Each year, enterprise organizations around the world face astronomical project failure rates, often wasting millions of dollars per failed project. “And then we see the construction industry and the procurement side of the construction industry squeezed on margin, and we’re seeing higher risk and project blow-ups,” says Atkinson. Technical issues may typically be prevented by leaders who ask critical questions early enough, or by addressing overconfidence that technology will work or that ground conditions are adequate.
It was reported this week that the new Clem Jones Tunnel in Brisbane (known as the Clem7) is in diabolical financial trouble due to traffic levels that are well below those forecast. Yet despite their sometimes staggering size, cost overruns attract little public attention.
“We have successfully established a credible long-term view of our collective needs as a nation — one that enables our leaders to look beyond elections and budgetary cycles and make evidence-based investment decisions. Because many are funded either fully or partly with public money, the social purpose takes increasing precedence.A water reservoir is a good example. All of these contribute to risks that impact the scope, timeline, costs or value of the project for different stakeholders.
“That’s a different model to just producing a piece of infrastructure,” she says.The traditional infrastructure funding and contracting model involves someone “clipping the ticket” (taking a fee) for finding the investment, then “clever contracts” that push the risk all the way down the supply chain and don’t take account of the whole life of the infrastructure asset. “Directors need to get energised all the way from conceptualisation stage,” he says. Newly graduated mining engineers could command US$100,000+ salaries, as could a kitchen hand on a FIFO (fly-in fly-out) contract in a remote or off-shore location. Prematurely announcing a major project that has not yet been adequately scoped can contribute to its failure. But a global report released today said billions of dollars are wasted on infrastructure projects because of bad planning, bureaucracy and the failure to retain good staff. “It will list the options if the risk cannot be satisfactorily mitigated,” he says. Interestingly, Caravel's report for Infrastructure Australia singles out that project's have failed to improve over 20 years and this is a direct result of inadeqate project governance; a sentiment that I whole heartedly agree with.
The success or failure of an infrastructure project is determined long before any concrete has been poured or any sods turned.While there are undoubtedly projects that run to time and budget, it’s not difficult to find a report about an infrastructure project cost, time blowout or under-delivery.In November alone, there were reports of another cost blowout to the much-delayed Sydney light rail project, Lendlease announced a multimillion-dollar provision due to tunnelling issues on the Sydney NorthConnex road project, and ASX-listed engineering group RCR Tomlinson went into administration after delays on several solar ventures. It has also developed guidelines to drive greater transparency and accountability in infrastructure decision-making and reduce instances of major projects receiving funding before appropriate planning and assessment. Overconfidence or delusion has plagued the success of many projects and is a major root cause of project failure.
Likewise, risks need to be fully identified and accounted for in the project contract, and boards need a director who can speak to the financial and legal aspects of the contract.Boards need to get enough information about a project to properly assess any issues and ensure management is taking appropriate steps to get them under control, says Grill, adding they also have to resist trying to manage the project itself.
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