65% of Mega-Projects Fail

Project Journal

There�s grounds why Mega Projects are only called �MegaProjects.� Extremely large in scale with significant impacts on communities, environment and budgets, megaprojects attract a great deal of public attention and frequently are more expensive than 1 billion. Because of its grandiose, a successful megaproject uses a lots of planning, responsibility and work. Likewise, the magnificence for these projects also results in a large margin for failure.

Mega-projects include big expectations. However a project�s success can often be within the eye from the beholder

Despite their socio-economic significance mega-projects - delivering airports, railways, power plants, Olympic parks along with other long-lived assets - use a good reputation for failure. It can be considered that over optimism, over complexity, poor execution, and weakness in organizational design and capabilities are the most frequent root causes of megaproject failure.

Programme Management

Blinded by enthusiasm for the project, individuals and organizations involved with megaprojects often miscalculate the complexity with the project. Each time a megaproject is pitched, its common for costs and timelines to get underestimated even though the benefits of the project are overestimated. According Danish economist Bent Flyvbjerg, it's just not unusual for project managers that are competing for funding to massage your data until it can be deemed affordable. All things considered, revealing the real costs in advance would make a job unappealing, he said. Consequently, these projects are destined for failure.

For instance, building new railways spanning multiple countries can be to get 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 put an end to the work. Such was the case when two countries spent nearly a decade training diplomatic considerations while constructing a hydroelectric dam.

Complications and complexities of megaprojects should be considered thoroughly before launch. One method to evaluate the ins and outs of an undertaking is thru reference-class forecasting. This process forces decision makers to consider past cases that could reflect similar outcomes on their proposed megaproject.

Poor execution is a cause for failure in megaprojects. Due to overoptimism and overcomplexity of your project, it�s possible for project managers and decision makers to chop corners trying to maintain cost assumptions and protect profits. Project execution will be at a loss for problems like 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 accountable for cost and time overruns. The other 27 percent ran into issues with politics such as new governments and laws.

Low productivity is an additional part of poor execution. Even though trends demonstrate that manufacturing has nearly doubled its productivity over the last 20 years, construction productivity remains flat as well as in some instances has even declined. However, wages always increase with inflation, resulting in higher costs for the same results.

Based on 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 result in around 25 % 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 need for contracting procedure for project failure or success

Finally, weaknesses in organizational design and capabilities leads to failed megaprojects. By way of example, organizational setups can have multiple layers and even the project director falls 4 to 5 levels under the top leadership. This can lead to problems since the top tier of the organizational chain (for example, subcontractors, contractors and construction managers) usually focus on more work plus much more money while the lower levels in the chain (for instance, owner�s representative and project sponsors) are dedicated to delivery schedules and budgets.

Likewise, too little capabilities can be a problem. Due to large-scaled, complex nature of megaprojects, you will find there's steep learning curve involved and the skills needed are scarce. Every one of the problems of megaprojects are compounded by the speed where projects are started. When starting from scratch, megaprojects may create organizations of lots of people within 12 months. This scale of labor is related to the important operational and managerial challenge a fresh start-up might face.

In the long run, apparently if organizations take the time to thoroughly prepare and plan for their megaprojects, problems like overcomplexity and overoptimism, poor execution, and weaknesses in organizational design and capabilities could be avoided. In fact, megaprojects are too large and very costly to rush into.