Why We Fail to Deliver Projects on Time and Budget?

In 2013, global investment in energy, infrastructure, mining, and real-estate-related projects was estimated about $6 trillion. By 2030, that could be $13 trillion, according to McKinsey research published on 2017. The same research estimates that 98 percent of megaprojects suffer cost overruns of more than 30 percent; 77 percent are at least 40 percent late. Considering any megaproject budgeted billions of USD, the cost of the overrun is $300 million per one billion. In a sample business case, any effort and budget to have your megaproject controlled more to deliver on budget or to limit the $300 million loss is justified. It can be done by adding a control team who is independent as a third party to the management team and stakeholders. The independent party fees might be minimum fees plus bonus on stopping the above 30% increase which might happened too. However, it is not that easy, even if the client is cleaver to do such step by adding more controls knowing that in all megaprojects, there are big companies to manage and control cost. Therefore, how we set up their contracts is the edge between success and failure. In a public fund project, the above point should be regulated and part of any project management. The history of waste fund in failed projects justifies such needed regulations. It is like an ongoing independent review for projects, which straighten things when it goes wrong before the sinkhole absorbs more funds.

Let’s read these examples:

1. the International Space Station Originally estimated to cost of $17.4 billion, the International Space Station really costed $160 billion by the time it was finished.
   On January 2022, NASA announced a planned date of January 2031 to de-orbit the station using a deorbit module and direct any remnants into a remote area of the South Pacific Ocean. Here public opinion still think positive about this project.
2. the Sydney Australia’s iconic Opera House is actually a study in a project failure. Its original plan had a four-year timetable and an AU $7 million budget, but in the end, it took AU $102 million and 14 years to complete. Here public opinion still think positive about this project.
3. Similarly, the Webb telescope was delayed by 15 years and had a cost overrun of 900% totaling around US9 billions. Here public opinion still think positive about this project.
4. The payroll system implementation disaster at Queensland Health in 2010 is said to be the most spectacular technology project failure in the Southern Hemisphere and arguably the second worst failure of public administration in Australia’s history. What began as an AU$6.19 million contract between the State of Queensland and IBM Australia to replace Queensland Health’s aging payroll system eventually led to over 35,000 payroll mistakes and will ultimately cost taxpayers a whopping AU$1.25 billion, which translates to approximately US$850 million. Here, the public and stakeholders think it is a disaster and went to court which decided on favour of IBM. While Australia’s auditor-general reported that “it was not clear which Accountable Officer had responsibility for the overall governance and successful completion of the whole project.”

From the above, an average person may not consider some projects as a failure, even though in academia, they are often used as case study for failed projects. Therefore, let us discuss two misleading concepts in the project management world. The first is the project management triangle of time, cost and quality (or scope). I consider this an outdated mindset, and we should put it in perspective. Is it a triangle, or even a decagon, and rethink what the real project success looks like?

The second is the perspective of the project parties. It is important to note that the contractor’s perspective is different from the client’s perspective. The targeted KPIs set are totally different. The public funded project has different benefits compared to a private investment project. Furthermore, success should not be measured solely on the basis of the project management triangle but should also take into account the client’s needs and expectations of benefits particularly in public projects.

So what are the assumptions, variables, and constants in the project delivery equation? If we consider time and cost to be constants, what are the variables?

The time and cost are always for a defined scope with targeted quality, so we can’t just talk about time and cost without balancing the targeted scope and standards. This is the core issue that often leads to confusion and misunderstanding when it comes to project delivery.

When there is a variation in cost and time, we start evaluating the degree of project success, and this can lead to tension between the project delivery team and stakeholders. Who is liable?

It is important to consider the quality and scope of the project, as well as any Non-Conformance Reports (NCRs), as these can open the door for other analysis routes. Ultimately, time and cost are the first parameters to trigger reviews, and it is essential to understand the big picture in order to ensure successful project delivery measurement.

Lets discuss the following projects:

1. In 2013, professional services company Accenture was awarded a ten-year, £46.11m contract to provide the i6 computer system to Police Scotland by the Scottish Police Authority (SPA). The i6 system was intended to replace 130 electronic and paper-based systems covering 80 per cent of police processes for recording crime and missing persons. The program started with projected savings of £200m to the authority and Police Scotland. However, the program ended in July 2016 with wasted resources, wasted money, wasted time, and has set Scotland’s police forces back several years. Accenture, the SPA, and Police Scotland mutually agreed to terminate the contract after a review found it would be impossible to deliver the system on time and on budget. A subsequent review of the program by Audit Scotland, published in March 2017, found that the project “ultimately collapsed due to a damaging loss of trust between those involved and fundamental disagreements about what the program needed to deliver”. Although “good practice” was followed during the program’s procurement, it soon ran into problems, Audit Scotland said. Commenting on the review, Lib Dem justice spokesperson Liam McArthur said: “This report shows a project that was doomed to fail from day one”. “Dogged by miscommunication and false expectations, everyone involved stuck their fingers in their ears and carried on regardless”.
2. An easy SAP implementation which supposedly, budgeted at EUR 180 million and 3 years for  Lidl the discount German grocery chain, which has close to €80 billion in annual revenue. The project ended with a waste of €500 after 7 years. Similarly, the giant British food retailer J Sainsbury PLC had to write off its US $526 million project investment in an automated supply-chain management system.

In the seven examples mentioned above and before , the client failed to limit the loses and the budget overrun increased and increased like a sinkhole and in some of them like blockhole with write of the total cost and shutting down the failed project and sometimes the company itself.

It is difficult to provide a specific percentage or number of projects that are delivered on time and budget as it can vary greatly depending on the industry, size and complexity of the project, or stage the project is in, and the specific organization or company. For example, construction contracts for buildings have more potentials to be delivered with small variation on cost if there are no surprises on the ground. However, the timeline of the project depends on the actions of both the client and contractor, as well as their systems and people. Infrastructure projects, on the other hand, are more likely to experience delays and cost overruns than buildings. Projects in the early development stages also tend to have more cost and time associated with them. We are talking here of more than the threshold from first estimation to final estimation of 30% or 40%. Therefore, all research and statistics about the percentage of projects delayed with cost overrun should take into account the criteria used to determine the analysis.

The criteria might be as followings:

1. Similar projects analysis.
2. The number of NCR and deviation of quality by the end of the project.
3. To compare the project to each original scope, time and cost only. If there are changes, then to consider the real time and cost for the changes to understand the real delays and cost overrun.
4. The other benefits which are not tangible.
5. The sustainability and ESG consideration which is a must nowadays. This delays the projects and cost more considering the maturity of the companies and market on sustainability and ESG regulations.
6. The connection to other external projects which might impact the project under analysis.
7. The maturity of the client.
8. The maturity of the contractor.
9. The stage of the project.
10. The type of contract.
11. The market conditions.
12. The supply chain problems.
13. The country regulations.
14. And many other factors which might change from one country to another based on their systems.

The above is similar to the trend of thinking away from just time and cost analysis to think about the big picture like McKinsey & Company did in its article study published on June 2022, where it compared the delays of the projects based on its discipline where it was higher on the following order (Oil & Gas, Power, Railways, Airports, Power, Real Estate, Power, Roads, Waste and Water, Ports, …). The issue is very crucial and is developing further. To address this, organizations must take a holistic approach to project management, considering all the factors that can lead to delays and cost overruns. This includes effective planning, risk management, and communication strategies. Additionally, organizations should strive to create a culture of accountability and transparency, where all stakeholders are held responsible for their actions and decisions. By taking these steps, organizations can increase the likelihood of delivering projects on time and on budget.

These steps and practices to limit loses include:

1. Clearly define the project governance and its processes and systems including the decision making process and DOA. This is considered the first factor for failure by recent published research.
2. Having a trigger role an independent review when a certain threshold of budget and time is reached.
3. Clearly defining project scope and objectives
4. Developing a detailed project plan
5. Regularly monitoring progress and identifying potential issues
6. Communicating effectively with stakeholders through live systems.
7. Managing changes to the project
8. Continuously evaluating and adjusting the project plan as needed
9. Additionally, it is important to have a good team in place, with clear roles and responsibilities, and effective collaboration and communication systems.

Concluding, it is not always possible to deliver projects on time and budget, but with proper planning, management, and execution, you can increase the chances of success and the right start is to start planning the governance early as possible to avoid the sinkhole situation.

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