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EURAM 2005 Responsible Management in an Uncertain World, May 4-7th 2005, TUM Business School, Munich, GermanySuccessful Megaprojects: Ensuring Quality at EntryOle Morten Magnussen a, * and Knut Samset aaThe Norwegian University of Science and Technology,Department of Civil and Transport Engineering, N-7491 Trondheim, Norway, Tel +47 73 59 4640, Fax +47 73 59 70 21* Corresponding author. Tel +47 73 59 52 07, Fax +47 73 59 70 21, E-mail:ole.magnussen@ntnu.noTrack 15: Management of Projects: Reconciling Uncertainty and Responsibility
AbstractCost overruns and delays are common in projects of all sizes. The potential savings from improvingimplementation may be considerable. However, the choice of strategy and fundamental design is moreessential, and the potential rewards for improving quality at entry might be considerably higher. Thispaper focuses on experiences gained in Norway to improve major public investment projects. Thisincludes problems such as inadequate needs assessments, initial poor designs, tactical budgeting by localauthorities, inadequate cost estimation and risk assessment, etc. The paper discusses consequences of suchproblems, and possible means to avoid major flaws in the initial conceptual design of mega-projects. Anintriguing aspect is that such up-front investments in quality improvements tend to pay back to anexceptional degree in terms of cost reduction, increased utility and economic benefits. Based onexperiences from some 50 Norwegian megaprojects, an initiative for handling challenges in the initialphases is discussed.KeywordsQuality Assurance, Megaprojects, Project DesignIntroductionThe paper describes lessons learned and provides some advice on how to improve the effects of majorpublic projects. The increased use of projects as a way to organize and perform various tasks, not only inthe business or industry environment but in all sectors of society, is challenged by a current focus onproblems associated with the major projects. Despite the emphasis placed on improved methods toanalyze and manage projects, the track record of projects reveal fundamental problems, and many projectsare assessed as failures. Efforts to improve the initial and fundamental design and to avoid some of thecommon problems related to the implementation of projects represent a potential for considerable savingsand added value. In this paper attention is directed to the early phases of projects as it discussesexperiences from front-end assessment and quality assurance of 50 major public projects in Norway. It isargued that the traditional focus on the actual implementation of projects is too narrow when theambition is to improve the viability and economic benefits of a project.Cost efficiency considerations: right priceSeveral studies of major projects show that cost overruns are common. Morris and Hough (1991) foundthat cost overruns in a large sample of projects were typically between 40 and 200 per cent. A governmentwhite paper (Kaasen et al. 1999) on Norwegian offshore oil and gas activities 1994-1998 (35 projects)reported a total cost overrun of NOK 26 billion, or about 13 per cent on average. The report states thatcompliance with the initial budget is not an essential success criterion, since the initial estimate should notbe an obstacle for flexibility, new business opportunities or technology, etc. A study of largetransportation infrastructure projects by Flyvbjerg, Skamris Holm and Buhl (2002) found that 9 out of 10projects fall victim to cost escalation, actual costs being on average 28 per cent higher than estimatedcosts. Berg, Kilde and Rolstadås (2003) discuss some lessons from five large Norwegian publicinfrastructure projects. They reported overruns between 10 and 222 per cent, partly explained by changeprocesses being unclear and difficult to control at a late stage in the projects and insufficient riskmanagement. It was noted that some of the projects were considered profitable despite cost overrun.Odeck (2004) reports from a study of 620 public road projects in Norway completed during 1992-1995that in more than half of the projects the total cost exceeded the budget. The average cost escalation wasclose to eight per cent. It should be noted that the majority of projects were relatively small, and that themore restricted sample of large projects came out with costs within budgets. For the projects as a whole,however, cost overrun amounted to more than NOK 500 million (≈EUR 60 million).The media’s current interest in the issue of cost overrun is associated with the cost-efficiency issue: Costoverruns imply wastage of public resources that could otherwise have been used for productive purposes1
Page 1 and 2: 3PrefaceThe research presented in t
Page 3 and 4: 5Table of contentsPART 1 ..........
Page 5 and 6: 7Summary/abstractThe work reported
Page 8 and 9: 101 IntroductionProjects are increa
Page 10: collection and interpretation of th
Page 13 and 14: 15normative agendas, in other words
Page 15 and 16: 17world of projects. The choice of
Page 17 and 18: 19Figure 3 Sources and dataThe proj
Page 19 and 20: 21In line with Flyvbjerg (2006b), t
Page 21 and 22: 233 Concepts and constructs of thep
Page 23 and 24: 25by most BOKs and textbooks in pro
Page 25 and 26: 274 Main topics covered by the rese
Page 27 and 28: 294.2 Empirical indications from ex
Page 29 and 30: 31Budget proposed by the Norwegian
Page 31 and 32: 3330 %Difference (%) from the propo
Page 33 and 34: 3520 00018 000Cost development from
Page 35 and 36: 37In paper 9 (Magnussen 2009a) an a
Page 37 and 38: 395 Conclusions and directions for
Page 39 and 40: 41estimates must be implemented at
Page 41 and 42: 43Klakegg, Ole Jonny, Terry William
Page 43 and 44: 45List of government documents 11Fi
Page 45 and 46: 47Part 2 - Papers1. Magnussen, Ole
Page 47: Paper 1Magnussen, Ole Morten, and K
Page 51 and 52: Cost effectiveness considerations:
Page 53 and 54: demonstrates another fundamental is
Page 55 and 56: Figure 1 The Extended Quality Assur
Page 57 and 58: Expected effects of the revised qua
Page 59 and 60: ReferencesBerg, Peder, Kilde, Halva
Page 61 and 62: International Journal of Project Ma
Page 63 and 64: O.M. Magnussen, N.O.E. Olsson / Int
Page 69 and 70: Paper 3Magnussen, Ole M., and Nils
Page 71 and 72: MANAGING THE FRONT-END OF PROJECTS:
Page 73 and 74: Olsson, Samset, Austeng and Lädre
Page 75 and 76: 1995; Packendorff, 1995), mainly cr
Page 77 and 78: to a better way of managing the fro
Page 79 and 80: Figure 1 Basic structure of the ind
Page 81 and 82: from empirical investigations has b
Page 83 and 84: among organizations, not individual
Page 85 and 86: actors, the relationships are repro
Page 87 and 88: the network approach has been used
Page 89 and 90: established based on the views of i
Page 91 and 92: IHFJKGAELDMBCA - The focal projectB
Page 93 and 94: the NDEA. The communication strateg
Page 95 and 96: Directorate for Cultural Heritage (
Page 97 and 98: the project. The basic activity was
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assumed to be more important than o
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Another interesting observation was
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REFERENCESEngwall, Mats. 2003. No p
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Söderlund, Jonas. 2002. On the dev
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Flexibility at Different Stages in
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Reproduced with permission of the c
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Paper 5Olsson, Nils O. E., and Ole
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PAPERSGovernance Frameworks for Pub
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supporting setting of and achieving
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The study proceeded as follows:•
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y the Chief of Defence Materiel, he
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(within MoD but independent of thep
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Norway U.K. (MoD) U.K. (OGC)Charact
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from the external consultants was s
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governance. International StudiesRe
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Paper 7Williams, Terry, Ole Jonny K
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The development of the frameworksUK
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notable characteristic of the Norwe
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Office to the National Audit Office
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highly complex and changing decisio
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ARTICLE IN PRESSAvailable online at
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ARTICLE IN PRESST. Williams et al.
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Paper submitted to the Internationa
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One constraint is that actual costs
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In other words, the QA scheme is a
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author, there apparently are no stu
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20,0 %15,0 %10,0 %5,0 %0,0 %P50 est
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The pre-eminent result is that the
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Results from the analysis of the de
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more fundamental assessments of pro
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Paper 10Magnussen, Ole M. 2009. Exp
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Explaining cost estimate difference
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changes and external factors. Facto
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30 %Difference (%) from the propose
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Table 2 Areas associated with expla
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agency. In this case, the observed
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ReferencesFlyvbjerg, B., Holm, M.K.
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