Project failure 1

Project Failure

Students Name

University/College
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Introduction

Project failure is a common occurrence due to a variety of factors such as level of

feasibility studies, attitudes of project proposals and optimism bias. Projects are large scale in

nature. It means that they require intense planning before implementation. Various issues can

arise after the project begins. These issues are often not part of the projections made during the

planning phase of the project. Projects are a means to create or deliver a unique service or

product. However, many projects have a high failure rate. It is often considered as an occurrence

that is planned or unintentional. Many organizations are involved in the use of projects to

achieve value-added work (Jennings, 2012). Projects are characterized by three different phases.

These are development stage, implementation phase and termination. A case to consider is the

Olympic games of 2012 in London. The project was characterized by many challenges arising

from under-estimations. Specifically, the issues entailed biases in regards to decisions made, lack

of attention to risks within the government and uncertainty in project administration and

management.

Causes of project failure

Project failure has a variety of causes. Project failure is considered an individual and

organizational problem. It arises from the use of under-skilled project managers who are

assigned to complex projects. The entire project is at risk of failure due to lack of competencies

by the project manager. In many cases, an unsuccessful project has goals that are established for

key parameters. It is regarding the costs, benefits and time. The goals are missed, leading to

project failure. The target could be missed because it is not attainable in the first place (Al-

Ahmad, et al., 2009). Furthermore, the implementation process could have suffered a failure.
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Project failure can be avoided by actively inviting external scrutiny. It allows the organization to

apply and learn lessons from other projects have shown a higher level of success. For instance,

the introduction of non-executive directors to be placed on the departmental boards is essential.

These individuals are well positioned and independent (Cruz-Cunha, et al., 2014). They have an

objective and unbiased view that avoids issues during the planning phase.

Many issues characterize many large infrastructure projects around the world. Benefits

shortfalls and cost overruns of about 50% are common in many projects. Furthermore, cost

overruns that are over 90 percent are normal. For instance, a study of research urban rail projects

in Europe and North America has shown that the cost overrun was about 45%. Project managers

and executives often attribute the underperformance due to various complexities (Kusek &

Hamilton, 2013). It includes technological uncertainty, project complexity and scope clarity.

Flawed decision-making leads to high failure rates. It arises from the differences in incentives

and preferences of the stakeholders. In this context, planners and politicians will strategically and

deliberately underestimate costs, over-estimate benefits to increase the chance that their project

will gain funding and the necessary support. These actors will often create scenarios of success

and avoid any issues that are the potential for failure. It leads to a situation where the managers

promote ventures that will often be over budget and would not be on time (Stark, 2016).

However, this issue due to failure and misrepresentation can be dealt with through an alignment

of incentives, accountability, and enhancing transparency.

Project failure can be avoided through reduced risk and realistic forecasts. Furthermore,

in the context of events such as the Olympics, full financing with a sovereign guarantee or full

public financing should be avoided. It is a major issue that would mean all parties would try to

be competitive to ensure that they win the project. The decisions to be made that allow the start
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of the project rely on the ability of the private financiers. It can be without the sovereign support

for at least a third of the entire financial needs of the project. The decisions are made in a way

that ensures the risk association is balanced. It can be through lack of comfortable clauses that

could return the problems to the citizens when there are limited funds to finish the project

(McManus & Wood-Harper, 2007). The shareholder and private leaders should detail their

forecasts. In the case of any issues these stakeholders are guilty for the mistakes.

Optimism bias in project approval

Many project managers tend to be optimistic when coming up with projects. In the

current age, projects are characterized by a high rate of failure. It is often in regards to the time

and budgetary allocations. It means that the projects will often be unable to deliver the benefit.

An important project management theory considers optimism bias as a major issue. Optimistic

projections often arise from three variables (Nicholas & Steyn, 2008). These are strategic

misrepresentation leading to the deception of stakeholders, technical factors leading to errors and

psychological issues leading to delusion by the decision maker.

The optimism bias is also known as the planning fallacy. It is an extremely optimistic

forecast that has the possibility of failing. It arises from many unexpected issues that could arise

during the start of a project. It would mean that the plan would be above the budgetary

allocations. The optimism bias can occur due technical issues. It stems from the planning tools

used and the input of inaccurate information. It can also occur due to lack of experience, leading

to projects that would turn out to be far from the given target. Optimism bias often leads to an

under-estimation of the delivery times (Gray & Larson, 2008). It is typical for complex projects

such as the Olympics preparations. These projects tend to have multiple stakeholders, financial
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and timing constraints. For instance, the Olympics was to be supported by other avenues such as

companies like sports equipment manufacturers and the government. Considering the

significance of the event to the country, the government is not always in a position to understand

the complexity of the preparations. The government would often choose a specific solution

without consideration of the context and alternative options that could prove beneficial.

It is important to understand the level of influence and motivations of various individuals

involved in a project. It would be crucial for the delivery of a project. In many scenarios, the

government will tend to be over-optimistic in regards to its ability to combine differing views

and the required time to make sufficient engagement (Kutsch, 2011). It is often the case when

the project entails new ways of working such as Olympic events that often vary with time. It

leads to a tendency to have assumptions about the behaviors of groups whom the government

lacks any direct control. Optimism bias can be deliberate or unconscious. It arises from strategic

misrepresentation. It could involve the desire by individuals to boost and protect their prospects

or to ensure that they secure investment for a particular project. Mostly, the officials would

begin to understate the risks or underestimate them. Furthermore, the pressures arising from

short-term budgetary and political cycles increases the chances of over-optimism for a process

that are being arranged by the government.

Feasibility studies

Feasibility studies are often carried out before the onset of a project. For instance, a study

was conducted during the planning stage of the London Olympics to establish the resources and

finances that would be required to ensure a successful event. A significant occurrence was

continuous budget increases for the event. Specifically, the cost overran that were allocated for
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the games by several cities was over 200% in comparison to previous estimates in the games

since 1976 (Nicholas & Steyn, 2012). Essentially, it shows that there has been a trend towards

systemic bias on cost inflation when it comes to massive projects.

Feasibility studies are essential to the success of the project. It arises from collective or

individual ability to imagine what needs to be done for the project to be completed successfully.

It would affect the success or failure of the project such as coming up with the necessary

components to ensure the success of the project. Project failure can be eliminated by dealing with

the various causes (Priemus, et al., 2008). It can be with reference class forecasting. It is a

technique where an outside view is used instead of an internal view. In this regard, a reference

class is used for a previously successful project instead of only taking consideration of the

project at hand. Furthermore, the benefits incurred and actual costs of the current project are

compared to previous projects. Eliminating the cases of optimism bias that would be deceptive to

stakeholders can be through promotion of accountability. It involves all people in the

management if the project, and would guarantee the transparency of information.

Issues with the project often arise during the development phase. Projects tend to have a

high failure rate due to poor feasibility studies or planning. Accordingly, it led to projects that are

canceled before being completed or were delivered but were not used. Information shows that

the failure rate in 2008 was 23% (Williams, 2011). Furthermore, projects that were characterized

by various issues such as over-budget, lack of required functions and features and those that late

were at 45% in 2008. It was a decrease from 47% in 2006. There has also been a slight increase

in overruns in many projects. In the case of the London Olympics, the feasibility studies were

responsible for the problems that arise in future. It stemmed from assumptions during the study,

with inaccurate forecasts being employed in the project. It meant that further changes were to be
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made during the implementation stage to ensure that all the needs of the project will be met.

Decision-making biases occurred during this stage. For instance, there was an anchoring of the

cost estimates based on previous budgetary allocations in Olympic Games. It was done without

considering the uncertainties that can arise (Jennings, 2012). Despite the current uses, costly

mistakes will be avoided if a feasibility study is conducted. It would reveal many issues that can

arise during the project, and how to avoid them.

Conclusion

In conclusion, project management is characterized by many risks. Project failure is a

frequent occurrence and arises due to a variety of factors. Project failure occurs due to many

factors such as technological uncertainty, project complexity, and scope clarity. It is imperative

to consider all these issues to ensure the success of a project. Optimism bias is a major problem

for project planning. It leads to planning fallacy such as cost under-estimation that would mean

the project would not be completed or would be completed without certain functionalities.

Feasibility studies have proven useful in ensuring that the needs of a project will be met.

Essentially, feasibility studies have a role to play in the success or failure of a project. A proper

feasibility study that considers all areas of the project such as risks that could be faced will

ensure the success of the project.

Recommendations

The project should have a shared financial responsibility. It will apply to the agents so

that they can approve and propose projects that benefit the shortfalls and all cover the cost

overruns. There should also be incentives in the form of rewards. It would encourage the

progress of the project. Furthermore, the individual who details the forecasts for the projects
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should also be criticized. It would help them to determine issues that have been overlooked that

would otherwise lead to a failure of the project (Gray & Larson, 2008). There should be strict

forecasts during the planning phase of the project. It is through audits that should be integrated to

encourage transparency of the information.

The stakeholders should consider the use of optimism bias uplifts. It would mean that a

promoter of a particular project would have to come up with a risk register to deal with the risks

that arise in the case of large projects. It acts as a list of all the risks that a project can face during

the implementation stage. These risks will affect the operation and delivery of the proposed

infrastructure (Al-Ahmad, et al., 2009). The operation risks include revenue and maintenance

risks. On the other hand, construction risks include cost and timescale perspectives. Furthermore,

the risk details who is blamed the identified risk. For instance, some risks could be transferrable

through financial instruments or insurance. It will ensure that any risk that arises will be dealt

with swiftly. These recommendations would prove beneficial in dealing with risk failure.
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References

Al-Ahmad, W. et al., 2009. A Taxonomy of an IT Project Failure: Root Causes. International

Management Review, 5(1), pp. 93-104,106.

Cruz-Cunha, M. M., Moreira, F. & Varajao, J., 2014. Handbook of research on enterprise 2.0:

technological, social, and organizational dimensions. 1st ed. Hershey, PA: Business Science

Reference.

Gray, C. F. & Larson, E. W., 2008. Project management: the managerial process. 1st ed. New

York: McGraw-Hill/Irwin.

Jennings, W., 2012. Why costs overrun: risk, optimism and uncertainty in budgeting for the

London 2012 Olympic Games. Construction Management and Economics, 30(6), pp. 455-462.

Kusek, J. Z. & Hamilton, B. C., 2013. Fail safe management: five rules to avoid project failure.

1st ed. Washington DC: The World Bank.

Kutsch, E., 2011. Performers, trackers, lemmings and the lost: sustained false optimism in

forecasting project outcomes evidence from a quasi-experiment. International Journal of

Project Management, 29(8), pp. 1070-1081.

McManus, J. & Wood-Harper, T., 2007. Understanding the Sources of Information Systems

Project Failure. Management Services, 51(3), pp. 38-43.

Nicholas, J. M. & Steyn, H., 2008. Project management for business, engineering, and

technology: principles and practice. 3rd ed. Amsterdam; Boston: Elsevier Butterworth-

Heinemann.
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Nicholas, J. M. & Steyn, H., 2012. Project Management for Engineering, Business, and

Technology. 1st ed. New York: Routledge.

Priemus, H., Flyvbjerg, B. & Wee, B. v., 2008. Decision-making on mega-projects: cost-benefit

analysis, planning, and innovation. 1st ed. Cheltenham, UK: Edward Elgar.

Stark, J., 2016. Product lifecycle management. Volume 2, The devil is in the details. 3rd ed.

Cham: Springer.

Williams, T. C., 2011. Rescue the problem project: a complete guide to identifying, preventing,

and recovering from project failure. 1st ed. New York: American Management Association.