Rethinking Megaprojects: Understanding the Iron Law of Project Management and the Need for Value Engineering

In the world of megaprojects, Mr. Prof. Bent Flyvbjerg Iron Law casts a dark shadow over ambitious endeavors. This law states that 99.5% of megaprojects fail to meet the goals of staying within budget, completing on time, and delivering anticipated benefits. As we grapple with this troubling statistic, it's essential to examine the effectiveness of existing project management methods and seek innovative solutions for these challenges.

Are you interested in becoming a Value Engineering Facilitator or want to learn more about VE? Contact us now via LinkedIn: Alvin Tehmono/Hein B.A. de Jong or visit our website for more information. We have a limited free seat for VM0 training!

The Current State of Megaprojects:

Megaprojects, known for their immense size, complexity, and often global significance, commonly face issues of going over budget, missing deadlines, and falling short of expected benefits. The prevalence of these problems raises doubts about the suitability of conventional project management approaches.

The PMP Certification Challenge:

Enter the Project Management Institute (PMI) and its widely known Project Management Professional (PMP) certification. While the PMI has successfully gained market traction and certified numerous project managers, real-world results paint a different picture. The persistent failure of megaprojects, even with certified project managers leading them, highlights the limitations of traditional project management methods in dealing with the unique challenges of these large-scale ventures.

The Iron Law and Its Implications:

Mr. Prof. Bent Flyvbjerg Iron Law serves as a strong reminder that prevailing project management models might not be well-matched for the complexities of megaprojects. When projects consistently fail to meet budget, time, and benefit goals, it results not only in financial losses but also potentially undermines public trust in the project management profession.

Value Engineering as a Shift:

To break away from the constraints of the Iron Law, a shift in perspective is necessary. Value engineering emerges as a promising solution, offering a systematic approach to project management that aims to maximize value while optimizing resources and reducing risks.

Key Aspects of Value Engineering:

1.?? Think slow, act fast:

The systematic process of Value Engineering (VE) in design processes facilitate a “think slow, act fast” by allowing design process to be conducted thoroughly. One of the tools of VE in facilitating this systematic process is called “job plan” which stems from the scientific method proposed by Francis Bacon (1561-1626), from observation (information phase, function analysis phase), hypothesis (function analysis phase, creativity phase), experimentation (creativity phase, evaluation phase), conclusion (development phase, etc), and it’s compatible with the Plan Do Check Act – a framework from Deming’s cycle.

2.?? Reducing commitment fallacy:

have you ever feels like you’re in a project that never exist? Sometimes Project is like a poker games. In the feasibility study phase, we estimate using secondary data that the project is feasible. But when we come to the Detail Engineering Design phase using primary data, the project cost become 2 to 5 times bigger than what we expected. If you as a politician, provide your commitment in the first place when the feasibility study deemed the project to be feasible, will you be a lost of face? Will there be a bias in the later Detail Engineering Design phase?

Value Engineering process reduce this commitment fallacy, by making several alternative of the design. Imagine there’s 2 alternatives, where one would facilitate the commitment (alternative 1), and another one would facilitate only the engineering part – and see what benefit can we get from it (alternative 2, a design to cost option, where we fix the cost, and find out what benefit can we get from it). Hence, the discrepancy between alternative 2 and alternative 1 is the cost of the commitment (function: Commit project), which is almost 4 times the project itself.

Going back to the poker analogy: after you enter the river (where you know the cards in your hand is not compatible with the community cards), are you going to continue the game (you’re going to lose, even if you’re bluffing), or are you going to fold, and left with only losing the money that you pay for the design (which is wiser than folding in the middle of the construction phase of project)? If you’re going to continue with the game, I suggest you to think “why”, and is it “worthed”? In poker, your goals (or your big why) is not to win every game, but to survive with positive balance in your portfolio (read: survive with gaining more money), hence losing a game is not that important if we look at the bigger picture/why.

In conclusion, employing value engineering processes, which include a thorough examination of commitment-related costs, provides decision-makers with valuable insights. It allows for informed choices, steering away from the reducing commitment fallacy and ensuring that commitments are aligned with the actual project costs, thereby minimizing the risk of unexpected financial and reputational setbacks.

3.?? Thinking from right to left, particularly by asking "why,"

Asking "Why" plays a crucial aspect of Value Engineering (VE). This approach involves scrutinizing functions within a project, moving from the detailed components to the overarching purpose by asking "Why". Categorizing functions from primary to secondary is a valuable exercise in determining where resources can be optimized or costs reduced.

The identification of primary and secondary functions often relies on understanding the context from various perspectives and stakeholders. Here's where the Function Analysis System Technique (FAST) diagram becomes a powerful tool. The FAST diagram essentially creates a visual representation of the Why-How relationship for a function.

In a meeting where multiple stakeholders are involved and chaos may ensue, the FAST diagram serves as a facilitative tool. It provides a structured method to map out arguments related to functions, fostering a clearer understanding of the logical connections between various components of a project.

The process involves breaking down a function into its fundamental "whys" and "hows," creating a hierarchy that allows stakeholders to see the relationships and dependencies. By visualizing the connections, participants can better grasp the impact of each function and its role in achieving the project's objectives.

The simplicity of the FAST diagram, despite its complexity in revealing intricate relationships, makes it accessible for diverse stakeholders. It becomes a shared language, helping to bridge communication gaps and facilitating consensus-building. As participants collaboratively explore the functions and their interdependencies, a more comprehensive understanding emerges, potentially leading to agreements on the prioritization and optimization of functions.

In essence, the FAST diagram transforms the often chaotic atmosphere of high-stakes meetings into a structured and systematic process. It enables participants to navigate through complexities, align on priorities, and collectively make informed decisions. By promoting a visual representation of the project's functions and their logical connections, the FAST diagram becomes a tool not just for analysis but for fostering collaboration and achieving consensus in challenging project scenarios.

Facilitators of Value Engineering:

It's a common misconception that people are practicing "Value Engineering" when, in reality, they might be missing key components such as a certified VE facilitator, comprehensive function analysis, and adherence to a structured job plan. In such cases, it can be accurate to say that they are only implementing a fraction of the complete Value Engineering process.

Effectively implementing Value Engineering need the involvement of certified VE facilitators. These professionals play a crucial role in guiding project teams through the intricacies of the process. Their certification signifies not only technical expertise but also a proficiency in facilitating creative and strategic thinking. With their guidance, teams can navigate the complexities of megaprojects more successfully.

Are you interested in becoming a Value Engineering Facilitator or want to learn more about VE? Contact us now via LinkedIn: Alvin Tehmono/Hein B.A. de Jong or visit our website for more information. We have a limited free seat for VM0 training!

Conclusion:

In the realm of megaprojects, where the Iron Law looms large, Value Engineering (VE) emerges as a beacon of hope, offering a systematic approach to navigate the challenges that often lead to budget overruns, missed deadlines, and unrealized benefits. As we reflect on the journey from understanding the Iron Law to exploring key aspects of VE, it becomes evident that a paradigm shift is necessary to break free from the constraints of conventional project management.

VE introduces a "think slow, act fast" philosophy, leveraging tools like the job plan and embracing the scientific method. This approach ensures a thorough examination of the design process, allowing for informed decisions and strategic actions. Additionally, VE serves as a powerful antidote to the reducing commitment fallacy, offering alternative designs that scrutinize the cost of commitments and mitigate potential financial and reputational setbacks.

Thinking from right to left, VE emphasizes the importance of asking "why" to scrutinize project functions systematically. The incorporation of the Function Analysis System Technique (FAST) diagram becomes a valuable tool in meetings with multiple stakeholders, transforming chaos into structured collaboration. The simplicity of the FAST diagram serves as a shared language, fostering consensus and enabling participants to collectively make informed decisions.

Amid these revelations, the role of certified VE facilitators emerges as paramount. These professionals, armed with technical expertise, creativity, and strategic thinking, guide project teams through the complexities of megaprojects. Their certification is a testament to their proficiency in navigating the intricacies of VE, ensuring that organizations not only implement a fraction but the entirety of the VE process.

In essence, as we rethink megaprojects and grapple with the challenges presented by the Iron Law, embracing Value Engineering with certified facilitators becomes a transformative strategy. It is not merely a tool or process; it is a holistic approach that empowers decision-makers to make informed choices, optimize resources, and ultimately steer megaprojects toward success. As we embark on this rethinking journey, the importance of certified VE facilitators stands out as a guiding force, ensuring that the promise of Value Engineering is fully realized in the complex landscape of megaprojects.

Are you interested in becoming a Value Engineering Facilitator or want to learn more about VE? Contact us now via LinkedIn: Alvin Tehmono/Hein B.A. de Jong or visit our website for more information. We have a limited free seat for VM0 training!

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