The rise of the “gigaproject”
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The document discusses challenges with large, complex projects known as "gigaprojects" and ways to address them. It notes that gigaprojects are increasing in spending and size. They face issues like cost overruns, risks, and stagnant productivity. To help, the document advocates connecting technology, processes, and people. This involves using technology to share integrated project information, improving processes, and addressing cognitive biases in decision-making. It provides an example of a $5 billion facility that streamlined management of 6 projects using integrated cost tracking, reporting, and schedule software.
The rise of the “gigaproject”
- 1. CONFIDENTIAL | 1 Featured Project: Marina Bay Sands Casino Resort, Singapore Connecting teams project-wide The rise of the “gigaproject” from mega to giga and why it matters Guy Barlow Global Commercial Director Aconex 16 November 2017
- 2. CONFIDENTIAL | 2 Talking Points The Goal Rise of Complexity Obvious & Hidden Challenges Moving Forward
- 3. CONFIDENTIAL | 3 Unlocking Growth Are we there yet? Innovation • What kind of projects have the most risk? • What drives change? How good are we at managing it? • What delivery methods work best? Do they differ regionally? By industry? • Do we have meaningful and actionable business insights? Or just lots of data? • Who are the best clients to work for? Where do we place our bets? Execution • Can project leaders focus on project delivery rather than data gathering? • Can information flow freely between team members, both internal and external? • Can we have financial line- of-sight visibility across our projects and portfolio? • Can we integrate mission critical systems to reduce duplication and risk of error? Scale • Do you feel like you start over for every new project? • Can you leverage best practices based on performance? • Is training/supporting new internal and external teams draining your resources? • Can your systems adapt to new business challenges?
- 4. CONFIDENTIAL | 4 Emergence of gigaprojects Spend is substantial & project size is increasing McKinsey
- 5. CONFIDENTIAL | 5 Emergence of gigaprojects The list keeps growing… 1. International Space Station – $150B 2. Al Maktoum International Airport (Dubai) – $82B 3. South-to-North Water Transfer Project (China) – $78B 4. California High-Speed Rail – $70B 5. Dubailand – $64B 6. London Crossrail Project – $23B 7. Beijing Daxing International Airport – $13B 8. Jubail II (Saudi Arabia) – $11B 9. Hong Kong-Zhuhai-Macao Bridge – $10.6B “…ultralarge projects represent an exponentially tougher challenge than a typical megaproject…” McKinsey
- 6. CONFIDENTIAL | 6 Infrastructure projects are complex and create a lot information Deep relationships are formed between organisations across projects Complex systems are inherently challenging – unstable? Ever-increasing complexity Exponential growth in data & information
- 7. CONFIDENTIAL | 7 The Results Current approaches are flawed, wasteful & not sustainable “A 1% reduction in costs would save the construction industry approximately $100 billion annually” •Average project cost overrun is 70% •Prices of construction projects have risen faster than the consumer price index +70% Increasing Overruns & Costs •Share price drop of 12% after a significant negative project event •Infrastructure projects are more exposed to political & economic risks -12% Growing Risks •Only 1% in productivity gains over 20 years •Reasonable productivity growth could add $1.6T to the industry +1% Stagnant Productivity
- 8. CONFIDENTIAL | 8 Connecting 3 Critical Elements Driving Innovation, Opportunity & Growth Technology ”Research found that the construction sector lagged behind most other parts of the US economy in the intensity of digital assets, usage, and labor." Process "The differing skill sets and working styles of architects and engineers affect the way they work with contractors and can prevent the right degree of cooperation and overlap needed for optimizing the design-build process." People "The skill level of supervisors and project managers is critical for good on-site productivity, but it can vary greatly among employees across the same firm."
- 9. CONFIDENTIAL | 9 RFIs Change Orders & Variations Payment Applications Transmittals & Doc Distribution Checklists & Punch Lists Bid & Tender Management Inefficient & Broken Processes Technology & Process Disconnected, substandard project controls leave you uncertain and exposed Information Silos Poor/Failing Performance CAN’T make informed decisions or take action ➕ =Estimates Budgets Actuals Commit- ments Schedule Contracts Technology Process
- 10. CONFIDENTIAL | 10 RFIs Change Orders & Variations Payment Applications Transmittals & Doc Distribution Checklists & Punch Lists Bid & Tender Management Inefficient & Broken Processes Technology & Process…and people Disconnected, substandard project controls leave you uncertain and exposed Information Silos Poor/Failing Performance CAN’T make informed decisions or take action ➕ =Estimates Budgets Actuals Commit- ments Schedule Contracts Technology Process People
- 11. CONFIDENTIAL | 11 A different view of “People” What was found… • findings challenge the assumption of human rationality • established a cognitive basis for common human errors Why this matters… US$1T wasted in infrastructure projects Bias in Decision-making
- 12. CONFIDENTIAL | 12 1. Confirmation Bias – looking for information that supports your beliefs 2. Anchoring – base your final decision from information gained earlier 3. Overconfidence Bias – too much faith in your own knowledge 4. Gambler's Fallacy – the expectation that past events influence the future 5. Fundamental Attribution Error – the tendency to blame others when things go wrong It’s in our DNA You’re only human
- 13. CONFIDENTIAL | 13 Connecting Technology, Process and People Too much “gut” decision-making Poor/Failing Performance CAN’T make informed decisions or take action ➕ = Information Silos Estimate Budgets Actuals Commit -ments Schedule Contract Technology RFIs Change Orders & Variations Payment Applications Transmittals & Doc Distribution Checklists & Punch Lists Bid & Tender Management Inefficient & Broken Processes Process Confirmation Bias Anchoring Overconfidence Bias Gambler's Fallacy Fundamental Attribution Error Too little time to correct for biasesScrambling to get the info needed People ➕
- 15. CONFIDENTIAL | 15 Recognizing Biases Admitting you have a problem Confirmation Bias Challenge what you think Anchoring Don't rush to judgement Overconfidence Bias Find objective data Gambler's Fallacy Adopt a different perspective Fundamental Attribution Error Avoid judgement
- 16. CONFIDENTIAL | 16 Technology, Process & People The complete picture to optimize decision-making ➕ = Information Silos Estimate Budgets Actuals Commit -ments Schedule Contract Technology RFIs Change Orders & Variations Payment Applications Transmittals & Doc Distribution Checklists & Punch Lists Bid & Tender Management Inefficient & Broken Processes Process Confirmation Bias Challenge what you think Anchoring Don't rush to judgement Overconfidence Bias Find objective data Gambler's Fallacy Adopt a different perspective Fundamental Attribution Error Avoid judgement People ➕ More time to correct for biasesEasy to get the info needed
- 17. CONFIDENTIAL | 17 USD$5B Facility Objectives • Easy way to deliver real time & accurate forecast to management • Track budget and cost at any level of detail - granular level (WBS) & actuals • Reporting - create customised reports • Track progress & performance for each section (project) & overall single view • P6 integration (5-8K schedule activities) Value • Financial Discipline – heightened visibility to how they are performing against budgets • Risk Mitigation – easily track, validate, and audit incoming information • Operational Excellence – efficiently documenting change & invoices along with work completed Solution • Implemented in 4 weeks • Multiple projects set-up for each section of the factory (6 “projects”) • Reduced 10,000 cost code Items to 1,000 • Up to 50 subcontractors and suppliers - submit payment and changes • P6 schedule integration Challenges • Multiple Cost Tools - Spreadsheets, P6, In-house Contract Admin, ERP • Unclear what money they had to spend or how it was being spent • Project reporting was manual and unacceptable • Senior management only receiving reports from Finance - lack of detail
- 18. CONFIDENTIAL | 18 1. Single source of the truth – reality sets in when it’s time to report out 2. Connect schedule and cost – without it, the true effect of change is impossible 3. Flexible and scalable systems – your projects and business will change over time 4. Effective change management – manage change, from initiation to resolution 5. Informed decision making – get the facts, real-time & take the time 5 Ways to Minimize Complexity
- 19. CONFIDENTIAL | 19 Featured Project: Marina Bay Sands Casino Resort, Singapore Connecting teams project-wide Thank you. Join us for a cocktail reception at the Royal Oak Suite, box 30
Editor's Notes
- #5: “Bridging infrastructure gaps: Has the world made progress?”, McKinsey, 2017
- #6: 1. International Space Station – $150 billion (as of 2010) The most expensive single item ever built. Expansions beyond 2020 are estimated to eventually cost $1 trillion. 2. Al Maktoum International Airport – $82 billion This airport in Dubai will be fully operational by 2018. It will be the world’s largest in terms of size and passenger volume – so big that four jets will be able to land simultaneously. 3. South-to-North Water Transfer Project – $78 billion (as of 2014) Thought the Three Gorges Dam was massive? This other Chinese megaproject is already nearly three times as expensive – it aims to divert water from the Yangtze River using three huge canals to bring it to the north of the country. 4. California High-Speed Rail – $70 billion Spanning 1,300 km (808 mi), this will link San Francisco to Los Angeles. 5. Dubailand – $64 billion This mega theme park project will open in 2025 in Dubai. It will also have the world’s largest hotel (6,500 rooms), sports venues, eco-tourism, science attractions, and a giant mall. 6. London Crossrail Project – $23 billion London is expanding its underground system, with 42 km (26 mi) of new tunnels to connect 40 stations. Everything will be complete by 2020. 7. Beijing Daxing International Airport – $13 billion Opening in 2025, this airport megaproject will have seven runways and the largest terminal in the world. It will help ease the load on nearby Beijing Capital International Airport. 8. Jubail II – $11 billion The second phase of development of the Jubail Industrial City in Saudi Arabia will add 100 industrial plants, an oil refinery, and one of the bigger desalination plants in the world. 9. Hong Kong-Zhuhai-Macao Bridge – $10.6 billion A series of bridges and undersea tunnels to link the three major cities on the Pearl River Delta in China. Ultimately, it will be 50 km (31 mi) of links, opening sometime beyond 2021.
- #7: Evolution of the ANZ and Asia region’s airport project network – 173 projects, 3,529 participating organisations and 5.2M mails
- #8: Can you relate to these points? (Answer is always “Yes”) Can you tell me about some examples that come to mind? What do you think were/are the drivers behind them? What was the underlying cause? Source: “1% Reduction” Increasing Overruns & Costs Stagnant Productivity Source: “REINVENTING CONSTRUCTION: A ROUTE TO HIGHER PRODUCTIVITY”, McKinsey Global Institute, 2017 Growing Risks Source: “Capital projects: Is your board doing enough? A user-friendly board guide for effective capital projects oversight”, PwC, 2013 “Capital project and infrastructure spending outlook: Agile strategies for changing markets”, PwC, 2016
- #9: Quotes all from: McKinsey Global Institute, BRIDGING GLOBAL INFRASTRUCTURE GAPS, JUNE 2016 Goal here is to point out that all of these companies faced these issues and made the decision to invest in CC to drive growth, reduce risk, etc.
- #10: We’ve heard from project controls teams/project leaders like you that they need help. They need collaboration, automation, and efficiency gains for cost management. Why is it a challenge? Historically cost management has been a disconnected process. And many companies fail to achieve high performance levels because of fragmentation. Here are a few relevant examples… Cost data continues to be siloed across every project, across spreadsheets and across each company’s own technology systems - there is no single source of truth when it comes to measuring program health that all parties can trust Cost engineers, project controls specialists, and project managers– are constantly still chasing data, trying to manually piece together a single view of how their programs are performing. The combination of delayed insights and the fact that project change is constant makes it impossible to measure performance against the baseline or approved budget for all parties across the project.
- #11: We’ve heard from project controls teams/project leaders like you that they need help. They need collaboration, automation, and efficiency gains for cost management. Why is it a challenge? Historically cost management has been a disconnected process. And many companies fail to achieve high performance levels because of fragmentation. Here are a few relevant examples… Cost data continues to be siloed across every project, across spreadsheets and across each company’s own technology systems - there is no single source of truth when it comes to measuring program health that all parties can trust Cost engineers, project controls specialists, and project managers– are constantly still chasing data, trying to manually piece together a single view of how their programs are performing. The combination of delayed insights and the fact that project change is constant makes it impossible to measure performance against the baseline or approved budget for all parties across the project.
- #13: Confirmation bias happens when you look for information that supports your existing beliefs, and reject data that go against what you believe. This can lead you to make biased decisions, because you don't factor in all of the relevant information. Anchoring – first impression
- #14: We’ve heard from project controls teams/project leaders like you that they need help. They need collaboration, automation, and efficiency gains for cost management. Why is it a challenge? Historically cost management has been a disconnected process. And many companies fail to achieve high performance levels because of fragmentation. Here are a few relevant examples… Cost data continues to be siloed across every project, across spreadsheets and across each company’s own technology systems - there is no single source of truth when it comes to measuring program health that all parties can trust Cost engineers, project controls specialists, and project managers– are constantly still chasing data, trying to manually piece together a single view of how their programs are performing. The combination of delayed insights and the fact that project change is constant makes it impossible to measure performance against the baseline or approved budget for all parties across the project.
- #15: Hoards of data; historically paper
- #17: We’ve heard from project controls teams/project leaders like you that they need help. They need collaboration, automation, and efficiency gains for cost management. Why is it a challenge? Historically cost management has been a disconnected process. And many companies fail to achieve high performance levels because of fragmentation. Here are a few relevant examples… Cost data continues to be siloed across every project, across spreadsheets and across each company’s own technology systems - there is no single source of truth when it comes to measuring program health that all parties can trust Cost engineers, project controls specialists, and project managers– are constantly still chasing data, trying to manually piece together a single view of how their programs are performing. The combination of delayed insights and the fact that project change is constant makes it impossible to measure performance against the baseline or approved budget for all parties across the project.