Risk, uncertainty and governance in megaprojects: A critical discussion of alternative explanations

Abstract

This article critically discusses different explanations for the performance problems exhibited by many megaprojects, and examines the proposed governance solutions. It proposes a three-fold typology of explanations and solutions by examining authors’ epistemological assumptions about decision-maker cognition and about decision-maker views on the nature of the future. It argues that despite important differences in their epistemological orientation, these explanations share an acceptance of the notion of actor farsightedness. It concludes that this encourages them to focus on governance in megaprojects, made forms of organization designed ex ante, and to ignore governing in megaprojects, spontaneous micro-processes of organizing emerging ex post. Identification of this gap adds support to calls by projects-as-practice researchers for a broadening of research to encompass the actuality of projects. A new line of enquiry within this broad projects-as-practice agenda is suggested.

Introduction

Governance has become an increasingly popular theme in the project management literature. This reflects a widening of focus away from the purely technical and operational tasks that need to be fulfilled to deliver project outcomes, to encompass a much greater interest in how interactions between the multiple actors responsible for undertaking those tasks are organized and coordinated (see, for example, Atkinson et al., 2006, Clegg et al., 2002, Flyvbjerg et al., 2003, Miller and Lessard, 2000, Pitsis et al., 2003, Pryke and Smyth, 2006, van Marrewijk et al., 2008, Williams et al., 2009, Winch, 2001, Winch, 2009). Kloppenborg and Opfer (2002) describe this in terms of an increased focus on stakeholder identification and management.

This reorientation in the literature has coincided with the increasing popularity over the last 25 years of a project form variously described as the megaproject (Flyvbjerg et al., 2003, van Marrewijk et al., 2008), the large engineering project (Miller and Lessard, 2000), or the service-led project (Alderman et al., 2005). These labels are applied to very large-scale projects with several shared features: the project delivers a substantial piece of physical infrastructure or a capital asset with a life expectancy measured in decades; the client is often a government or public sector organization; the main contractor or consortium of contractors are usually privately-owned and financed; the contractor often retains an ownership stake in the infrastructure/asset after the construction phase is completed – typically as a minority shareholder in a special purpose vehicle (SPV) – and is paid by the client for the service that flows from the asset's operation or use over a number of years. It is this final feature, commonly associated in the literature with the notion of public-private partnership (Skelcher, 2005), that most differentiates such infrastructure projects from those undertaken in the years before the mid-1980s.

These characteristics, associated with what Crawford and Pollack (2004) call ‘soft’ projects, are deemed to create exceptional challenges for project managers. There are high levels of complexity along various dimensions (Remington and Pollack, 2007), the potential for significant conflicts of interest between the wide variety of public and private sector stakeholders (Alderman et al., 2005, Clegg et al., 2002), and the need to make decisions and to act under conditions of uncertainty as well as risk (Atkinson et al., 2006, Loch et al., 2006). There is substantial evidence that these challenges are proving somewhat intractable, often leading to substantial cost overruns, delays in completion and failure to deliver against the objectives used to justify projects (see, for example, Eden et al., 2005, Flyvbjerg, 2009, Flyvbjerg et al., 2002, Flyvbjerg et al., 2003, Miller and Lessard, 2000, NAO, 2006, NAO, 2009, Williams, 2005, Williams, 2009). It might seem somewhat paradoxical, therefore, that megaprojects have become increasingly popular in recent years (Williams, 2009). A willingness to take on these challenges is attributed by some to what Bauman (1998) has called the ‘Great War of Independence from Space,’ suggesting that infrastructure enhancements are playing a key role in reducing distance and therefore friction between actors in different parts of the world (Flyvbjerg et al., 2003).

This article discusses how a number of different writers seek to explain the significant performance problems exhibited by many megaprojects, and critically examines their suggested governance solutions. The key aims are to provide a broad categorisation of different types of explanation and associated solutions, and to identify any significant commonalities between explanations. This is achieved by examining each author's fundamental epistemological assumptions about decision-maker cognition and about decision-maker views on the nature of the future (risky or uncertain). The use of epistemological foundations as a basis for categorising different explanations of megaproject performance is inspired by the work of the Rethinking Project Management Network (Cicmil et al., 2006, Winter et al., 2006).

The different ways in which these epistemological assumptions might be handled are examined in the next section, in order to elucidate some spaces within which the selected texts can be categorised and critiqued. Three types of explanation are identified and discussed in the subsequent section. The key insight derived from the discussion is that despite important differences in their epistemological orientation these three types of explanation share an acceptance of the notion of actor farsightedness, albeit differently conceived. It is concluded that this acceptance encourages these explanations to focus on governance in megaprojects – forms of organization designed ex ante – and to ignore governing in megaprojects — micro-processes of organizing emerging ex post. The possibility that changes in governance might occur and the nature of any change as a project proceeds are therefore downplayed. A call is made for future research to include a greater focus on project governing, conceiving it as spontaneous order rather than something that is designed or made (Chia and Holt, 2009). The argument here, though, is not that a focus on governing should replace a focus on governance, but rather that there should be an appreciation of both levels of analysis. It is acknowledged that governing exists in the context of governance and that the two are mutually constitutive. The paper thus adds to calls made by other researchers for a broadening of research to provide a richer understanding of the actuality of projects (Cicmil et al., 2006, Hällgren and Söderholm, 2011) and suggests a way in which this broader agenda can be taken forward.