From Japan’s pioneering Shinkansen to the lauded North Sea offshore wind farms and our visionary Snowy Hydro, awe-inspiring megaprojects around the world remind us of the boundless possibilities of the human race. More than just infrastructure, they promise transformational improvements to communities, economies and the environment, whether revolutionising travel through high speed rail networks and improved regional connectivity, or accelerating our transition to low carbon emissions with renewable energy projects.

Despite their grand ambitions, megaprojects often encounter significant challenges, sometimes resulting in ineffective procurement, significant cost and delays, failing to meet their objectives and ultimately reducing their value. But given their high levels of complexity, scale, duration and impact on communities, the environment and governments, is it possible to get these projects right? The short answer is YES. Let’s explore some common reasons stemming from the development phase for megaproject failures, in no particular order, and how to mitigate them.

1. 1. Poor Initial Planning and Scope Definition

Issue: Managing complexity and scale becomes challenging, with inadequate understanding of project requirements and goals, and the intricate systems, multiple stakeholders, vast resources and potential risks involved.

Impact: This lack of clarity leads to scope creep, cost overruns, and delays.

2. 2. Unrealistic Expectations and Optimism Bias

Issue: Overestimation of benefits, underestimation of costs and overly optimistic timelines.

Impact: Unrealistic expectations set the stage for disappointment and financial strain.

3. 3. Political / Electoral Cycle Pressures and Stakeholder Conflicts

Issue: Political pressures and early commitments, conflicting interests and changes in leadership.

Impact: These factors disrupt project continuity, alter priorities, and hinder decision-making.

4. 4. Misaligned Strategy, Governance and Culture

Issue: Lack of harmony between strategic and project priorities and measure of success, absence of clear responsibility, accountability and reporting mechanisms.

Impact: Lack of awareness, accountability and transparency, opaque decision-making, hindering project management and course correction.

5. 5. Ineffective Risk Management

Issue: Inadequate capability, governance and establishment of ineffective risk management processes during planning and ignoring or downplaying risks in delivery.

Impact: Inability to manage uncertainty and unexpected events effectively, can result in risk premium, additional cost, delays and reduced outcomes, therefore derailing the project.

6. 6. Financial Mismanagement

Issue: Poor budgeting, cost overruns and lack of financial control and integration with execution.

Impact: Financial instability jeopardises project viability.

7. 7. Technological and Engineering Challenges

Issue: Technical difficulties, design flaws and unforeseen obstacles.

Impact: These hurdles delay progress and inflate costs.

8. 8. Environmental and Social Factors

Issue: Neglecting environmental sustainability and community concerns.

Impact: Reduced environmental and social benefits, protests legal battles, reputational damage which could potentially halt projects.

9. 9. Ineffective Risk Allocation and Inadequate Procurement

Issue: Non-optimal allocation of risks to a party less capable of managing them.

Impact: Ineffective risk and commercial management, hampered project management and risk premium.

10. 10. Changing Circumstances and External Factors

Issue: Megaprojects span years, during which external conditions evolve.

Impact: Economic shifts, policy changes and technological disruptions affect project outcomes.

Risk can often be daunting – but it shouldn’t be!

Clients tell us that they appreciate our unique approach to developing and communicating risk strategies alongside them in a collaborative, easy-to-digest way.

Get it right from Day 1

At MBB, we believe that all the above risk drivers are foreseeable and, mostly, present from the onset of a project. Therefore, early planning, rigorous implementation and decisive decision-making can be strong allies for the successful delivery of projects.

Plan early, act promptly.

1. 1. Plan early.

• Demonstrate leadership commitment to risk management by aligning business strategy and success measures with risk management .
• Foster a risk-aware culture by clearly defining the benefits of risk management in line with the organisation’s values.
• Develop and maintain professional risk management capabilities, and continuously monitor and improve process performance.
• Establish effective risk governance, with clear definition of roles and responsibilities.
• Tackle complexity by breaking the project down into simpler components and streamline the risk management process.

2. 2. Act promptly and decisively.

• Establish a holistic, forward-looking risk management process to identify emerging risks, and enable early prioritisation and development of adequate treatment plans.
• Apply the risk management process rigorously and systematically, to maintain accurate information and understanding of the risk profile.
• Communicate risks transparently, take account of them in any decision-making and act promptly and decisively.

In summary, successful megaprojects require meticulous planning, adaptive management, optimal stakeholder engagement, accurate assessment and transparent communication of risks. Learning from past failures and embracing best practice can improve the chances of achieving transformative results.

Stay tuned for our next article where you’ll find MBB’s insights on transitioning to delivery for successful project outcomes.

MBB – your partner in Risk

Our Risk Management Team, led by well-respected industry leader Juan Martin, is known for our ability to deliver expertise, lessons and strategic insights gained from major infrastructure experience across Australasia, Europe, Asia and the Americas.

We offer clients a comprehensive understanding of the potential risks and uncertainties associated with every phase of the project lifecycle – from development, through procurement and delivery, to operational readiness. Our core competencies include risk management, quantitative risk analysis, business and technical advisory, process improvement and stakeholder engagement.

Lead contacts

Juan Martin – Director – Risk
(Certified Professional Risk Associate with the Risk Management Institute of Australasia)

Juan.Martin@mbbgroup.com.au
0421 620 760

Key work highlights

• M6 Motorway
• New Intercity Fleet – Blue Mountains Route Clearance
• Sydney Metro (Northwest, City & Southwest, Western Sydney Airport)
• Transport Access Program (TAP 1 & TAP 2)
• WestConnex (New M5 (M8), Rozelle Interchange)

What clients say about Juan
Juan – It’s a huge challenge ahead to align everyone’s thinking on Risk Management. But I feel we’re in a better place than most other projects at this stage in the lifecycle. And with you driving the Risk Management culture, we’ll prevail.
Ben Pearson – Executive Director, Director PMO – Sydney Metro

Rob Fields – Executive Director Strategy, Risk, PMO and Delivery Services

Rob.Fields@mbbgroup.com.au
0439 321 476

Key work highlights

• VicGrid Renewable Energy Transition Portfolio, including Marinus Link and Western Renwables Link
• MTR Capital Works Business Unit (HK)
• Sydney Water Northwest Treatment Hub Growth Program
• Sydney Metro Authority
• NSW Treasury and VIC DTF Joint Major Infrastructure Procurement Reform Review