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2.1 Engineering Projects and their Cost-Schedule Performance - Coggle…
2.1
Engineering Projects and their Cost-Schedule Performance
What is meant by Major Projects / Megaproject / Large Project?
Large Scale Finances
A major project is associated with a large sum of money over $1 B
Long Life Span
Major projects take years and even decades
Technical and organisational complexity
Major projects might be complex, involving high level technical details such as NPPs or refineries
Might involve coordination and between organisations from different countries and different cultures
Impact on the Economy, society and environment
Creating jobs and tourism
might change the landscape and influence sustainability
High level political interest
Political parties can highlight major projects in their campaigns in order to promote their achievements, or such projects can prove contentious issues for those involved in politics
Symbolic significance
In some cases, major projects become symbolic landmarks
What types of risks are involved in major projects?
Technical Risk
As an example, a project designed to construct a new satellite involves very complex technology
Market-related Risk
The planning and delivery of major projects might take decades to carry out, therefore the final value of the completed project may not reflect the initial planned value.
Socio-political risk
When a project trigger controversy from the local community if they might be adversely affected by the projects plans, for example NIMBY reaction
Assessing major projects overall performance
What is
the iron triangle
?
A tool to asses and evaluate project performance by considering three factors
Schedule (Time)
"the approved estimate for the project or any work breakdown structure component or any schedule activity." (Project Management Institute, 2013, p.530).
Resources (Costs and budget)
"a schedule model that presents linked activities with planned dates, durations, milestones and resources." (Project Management Institute, 2013, p.555).
Scope (Features and functionality)
"the sum of the products, services, and results to be provided as a project." (Project Management Institute, 2013, p.560).
The three factors apply constraint on any project, particularly on the planning phase, when one changes the others change as a result
Error and inaccuracy in major projects: infrastructure projects
Major projects, especially infrastructure projects encounter delays and run over budget failing to deliver the expected benefits that were projected at the planning stage.
Actual cost vs estimated cost is one of the main issues
Following Professor Flyvbjerg's narrative, around 9/10 projects have overruns in terms of budget
Estimating project benefits
In transportation projects, one difficulty is forecasting the number of passengers and traffic a new project will be able to accommodate.
the difference between the actual and estimated usage is usually more than 20%.
Reasons why infrastructure projects run over budget
(Cost Escelation)
Technical
Scope Changes
Inadequate Decision-making
Inadequate Planning
Uncertain Organisational Structure
Forecasting Errors
Poor Project Design
Incomplete Estimations
Price Rise
Deliberate Underestimation of costs:
Lack of incentive or resources
Inefficient use of resources
Lack of funding process
Strategic behavior
Poor financing
Psychological Reasons
Cognitive bias
Caution attitude to risk
Optimism bias of local officilas
Political Reasons
Manipulation of costs (corruptio)
This problem is systemic and showed little improvement over time
"Tolerance for Deviation"
When people in an organisation become so used to a deviant behavior that they accept as normal (Pinto, 2014)