Risk-Management Approach to Successful Megaproject
Infrastructure mega projects—multibillion dollar investments—often require once-in-a-lifetime commitments of resources and capital. Yet, eighty percent of mega projects exceed budgets and schedules. The consequences for both owners and contractors can be disastrous. For owners, overruns not only affect their bottom line, but also lead to squandered business opportunities and compromised credibility. On the other hand, contractors who exceed budgets and schedules erode resources, profits, and perhaps most importantly, client trust. Projects of this size are naturally more challenging than smaller projects. In our experience, carefully planned mega projects can succeed, if both parties’ objectives and incentives are properly aligned and communicated, and when best practices for simple project delivery are consistently applied.
Our Infrastructure Practice serves both owner teams and contractors. We help clients plan, execute, and in some cases, rescue multibillion-dollar mega projects. Supported by our experts and our broad network of external experts, our global team of consultants constantly tests and refines its proprietary tools and solutions. To ensure the long-term success of a project, we work closely with clients to build their capabilities at every stage.
Our on-the-ground experience and deep knowledge of functional topics, such as organizational effectiveness, lean execution, procurement, supply chain management, and risk management, uniquely positions us to support both project owners and contractors.
Public and Private Owners. Successful mega projects are rooted in and guided by a strong business case. Unfortunately, in our experience, design and construction issues can quickly hijack projects. And decision makers can lose sight of long-term investment goals. Many owners lack the resources and experience to manage contractors and at the same time, protect their broader business objectives. We support owners planning mega projects by developing business cases aligned with their long-term strategic objectives, by ensuring rapid and effective decision making through our proprietary project management tools, and by performing key analyses to monitor the progress, economics, and risk associated with the project. During execution, we take a hands-on approach to help select and manage contractors, optimize procurement and supply chain strategies, monitor the overall execution of the project, and drive productivity. All the while, we ensure the client’s objective—delivering this mega project on time and within budget—remains the top priority.
Contractors and Vendors. Mega projects are inherently complicated. To deliver a project according to an owner’s often-changing requirements is particularly challenging. Other factors, such as shortages of experienced project staff, remoteness and complexity of projects, and deteriorating labor conditions can add to the challenge. With owners increasingly pushing to transfer project delivery risks to the contractor, decades-old practices of delivering engineering and construction services are no longer sufficient to ensure profitability and owner satisfaction. Drawing on our experience in other industries, we find that applying critical path method (CPM) practices at every stage of a mega project can result in significantly higher margins, and improved client loyalty and trust. Our Infrastructure Practice supports contractors in planning and executing projects according to CPM Schedule Management principles. To ensure long-term success, we focus on building the client’s skills throughout every stage of the project in a sustainable way.
Better Forecasting for Large Capital Projects
We bring an independent perspective to our clients that is aligned with their goals and unencumbered by competing interests of the numerous stakeholders involved with large capital projects. This distinct focus on successful economic delivery mitigates many frequent problems that lead to cost overruns or schedule delays on eighty percent of megaprojects, according to our research. Our project-development work is focused on helping to bridge the current gap between infrastructure investment and needs by convening the right parties and working collaboratively to establish viable, bankable infrastructure projects that investors can be confident in. We use several flexible models to help our clients match projects to financing and develop projects and pipelines, including establishing partnership models with our clients.
We design organizations and team structures that match the scope of a project, the contracting strategy, and the complexity of a client’s portfolio. We also take a holistic look at their existing teams to identify talent gaps and develop actions plans for recruiting or developing talent. In addition, we help put advanced, innovative tools and processes in place to streamline processes and enable a more rigorous approach to decision making.