Bill Zuurbier is chairman of risk management consultancy, Equib, which specialises in advising teams involved in the delivery of major-scale infrastructure programmes. Here he discusses if it is time to reverse the mega project trend.
According to renowned mega project expert, Bent Flyvbjerg, major infrastructure projects are too slow, costly and risky to effectively stimulate GDP and a focus on smaller projects is key to achieving the UK’s economic recovery. However, by applying a more realistic approach to risk management and investing more in mitigation activities, it should be possible for mega projects to avoid significant cost and time overruns while delivering the economic boost that the country so desperately needs.
The ‘one-of-a-kind’ nature of mega projects, and the idea that project managers can’t rely on past experience to guide them, is often used to justify why so many overshoot time and cost estimates. Yet in reality, such projects tend to share a number of commonalities, which project teams fail to learn from time and time again.
One of the key reasons why so many mega projects fail to deliver value for money is a lack of upfront investment in risk mitigation measures. Such activities are often a time-consuming and costly undertaking, which may lead project managers to avoid discussing them with stakeholders altogether. However, ignoring real-world risk can often cost stakeholders dearly in the long run, making it difficult to get developments to complete on time and on budget. In order to stop history repeating itself, the industry needs to acknowledge that it sometimes gets things wrong and then prepare for a number of possible risk scenarios.
Bent Flyvbjerg has famously spoken about the tendency for project managers to be overly-optimistic and, in some cases, strategically misrepresent risk in order to convince stakeholders that initiatives should go ahead. The stop-start nature of many projects, for example, the Thameslink Programme, can also cause valuable knowledge of project risks to be lost when key individuals move on. Ultimately, all of these factors can make it more difficult to learn from past mistakes and steer projects out of danger.
At the beginning of a major programme, project managers should perform a comprehensive risk assessment, taking into account a wide range of possible eventualities. At this stage, a Risk Breakdown Structure can prove a useful decision-making tool. This involves positioning all the risks identified within a hierarchy, enabling project managers to clearly see the priorities for spend on mitigation activities. This method can also support them in developing a convincing business case for key stakeholders. Monte Carlo Analysis can then be used to determine appropriate levels of confidence and volatility.
For every risk identified, project managers should use one of the five key principles of risk mitigation – eliminate, transfer, mitigate, accept or exploit – to manage it to a tolerable level. However, regardless of which of the five principles is chosen, it’s vital to ensure that the controls are not only realistic, but that all stakeholders are fully on board with them too. With regards to the final principle, it’s worth noting that risk analyses can also reveal opportunities for improving project outcomes.
From the beginning of projects, project managers should look out for red flags, which might suggest an under investment in risk management. For example, a focus on software tools could result in risk management becoming a tick-box exercise. Other warning signs might include the lack of a specialist team and dedicated budget for risk management and analysis, or insufficient emphasis on risk during monthly progress meetings. Risk should hold a constant position at the top of the project agenda, to ensure important sources are addressed and kept under close review as mitigation strategies are delivered.
Rather than repeatedly allowing mega project costs and timings to spiral out of control, it’s never been more vital for the industry to adopt a realistic approach to risk. By investing in the right mitigation activities from the outset and applying lessons from past projects, project managers can improve outcomes for mega projects and play a valuable role in the UK’s economic recovery.
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