Mega-Projects: Big decisions

Date: 
Tuesday, July 31, 2018
The ability to make the right strategic, investment and technical decisions at the right time is a critical success factor on mega-projects.  Check out Pcubed Consultant Osian Evans's article featured in the Summer 2018 edition of the PROJECT magazine.


Projects and programmes are becoming bigger and more complex, and are spanning longer timescales. Considering how lengthy some projects are and how costly overruns can be, it’s essential that the decision-making process is not overlooked.

Mega-projects are complex, large-scale undertakings with price tags climbing into the billions. Annual global spending on mega-projects is estimated to be $6–$9 trillion. When these kinds of projects overrun, as they frequently do, the cost increases exponentially, and can result in astronomical budgets, with the additional cost exceeding the original budget many times over.

This issue of overruns is pertinent, given the rate at which they occur. To give just two examples: hydrocarbon megaprojects overrun about 64 per cent of the time, while the average cost overrun for rail projects is 45 per cent, according to the Project Management Journal and The Oxford Handbook of Megaproject Management, respectively.

We’ve worked on mega-projects such as the 2012 Olympic Games, the Airbus A380 and high-speed rail projects.  Experience has taught us that the ability for the right groups of people to make the right strategic, investment and technical decisions at the right time is a critical success factor on any mega-project.

Today, we are seeing more projects spanning multiple government periods (longevity), an increased level of working across organisational boundaries (breadth), and deeper organisational and work breakdown structures (depth).  See the diagram below.

Although it is important for organisations to remain flexible and able to make quick decisions, in the control of a project, it is just as important for the leadership team to be proactive in understanding and mapping out the decisions that will need to be made in the future, especially at the early stages of the life cycle. Project teams must make decisions constantly. In fact, the ability to make decisions is a core project leadership skill. Some decisions can be made quickly by one person, while others require the whole project team to convene.  Sometimes, decision-makers have the luxury of time to carefully analyse all the issues involved; other times, decisions must be made with lightning speed, lest the business forfeit a market advantage or allow a deal to slip away.

The effective project leader systematically builds decisions on a solid foundation of knowledge of project goals, objectives and relevant information. Those decisions may be made under conditions of tremendous stress and uncertainty, or in a rigorous, controlled process with data. Some decisions are most appropriately made using ‘automatic’ thinking (intuition), while others benefit from structured analytic or statistical techniques.  Nevertheless, the way in which decisionmakers think about the decision-making process itself should remain consistent.  As the project evolves, there can be a requirement to manage the volume and interdependent nature of the decisions made centrally, across subprojects, and even across multiple organisational boundaries.

FIVE TIPS FOR MEGA-PROJECT SUCCESS

1. Ensure governance is appropriate

Which board should this decision go to?  Does the decision need to go to a sub-board beforehand?  How far in advance does the board paper need to be submitted? Does the board sit in time for the decision to be made?

THE ONLY WAY TO BE FULLY PREPARED FOR A FINAL DECISION POINT IS FOR IT TO HAVE GONE THROUGH THE APPROPRIATE LEAD-IN POINTS

Sound governance is a key factor in determining the outcome of any project. However, one of the challenges posed by a mega-project is the number of oversight boards that need to be navigated. Seeing decisions ‘bounced back’ or referred to a different forum is a sign that the preparatory work for that decision is inadequate – but it could also be an indication that the governance isn’t fit for purpose and needs to be reworked.

2. Consider joint governance

Decisions are often joint, across organisational boundaries, and can even be industry-wide. In APM’s book Governance of Co-Owned Projects, the authors assert: “The challenge for organisations who sponsor or deliver coowned projects is that traditional project management frameworks and methods are based on governance structures that assume a single hierarchical route for authority and accountability. This is rarely the case for co-owned projects, which is why organisations are rightly challenging whether their traditional governance arrangements are fit for purpose.” 

In this case, setting up centralised oversight forums to make these decisions may be appropriate.

3. Appreciate the ‘tadpole effect’

A decision may be made at a single point in time, but the lead-in to a final decision point can take anywhere from three to 12 months of reviews and sub-decisions. The only way to be fully prepared for a final decision point is for it to have gone through the appropriate lead-in points – for example, forums lower down in the governance hierarchy. We recommend mapping decisions and categorising them (such as strategic/investment/technical), identifying which are joint and hence do not have a single, hierarchical route. Doing so enables the senior team to ‘see’ individual decisions through the forwardlooking master list of all key decisions, including their interdependent nature, and what route and how long they will take; and, perhaps most importantly, to appreciate how far in advance teams need to start the preparatory work for a decision. Keep the focus on being proactive rather than reactive by appreciating the tadpole effect.

4. Decisions can drive the schedule

Decisions are integral to achieving key project commitments. Often, the final approval point of a major decision will be, or be linked to, a key milestone. A ‘no’ decision or a delayed decision will result in schedule slippage. Therefore, we recommend that all the steps relating to a decision (including stakeholder consultation) are captured within the project schedule to ensure decisions are made, and made on time.

5. A feedback loop is key

It is important that the project governance implements a feedback loop from all management boards to quickly and efficiently cascade outputs from the meetings – for example, to notify the right individuals if the decision paper was approved. In the interests of traceability, the project should keep a centralised record of key decisions made across the programme. This feedback loop could be the key to resolving any future disputes, and may better identify lessons learned for future mega-projects.

Article authored by Osian Evans, originally published in the APM Summer 2018 Project Magazine. 
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