PM101-1 Why Are Most Projects Not Successful?

In my 30+ year career, I have successfully led people and projects in several industries: steel, refining, chemicals, software, industrial gases, agri-business, biotech, and pharma for both owners and EPCs. These projects have ranged from small <50k to large 500M.

With this in mind, I have decided to write a series of articles discussing project management with the idea of helping others learn and start conversations. These articles will provide a different view of industrial projects than most PM organizations. It will be my own alternative, altPMP, view and opinions. However, I will refer to ideas and data from PMI and IPA to provide non-biased information.

Notice the -1 implies the first article in a PM101 series.

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Let us begin with a definition and some reasons for a project not being successful.

PMI states that "...projects are temporary efforts to create value through unique products, services, and processes. Some projects are engineered to resolve problems quickly. Others require extended timelines to produce outcomes that will not need major improvements outside of projected maintenance..."

Let us focus on the temporary effort portion. We are trying to solve a problem(s) that should not take forever. Most large industrial projects tend to take anywhere from 1 to 3+ years. Over time their size has gotten bigger and bigger and now we are dealing with billion+ dollar projects that are bigger than the budgets of some small countries.

So temporary simply means that a Project has a start and a finish date. Compare that with Operations which has a start date and hopefully no end date. Operations inherit the results of projects- whether successful or not.

So what?

According to IPA two thirds (2/3) of projects are labeled as unsuccessful. So what makes these temporary efforts unsuccessful?

There are three principal players: owner(s), engineering company, and construction company(General Contractor-GC). Seldom are the interests of the three players aligned. The owner wants the scope/schedule/cost to be what they poorly predicted with their internal business case. The engineering company is in the business of selling services so the more hours the more profit. Construction companies, whether lump sum OR time & material (T&M) contracts OR some blend for different phases are also in the business of making money by providing a service.

As a rule, most owners are not experts at executing projects. Most industrial companies do not have a smooth process from Project Sponsor to project execution team to engineering team to construction team. In my experience, most owners do not have the engineering capabilities they claim. Some have large teams and software BUT can not execute complete design properly.

For the three principals, everyone wants to make money but the only one that wants to save money is the owner. This introduces a misalignment in priorities. This is often referred to as the Principal-Agent problem- the belief by the owner that the interests and understanding of the principals are aligned perfectly and contractors have their best interest at heart.

Another reason for failure is the belief by the owner that Scope AND Schedule AND Cost can be managed to 1% of final approval amounts and time. Owners sometimes don't just want world-class projects, they want galaxy-class projects.

Realistically, a PM can manage 2 out of 3(Scope/Schedule/Cost), BUT in reality, when you try to manage two variables, quality will suffer. And in the end, if you underspend or accelerate the schedule we often end up with challenges in Operability. If the project has Quality or Operability issues the project will be judged as unsuccessful even if it came in under budget and on schedule.

So a project can miss the Cost, Schedule, Scope, Quality, and lastly Operability targets. We will work through those details in future articles and how to do this better.

This article aimed to have you consider the definition of a project and some reasons why projects are not successful.

My four cents...