View from the Field Part 2 - The Front-End Makes the Megaproject

This series of blog posts provides a practitioner’s view of the management processes and challenges associated with megaprojects as well as large and complex projects. Addressed by both Edward W. Merrow of Independent Project Analysis, Inc. and construction lawyer Andy Ness at a recent ABA Forum on Construction Law conference, their high-level perspectives are elaborated herein. This multi-part series has and will expand upon some practical aspects of the many challenges facing managers as well as highlight suggestions for implementation by inside or outside counsel.

Mr. Merrow’s High-Level Findings

In Mr. Merrow’s presentation, he advised and emphasized that only about 35% of Megaprojects are successful. By contrast, Major Projects less than $500 million have a success rate of approximately 63% (hence even these projects experience a failure rate of one-third). Key metrics are: Cost Index, Cost Growth, Execution Schedule Index, Execution Schedule Slip, and Production Problems. Mr. Merrow’s theme for success – “The Front-end Makes the Megaproject.”

The summary, highest level findings (regarding Megaprojects) of Mr. Merrow’s presentation are:

• The Front-end Makes (or breaks) (is essential for success of) the Megaproject
• Sponsors of Megaprojects have three critical responsibilities:
• Shaping – shape the project such that stakeholders are aligned
• Basic Data – technical data are correct and complete
• Front-end Loading – fully define the project before starting execution
• All of these are owner responsibilities alone (i.e., not contractors).

Mr. Ness’ High-Level Findings

Mr. Ness wrote a paper Why Megaprojects Fail So Often and Why You Should Care, No Matter the Size of Your Project and focused on business decisions in “4. Business Decisions That Hurt Prospects for Project Success.” Several key points follow:

Business-driven actions or inactions…

These include under-investing in up-front project development, failing to assign the full required team to the project, untimely changes to the project’s scope, demands to shave the budget or compress the deadline for completing the project without reducing the scope, and involving the company’s purchasing organization in the process of selecting key project contractors and other participants.

Mr. Ness continues “The monumental mistakes usually belong to the business side.” Hence, this is not “The Field” (defined below).

Why Study Industrial Megaprojects?

Given Mr. Merrow’s findings and Mr. Ness’ perspectives, it is legitimate to question the value since most projects, although they may be large and/or complex, are not industrial megaprojects. The reasons are:

• Problems are similar on large & complex (not megaprojects) projects – lessons learned are valuable
•  Large & Complex success rate is 60%+, therefore, failure rate is 30%+
• Formulas and managerial methodologies for success are valuable models for planning and execution of large and complex projects (not megaprojects).

View from the Field – The Front-End

What is the Field? In this case, we define “The Field” as any Project Management Team (PMT): owner, contractor(s) (including engineering, architectural, construction and specialty), suppliers and vendors. I have had all of these roles in large and complex projects, some megaprojects.

Shaping (shape the project such that stakeholders are aligned) – Stakeholder Alignment managerial process is addressed in several industry standards. These resources include PMI Project Management Body of Knowledge (PMBOK), Stakeholder Management and Project Management, as well as Kerzner, Stakeholder Relations Management. Stakeholder Alignment can be achieved using these (and other) processes. The processes can be implemented within the Project Execution Plan (PEP) (also known as Project Plan, Project Management Plan, and other titles) using an extensive PEP workshop process.

In Leading Complex Projects, Mr. Merrow describes the PEP as:

A project execution plan (PEP) is a document that is produced by almost all project teams in all of our clients across all industrial sectors. It is a ubiquitous document that is, in theory, supposed to tell the expected story of the project and its execution. Some PEP’s we see are very good and some of the PEP’s are utterly horrid.

Stakeholders such as inside or outside counsel may achieve insight into the status of Stakeholder Alignment by attending a few workshop sessions and/or reviewing the PEP deliverable.

Basic Data – requires specialized and suitably credentialed Subject Matter Experts (SME’s).  I have encountered these situations and made the decisions to acquire suitable SME’s. Credentialed SME’s should deliver a report assessing basic data status and readiness to proceed into the project development process.

Front-end Loading – How does the project team evaluate readiness (suitable front-end loading)? A creditable tool is Construction Industry Institute (CII) Project Development Readiness Index (PDRI). These tools are available for various industries. Business unit representatives/SME’s (not merely the PMT) provide creditable expertise for representing/contributing business interests, values and requirements. Further, stakeholders such as inside or outside counsel, could assess the status by attending working sessions and/or reviewing standard reports.

Conclusions (Part 2)

The Front-end makes the large and complex project. The developmental processes are all the responsibility of the owner. Hence, owners (including owner PMT’s) need to make sure that this process is robust and complete. Contractors need to evaluate the degree of completeness during the bidding process. Inside and outside counsel can use the managerial processes and deliverables as assessment tools in order to evaluate the large and complex project readiness for further development (or readiness for passage through the next stage gate).

View from the Field – Interface Management

Part 3 of this series will address the challenges of Interface Management that is required when using “Mixed” contracting approach.

Author George T. McLaughlin PMP CCM has worked worldwide in this industrial marketplace since the early 1980’s. He serves Owners, Prime Contractors, and Subcontractors. For the most part, Mr. McLaughlin’s work is performed on-location where the relevant work is being performed hence the title “view from the field.” Mr. McLaughlin is a principal of McLaughlin & McLaughlin out of Austin, Texas.