Contract Strategies for Major Projects

CHAPTER 11The Effects of Scale

Large projects worry everyone involved because there is always a great deal at stake. They are very visible and can be career‐breakers and even company‐breakers. It is accepted wisdom in the projects literature and community that project outcomes tend to degrade as projects become larger and more complex.¹ There is much less agreement with regard to why larger and more complex projects tend to fail. Flyvbjerg et al. suggest that the optimism bias² and “strategic misrepresentation” are the primary causes.³ Without denying the reality of the optimism bias and the capacity of humans to lie, my colleagues and I have demonstrated empirically that the same problems that lead smaller projects to go poorly cause large complex projects to fail miserably. Those problems start with objectives that are unreasonable, with owner teams that are missing key functions, and with front‐end loading that is incomplete. Problems that would be damaging but manageable in smaller, simpler projects cause havoc in megaprojects because megaprojects are necessarily tightly woven projects and are therefore more susceptible to cascade failures.

Project performance degrades incrementally with size until projects approach about $300 million. Then degradation of project outcomes begins to accelerate. By the time project size approaches $1 billion, the average project performance is significantly worse for cost effectiveness, cost overruns, slip in the execution schedule, and operability. ...