1. Stærsta tækifæri verkefnastjórans? Íslensk stjórnsýsla í samhengi verkefnastjórnunar Þórður Víkingur Friðgeirsson School of Science and Engineering Reykjavik University MPM April 15, 2015.

2. This lecture The problem/opportunity The evidences The gap The expected future Improvement of the Governance and Management of Icelandic Public Projects

3. The international problem Why should we assume “things will go according to the plan”? Improvement of the Governance and Management of Icelandic Public Projects

4. The Icelandic problem (opportunity) Improvement of the Governance and Management of Icelandic Public Projects

5. Significance of this study Post financial collapse analysis –G.H. Kristinsson –S. Nordal –Vaiman et al. –Investigation reports This study is the first attempt to understand the problem on the tactical/operational (managerial) level Information to be used for improvement Improvement of the Governance and Management of Icelandic Public Projects

6. Research questions 1.Do the arrangements for a feasibility study on public projects in Iceland align with current best practice? 2.Are Icelandic sets of standards regarding the conception, planning and management of public projects comparable with Norwegian, UK and other international standards? 3.As cost overruns are frequent in public projects, are parliamentarians aware of their behaviour when facing different probable cost overruns for projects? 4.Is the due diligence process in Iceland concerning the conception of an individual project comparable with Norwegian standards? 5.Can reference class forecasting improve forecasting accuracy? Improvement of the Governance and Management of Icelandic Public Projects

7. Five studies Study I: The Feasibility of Public Projects in Iceland Study II: Benchmarking study of Icelandic and international planning and decision procedures on projects Study III: Does the perceived risk attitude among Icelandic decision makers correlate with the reality of cost overruns? Study IV: Prerequisites and decision-making procedures on an Icelandic public project compared with Norwegian standards Study V: Reference class forecasting in Icelandic transport infrastructure projects Improvement of the Governance and Management of Icelandic Public Projects

8. Theoretical framework Governance Project management Risk management Improvement of the Governance and Management of Icelandic Public Projects

9. Governance “The formal and informal arrangements that determine how public decisions are made and how public actions are carried out, from the perspective of maintaining a country’s constitutional values in the face of changing problems, actors and environments” The OECD (2005) The “Agent Problem” Improvement of the Governance and Management of Icelandic Public Projects

10. The governance framework “a formal system of cooperation [that] requires an objective, a purpose, an aim (...) it is important to note the complete distinction between the aim of a cooperative effort and that of an individual” Barnard (1968) Improvement of the Governance and Management of Icelandic Public Projects

11. Impact on the project management lifecycle New Public Management (NPM) –NPM is a response to the assumption that “politicians are inherently venal and likely to abuse their authority to enrich themselves and their friends leading to high-cost, low quality products” (Hood, 1995) –NPM is the “focus on management over policy” ( Bevir et al., 2003) –NPM “is about ensuring that the outcomes are right” and, furthermore, that one of two criteria for “good governance” is “implementation by all stakeholders of a set of principles and processes by means of which appropriate public policies will be designed and put into practice” ( Bovaird and Löffler, 2003) Improvement of the Governance and Management of Icelandic Public Projects

12. Project management pillars (Van der Merwe, 2002) Standardization of project management –AMP –PMI –IPMA –PRINCE2 –Etc… Improvement of the Governance and Management of Icelandic Public Projects

13. Public projects Strategic > operational The limits of EU theories –Rational or Cognitive – that is the question Accountability problem Improvement of the Governance and Management of Icelandic Public Projects

14. Risk elements of public projects Cognitive heuristics (Kahneman and Tversky, 1974, 1979) –Anchoring, Availability, Representativeness, Framing Strategic misrepresentation –“…is the planned, systematic distortion or misstatement of fact, lying, in response to incentives in the budget process” (Jones and Euske, 1991) Improvement of the Governance and Management of Icelandic Public Projects

15. Reaction in the public domain …that “[the] objective of this legislation [was] to ensure optimal use of capital invested in public projects” (The Icelandic Finance Minister – taken from Haarde, 2001). …to ensure ”adequate quality at entry, compliance with agreed objectives, management and resolution of issues that may arise during the project, etc., and standards for quality review of key governance documents” (The Norwegian Ministry of Finance – taken from Samset et al., 2006) …”[the] Government is committed to continuing improvement in the delivery of public services. A major part of this is ensuring that public funds are spent on activities that provide the greatest benefits to society, and that they are spent in the most efficient way” (HM Treasury, 2011:v – taken from the Green Book) Improvement of the Governance and Management of Icelandic Public Projects

16. Study I The feasibility of public projects in Iceland. 28th IPMA World Congress, Rotterdam, Holland, September 29-October 1, Academic submissions: Approved for publication Research question: –Do the arrangements for a feasibility study on public projects in Iceland align with current best practice? Improvement of the Governance and Management of Icelandic Public Projects

17. Consistency with best practice for six selected projects Improvement of the Governance and Management of Icelandic Public Projects

18. General results A significant gap between best practices and applied practices Improvement of the Governance and Management of Icelandic Public Projects

19. Study II Benchmarking Icelandic Planning and Decision-making in Public Projects, European Journal of Government and Economics. Under review Research question: –Are Icelandic sets of standards regarding the conception, planning and management of public projects comparable with Norwegian, UK and other international standards? Improvement of the Governance and Management of Icelandic Public Projects

20. Results Comparison of the Green Book and the PPC with PMBOK ® knowledge areas PMI’s - PMBOK® knowledge areas UK HM Treasury - Green BookRating Iceland Ministry of Finance - PPCRating Project integration managementSome consistency2Limited consistency1 Project scope managementFull consistency3No consistency0 Project time managementFull consistency3Some consistency2 Project cost managementFull consistency3Some consistency2 Project risk managementFull consistency3No consistency0 Overall93% 33% Improvement of the Governance and Management of Icelandic Public Projects

21. General results Significant difference on many fronts Improvement of the Governance and Management of Icelandic Public Projects

22. Study III Does the perceived risk attitude among Icelandic decision makers correlate with the reality of cost overruns? Verktækni, The Journal of the Icelandic Engineering Association. Under review Research question: –Does the perceived risk attitude among Icelandic decision makers correlate with the reality of cost overruns? Improvement of the Governance and Management of Icelandic Public Projects

23. Results The perceived risk attitude of parliamentarians is significantly more averse than private decision makers

24. Study IV Prerequisites and Decision-making Procedures of an Icelandic Project compared against Norwegian Standards Iceland Review of Politics & Administration,10(1), 17-30. Published Research question: –Is the due diligence process in Iceland concerning the conception of an individual project comparable with Norwegian standards? Improvement of the Governance and Management of Icelandic Public Projects

25. Results Limited compliance with Norwegian standards Improvement of the Governance and Management of Icelandic Public Projects

26. Study V Reference class forecasting in Icelandic Transport Infrastructure Projects Conference on International Science, Baden-Wuertemberg Cooperative State University, Discussions Papers No 1/14. Published. Transport Problems, Scientific Journal, The Silesian University of Technology, Faculty of Transport. Under review Research question: –Can reference class forecasting improve forecasting accuracy (at the planning stage)? Improvement of the Governance and Management of Icelandic Public Projects

27. Example of results Required uplift as function of the maximum acceptable level of risk for cost overrun – Roads (ICERA) N=65. Not likely to lead to significant improvements at the planning stage of the project lifcycle

28. Discussions All studies, except one, reveal considerable room for improvement. International developments suggest noteworthy activities to clarify the interface between the market and the public organization. The relative gap between Iceland and international standards is large. This leads to inconsistency as public projects are conceived, planned and executed on case by case basis. Significant effort must be devoted to bringing Iceland to the same level as nations with similar governmental structure and economic prosperity. Improvement of the Governance and Management of Icelandic Public Projects

29. Limitations The research is limited to the realms of project management governance Müller (2012), PMI (2008), Yun and Caldas (2009), Shen et al, (2010) and others It does not deal with transaction cost economics (TCE) or political science This study is not concerned with individual mistakes or personal wrongdoings Improvement of the Governance and Management of Icelandic Public Projects

30. Further research examples Information control, transparency and communications –Database The “true” risk function of public decision makers How government, academia and industry can collaborate Develop a risk assessment tool with reference classes Improvement of the Governance and Management of Icelandic Public Projects

31. Recommendations in context Improvement if the Governance and Management of Icelandic Public Projects

32. Thank you Improvement if the Governance and Management of Icelandic Public Projects