Explaining Cost Overruns of Large-Scale Transportation Infrastructure Projects using a Signalling Game

Strategic behaviour is one of the main explanations for cost overruns. It can theoretically be supported by agency theory, in which strategic behaviour is the result of asymmetric information between the principal and agent. This paper gives a formal account of this relation by a signalling game. This is a game with incomplete information which considers the way in which parties anticipate upon other parties' behaviour in choosing a course of action. The game shows how cost overruns are the result of an inappropriate signal. This makes it impossible for the principal to distinguish between the types of agents, and hence, allows for strategic behaviour. It is illustrated how cost overruns can be avoided by means of two policy measures, e.g. an accountability structure and benchmarking

Managing complex projects

Complexity is an issue that affects all projects. Project managers know this, but it can be difficult to express the realities they face in a language that others can easily grasp. In this chapter we draw on research that identifies three different kinds of project complexity – structural, socio-political, and emergent, and look at practical response techniques to these. We offer a complexity framework to help managers deal with these challenges. We then show how this can be used both as a problem-solving tool, and also as a method to draw out lessons learned at gate reviews or at the completion of the work

Managing disruptions in complex projects: the antifragility hierarchy

Projects are prone to a variety of disruptions across their development cycle, requiring that effective organizations develop strategies for proactively recognizing disruption likelihood and swiftly responding to these events. This paper explores a hierarchy of responses to disruption, based on Taleb’s (2012) theory of antifragile system behavior. Following this reasoning, we suggest that when faced with project disruptions, organizations need to investigate the means to trigger a “convex” response that increases value through antifragile thinking. We propose an “antifragile hierarchy” in which four key responses to project disruption are demonstrated, with a range of strategies available for addressing these disruptions. This hierarchy offers a novel conceptualization of responses to project disruption events, suggesting that the options available to organizations facing disruptions range from fragile (the least effective) to antifragile (the most constructive). Finally, we offer a set of strategies for effectively responding to disruptions to promote antifragility in projects

Lock-in and its influence on the project performance of large-scale transportation infrastructure projects: investigating the way in which lock-in can emerge and affect cost overruns

Lock-in, the escalating commitment of decision makers to an ineffective course of action, has the potential to explain the large cost overruns in large-scale transportation infrastructure projects. Lock-in can occur both at the decision-making level (before the decision to build) and at the project level (after the decision to build) and can influence the extent of overruns in two ways. The first involves the ‘methodology’ of calculating cost overruns according to the ‘formal decision to build’. Due to lock-in, however, the ‘real decision to build’ is made much earlier in the decision-making process and the costs estimated at that stage are often much lower than those that are estimated at a later stage in the decision-making process, thus increasing cost overruns. The second way that lock-in can affect cost overruns is through ‘practice’. Although decisions about the project (design and implementation) need to be made, lock-in can lead to inefficient decisions that involve higher costs. Sunk costs (in terms of both time and money), the need for justification, escalating commitment, and inflexibility and the closure of alternatives are indicators of lock-in. Two case studies, of the Betuweroute and the High Speed Link-South projects in the Netherlands, demonstrate the presence of lock-in and its influence on the extent of cost overruns at both the decision-making and project levels. This suggests that recognition of lock-in as an explanation for cost overruns contributes significantly to the understanding of the inadequate planning process of projects and allows development of more appropriate means.

Touching the void: The loss of containment and the space between operational and entrepreneurial leadership in the K2 disaster

In this paper, we seek to understand how members of a collective facing a novel, unprecedented challenge can lose an integrated and realistic connection to the people, events, opportunities, and threats around them. Using extensive data, including interviews with survivors and unique video footage we analyze how eleven experienced climbers lost their lives in 2008 attempting to summit K2, the world’s second-highest mountain. Existing theories of leadership and information-processing views of human cognition do not fully explain observations from our qualitative study. However, containment and social defense constructs suggest how and why people failed to respond to the impending disaster. We offer four key findings. First, destabilizing conditions can erode operational leadership resulting in a breakdown of the traditional sanctuaries of procedure, role clarity, hierarchy, and positional authority. Second, despite clear, escalating threats and the potential for impending disaster, individual and collective responsiveness, proactivity, and adaption can fail to materialize. Third, people’s responses to novel, unprecedented circumstances are deeply connected to and reliant on the ways collectives develop to contain anxiety. Finally, loss of containment can result in a void, disabling people from confronting and adapting to challenging situations realistically and competently