Book Summary - How Big Things Get Done

🚧 Your Guide to Australian Civil Construction 🚧

If you're just stopping by, subscribe below. It's completely free!

Today’s article is 3350 words… 25 mins reading time.

The author Bent Flyvbjerg is well known for his long history of research on megaproject planning and management.

With so many major projects happening in Australia at once, it makes sense to have a closer look at the data behind why megaprojects so often fail. How do we change the odds to successfully deliver projects on time and within budget.

If you don’t have the time, here are the 11 key takeaways;

1. Hire a master builder - Someone with a proven track record and deep domain expertise.

2. Get your team right - A good objective + mediocre team = mediocre result. A mediocre objective + a good team = They will find and develop a better way to achieve the objective.

3. Ask Why? - Good leaders never lose sight of the why and actions are aligned.

4. Build with lego - Big is best built from small (modular). The delivery process can be iterated, improved and efficiencies made.

5. Think slow, act fast - Limit your exposure to risk during delivery. Planning is cheap and safe, delivery is expensive and dangerous.

6. Take the outside view - Your project is not unique, gather data and develop accurate forecasts. Underestimating is the first step to project failure.

7. Watch your downside - Risk can destroy you and your project. Mitigate by spotting and eliminating dangers.

8. Say no and walk away - Saying no is essential to success. Not enough resources, untested technology, doesn’t contribute to your 'why'? Say no and walk away.

9. Make friends and keep them friendly - Build your bridges before you need them, it is essential risk management.

10. Build climate mitigation into your project - We have the ability and it is imperative for our projects and our future.

11. Know that your biggest risk is you - The greatest threat is in our own behavioural biases.

If you have the time to read the full summary, soldier on.

Introduction

The surprising factors that determine the fait of every project.

In 2008 people in San Fran were told to imagine themselves in downtown LA within 2 and a half hours about the same time it would take the average person to check in and fly.

California High Speed Rail

It would connect two of the worlds great cities. An estimated cost of $33b and ready to roll by 2020, Californians approved and work began.

14 years later and much about the project remains uncertain.

It started and was hit with numerous delays. Estimates soured, 43 billion, then to 63, to 83 and it now sits at over $100 billion USD. What was originally promised will not be delivered.

The bullet train to nowhere.

A bucket of infrastructure money and a vision is not enough. Research shows that this is not uncommon, that in fact, this is the standard.

What are the universal drivers that make the difference to make the project a success?

Psychology - All projects have people involved that think, make judgements and ultimately the decisions. Therefore psychology is always at play.

Power - Any big project, people and organisations compete for resources and jockey for positions. For example, that of a politician pushing through a pet project (Malcom Turnbull - Snowy Hydro).

This applies to projects across all industries.

Hallmark of failed projects is - Think fast act slow.

California High Speed Rail was approved and quickly started with a rush of excitement, challenges arose and the progressed slowed and slowed.

Successful projects tend to do the opposite - Think slow act fast.

Hoover Dam was extensively thought out and time taken during the planning process. It was completed a little under budget and in as little as 5 years which was 2 ahead of schedule.

Chapter 1: Think Slow Act Fast

Megaproject management is not a field of honest numbers.

There a hundreds of numbers on costs and budgets developed at different stages by different parties. Those who have much to lose will spin the numbers in their favour i.e. a government trying to downplay a bad decision.

The authors study took in over 250 megaprojects and analysed the data. This database has grown since and is the largest of its kind. The largest failures were in rail projects at 41% over, bridges and tunnels were 34%. These numbers were conservative in nature, highlighting that the losses were somewhere above these estimates.

The study expanded to all mega events - olympic games, rockets, defence, nuclear power, mining. The pattern remained the same. Even across different regions. Even the famously efficient Germans with Berlins Brandenburg airport was years delayed and billions over budget, the precision of the Swiss government with the Gotthard Base Tunnel came in 100% over budget.

So why would their outcomes be statistically so similar?

The pattern was so clear that the “Iron Law of Megaprojects” was developed.

The database now contains more than 16,000 projects across 20 different industries and the story remains the same.

Most contractors build in a 10-15% buffer to protect themselves against risk. However, you come across this study and understand that typically they come in 62% over budget.

Fat tail distributions - That the Black Swan outliers of low probability/high consequence are actually more common than we think. Increasing the risk of significant blow outs.

The more progress delays, the longer the duration, the more likely unforeseen risks develop. An election upset, a stock market collapse, Covid-19 pandemic etc. Struggling projects are likely to worsen before they improve (fat tail distributions).

Shortening project durations is the most effective way to reduce risk. 

Speed up by slowing down.

Planning is a safe harbour, Delivery is venturing across the rough seas.

It is good for planning to be slow. Spotting risks and testing solutions takes time and thinking. Creative and critical thinking is slow.

If you had 5 minutes to chop down a tree, you should spend 3 minutes sharpening the axe.

Think slow, act fast.

However, the track record of megaprojects show that they tend to do the opposite.

Projects don't go wrong, they start wrong.

Chapter 2: The Commitment Fallacy

Most projects rush to commit.

Whether from political pressure, overpromising, or to gain a strategic advantage.

Good politics often makes for bad infrastructure investment.

The Commitment Fallacy - the tendency to make a quick, intuitive decision (approve a project) before taking the deep look into all the risks and alternatives.

Explanations of why this fallacy exists;

• Strategic misrepresentation - The tendency to deliberately alter or distort information for a strategic gain. If you want to win a project or get something approved, glossing over major challenges keeps the estimations and time down, which wins contracts and gets projects started.

• Psychology - The common denominator of any project is that the people are making decisions. We are a deeply optimistic overconfident species - small business owners believe their business will be successful when ultimately most fail, smokers believe they are less likely to get lung cancer than other smokers etc. You want the flight attendant not the pilot to be the optimist, what you need from your pilot is to have a hard-nosed analytical stance that understands the risks.

• Hofstadter's law - The planning fallacy where we tend to underestimate costs and overestimate benefits. You expect to travel downtown in 20 mins but it ends up taking 40mins like last time. You think it will take 15mins to get your toddler to sleep but it takes half an hour etc. We imagine the best case scenario, when applying this for an estimate is a really bad idea.

• The bias for action - Project Managers feel more comfortable executing tasks then planning them. The idea that it is better to try first and see. This is applicable for simple tasks or ones that are reversible. When we apply this to large projects, the costs are catastrophic.

• Lock in or escalation of commitment - “Once a hole is dug, there is no alternative but to keep paying for the project”. It is why strategic misrepresentation works.

• Sunk cost fallacy - Once money is already spent on a project, we are more likely to keep going even if it is no longer the best decision. Even politicians that know better, understand that the public is likely to be swayed by sunk costs, so sticking with a fallacy is politically safer than a logical decision.

Subject plans to serious questioning, too often we don’t and tend to just ‘drive into the blizzard’.

Chapter 3: Think From Right to Left

Always assume there is more to learn. The first site you see for a development isn't the best, assume there is more to see and ask questions.

Start with the most basic question - Why this project?

Establish clear goals and consider all alternatives in which to meet them.

Think from right to left - Steve jobs stated to always start with the customer experience first and work backwards on how to deliver that product. Never lose sight of the goal on the right.

Good planning explores, imagines, analyses, tests and iterates. That takes time, thus slow is a consequence of doing planning right.

Chapter 4: Pixar Planning

Good planning is to try, to test, experiment, iterate and improve.

We're good at learning by tinkering and terrible at knowing the answer from the beginning.

This is where it is safe to learn and make changes during planning where the cost of change is low.

Project examples - 2 iconic structures of the last century.

Sydney Opera House

• 1000% over budget, 14 years to build instead of 5

• NSW Premier Joe Cahill had terminal cancer and wanted to leave a tangible legacy in the form of a structure.

• He employed a classic political strategy and lowballed the cost with optimistic assumptions.

• Process was rushed pre-election, final design not completed and construction commenced. It progressed far enough that no later government could cancel.

• Original drawings were beautiful but no engineers had been consulted and the design had not been tested and reiterated.

• Think fast act slow

Guggenheim Museum, Bilbao

• 3% under budget and on time.

• Models were made from wood and cardboard and changes were constantly made. Multiple iterations were developed over and over again.

• Results were discussed with consultants and experts.

• Assurances on budget and constructability were confirmed prior to commencing the delivery.

• A digital twin was completed prior to construction.

• Think slow act fast

Pixar Comparison

• Pixar gives it directors months to explore ideas and develop stories.

• Artists develop detailed storyboards and a draft movie is produced with dialogue.

• Draft film is examined and iterated by experts.

• A new audience reviews the second draft and the process is repeated.

• A draft film is reviewed by an audience and reiterated on average 8 times prior to production commencing.

• Only then the producer can begin animation and production.

Iteration frees people to experiment. The process ensures every part of the project is scrutinised and tested.

It corrects and eliminates cognitive bias.

People assume they understand concepts more than they actually do, asking people to explain over and over helps develop true understanding.

A slow and iterative planning process which utilises experience is the formation of all successful projects.

Chapter 5: Are You Experienced

Experience is invaluable, this is common knowledge. That the experienced carpenter will perform better than the inexperienced.

However, large projects have political factors will commonly override this.

Good politics will support local and select domestic contractors over experienced even when the risk of this is huge.

California High Speed Rail - American contractors were chosen over experienced European companies even though a single high speed rail project had never been delivered in the US.

Uniqueness Bias - we often believe our large projects to be unique that have little to learn from other projects.

Being First - Pioneers have a 50% fail rate. It is much better to be Apple and learn from Blackberry’s initial smartphone attempt, than to be first to test the market.

Too often we assume new technology as better, even though it is ‘inexperienced’. We don’t treat it like a carpenter where the old, tried and tested carpenter is always preferred. Even though we should!

Seattle underground chose to launch the world’s largest TBM to combine two tunnels into one, ‘a political brag’. When smaller separate tunnels had been tried and tested previously. The TBM eventually broke down and became the worlds largest cork in a bottle. Costing 100’s of millions to remove, repair and reinstate and the project was delivered years behind schedule.

Olympic Blowouts - Since 1960, the total cost of hosting the games has grown to over the 10s of billions of dollars. Every single games has gone over budget and the average is 157%.

They aggressively marginalize experience - There is no permanent host. As a result the Olympics are forever planned and delivered by beginners.

Don’t be the first - If there is a design or construction technique that has delivered many times before, use it or mix it with similarly proven methods. Use previous technologies, use experienced people and rely on the reliable.

The less proven, the more it must be tested and iterated.

Chapter 6: So You Think Your Project is Unique

Early delays are more costly than later delays in a project.

Delays and overruns are measured against benchmarks, but are those reasonable to begin with?

We often forget to ask this question.

The real source of the problem can often not be the overruns but the underestimation of the project and it’s complexities.

With every project, there are often a long list of things that could go wrong. These often have a small probability that are left out of consideration for estimations and forecasts. This is a common error with large projects. The longer the duration, the longer the list, the more probable that one or two of these risks will come to light.

We ignore these risks as we tend to believe our projects to be unique or special when history demonstrates otherwise.

Uniqueness Bias is always at play, it’s why we think higher of our own children compared to others.

Reference Class Forecast (RCF) - using average cost/time for similar projects as your forecast. Use these to anchor your forecast and scale up or down accordingly using facts/evidence from your project. This eliminates bias and underestimations.

Highly experienced professionals, will have access to their own database so their estimates will always be more accurate.

Use a RCF average, add 10-15% risk to the forecast to safely cover your project.

Chapter 7: Can Ignorance Be Your Friend

The counter argument - 'Just do it'

There's something appealing about people daring to skip planning and throw themselves into a project.

Jimi Hendrix - Electric Lady Land Studios. An opportunistic idea turned into an under prepared project. Blowout costs and difficulties arose and Jimi passed away only weeks after it opened. However since this, it has become one of the most successful studios ever built and is still in operation today.

Opera house, Electric Lady Land etc. These are stories that are remembered and celebrated, however the large number of failures are abandoned and forgotten.

Stories vs Data

Survivorship Bias - noting only those things that made it through a process while overlooking those that failed.

Steve Jobs, Bill Gates and Zuckerberg dropped out of college. So a conclusion is made that this is required to be successful in Tech. Refusing to acknowledge the mass number of drop-outs that fail.

Projects that underestimated costs and overestimated benefits represent 80% of large projects - That is an 80% chance of project failure!

Even if the numbers show a failure the project can be somewhat a success.

Yet, there are always other costs that aren't visible. Ruined careers, failed companies and the waste of public money that could otherwise be spent elsewhere.

Imaginative leaps belong in planning not in delivery - When stakes and stress are low, we are free to think creatively and experiment.

Planning is crucial to creativity

Chapter 8: A Single, Deteremined Organism

After the project goal has been decided, the plan has been developed, tested then improved, and after accurate forecasts have been made and risks mitigated.

You need a strong team.

Hoover Dam - Frank Crowe Engineering Manager. It came in under budget and ahead on schedule. He had a long career in building dams and over that career he had a loyal team that followed him from project to project.

The value of experienced teams can not be understated.

• The additional cost of sourcing a suitably qualified team is insignificant compared to project blowouts.

• Establish an identity for the project, from the suits to the hard-hats. The range of companies, contractors, subcontractors and trades required in delivery need to share a common goal.

• Establish trust with the workforce. Give them what they need to complete their jobs from the start. Small things matter, i.e. having the right safety gloves available at all times helps and multiplies results over time.

Chapter 9: What’s Your Lego?

The risk with building just one thing - one huge hydroelectric dam, one high speed rail line, one huge tunnel.

The risk grows, it becomes more difficult to experiment and iterate the design, it becomes bespoke and experience is rare. You have only one shot, you have to get it right the first time.

When the scale is so large, even 90% complete is still useless, when the capital cost to reach this milestone is enormous.

All projects are vulnerable to negative black swan events, the longer the duration, the more chance of this occurring.

Nepal School System - A classroom is small, however multiple classrooms makes a school, multiple schools become a district, multiple districts support a national education system.

Simple is good. One or two basic earthquake proof designs, delivered a major infrastructure network of schools. The design can be iterated and improved. Experience utilised and efficiencies gained.

The core of modularity is repetition. You fail fast, generate experience, iterate the design and make each version better and more efficient.

Repetition boosts you up the learning curve.

Scale free - scale up or down following the same design principles independently. You can build something massive or small with similar detail.

Tesla factory example - building Giga Nevada. The world's largest factory was initiated with ‘modular’ in mind. Elon Musk’s lego was a small factory, build one, get it working, then another, then integrate the two. Work started, batteries were produced and efficiencies gained prior to final completion.

Madrid Metro - 76 stations all shared the same simple design of proven technologies. Costs plunged and speed of delivery soared. Lengths of tunnel were also made modular. 131kms of rail line and 76 stations were delivered in 2 stages of 4 years each - twice the speed of the industry average and at half the cost.

Modular thinking radically reduces risk.

Solar and wind farms out perform other projects in regards to costs and benefits gained. They are modular by design - repeated and scalable (up or down).

Climate Crisis

The World Health Organisation estimates that climate change will cause an additional 250,000 deaths per year between 2030 and 2050.

Extreme weather events have always happened but these are getting more frequent and more extreme. Black swans are becoming more common.

Climate target of net zero by 2050 - sounds simple, although we underestimate how ambitious this is.

We’re talking about projects and infrastructure at a scale never seen before in human history.

Good project delivery is essential to help achieve these targets.

Scale and speed are critical.

We can no longer afford bloaded budgets and sliding deadlines. We can definitely no longer afford failed projects like California High Speed Rail.

Wasted resources and time are now a threat to civilisation.

Additional resource - A conversation with the Author;

Thanks for reading! 👷