Integrated project controls can help avoid major disappointments on mega-projects
As the infrastructure sector shoulders expectations of building more productive, inclusive and sustainable economies post the pandemic, the pressure is on to ensure that planned projects and programmes live up to expectations.
As COVID-19 suppressed global economic activity, governments across the world stepped in and turned to infrastructure spending as a key mechanism in cushioning the negative economic impact. With a unique capacity to confer wider economic benefits and improve regional and national productivity, the global sector has seen US$79 trillion invested by governments hoping to spearhead economic recovery - across energy, telecommunication, aviation, ports, rail, road and water.
Alongside this enormous investment and responsibility, the sector also faces disruption from the pandemic and the economic headwinds. What started as short-term challenges for the sector have become long-term disruption to overcome. A combination of people shortages, supply disruptions, and rising interest rates are having multiplier effects with financial administration as a very real risk for many. Companies are looking to proactively tackle this risk, and integrated project controls can play a key role.
Organisations need to take a step back and make time to set up robust project controls with a clear baseline to enable project and programme performance - in turn, helping governments and investors realise their planned economic benefits for society.
Trouble with targets
With such high stakes, understanding what ‘failure’ could look like is essential, in order to avoid it. Traditionally, the three main requirements of mega projects are to meet stakeholder expectations, meet technical and functional specifications, and avoid significant overruns of schedule or cost. While the end asset may still deliver transformational benefits, failure to achieve any one of these tests can result in significant issues and disappointment.
Stakeholder expectations are also changing, with broader measures of value and success taking the fore. Every mega project should be looking to get ahead of this curve and shape strategies around the highest sustainability and social value standards – such as the 17 Sustainable Development Goals that United Nations Member States have adopted.
Scrutiny falls on major programmes in particular because of their scale, but also the significant vested interest in seeing them be a success. Largely funded by the taxpayer, accountability of the project leads to both investors and public opinion, in turn spurs media and political interest. The pressure to progress projects on time, on budget and to the highest quality is acute, and any missed targets (however small) can reflect poorly on all stakeholders involved, both in terms of financial and reputational risks.
Project controls is a critical tool to minimise risk exposure and provide greater confidence in the predictable delivery of an investment – and setting project controls up for success requires all the relevant enablers for control to be established and integrated across the project or programme.
This reference point allows performance assurance, setting goals and measuring delivery against targets.
There is a common perception that major infrastructure projects are associated with cost overruns. Policy research institute Grattan reports that the average cost overrun for Australian transportation infrastructure projects is between nine and 20 percent after principal contracts have been awarded. Turner & Townsend’s own research into ‘Enhancing Performance’ of major infrastructure projects revealed that delivering on time and on budget was the top measure of success for any project. But this can be avoided – with 48 percent of respondents surveyed arguing that insufficient time was spent in the planning stages, leading to the overruns.
There is a clear correlation between establishing project controls in mega-projects and positive schedule and cost outcomes. Independent Project Analysis (IPA) reported that “good project control practices reduce execution schedule slip by 15 percent. Project controls cost range from 0.5 percent to 3 percent of a total project, (including cost accounting), therefore, to break even, project control needs to improve cost effectiveness by around two percent.”
A study conducted by the IBC Cost Engineering Committee of IPA also showed that “cost improvements for the projects in the study were more than ten percent. It is noted that Net Present Value also benefits from schedule improvements.”
Understanding integrated project controls
Project controls in itself does not guarantee success – but need to be set up in the right way. Often on mega infrastructure projects and programmes, controls are established in siloes – for example in planning, cost, risk, change and governance – with a lack of integration between processes. This will have some benefit to the project but may not meet the true potential of integrated project controls (IPC).
With the increased pressure on infrastructure to deliver projects successfully, it is more important than ever for the industry to make the leap to a full IPC model – systematically bringing together customer requirements, supplier-management values, and status information from all data sources in a compatible form that allows for rational decision making.
This may need to be aligned to the current ways of working with flattened organisation structure and networked teams within project organisations. Moreover, increased pressure will require integration of controls with the supply chain as currently, projects are increasingly competing for a limited pool of suppliers and resources.
This can provide data-driven insights from integrated data sources to advise on areas for efficiency, recommend management action to protect the performance and bring project and market data to compare performance and propagate learning in the program. The most effective decisions can only be made informed by data and through proper integration – a fact that also increases the importance of data stewardship on projects. A focus on establishing a culture of project controls thus establishing some ‘ways of working’ early as a team can help mitigate some of the behavioural aspects which deter the effectiveness of project controls.
Establishing IPC early
Getting it right relies on setting up IPC early. Currently, project controls is not inherently part of early project development. By making project controls and data strategy an inherent part of project strategy and boardroom discussions, programme teams can signal from day one that transparency over performance is central to effective delivery. This can be doubly relevant when global infrastructure projects face so-called ‘wicked problems’ – a common situation where participants have incomplete knowledge and the problems are interconnected.
Early establishment of systems and normalisation of data-driven information gathering would help to set up a reliable source of project data and to inform effective decision-making.
This can also help in avoiding any biases of personality politics that can sometimes be at play in organisations – focusing all decisions on hard data and clear, rational arguments. Achieving this takes rigour and buy-in from the leadership team, but the benefits must not be underestimated.
The process of getting started with integration can be perceived as cumbersome and cost-intensive. This need not be the case. There are three key steps all teams should consider, which will make establishing IPC on a mega infrastructure project clear and simple – delivering confidence in programme and project performance.
Firstly, investment in a culture of transparency on projects – with the necessary executive buy-in. A lack of transparency comes hand in hand with the sort of siloed approach that should be avoided if we want to encourage data-driven decision-making at every level.
Secondly, teams must establish a data strategy to have an integrated project controls system in place. If all data points are not integrated and thought through, the full benefits of IPC will not be felt.
Thirdly, front-end planning is vital - with a focus on critical path activities such as long lead item procurement or awarding early contracts. By doing this, the efficiencies on projects can be realised and be more effective.
Realising infrastructure’s potential
Challenging perceptions around cost and schedule overruns relies on the industry taking proactive steps to change this narrative – both in terms of improving efficiency, and in focusing on the bigger outcomes and benefits that are gained from these mega infrastructure projects. To fulfil the potential of global infrastructure to support economic recovery across international markets, and to bring tangible benefits to people all over the world, we need a consolidated effort to embed IPC at the beginning of any mega project.
By adopting an IPC approach with integrated data points, and avoiding a siloed approach, we can produce actionable insights for projects to generate better outcomes and enable projects to realise long-lasting benefits for the economy, society, and environment. As stakeholders and project leaders, we all need to be part of a shift in mindset that is required to meet this goal.