When the media reports on public infrastructure projects, it is rarely favorable. Indeed, more often than not, the causes for the reporting are increasing costs, delays or even complete project failures. Exceptionally few public infrastructure projects are completed within the planned time and the estimated budget. In the following article, we explain, why this is the case and how effective project management can help.
The Marie-Elisabeth-Lüders building, an extension to the House of Representatives in Berlin, Germany’s capital, recently acquired the inglorious title "BER 2.0". The reason for this was the announcement that the building will not be completed before 2024. However, to finish the project by this date, everything has to go according to plan from now on. If this had been the case earlier, the building would have been completed in 2014 already. The costs, initially estimated at 190 million euros, have now risen to 332 million euros and are expected to keep increasing. Even though this project not quite reaches the epic financial miscalculation of Berlin’s BER airport, it again shows the difficulties realizing public infrastructure projects within their tightly constraint project plan.
Even in the case of almost perfectly planned projects, external circumstances can require adjustments in budgets and schedules. Large-scale construction projects in particular are subject to numerous uncertainties due to their complexity and the time involved. During the extensive approval processes alone, inflation can already pose a threat to budget planning. However, inflation can be taken into account to a certain extent. Price increases that are associated with troubled supply chains or fluctuating raw material costs, however, are much more problematic. Both the Corona pandemic and the armed conflict in Ukraine are the most recent examples for the major impact on the availability and prices of certain goods. It is impossible to take such events into account in advance when planning projects.
In almost all projects, especially in construction, complications can arise that are hardly foreseeable at the beginning and thus jeopardize the project. In public construction projects, however, this is by no means the biggest problem that leads to cost explosions and schedule delays. There are others, which are entirely preventable.
A critical reason for the massive miscalculations in public infrastructure and construction projects could easily be avoided: the deliberately tight budgeting and timing of projects. Public construction projects require approval. In order to obtain it and convince concerned parties of it, a project needs to appear as attractive as possible, and this is the case with apparently low-cost projects. The state is also obligated to put construction projects out to tender and select the most favorable bidder. The bidding companies know that of course and calculate their offers as tightly as possible for a better chance of winning the contract. Despite a binding offer from the respective contractor, a certain risk remains for the state here as well.
Consequently, one can hardly speak of a cost explosion. Rather, the true costs, that were previously deliberately concealed and glossed over, are revealed in the course of the project.
Because of the government's obligation to select the lowest-cost bidder, general contractors, which tend to be more expensive, are usually rejected. As a result, a large number of separate contractors work together on a project, making coordination much more difficult. The complexity of the processes of and between the service providers demand transparency. Lack of effective communication leads to enormous complications. Accordingly, uniform coordination and communication with the help of project management software is vital.
Looking at many public construction projects it is obvious that there are enormous deficits in project management. Those are particularly noticeable in the following aspects:
Especially in construction projects, the time planning is very complex. Many processes run in parallel and there are many dependencies. Appropriate project management software is required to cope with this complexity. Without it, inconsistencies are inevitable, directly leading to increased costs. Consequently, compliant time planning is a prerequisite for proper budgeting. In order to price not only time expenditures, but also all other cost items accordingly, it makes sense to use appropriate project management tools. This is the only way to easily map such an extensive cost structure.
Another critical aspect is communication. It is essential to establish a comprehensive and targeted communication structure to enable many stakeholders to exchange information as easily as possible. This is a challenge in large projects anyway, but it is even more difficult with many independent contractors.
Ultimately, large construction projects require the highest level of expertise and also perfectly fitting project management software such as InLoox to accompany and support the project.
At the beginning of this article, external circumstances, that can lead to cost increases and time delays in construction projects, were described. Internally, projects also have a variety of uncertainties. For example, it is possible that workers may be absent due to illness, machinery may be defective, or construction progress may have to be paused due to an accident. These are all matters that are difficult to predict. Nevertheless, the resulting damage can be minimized through proactive risk management.
It is tempting to avoid communicating potential risks to maintain the attractiveness of the project. If risks are not communicated, however, they simply cannot be factored in. Consequently, a more open communication culture is needed. Communicating possible complications demonstrates transparency, which is appreciated by partners. It is a sign of high competence if, after completion of the project, it turns out that the planning was realistic. In conclusion, public construction projects can be realized more successfully and on budget and time if there is a greater focus on competence, honesty and ultimately effective project management.