De-risking ‘one-of-a-kind’ projects

By adopting a collaborative approach to managing supply chain risk and convincing stakeholders of a project’s unique benefits, project managers can support the delivery of the UK’s infrastructure revolution, says Bill Zuurbier.

Norway’s $47bn highway is the largest infrastructure project in the country’s history.

One of the reasons for delays when delivering mega-projects is that they are often ‘one-of-a-kind’ undertakings, and project managers can’t rely on past experience to guide them. However, recognising that large-scale initiatives might share commonalities and selling their individual benefits, could help managers to optimise project results, and avoid history repeating itself.

The increasing scale and complexity of major infrastructure projects means that project managers can often find themselves in uncharted territory when it comes to risk management. This can make it difficult to get developments to completion on time, and on budget. 

While many examples of specific types of mega-project exist all over the world, applying learnings from these in different areas or environments can be far from straightforward. For example, while the construction of Norway’s $47bn highway – the largest infrastructure project in the country’s history - will involve navigating its extensive fjord network, delivering a major-scale road infrastructure project in the UK would likely involve more risks related to building in densely-populated areas. Other types of risks, which may vary significantly between jurisdictions, include differing legal processes and building standards, social and environmental impacts and construction techniques.

For the UK to deliver much-needed infrastructure and ensure that taxpayers’ money is well spent, it is essential that project managers avoid repeating the same mistakes. A consideration of common mega-project failings can help managers to satisfy key stakeholders that all eventualities have been considered at the outset and optimise project outcome.

One of the most important learnings that project managers can take from past projects and a common reason for delays, is the need to shoulder a greater amount of supply chain risk. Historically, tier one contractors have had little choice but to accept onerous agreements, apportioning too much liability to them. By contrast, further down the supply chain, there is a very low level of accountability for sub-contractors and suppliers. This way of working is exposing one part of the supply chain to an exceptionally high level of risk.

On specialist or complex projects, where managers may lack some areas of expertise, undertaking a quantitative risk assessment at the earliest possible opportunity is essential. This can help to ensure that contractors understand the full extent of their liabilities and are able to price their activities accordingly. From here, project managers should ensure that risk terms are clearly stated in contracts and are attributed fairly to the appropriate stakeholder. As part of this process, it is important to make a clear differentiation between the party carrying the liability, and that responsible for managing risk. For example, in many cases, the end client is in the strongest financial position and has the highest level of in-house expertise and is therefore best placed to manage risk within the supply chain.

Throughout history, some of the most iconic and lasting infrastructure programmes, such as the Channel Tunnel, have gone ahead even though nothing like them had gone before. This is because the project managers and politicians of the day were able to persuade stakeholders that the programme would bring game-changing benefits for society.

An essential skill when delivering ‘one-of-a-kind’ projects is the ability to identify their unique benefits and sell them to stakeholders. Cost-benefit analyses can help to facilitate this process by converting a project’s expected benefits into a cash equivalent. 

For example, the government’s proposed £20bn Scotland-Northern Ireland bridge could have a number of local economic benefits, which deserve to be taken into consideration. By attributing an economic value to each of these benefits and including them in a cost-benefit ratio, stakeholders will be able to weigh up different projects, and decide which should go ahead. It is worth bearing in mind that as unique, complex projects often prove costly to deliver, it can be difficult to show a cost benefit. Nevertheless, it is usually possible for project managers to illustrate potential long-term benefits by making comparisons with other more cost-efficient projects.

Mega-project expert, Bent Flyvbjerg, famously spoke about the tendency for project managers to be overly optimistic. To prevent unique projects from exceeding time and cost estimates, a shift in culture is needed. As well as becoming better at communicating bad news to stakeholders at the earliest possible opportunity, adopting a solutions-focused approach to risk management can give managers a better chance of steering projects out of danger. This should involve clearly explaining the proposed mitigation strategies for any risks identified and how these will be implemented. As risks linked to time and money are most likely to grab stakeholders’ attention, focusing on these when agreeing mitigation strategies is key to securing their buy-in.

In order to realise the government’s vision of delivering an ‘infrastructure revolution’, it is vital that managers are empowered to optimise project delivery by learning from past mistakes. By adopting a collaborative approach to managing supply chain risk and convincing stakeholders of a project’s unique benefits, project managers can support the delivery of the UK’s infrastructure revolution.

Bill Zuurbier is the co-founder and managing director of risk management consultancy, Equib.

If you would like to contact Andy Walker about this, or any other story, please email awalker@infrastructure-intelligence.com.