Taxpayers beware: New survey shows cost of troubled projects worldwide

By Manufacturing Business Technology Staff August 5, 2008

According to research conducted jointly by ESI International and the project benchmarking company Independent Project Analysis (IPA), troubled projects are costing taxpayers millions.

Study findings confirm these points:

  • 34 percent of all projects succeed.

  • An average of 15 percent of all projects fail.

  • Projects that are considered “challenged”—usually due to cost or schedule overruns—account for 51 percent of all projects.

  • The lost dollar value for U.S. projects in 2002 alone is estimated at $38 billion, with another $17 billion in cost overruns, for a total project waste of$55 billion against $255 billion in project spending ( Source: The Standish Group 2003 ).

  • 59 percent of organizations in the Asia-Pacific region had at least one project failure with an average cost of $8.9 million.

  • Africa, Europe, and the Americas followed suit with an average of 56 percent of the organizations reporting at least one project failure with an average cost of $11.6 million ( Source: KPMG International 2003 ).

“Tangible results require tangible skills. Effective project management can save organizations millions, if not billions of dollars in lost revenue,” says J. LeRoy Ward, PMP, PgMP, executive VP at ESI International, a global organization specializing in project and program management performance improvement.

“When a project fails, it’s important to first acknowledge what’s happening,” says Ward. Signs of failure include strained team relationships, long hours, and threats of legal action. “Troubled project recovery is one of the greatest challenges a project manager can face, but the payoff is enormous.”

The study says troubled projects are a worldwide affliction. From the U.S., to the U.K. and the Asian Pacific Rim, cost overruns coupled with failed time lines lead to sidetracked projects and, ultimately, wasted resources in the form of time, dollars, and people.

In 2003 the United Kingdom’s Office of Government Commerce (OGC) reported the cost of over-budget government IT projects had exceeded

“Projects with poorly defined scope, undeveloped teams, and whose cost and schedule lack detail at the time of execution are more likely to not meet business objectives,” says Mary Ellen Yarossi, director, IPA Institute. “Based on the IPA database of more than 300 IT projects, the quality of project scope development in conjunction with team effectiveness allows projects that have more predictable and more effective project results. Best practices have been shown to reduce costs by 10 percent, reduce execution and implementation time by 8 percent, and improve performance by 10 percent. These project improvements can take a 15-percent rate-of-return project and turn it into a 24 percent rate-of-return project—a 60-percent improvement.”