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Investigating Reasons for Underestimated Costs and Time in Public Works Projects

Critical Analysis of the NHS National Programme for IT

Project Report 2013 11 Pages

Business economics - Business Management, Corporate Governance

Excerpt

Contents

1. Introduction

2. Literature Review
2.1 Turner’s Five Core Functions of Project Management
2.2 Project Life Cycle
2.3 McKinsey 7S Framework

3. Case Study
3.1 Background
3.2 Risks of the Project Scope
3.3 Control of Costs
3.4 Project Dilemmas

4. Findings

5. Conclusion

6. References

1. INTRODUCTION

The debate about whether project costs or time often exceed forecasts has been framed as a research topic and investigated in different scales, methods and locations. Flyvbjerg, Holm and Buhl (2002) pointed out that even though the majority of researchers concluded that project costs were often underestimated, these studies are not quantitative significant to explain whether cost underestimation is caused by errors or strategic misrepresentation. The study of Flyvbjerg et al fills in this research gap and suggests that project sponsors are lying with their original estimates to ensure funding for their projects. However, other project management theories, such as Turner’s Five Core Functions, the MacLeamy curve and the McKinsey 7S framework, suggest that there are possibilities that cost and time exceed forecasts when other factors surround a project are not managed properly. Therefore, this report is going to, first, review the abovementioned theories; second, compare and contrast the theories with a public sector project, the NHS National Programme for IT; and third, measure the extent to which the project can be explained by theories. The finding of this report shows that there are a variety of pitfalls associated with a project that could lead to costs and time exceeding forecasts, but strategic misrepresentation might be one of the reasons as well.

2. LITERATURE REVIEW

2.1 Turner’s Five Core Functions of Project Management

Scholars have different opinions of how to measure the success of a project but the ideas of these measurements are more or less developed from the basis of the iron triangle: time, cost and quality. These three elements are vital to a project and project management (Association of Project Management, 2006) and are the major criteria for delivering a successful project. However, Turner (2009) points out that two more core elements are also needed to be managed, namely project scope and project organisation. The former entails the scope of work that has to be managed by a work breakdown, whereas the latter details the resources to be used and has to be managed by an organisation breakdown (Lee-Kelley & Loong, 2003). This forms the Turner’s Five Core Functions of Project Management as shown in figure 1, which illustrates the relationship between the five functions and implies that the performance of each function has direct impacts on the others. Nonetheless, Turner (2009) also highlights that risks associated with the scope of work and stakeholders associated with the project organisation need to be managed carefully.

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Figure 1 Five Core Functions of Project Management (Turner, 2009, p.7)

2.2 Project Life Cycle

A project life cycle outlines the number of stages that are involved in a project from its initial conception to its eventual completion. It is a methodology that brings uniformity and control to a project (Kerzner, 2009) and there are numerous versions of project life cycles developed by scholars (e.g. Gardiner, 2005; Gray and Larson, 2006, cited in Haberberg & Rieple, 2008). However, it is stated that “Although many projects may have similar phase names with similar deliverables, few are identical” (Project Management Institute, 2008, p.19). The differentiations are caused by the variation of project types, therefore it can hardly be standardised.

It is also important to understand the ways to measure these stages by two critical elements of a project life cycle: time and level of effort. Meredith and Mantel, Jr., (2012) explain that the latter usually represents resources expended per unit of time. These two elements together provide a scale to estimate the scope of a project. However, the authors stress that costs should be included as it is a major consideration in a project life cycle, and argue that “increasing effort in the early stages of the life cycle will improve the chance of project success” (Meredith and Mantel, Jr., 2012, p.19).

Regarding project costs, research done by Paulson, Jr. (1976) suggests that the level of influence of costs is the highest in the early phases of a project and will decrease gradually throughout the project. The Construction Users Roundtable (2004) put this theory forward and developed the MacLeamy curve [see figure 2], which combines the ability to impact costs with a project life cycle. According to this concept, the ability to influence costs decreases over time while costs of changing details of a project increase. This view supports the assertion made by Meredith and Mantel, Jr., (2012) that the more effort is put in the beginning of a project the more likely the project will succeed.

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Figure 2 MacLeamy curve (The Construction Users Roundtable, 2004, p.4)

2.3 McKinsey 7S Framework

In the field of project management McKinsey 7S framework is often adapted as an analytical tool which consists of seven inter-linked elements that determine the extent to which an organisation succeeds in managing changes. Zairi and Jarrar (2001) described the content of each element as shown in table 1.

Table 1 McKinsey 7S Framework Description (Zairi & Jarrar, 2001, p.884)

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Details

Pages
11
Year
2013
ISBN (eBook)
9783656427650
ISBN (Book)
9783656439127
File size
565 KB
Language
English
Catalog Number
v214481
Grade
75%
Tags
investigating reasons underestimated costs time public works projects critical analysis national programme

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Title: Investigating Reasons for Underestimated Costs and Time in Public Works Projects