Headlamp’s Common Sense Series: Megaprojects Deadly Mistakes

Following the Right Timeline – Speed Kills

While a number of factors including declining oil production amid low global oil prices has put a spotlight on Alaska’s struggling fiscal reserves, gas development projects like AKLNG represent a significant opportunity for the future of the state. But like any good thing, these things take time.

That brings us to Deadly Mistake #2: “I Want it Yesterday!”

With complex projects like AKLNG, there is a direct relationship between timing and project costs. The problem then becomes finding a balance between these two factors that ultimately have the ability to kill a projects future development. As we discussed in our last post, multi-billion dollar projects are fragile and need to be thoughtfully blueprinted and mapped out. Therefore it is imperative that we keep a methodical pace that doesn’t cut corners to quickly receive end gains.

According to IPA, pushing for a speedier process can result in a project potentially outrunning a number of key factors in their development, including:

  • Basic technical data development
  • Stakeholder alignment
  • Permitting requirements
  • Even the business deal

Large projects are tightly interconnected and cannot easily recover from a mistake made while cutting corners and “work around” strategies just simply don’t exist. But the worrisome part about this tactic is that an aggressive schedule seems to be exactly what the state’s team  is pushing for- to move the project on a faster schedule.  Rushing can increase the overall cost of the project, which would leave Alaska footing the bill.

This ties directly into IPA’s Deadly Mistake #3: “We’ll Just Work Out the Deal Details Later”

In addition to the nuts and bolts of the project, the contours of the business deal, especially between the resource holders and the project sponsors, must be thoughtfully worked out and decided on before finalization. According to IPA, what is done (and not done) on the front-end has more bearing on megaprojects outcomes than anything else.

Essentially the deal must shape the project; the project cannot shape the deal

Alaska’s project, which is the largest infrastructure project in North America, needs certainty and management that is best left to the private sector to lead. All parties must collaborate in good faith and take the necessary time to make thoughtful decisions that aren’t beholden to artificial deadlines and schedules.

Stay tuned for the next “Deadly Mistakes” post on Managing Costs and Accountability – Right Cost, Right People