Increasing transparency in megaproject execution
Cost and schedule overruns are the norm in big capital projects. Here’s how to uncover their causes—and tackle them.
In the coming decades, a significant amount of capital—which our colleagues have estimated at $130 trillion—is likely to be spent on projects to decarbonize the global economy and renew critical infrastructure. Few organizations are prepared to handle this capital influx with the speed and efficiency it demands, however, with many already struggling to deliver their existing capital programs. A recent survey of senior project executives found that, on average, projects overrun their budgets and schedules by 30 to 45 percent.
Why is it so hard to deliver capital projects on time and on budget? High levels of complexity are part of the problem. Executing major projects is always challenging, requiring complex, multilevel collaboration across an ecosystem of partner organizations and the coordination of resources at the front line. That complexity makes it vital that leaders have clear visibility of project performance. No big project is going to run seamlessly; organizations will need to manage all sorts of challenges, from supply chain delays to skills shortages. Fixing those problems is easiest when owners intervene quickly and decisively to address them.
Yet all too often, leaders lack a clear picture of what is happening on the ground. It can take days or weeks for the news of execution delays to filter up through the organization. And when information does arrive, it may not be the right information at the right level of detail for the recipients to understand the root cause of the execution delay. This makes it difficult for project leaders to take timely mitigation and recovery actions.
This lack of transparency is driven by multiple reporting issues. Data on progress may be siloed in disparate systems used by many different contractors. Critical data may be collected in ways that make aggregation and analysis difficult, such as nonstandardized PDF forms or handwritten notes. Teams on the ground may not be disciplined in keeping accurate and up-to-date records. Even on the same project, dozens of measures of performance may not be consistently tracked across the enterprise or standardized across contractors. That means that inaccurate, out-of-date, or misleading information is often presented to project leaders for decision making.
Additionally, multiple stakeholders with different needs and objectives are looking for different insights from project data. Project directors need to understand how issues will affect the overall budget, for example, while project managers may be more concerned about how delays in materials supplied to the site will affect construction schedules. If they don’t receive the right information at the needed frequency and granularity, it becomes even harder for owners and contractors to generate insights, identify issues and opportunities, and make decisions at the right time.
To address these challenges, organizations should focus on three key areas. First, they need new technical solutions to capture and analyze project data. Second, they need improved project performance management processes that enable rapid, effective decision making based on that data. Third, they need project leaders with the right mindsets, behaviors, and capabilities to support high productivity, quality, and consistency in project execution. None of these elements are optional. A more effective project management approach “recipe” requires all three ingredients, and they work together to deliver improved project performance.
Revealing the truth: Using data and analytics to transform data into insights
Complex projects generate huge amounts of data. Taken together, engineering documents, schedules, purchase orders and invoices, staff time sheets, and countless other items can paint a rich and detailed picture of a project’s status. But to see that picture, management teams need a better way to access and interpret all their data.
Technical solutions involve setting up the digital infrastructure necessary to create project transparency among execution teams and top management. Historically, project information has been captured in disparate and fragmented systems, with linkages between information that can drive differentiated insights often lost in the shuffle. Implementing the right technical system increases the speed of ingestion, aggregation, and visualization of project data from different sources.
This allows organizations to apply analytics and draw predictive insights that enable decisive actions to mitigate risks. Such insights might include early warnings or red flags when slow progress on one or more activities puts the on-time achievement of critical project milestones in doubt, or where unresolved design or supply chain issues mean other activities are not ready to commence on their scheduled dates. Management teams can also use predictive tools to conduct what-if analyses. This might allow them to compare the likely impact of various interventions, such as productivity improvement in key tasks, or the sharing of equipment and personnel between projects.
A unified technical infrastructure (see sidebar, “Visualizing a better digital control tower”) helps the entire organization work together to keep execution on track, ensuring that project executives see a comprehensive picture, while on-the-ground leadership has all the necessary data to make decisions. For example, if the delivery of a piece of critical equipment to the job site is delayed, communicating that issue quickly to multiple stakeholders allows everyone to take the most appropriate actions. The construction supervisor sees the delay in their project delivery dashboard and decides to redeploy their crew to another critical task while they wait. Procurement or logistics sees the equipment is delayed and begins to work on expediting procedures. The executive team sees that it is delayed but recognizes that schedule slippage is expected to be minimal, based on the mitigating actions that construction and procurement have implemented.
When one chemical company faced cost overruns and delays in the construction of a large petrochemical facility, it set up a digital control tower to act as central data repository and analysis hub. The control tower helped the project team to identify, manage, and deliver more than $75 million in cost savings over the remaining course of the project—and it found those opportunities quickly. Setting up an effective and targeted control tower can take as little as two or three weeks, with dedicated resources and clear alignment from leadership, without requiring significant additional technical infrastructure.
Taking action: Improving project management processes to drive an effective performance cadence
Good data is necessary for successful project execution, but it isn’t sufficient. Projects also need management processes that enable effective decision making and drive performance on the ground. Too often, however, project management meetings struggle to meet that ideal. Common issues include discussions based on anecdotes or qualitative estimates of progress rather than hard facts, and a tendency to look backward rather than forward, focusing on explaining what happened yesterday rather than on problem solving for better performance tomorrow. These problems can be exacerbated by the tools companies use. For example, paper reports or PowerPoint presentations don’t allow leaders to drill down into project data and understand the root cause of issues. Without standard agendas and action logs, it is hard to ensure that decisions are followed through. And disconnections inside the organization can prevent the effective two-way flow of information and decisions between the top management team and the front line.
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