All over the world, megaprojects like large dams and major airports are a double-edged sword: They are necessary for development but notoriously very difficult to deliver.
“Mega infrastructure projects change landscapes and generate prosperity,” Dr. Atif Ansar, the Programme Director of the MSc in Major Programme Management at the Saïd Business School in Oxford University, said at the third annual meeting of the Indonesia Economic Forum (IEF) at the Shangri-La Hotel Jakarta on November 15, 2016.
He cited the experience of Dubai, a barren plot of dessert that has been changed into a bustling metropolis by massive infrastructure development.
Infrastructure, he said, enables economic prosperity. But “if done wrong, it can create a huge mess.”
For instance, Pakistan is building big dams to solve both flooding and electricity problems. But dams have a poor track record of coming in on budget, with one in three projects tripling their costs.
“Pakistan is building a $10 billion dam that can potentially triple in cost,” Dr. Ansar said.
In different parts of the world, there are more than enough examples of projects generating massive cost overruns that make investments impossible to recoup.
He cited the Berlin airport, which had a 200 percent cost overrun. The US government’s Healthcare.gov project, he said, had a 400 percent cost overrun. And the famed Sydney Opera House had a massive 1,400 percent cost overrun.
So how do we get them right?
Through incremental changes and radical innovation, he said.
This means getting each of the many aspects right: Setting up your organizational design and governance right up front, hiring good people and investing in their capabilities, getting your processes right, getting your technology systems right, getting your upfront project design and estimates right, securing adequate resources and finances upfront, getting your internal and external communications right, and last but not least, establishing partnerships that can deliver.
“It’s not external risk causing problems,” Dr. Ansar explained. “Your plan just didn’t take reality into account. Innate optimism could be in the way.”
There are also radical innovation solutions available. “Standardize it completely, use exactly identical modules repeated over and over again, like data server farms,” he said.
He added that it is now “a good time to build infrastructure” because almost all the requirement needed are cheap.
“Money is cheap, energy is cheap, commodities are cheap, labor is available, and there is slack in the global supply chains and global labor markets,” he said.