When is it too late to cancel a project?


‘I’ve started so I’ll finish.’

‘We’ve spent so much already, we must carry on.’

‘We can’t lose face, we must complete.’

The simple answer is that if the present value of the benefits to be gained by completing the project is greater than the present value of the costs YET TO BE INCURRED, then you should carry on. Sorry about the shouting, but human nature seems to be that we ignore the issue of sunk costs. Sunk costs are those costs that we have already spent, and can’t get back. They weigh heavily upon our thinking, but are irrelevant. How ever much money you have spent so far, the past is the past. It’s gone! What matters is the future. What expenditure is yet to come and what benefits will arise as a consequence? This is the question facing the Project Sponsor, guardian of the business case.

There are however costs that may appear to be sunk, but aren’t. If for example you have bought land to build on, then you could stop the project and sell the land. The money spent on the land is probably not sunk, assuming you can sell it again at something like what you paid for it. The money you have spent on consultants, designers etc. is probably sunk. Money spent on surveys is also probably sunk.

Project governance helps us to assess the issue of cancel or carry on through stage gate reviews. For many projects the most crucial go / no go decision is where the biggest expenditure is committed, and that is often when construction or manufacturing contracts are about to be entered into. If the manufacturing or construction stage is of one or two years duration, then that is perhaps the last point at which it is practical to cancel. Having passed that point, by the time you realise that the business case is starting to unravel, you may not have time to assess it, and stop the project. However for projects and programmes of much longer duration, the problem is more difficult.

Take for example the modernisation and electrification of a railway. Working on an existing railway is inherently very difficult and expensive, because you get very limited opportunities to do the work, e.g. at night, and the process of taking possession of the railway to work on, and giving it back to be used, at the end of the possession, is time consuming. The benefits are great. Electric trains to run at very high speeds are widely available. Electric locomotives are much lighter than their diesel counterparts and have a much higher power to weight ratio. Consequently there is a significant improvement in acceleration and journey time. Electric motors also have much fewer moving parts than diesels and the maintenance costs are lower. Electric traction is also much cleaner and better for the environment. 

But as we have seen on the Great Western Railway, on such a large project unexpected costs can emerge and pressure to cut costs becomes unavoidable. When significant sections of route have been electrified, but some particularly difficult sections are yet to be, then difficult decisions are made. We arrive in a situation where some route sections are electrified but some are not. So we buy hybrid trains which use the overhead electric wires where they exist, but diesel energy where they do not. A practical solution to a difficult issue perhaps. But although many of the environmental benefits are retained, the trains are still hauling around a diesel engine or two, even when on electric power, which dulls the power to weight ratio advantage. Likewise the diesel engines still need maintenance. What has been gained though, is to have laid much of the groundwork for completing the original project at a later date, so that the entire route can be electrified. Valuable lessons will have been learnt and much of the work is already done. 

For more on project sponsorship and project business cases, read my book.

 

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Tidal Power & Smart Consumption


This week’s New Civil Engineer magazine once again contains some great stories.

Firstly there is news of the world’s largest tidal stream array, which is about to be expanded. Firstly we must distinguish between tidal stream energy and tidal range barriers. The latter capture  energy from the relatively slow rise and fall of the tide, whereas the former captures energy from the flow of water going past a turbine or similar device.

Tides are very predictable, whereas wind is not. For every 2MW of installed wind turbine infrastructure, the average output is 250kW, or 12.5%. For every 2MW of tidal stream installed infrastructure the output is 1.8MW guaranteed, or 90%.

Of course the tidal turbines have to be very robust, and are a lot more difficult to install than wind turbines. Nevertheless costs will come down as more are installed. So it’s disappointing to read that the UK government pulled the plug on all tidal power development in 2016. It’s heartening that Atlantis (the developer) are going ahead with the next phase, having secured funding from the Scottish government and Europe. You can read more here.

https://simecatlantis.com/projects/meygen

In previous blogs, I’ve talked about the need for energy storage because when people want to use the most energy, (like when everybody puts the kettle on at half time in the world cup final) rarely coincides with when the wind is blowing or the sun is shining.

However, the internet of things now means that your house (if fitted with all the smart devices) can do things like pause the fridge freezer, dishwasher and washing machine, while you have the kettle on, thereby evening out your consumption.

Even better than that, on sunny days or when there is a lot of wind, there can be surplus electricity on the Grid, when prices go negative. National Grid have produced a tool that predicts when is the best time to turn on the washing machine, dishwasher and charge the car, thereby using energy at its greenest AND cheapest.

http://carbonintensity.org.uk

Project Management, Project Sponsorship & BREXIT


I’m wondering if there are lessons that can be learnt by the project community from BREXIT. I’m assuming BREXIT is a project. It certainly had a start, some think it will have an end, and I hope it isn’t business as usual. Yes, let’s assume it is a project.
I have met very few people who think BREXIT is going well. Many, perhaps most, if recent polls are to be believed, hope it will just be abandoned. Those who do want it to be delivered are split over what they want it to look like, but all want it delivered yesterday. Some think Mrs May (shall we call her the Project Director?) is doing a terrific job in an almost impossible situation. You certainly have to admire her resilience. One of my favourite project management books is by Kerzner. There is a great section on project proverbs, and the one that seems most relevant is ‘The more desperate the situation, the more optimistic the ‘situatee’.

It seems to me though, that the biggest problems with BREXIT stem from the project definition phase. When your stakeholders want to know what the project is, “BREXIT means BREXIT” isn’t totally satisfactory.
Most projects have a business case, owned by the Project Sponsor, which tests whether the project will deliver a better outcome than the ‘do nothing’ scenario. Unfortunately the business case was poorly presented to the most important stakeholder, the voting public, and the only thing many remembered was a big red bus carrying a promise of £350 million a week more for the NHS.
We were told, back at the project definition stage, that we would get a fabulous “cake and eat it” deal because the UK held all the cards. Now it seems that there’s a soft BREXIT deal (that it looks like another important stakeholder, parliament doesn’t like) or a hard BREXIT. It really would seem like a good idea to revisit the referendum and try to give the voting public a better idea of what they’re actually voting for.
Can I commend my book on project sponsorship if anybody wants to know how to get a project off the ground.

The Golden Years


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I fell in love with this print many years ago and it hangs in our living room. It’s called Croyden Departure, The Golden Years. The aircraft in the foreground is a Handley Page Hercules, which was the workhorse of the Imperial Airways land based fleet, on the Africa and India routes. They flew between 1930 and 1940 and had an unblemished safety record, with no accidents. They had a cruising speed of 90 mph and could carry 38 passengers. There were eight of them built. It does highlight how exclusive air travel was in those golden years.

My wife and I love anything Art Deco, Jazz Age, it’s all so romantic, isn’t it? Well yes, unless you were bereaved by the first war or about to be by the second. If you were struggling for freedom against the empire, or impoverished by the Great Depression, it probably didn’t seem too golden. I’m sure Jarrow marchers saw little romance in it. In fact the only good thing to say about the inter-war years is perhaps that they were better than the war years. I wonder why we tend to have such rose tinted rear view mirrors?

Leadership, Lawrence of Arabia and Allenby


My father fought in North Africa in WW2 and his officers recommended Seven Pillars of Wisdom by T.E. Lawrence as essential reading for desert warfare.

I tried to read it many decades ago, but didn’t get far. I tried again recently and I was spellbound from start to finish. The strategic and political genius of Lawrence is amazing. His writing is brilliant, and his stamina to endure 22 hours a day riding a camel owes more to his mind than his body, the latter he seems to have despised. Lawrence is generous with his recognition of others in the defeat of the Turks and one name kept occurring, Allenby. To quote Lawrence,”But their casualty lists (British Army in Mesopotamia) compared with Allenby’s, their wood-chopping tactics compared to his rapier-play, showed how formidably an adverse political situation was able to cramp a purely military operation.”
“Allenby, who was the man the men worked for, the image we worshipped.”
“Allenby never questioned our fulfilling what was ordered. Power lay in his calm assumption that he would receive as perfect obedience as he gave trust.”

I read more about General Allenby, and didn’t immediately recognise Lawrence’s great leader. He was nicknamed ‘The Bull’ because of his explosive temper and 6’2″ barrel chested frame. When in command of a cavalry regiment on the Western Front, covering the retreat from Mons, one of Allenby’s subordinates claimed “he cannot explain with any lucidity at all, what his plans are.” Also when a headquarters officer enquired why Hubert Gough’s cavalry brigade was miles from where it was supposed to be, the reply he received was that “he told me he was getting as far away from the Bull as possible.”

Later however we find a man whose staff officers found intellectually curious, alway interested in finding new ways of breaking the stalemate. He always asked his staff if they had any new ideas about how to win the war.

The journalist Mark Upton has argued that Allenby is one of the most important British Generals who ever lived and that Allenby’s use of air power, mechanised forces and irregulars led by Lawrence marked the first attempt at a new type of war, while at the same time acting as politician holding together an alliance of forces from many nations, “the first of the modern supreme commanders”.

As an example of Allenby’s political sensitivity, when he victoriously entered Jerusalem, having driven out the Turks, he dismounted and walked in out of respect. His address to the people of Jerusalem was as follows:

“To the Inhabitants of Jerusalem the Blessed and the People Dwelling in Its Vicinity:

The defeat inflicted upon the Turks by the troops under my command has resulted in the occupation of your city by my forces. I, therefore, here now proclaim it to be under martial law, under which form of administration it will remain so long as military considerations make necessary.

However, lest any of you be alarmed by reason of your experience at the hands of the enemy who has retired, I hereby inform you that it is my desire that every person pursue his lawful business without fear of interruption.
  Furthermore, since your city is regarded with affection by the adherents of three of the great religions of mankind and its soil has been consecrated by the prayers and pilgrimages of multitudes of devout people of these three religions for many centuries, therefore, do I make it known to you that every sacred building, monument, holy spot, shrine, traditional site, endowment, pious bequest, or customary place of prayer of whatsoever form of the three religions will be maintained and protected according to the existing customs and beliefs of those to whose faith they are sacred.

Guardians have been established at Bethlehem and on Rachel’s Tomb. The tomb at Hebron has been placed under exclusive Moslem control.

The hereditary custodians at the gates of the Holy Sepulchre have been requested to take up their accustomed duties in remembrance of the magnanimous act of the Caliph Omar, who protected that church.”

So what can Allenby and Lawrence teach us about leadership?

  1. If you’re not a good leader to start with, you can learn to be.
  2. Rages will drive your staff away, not motivate them.
  3. Actively seek new ideas from your team.
  4. Recognise talent and encourage it.
  5. Get to understand the politics of your stakeholders and respect it.
  6. More often than not trust wins obedience.

One other thing I’ve learnt is that whilst a picture may tell a thousand words, a motion picture can only be an outline sketch of a great book. David Lean’s brilliant film is wonderful entertainment, but it doesn’t do Lawrence, Allenby or indeed the Arab leaders justice. You have to read the book.

 

The Rise of the Megacity


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According to New Civil Engineer (NCE) magazine, 54% of the world’s population live in urban areas and the United Nations expect this to rise 66% by 2015. A megacity is defined as one with a population of of more than 10 million inhabitants. In 2016 there were 31 of these, and there are expected to be 41 by 2030.

So is this a good thing? Well if population is to continue increasing, cities do make it more efficient to organise. Skyscrapers may not be everyone’s dream home, buy they are an efficient use of footprint. Mass transit systems are an efficient way of moving people around, and when home, work, shops and gym may be in the same block, there isn’t that much need to move at all.

However as the NCE article makes clear urban development is often associated with loneliness. That rings true to me. I have lived in a city, a suburb and now a village. The village is the only place that feels like home, and that’s because there is a real feeling of community. When we lived in a city we never knew the people next door. Now I can’t walk down to the village pub, shop, or church without bumping into friends on the way. I can also, quite easily walk into our nearby market town and catch a mainline train from there if I want to. I have community and connectivity, easily, without resorting to the car.

Some years ago I worked on the development of a new housing estate, or community, as the company called it. Indeed the company was dedicated to genuinely making it a community, and our team toured many award winning developments to see what we could learn from them. The materials, variety of housing styles, street design were all inspiring. But what I kept asking was “where’s the pub?”. I couldn’t get out of my head the theme of the TV show Cheers – “where everybody knows your name.”

In the NCE article there is a list of the cities expected to contribute most to GDP by 2030 In the top 15 are two US cities, New York and LA, nine Chinese cities and only one European city, London. I always enjoy visiting European cities so I wonder, does europe have a connected small city model that might be an alternative to the megacity?

Voices of Reason


Sometimes when all about you is doom and gloom it is worthwhile casting a brief look back at how far you have already come. My wife is reading the autobiography of Emmeline Pankhurst, and a conversation prompted me to look into the Reform Acts of 1832 & 1867.

These had the effect of giving the vote to some working men paying rent of £10 per year.

The parliamentary debates seem to have consisted mainly of spouting statistics, insults and scaremongering. Disraeli was called a “superlative Hebrew conjuror” by Thomas Carlyle. The ‘Liberal’ MP Robert Lowe argued that control of the House of Commons should remain in the hands of “wealth and intellect rather than numbers. The educated few rather than the unthinking many”.

One voice of reason stands out, that of John Stuart Mill. He eschewed self-congratulation and chauvinism and instead turned his opponents arguments back on themselves. Lowe had repeatedly quoted the statistic that 26% of working men already had the vote.

Employing his characteristically clear reasoning and understated sarcasm, Mill pointed out that “a minority of  26% of the electorate gave workers the right of voting that may be only the right of being everywhere outvoted”.

Mill also attempted to inaugurate women’s suffrage through an amendment that would have replaced the word man in the bill with the gender-neutral person. This was outvoted although there were seventy-two other MPs willing to vote for it with him.

Perhaps what shocked me the most in my research was that in amendments to the 1867 Act there was an exclusion to the new voting rights, “women, idiots, criminals, and minors” would not get the vote.

As we know it took civil disobedience and attacks on property to secure the vote, by the Chartists for the working man, and by the Suffragettes for women. But it also took voices of reason.

Much as we look back now on the unbelievable prejudice of the past, future generations will shake their heads at the prejudices that continue today. I prey there may be ever greater voices of reason that prevail. I shall add John Stuart Mill to my list of these great voices, alongside Abraham Lincoln, Martin Luther-King, Barrack Obama and Stephen Hawking.

Tackling Carbon & Whole Life Costings


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2018 is the Institution of Civil Engineer’s bicentenary year. As one might expect this month’s NCE celebrates the achievements of Civil Engineers in our adopted role of “directing the great forces of nature for the betterment of mankind”. But of course there are always new challenges. As Mark Hansford says in his editorial “The science tells us that it is the level of greenhouse gases in the atmosphere that is unquestionably the cause of climate change, and that is driven by our carbon based society.” He goes on to add that the UK government’s Infrastructure Carbon Review highlighted that the infrastructure sector has full control over 16% of total carbon-based emissions and influence over a further 37%. The UN has just said that 2017 and 2016 were the second and third hottest years on record and that global carbon emissions rose again in 2017 after three years of little or no growth. And Mark asks how has our (Civil Engineering) industry changed? His assessment – “Not much. The materials and methods used to build operate and maintain infrastructure remain carbon-intensive.”

I’m going to quote the next bit in full because it’s truly shocking. “We are still not using whole-life carbon emissions as the primary parameter by which we decide what gets built and how it gets built. But then we are still not even using whole life costs (Totex) as a primary calculation rather than capital costs (Capex) on anything but a handful of projects in the utility sector. And Anglian Water is still seen as the only client that really cares about this.”

So is there any hope? Apparently institutional investors and insurers are waking up to the threat that climate risks pose to their investments and are asking searching questions of the companies advising them.

Well if I can help anyone being asked those searching questions, or indeed the investors asking the questions, the RICS recently published guidance on Whole Life Carbon Assessment in the Built Environment . My book Project Sponsorship gives detailed and easy to use guidance on whole life costing and developing the business case for investment. We must all get smarter on this vital issue.

 

 

Why so many projects finish late


There is a simple technical reason why so many projects finish late, which is very poorly understood by project managers.

Imagine a project programme (or schedule in the US) where a task of 1 week duration is followed by three parallel tasks also of 1 week duration each. These three tasks must all be completed before a final task (also of 1 week duration) can commence. It’s clearly a three week overall programme.

Parallel Activities

Tasks in parallel – three week schedule

However, let’s take a closer look at the three parallel activities and consider the possibilities. I’ll simplify the maths by suggesting that a task can either finish early (E) or late (L).

LEL

The problem of parallel activities

There are eight scenarios (two possible outcomes to the power of three tasks). Seven of those eight include at least one Late finish, which because the successor task depends upon all three tasks being complete results in a late overall finish. So in this simple five task schedule the odds are stacked 7:1 in favour of a late finish. Understand now why so many projects finish late? A simple sensitivity test using Monte Carlo simulation allows this problem to be spotted at the planning stage, but it’s rarely done.

If you found that interesting you might enjoy my book, Project Sponsorship

Harvey Weinstein, MPs and a Problem with Men


The emerging scandals triggered by the Harvey Weinstein investigations seem to have brought about a watershed moment. Enough is enough, abuse of power and inappropriate sexual advances have to be stopped. I have heard politicians and others making suggestions about how they might be stopped, but I haven’t heard anyone mention one of the fundamental problems with men. Most men are useless at body language. I read a book about body language many years ago and reading it was one of those lightbulb experiences. Apparently successful courtship behaviour is conducted through body language. Women are generally genetically programmed to read the body language of a small human which can’t speak, whereas men aren’t. The book described the average man’s attempts at courtship behaviour as like trying to catch fish by standing in the middle of a river trying to bash fish over the head with a club.

Of course there is still an urgent need for measures to stop the inappropriate behaviour we are hearing about now. But wouldn’t it help if men and women spoke the same language of courtship? Wouldn’t it be better if a man understood whether a woman was interested through some subtle body language signals rather than clumsy suggestions or worse?

So my suggestion is teach body language skills in schools. The girls might get bored, but it would be a useful lesson for them too, in understanding how poorly most men are equipped in that communication channel.

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