65% of Mega-Projects Fail

Project Journal

There�s an excuse why Mega Projects are merely called �MegaProjects.� Extremely large in scale with significant impacts on communities, environment and budgets, megaprojects attract a lot of public attention and sometimes be more pricey than 1 billion. Because of its grandiose, an excellent megaproject requires a lots of planning, responsibility and work. Likewise, the magnificence of these projects also creates a large margin to fail.
Mega-projects include big expectations. However a project�s success is usually inside the eye in the beholder
Despite their socio-economic significance mega-projects - delivering airports, railways, power plants, Olympic parks and other long-lived assets - possess a reputation for failure. It really is thought that over optimism, over complexity, poor execution, and weakness in organizational design and capabilities are the most frequent root factors behind megaproject failure.
Blinded by enthusiasm to the project, individuals and organizations involved with megaprojects often miscalculate the complexity with the project. Whenever a megaproject is pitched, its common for costs and timelines to be underestimated while the benefits of the project are overestimated. According Danish economist Bent Flyvbjerg, it isn't unusual for project managers who will be competing for funding to massage the information until it's deemed affordable. All things considered, revealing the real costs beforehand can make a task unappealing, he explained. Consequently, these projects are destined for failure.
For instance, building new railways spanning multiple countries could prove to get disastrous if plans are overly complex and over-optimized. Such a large-scale project involves national and local governments, various environmental and health standards, an array of skills and wages, private contractors, suppliers and consumers; therefore, one issue could end the project. Such was true when two countries spent nearly 10 years doing exercises diplomatic considerations while creating a hydroelectric dam.

Programme Management

Complications and complexities of megaprojects should be considered thoroughly before launch. One method to review the ins and outs of an undertaking is via reference-class forecasting. This method forces decision makers to look at past cases that might reflect similar outcomes for their proposed megaproject.
Poor execution can be another cause for failure in megaprojects. Due to the overoptimism and overcomplexity of a project, it�s easy for project managers and decision makers to cut corners attempting to maintain cost assumptions and protect income. Project execution is then at a loss for problems including 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 of the cases, poor execution was to blame for cost and time overruns. The other 27 percent came across issues with politics like new governments and laws.
Low productivity is yet another element of poor execution. Despite the fact that trends show that manufacturing has nearly doubled its productivity in the last 2 decades, construction productivity remains flat and in some instances has even declined. However, wages continue to increase with inflation, bringing about higher costs for the same results.
As outlined by McKinsey studies, efficiency in delivering infrastructure is effective in reducing total costs by 15 percent. Efficiency gains in areas like approval, engineering, procurement and construction can result in as much as 25 percent of savings on new projects without compromising quality outcomes. This proves that planning before execution will be worth its weight in gold.
We often exaggerate the significance of contracting way of project failure or success
Finally, weaknesses in organizational design and capabilities brings about failed megaprojects. For instance, organizational setups can have multiple layers and even the project director falls four or five levels below the top leadership. This might lead to problems because top tier from the organizational chain (for instance, subcontractors, contractors and construction managers) have a tendency to concentrate on more work and more money even though the lower levels of the chain (for example, owner�s representative and project sponsors) are devoted to delivery schedules and budgets.
Likewise, an absence of capabilities is a problem. Due to the large-scaled, complex nature of megaprojects, there exists a steep learning curve involved and also the skills needed are scarce. Each of the problems of megaprojects are compounded by the speed of which projects are started. When starting from scratch, megaprojects may create organizations of countless people within 1 year. This scale at work is related to the functional operational and managerial challenge a fresh start-up might face.
In the long run, apparently if organizations take the time to thoroughly prepare and insurance policy for their megaprojects, problems like overcomplexity and overoptimism, poor execution, and weaknesses in organizational design and capabilities could be avoided. In fact, megaprojects are so large and too expensive to rush into.