Determinants of project performance in the Russian construction industry: a strategic project management perspective

Poor project performance is an ongoing problem in the Russian construction industry, and more generally on a worldwide scale. The root causes of poor performance in construction projects have been researched extensively in many other markets. However, to our knowledge, there has been no research to date to investigate the causes of poor performance in the Russian construction industry, a market plagued with excessive project delays and budget overruns.

In the wake of the real estate crisis that deeply changed the Russian construction industry, the need for improved governance is more pressing than ever.

In order to understand the drivers of poor project performance in the Russian construction industry, our Construction Project Management Team (of Transaction Real Estate Advisory Services) based in our Moscow office conducted a survey among contractors and construction management firms covering a wide range of potential determinants of project performance.

The survey covered three major areas that potentially affect construction project performance:

  • External and internal environments of the project
  • Project execution strategy development (planning)
  • Strategy implementation

We compiled the survey questions based on an extensive body of research in strategic management, organizational theory and project management. These three areas formed the basis for our measurement of the correlations between the responses and budget and schedule performance for actual projects.

Our preliminary results showed that the determinants of poor performance concentrated in two areas: (1) project planning; and (2) execution governance. The main drivers of poor performance in project planning were scope definition, sufficient technical plans and specifications at the outset, identification of project risks, and allocation of obligations among parties.

Similarly, the main drivers in execution governance were effectiveness of responsibility structures, operating procedures, reward structures and dispute resolution processes. These findings show that, in a market where projects are typically fast tracked with negligible front-end preparation, contracts are signed with minimal design documentation and insufficient project governance systems are put in place for the project execution. As a result, owners may be paying too great a price in the long term for the perceived benefits of the fast track approach.

The survey, which also measured past performance drivers, provides a simple but effective tool for forecasting the overall future performance, as well as defining those areas that require more preparation and attention for projects at the beginning of the development cycle.

Finally, we examined the owner-contractor alignment for one of the projects surveyed. This showed that poor owner-contractor alignment is likely to be a key root cause of the overall project performance problems.

The complete article was written by:

  • B. Kagan Ceylan (Dr.Eng., MRICS)
    Manager, Construction Project Management Group, Ernst & Young (CIS) BV

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