What NASA’s James Webb Telescope Project Teaches Us About Cost Overruns

What NASA’s James Webb Telescope Project Teaches Us About Cost Overruns

Image of Carina Nebula taken by the James Webb Telescope. Credits: NASA, ESA, CSA, and STScI

This week, NASA released the first photographs from the James Webb Space Telescope. They captured our imagination. I just listened to a podcast episode of Wall Street Journal’s, the Journal, on how this project almost didn’t make it because of cost overruns and project delays, something the mining industry knows a lot about. It is an interesting one that I will highly recommend. Listening to the episode, I thought there are some key lessons the mining industry can learn from NASA’s challenges getting the project to completion. I will share these thoughts in this post.

I have discussed cost overruns and the implications for QP liability in a previous post. As I stated in my earlier post, others have estimated mining cost overruns to average nearly 40%. This is high when compared to the requirement in the CRIRSCO standards that qualified persons (QPs) estimate capital and operating cost to an accuracy of ±25% and ±15% for prefeasibility and final feasibility studies, respectively. The US Securities and Exchange Commission’s (SEC’s) Regulation S-K 1300, in addition to this, asks QPs to state the accuracy of their cost estimates in technical report summaries filed with the Commission.

However, cost overruns are not limited to mining projects. Public projects suffer from cost overruns too. NASA went over budget by $9 billion and was 15 years late in sending the James Webb Telescope into orbit according to the Wall Street Journal’s podcast. For a project that was estimated to cost $1 billion, that is a 900% cost overrun! So what can we learn from this?

First, I believe optimism of the proponents is a key culprit when it comes to cost overruns. This is the case of Olympic Games and other major sports events. Often, because the proponents are believers in the project, they tend to not see risks as much or downplay issues that others can easily identify. I remember a conversation I had with a contractor with years of experience building projects in mining. He told me a project where his company offered to provide risk assessment to the owner, but the owner’s staff refused on the basis that they know what the risk assessment is going to say and would rather that those results are not written down!

Second, leadership matters in building projects on schedule and on budget. As the Journal documents in the episode, one leader coming in boosted the Webb Telescope project and changed its trajectory. This is true in the mining industry too. The leader sets the tone for how projects are built especially in the mining industry where the project tends to be built by contractors. The project manager who communicates targets and expectations clearly and holds people accountable will make a difference in how projects are built. In the mining industry, we can also change leaders too often on a project which can cause its own problems.

Lastly, it is important for the whole team to have key performance indicators (KPIs) that drive project review. For NASA, this appears to be the project’s schedule efficiency (the relative amount the project is ahead/behind schedule). But regardless of which KPIs you choose for your project, you need to communicate them to everyone, measure them frequently and accurately, and hold everyone accountable for achieving the targets. Be careful though what KPIs you measure because you will get the targets you focus on. Sometimes, we set KPIs that don’t fully capture what we are looking for (i.e., is the project being on time and underbudget all that matters? Do we also want people to be safe? etc.).

Share your own thoughts on what one can learn from this project.

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