Despite their socio-economic significance, megaprojects (projects in excess of $1 billion, ranging from massive infrastructure and large-scale IT, to new bombers for the Department of Defense and blockbuster pharmaceuticals) have earned a reputation for failing to deliver – on time, budget and even benefit. Sadly, city officials, executives, investors and other key stakeholders have come to expect such enormous overruns in cost and promises that they barely register as major issues.
But Bent Flyvbjerg, the project management industry’s guru and most widely cited scholar in the field, believes we can head off the problems – and even help solve them – before projects break ground. It starts with eliminating unrealistic proposals at the source: planners.
“Projects that should never have been started were given the green light because decision makers succumbed to double or even triple biases at the initial cost-benefit analysis stage,” explains Flyvbjerg, professor at the University of Oxford’s Saïd Business School, where he directs a program that teaches megaproject managers how to beat the odds and achieve megaproject success. “Not only do planners typically underestimate the time, difficulties and costs involved in completing projects, they also overestimate the likely benefits – including the ease with which people will come up with ways to overcome obstacles.”
Planners are often blinded to projects’ potential difficulties. It’s a phenomenon Flyvbjerg calls the “Malevolent Hiding Hand,” which he and his co-author, Harvard Law School Professor Cass R. Sunstein, detail in a forthcoming Social Research article. The evil twin to economist Albert Hirschman’s “Benevolent Hiding Hand” idea, it’s also much more common, according to the expert duo’s research.
Drawing from their cost-benefit ratio analysis of more than 2,000 large projects, Flyvbjerg and Sunstein disprove Hirschman’s belief that when things go wrong, people discover unexpected ways to right them, and succeed against all odds. In fact, 78 percent of the projects they studied suffered from situations in which creativity emerged too late or not at all, and couldn’t possibly “save the day.”
There is no benefit to hidden difficulties. Instead, Flyvbjerg argues that policymakers must recognize the reality of the Malevolent Hiding Hand and develop specific measures to overcome it. Among his suggestions: planners should be given “skin in the game” – rewarded for accurate projections and penalized for cost-benefit mistakes that incur severe consequences. And decisions should be de-biased. Flyvbjerg has developed tools for how to do this.
The risks associated with megaprojects are well documented. What Flyvbjerg terms “the planning fallacy, writ large” is pervasive. But he’s confident changes made in the early stages, namely the accountability and de-biasing of those responsible for encouraging decision makers to commit to unrealistic proposals, will mitigate many of those risks – saving time, money and preserving value, in the billions.