Ashburn, Va. (Vocus) April 29, 2010
A recent study by Independent Project Analysis, Inc. (IPA) revealed that only one in three site-based projects successfully meet the business objectives established at project authorization.
Historically, small site-based projects (those projects costing less than US$10 million) have lagged their larger counterparts in terms of both using Best Practices and achieving competitive outcomes. This trend was particularly apparent during the market boom from 2003 to 2008 when many small projects suffered as resources and attention were diverted to larger projects.
An IPA study presented at the March 2010 annual meeting of the Industry Benchmarking Consortium (IBC 2010) quantified just how frequently small, site-based projects fail to meet objectives. The study divided the projects into two groups, cost driven and schedule driven, and evaluated how frequently these projects meet all of the following criteria:
1) No safety incidents
2) Worked as planned (e.g., met business and technical objectives)
3) Experienced less than 10 percent cost growth over the authorization estimate AND
4) Achieved a lower than Industry capital cost (for the cost-driven projects) OR
5) Met the planned completion date (for the schedule-driven projects)
After examining more than 1,000 projects from over 100 different manufacturing sites around the world, the study found that, on average, only 37 percent of the projects at a site meet these success criteria.
Common reasons for failure include the lack of definition, project managers managing too many concurrent projects, the lack of input from key project stakeholders during the definition phase, and making design changes after authorization, among others.
In the current economic climate, most companies have decreased spending on large projects. However, capital expenditure on small, site-based projects remains relatively constant as sites must spend money to maintain and repair their assets. Thus, there is substantial value for sites to gain by tackling the issues that prohibit small project success and applying practices that lead to a higher success rate.
Since its founding by Edward Merrow in 1987, IPA has rapidly evolved into the preeminent consultancy in project evaluation and in project system benchmarking, and has become the industry leader in quantitative analysis of project management systems. Our staff of project and research analysis professionals at seven offices on five continents serves hundreds of clients. The largest oil companies, chemical producers, pharmaceutical companies, minerals and mining companies, and consumer products manufacturers enhance their capital productivity using IPA's Project Evaluation System (PES®) and project system benchmarking services. Further information can be found at http://www.ipaglobal.com.