A number of researchers, particularly Bent Flyvbjerg, Chair of Major Programme Management at Oxford University’s Saïd Business School have been highlighting the consistent failure of mega-projects to deliver on budget. It appears this is not a new thing.
Working on a side-project to the publication of my Easy EVM ‘course-in-a-book’, I was looking at the origins of engineering cost management and found that under estimating engineering projects seems to have been common in the 18th century. Financial controls in both business and projects extend back into antiquity, but developing the governance and technical processes to accurately estimate new engineering works was primarily a development of the 19th and 20th centuries, but has this led to improved outcomes?
The world’s first major transport boom was the construction of several thousand kilometers of canals in the United Kingdom (mainly in the English Midlands between 1757 (the opening of the Sankey Canal near Liverpool, followed by the Bridgewater Canal near Manchester in 1761) through to the 1830s. From 1840 onward, the canals began to decline, due to competition from the growing railway network. The canal projects were largely financed by public subscription to the purchase of financial bonds. But, the accuracy of the construction cost estimates used by the canal companies to raise their capital were to say the least mixed (although many of these canals were highly profitable until supplanted by railways). A comparison of the estimate to the actual costs on a select number of canals in the table below shows an average increase in price of 2.79.
J. A. Sutcliffe, in his Treatise on Canals and Reservoirs, published by Law and Whittaker, London, 1816 has this to say at page 168 “Had the engineer told the subscribers at first what would be the fatal consequences of this canal……..; and had he given them a true statement of the expense, and a rational estimate of the probable quantity of tonnage [to be shipped on the canal], most likely the spade would never have been put into the ground; but whether giving this kind of plain, useful information, is any part of the engineer’s creed, I leave the subscribers to judge by his estimates.”
The profession of engineering, and the sub-disciplines of estimating and cost-engineering have come a long way since the early 1800s, so why do so many major projects still end up underestimated? The canals discussed by Sutcliffe were funded by ordinary people buying bonds (and many losing their money); modern project such as the London Cross Rail are funded by ordinary people paying taxes. What’s clear, is governance and controls issues for major engineering project have not changed much in 200 years, some projects are successful, others are not, and differentiating between the two before they start seems to be a fundamental challenge.
The failure to accurately estimate costs, risks, and revenues has been a recurring theme of Prof. Bent Flyvbjerg’s research; many of his papers are easily accessed via a Google search. Then, once you have a reasonable cost estimate, world class controls such as properly implemented Earned Value Management (EVM) exist and are important for delivering the project on-budget; but the use of EVM is also far from common. The objective of writing Easy EVM is to help change this by showing what’s needed to implement a pragmatic EVM system based on ISO 21508, explained in normal project/business language.
A free preview of Easy EVM is available at: https://mosaicprojects.com.au/shop-easy-evm.php
For more papers on the history of canal building in the UK see: The First Canal Projects
For more papers on the history of governance see: https://mosaicprojects.com.au/PMKI-ZSY-015.php#Process1
Pat Weaver
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