Why are Megaprojects, Including Nuclear Power Plants, Delivered Overbudget and Late? Reasons and Remedies

Similarly, (Hu et al. 2013) claim that a deterministic cost threshold is not appropriate for all countries, and a relative threshold such as the GDP should be used instead. According to (Brookes & Locatelli 2015) “Megaprojects are temporary endeavours (i.e. projects) characterized by large investment commitment, vast complexity (especially in organizational terms), and long-lasting impact on the economy, the environment, and society”. Megaprojects tend to be massive, indivisible, and have longterm impacts, with investments taking place in waves. Megaprojects’ “effects are felt over many years, especially as auxiliary and complementary additions are made” (Miller & Lessard 2001). Public policy strongly affects the performance of public megaprojects. In fact, megaprojects “remain under political scrutiny well after the final official decision is made. Decisions made early on can have disastrous effects when abstract political ambitions crystalize in specific technical challenges” (Giezen 2012). The planning and delivery of megaprojects involves a large number of organisations and sometimes planning and delivery last longer than the organisations themselves (Brookes et al. 2017). Clearly, Nuclear Power Plants (NPP) fit the definition and characteristics of megaprojects.

Despite their fundamental economic and social role, megaprojects are extremely risky (Locatelli & Mancini 2010) and are often implemented after a weak (i.e. often sub-optimal) phase of project planning leading to underestimations of the costs and overestimation of short-term benefits (Flyvbjerg 2006). An analysis of data from 318 industrial megaprojects (Merrow 2011) shows that the vast majority of megaprojects might be considered a failure when considering adherence to schedule and budget as well as benefits in operation. Megaprojects are often affected by budget overruns, delays in different phases of the project development, and their operating results rarely justify, in the short term at least, the implementation of the project (Flyvbjerg et al. 2003) 1 .

Table 1 provides an overview of large and mega transportation projects, demonstrating how these projects are overbudget all over the world. The cost escalation is common even for long-planned, 1 It is worth noting that authors such as (Dimitriou et al. 2013;Turner & Zolin 2012) are quite critical of Flyvbjerg and Merrow’s perspective about the benefits of megaprojects, and stress that they need to be assessed with a much longer-term perspective and include a wide range of stakeholders. multi-billion dollar, one-of-a-kind infrastructure projects such as Eurotunnel which increased by 59% alone or 69% considering other related projects (Winch 2013).

The question of megaprojects often being overbudget and late has been addressed by many researchers in the field. Three stand out as major contributors: Bent Flyvbjerg, Edward Merrow and Peter E.D. Love. Their views are summarized in this section.

Bent Flyvbjerg is the Professor and inaugural Chair of Major Programme Management at Oxford University’s Saïd Business School. (Cantarelli et al. 2010) summarizes the most important arguments that have emerged from Flyvbjerg’s studies, e.g. (Flyvbjerg 2006;Flyvbjerg & Molloy 2011;Flyvbjerg et al. 2016) as follows:

 Technical: Forecasting errors including price increases, poor project design, and incomplete estimates, scope changes, uncertainty, inappropriate organizational structure etc.

 Psychological: optimism bias among local officials, the cognitive bias of people, and cautious attitudes towards risk.

o Vendors/contractors: willingness of vendors to intentionally underestimate the cost and overestimate the benefit in order to “sell the projects”.

o Political: manipulation of forecasts for starting projects for unethical reasons (e.g. gain consensus for the next elections) or corruption phenomena in general (see also (G. Locatelli et al. 2017) on this latter point).

 Poor financing / contract management: poor risk allocation, typically awarding the project (or sub-contracts) the lowest priced “turn-key contract” allocating the key risks to contractors that might not be able to properly manage them (see for instance the case of concrete in Olikuoto 3 - (Ruuska et al. 2009)).

Deliberate underestimations and psychological reasons are key in Flyvbjerg’s research. However, there is an important distinction to make, a

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