Introducing Megaprojects: 10 Facts You Should Know

Strategic infrastructure in energy, transport, utilities, and ICT is the backbone of modern society. For years, managing megaprojects successfully has been our key promise to our public and private clients. Successfully delivering megaprojects requires a dedicated project management approach, which is different from "standard" projects. Are you familiar with the ten most important facts? This is your checklist.

• Megaprojects: A definition
  
  Megaprojects are complex, large-scale projects that typically cost USD 1 billion or more from incubation to go-live. They span many different sectors: from construction, energy, and transportation to defense, infrastructure, and ICT. They can be found around the globe both in the largest economies and emerging markets, and are financed either by private or public sector players or as public-private partnerships. The Olympics are a prime example.
  
  
• Different from other projects
  
  It is not only high costs that make projects "mega". Typically, they involve a large number of stakeholders, take many years to develop and implement, and are significantly more complex than other projects in technology and design. Because of these factors, megaprojects need a dedicated approach to project management to be delivered successfully.
  
  
• Bigger and bigger
  
  Based on recent studies and our industry insights, Roland Berger estimates that the global market for megaprojects is about USD 8 trillion per year – that is close to 8% of global GDP spent on megaprojects every year!
  
  Moreover, if projected from past development into the future, these numbers will probably increase further. The largest dams are getting larger, the Olympics are getting bigger, and the tallest buildings are getting taller. The current record-holding Burj Khalifa, opened only in 2010 with a height of 828m is already being surpassed by Jeddah Tower, which will probably be more than 1,000m high.
  
  
• Delays and cost overruns
  
  Apart from their size and complexity, megaprojects have another – unfortunate – feature - 90% of megaprojects are significantly delayed, over budget, or fall short of their promised benefits. This is true for megaprojects from all sectors and across the globe – rich countries do not seem to perform better than poorer countries, and megaprojects in one sector are not managed better than in other sectors. Also, over the past few decades, megaproject performance in terms of on-time, on-budget, and on-quality delivery has not become significantly better.

• Too much optimism
  
  The main reason for megaproject cost and time overruns is too much optimism when it comes to the complexity of such large projects. Megaprojects are typically "once-in-a-lifetime projects", meaning that probably all project participants, including the top management, have never steered a project of this complexity before. Therefore, we witness a lack of experience on all sides, resulting in managers handling megaprojects as if they were "standard" projects. Thereby, project members often underestimate the true complexity, risks, and challenges of megaprojects.
  
  
• Flawed decisions
  
  The largest share of cost overruns can typically be traced back to flawed decisions made in early project stages – during setup and planning. Cost overruns stem from unfit project governance setups, with mismanaged interfaces between a multitude of stakeholders, contractors, and subcontractors and incomplete budget and schedule controlling mechanisms. In many cases, contractors have partially incomplete contracts and their incentives are not properly aligned with the objectives of the project. Therefore, many projects start with an unfinished planning scope, leaving space for costly claim management.
  
  
• First time right?
  
  If the set-up is poor, technological and design risks turn out to be worse than anticipated and need to be hedged – which often implies an addendum to service providers' contracts. Changes in the project scope – due to user requests or regulatory requirements – add to rising costs. Interfaces between stakeholders that were previously not thought of become important, with questions of accountability and responsibility often leading to legal discussions and an extensive claim management that interferes with the projects' progress. Additionally, different reporting structures and standards within the multitude of stakeholders can hardly be aligned. Often, the management receives an unclear picture of the project status, being unable to react swiftly.

• Poor performance, severe consequences
  
  The problem of cost and time overruns of megaprojects is bad in itself. But there are further severe consequences – for people, companies, and institutions. Companies' profits drop and they have to take on additional debt, financiers crumble or crack under the weight of costs, projects go bankrupt, CEOs and politicians resign over projects running into heavy difficulties under their watch, taxpayers' contributions are wasted, and parties loose elections. These consequences are important calls for better megaproject management.
  
  
• Never too late to improve
  
  It is never too late to implement methods of megaproject management. Even after projects have gone off schedule and budget, mitigation measures can be taken to get the projects back on track and lead them to success – with strong and concentrated effort and focus on key issues at hand.
  
  

• Profit from our experience
  
  Roland Berger has long standing experience in megaproject management across all sectors and around the globe, in all relevant project stages. We have successfully backed projects during their incubation, planning and approval procedure. We have also assisted in getting distressed projects back on track. Building on our strong track record, we have developed service offerings designed to meet the specific requirements of megaproject management.