Construction sector must adapt to the age of the 'gigaproject'
Guy Barlow, global commercial director, Connected Cost, at Aconex talks about the growing prominence of the ‘gigaproject’ in today's construction industry
Megaprojects in the construction industry are nothing to scoff at. These projects are often huge in scale—costing around $1bn—and face a range of environmental, social and political challenges. Recently, an explosion of multi-billion dollar projects are unveiling a new construction paradigm dubbed the ‘gigaproject’.
Two exceptional gigaproject examples include the London Crossrail ($23bn)—connecting 41 stations—and the International Space Station—the most complex international engineering project in history, and the largest structure humans have ever put into space ($150bn). These projects go way beyond the traditional megaproject due to their cost, size, and scale. Project leaders must ensure they’re adopting technology-driven processes to meet the ever-increasing demands of this burgeoning multi-billion-dollar industry.
A recent McKinsey report into the construction industry found that existing approaches to managing massive projects are flawed, wasteful, and unsustainable. An average project cost overrun is 70%, with a meagre productivity gain of just 1% over the past 20 years (note: a spike in productivity could easily add $1.6tn to the industry). Many of these large investments are public-funded infrastructure projects exposed to political and economic risks, while private sector firms face plummeting share prices—up to 12%— if there are issues with a project.
The report goes on to state that approximately $10tn is spent on engineering and construction (E&C) projects every year. China, for example, is building entire new cities—driving the creation of new projects and the rise in value per project. The country has plans to build 136 new airports by 2025 according to government sources.
China isn’t the only country with big plans as new smart cities, LNG operations, national infrastructure programs, and even construction for the Olympics add to an ambitious array of significant E&C projects globally. Such expansive, challenging project ecosystems include heightened exposure to inaccuracy and mistakes.
But as an industry, we have a responsibility to improve our understanding of the drivers behind gigaprojects to identify the challenges they present and how companies address those challenges to avoid making some of the same mistakes from the past but on a significantly bigger scale. To do this, the project controls ecosystem must combine three well-known elements -- technology, processes, and people.
People – making the right decisions
There’s an urgent need for people to make well-informed decisions on these expensive projects. An ageing workforce must be reskilled to successfully adapt to new technology and processes. McKinsey sites that $1 trillion is wasted every year in US infrastructure projects alone. In addition, key decision-makers are forced to make snap judgements because of the ever-growing complexity and high-pressure demands inherent in large scale projects. We’re sadly confusing quick decisions with sound decisions. Cognitive biases are limiting our ability to make informed choices.
Training and change management can help get the “people” part right, but bias (aka, “gut-decision thinking”) is still in our DNA. Individual decisions are often influenced by the “Gambler’s Fallacy” (the expectation that past events influence the future), the “Confirmation Bias” (looking for information that supports one’s beliefs but ignores other information) and the “Anchoring Bias” (basing one’s final decision based off prior information).
Ignoring these biases that impact decision making can result in potentially catastrophic implications—particularly as projects grow in scale. Adopting technology-driven processes can help E&C avoid the pitfalls of defaulting to decision-making biases to manage gigagprojects.
Technology and Processes – embracing change
The majority of E&C companies are relying on basic technology, such as spreadsheets, but the opportunity for new project controls technology is enormous. Manual processes and information silos result in potentially disastrous inaccuracies, errors, and oversights. The demand for E&C project control solutions is fortunately increasing-- particularly over the last few years.
Adopting and aligning to technology-drive processes eliminates time-consuming tasks such as manual data entry, collecting information from disparate systems, and paper-bases sources. We’re able to minimize the impact of biases by leveraging time-saving, efficient technology. We quickly grasp the essence of the problem to make the correct decision instead of relying on hasty, ill-informed judgement calls.
With gigaprojects on the rise, project control leaders must accept that adaptations and revisions within a project will always occur. Reflecting on their decision-making process and adopting technology-driven processes will help ensure their projects are delivered on time and on budget despite continual changes on the jobsite.