Contractor Performance on Mega Projects – Avoiding the Pitfalls
Working Paper Proceedings 15th Engineering Project Organization Conference with 5th International Megaprojects Workshop Stanford Sierra Camp, California June 5-7, 2017 Contractor Performance on Mega Projects – Avoiding the Pitfalls Peter Ryan, WBHO Infrastructure Pty Ltd, The University of Melbourne, Australia Colin F. Duffield, The University of Melbourne, Australia Proceedings Editors Ashwin Mahalingam, IIT Madras, Tripp Shealy, Virginia Tech, and Nuno Gil, University of Manchester © Copyright belongs to the authors. All rights reserved. Please contact authors for citation details. CONTRACTOR PERFORMANCE ON MEGA PROJECTS – AVOIDING THE PITFALLS Peter Ryan1 and Colin Duffield2 ABSTRACT The Tier 1 contractors operating in the Australian marketplace have consistently failed to deliver their financial targets on mega projects. Although these organisations have theoretically developed expertise in delivery, been governed by astute directors, employed the best leaders, paid top salaries, and developed dependable systems, the industry has delivered disastrous financial outcomes and their results on mega projects have continued to erode shareholder value. To quantify the scale and impact of financial failures in the industry, this study examined the performance of infrastructure mega projects in Australia since 2000, as well as the personal experiences of business executives and project leaders. Analysis of the results from the mega projects studied indicates that on average, each completed project has posted a loss of 16%. This suggests that each project destroys its original 9% profit margin plus a further deterioration of 7%. This represents a loss of A$215m on an average project size of A$1.32b. Australian contractors have incurred losses of A$6b on mega projects completed between 2000 and 2015 and, if nothing changes, will potentially lose a further A$11b on current mega projects that will be delivered between 2015 and 2020.
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