07
Aug

Why Megaproject is NOT a Project?

If one has to find a common business of governments across the globe, then it would be megaprojects. For good or bad, where we are today is due to megaprojects and vice versa.

Megaprojects are everywhere and more or less in every major sector. McKinsey estimates that the world needs to spend about US$ 57 trillion on infrastructure by 2030[1]. International Energy Agency (IEA) estimates a cumulative investment of US$ 22.4 trillion in the global oil and gas sector between 2014-2035 and around US$ 20 trillion in power sector infrastructure from 2016 to 2040 whereas IT industry’s expenditure is estimated to be US$ 4 trillion [3]. World economic forum reports an annual figure of US$ 6.5 trillion expenditure on healthcare [4]; more or less 700 healthcare construction projects are currently in progress in GCC [5], with a combined estimated value of US$ 65 billion.

Megaprojects are defined as large-scale, complex endeavors that typically cost around US$ 1 billion; would take an inordinate length of time to develop, involve multiple public and private stakeholders, are transformational in nature, and would impact millions of people [6].

History suggests that trend of megaprojects is way too old: The Great Wall of China and the Pyramids of Egypt are two prominent examples. However a typical example of megaproject in space industry is international space center costing around US$ 150 billion each [7], in defense industry, F-35 costing around US$ 1.5 trillion respectively [8], in construction industry, Al Maktoum International Airport valued at US$ 82 billion [7], and in transport industry, California high-speed rail costed around US$ 70 billion [7].

Despite the fact, that there is a trend of megaprojects all over the world, their performance in terms of achieving the desired results (i.e. cost, schedule and utilization) is very low, Flyvbjerg, describes it as a performance paradox [9], and according to a study by Flyvbjerg and his colleagues, 9 out of 10 projects have cost overrun [10]. Interestingly, this trend is common for both developed and developing nations, and they found it in 20 nations particularly and in 5 continents generally across all project types. It is also the case for schedule overrun whereas per their study, average overrun is 50-100% and again 9 out of 10 projects have schedule overrun. For me, the worst part is, with all cost overruns, and schedule delays, the utilization or aids that were anticipated to do such big initiatives are very low. Based on another study [11], 84% of rail passenger forecasts are wrong by more than ±20%, and 50% of road traffic forecasts are erroneous by more than ±20%.

Multiple reasons can be found, both in practice and in research regarding the immense failures of megaprojects. However, I would say Sanderson [12] has done a great job and distilled them into three types, where Type A mentions that the reason for bad performance is due to the treachery of politicians and contractors who presents the megaprojects as a viable solution, firstly to achieve political mileage and secondly to win the contract at a low price, as stumpy amount at that stage elevates the chance of winning the megaproject bid. Type B, on the other hand explains that the reason for poor performance is associated with capability of an organization to deal with the complexities and risks linked with megaprojects, as they are long duration projects, with great uncertainty. For Type C, the argument is that megaprojects are subjected to the process of social construction and characterized by multiple and diverse discussions, cultures and rationali­ties, which effects the performance. These different views; Type A, B and C, in my view reflects how megaprojects should be defined and carried for the interest of public, rather than for the interest of politicians or contractors.

Although each type has its recommended solution, and I would endorse the worth to read Sanderson [12] article, but what I found during my research, observation, and practice in megaprojects that, managing or considering megaproject as a project is one of the key issue.

Megaprojects, as recommended by Arena and Molloy [13] should be managed like an organization, or I would say temporary organization with a predefined completion date. If we map the concept of temporary organization in project management, it is defined as a program instead of a project. Ferns [14] mentions it as a single objective model of program, and recommends to establish a new company; APMG [15] standard for program management defines it as “temporary flexible organization structure”, and PMI [16] uses a concept of program infrastructure for this very purpose.

So my take on this situation is to manage megaprojects from the concept of program management in place of project management because megaprojects are not projects, they are programs, and special attention is required to design the program structure based on its specific needs.

References