cips south west wales branch · • rig was designed, maintained and owned by transocean, the...

Consultancy Negotiation Skills Development Recruitment Interim Management Asia Sourcing © PMMS Consulting Group 2008 All Rights Reserved www.pmms-group.com

+44(0)1253 795177

CIPS South West Wales Branch

Major Projects - Learning from the experience of others

Presented by:

Dave Porter

© PMMS Consulting Group 2008 All Rights Reserved www.pmms-group.com

+44(0)1253 795177


+44(0)1253 795177

How do projects fail?

• Costs exceed budget

• Late Delivery

• Failure to deliver specified requirement

• Catastrophic failure


+44(0)1253 795177


+44(0)1253 795177

Some Examples

• Technology– R100 and R101 airships

• Construction– Scottish Parliament

• IT– Taurus – share dealing service

• Utility/Energy– Deepwater Horizon gulf oil spill

http://en.wikipedia.org/wiki/File:Deepwater_Horizon.jpg

http://en.wikipedia.org/wiki/File:Deepwater_Horizon_oil_spill_fishing_closure_map_2010-06-21.png


+44(0)1253 795177


+44(0)1253 795177

R100 and R101 Airships

• Designed and built by Vickers – Armstrongs under fixed price contract

• Successful maiden flight to Toronto in July 1930

• No design constraints or targets

• New technology only where beneficial

• Experienced design team given full responsibility for design

• Ship performed broadly as anticipated

• Designed and built by the Air Ministry on cost plus basis

• Crashed in France in October 1930 on maiden flight to India

• Design priorities set by Air Ministry

• Intended to push the boundaries of design

• Air Ministry imposed design decisions periodically on a relatively inexperienced design team without anyone fully understanding the cumulative impact– For example, engines were underpowered,

gas bags generated inadequate lift and leaked due to abrasion against the air frame

• Ship was prone to diving - certificate of airworthiness initially refused but granted on appeal– Launch or lose?

Competition between private and public sectors to develop commercial long haul airships

R100 R101Standard Output Specification


+44(0)1253 795177


+44(0)1253 795177

TAURUS - Transfer and Registration of Uncertified Stock

• IT System to provide paperless trading on the London Stock Exchange to the satisfaction of many diverse stakeholders

– Reduce time and cost of transactions and meet political expectation

• Commenced in the 1980s and abandoned in 1993

• Although existing technology could have been adapted, TAURUS was expected to be better, creating the need for a bespoke system

• Original budget of £6m had reportedly reached £800m by the time it was abandoned in 1993

• The requirements were not fully specified at the outset leading to frequent change, piecemeal development and scope creep.

• System as a whole was dysfunctional and the project team did not communicate this fully to the board

• The Sunday Times described TAURUS as the beginning of the end for the London Stock Exchange

– For the CEO, it was the end

Spot the difference with the £20b NHS National Programme for IT


+44(0)1253 795177


+44(0)1253 795177

Scottish Parliament

• Catalan designer, Enric Miralles, selected in July 1998 following international design (designer) contest – public preferred Miralles designs

• Symbolises the relationship between nature and the Scottish people

– Much gneiss, granite, oak and sycamore fittings; architecture portrays upturned boats and leaves and uses very few standard components

• Estimated to cost £55m in July 1998 excluding site acquisition and VAT, the first full cost estimate of £109m was presented to MSPs in July 1999.

• Final cost was £414m with completion delayed from 2001 to 2004

• Construction management adopted to enable simultaneous design and construction

• Bovis were appointed as construction manager with fees of £5.5m having been allowed to reduce their bid by £0.5m after tenders had been received and analysed

• Project was plagued by constant change (internally & externally driven) with consequent cost increase and delay – construction management provides little pressure to control cost

• Tax Payer Alliance estimates building cost of £6,686 per square metre vs Edinburgh average of £1,544

Spot the difference with the Welsh Assembly building. What about the Houses of Parliament?


+44(0)1253 795177


+44(0)1253 795177

Deepwater Horizon Oil Spill - based on reports of investigations to August 2010

• Largest marine oil spill in history - massive environmental, economic and social damage

• Rig was designed, maintained and owned by Transocean, the world’s largest offshore drilling contractor employing 25,000 employees worldwide

– Not unusual – on average over 80% of oil company turnover is outsourced

• Transocean responsible for the operation of the rig – oil field 65% owned by BP.

• On board BP managers monitored operations and approved key decisions but had no right to over-rule Transocean management who could stop operations at any time

• On 20 April 2010, methane gas shot up the drill column, shrouded the rig and ignited

• This was a modern rig (9 years old) but:

– Some systems were dysfunctional and some had been disabled to limit disturbances

– Monitoring data misread by BP staff who approved the replacement of drilling fluid with sea water which was not heavy enough to prevent the escape of methane

– Drilling column broke when the rig sank allowing escape of oil

– Sea bed ‘cut off’ valve failed to operate – subsequently revealed that installation did not match plans and one battery connected with the valve actuator had discharged

• President Obama and the American people blame BP

Do you have a view?


+44(0)1253 795177


+44(0)1253 795177

What are the causes of failure?

Causes R101 TAURUS Scottish Parliament

Deepwater Horizon

Technology incompetence Yes Yes Yes Yes?

Political imperative – strategic misrepresentation

Yes? Yes? Yes?

Inadequate understanding of risk

Yes Yes Yes Yes?

Unwillingness to communicate bad news or respond appropriately to bad news

Yes Yes Yes Yes?

Incomplete specification and/or many subsequent changes

Yes Yes Yes

Ineffective engagement with stakeholders

Yes Yes

Ineffective integration of client, supplier and supply chain

Yes Yes Yes?


+44(0)1253 795177


+44(0)1253 795177

Standish Group Report - ‘CHAOS’ –Analysis of IT Projects

• User involvement• Executive management support• Clear statement of requirements• Proper planning• Realistic expectations• Smaller project milestones• Competent staff• Ownership• Clear vision and objectives• Hard working focused staff• Other

• Lack of user input• Incomplete requirements/specification• Changing requirements/specification• Lack of executive support• Technology incompetence• Lack of resources• Unrealistic expectations• Unclear objectives and poor planning• Unrealistic timeframes• New technology• Other

Success Factors Failure Factors


+44(0)1253 795177


+44(0)1253 795177

Why do Projects in General Fail?

UK Gov’t analysis of public sectorprojects:1. No clear links between the project and the

organisation’s key strategic priorities, including agreed measures of success.

2. No clear senior management ownership and leadership

3. Ineffective engagement with stakeholders

4. Limited project management and risk management capability

5. Projects not broken down into manageable chunks

6. Decisions driven by initial price not long term value for money

7. Limited senior level contact with and understanding of the supply industry

8. Ineffective integration of client, supplier team and the supply chain

Major Projects Association analysis of public and private sector projects:1. Poor project definition

2. Unclear objectives

3. Unrealistic targets

4. Inadequate risk evaluation

5. Client inexperience

6. Poor forecasting of demand

7. Lack of an effective sponsor and strong leadership

8. Poor communication and lack of openness

9. Inadequate stakeholder management

10. Management focus wrongly targeted at the back end.


+44(0)1253 795177


+44(0)1253 795177

Cost Overrun – an impressive history

Project Cost Overrun Country Date

Sydney opera house 1400% Australia 1973

Concorde 1100% UK and France 1969

Humber bridge 350% UK 1981

Boston big dig 275% USA 2006

Houses of Parliament 275% UK 1860

NHS National Programme for IT 100% UK 2010

Rolls Royce RB211 100% UK 1970

Airbus A380 25% UK, France, Germany, Spain

2009


+44(0)1253 795177


+44(0)1253 795177

Why are costs under-estimated?

• 2002 Study (1) of 258 transportation projects and several hundred other projects worldwide concluded:

– In 90% of transportation projects, costs are underestimated

– Average cost overrun is 30% (Standish IT study 43%)

– Global phenomenon (data covered 20 countries and 5 continents)

– No improvement over the last 70 years – no learning seems to take place

• Underlying causes– Technical – lack of competence

• Not supported by data

– Economic

• Self interest of promoters & other beneficiaries – public interest (to keep cost down)

– Optimism bias – psychological tendency to be overly optimistic

• But experienced estimators would address known bias

– Strategic misrepresentation - to promote projects

• Conclusion – promoters and beneficiaries believe that ‘lying pays’(1) (APA Journal Vol 68 2002)

Consultancy Negotiation Skills Development Recruitment Interim Management Asia Sourcing © PMMS Consulting Group 2008 All Rights Reserved www.pmms-group.com

+44(0)1253 795177

CIPS South West Wales Branch

Major Projects - Learning from the experience of others

Presented by:

Dave Porter

cips south west wales branch · • rig was designed, maintained and owned by transocean, the...

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