How well does your company manage its projects and operations? Do you actively work to prevent scope creep? Do you agree on deliverables with your customer and then stay on point throughout the life of the project?
Project Management is an essential function of any organization. A firm grasp of the principles of project management will help companies in their quest to gain more clients and execute on contracts in a more efficient manner. In my quest to improve my project management abilities, I am enrolled in a class on Project Management as part of my MBA in Strategic Leadership.
I would like to share my weekly writings with you. Perhaps it can help your organization better plan its projects or at the very least, provide a clever antidote to read. Enjoy: Deconstructing the Big Dig.
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Deconstructing the Big Dig
By: Matthew Ramey
Abstract
Project procurement planning is vital to the success of any project, especially with mega-projects that can span many years. Take the case of the Boston’s Big Dig: a project designed to build an underground highway in the city of Boston. Begun in 1985 and with an original cost estimation of $2.56B dollars, the project was finally finished in 2007, with the final cost being $14.8B, which is an increase of 428% over the original estimates. In this paper, we will analyze how this project became so far over budget and steps project managers can take to alleviate these issues.
What is Project Procurement Planning?
Project Procurement Planning is the process of deciding what to buy and from what source. It is important because (Lynch, J., C., E., M., Modiriyat, P., & Isabel, A., 2012):
It helps to decide what to buy and from what sources.
It allows planners to determine if expectations are realistic.
It allows all stakeholders to come together to discuss the project procurement plan and whether or not it is a realistic plan.
It allows for the creation of a procurement strategy.
Planners can estimate the time required for to complete each process and award resources towards the contract.
Planners can access the feasibility of the project.
What Went Wrong with the Big Dig?
The Big Dig was a challenging endeavor from the beginning as it had signs and symptoms of serious mismanagement.
First off, the project seriously underestimated the cost of the actual project. While some cost overruns are necessary and even expected in projects of this size, it is shown that often times project costs are underestimated from the beginning in order for the project to be approved (Greiman & Warburton, 2009).
Secondly, the project had numerous political pressures which caused issues with the overall project. It was pushed through during a democratic stronghold in the city of Boston and fought delays every step of the way. Numerous delays and budget constraints turned this project into a 25 year behemoth.
Third and foremost, costs were out of control. This was due to many factors including but not limited to: failure to assess the impact of unknown subsurface conditions, environmental and mitigation costs, and increased scope.
In fact, throughout the project’s lifespan, it had 1,500 separate mitigation agreements and the original design had several components that were added in later that were not included in the original scope: the Massachusetts Avenue Interchange, linkages to Logan Airport in East Boston, and work North of the Charles River. (Greiman & Warburton, 2009)
Could The Cost and Time Overruns Been Prevented?
The authors of this case study seem to argue yes and no. Greiman and Warburton readily admit that it is common place for Mega-Projects to experience cost overruns. However, they do offer a few suggestions for practicality purposes (Greiman & Warburton, 2009):
1. Study the historical data from mega-projects—the patterns in the data are valuable indicators of trouble.
2. Recognize the limitations of the assumptions in historical projects with comparable characteristics.
3. Identify the attributes of the project that will grow and change over time.
4. Recognize that the accuracy of cost estimates vary throughout the project.
5. Adopt a baseline for cost control during inception and update the baseline when schedule, scope, and quality change.
6. Estimate inflation at the inception of the project for the entire duration of the project.
7. Enforce project standards and requirements on all project contractors.
8. Utilize management reserves solely within the framework for which they are maintained.
Project Governance
Another case study I found was also applicable and brought in an interesting debate. It cited the concept of Project Procurement Planning and tying this process very closely with Project Governance.
Project Governance is a subset of corporate governance in that it relates to all aspects of project management: portfolio direction, project sponsorship, proper disclosure and reporting. (Hassim, Kajewski & Trigunarsyah, 2011)
In applying this concept to the Big Dig, it can be seen that the project was poorly planned from the beginning but also that it experience much scope creep and cost overruns, which relates to a poor governance and change control structure. In unison with the improvement’s cited by Greiman & Warburton, it is evident that improvements in project governance would be another vital improvement to mega-projects.
Summary
The Big Dig serves as a stark example of how project management costs can spiral out of control very quickly. It is evident from this case study that properly identifying costs through proper project procurement planning was not done from the beginning and the cost was a project over budget by $12.2B (428%). Project Managers need to make sure the plan is solid and scope is adhered to in order to prevent such significant cost and time overruns in the future.
REFERENCES
A guide to the project management body of knowledge: (PMBOK® guide). (2017). Newtown Square,
PA, USA: Project Management Institute.
Abu Hassim, Aliza, Kajewski, Stephen L., & Trigunarsyah, Bambang (2011) The importance of
project governance framework in project procurement planning. In: 12th East Asia‐Pacific
Conference on Structural Engineering and Construction, 26‐28 January 2011, Hong Kong Convention and Exhibition Centre, Hong Kong.
C. (2016, September 22). Retrieved July 11, 2018, from https://www.youtube.com/watch?v=eF5aUClwJ9w
Greiman, V. & Warburton, R. D. H. (2009). Deconstructing the Big Dig: best practices for
mega-project cost estimating. Paper presented at PMI® Global Congress 2009—North
America, Orlando, FL. Newtown Square, PA: Project Management Institute.
Lynch, J., C., E., M., Modiriyat, P., & Isabel, A. (2012, August 19). Procurement Planning and the
Procurement Plan: Why are they Important? – Procurement ClassRoom. Retrieved July 10,
2018, from https://procurementclassroom.com/procurement-planning-and-the-procurement-plan-why-are-they-important/
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Feature Photo by Jason Leung on Unsplash