Policy and Planning for Large Infrastructure Projects: Problems, Causes, Cures
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An Assessment of the Causes of Schedule and Cost Overruns in South African Megaprojects: a Case of the Critical Gov.Za> Energy Sector Projects of Medupi and Kusile
Review articles • Oorsigartikels Fhumulani Tshidavhu Ms Fhumulani Tshidavhu, Old Mutual Building, 78 Hans Van Rensburg Street, Polokwane, 0699, Limpopo, Published by the UFS RSA National Department of Public http://journals.ufs.ac.za/index.php/as Works, Polokwane, South Africa. Phone: 071 679 8604, © Creative Commons With Attribution (CC-BY) e-mail: <Fhumulani.Tshidavhu@dpw. How to cite: Tshidavhu, F. & Khatleli, N. 2020. An assessment of the causes of schedule and cost overruns in South African megaprojects: A case of the critical gov.za> energy sector projects of Medupi and Kusile. Acta Structilia, 26(2), pp. 119-143. Nthatisi Khatleli AN ASSESSMENT OF THE CAUSES Dr Nthatisi Khatleli, senior lecturer, School of Construction Economics OF SCHEDULE AND COST and Management, University of OVERRUNS IN SOUTH AFRICAN the Witwatersrand, Johannesburg, South Africa. MEGAPROJECTS: A CASE Phone: 011 7177651, e-mail: <[email protected]> OF THE CRITICAL ENERGY DOI: http://dx.doi. SECTOR PROJECTS OF org/10.18820/24150487/as27i1.5 MEDUPI AND KUSILE ISSN: 1023-0564 e-ISSN: 2415-0487 Peer reviewed and revised March 2020 Acta Structilia 2020 27(1): 119-143 Published June 2020 *The authors declared no conflict of interest for the article or title ABSTRACT Cost and schedule overruns are the most common challenges in mega construction projects around the globe, and South Africa is no different. Although comparatively small in number, megaprojects have an inordinate number of projects failing, due to budget overflow and schedule slippage. This article assessed the causes of cost and schedule overruns as well as the challenges with the implementation of critical construction megaprojects, using Kusile and Medupi energy-sector megaprojects in South Africa. -
78 Risk Assessment of Time and Cost Overrun Factors Throughout
Risk Assessment of Time and Cost Overrun Factors throughout Construction Project Lifecycle Prof. Mostafa Hasan Kotb1, Prof. Amin Saleh Aly2 and Eng. Khaled Muhammad Ali Muhammad3 1Professor, Structural Engineering Department, Faculty of Engineering, Al-Azhar University, Cairo, Egypt 2Professor, Structural Engineering Department, Faculty of Engineering, Ain Shams University, Cairo, Egypt 3PhD Student,, Structural Engineering Department, Faculty of Engineering, Al-Azhar University, Cairo, Egypt [email protected] Abstract: The construction industry has a reputation for delivering projects over budget. This research identifies actual project examples illustrating the problem of cost overruns. Results of a questionnaire survey present perceptions of the main reasons why building construction projects sometimes exceed the initial budget estimate. The paper reviews how the construction industry is responding to the challenge of accurate budgeting. In the domain of facility capital cost budgets and risk management, two key conclusions are made. Firstly, that complete design information leads to more accurate budget estimates. Secondly, that client driven design change is the greatest risk. Clients are the key drivers of change and they must therefore take a look at themselves before blaming the industry for being inefficient. [Mostafa Hasan Kotb, Amin Saleh Aly, and Khaled Muhammad Ali Muhammad. Risk Assessment of Time and Cost Overrun Factors throughout Construction Project Lifecycle. Life Sci J 2019;16(9):78-91]. ISSN: 1097- 8135 (Print) -
Simulation Modeling of Cost Overrun in Construction Project in Ethiopia Geletaw Taye
International Journal of Recent Technology and Engineering (IJRTE) ISSN: 2277-3878, Volume-8 Issue-4, November 2019 Simulation Modeling of Cost Overrun in Construction Project in Ethiopia Geletaw Taye Abstract: Cost is an essential part of any construction worldwide and it is more severe in developing countries. project. It was observed that cost overrun is one of the most Like many other developing countries, the construction frequently occurring issues in construction projects of Ethiopia and it is more severe in different parts of the country. The aim of industry in Ethiopia also affected by the cost overrun. Most this research has identified the factors that influence cost of the construction projects in Ethiopia are exposed to cost overruns of construction projects, quantified the percentage of overrun this leading to loss of projects profit, budget identified factors, established probability distribution of identified shortfall of project owners, falling the project to deliver on factors and develop simulation modeling of cost overrun. The study was conducted based on the desk study and questionnaire time, the company or firms exposed to bad debt or survey. Questionnaire surveys were analyzed by using Relative bankruptcy, and it also considered another a big problem, Important Index (RII) ranking and significance of data checked which hinders project's progress since it decreases the by using a t-test at a 95% confidence level. Based on the desk study of 19 projects, a simulation model of cost overrun was contractor profit leading to huge losses leaving the project in developed by using the Monte Carlo simulation method. a big trouble. -
Using Agile in Construction Projects: It’S More Than a Methodology
Using agile in construction projects: It’s more than a methodology Milind Padalkar Indian Institute of Management, Kozhikode, Kerala, India Saji Gopinath Bennett University, NOIDA, UP, India [email protected] Abhilash Kumar UL Technology Solutions Ltd., Trivandrum, Kerala, India Abstract Agile methods have been successful in information technology projects. Can they lead to superior performance in construction projects under high uncertainty? From case study of a high performance construction company, we find that agile methods succeed when supplemented by high levels of trust, vertical communication, empowerment, and ethical values. Keywords: Agile methods, Construction industry, Organizational trust, Values INTRODUCTION Despite several decades of practice experience and research attention, project performance remains far from satisfactory. According to a recent Standish Group survey report, 61 per cent of information technology projects either failed or were challenged to meet success criteria; and 74 per cent faced schedule overruns (Standish, 2013). Zwikael and Globerson (2006) survey project managers from several industries and report that despite much discussion in practitioner literature about critical success factors, the failure rate of projects remains high, with average schedule overrun of 32 per cent and average cost overrun of 25 per cent. Another study finds that 40 to 200 per cent schedule overrun is normal in information technology projects (Lyneis et al. 2001). Multiple studies link failures in information systems projects to an inability to foresee and manage uncertainty in project contexts such as user involvement, stakeholder communication; or process risks such as weak estimates, requirements analysis (Yeo, 2002, p. 245; Nelson, 2008, p. 70-71; Chua, 2009, p. -
IMIA Working Group Paper 96(16) Cost Overrun in Construction Projects 49 Annual IMIA Conference, September 2016, Qatar
IMIA WG Pape 96(16), Cost Overrun . I M I A Working Group Paper 96(16) Cost Overrun in Construction Projects 49th Annual IMIA Conference, September 2016, Qatar Working Group Members Caroline Hairsine, CNA Hardy – Chairperson Roman Emelyanov, Sogaz Vitaly Valyuk, Sogaz Cedric Wong, Swiss Re Marina Zyuganova, Renaissance Insurance Group IMIA EC Sponsor: Olivier Hautefeuille, SCOR 1 IMIA WG Pape 96(16), Cost Overrun . Table of Contents Executive Summary ........................................................................................................................ 3 Cost overrun in the Construction Industry .................................................................................... 4 What is Cost Overrun ................................................................................................................. 4 The challenges for construction industry .................................................................................. 4 What are the causes of Cost overrun? ..................................................................................... 8 Does the type of contract have an impact on cost overrun? ................................................. 12 Liquidated Damages and it’s interface with cost overrun ...................................................... 13 Feasibility Studies & Risk Management as a means to mitigate cost overrun .................... 13 Project Finance Issues ............................................................................................................. 14 Cost and -
Cost Engineering Journal
THE JOURNAL OF AACE® INTERNATIONAL - THE AUTHORITY FOR TOTAL COST MANAGEMENT® March/April 2016 ENGINEERINGENGINEERING COSCOSTT www.aacei.org REVIEWING RESOURCE LEVELED SCHEDULES USING P6TM THE PLANNING FALLACY AND ITS EFFECT ON REALISTIC PROJECT SCHEDULES FORENSIC SCHEDULE ANALYSIS AND DISCRETIONARY LOGIC TECHNICAL ARTICLE The Planning Fallacy and Its Effect on Realistic Project Schedules Jeffrey Valdahl and Shannon A. Katt performing similar tasks. Kahneman Abstract: “How long do you think that task will take?” It’s a question that is states that the planning fallacy asked frequently during the course of a project, but is often answered with describes plans and forecasts that: little or no factual basis. Project team members typically underestimate the time needed to complete a task they are responsible for. This tendency has been referred to as the “planning fallacy,” and it can have a dramatic effect • Are unrealistically close to best- on developing a realistic overall project schedule. This article examines var- case scenarios ious causes of the planning fallacy, including optimism bias, lack of task un- • Could be improved by consulting packing, and short memory. the statistics of similar cases [7]. As a project manager or planner, it is important to recognize when these psychological effects are impacting your project schedule. This article uses Kahneman also describes the examples from various projects to show where this challenging planning exercise that first led him to describe issue is likely to occur. Identifying where adjustments need to be made, at the concept. He was working with a both the task and overall project level, is essential in developing a project team of colleagues to write an schedule that is both achievable and reasonable. -
Does and Should Control Live in Agile Development
ee DEGREE PROJECT, IN PROJECT MANAGEMENT AND OPERATIONAL DEVELOPMENT, SECOND LEVEL STOCKHOLM, SWEDEN 2014 Does and should control live in Agile Development. A case study of a gaming company Pamela Morris Williams KTH ROYAL INSTITUTE OF TECHNOLOGY INDUSTRIAL ENGINEERING AND MANAGEMENT ABSTRACT In an ever changing and competitive global market, cost estimation and cost control are becoming paramount when companies develop new products and services. Being that the driving force for continuous evolvement in Agile methodologies is reduction in time hence cost, it is quite peculiar that there is so little research made in cost control in Agile. This even though the problem in regards to cost control and handling in system development is a known problem area. Furthermore, most cost estimation in regards to software in an Agile software development environment has several challenges due to the continuous varying levels of customer requirements and different individual personnel capabilities. The question proposed by this research is: How is cost control affected and managed in Agile driven development projects? In other words how can a company handle cost control in a sufficient and effective manner when using an Agile methodology. The research in this thesis is based on both relevant literature studies as a case study analysis. Several conclusions can be drawn from the research one being that it is crucial that a company using the Agile Scrum methodology finds a cost estimation technique that gives cost estimation on the on-going projects. A method that will work together with the teams and also give the management the ability to budget and plan for both the short and long term future. -
Cost Overruns in Large-Scale Transportation Infrastructure Projects: Explanations and Their Theoretical Embeddedness
Cost overruns in Large-Scale Transportation Infrastructure Projects: Explanations and Their Theoretical Embeddedness By Chantal C. Cantarelli, Bent Flybjerg, Eric J. E. Molin, and Bert van Wee Full reference: Cantarelli, C. C., Flyvbjerg, B., Molin, E.J.E., and van Wee, B. 2010. “Cost Overruns in Large-Scale Transportation Infrastructure Projects: Explanations and Their Theoretical Embeddedness,” European Journal of Transport and Infrastructure Research, 10 (1): 5-18. Link to published article: http://www.ejtir.tbm.tudelft.nl/issues/2010_01 2 Abstract Managing large-scale transportation infrastructure projects is difficult due to frequent misinformation about the costs which results in large cost overruns that often threaten the overall project viability. This paper investigates the explanations for cost overruns that are given in the literature. Overall, four categories of explanations can be distinguished: technical, economic, psychological, and political. Political explanations have been seen to be the most dominant explanations for cost overruns. Agency theory is considered the most interesting for political explanations and an eclectic theory is also considered possible. Non- political explanations are diverse in character, therefore a range of different theories (including rational choice theory and prospect theory), depending on the kind of explanation is considered more appropriate than one all-embracing theory. Keywords: cost overruns, explanations, large-scale projects, theoretical embeddedness, transportation infrastructure 3 Introduction Investments in infrastructure are a considerable burden on a country’s gross domestic product (GDP). For example, in 2005 the Dutch government invested about 8 billion euros (CBS, 2005 in KIM, 2007) in infrastructure, amounting to 1.55% of GDP. This is of even greater concern if the inefficient allocation of financial resources as the result of decisions based on misinformation are recognised (Flyvbjerg, 2005b, De Bruijn and Leijten, 2007). -
How to Cite Complete Issue More Information About This
Revista Finanzas y Política Económica ISSN: 2248-6046 ISSN: 2011-7663 Universidad Católica de Colombia Peña, Víctor Alberto; Gómez-Mejía, Alina Effect of the anchoring and adjustment heuristic and optimism bias in stock market forecasts Revista Finanzas y Política Económica, vol. 11, no. 2, 2019, July-December, pp. 389-409 Universidad Católica de Colombia DOI: https://doi.org/10.14718/revfinanzpolitecon.2019.11.2.10 Available in: https://www.redalyc.org/articulo.oa?id=323564772010 How to cite Complete issue Scientific Information System Redalyc More information about this article Network of Scientific Journals from Latin America and the Caribbean, Spain and Journal's webpage in redalyc.org Portugal Project academic non-profit, developed under the open access initiative Finanz. polit. econ., ISSN: 2248-6046, Vol. 11, N.° 2, julio-diciembre, 2019, pp. 389-409 http://doi.org/10.14718/revfinanzpolitecon.2019.11.2.10 Effect of the anchoring and Víctor Alberto Peña* Alina Gómez-Mejía** adjustment heuristic and optimism bias in stock market Recibido: 21 de agosto de 2019 forecasts Concepto de evaluación: 30 de octubre de 2019 ABSTRACT Aprobado: 12 de diciembre de 2019 Stock market forecasting is an important and challenging process that influences investment decisions. This paper presents an experimental design Artículo de investigación that aims to measure the influence of the anchoring and adjustment heuristic © 2019 Universidad Católica de Colombia. and optimism bias in these forecasts. Facultad de Ciencias The study was conducted using information from the S&P MILA Pacific Económicas y Administrativas. Alliance Select financial index; this was presented to 670 students from the cities Todos los derechos reservados of Concepción (Chile), Cali (Colombia), and Lima (Peru). -
A Proposal to Study the Effect of Optimism, Overconfidence, and the Planning Fallacy on Lawyers’ Ability to Secure Favorable Results for Clients
University of Pennsylvania Carey Law School Penn Law: Legal Scholarship Repository Prize Winning Papers Student Papers 2017 A Proposal to Study the Effect of Optimism, Overconfidence, and the Planning Fallacy on Lawyers’ Ability to Secure Favorable Results for Clients Chelsea Berry University of Pennsylvania Follow this and additional works at: https://scholarship.law.upenn.edu/prize_papers Part of the Legal Ethics and Professional Responsibility Commons Repository Citation Berry, Chelsea, "A Proposal to Study the Effect of Optimism, Overconfidence, and the Planning allacyF on Lawyers’ Ability to Secure Favorable Results for Clients" (2017). Prize Winning Papers. 7. https://scholarship.law.upenn.edu/prize_papers/7 This Prize Paper is brought to you for free and open access by the Student Papers at Penn Law: Legal Scholarship Repository. It has been accepted for inclusion in Prize Winning Papers by an authorized administrator of Penn Law: Legal Scholarship Repository. For more information, please contact [email protected]. Chelsea Berry A Proposal to Study the Effect of Optimism, Overconfidence, and the Planning Fallacy on Lawyers’ Ability to Secure Favorable Results for Clients I. Introduction Lawyers are notoriously risk averse. The media and popular culture have an abundance of references to lawyers serving reality checks to overambitious clients, often labeling lawyers as “deal breakers” or “obstructionists.”1 Risk aversion may come with pessimism or cautious decision-making. Lawyers may also be seen, by some, as professional -
Reduce Optimism Bias Introduction to Reference Class Forecasting
Transactions, SMiRT-25 Charlotte, NC, USA, August 4-9, 2019 Division XII REDUCE OPTIMISM BIAS INTRODUCTION TO REFERENCE CLASS FORECASTING James Michael Devine1 CCP 1 Director, International Business Development, Project Time & Cost LLC, Atlanta, GA, USA, [email protected] ABSTRACT Project planning often contains several elements of optimism bias. Even when project planners are aware of the potential to do so, overly optimistic cost estimates and schedules are produced. Also, all too often, risks tend to be overlooked or downplayed during the planning process. The tendency to “bake in” overly optimistic outcomes into project planning, per several well-known, analytical studies, is simply human nature. Information, supporting this tendency is presented within this paper. Several different approaches and guidance have been developed and deployed by different professional organizations and government agencies to help alleviate overly optimistic project planning. This paper introduces the concept of Reference Class Forecasting (RCF) which, when properly implemented, can improve project planning and more accurately predict final project outcomes. To implement RCF it is important to identify relevant past projects, or applicable elements of past projects, that can be used as reference points or benchmarks. Once these relevant benchmarks have been established and converted into a meaningful reference class distribution, project planners can use these known, external elements, for comparison to help alleviate optimism bias in their project plans. Recognition and treatment of project risk is also improved through this process. This methodology can produce a project plan that is more likely to approximate a project’s outcome. INTRODUCTION One might consider that optimism lies at the very core of human nature and the primary factor contributing to the survival of the species. -
Reference Class Forecasting Guidelines for Use in Connection with National Roads Projects Table of Contents
Reference Class Forecasting Guidelines for use in connection with National Roads Projects Table of Contents Page Section 1 1 Background to Reference Class Forecasting Section 2 9 Development of National Roads Reference Class Section 3 17 Reference Class Forecasting for National Roads Schemes Bibliography 20 Appendix A 21 Schemes included in Reference Classes Appendix B 23 Reference Class Curves for National Roads Projects Appendix C 25 Worked Examples Foreword The government is seeking to transform the way we both deliver and use our infrastructure so we can extract the maximum possible value from our investment and so bring about real change for people, communities and our economy. In response to updated guidance in the Public Spending Code, Transport Infrastructure Ireland (TII) is transforming its cost forecasting process both through an update to TII’s Cost Management Manual (for publication in 2020) and the preparation of this document providing guidance on the use of reference class forecasting in connection with Irish national roads projects. TII has been involved in the delivery of new national road schemes since the formation of the National Roads Authority in 1994 and thus has a wealth of data available to it from previous Irish national roads projects which is suitable for use in generating specific reference class curves appropriate to Irish national roads projects. As reference class forecasting, as a concept, evolved from issues with cost estimation identified through behavioural science, it is appropriate that the first section of these guidelines addresses the background to reference class forecasting and provides the context for its use. While it is acknowledged that much of this context is based on international experience and would not truly reflect TII’s experience on Irish national roads projects, it was felt that findings from a blend of international experience would provide the reader with an introduction to the concepts underlying reference class forecasting.