How to Prevent Catastrophic Project Blowouts

In this episode of Risk! Engineers Talk Governance, due diligence engineers Richard Robinson and Gaye Francis discuss: How to prevent catastrophic project blowouts.

They discuss the three key considerations when undertaking project due diligence and preventing catastrophic project blowouts as:

1. Ensure your scope is right, have identified your critical success outcomes are and all key stakeholders understand what the prize is and agree.
   
   
2. Undertake a completeness check of threats. Project due diligence is not a risk assessment, it’s about controls, and putting in controls to protect against threats. 
    
3. Review the project on a regular basis and at key milestones. If there are any scope changes being proposed, you need to question what it will actually do to your project and where it’s at now. Redefine the project scope, as appropriate, but ensure changes are communicated transparently and clearly.

This discussion follows R2A’s booklet: How To Prevent Catastrophic Project Blowouts (A Practical Guide for Directors). You can purchase online at https://www.r2a.com.au/store/p/project-governance-booklet-directors

For further information on Richard and Gaye’s consulting work with R2A, head to https://www.r2a.com.au.

Gaye is also founder of women’s safety workwear company Apto PPE if you’d like to check out the garments at https://www.aptoppe.com.au

Transcript

Megan (Producer) (00:00):

Welcome to Risk! Engineers Talk Governance. In this episode, due diligence engineers Richard Robinson and Gaye Francis discuss: How to prevent catastrophic project blowouts.

(00:14):

We hope you enjoy their chat. If you do, please give us a rating and subscribe on your favourite podcast platform. If you'd like more information on R@A's work or have any feedback or topic ideas, please head to the website www.r2a.com au.

Gaye Francis (00:32):

Hello Richard, welcome to another podcast session.

Richard Robinson (00:35):

Good morning Gaye. Interesting trip in today!

Gaye Francis (00:37):

It 's been a difficult start to the morning, but we are here now and ready to do a podcast. So today we're going to talk about preventing catastrophic project blowouts and it's a bit timely in that we've just updated our little booklet for 2025 and that's now available.

Richard Robinson (00:57):

And you might notice one of my favourite chapters is in it.

Gaye Francis (00:59):

What's your favourite chapter?

Richard Robinson (01:01):

Eeke, Irk and Oops!

Gaye Francis (01:03):

You can tell Richard went about naming some of these chapters, can't you?

Richard Robinson (01:07):

Yes. But see, I explained this to you a long time ago and one of the first things that happened when you arrived at R2A if I recall correctly, and you said there's a fourth term. I was explaining how these are three critical terms in risk. And you said the fourth term is Grrrr. And I said, what does that mean? You said, it arises when you're a younger female working with an older male.

Gaye Francis (01:30):

It probably still exists today even though we've aged a little bit. So we've gone out off on a tangent already in the first two minutes of the podcast, but that's alright. So for ending catastrophic project blowouts, and it was also timely in that there was a recent article in Create at the end of February and it was called...

Richard Robinson (01:49):

Create Magazine from Engineers Australia.

Gaye Francis (01:51):

Correct. Big budget blowouts costing billions each year. And it was basically an interview and a chat with the national chair of the CROSS Engineering Society and it sort of covered projects like Inland Rail, Snowy Hydro, the Northeast Link, Paradise Dam, Project Energy Connect, and then the Northeast Link. And I think one of the interesting things that it said was they're typically not technical issues that slow a project down or stop a project down. And when they were talking about budget blowouts, they were talking in terms of cost, time and also scope, which was an interesting one. But they were saying that the engineers aren't so good at communicating such things as the environmentals approvals and legislation and land acquisition issues and they're typically the issues that can blow projects out.

(02:48):

So it was really interesting. I think one of the interesting things that he said was typically projects don't go wrong, they start wrong. And I think some of our stuff that we would observe in the project due diligence stuff that we do, and I think the governance process and the due diligence process at R2A applies to projects probably extends that cost engineering idea further because he's sort of talking about typically the most likely type of blowouts and things that can go wrong in projects and starting with other projects. But we're saying what are those catastrophic issues regardless of how likely they are, that can stop a project.

Richard Robinson (03:32):

And the key thing was to make sure you understand what it is you're actually doing. I mean one of the points we make is that our approach to all this is a very military intelligence approach because we learned, I got this with Bob Browning all those years ago and he got it off MI6, I think it was when he was on exchange to the UK. But the point was you need to clearly understand what is you're trying to achieve as setting out to achieve. And if you don't get that right, it will come unstuck. And I say it's the military intelligence technique because one of the things that you try to do if you're about to go on a military mission on which your life depends and if you get it wrong, things are going to go badly. You need to really spell out what success looks like and how you're going to get there. And then you make sure that anything that threatens those outcomes are dealt with them, we call them vulnerabilities, but that means we're looking at control. And one of the more interesting articles that popped up, I dunno quite why I came across it, but I was doing a search for some work we were doing. Oh it was we were doing course last week wasn't it?

Gaye Francis (04:25):

Last week for defense?

Richard Robinson (04:26):

For defense. And I came across an article by, it was an RMIT researcher and aI New Zealand army personnel person. And they were reviewing 10 years of the implication of WHS legislation on defense in Australia. And they said, this is sort of the first study this has been done. It's been around now for about 10 years from defense's viewpoint because it commenced in 2012. And they were asking the question, well what's the impact? And the last sentence, literally the last sentence in the whole article just says that the WHS legislation, the difference it's made, it's not about the level of risk, it's all about the level of control. And that's the final conclusion.

(05:08):

And that's our point because our frustration with all this stuff is particularly to do with the Rsk Management Standard. And I suppose I could mention a current court case I've got, but people still doing risk assessments, working out target levels of risk and safety when the legislation, it's just flowing from that very human thing. It's not the level of risk that counts. It's always been the level of control. And that's the same thing, whether it's projects or safety.

Gaye Francis (05:31):

And I think that's the difficult conversation that people have to have. Isn't it often the project comes unstuck because the aim or the objectives of the project aren't articulated that all the stakeholders agree that that's what they're working towards.

Richard Robinson (05:47):

Correct. I mean we make the remark about we watch defense in some of their gate procurement processes. If you don't keep an eye on what the overall outcome is, I mean they go through this gate and there's a two year team that's got to get through the next gate. Well for them that's their critical success outcomes. But if that team there isn't looking to what the final outcome is supposed to be, then they set all the other teams in the following gates up for the fall.

Gaye Francis (06:12):

So I think the idea of scope creep is a little bit of a funny one, because you've actually got to go back and say, alright, if we change that in our project, how does that affect our critical success outcomes? And it's not just time and budget, it's actually is it actually delivering what we want it to deliver? And do all the stakeholders agree to that?

Richard Robinson (06:33):

Yes. And one of the problems you've got is times change and if it's a long project, people's perceptions change and what's important, what it was trying to achieve can change too. I mean one of the funny things last week we got asked about Agile and I had a quick look at that. I mean I've come across it before, but all the different techniques that pop like PRINCE2 and all the other ones that different people say, this is the way to do it, if you don't do it this way, it's a failure. Whereas I think we would say it is better off to think through what you're trying to achieve rather than just rely on a (one technique).

Gaye Francis (07:02):

Previous experience on other projects, I think would be our suggestion to think it through. And then, I mean, don't lose all the lessons learned and everything, but don't use it as the basis for going forward. Use it as insight to reflect on the project that you are doing.

Richard Robinson (07:17):

But you've got to make sure you understand what it's you're trying to achieve. And if you don't, it will come and haunt you.

Gaye Francis (07:23):

We've actually walked away from projects because they couldn't articulate what they were trying to achieve.

Richard Robinson (07:27):

Well, you might remember that large desal project in Victoria and the project manager wanted to do it our way and because they wouldn't do it our way he walked.

Gaye Francis (07:35):

I think one of the other difficult things that there's a lot of pressure on projects at the moment and they're saying that there's big project blowouts and things like that, but many of these projects were scoped and started and estimated before Covid-19 and during Covid. And I think times have really changed. There's a big difference in the costs associated with projects in today's dollars compared to what they were five years ago.

Richard Robinson (08:02):

Yeah, it's been 10% per year roughly from what I can see. You watch the CPI figures and things like that and what's happening in procurement and so forth. Although I was listening to somebody saying, and one of the problems is just not having the people to do things at the moment, getting anybody even give you a quote or a tender is getting problematic, but somebody did say that that's all starting to slow down a bit and there might be more bodies available to do things in the future.

Gaye Francis (08:26):

So maybe there'll be an improvement in some of those?

Richard Robinson (08:31):

Maybe. I don't know. The world is a very strange place at the moment. If anybody's watching politics.

Gaye Francis (08:38):

It's also for us, we often see that look typically projects do some sort of risk management or due diligence with their projects, what we...

Richard Robinson (08:47):

They always do. Whether it's successful or not, that's the next question.

Gaye Francis (08:50):

Yep. I think the other thing is that we often see missing is there's gaps in it. There's not a completeness check of ideas. And a lot of the work that we do, I think that's one of our key criticisms of the risk processes or due diligence work that people undertake or organisations and projects undertake is you don't have that sense of completeness. It's sort of a brain dump of issues in no particular order. And I would agree with the Chair of the CROSS Engineering Society in that I think typically it's not technical issues.

Richard Robinson (09:26):

For a known technical issue, they seldom failed. It's the unknown one or unspecified one that nobody quite understood was there or chose not to understand.

Gaye Francis (09:36):

And so there's some planning associated with that. But if you go through a project due diligence viewpoint and you list the threats by project life cycles starting at the very, very top where you've got procurement and planning and approvals processes. One of the things that the inland rail was getting a bit of a bad rap about was basically it's a rail project, but it's going through three different jurisdictions, which means that there's three different approval processes and they didn't allow sufficient time. And I don't know whether they were actually one approval before you could get the next approval or whether you could go and get 'em concurrently.

Richard Robinson (10:19):

You might remember the Tugan bypass Queensland said New South Wales goes under a federal airport. And we had 40 people in the room, remember, because it was all becoming a bit unstuck. But it did come down to who has the biggest, well, I'm not quite sure, but it seemed to me that the Queensland's were paying for it, but New South Wales had the greatest impact, which seemed a bit unfair to me.

Gaye Francis (10:40):

I think that was because from emergency services viewpoint, they were the one that would respond to any incident under the tunnel. So that's that discussion around which we've had many times around stakeholders, key stakeholders and interested parties who actually live and dies by the (decisions). So by going through all of this stuff, it's not just the technical issues. If your project's only considering the technical issues, you will come unstuck.

Richard Robinson (11:04):

And people are still trying to apply the Risk Management Standard. Just again, because I'm in this Expert Witness thing, you're talking about unlikely things and one of the thing is experts are not omniscient. They can't be. So they can't say when you're talking about rare, big, bad things, they of themselves can't say what all those things are and how they might manifest. But you can go about it another way. But if you try to risk assess it and you're trying to say, I've identified them all, it is all about the control. It's not about the risk assessment. That doesn't help at that point because you cumulatively, you can't work out from a calculation viewpoint what that might be.

Gaye Francis (11:45):

So the three key things that we would say for project due diligence and preventing catastrophic project blowout is make sure you've got your scope right and you've identified what your critical success outcomes are.

Richard Robinson (11:55):

And you've communicated to everybody. So everybody understands what the prize is.

Gaye Francis (11:58):

And everyone agrees! That's always a bonus. I think you happen to have a completeness check of threats because you can typically manage... You can't manage the surprises. Projects can typically manage things that can go wrong. And then, as you said, it's a controls review to say, well, these are the controls you can put in place to protect against these sort of threats.

Richard Robinson (12:24):

And things that pop up if you've got the control there can be dealt with. But when there's no control, it's just a surprise.

Gaye Francis (12:32):

And I guess that takes us down to our last point. It's not do you due diligence review or your risk assessment and then pop it on the shelf for the entire remainder of the project. You've actually got to review these things on regular basis and the key times to do that are project milestones or if there's one of those scope changes being proposed, you really got to pull that out and say, well, what does that scope changer actually do to our project and where we are. Now, you can redefine it, that's fine, but you have to take everybody on the journey and it has to be transparent and clear.

Richard Robinson (13:06):

And that's what I understood the Agile process was trying to do.

Gaye Francis (13:09):

A change management process? Ok. So again, we're not saying that any of these things are wrong or anything like that.

Richard Robinson (13:18):

Hey, hang on a minute, we've in crucifying, the risk management standard. And I will point out that...

Gaye Francis (13:22):

In isolation.

Richard Robinson (13:23):

But I will point out that article I read, it was commenting that the Engineer's Australia Safety Guideline actually said the Risk Management Standard was an error and that the defense had been agreeing with that.

Gaye Francis (13:34):

For safety terms.

Richard Robinson (13:35):

For safety terms, correct.

Gaye Francis (13:37):

Correct. So understand what your different processes and tools do and then yeah, use 'em as guidance rather than the answer, I would say.

Richard Robinson (13:48):

Yep.

Gaye Francis (13:48):

Thank you for joining us today and we hope that our chat has prevented a catastrophic project blowout for your particular project. Thanks, Richard.

Richard Robinson (14:00):

Thanks Gaye. Always interesting.

Gaye Francis (14:01):

Bye.