/ May 2014 Project Management Journal. This was an invited article from PMI written by Bent Flyvbjerg from Oxford University.

Flyvbjerg presented the current state of megaprojects providing an overview of the current market and trends, a general conclusion that there are a huge number of problems with megaprojects, the source of these problems in a couple recommendations. A historical analysis of the development of your project was very interesting and included a number of statements that needed backup. For example, he said: “when projects of such as go wrong entire company’s national economies suffer.” This may be a logical conclusion but in a research oriented journal I would say he would need to present data to back up his point. He also included the stimulus package that was passed by Congress in response to the banking crisis as a project and the major acquisitions program portfolio of the United States Department of Defense. By including these programs within his discussion of projects he has blurred his arguments.

Flyvbjerg been listed a number of megaprojects that went wrong; over cost, late, not meeting the specifications and leading to a negative ROI. The list of projects that that one or more these criteria for an underperforming project was impressive. One of the most valuable parts of the article for me was a list of challenges that are inherent in megaprojects and are not typically dealt with in planning and executing megaprojects. In paraphrasing these challenges list included:

1.      megaprojects are risky

2.      planners and managers don’t have the appropriate skills

3.      stakeholders have conflicting interests

4.      technology is typically new and untested

5.      overcommitment to project without justifiable data

6.      optimism bias

7.      significant changes over time

8.      ignoring events that could cause risk for the project

9.      inadequate contingency

10.  misinformation about cost, schedule, benefits, and risk

Although I believe this list has a lot of validity, it would’ve been helpful to have some data that supported the belief. In a later section we also indicated that “front in planning this scant and bad projects are not stopped”. These types of conclusions cry out for citations.

Flyvbjerg quoted from the Standish Group research about the number of failed projects and I believe this detracted from his argument because of the flaws in this research that has been pointed out.

One of the more interesting parts of the paper was the discussion of the Hirschman’s Hiding Hand. In short, this is the intentional underestimate of a project in order to get approval. Flyvbjerg presented several situations where the original estimate of the project was intentionally at the level to be approved with knowledge that the estimate was significantly lower than the anticipated actual cost. In the construction industry recalled this “lowballing” an estimate. Companies would bid on projects at or below cost with the knowledge that there would be sufficient changes that could be created that will enable the company to make a profit. The art was estimating how you could go and how many changes could you create to have a successful project. I watch the original estimates for the new nuclear power plant proposal that went to the utilities commission in South Carolina. With my limited experience in this industry I estimated the cost to be at least double what was submitted to the utility commission. After initial approval, every update provided to the utility commission included at least a 10 to 15% increase in the estimate. I find it difficult to believe that the people making the estimate and probably the people accepting the estimate and making approval did not know that the true cost will probably be double.

Flyvbjerg suggested that there are number of drivers that lead to these intentional underestimates. He also recommended that companies and governments establish significant consequences for anyone or any organization that intentionally provides misinformation in these processes. He also gave several examples where countries are taking a step including the United Kingdom, Switzerland and Australia. It also appears that many private organizations are relying more on consultants to evaluate project bids more closely. Flyvbjerg suggest that we cannot solve problems that we do not talk about and cited Pres. Obama’s identification of costly overruns, fraud and abuse, and endless excuses as key policy problems, is one indication of a lease beginning to talk about these issues.

As I’ve addressed in other post, I believe this is indicative of where we are in the project management profession in the issues addressed in this article are not exclusively related to megaprojects. One of my focuses the best several years has been to better understand our projects. I believe the tools and techniques for developing a good understanding of the project are not well developed and without a good understanding of the project it is difficult to develop an appropriate execution approach. See my other post on project profiling.

One of the things I’ve discussed in earlier posts has been the breaking up of large projects into smaller components. Most organizations have a project size and complexity comfort zone and when the project gets too far out of that zone is important to break the project down into smaller projects that can be managed independently and coordinated from a program point of view. This approach should have had some mention in Flyvbjerg’s article.

The article is worth reading and does provide a good overview of some of the issues surrounding megaprojects as well as some of our project execution as a whole. It is important to put on the table that much of this underestimating of project costs is intentional and that’s difficult for the project manager to address and project execution.

Russ