CAMBRIDGE, Mass., Aug. 13, 2001 – Much of what is commonly held to be true about how to manage large engineering projects (LEPs) successfully is not supported by evidence gathered from the field, according to a new book on the strategic management of LEPs.
The book, The Strategic Management of Large Engineering Projects: Shaping Institutions, Risks, and Governance, is co-authored by Brattle Principal Donald R. Lessard and University of Quebec Professor Roger Miller. The IMEC Research Group, led by Miller, conducted the research on which the book is based.
Based on an analysis of 60 LEPs worldwide, including the Boston Harbor cleanup, the first phase of subway construction in Ankara, Turkey, and a hydro dam on the Caroni River in Venezuela, the authors conclude that rapid changes in the field of LEP management have created “a gap between accepted views of how to manage large projects and the practices being observed.”
“During the course of the research, we began to realize that in many ways the conventional wisdom surrounding the field of LEP management no longer applies,” said Dr. Lessard. “As the number, complexity, and scope of LEPs increase worldwide, the huge stakes may endanger the survival of corporations and threaten the stability of countries that do not re-think their approaches to the strategic management of these projects.”
According to the book, the following are the “top six” myths associated with the strategic management of LEPs:
Myth #1: Project engineering and management play the largest role in determining the success of an LEP.
Fact: The presence of coherent and well-developed institutional arrangements is the most important factor in determining the success of a given project, and front-end planning generally is more important than engineering and management during implementation. As the authors state, “Projects shaped in incomplete and shifting arrangements have a hard time taking off: they require deals and agreements that may not stand for long. In contrast, well-developed laws, regulations, and practices contribute significantly to enhancing project performance.”
For example, the Njord oil platform, built by Norse Hydro in the late 1990s, benefited from Norway’s clear framework of laws and regulations that allocate exploration rights, build alliances between Norwegian and foreign firms, and set criteria by which projects are approved by the legislative assembly.
Myth #2: LEPs are almost never completed on time and on budget.
Fact: In the IMEC sample, 81.9 percent of the projects met their cost targets and 71.9 percent were completed on schedule. As the book notes, efficiency is not usually the problem when it comes to LEPs.
Effectiveness is harder to come by. Only 45 percent of the IMEC projects “met most of their stated objectives,” with the majority falling short and many experiencing bankruptcy or outright abandonment. All told, whether or not they met budget and schedule expectations, more than one third of large projects performed poorly.
Myth #3: Private owners and sponsors of LEPs are more efficient and effective than their public counterparts.
Fact: Based on the IMEC sample, public and private owners and sponsors are nearly equal in terms of their ability to successfully conceive, plan, and construct LEPs. What’s far more important is that the owners and/or sponsors have gained experience and competency from their involvement in multiple prior projects that can be bundled on behalf of individual projects.
Myth #4: LEPs often fail because they encounter technical difficulties and social disturbances caused by their enormous size.
Fact: These issues are not significant factors. Large projects may be complicated, but engineers are fully capable of solving difficult tasks and LEPs generate enough value to become worth tackling. “Technical difficulties, social disturbance, and size are not statistically linked to performance in IMEC’s sample of projects and do not condemn projects to failure,” the authors state.
Myth #5: The management of LEPs is converging toward a single, best path in the sponsorship and execution.
Fact: The IMEC sample identified eight different “project trajectories” that can lead to good or mediocre performance. As the authors note, “Sponsors with varying sets of competencies and the shaping of projects of varying difficulties and within different institutional arrangements will follow different trajectories.”
Myth #6: Speed is equally important at all stages of the project.
Fact: A long front-end and a “sprint to finish” once institutional arrangements are concluded seems to be ideal. A 70-30 rule (70 of elapsed time before design freeze, 30 percent in sprint to finish after freeze) applies to LEPs with lives of 15 years, just as it does to software projects with lives of one year.
The sample of 60 LEPs undertaken between the early 1980s and the present was selected from the fields of electric power (32 total); urban transportation, roads and tunnels (16); oil production (4); and technology and other projects (8). Seventeen of the projects were in North America, 21 in Europe, 10 in Latin American, and 12 in Asia. The cost of these projects exceeded $1 billion each. The research consisted of interviews with key participants in each project and questionnaires sent to project sponsors.
Dr. Lessard is a Principal with The Brattle Group and the Deputy Dean at MIT/Sloan School of Management and the Epoch Foundation Professor of International Management. He has been a visiting professor at the London Business School, Stanford University, IESE (Barcelona Spain), STOA (Naples Italy), and the Stockholm School of Economics. Roger Miller is the Hydro- Quebec/CAE Professor of Technology Management at the University of Quebec at Montreal, a Fellow at SPRU at the University of Sussex, United Kingdom, and a founding partner of SECOR.
The Brattle Group has offices in Cambridge, Washington D.C., and London. The Brattle Group provides consulting services and expert testimony on economic, finance, regulatory, and strategic issues to corporations, law firms, and public agencies worldwide.
For more information about The Strategic Management of Large Engineering Projects, Donald Lessard, or the consulting services of The Brattle Group, please Sheryl Mumm-Touailat at 617-864-7900 or visit The Brattle Group’s web site at http://www.brattle.com .