The performance of capital projects, in terms of meeting cost, time and performance requirements, has always been questionable. Despite the availability of project management tools, techniques, processes and advanced software applications, the overall non-performance of large capital projects has seemed to stagnate over the past century. Calls by financiers and participating stakeholders have been surfacing since the 1980s for a different approach to the management of development and implementation of capital projects, especially those that extend into multiple countries. Rather than exploring the development of radical new ways for managing the life-cycle of large capital projects, this research focussed on conducting a review of general management areas and their response to institutional failure.
Towards the end of the 20<sup>th</sup> century the corporate world experienced much turbulence and controversy with respect to responsible financial and corporate management. Various corporate scandals were reported, the result being the development and implementation of various forms of corporate governance principles. The roll-out and application of corporate governance soon became a global imperative with a fairly positive impact on responsible corporate citizenship. Given the success and global acceptance of corporate governance, the potential application of the principles contained in corporate governance guidelines, and even legislation, in the field of capital projects, was investigated. The view of projects as a form of temporary organisation was used to establish the parallel between general and project management practices, resulting in reference to the term project governance.
In general project management literature, the term project governance is used in various applications, namely information management protection, project control and even to indicate project portfolio management. However, no commonly agreed upon definition for the term was found. In order to contextualise the term project governance, an in-depth literature study was done on the evolutionary development of corporate governance as well as the characteristics of large capital projects. Given the literature background, a Delphi study was conducted among experienced and knowledgeable project practitioners and academics to establish a common definition and framework for project governance. Two important observations from the Delphi study were first the requirement that project governance should be strongly aligned with corporate governance principles and second and that a typical project governance framework should be fairly generic with flexibility to allow for customisation for specific applications.
Given the input from the Delphi study, two corporate governance frameworks were selected as the basis from which to compile the principle backbone for a Concept Project Governance Framework (CPGF). In order to allow for the multi-country, multi-company participation of large capital projects, especially where established companies from the West are involved in projects in the developing world, the corporate governance frameworks of the United States of America (USA), namely the Sarbanes Oxley Act and the King II Report from South Africa, were used. These two frameworks represented the thinking and corporate drives of the two respective countries, and for that matter, the developed and developing worlds. With input from the Sarbanes Oxley Act, King II, Delphi results and literature review, the CPGF was constructed for testing on various case studies.
The case study research was conducted in two phases. The first phase, also referred to as the primary case studies, comprised an in-depth study on two large projects involving cross-border participation by various local and international companies and stakeholders. Although it was intended to select a mix of successful and unsuccessful projects for the primary study, the unwillingness of project managers involved in unsuccessful projects to reveal information made the inclusion of these project cases not viable for this study. The two primary case studies selected were based on successful projects. The extent to which these projects formally or informally adhered to or did not adhere to project governance principles as stipulated in the CPGF was evaluated. Apart from a review of literature on the primary case studies, the nominal group technique (NGT) was also employed to extract embedded information from project role players. Their input was documented and incorporated into the CPGF.
In order to confirm the general application of the CPGF, a set of secondary case studies was conducted. These case studies comprised a total of 15 capital projects, selected from various sources and industries. These projects were categorised as being successful, questionable or a failure. The reasons for the outcomes were plotted against the existing CPGF criteria and it was evident that the reasons for success or failure could be traced to specific areas in the CPGF. According to the CPGF, the most prominent areas that determined project performance, whether failure or success, were the composition of the steering committee as well as adherence to ethics, responsible conduct and conflict of interest.
Given the results of the research, the study concludes with a proposed Project Governance Framework (PGF) to be applied to large capital projects, especially during the initiation phase of the project. It is believed that adherence to the generic stipulations listed in the PGF will contribute positively to the successful outcome of large capital projects.
© University of Pretoria 2008
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