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U.S. Squandering Millions Due To Clumsy Project Management

Wed, 12/03/2008 - 6:36am
Troubled projects are costing taxpayers millions, according to joint research conducted by ESI Intl., an organization specializing in project and program management performance improvement, and Independent Project Analysis (IPA), a project benchmarking company.

The companies say that some poignant conclusions of the study reveal that:

• 34 percent of all projects succeed, while an average of 15 percent of all projects fail.

• Projects that are considered “challenged”—usually due to cost or schedule overruns—account for 51 percent of all projects.

• The lost dollar value for U.S. projects in 2002 alone is estimated at $38 billion, with another $17 billion in cost overruns, for a total project waste of $55 billion against $255 billion in project spending (The Standish Group 2003).

• 59 percent of organizations in the Asia-Pacific region had at least one project failure with an average cost of $8.9 million.

• Africa, Europe and the Americas followed suit with an average of 56 percent of organizations reporting at least one project failure with an average cost of $11.6 million (KPMG International 2003).

“Tangible results require tangible skills. Effective project management can save organizations millions, if not billions, of dollars in lost revenue,” according to ESI Executive Vice President J. LeRoy Ward, who is a project, as well as a program, management professional by Project Management Institute standards.

The study further indicates that troubled projects are a worldwide affliction. From the U.S. to the Asian Pacific, cost overruns coupled with failed timelines lead to sidetracked projects and, ultimately, wasted resources in the form of time, dollars and people.

“Projects with poorly defined scope, undeveloped teams, and in which cost and schedule lack detail at the time of execution are more likely to not meet business objectives,” says IPA Institute Director Mary Ellen Yarossi. “Based on the IPA database of more than 300 IT projects, the quality of project scope development in conjunction with team effectiveness allows projects that have more predictable and more effective project results.

“Best practices have been shown to reduce costs by 10 percent, reduce execution and implementation time by 8 percent, and improve performance by 10 percent. These project improvements can take a 15 percent rate of return project and turn it into a 24 percent rate of return project—a 60 percent improvement.”

ESI and IPA say that the State of Wisconsin lost $122 million due to failed projects in 2007, and according to the Joint Legislative Audit and Review Commission of the Virginia General Assembly, the State of Virginia wasted $75 million on failed development efforts with an additional $28 million incurred in cost overruns in 2003. The State of Texas has reportedly run into similar issues.

“When a project fails, it’s important to first acknowledge what’s happening,” warns Ward. (ESI and IPA believe that signs of failure may include strained team relationships, long hours and threats of legal action.) “Troubled project recovery is one of the greatest challenges a project manager can face, but the payoff is enormous.”
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