Nothing is more frustrating than dedicating hundreds of millions or billions of dollars to a project and getting it kicked off only to find out half way through that the final bill will cost 10 or 15 percent more than you had earmarked and the schedule has been delayed a year or two.
You feel like screaming! What’s wrong with these people? Why does this have to be so difficult? Why can’t the project team take care of the bottom line?
The fact is, this is a common occurrence. Whether building oil pipelines or athletes’ villages or subway system extensions or nuclear power plant refurbishments, it is easy to let projects get away from you. Despite all the best intentions and all the good words of reassurance that it will be different in this case, this time…
These big projects are enormously complex. Much more so than most people understand. Imagine a run-of-the-mill $50,000 kitchen remodelling job and the complexity involved with all the contractors coming and going, the materials and appliances being ordered and delivered late and arriving with the wrong components and permits and inspections and deadlines and loans and contracts. Multiply that complexity by 20,000. That’s a one billion dollar project.
How can you ensure you stay on track, on budget and on time?
These types of large scale projects require a strong, empowered management team dedicated to making it successful. This is not a part time activity. Just as running a successful organization is a full time job. Why does it make sense to ask that same operating team with full time jobs running your company to also manage a billion dollar addition to their facilities in their spare time? They may give it lip service: “We have hired qualified contractors to do the work and they should be able to take care of it”. But this is not the case! Big projects require a strong owner decision making team no matter how good the contractor is. There is just no way to get around this fact.
Think of a billion dollar project that takes five years to build as a business. A public company with a 200 million dollar budget over five years would need exceptionally strong leadership to be successful. We wouldn’t consider asking the management team in another company to lead this in their spare time. Why would a project be any different?
In the grand scheme of things, a strong, experienced, dedicated management team is an invaluable investment in the project. If the management team can prevent 1% escalation on a billion dollar project, that’s a ten million dollar savings — more than enough to justify the expense of the team over the life of the project.
Through the years I have witnessed investors and boards and executives make this same mistake time and again. Oil sands projects in the late 90s and early 2000s; the athlete’s village in Vancouver; subway extensions in Toronto; and nuclear power plant refurbishments in Canada and the US, all suffered from the same issue. Investors, owners, senior executives, governments and boards all routinely under invested when setting up the team early on. They had the mistaken sense that this was no big deal and that the existing team should be able to make this happen at the same time as managing their day jobs.
In most cases, by the time management realizes they need a stronger, dedicated team, the damage has been done. The scope has been nailed down, the unrealistic estimates have been floated, the unattainable timelines agreed to and the investors signed on. Then, when the “A” team finally arrives, they are tasked with doing the impossible.
And as actor John Candy once said: “Whoever said nothing is impossible obviously hasn’t tried nailing Jello to a tree.”