For construction managers, project overruns are a major part of the business. Relatively few projects meet their target dates of completion and budgets, but there are a few ways of predicting whether or not an overrun is going to occur, and if it does, how big it will be. Let’s look at a few famous examples of projects with major overruns and some of the management mistakes that led to problems.
The Suez Canal, now a critical part of international trade, was one of the great white elephants of its day. Originally chartered with a deal brokered by a French diplomat and an Egyptian sultan in 1854, planning commenced in 1856 and work started in 1859. The project took 10 years to complete, opening in 1869 after a more than 100% cost overrun. The Suez Canal relied on corvee, labor forced by the state. At the same time, the British government, a staunch opponent of the project, began an international campaign to end European sponsorship of corvee, going so far as to hire provocateurs to instigate rebellion among the workers. This tense political climate led to a severe overrun in cost. Secondly, the Suez Canal was the grandest project of its day. The budget of a construction project of that scope and ambition could not reasonably be predicted.
More recently, the construction of the Sydney Opera House in 1957-73 was similarly ill-fated, and led to an even greater overrun. The Opera House opened ten years after target date of completion with the final cost of construction coming to 14 times the initial budget of 3.5 million pounds. Debate still continues over what caused such severe overruns. Jorn Utzon’s bold design, modeled on curved sections of a sphere, was widely beloved, but faced engineering difficulties. While a great deal of hype surrounded the project, the actual blueprints weren’t produced until six years in. This is just one example of poor communication between the architect, engineers, civic planners, and construction crews. By 1961, construction was nearly a full year behind schedule due to a combination of unpredictable problems (poor weather, flood damage) and simple management failure (lack of centralized planning, last-minute changes to design). These mistakes not only led to overruns, it led to Utzon abandoning the project. While the Sydney Opera House is regarded as a masterpiece today, poor management dogged the building’s construction for years.
A recent American example can be found in Boston’s appropriately named “Big Dig” tunnel project. Designed to relieve traffic in the seaside city’s congested bridge system. Planning began in 1982, and during 1987-91, the project was the subject of a major political fracas, with various factions within the federal government debating whether or not to fund the project. The Big Dig was eventually funded, with $2.8 billion earmarked for its completion and a target opening of 1998. It actually opened in 2007, at a cost of $14.6 billion. Planning was delayed due to its potentially heavy environmental impact, and construction delayed due to the unexpected consistency of the dirt and sand that the tunnel cut through. Obstacles ranging from the fairly common (boulders) to the bizarre (sunken ships) blocked passage. Not only did the budget not take these potential obstacles into account, it was decried by many local politicians and activists as overly optimistic, intentionally underestimated to curry the favor of Washington politicians.
These three projects illustrate a number of major construction management pitfalls:
What we can gather is that scientific techniques, good communication, realistic outlook, and transparency are essential to prevent cost overruns. The construction manager has a responsibility to ensure that overruns are prevented.