Megaproject management woes

Read the case study and answer all questions.

Megaprojects are at the heart of resolving South Africa's energy problem by increasing supply capacity Two of these, however, namely Medupi and Kusile, coal$-$fired power stations, have been mired in controversy, largely because of how much longer they will take to complete than originally planned for, and indeed, how much more they will cost.

Take Medupi for instance, the first unit of which became operational in $2015,$ an estimated three years behind schedule. It was forecasted to cost R$70$ bn$,$ but this cost projection had escalated to RI $05$ bn in $2014$ just prior to it being synchronised with the grid. A report produced by the University of Pretoria estimated that Kusile will cost a staggering $40$ times more than the R$80$ bn that was originally projected, with a final cost in the region of RI $,449$ trillion and R$3,279$ trillion. The first unit of Kusile was switched on in August $2017,$ four years behind the original schedule. Both Kusile and Medupi are only expected to be fully completed in $2020$t despite construction having started in $2007.$

A number of compelling reasons have been put forward for the massive escalation in costs as well as the delays to the schedule:

Under budgeting at the outset of the project appears to have been an issue, particularly the 'real' cost of the project often being underestimated. For instance, the UP report's revised estimated cost for Kusile took into account externalities over the fifty$-$year lift span of Kusile such as the plant's broader environmental and societal impact. Issues related to biodiversity, air pollution, greenhouse gas output, damage to roads, noise and water quality were accounted for. Beyond budgeting concerns, the Dentons report produced by the law firm of the SA and commissioned by Eskom in $2015$ to investigate issues pertaining to poor performance the plants, high energy costs and financial challenges, further identified are to why the plants were running behind schedule and over budget$\mathrm{.}96$ Some of these included inadequate front planning, poor project integration, as well as lack of studies.

For instance, the Minister of Public Enterprises, Lynne Brown, suggested in $2014$ particular reference to Medupi and prior to the release of the Dentons report, that critical aspects such as environmental permits, geotechnical surveys and subsequent design were not completed prior to the commencement date, resulting in additional delays." Moreover, labour issues have been identified as being of further concern. Two issues come to the fore. The first is labour unrest, which caused delays in construction at both second is lack of skills. The Dentons report particularly maintained that Eskom simply lacked the skills to build new power stations as this had not been something they had done for several decades.

Issues pertaining to the quality of contractors as well as components were raised.

Procurement of equipment might prove to be problematic. Should there be a deterioration in the exchange rate, costs will likely be driven up$,$ particularly if international suppliers are used

Finally, on the upside, the Dentons report suggested that some of the lessons learnt from Medupi's experience were carried forward to the construction of the Kusile plant. Integration planning was better performed as was quality control.

Answer the following questions:

$1$ Both Medupi and Kusile are considered to be 'mega projects'. Provide reasons for this consideration based on the definition of what a mega project is$,$ as well as evidence from the case study. $(5)$