As the Kingdom of Saudi Arabia (KSA) embarks on some of history's most ambitious construction programmes, effective project governance is essential to success.
Giga projects are so-called for a reason: everything is supersized, from the scale of the developments to the pace of delivery, not to mention the budgets.
However, the greater the ambition, the higher the stakes. With the world’s eyes watching, KSA must uphold its reputation as well as protect the $3 trillion it has dedicated to realising Vision 2030, its socio-economic restructuring plan.
Why Projects Fail
Ankura’s expertise in project governance and acting as delay and quantum experts in arbitration and litigation on capital projects has helped hundreds of clients turn around projects and resolve disputes.
In almost every case – whether for a $1 million or $10 billion project – the underlying cause of failure is connected to poor project governance.
This observation is confirmed by countless thought leadership articles, as well as the findings of enquiries following the failure of large public projects.
The UK’s National Audit Office, for example, cited a lack of project governance, amongst other factors, for the failure of the c.£17 billion London Underground PPP contracts[1].
Governance Defined
What do we mean by governance? Project governance has developed from the broader concepts of corporate governance. The Association of Project Management defines governance as: “The framework of authority and accountability that defines and controls the outputs, outcomes, and benefits from projects, programmes, and portfolios.”
Zooming In
We can split project governance into four areas.
- Alignment of the project portfolio with the organisation’s profitability, customer service, reputation, and sustainability. We have seen, for example, that Neom has embedded its objective, of creating a new model for sustainable living, by specifying that it will be powered entirely by renewable sources.
- Project sponsorship. This is the integration of project objectives with the organisation’s strategy. Project sponsors develop the business case and scope of the project, report progress and issues to the board, and obtain authority and/or decisions.
- Project management effectiveness, i.e. a team’s ability to deliver a project. This depends on having experienced and competent personnel and equipping them with the right resources, processes, and management systems such as planning, cost and risk management, and change control systems.
- Reliable and timely disclosure and reporting by project management and the supply chain. Without a regime of timely disclosure, the board will be unable to make appropriate decisions like authorising additional funds for changes and claims to the project.
Introducing Giga-Governance
The question for giga projects is not whether but how to embed the four elements of project governance throughout the organisation and the supply chain.
The good news is that there are plenty of frameworks for project governance. The Association for Project Management’s (APM’s) ‘guide to governance of project management’ is a good start.
The better news is that most available frameworks are scalable – the same factors apply no matter the project size. However, good project governance also requires resources, buy-in, and planning.
At Ankura, our project governance model is based on our experience in advising and acting on disputes on some of the world’s largest capital projects.
It also draws from industry-recognised protocols and codes of practice on disputes and project management including:
- Association of Project Management Body of Knowledge
- Society of Construction Law – Delay and Disruption Protocol
- Association for the Advancement of Cost Engineering – Forensic Scheduling Protocol
- Publications by the UK’s Office of Government Commerce (OGC) – The OGC was responsible for improving value for money by driving up standards and capability in government procurement.
Rising Demand
Ankura has seen an uptick in demand for project governance auditing and other services, in KSA. This shows that the construction sector realises the benefits of getting frameworks in place early.
We are also increasingly playing an active part in the governance process itself. For example, we are involved in reviewing, recommending, and implementing (including training) processes from inception to delivery, to help projects stay on track.
Other in-demand services include contract reviews, which help identify opportunities and risks at an early stage to maximise success and avoid disputes.
Meanwhile, our forecasting service is helping to drive project management effectiveness by providing independent schedule forecasts, simulations, and capital cost projections for individual projects or entire portfolios.
A Ticking Clock
With ambitious projects come ambitious timelines. With seven years to go, effective project corporate governance is imperative for the successful delivery of the Vision 2030 giga projects.
With good project governance, KSA will not only set a global example by what it has achieved but will provide a good practice guide to the industry as a whole.
[1] National Audit Office, ‘The Failure of Metronet: Department for Transport’, House of Commons papers 512, 2008-9 (TSO, 2009)
This article was first published for Construction Week.
© Copyright 2023. The views expressed herein are those of the author(s) and not necessarily the views of Ankura Consulting Group, LLC., its management, its subsidiaries, its affiliates, or its other professionals. Ankura is not a law firm and cannot provide legal advice.
