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The Factors Contributing to the Failure of Large-scale Projects: Climate Change and AUKUS Submarines

Book Review: “How Big Things Get Done” by Bent Flyvbjerg and Dan Gardner

Large-scale projects often exceed their construction budgets, and this is a well-known fact. The authors of “How Big Things Get Done,” Bent Flyvbjerg and Dan Gardner, have conducted extensive research that not only highlights past failures but also presents strategies for improvement. These insights are crucial for Australia, especially in the areas of climate and defense.

The decision-making process is a key issue for public sector projects. Political decisions are often influenced by vested interests and single-issue agendas. While the ideal scenario would involve technical and budget discipline, more often than not, projects suffer from delays, revisions, compromises, and inadequate planning.

Proponents of these projects tend to underestimate costs and difficulties due to what is known as the “optimism heuristic” coined by Kahneman. The rush to make project decisions is influenced by political timetables and the psychology of power. The Sydney Opera House serves as a prime example of a planning disaster, going fourteen times over budget and three times over schedule due to a rushed decision made by the then-premier before his impending death.

Even in the private sector, large-scale projects often encounter issues, although they may not receive as much publicity. The popular approach of outsourcing public infrastructure projects to the private sector also faces challenges in terms of coordination and risk-sharing between the public and private entities involved.

Is there an inherent reason why big projects always exceed their budgets and timelines? The authors argue against such pessimism and provide examples of successful projects. One such example is the Empire State Building, which was completed in a year and came in 17 percent under budget. The authors attribute this success to the use of well-established technology and the standardized nature of each floor, allowing workers to gain experience and improve efficiency.

Denmark’s achievements in establishing its wind turbine industry and the success of Dutch firm ASML in the field of lithography machines used in silicon chipmaking illustrate the importance of drawing on existing knowledge and collaborating with suppliers. The Boeing 747 is another notable example of a successful large-scale project that benefited from meticulous planning and extensive experience in manufacturing large bombers.

While “How Big Things Get Done” primarily focuses on the construction phase of projects, the overall success of a project throughout its lifetime is a separate issue. The Empire State Building, for example, faced commercial challenges initially but later became an iconic structure. On the other hand, the Sydney Opera House overcame its construction excesses to become a priceless icon.

To improve the track record of construction projects, the authors offer several suggestions. First, projects should prioritize the use of well-established technology rather than succumbing to the temptation of incorporating cutting-edge innovations for political reasons. Second, modular technology is superior to bespoke one-off solutions, as demonstrated by the impact of containerization on the shipping industry and the efficiency of large-scale solar farms.

Experience is essential in project implementation, as it allows for cost reductions and improved efficiency. The authors highlight Japan’s automobile industry as an example of how incorporating factory-floor advice into the production process can lead to success. Additionally, employing seasoned experts rather than opting for the cheapest suppliers can prevent cost overruns.

The authors also caution against the “sunk cost” fallacy and emphasize the importance of learning from failure, including the failures of others. Detailed planning and avoiding premature commitments are crucial to project success. Reference Class Forecasting is another valuable tool for combating chronic cost overruns, as it provides insights from similar projects and accounts for the standard optimism bias.

Lastly, the authors analyze the “degree of difficulty” of different project types and identify certain projects, such as nuclear power plants, Olympic Games, and IT projects, as more prone to cost overruns. Understanding these challenges can inform decision-making and risk assessment.

These insights are particularly relevant to Australia, especially in the areas of climate change and defense procurement. The authors argue that if nuclear power is to be included in the Australian electricity grid, it should be in the form of Small Modular Reactors rather than large-scale conventional reactors. They also question the viability of the AUKUS submarine project, highlighting its rushed decision-making process, lack of experience and established supply chains, technological complexity, and limited modularity.

In conclusion, “How Big Things Get Done” provides valuable insights into the challenges and potential solutions for large-scale projects. By learning from past failures and embracing best practices, it is possible to improve the success rate of these endeavors.

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