Back to Volume 3 | Winter 2018

PPI Position: The Limitations of Capital Project Benchmarking

Executive Summary

Over the last thirty years, the practice of benchmarking capital projects and performing statistical analyses to infer trends and best practices, has become a standard for the evaluation of capital project performance. Over that period, despite the emergence of many recommended best practices to improve project performance derived from benchmarking, major capital project outcomes remain stubbornly poor.

The Institute argues here that the promise of benchmarking methodology to infer the most relevant root causes for project underperformance is limited. There are two reasons. First, Era 1 & Era 2 project thinking [1] dominates conventional wisdom in hypothesizing root causes of project underperformance. The true underlying root causes can be arrived from a deeper Operations Science analysis offered by Project Production Management (PPM).

The second reason is that correlation is not causation: inferring trends and best practices through statistical correlation may well identify practices common to “successful” projects. However, it does not guarantee that performing those practices will assure project success. In other words, benchmarking can help to identify practices which may well be necessary, but which are by no means sufficient for successful project performance.

We compare benchmarking with Project Production Management, which in contrast is a technical framework that applies Operations Science theory to understand and control project execution in an entirely predictable manner.

Keywords: Capital Project; Benchmarking; Statistical Test; Correlation; Three Eras

Author: 
Ram G. Shenoy Ph.D., Executive Director, Project Production Institute, rshenoy@projectproduction.org



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