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So-called market "efficiency"  
Posted by Brian D on March 17 2008, 00:02 » Uploaded 17/03/08 00:04  

Some of the material I turned up while researching for a forthcoming Idler article on the counterproductive (among other things) Anglo-American obsession with "efficiency" and time-management:

Over the last century managing projects became an industry in its own right – but time and cost overruns are still the norm:

• A 2006 National Audit Office review of 20 large UK defence projects found a total delay of 36 years – an average of 1 year, 9 months per project.

• An international study on the management of public projects, published in 2002, found that almost 9 out of 10 projects went over budget, with overruns of 50-100% common.

• 71% of IT projects go behind schedule, over budget and/or under scope, according to a 2004 industry study by the Standish Group.

• 75% of UK government building projects are completed late and over budget, according to a 2001 BBC report.

[Sources: National Audit Office’s ‘Ministry of Defence: Major Projects Report 2006’, 24/11/2006; ‘Underestimating Costs in Public Works’, Journal of the American Planning Association, Vol. 68, No. 3, Summer 2002; ‘CHAOS Report 2004’, The Standish Group; BBC Radio 4 ‘Today’, 11/1/2001]

Underestimating by billions

The public ends up paying billions for projects which are either cancelled or which would never have received the go-ahead if the true cost had been known from the start:

• An ID card scheme for benefit claimants was scrapped in 1999 after nearly £1bn was spent on it. The National Audit Office found that “skimping” at the start of the project led to “vast delay and waste of money”. It added: “Mistakes of this kind are made time and time again”.

• The National Programme for IT (an NHS project) was originally expected to cost £2.3bn over three years, but in June 2006 the total cost was estimated by the National Audit Office to be £12.4bn.

• The cost of the Jubilee Line (London underground railway) was estimated in 1994 at £2.1bn. The final cost (it was two years late) was £3.5bn.

• The Eurofighter jet (a UK/European project) cost, in total, £50bn. It was £30bn over budget and completed a decade late, according to a 2003 BBC2 report.

• A £1bn upgrade to the Tornado GR-4 fighter jet left it unable to fire modern “smart” bombs, giving it less capability than before the “upgrade”. As a result, the jets couldn’t be used in the Kosovo conflict, forcing British forces to rely on older GR-1s and Harrier jets.

• The New Deal welfare-to-work scheme was originally budgeted at over £5bn, with an estimated cost of £4,000 for each job. In July 2000 an independent report put the real cost at £11,000 per job.

• Refurbishment and building work on the headquarters of MI5 and MI6 cost over half a billion pounds – more than twice the estimate.

• The Channel Tunnel was financed with private money, but this didn’t stop it going over-budget by £5.2bn (original estimated cost: £4.8bn; final cost: £10bn).

[Sources: BBC News Online, 5/9/2000; Wikipedia (NHS cost); The Guardian, 7/3/2000; ‘Eurofighter’, BBC2, 11/11/03; The Guardian, 7/3/2000; The Guardian, 14/7/2000; The Guardian, 18/2/2000; BBC News Online, 5/9/2000]

OUTSOURCING WORKS?

Private Eye (No. 1136) listed ten notable examples of UK public sector computer projects, outsourced to the private sector, that have experienced cost overruns and cancellations.

The figures below show the 'excess charges' to the UK taxpayer.

Client Contractor Loss to UK Taxpayer
Post Office/DSS ICL Fujitsu 1,000 million
Magistrates Courts ICL Fujitsu

244 million

Criminal Records Bureau Capita

150 million

DSS Accenture

150 million

Cabinet Office ITNET

85 million

Home Office Siemens

80 million

Medical Research Council LogicaGMC

55 million

Education Capita

50 million

Child Support Agency EDS

50 million

Passport Office

Siemens

13 million


TOTAL
 

 

1,877 million

Source - Private Eye (Number 1136) - July 8 to 21 2005 

Racing against the clock

The view of time as a precious commodity seems to have roots in the Protestant beliefs which drove the Industrial Revolution. American business culture was the first to have workers compete against the clock to finish tasks in ever-shorter times. It was the birthplace of time-and-motion studies and Fordist assembly lines – an obsession with measuring production by stopwatch.

As Charles Hampden-Turner and Fons Trompenaars point out in their book, The Seven Cultures of Capitalism, this obsession comes from the Puritan cultural heritage: “The Puritans were not, like those of other religious persuasions, awaiting the afterlife in quiet contemplation. They had God’s earthly kingdom to build and, given seventeenth and eighteenth-century life expectancies, a perilously short time in which to build it […] Time is the Puritan’s Great Disciplinarian and Cost Accountant”.

Hampden-Turner and Trompenaars identified two predominant cultural conceptions of time. They surveyed 15,000 managers from around the world and found that in the US, UK, Sweden and the Netherlands time is largely viewed sequentially, as a “race”, whereas in Japan, Germany and France, it’s conceived as a synchronised “dance”.

“Sequential time”, they argue, is seen as a threat, as it’s running out fast. The resulting anxieties lead to a preference for short-term profit-making, with paper entrepreneurs favouring creative accounting and tax avoidance over longer-term processes such as manufacturing.

“Synchronised time”, on the other hand, is seen as a friend. The past and future are but our memories and anticipations synchronised as ideas in the present – an eternal “dance” of possibilities recurring in the moment. Thus Japanese culture (which leans towards a synchronised view of time) tends to be the most long-term in its outlook.

Short-termism in American business culture is often blamed on the higher levels of equity financing by shareholders who want quick returns. But this doesn’t appear to be the real cause. Those impatient shareholders are simply reflecting existing cultural fears about time running out – the sooner they get their money, the better.

More project overruns

The Dome is to receive a further £47m from the Millennium Commission. It is not, however, the first major scheme to come in over budget...

Project: Millennium Dome
Original estimated cost to Lottery: £399m in 1997
Final cost:Who knows? The new cash plea would put the Lottery contribution up to £578m. But will it stop there? In May, the Millennium Commission said its then hand-out would be the last.
OVER BUDGET BY: To be announced

Project: Scottish Parliament
Original estimated cost: £40m
Final cost: Capped at £195m
An independent architect was brought in to assess the cost of the scheme; ministers had been forced to admit they did not know how much the project was going to cost.
OVER BUDGET BY: £155m

Old ways of paying benefits slow but cheap
Project: Swipe cards for benefit claimants
Original estimated cost: £1bn
The whole scheme, which was going to be run jointly by the Department for Social Security and the Post Office, was scrapped in 1999. Last month the National Audit Office found "skimping" at the outset of the project had led to "vast delay and waste of money". It added: "Mistakes of this kind are made time and time again."
OVER BUDGET BY: Project scrapped

Project: Jubilee Line
Original estimated cost: £2.1bn, estimated in 1994
Final cost: £3.5bn
The final opening of the 10-mile extension was nearly two years late, but was fully open in time for its big night on Millennium Eve.
OVER BUDGET BY: £1.4bn

Project: Channel Tunnel
Original estimated cost:£4.8bn
Final cost: £10bn
The Channel Tunnel stands out among the huge building projects because it was financed with private money. This did not stop it being over-budget though, and developers had to wrangle several times with backers to get its funding increased.
OVER BUDGET BY: £5.2bn

Jubilee Line: Cost escalated
Project: New Air Traffic Control centre in Swanwick, Hampshire
Original estimated cost: £350m
Final cost: £623m
The new computerised centre was due to open in 1996, but this has now been delayed until 2002. An independent audit last year found 1,400 bugs in the system, but by last month this had been reduced to 200.
OVER BUDGET BY: £273m

Project: Defence purchasing
Original estimated cost: £35.4bn
Final cost: £38.3bn
This figure includes the cost of the Eurofighter, which ALONE is £1.5bn over budget. But a report by the National Audit Office found that not only were the Ministry of Defence's top 25 procurement projects over budget, they were 43 months late.
OVER BUDGET BY: £2.9bn

Source: http://news.bbc.co.uk/1/hi/uk/911317.stm

 


 

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