I’ve recently heard some very compelling points with regards to the systemic nature of projects. Perhaps the most poignant concept is the realization that the sum of project overruns is often greater than its parts. I know that, in hindsight, it is difficult to explain how any one change, or the uncertainty in a single arena, could have led to the final outcome. Rather, it’s the impact of the cause of the overrun, multiplied through feedback mechanisms, and by the resulting negative effect on areas of the project that may not be directly linked to the initial difficulty.
The key villains that drive cost escalation are the project organization and the clients themselves. Of course, external forces such as the changes in the regulatory environment or advances in technology can have an impact. However, even though the consequences, in terms of increased costs, may be more severe from external changes, the likelihood of occurrence is usually low (although the longer the duration of the project, the more critical this area becomes), so I wouldn’t consider it a “key” villain.
Systemicity is really an embedded reality for projects. In and of itself, the systemic structure of a project doesn’t drive cost escalation – it simply magnifies it and helps to create “vicious” or “virtuous” circles. So although it’s worth discussion and is a cause of the sum being greater than the parts, it’s not really a key villain when discussing cost overruns. Neither is schedule acceleration, because it is a reaction to project trouble, not a direct cause.
The factors that cause cost overruns, and contribute to large-scale cost escalations, typically include the planning (or control) estimate, customer interference, and customer or contractor created changes to the project plan. These cause the initial difficulties, and act as a root cause for cost escalation. These stages are usually foreseeable, and are controllable, by the two key villains I mentioned above – the project organization and the customer organization.
The real causes of cost escalation during these stages are usually the customer’s failure to provide thorough information during the planning stages, or their inability to “help” the contractor execute the project. Or it may be the contractor’s failure to follow proper configuration management techniques, or ensure a “meeting of the minds” on key project specifications. Failure by both organizations to manage these types of problems throughout the project will lead to cost escalation for each arena, and give rise to the systemic and acceleration stages that will make the team look back and wonder what happened.
