9 out of 10 projects come in over budget and late.
Every project encounters risk. If and when issues occur, they can significantly impact time, budget, and deliverability meaning that if risks are not carefully considered at the planning stages, the project will inevitably fail to meet its objectives.
So, what’s the answer? Don’t take any risks at all? There wouldn’t be many projects running if they chose this option. We simply need to plan for potential risks from the get-go.
We recently ran a series of webinars exploring the process, risks, and techniques of effective bid risk management. Click here to watch the series.
When bidding into a project, it is vital that all potential risks are assessed so that you don’t end up overpromising and ultimately, underdelivering. There are three dimensions to consider: creating a realistic schedule, getting a thorough understanding of the budget and ensuring scope deliverability.
Many projects are time sensitive.
In the lead up to the 2012 Olympics, we worked with LendLease who were contracted to build the athletes’ village. They had to overcome several uncertainties. The 7/7 bombings occurring the day after the Olympics were awarded in 2005 suddenly making terrorism a very real threat. Then came the global credit crunch in 2008, another headache to contend with. LendLease were forced to deliver the project with less money alongside a significant increase in security costs driving up the overall price of the program.
With the deadline of the Olympics looming, they could not afford to be delayed by even a month. Together with Risk Decisions, LendLease were able to reassess their risk analysis using Predict! Risk Analyser – shifting to a model of 100% risk confidence. This ensured that minor project level risks had to be addressed with 100% accuracy every month so they would not result in any larger delays in the future, the result of which would have been disastrous.
Not all projects have been this successful. California’s high-speed rail project has been in the works since 2008 with $5bn spent and seemingly little progress, the delivery date still continuing to be pushed back. Australia’s National Broadband Network project, launched in 2009, promised 93% coverage across the country by 2016, but was still only 90% complete in 2020. The UK MOD Warrior Armoured Vehicle project was delayed by 7 years and then ultimately cancelled. London Crossrail is only opening the Elizabeth Line now, over 3.5 years behind schedule and more than £4bn over budget.
Considering the risks involved in your project in the initial stages and plotting in contingency time is vital to ensuring you stick to your schedule. Predict! provides a flexible platform to give you a personalised, highly configurable experience, ensuring your projects are delivered on time.
Find out more about managing scheduling risks in our recent webinar – Bidding to Win: How risky is your promise date?
There should always be room in your budget for risk. If unexpected events occur, they could end up costing you, meaning that your project ends up massively over budget or ultimately, undeliverable because you don’t have the funds to cover what’s gone wrong.
With a predicted $3.2 trillion annual spend on infrastructure projects until 2030, based on historic results 9 out of 10 of these projects will run over budget. Examples of staggering overruns include the Montreal Summer Olympics (400% over budget), Scottish Parliament (975% over budget), Sydney Opera House (1,300% over budget), and the Suez Canal (1,900% over budget). Each of these projects cost businesses and taxpayers billions of dollars to fund in deficit.
In many cases, these projects rely on taxpayer money and risks occurring not only lead to unnecessary cost, but massive public outcry when they come in over budget. Therefore it’s important to consider all the possible costs that could occur unexpectedly. Predict! helps projects and programs manage their costs from the outset ensuring that there are no surprises along the way. After implementing Predict! to manage risk during project delivery, read how Babcock increased their gross margins by around 2%.
Find out more about managing budgeting risks in our recent webinar – Bidding to Win: How risky is your budget?
Weighing out the risks associated with your project should come at the early planning stages. If your budget and time constraints don’t allow for risks, you can’t deliver against expectations if any hazards occur. It is vital to plan risk contingency into your project schedule and budget.
When construction giant Carillion unexpectedly collapsed in 2018 whilst working on several public sector projects, it became a high-profile news story due to the massive impact on not only employees and taxpayers but to the public-private partnership policy. Carillion were taking a massive amount of risk on bidding into projects and not managing that risk effectively so that when disasters occurred, they had no contingency plan. This ultimately led to the company going bust, more than 3,000 people losing their jobs and crisis for 450 public sector projects including hospitals and schools. This was a prime example of an organisation overpromising and failing to deliver.
But it doesn’t have to be like this. Risk Decisions have been working with Danish construction company, Femern, for the past 10 years to help manage risk around their development of a tunnel to improve transport links between Denmark and Germany. With completion of the project set for 2029, success can already be measured. Notably, the considerable amount of research that went into the planning and decision-making stages focused on keeping the project on schedule and delivering as promised.
Predict! is on hand to help organisations manage risk, enhancing user experience by providing a full picture of your risk management and strategy to enable you to make Risk Intelligent decisions and improve your project outcomes.
Find out more about weighing up necessary and unnecessary risks in our recent webinar – Bidding to Win: Are you taking the right amount of risk?
Using the Predict! Risk Management Software Suite, you can plan and account for every risk that could occur throughout your project, and therefore manage budgeting and scheduling accordingly.
To find out more about how time and budgetary risks can affect your project outcomes and how Predict! can help you effectively manage risk, watch our recent webinar series – Bidding to Win.