The iconic Empire State Building, which stands 1,454 feet, was the world’s tallest skyscraper from its creation in 1931 until 1972 (when the World Trade Center overtook it). A megaproject in every way, “The construction of the ... Empire State Building was a model of efficiency,” says ThoughtCo.
Just how efficient? The building was completed in just thirteen and a half months, a year ahead of schedule. It was also under budget, at approximately $41 million ($615 million in today’s dollars) of its $50 million budget.
Like today, the area surrounding the Empire State Building construction site was a bustling city street. In fact, “…crowds formed to watch the work. Passersby would stop to gaze upward at the workers as they placed the girders together,” according to ThoughtCo.
And then there are today’s megaprojects. “The industry does poorly completing megaprojects on time, on budget, and to specifications,” according to McKinsey.
Let’s backtrack for a moment. Megaprojects are defined as projects with a price tag of $1 billion or more.
Just how problematic are today’s megaprojects? Again, from McKinsey, “Our research estimates that 98 percent of megaprojects suffer cost overruns of more than 30 percent; 77 percent are at least 40 percent late.”
How could the Empire State Building have been completed early and under budget 90 years ago while today’s megaprojects are typically late and over budget?
Although today’s projects are more complex and have more detailed specs to fulfill, construction industry professionals also have modern technology at their disposal. One might think this tradeoff would be enough to balance the scales. Yet, clearly it’s not.
So, where do major infrastructure projects go wrong?
Let’s take a deep dive into the major ways mega infrastructure projects go awry and consider potential solutions to these most common problems.
Excessive optimism – You can’t handle the truth!
When a new project begins, those involved generally feel excited about the possibilities and the wonderful piece of infrastructure they are going to create. Beginnings, in general, are exciting and can lead to optimism bias.
“Your brain has a built-in optimism bias,” says Verywell Mind, an award-winning online resource for health information. “Researchers have found that the human brain is sometimes too optimistic for its own good.” Further, we “believe that we are less likely to suffer from misfortune and more likely to attain success than reality would suggest.”
While there are many positives to being optimistic, optimism bias can “lead to poor decision-making, which can sometimes have disastrous results.”
This bias goes beyond what an individual imagines or thinks of themselves. Some view it as a key reason why megaprojects regularly fail.
An article reported on ResearchGate “…found that optimism bias applies to estimates of costs and benefits, both. An optimistic cost estimate is low and leads to cost overrun, whereas an optimistic benefit estimate is high and results in benefit shortfalls.”
Some believe this sort of thinking is essential to getting a megaproject completed. They argue “that if people knew in advance the real costs and challenges involved in delivering a large project, ‘they probably would never have touched it’ and nothing would ever get built. So it is better not to know, because ignorance helps get projects started, according to this argument.”
As Colonel Jessup aka Jack Nicholson, said in the movie A Few Good Men, “You can’t handle the truth!”
With this sort of thinking, is it any wonder that megaprojects come in over budget and behind schedule?
Although the argument noted in ResearchGate is over 50 years ago, it’s still relevant. Despite the advanced technology available today to run models and crunch numbers, the figures are sometimes manipulated. It’s nearly impossible to determine whether optimistic predictions are unintentional or mistakes.
In reporting on an underground tunnel project in Australia, the Melbourne newspaper The Age reported, “They worked out what the investor was going to be happy with in terms of rates of return, and they worked back to a set of numbers which would produce that return for investors. Such forecasts do not properly relate to the interaction of land use and transport, and it is not surprising that they are not fulfilled.”
This may seem like a simple and insignificant error. However, it led to a huge shortfall of funding and left taxpayers liable for the money.
Can the optimism bias be overcome?
Professor Andrew Davies at Bartlett Faculty of the Built Environment, University College London, believes so. “Over the past decade or so, the UK has transformed the way megaprojects are delivered, moving away from a world of fixed-price contracts, risk transfer, lowest-cost tendering and adversarial relationships,” Davies says in an article by Jim McClelland and Raconteur Publishing.
The Age argues similarly, “as much as the legion of advisers, traffic forecasters and companies behind the failed projects share the blame, governments, too, deserve to take much of the criticism for creating a model that enabled the group with the most optimistic forecasts to win the project bids.”
It’s great to be optimistic and excited when a mega infrastructure project is being developed. However, if that excitement spills over and clouds people’s thinking and impacts the data used to develop schedules and budget, it will eventually turn to frustration.
In a company’s zest to be involved in high profile projects that score big paydays, they need to pump the breaks and be realistic. Fudging numbers, whether intentional or not, is ultimately a hindrance that can sink a project. Those who do so need to pay a price to encourage everyone to bid with more realistic data. Owners also need to be prepared to accept that what they initially budgeted and their hoped-for schedule might not be sufficient.
“If people knew the real cost from the start, nothing would ever be approved.”
Willie Brown Former Speaker of the California State AssemblyThe Wow Factor
Major infrastructure products grab headlines. It may be because of their sheer size and cost, or perhaps they are filling a need a community has had for some time. Another reason for headlines is the unique elements often included in major infrastructure projects (and construction projects in general).
Megaprojects are not the standard lane addition, bridge deck replacement, etc. Going big usually means something out of the ordinary in either how the project will be constructed or what will be constructed.
Unique or new grabs headlines, but also engenders uncertainty.
“The main cause of poor megaproject performance associated with technological novelty is the introduction of unproven technology leading to cost and time overruns. The uncertainty about how to deal with a new technology often requires longer design and development phases of the project,” notes a study from Project Management Journal. The study says of technological novelties, it’s “first-of-a-kind technologies that have frequently been introduced in large innovative projects and are associated with risks.”
Technological novelty may be essential when it comes to megaprojects as it sparks the interest of the public and potential partners. Without this spark, investment might not be forthcoming.
The study also considers complexity, which it defines as “the underlying factor of megaprojects that can be defined by the large number of parts and its relationships among each other and with the external environment.”
This interconnectedness is true of any construction project. By its very definition, a megaproject has more parts and therefore from its inception to its completion requires more synchronicity. Therefore, adding an unknown or untried element into the equation has the potential to greatly impact the process.
“The primary cause [of risk] connected with complexity is the uncertain interactions between a large number of moving and evolving parts within the megaproject system, as well as their relationships with the external environment,” notes the Project Management Journal study.
The atypical part of a project may also be something more mundane. A large infrastructure project may cross city, county, or even state lines. It can run into NIMBY (not in my backyard) pushback which the Encyclopedia Britannica defines as, “a colloquialism signifying one’s opposition to the locating of something considered undesirable in one’s neighborhood.”
Local and state governments have their own specific ways of doing things, such as permits, environmental regulations, etc., and expect construction to abide by them. Getting construction companies as well as potentially multiple private stakeholders on the same page and meeting all the parties’ requirements can be a long and tedious process.
Everyone wants to be part of the reveal when the cameras are on but as they say, the devil is in the details.
The question is, how can those responsible for a major infrastructure project adjust for the wow factor so it does not drive up prices and create schedule delays?
A dose of realism is in order. Again, excessive optimism often results in predictions or expectations that are unlikely to be met. When dealing with unfamiliar or new construction techniques or unusual elements, it’s better to be realistic and consider that unexpected challenges may arise, or things may simply take more time than anticipated.
It’s prudent to create slack in a schedule to take the wow factor into consideration.
Although a spacious schedule may seem like a simple solution, there’s pressure to get things done quickly. Creating the expectation from the beginning regarding the schedule and lessening the pressure allows time for inevitable issues to be dealt with.
Look to the Past
“Those who cannot remember the past are condemned to repeat it.” George Santayana, The Life of Reason
This often-repeated saying encourages people to learn from the past, so the same mistakes are not committed. But what if the past was a troubling time?
Such is the case with major infrastructure projects. Because they are rarely successful, there are few examples one would want to follow. And as noted above, major infrastructure projects typically include unique elements that make scheduling and budgeting difficult.
The time allotted for developing a proposal is limited, and general contractors typically feel rushed when composing a schedule and budget. To meet pressing deadlines and simplify the process, some may find a similar project and simply plug in the numbers.
Yet, ultimately each megaproject is its own entity that involves hundreds of factors. Some may be similar to past projects, but that does not make the two projects the same.
Consider the case noted above detailed in The Age. The project discussed was a tunnel under the Brisbane River in Brisbane. According to the paper, “traffic forecasters predicted that thousands more motorists would use the new Clem7 tunnel under the Brisbane River every day than another four-lane artery in New York linking Queens with central Manhattan.” They add that Brisbane’s population is not even 25% of New York City’s.
Although the tunnel under the Brisbane River may have been similar to New York’s Midtown Tunnel, the comparison overall made no sense given the logistics.
Professor Bent Flyvbjerg of Oxford University's Saïd Business School, an authority on mega projects, goes further, “Generally, megaproject planners and managers – and their organizations – do not know how to deliver successful megaprojects….”
The lack of successful precedents also makes building a qualified team extremely difficult. McKinsey notes that “without a well-resourced and qualified network of project managers, advisers, and controllers, projects will not deliver the best possible return on investment.”
Because there’s a very limited supply of companies who have the expertise, “often projects are led by planners and managers without deep domain experience who keep changing throughout the long project cycles that apply to megaprojects, leaving leadership weak,” Flyvbjerg says.
Putting together competent teams does not guarantee a good team. “The main cause of poor performance associated with project leadership is an inappropriate definition of the project culture and sense of purpose, which lead to intra- and inter-organizational misalignments,” according to the same study from Project Management Journal. In addition, “it promotes dysfunctional structures that encourage behaviors driven to attend to individual goals rather than the collective vision and objectives.”
The above study focuses on management. Yet, the construction industry has been dealing with a labor shortage for some time. The challenge in finding and hiring enough workers as needed impacts schedules and ultimately costs as well. Understaffed projects are slowed. Workers on staff may need to take on tasks they are not suited for. In addition, they may feel overworked or frustrated leading to high staff turnover. All of this, notes Project Management Journal, “…creates a reinforcing negative loop given the shortage of qualified resources.”
So, what can be done to overcome this challenge? Consider the megaprojects that came in on time and on budget. “It is particularly important to study such projects to understand the causes of success and test whether success may be replicated elsewhere,” Flyvbjerg says. However, make certain to recognize the differences inherent in each project and adjust accordingly.
Also, creating a team is not simply gathering those who are on speed dial from past work. Evaluate each company and whether its capabilities are appropriate for each specific task before adding them to the job.
Finally, establish clear lines of communication and ensure that each of the major players is clear on their role and the aims and goals of the entire project. This helps with buy-in and promotes vision.
Watch the Clock and More
“Time is precious, but truth is more precious than time.” Benjamin Disraeli
Although developing a schedule for a major infrastructure project is challenging, technology exists that makes doing so reasonable.
But carefully consider the fact that it is nearly impossible to develop an initial schedule that can actually be maintained throughout the project.
The length of time major projects require, even as they are scheduled on the drawing board, is lengthy, which makes them subject to black swans. As Flyvbjerg cites in another study, “Delivery is a high-risk, stochastic activity, with overexposure to so-called ‘black swans,’ i.e., extreme events with massively negative outcomes. Managers tend to ignore this, treating projects as if they exist largely in a deterministic Newtonian world of cause, effect, and control.”
Rather than keep this in mind, Flyvbjerg says, “Statistical evidence shows that such complexity and unplanned events are often unaccounted for, leaving budget and time contingencies inadequate.”
Sure, anyone who has ever been involved in an infrastructure project, particularly a major one, knows that unplanned-for elements pop up. It’s inevitable.
But how can one account for the unexpected? If one could do so, the event would not be unexpected. Sure, slack can (and should) be factored into a schedule. Still, determining how much slack to include is a crapshoot.
Getting the schedule right is crucial. After all, time, money, and design are bound together on a construction project. Issues and miscalculations on one are bound to impact the others.
Just like scheduling, budgeting for a major infrastructure project is challenging, although technology can make the task more doable. Ditto for design, which is also aided by technology.
Assume for a moment that the data put into the technology is relevant and accurate. Therefore, a workable realistic budget and schedule are developed along with a clean and clear design. Even in this scenario, a challenge remains.
A team/company works on the design. A second team/company works on the schedule. Finally, a third team/company works on the budget. Like a baton being passed during a relay race, each team builds off the other. However, often there’s a lack of communication between the teams, and their contributions are ultimately developed and remain in a silo.
This fragmented process breaks down all together during the construction process. As noted above, when a project, particularly a major infrastructure project, inevitably runs into snags, adjustments need to be made.
Typically, each of the documents – the design, schedule, and budget – live in their own silo. Again, a change to one will impact the others. Therefore, these documents should be somehow forged together. If each of these documents were in one place and visible together, making a change to one would automatically change the others.
Consider this example: The price of gravel is rising as an infrastructure project is in progress. What can be done? Maybe all the gravel required for the project should be bought as soon as possible. Or, maybe the design could be adjusted. Both are reasonable solutions – which is better? Without considering how the change impacts each of the three elements it’s impossible to know.
Complex issues may arise while construction on a major infrastructure project is in progress . How the team reacts to those issues can be the difference between a successful project and a failure. Management can make better and more informed decisions with better communication and data integration that allows them to consider multiple scenarios and the impact on each of the key factors.
Conclusion
There are many issues that could throw your major infrastructure project over budget and off schedule. Controlling and considering all the potential scenarios with a lack of precedent and new construction scenarios is a tall task.
Nevertheless, you don’t want to get to the end of the project and be left wondering, like Bugs Bunny, if you should have made a left turn at Albuquerque.
So, how can you consider multiple scenarios and determine which one is most likely to lead to a successful project?
ALICE is the world’s first artificial intelligence platform that understands construction. ALICE explores millions of different schedule sequences and gives teams the power to answer “what-if?” scenarios and completely reschedule in just minutes. During construction, you can input actual data and be provided with alternative ways to meet your schedule and budget.
ALICE helps keep major infrastructure projects on budget and on schedule.
