Despite the well-documented challenges of megaprojects — large-scale construction projects with budgets in excess of $1 billion — the industry continues to be asked to participate and lead these multi-phased, multi-stakeholder, multi-year projects.

The recent infrastructure bill creates additional funding to improve national infrastructure, even as the industry faces increasing talent and material shortages.

While these types of projects are often talked about in terms of failure, research suggests that one of the keys to long-term success can be attributed to strong leadership.¹

As expenditure on megaprojects continues to grow, the opportunities for companies to play a role in developing infrastructure that will benefit communities for generations to come will also increase.

Using data from Megaprojects: Changing the Conversation² from FMI and the Construction Industry Round Table (CIRT) to investigate leadership practices associated with megaprojects, this article lays out the most valuable competencies, offers a framework for looking at the costs and benefits of effective leaders, and makes the case that investment in team building and leadership training has an outsized payoff on large projects.

The Challenges With Megaprojects

“FMI predicts that over the next decade, annual construction put in place (CPiP) on megaprojects in the U.S. will increase nearly 600%, from about $50 billion to just over $350 billion,” which is near or above 20% of total CPiP³ and 24% of global GDP.⁴ As many have observed, though, once budgets pass $1 billion, projects often experience a cascade of complications.

Cost Overruns

According to Bent Flyvberg, megaproject researcher, nine out of 10 megaprojects experience cost overruns greater than 50% and almost all experience unforeseen challenges.⁵ These challenges can range from community resistance and interparty litigation to such events as the discovery of Native American artifacts during excavation. For example, in the case of Boston’s Big Dig arterial tunnel project, there was no shortage of blame, litigation, and media criticism on that 16-year-long project, which came in more than five times over budget.⁶

But Virginia Greiman, author of Megaproject Management: Lessons on Risk and Project Management from the Big Dig, looks back on it as a useful case study for leadership. Adaptable, capable leaders are increasingly recognized as the most important factor in multi-year, billion-dollar undertakings. “In a megaproject, you are managing change,” says Greiman, an assistant professor at the Boston University School of Law. “You have to discern problems that exist then and see the future also, because megaprojects can take 20 or 30 years.”

Scale

Megaprojects are not simply larger projects; they involve a different scale of aspiration, stakeholder involvement, lead time, complexity, and impact. In terms of society, humanity, science, and the environment, the benefits defy the old measurements. In many cases, the social impact of a megaproject will shape lives for decades to come.

The logistical challenges are equally immense and can’t be addressed with the usual toolbox. “Classical project management theory works great for run-of-the-mill everyday projects, but it completely breaks down in scale,” says Robert Prieto, Chairman and CEO of Strategic Project Management LLC. “Rare or extreme behaviors and events occur much more frequently” in megaprojects than what a normal distribution of outcomes suggests. Put simply, “Complex systems behave catastrophically.”

Contract type or project delivery methods do not determine a project’s success, according to research conducted by Keith Molenaar, Associate Dean for Research at the University of Colorado Boulder, in collaboration with the Charles Pankow Foundation.⁷ Rather, researchers identified that a collaborative work environment is the most important factor, which is also in line with FMI’s research. And this comes down to leadership.

Leadership Biases & How They Impact the Bottom Line

Since megaprojects often come in late, the payoff is usually delayed and additional costs are incurred in the meantime. Research into multimillion-dollar IT projects (which are much simpler undertakings than multibillion-dollar construction projects) found that every additional year spent on a project beyond the original deadline incurs a 15% cost overrun.⁸ So, what do leaders keep getting wrong?