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Mega Projects: Characteristics, Challenges and Causes for Cost and Schedule Overruns
George Jergeas, PEng, PhD Professor of Project Management University of Calgary, Alberta, Canada President, K3 Project Management Ltd. gjergeas@hotmail.com
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Mega Projects
Cost > $1 billion plus
Significant interfaces / complexity
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The under appreciation of project complexity, interfaces, interdependencies and risks. Underestimating the cost to attract and maintain labour.
Underestimating the direct and indirect costs of overtime.
Craft wage increases to attract personnel to the location. Regional and national demands on labour, including that from other mega projects.
Under estimation of the labour productivity loss associated with working in cold weather climates and locations with severely shorter daylight hours in northern.
Shortages of skilled labour Lower than anticipated labour productivity due to mismanagement of the construction phase. High labour turnover mainly due to the harsh working environment and competition between employers attracting labour. Underestimating transportation costs for permanent materials, construction equipment, personal, staff, etc. Environmental and regulatory compliance costs are not given sufficient consideration. Material cost for both permanent facilities and temporary facilities are not sufficiently escalated during the project budget development phase.
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Some project strategies deployed do not properly consider the level of: Scope definition, The fast track nature of the mega project environment, Market condition, Owner participation, Owner control and owner risk. Improper or late consideration of the following project strategies adds to cost overruns (ECI, 2002): Project management strategies such as risk management, project control, change control, communications, organization and responsibilities. Contract strategies relating to management, design, construction and commissioning services. Design strategies such as contributions from client business, operation, project team, contractors and suppliers. Procurement strategies including preferred suppliers, progressing, inspection and expediting, receipt, storage and management, spares and documentation. Construction strategies including site management and organization, site layout, power, utilities and drainage, work breakdown structure, construction method, off-site prefabrication and assembly, schedule and milestones, industrial relations, and pre-commissioning. Commissioning strategies including responsibilities, schedule and integration with construction, resources, training and validation, engineering and trade support, and provision of operating materials.
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Early involvement of key contractors & suppliers Partner involvement; proper project governance Decision making responsibilities clearly defined Comprehensive Project Execution Plan
Define local & global issues Early identification & management Support of mitigation plans
Effective Communication & Alignment Process
Clear statement of project objectives & goals; communication throughout project team Use of Steering Committees and Approval Boards
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Early Definition of Scope Achievable Cost & Schedule Early design and design optimization involving owner, contractors and key suppliers Continuous market monitoring & periodic cost surveys Schedule validation using historic norms
Use of Program Management Contractor Multiple large contracts vs. consortium interface management Lump sum vs. reimbursable compensation Effective work Breakdown structure Early Contractor evaluation
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Applicability of Phased execution Comparison to historic norms Use of modularization Early identification of constraints engineering, manpower, supervision, camp, logistics, material deliveries
Plot layout & work sequencing Construction infrastructure planning Labour management Productivity enhancement
Materials and Equipment Management
Critical equipment identification Vendor participation Transportation & Logistics Laydown & storage Slide 10
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