Mar 9, 2020
Megaprojects are large projects with a sizable scale and complexity. Most of these major capital projects are commissioned by large companies and public bodies such as local and regional governments. These major capital projects typically have a budget that surpasses $1 billion.
Why are major capital projects so susceptible to time and cost overruns?
A National Audit Office 2013 report stated that the majority of government-based megaprojects fail because of "over-optimism" in regards to budget, scope, and completion time. 9 out of 10 major capital projects around the world have exceeded their time and budget, according to the same study. How far back does this trend go? Look at the Suez Canal from over 150 years ago. At the time of its completion, the megaproject cost over 1900% more than had been originally budgeted.
A team at UCL analyzed the working practices and end results of more than 6000 megaprojects, identifying six key themes that explain why a project may fail: “decision-making behavior; strategy, governance, and procurement; risk and uncertainty; leadership and capable teams; stakeholder engagement and management; supply chain integration and coordination.” Importantly, all of these reasons were of equal significance to a megaproject’s poor performance.
The latest stage of the HS2 rail project has been approved by the government, but not without criticism. The project, designed to link London, Birmingham, Manchester and Leeds, is likely the take far longer than anticipated and a review has suggested that costs may double to as much as £106 billion. When HS2 was pitched, it was imagined as a £33 billion project that would open partly in 2026, with new estimates suggesting that 2031 may be a more reasonable expectation. Delays were, of course, predicted when HS2 was announced, and it’s just one of many major projects facing time and cost increases – so why are these so-called megaprojects so susceptible to overrunning?
What is a megaproject? Simply put, it is a large project, with a significant scale or complexity – these days, most megaprojects are commissioned by governments, public bodies and large companies, normally with a budget of more than $1 billion. A 2013 National Audit Office (NAO) report found that most major government projects failed on their initial cost-benefit analysis – the NAO blamed “over-optimism”, saying that many projects began with unrealistic assumptions about the time, costs and risks involved and were therefore forced to alter these predictions mid-project.
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