Latest publication: Consequence on project complexity of the increased presence of financial owners for major capital projects

Company updates, Opinion

We have been pleased to contribute to the latest issue of Connect Magazine of ICCPM (International Centre for Complex Project management) on the topic of ‘Consequence on project complexity of the increased presence of financial owners for major capital projects‘ (link to the full article)

A definite trend in infrastructure and energy is to have financial holdings take ownership over large complex capital projects. Those owners do not have the history, technical background and experience that more traditional industrial owners have developed over time. In addition to possible unrealistic expectations, additional complexity is created because of the need to contract additional owner engineers, future operator and project management support entities. Project complexity can then reach a threshold where the project outcome becomes quite unpredictable. The article explores the consequences of this trend in terms of contracting strategies and the associated complexity risk. It also provides insights as to the measures that financial owners should take to be successful.

This setup may create issues and project complexity concerns, mainly along three dimensions:

  • A general context of excessive expectations regarding project and asset performance,
  • Lack of competence of the owner to drive the right technical decisions during project definition and execution, in the interest of the full lifecycle value of the asset. This is also linked to poor governance including inadequate control of key project milestones,
  • Lack of alignment of interests between owner and owner assistance contributors leading to poor project execution decision-making. This additional complexity may have a significant impact on project delivery.

It is our persistent observation that capital projects involving financial owners are often much more complex mostly due to the involvement of additional contributors, compounded by a frequent lack of understanding by the owner of the key capital project success factors. This is however not inevitable. Practices that will allow one to overcome this situation include internalizing sufficient competencies and project control capabilities, setting realistic expectations aligned with industry benchmarks, being careful about adequate and timely decision-making, and setting up an integrated project team aligning all contributors towards a common goal.

Read our ICCPM Connect article ‘Consequence on project complexity of the increased presence of financial owners for major capital projects‘.

If you can’t access the link to the white paper, copy and paste the following link in your browser: https://www.projectvaluedelivery.com/_library/CONNECT%20Sept%202021%20-%20Averous.pdf

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Review of the new book ‘Leading Complex Projects’

Opinion

In a new book ‘Leading Complex Projects‘, the IPA founder Edward Merrow and IPA staff Neeraj Nandurdikar share new research on the traits that make project directors of complex projects successful.

The book concentrates on Owners’ Project Directors. The main message is that the skillset to be a successful project director on (large) complex projects is quite different from what makes one project manager successful on simpler projects, and that most organisations don’t get it. Therefore, while successful project directors of complex projects seem to have common traits, nomination of project directors follow some random pattern which could explain why so many fail.

What makes a project director on complex projects successful? According to the book, it is all about leadership capabilities and high emotional intelligence. A Project Director for such projects is forst and foremost a Project Leader. First it is all about openness and being a generalist rather than a specialist; and experiences in other organisations and industries help. Second it is about understanding that the job involves mainly spending time of soft activities like communication and stakeholder management rather than the hard stuff that needs to be done by the team – while the latter may be a comfort zone for the upcoming project manager, and thus source of failure when stepping up into this type of jobs.

This all ties back to what we have always supported: complex projects are first of all a human adventure. And Project Managers should be Project Leaders. It is all about Project Soft Power!

This is a nice short book. The only negative maybe is that it is more like a monography from a research project than a full book on the subject, and practitioners may be a bit frustrated not to find more content on how to be and develop project leaders. Still it provides useful insights for Owners involved in large complex projects and quite worth the read.

Enjoy ‘Leading Complex Projects‘, a good read for the summer for executives in organisations implementing complex projects!

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How Improving Risk Management in Projects is Not Enough – Opinion

Opinion

Delivering infrastructure projects in a way that delivers the expected benefits is essential for the good utilization of public and private resources. Still, many infrastructure projects do fail, sometimes miserably and publicly, like for example the new Berlin Brandenburg airport. Causes are almost always the same – poor governance, poor management of changes during the project, and poor coordination of contractors and their interfaces.

The new Berlin Brandenburg airport, still empty

The new Berlin Brandenburg airport, still empty 4 years after construction finished

An interesting paper by McKinsey proposes as a solution to these failures that the risk management framework around large infrastructure projects should be deeply reviewed. In typical McKinsey style they state “In our view, most overruns are foreseeable and avoidable. Many of the problems we observe are due to a lack of professional, forward-looking risk management“. The paper goes on with good recommendations on how to implement a comprehensive and consistent risk management process throughout the entire project lifecycle.

But is that sufficient? In my view, process-based solutions are only effective if there is no basic governance breakdown. And more often than not, this is the issue, with situations such as:

  • over-inflated usage expectations, to justify the investment, based on other motivations (political, status within the company, etc.),
  • under-estimated costs and duration to make the investment more palatable to investors,
  • under-estimated effort to coordinate the project and poor contractual approaches with contractors
  • etc.

It happens too often that we are called as consultants to sort out an issue in the mechanistic project execution only to find out that it is the entire project governance that is rotten to the core.

No amount of process will deal with this issue if the system is not ready for candor and self-examination. It is often necessary to take a broader view and address the complexity of decision-making to deal with problems. It’s often tough and we feel like pulling teeth, but that is what needs to be done when things go awry in infrastructure projects.

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