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Project Sponsorship, Climate Change and Mycroft

The project triangle is a simple yet effective graph which shows us the tension that exists within any project between cost, time and quality. Performance was later substituted for quality and I would suggest that benefit is in fact a better word than performance. Value would be wrong because value is the ratio of benefit to cost. Oscar Wilde said that the definition of a cynic is “a man who knows the price of everything and the value of nothing.” In project management this is a little harsh because the unique nature of projects makes prices quite hard to estimate, compared with operational management where one would be buying the same product over and over again, and the benefits really hard to estimate. When it comes to comparing the benefits and values of projects in different sectors, that’s a real challenge.

The Gulf Stream has recently been a conveyor belt unleashing storm after storm on Western Europe and the eastern United States. In the U.K. funding has been promised to address the aftermath of flooding and to improve flood defences and resilience for the future. In this week’s New Civil Engineer magazine the editor Mark Hansford asks a question about the choice between funding the new HS2 high speed rail project or funding resilient infrastructure. It’s a good question because there is never enough money to fund everything we want. The traditional test for whether a project should go ahead or not is based on the net present value (NPV) of the project’s benefits minus its costs. If this is positive then the project adds value. However in an environment of constrained resources capital rationing applies. The public sector ranks projects by NPV/k where k is the public sector contribution to the project funding. Projects with the highest NPV/k take precedence for approval and in this way the maximum value for public funding should be assured.

The main role of the project sponsor is as guardian of the business case. If project costs rise or the schedule slips, then the project sponsor must again weigh the benefits against the costs and determine whether the project is still of value. It is often hard enough to estimate project costs and timescales, but estimating benefit is much harder. Even in relatively simple sectors such as commercial property development, we may know very well market rental values right now, but what they will be in five years’ time, when our development comes to market, is much less easy to estimate. In the railway industry, where I have invested over a third of my career, there is a sophisticated science for establishing the value of enhancements in rail services built around demand forecasting and valuation of journey time savings. However opponents of HS2 have recently questioned the core of this science by suggesting that in the era of 4G digital communications time spent by an executive on a train is not wasted. Time spent on a train may be just as productive as time spent in the office.

So project sponsors have a difficult task to determine with any degree of accuracy what a project’s benefits will be. But how much more difficult it is if you must weigh the value of investing in flood defences versus investing in high speed rail for example. Unfortunately I haven’t invested any of my career in flood defence, but I guess you can start by asking the insurance companies. If railways value an executive’s time it seems only fair to assign value to the time lost, by not only the victims of flooding but also the myriad of people dealing with the flood aftermath. Then there’s the loss of agricultural production. There must be so many more valuations to be made, not least the cost to the health service and society in general of the human cost of flooding.

When it’s difficult enough to value benefits in a single sector, the task of government in making funding decisions across sectors is truly daunting. I have just finished reading The House of Silk, the new Sherlock Holmes novel by the hugely talented Anthony Horowitz. Sherlock’s brother Mycroft is described as “a vital figure in government circles, a human repository of arcane facts, the man whom every department consulted when something needed to be known.” Therefore as I think I am calling for an improved method of assessing project benefits and value across sectors and departments, that method could be called Mycroft.

Until such time as Mycroft is developed, the cynic in me believes that such funding decisions will be calculated on an assessment of how many votes there might be in flood defence versus high speed rail for example, rather than a calculated assessment of the overall value to society. But then perhaps that’s what democracy is all about.

[ribbon-light]Author Bio:[/ribbon-light] David West graduated with a masters degree in Engineering Science from the University of Oxford, and later added an MBA. He is a chartered civil engineer, member of the Association for Project Management and also the Institute of Risk Management. He has worked on projects in the power, nuclear, petro-chemical, building, leisure, health, defence, rail, and development sectors. He has worked right across the project spectrum including roles as: designer, design manager, site manager, construction manager, project manager, project sponsor, risk manager, business unit manager, developer and project sponsor. He has also taught on the Open University MBA programme. He is the author of Project Sponsorship: An Essential Guide for Those Sponsoring Projects Within Their Organizations, ISBN 978-0566088889 published by Gower. David is a Senior Technical Director with WSP, a professional services consultancy specializing in Property, Transport & Infrastructure, Industry and Environment projects. Information about his Project Sponsorship paperback book can be found at www.gowerpublishing.com/isbn/9780566088889 and Project Sponsorship ebook at www.gowerpublishing.com/isbn/9781409410799.

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