The Widening Trust Gap in Projects
Trust is essential for project success. With several stakeholders, often with competing short term business objectives, how is this trust established by the owner team? What causes trust to break down? In this article we discuss this challenge from the perspective of the owner team.
This article was triggered by four recent events, which caused me to reflect on what the future holds for projects. These events are:
- A thought-provoking Insight Article on the future of project controls (Mattheys, 2018);
- The Insight Article on the role and responsibilities of a project management office (PMO) (Taljaard, 2018);
- Cenpower Generation’s recent termination of its contract with the construction company, Group Five, to complete the $410m Kpone power station in Tema, Ghana (Claassen, 2018); and
- A second down-scaling in a period of four years of the engineering and project management departments at a petrochemicals company where I spent most of my working career.
Literature is freely available on future trends in project management and what would be expected from future project managers (Alexander, 2018; Evamy, 2017; Jordan, 2017; Schoper, Gemünden & Nguyen, 2016). However, discussions on the widening of the trust gap and its impact on project success is extremely limited.
Keep in mind that I’m based in South Africa, and my observations might be unique to Africa and third world countries.
The trust gap
Independent Project Analysis (IPA) have been analysing megaprojects for over 30 years to determine the requirements for project success and to help their customers create and use capital assets more efficiently. They’ve highlighted the crucial role that a strong, fully staffed, owner project management team, with the appropriate work and governance processes in place, plays in delivering successful projects (Merrow, 2011). It is the owner project management team that typically leads the front-end loading phase of projects. Merrow (2011) emphasises the extraordinary degree of trust, cooperation and communication required between the owner organisation, as represented by the project sponsor, and the owner project management team.
van Heerden, Steyn and van der Walt (2015) build on these principles and propose a preferred structure for the owner project management team, as shown in Figure 1. The owner project management team is shown as a collection of four blue triangles, representing business management, project management, engineering and operations, arranged in a larger triangle. Below this, and shown as a red box, we have contracted in functional services, technology suppliers, and engineering and project management contractors.
Figure 1: Trust gap between owner PMT and contractors (Adapted from van Heerden, et al, 2015)
I refer to the interface between the owner project management team and contractors, suppliers and service providers, i.e. the gap between the blue triangles and the red box in Figure 1, as the trust gap. Obviously, the working relationship between these parties, responsibilities and deliverables must be described in numerous carefully worded contracts, but significant trust is essential for project success.
Before getting to the factors that contribute to a widening trust gap, let us first consider the different roles and perspectives of the owner organisation and the owner project management team on the one hand, and the contractors on the other.
Different roles and perspectives for owners and contractors
Owner organisations, and specifically the owner project team, have a different role and perspective than the contractors in projects. This difference stems from the fact that owner organisations implement projects to achieve strategic business objectives, whereas contractors only focus on delivering projects which meet the agreed performance standards, on time and within budget. A summary of the different objectives, roles and perspectives of owners and contractors is given in Figure 2.
Figure 2: Different perspectives for owners and contractors
Project scope changes can lead to cost overruns and schedule slip and should be diligently managed to that which can result in significant, demonstrated improvement to the project, or that which is essential to achieve safety and compliance objectives. However, from the point of view of an engineering contractor, scope changes could mean thousands of extra, recoverable, engineering hours. Scope changes can also be used as an easy excuse for schedule slip by contractors.
Current trends at owner organisations
Owner organisations can be public companies, private companies and state-owned enterprises (SOE). Owner organisations typically own and operate the production facilities and/or infrastructure delivered by projects.
Over the past number of years, we’ve seen a gradual eating away at the numbers and experience base of primarily the engineering and project management departments in owner organisations. Reasons for this are plentiful, and range from the inability to raise capital for projects, to poor strategic vision for the company. Restructuring of top management and personnel cuts in the operations department also result in fewer individuals in these areas being available to focus on capital projects. Business and operations management are important stakeholders in any project, and play a significant role in the commissioning of facilities and the running of a sustainable business. This situation is reflected in Figure 3 as mice eating away at the underbelly of primarily the engineering and project management departments, and so widening the trust gap.
Figure 3: Widening of the trust gap (Adapted from van Heerden, et al, 2015)
In SOE, most top positions are political appointments. In South Africa and in the Gupta state-capture era, important project and tender decisions were often made by individuals with little or no project management or engineering background. The primary focus seemed to be self-enrichment, and not project success. There are many instances where SOE’s ignored their own tender regulations when awarding contracts, for example, South African railways officials imported brand new locomotives from Europe worth hundreds of millions of rand, despite explicit warnings that the trains are not suited for local rail lines (Myburgh, 2015).
In South Africa, we have the additional burden of complying with Broad-Based Black Economic Empowerment (BBBEE) requirements, with the implication that individuals with extensive experience are made redundant, or are replaced with candidates with limited experience. Project management and engineering departments thus not only become smaller, but tend to be staffed with less experienced personnel.
Trends at engineering and PM companies
Referring to Figure 3, it is obvious that the widening of the trust gap is not only as a result of personnel cutbacks, loss of project and engineering experience, and greed from the side of the owner organisation.
The trust gap can also open from the side of contractors, suppliers and service providers, as illustrated by the erosion of the red box in Figure 3. Some of the factors that can contribute to this erosion of trust are listed below:
- Financial standing: Construction companies in South Africa are in a difficult situation at present and personnel cutbacks are frequent. Companies are downsizing and/or put up for sale;
- Bribery: Attempts at bribery of technology suppliers, service providers and contractors by personnel from state or owner organisations prior to the signing of a contract or during the execution thereof can lead to strained relationships and would impact the chance of project success;
- Communication: Unclear project objectives and charter, from an immature or understaffed owner project management team, combined with ad hoc and incomplete communication will erode trust;
- Interface management: Insufficient effort or resources for proper client liaison by contractors and service providers, most likely due to in-house cost cutting at the contractors and service providers;
- Relationships: Soured relationships following a history of schedule and cost overruns on previous projects for same owner organisation. This can also be a concern based on underperforming end-products from previous projects and outstanding claims;
- Coordination: No experienced managing contractor to keep a project on track, despite poor decision-making from the owner project management team. This is a certain recipe for disaster; and
- Incompetence: Disregard of owner company tender procedures may lead to the selection of incompetent contractors and service providers, often with catastrophic results.
Impact of a widening trust gap
IPA measure five dimensions of project effectiveness in their assessments to determine whether a project is a success, or not (Merrow, 2011). If a project surpasses the threshold limit for failure on any one of these dimensions, the project is considered a failure. The five dimensions are cost overruns (>25%), cost competitiveness (>25%), schedule slip (>25%), schedule competitiveness (>50%) and production vs. plan in year 2 of operation. Project success is defined as a lack of failure.
As the trust gap widens, the probability of remaining below the threshold limit for failure on any of these dimensions decreases, i.e. the wider the trust gap, the larger the likelihood of an unsuccessful project.
Closing the trust gap
Given the state of the South African economy and political uncertainties, the question is whether the trust gap can be reduced to improve the likelihood of project success. Two options immediately spring to mind:
- Eliminate corruption: Elimination of corruption in specifically SOE should receive attention at the highest level and proper governance should be instituted to ensure that tender procedures are always followed. The decision of which contractor to employ should always be made by a team of professionals with the necessary experience and knowledge, and using a predetermined decision matrix; and
- Use external resources: The southern African market is awash with highly competent engineers and project managers, many of whom were put on early retirement due to the factors described in previous sections. Many of them are available as consultants to fill critical vacancies on owner project teams, especially during the early project stages. These are people who understand the business requirements and can translate strategic business objectives into clear project objectives.
The future of the Project Management Office (PMO)
Taljaard (2018) describes the roles and responsibilities of the PMO very clearly in his recent article. Based on the trends described above, it is obvious that owner organisations must make a fundamental mind-shift where it involves project implementation. Although all the PMO functions remain relevant, I forecast a downscaling of some of the functions, and a possible sharing of some of the PMO roles, like project portfolio management and optimisation by other senior business leaders.
I forecast a growth in the number and utilisation of owner project team support professionals. Lastly, the role of the owner project sponsor will become increasingly important. For large and complex projects, the project sponsor is seen as an executive, full-time position by competent individuals who have been trained as sponsors, understand the business objectives and can make decisions based on facts
Figure 4 is summary of my view of the future of the PMO and the project sponsor.
Figure 4: The future of the PMO
The widening of the trust gap is very visible in southern Africa and may be applicable in most third world countries. The wider the trust gap, the lower the probability of project success… Fortunately, the widening can be curtailed by improved governance and the elimination of corruption, as well as the use of freelance project management and engineering professionals.
OTC, and other consulting groups like us, should see an increase in the demand for our services, once owner organisations make a mind-shift in their approach to projects.
Alexander, M., 2018, 5 Project management trends to watch in 2018. Available from https://www.techrepublic.com/article/5-project-management-trends-to-watch-in-2018/. Accessed on 28 December 2018.
Claassen, L., 2018, Ghanaian power firm ends troubled contract with Group Five. Published in BusinessDay of 2 December 2018. Available from https://www.businesslive.co.za/bd/companies/energy/2018-12-02-ghanaian-power-company-ends-troubled-contract-with-group-five/ . Accessed on 28 December 2018.
Evamy, M. (ed), 2017, Future of project management., Publication by the Association of Project Management, Arup and The Bartlett School of Construction and Project Management at UCL.
Jordan, A., 2017, The technology-driven future of project management: capitalizing on the potential changes and opportunities. Publication by Oracle, projectmanagement.com and Project Management Institute.
Mattheys, K., 2018, Insight Article 052: Disrupting project controls – fast forward 20 years. Available from https://www.ownerteamconsult.com/publications/ Accessed on 14 December 2018.
Merrow, E.W., 2011, Industrial megaprojects: concepts, strategies, and practices for success., John Wiley & Sons, Inc., Hoboken, New Jersey.
Myburgh, P-L., 2015, SA’s R600 million train blunder. Available from https://www.news24.com/SouthAfrica/News/SAs-R600-million-train-blunder-20150704. Accessed on 28 December 2018.
Schoper, Y-G., Gemünden, H-G. & Nguyen, N.M., 2016, Fifteen future trends for Project Management in 2025. Published in the Proceedings of the International Expert Seminar in Zurich in February 2016 on Future Trends in Project, Programme and Portfolio Management.
Taljaard, J.J., 2018, Insight Article 054: The project management office (PMO). Available from https://www.ownerteamconsult.com/publications/ Accessed on 14 December 2018.
van Heerden, F.J., Steyn, J.W. & van der Walt, D., 2015, Programme management for owner teams: a practical guide to what you need to know., OTC Publications, Vaalpark, RSA. Available from Amazon.
Consulting Partner, Director
Jurie holds a BEng(Chem)Hons and an MBA. He has more than 37 years of engineering, operations management and functional management experience. He started, developed and managed the Environmental & Risk Engineering group in Sasol Technology for more than 14 years. More...
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