Let’s start by accepting the part about how COVID-19 is unprecedented in its impact, and to most, it is a Black Swan*. To read more about Black Swan events, check out my co-founder Alan’s blog post here. This article is designed to share thoughts on how best to think about reducing the system-wide impacts of COVID-19 on construction projects, the tools and methods we have at our disposal and how best to utilise them.
“I was late on my last 3 projects but this project will be different” — anonymous Project Manager
Given that delays are frequent, unforeseen and can often be of catastrophic consequence, there needs to be some conclusion drawn that, in fact, Black Swan’s do occur on projects. Here’s an example — Project A is a Greenfield power plant, connected by road to the remote project site. During the Project, the team is making excellent progress, with activities tracking as planned. A critical part of the plan is the installation of a gas turbine. Unfortunately, during transport the bridge on the primary road collapses under the turbine’s weight. Turbine + Water = Dead Turbine.
An event of this magnitude would have catastrophic consequences to the Project. Sourcing an alternative turbine can take many months and there will be chaos as the team scrambles to minimise the extent of damage to the Project. In hindsight, the team should have taken into account the low likelihood, high impact event of a bridge collapse — the frustrating beauty of hindsight! The team from Project A now have the data embedded in them to correctly estimate the likelihood and extent of a project delay due to a bridge collapse whilst a turbine is traversing it. In isolation, this data probably doesn’t feel very representative of the “average” project but if you consider that, in fact, 128 bridges are expected to collapse in the US annually, the chances that another construction project will suffer in a similar way to Project A is now considerable.
How is a bridge collapse similar to COVID-19’s impact? Both were deemed to be unlikely by project teams, both have significant consequences to project duration and both appear to have a way of being rationalised in hindsight. The difference is that COVID-19 affects all projects around the world and therefore takes a system-wide toll, as opposed to a local toll in the case of the bridge.
However, if you consider each project in isolation, similar to Project A, there is sufficient ground truth to say that past data on construction project performance contains Black Swan events, which can be used to estimate the likely impacts of the most topical Black Swan of modern time. If that wasn’t a jaw dropper, past data shows us how projects (irrespective of the cause) have handled impacts, giving us access to a wealth of knowledge and experience to guide us in these testing times.
Thinking of projects in isolation leaves the question of the system (or portfolio) that eventually makes up the balance sheet of most contractors. We’ve spent time at nPlan thinking about how best to spot the weak links or fragile projects in the portfolio, quite simply by comparing them against past data. If this were to scale up to a Government or National level, we’d be able to tell which projects are most likely to emerge a success and which are most likely to waste public money, think of it as a way of removing biases and leveraging data to guide over $1.2T in public money in wiser ways. Our friends at Harvard Business Review tend to agree here.
If there is one thing I can remember from my time managing projects with Shell, it is that not knowing where the project is headed is a deeply unsettling feeling. Using data from how past projects performed would have helped me many years ago and I hope that the work we’re doing at nPlan will help those who need it the most today.
* The author of the Black Swan, Nassim Taleb, has argued that COVID-19 is a White Swan — a predicted event of known consequence.