Experience of the role of contracts in megaproject execution

Abstract

The majority of megaprojects fail to achieve their objectives. Studies suggest that up to two-thirds of them do not meet time, cost or performance targets, a much higher proportion than that for conventional projects. Failures are attributed to various causes: stakeholder biases, lack of investment in front-end planning and optimistic estimates and/or schedules, among other factors. Further, it is evident that owners increasingly require larger, more complex projects within compressed timescales. However, even if experience shows that the objectives are unrealistic, there is almost invariably a contractor that is willing to provide a competitive tender for the work. Despite recent improvements in management capability and enhancements to procurement and contracting practices, risk assessment, project planning and control, there has been little noticeable improvement in the outcomes of most megaprojects. This paper, based on both authors’ academic and industrial experiences of megaprojects, focuses on another factor, the contract, and provides an alternative view of the contractual context in which megaprojects are to be delivered and how this affects the current practice of scaling up contracts and procedures in an attempt to offer megaprojects levels of certainty similar to those of traditional projects. Indeed, the existing contracting practice may act to militate against the adoption of more appropriate delivery approaches.