MGT5PLS – Project Leadership
ASSESSMENT 3: PROJECT GOVERNANCE SCENARIO
East-Europe Tunnel
Student:
Ari Pianta (15532381)
Word Count:
1989 words (excluding executive summary, appendix and
references)
Governance at the corporate level, largely surrounding the operation and roles boards of
directors play and the separation to management of firms, has been well established in academia since
the early 1970’s (Williamson, 1975). This has allowed significant steps in establishing the vital role
governance plays within contemporary organisations and enabling organisational success. Meanwhile,
since the 2000’s the increase in the ‘projectization’ of many industries (that is the increasing
dependence of projects to bring about organisational change) has developed a growing need for the
review and refinement of governance in the project environment (Muller, 2009). In turn, this has
developed a body of research in the area. This body of research will be used to identify definitions of
governance in projects as well as determine the role it plays within successful project outcomes.
Furthermore, this will build a foundation upon which we can analyse the scenario of the East-Europe
Tunnel. This scenario allows demonstration of those responsible for project governance and due its
project outcomes, recommendations in retrospect to discuss project governance further.
Müller (2009) explains how governance is no longer confined to the boardroom. Here, Müller
(2009) describes projects as ‘temporary organisation’s’ and that the overall aim of projects are not
simply outcomes of individual projects, but to build upon an organisations strategy. Accordingly, this
demonstrates a higher level of project objectives, beyond what is seen at the project management, or
operational, level. Just as at a corporate level, where the role of the board is to ‘steer’ firms within
overall strategic business directions, projects require a level above operational management to guide
toward corporate strategies (Ahol et al, 2014). Biesenthal & Wilden (2014) presented a summation of
modern project governance definitions aligned with this strategic approach, concluding project
governance is “concerned about the alignment of project objectives with the organizational strategy,
and therefore, it aims to create benefits for different stakeholders across different organizational levels”.
With an understanding that project governance largely surrounds the guidance of projects
towards overall firm benefit, the question remains as to how this may impact upon individual projects
and their success. Joslin & Müller (2016) posed this very question in relation to corporate governance
orientation, and the impacts it may have on success. Here, a review of two common orientations,
shareholder versus stakeholder, was performed. Shareholder orientation places shareholders as the
primary, and often sole, stakeholder to which governance structures are accountable for. Shareholderorientated governance structures therefore seek to limit the supposed ‘self-serving’ behaviors of
managers based upon agency theory (that is managers acting within their own self-interests).
Meanwhile, a stakeholder-orientation positions firms accountable the broader range of stakeholders
impacted by a project, inclusive beyond the narrowed shareholder field of view (Joslin & Müller, 2015).
This includes a variety of stakeholders such as management, operational staff, end users, employees,
the wider community, the environment and more. In their research, Joslin, & Müller (2016) found that
this stakeholder-orientation was significantly correlated with project success, to the amount of 6.3%,
where an “increase in stakeholder orientation correlates with an increase in project success”.
Furthermore, closely related to the scenario in question, Hjelmbrekke et al (2014) analyzed
project governance across multiple construction projects specifically to review success factors. It was
found that often projects were lacking clear strategic direction, or higher level governance structures,
that aligned specific projects with overall business strategy. Hjelmbrekke et al (2014) found those
projects that failed were more commonly lacking this, namely the governance roles of Project Sponsors
that can align value propositions with overall business direction. McGrath & Whitty (2015) further
support the role project governance plays in project success, noting governance and a proper
understanding of such, is ‘critical’ in project success. Finally, PMI (2018) support the need for project
governance in seeding a productive operational environment by providing adequate checks and
balances for project, and institutional, success.
It is evident from the literature (Joslin, & Müller,2016, Hjelmbrekke et al, 2014, McGrath &
Whitty, 2015, PMI, 2018) that project governance plays a key and crucial role in project success. Firstly,
proper governance structures enable success to be aligned with overall firm strategy, ensuring the
projects thus deliver success at a level above individual outcomes. Further, these same governance
structures are seen to influence project outcomes and delivering success. Whilst this creates a “chicken
and egg” scenario, whereby it could be argued good governance creates success or success creates good
governance. Regardless of which factor precedes the other, it is clear the projects require proper
governance structures and frameworks.
With an understanding now the importance project governance plays, it then creates the
question of responsibility. Who in the project context is responsible for the governance of projects? In
simple, single firm or internal projects, this is straightforward. Firms undergo appointment of senior
leaders into the role of Project Sponsor and Project Boards created simply through senior or executive
management separate to operational roles (Müller, 20019). As projects grow in size, scope and
complexity, it is promoted that governance framework and responsibilities are adapted to the scale and
context of projects applied (Miller and Hobbs, 2005).
Governance responsibilities therefore become rather complicated in the case of large,
multiorganizational and often multinational projects, such as the East-Europe Tunnel scenario. In this
case, we have the collaboration of two national governments, multiple funders, numerous regulatory
agencies on top of countless contractors responsible for project delivery. Millar (2007) labels these types
of projects ‘Multi-Owned Projects’ and Musawir (2020) describes these style of projects as “Type III Projects Led By A Network Of Organizations”, further the term ‘megaproject’ is often used and will be
here for simplicity. Whilst governance is more complex in megaprojects it is also far more important.
Financial costs alone associated with project failure of a project this size has ramifications far beyond
the single firm project exemplified above, not to mention social, environmental and other costs.
Due to the nature of numerous funders and effective project ‘owners’, the ability for each
organisation, be it governmental or private, to secure its own strategic interest diminishes (Kahn et al,
2021). Each stakeholder must understand when entering a project of this scope that individual strategic
goals must be somewhat flexible. Without this, aligning the goals of each and every stakeholder would
be impossible and projects would stagnant and fail. Zwikael & Meredith (2018) provide some insight into
these large scale projects with role definitions of Project Owner and Program Owner. Zwikael &
Meredith (2018) contend that in projects of this scale require multiple Project Owner’s, though a single
Program Owner responsible for overall project governance. The Program Owner may be a higher-level
authority, though commonly arises from the funder entity, in this case from financial institutions or
national governments.
Whilst no formal consensus is developed on megaproject governance, guidance into governance
responsibilities is delivered by Miller & Hobbs (2005). Here, it is explained that governance in projects of
this scale involve a networking approach of coalitions or Alliances involving all major funding
stakeholders. Equivalent to the corporate board, the Alliance is a temporary organisations established in
megaprojects made up of a network of key project parties. In the case of the East-Europe Tunnel, this
Alliance is likely that of the nation’s Italy and Greece as well as key funders (larger underwriting
institutions). These ‘Private-Public-Partnerships’ are required in megaprojects to ensure that key
stakeholders are understood and involved in governance practices (Merrow, 2011). Miller & Hobbs
(2005) note that governance structures below this level may too become complex, as stakeholders
needs and influence flex over the life of projects. Though, it is important that this shared-governance
practice remains to uphold the stakeholder lead approach seen as driving success in megaprojects.
Ma et al (2017) explores this further, and largely through a Stakeholder lens, to create
frameworks for these responsible parties to utilize in governing large scale projects. Here, Ma et al (2017)
develops Alliance governance structures in megaprojects that “create shared and sustainable value for
all the stakeholders”. The proposed “Business–Government–Society” view provides guidance for these
alliances for all key stakeholders to follow in regard to responsibilities but also aims to build trust and
connections between parties to enable project success.
Megaprojects are complex networks of stakeholders and so too are their governance
mechanisms. Responsibility for governance across this project follows this network approach, shared
amongst key funders and governments. This private-public-partnership approach requires some
flexibility in the institutional aims though is a necessary mechanisms to ensure input from all
stakeholders.
In the case of the East-Europe Tunnel, the benefit of hindsight allows commentary of
recommendations that may overcome some of the issues faced. These issues noted include delays, costblow-outs, poor communication and ownership, limited stakeholder engagement and poor cultural
development. These recommendations will first focus at a strategic level, that is how governance may
be approached differently to ensure outcomes of projects meet the corporate strategy overall.
As mentioned earlier, the creation of a formal project alliance from the outset of a megaproject
at this scale is key. It would be recommended that the East-Europe tunnel utilize an established
framework to establish this governance alliance. A framework of note is that demonstrated by the
Australian Department of Infrastructure and Transport (2011) and is studied by Walker & Lloyd-Walker
(2014) in the Australian context. This “Program Alliance” framework enables the creation of individual
governance cultures through agreed alliance principles. These principles may be distinct from each
individual organisations strategy, though necessary for overall project success and alignment in a
somewhat utilitarianism approach. The use of formal project alliance frameworks would mean that
these temporary organizations have their own culture and vision distinct to the project, allowing more
flexible and adaptive approaches as they are no longer purely acting in self-interest. This alliance style
would likely reduce issues in the East-Europe tunnel such as limited ownership and leadership, as the
alliance creates this role distinctly.
Furthermore, from a strategic level the underpinning of governance frameworks to a
stakeholder approach is key. Park et al (2017) notes that the stakeholder orientation and involvement
in construction projects, especially those of scale, is the “most critical factor” in project success.
Therefore, the East-Europe Tunnel alliance required established principles that share this stakeholder
approach. This begins with the mapping and identification of all key stakeholders in the complex project,
as well as engagement and communication throughout. The Department of Infrastructure and Transport
(2011) framework further emphasizes this commitment to meaningful and ongoing stakeholder
engagement, from concept to delivery and would therefore be a useful guide here also.
Further to this stakeholder approach, Kahn et al (2021) advises upon technical
recommendations following research into governance and stakeholder management. The East-Europe
tunnel project experienced issues with stakeholder communication as well as project team culture and
integration between clients. Kahn et al (2021) found that critical factors for improving these project
elements were formal consistent methods of information disclosure. The communications include
project milestones and progress, though Kahn et al (2021) found that reporting any barriers, issues and
conflicts was key to the building of strong project relationships and culture moving forth. The EastEurope Tunnel alliance would be advised to have establish communication mechanisms for all
stakeholders of key information, be it positive, negative or neutral to allow transparency throughout
and the fostering of positive project cultures.
Overall, project governance of the East-Europe Tunnel is of clear and critical importance. Whilst
the East-Europe Tunnel experienced issues, hindsight would advise strategic recommendations of
alliance formation, as well as stakeholder orientation and consistent communication pathways. The
establishment of a project alliance developed using an established framework would allowing clear
responsibilities as well as inputs from key funders, governments and contractors. This alliance would be
advised to govern utilizing a stakeholder orientated approach, seen as crucial in construction projects of
all scopes though most in megaprojects.
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