3.2.1 Strategy and Project Objectives

One of the first reasons for large capital expenditure project failures is an apparent disconnect between undertaking projects and corporate strategy and project objectives. That is, projects do not have the benefit of a sound rationale justification and thorough strategic and portfolio‐fit assessment. Because of that, and in the absence of a well‐thought‐out project strategy, project objectives are vague, confusing, and unsupported by facts. In such a context, project objectives are influenced by excessive optimism and the problem is compounded by wishful thinking begetting unrealistic expectations. This is true of some project sponsor or developer and other project stakeholders' objectives, including those of the host government ceding authorities.

In the absence of a clear project strategy that is consistent with the overall project stakeholder strategy, conflicting participant interests and objectives can create cooperation problems and result in longer negotiations of contracts and project delays. This kind of environment is characterized by impeded communication, coordination, cooperation, and collaboration all of which result in mistrust and indecision. What comes out of that context is a set of different and unreconciled individual project stakeholder objectives which drive project forecasts and financials everywhere. This is not a correct, consensus, reality checking, and validating‐assumptions environment. Another factor contributing to project failures is that project objectives do not align with project requirements. That is, a gap exists between project specifications and performance requirements and unrealistic sponsor expectations and objectives which results in wrong cost estimates and different perceptions of project financeability.

A different failure factor related to project sponsor strategy and project objectives has to do with project portfolio management, or more precisely, with little consideration and analysis given to the project impacts on the portfolio allocation and risk composition in current project finance practices. So, why is that a problem? It is because it results in unbalanced portfolios in terms of risk exposure, blurred strategic intent and clarity of purpose, and suboptimal allocation of capital investments. It is also because successful project portfolios require correspondingly appropriate allocation of scarce financial and human scarce resources possessing the right skills and competencies. This is true of all types of project stakeholders, but particularly true of project sponsors or developers initiating large projects.

3.2.2 Screening and Preparation

Projects starting with unclear strategy and project objectives are followed by inadequate preparation and project screening, which are then complicated by a series of other project failure factors. Screening is usually limited to technical achievability and financial viability while ignoring other tests, such as the ability to execute successfully, compatibility of technical platforms, and alternative project investment prospects. Poor sponsor‐team preparation for a large project begins with reliance on the initiating organization to move the project forward and not creating early on a dedicated project team with experienced personnel supported by external advisors and consultants. But, even in cases of early project team formation, failures occur when teams are inadequately resourced or not fully dedicated to project screening, preparation, and development. Also, when little attention is paid to processes and required financial and human resource systems to ensure proper screening and preparation, disappointing project evaluation and performance follow. Other project failures related to screening and preparation are due to inadequate host government preparation, systems, resources, and project development plans and processes.

Failure factors caused by host governments originate with inadequate ceding‐agency preparation, issuance of bids with unclear project requirements, and underestimating the financial support needed for the project. On the sponsor side, inadequate understanding of the host country macroeconomic and operating environment; partial knowledge of industry structure, capacity, and dynamics; and little appreciation of the effects of megatrends and subtrends are factors causing false assessments of project viability and subsequent project failure. Also, poor assessment of host country social and living conditions for skilled project company expatriates result in difficulties recruiting talent needed to manage the project company. The combined effect of these factors leads to poor risk assessment and inadequate risk allocation and mitigation.

The main factors resulting in project failures from the screening and operational fit assessment side are inadequate understanding of project equipment requirements and design specifications, and ambiguity of performance specifications that result in flawed cost estimates and financing requirements. While the absence of standardized project screening and evaluation templates is sometimes blamed for project finance failures, the reality is that projects are unique and require the tailoring of processes and assessments throughout the project stages. However, there is cursory, if any, sponsor‐company strengths, weakness, opportunities, threats (SWOT) analysis, which impedes the project team's ability to execute a project successfully. The absence of early and comprehensive political, economic, social, technical, legal, educational, and demographic assessments produces erroneous project‐feasibility studies. Time after time, weak industry, market, and competitor assessments and a lack of benchmarking data result in the creation of faulty assumption sets and skewed economic evaluations. These factors complicate the due diligence process and result in incomplete risk assessments and weak due diligence reports that weaken the major cornerstones of project finance.

The failure factors mentioned above are project‐preparation causes, but factors related directly to raising financing failures have to do with poor PFO and project team preparation and planning with respect to ensuring clear and complete processes, integrated planning and budgeting, sound financial models development, and correct data and assumption inputs. Just as damaging a factor is the inability of sponsor PFOs to educate, prepare, and help the host government ceding agency understand all project finance requirements and what it takes to complete a project successfully. Also, a failure to cultivate good working relationships with funding sources globally, and to know well their processes and requirements for different types of projects, is another factor leading to project finance complications and delays.

3.2.3 Bidding and Procurement

Many of the bidding and procurement‐related reasons for project failures stem from confusion among project stakeholders, misunderstandings of requirements, protracted fact finding, and back and forth clarification seeking discussions. More often than not, a lack of host‐government bidding process transparency and clear selection criteria throws projects off track. This is a prime factor for frictions, delays, and project failure. Also, the difficulties of inexperienced sponsor teams working with different cultures and host‐government bureaucracies add to mistakes, delays, and inefficiencies, as does the absence of rigorous bidding and procurement processes, which lead to wrong assessments of project development costs.

Ambiguous bid requirements and project specifications even in the presence of good intentions result in project changes, delays, technical difficulties, longer negotiations, and cost overruns. But, the effect of low ball bids by competitors not bound by laws such as the US Foreign Corruption Practices Act, causes sponsors going back to the drawing board, making costly technical changes and price adjustments in order to prepare more competitive bids to win a project and in the process end up with a losing proposition. More factors responsible for failures, however, have to do with rigged bid processes and procurement practices and, sometimes, with host government officials' corruption and fraud. And, one cannot ignore the effect of loss of proprietary information contained in bids which are assessed by independent agents hired by the ceding authority and leaks to competitors on the current and future project chances of structuring profitable deals.

3.2.4 Skills and Competencies

It is widely recognized that an all‐around project finance knowledge deficit is a leading cause of project finance failures. Just as important, however, is the point that because the knowledge, skills, and experience required in project finance are so broad that, by necessity, they are rare. To work around that constraint, they are compartmentalized and highly specialized. Engineers know project design and technology; project finance associates know accounting and tax, financial modeling, and instruments; legal teams know law, contract development, and negotiation of agreements; but they do not know each other's area. Therefore, all the responsibility of integrating the vast amount of diverse knowledge, analyses, and evaluations rests with the project manager supported by the PFO. In large capital investment projects, if the set of required project finance and project management skills and competencies is weak and not outsourced, it is a common and major cause of project failures. This is primarily because the inability to direct and integrate effectively results and deliverables of varied and specialized assessments into a unified evaluation that results in erroneous conclusions and project failures.

A sponsor project team's lack of international business experience and its inability to work with different cultures and government bureaucracies to gain political support and negotiate contracts effectively is another failure factor. This manifests itself in long negotiations and contract revisions and an inability to implement the project company's business plan successfully. Similarly, weak and ineffective PFOs are responsible for project failures in three ways: The lack of project finance skills and experience, the inability to screen and select qualified external advisors and consultants, and failure to create processes that are best suited for each project and assign roles and responsibilities appropriately.

A lack of adequate PFO skills and competencies extends to unfamiliarity with specific duties in the different project stages, and failure to lead and manage project finance processes and create sound project company business plans. This is partly due to lack of critical mass of project finance transactions for a sponsor company and excessive reliance on the skill set and guidance of external advisors, who may not have a thorough understanding of the sponsor company's needs, strategy, and objectives, nor the customers' needs and requirements. A more common factor, however, is the limited set of established, good working relationships with associates in funding sources and partial knowledge of financial instruments and their proper application in different projects. Lack of innovation added to each of these factors individually can lead to project failures, but when combined they undoubtedly lead to unsuccessful project structuring and financing.

3.2.5 Project Processes

Processes in project finance are important because (1) they serve as clear maps and blueprints that guide the project team through the maze of activities to be performed and do it consistently well, and (2) of the necessary integration of each process' analyses and evaluations into other processes with minimal frictions and adjustments. Sound processes are complete, efficient, parsimonious, and effective procedures that have been executed successfully a number of times and lead to the least time to completion and lowest costs of doing a project. Such processes are not a common occurrence in many project finance deals in the current paradigm. In fact, the opposite is true; that is, project failures result from flawed or incomplete processes that are developed with an orientation towards expediency and weak organizational cultures, or when dictated by wrong or misguided project objectives.

The creation of effective project finance processes involves skilled associates, good preparation and planning, and the right financial and contract management systems, lack of which leads to wrong evaluations, schedule slippages, and errors. Even when there are sound processes in place, a lack of adherence to tested processes and procedures, and difficulty managing the integration of the various processes, leads to failures to meet project financing requirements as well as compliance with lender, ECA, and multilateral institution guidelines and requirements. Project failures due to process defects are usually related and traced to the following causes:

1. Compartmentalized sponsor‐company processes of sales, engineering, finance, legal, and external affairs organizations with individual needs, processes, and objectives
2. Difficulties in dovetailing internal sponsor company processes to create a seamless, consistent, and complete end‐to‐end project finance process and winning proposals
3. Incomplete, inconsistent, faulty host‐government processes that are challenging to reconcile with sponsor and funding source processes and requirements
4. Impeded all‐around communication, coordination, cooperation, and collaboration within the sponsor entity and between project participants leading to inability to manage processes effectively and to project delays, errors, and omissions
5. An unwarranted, single focus on engineering, finance, or legal processes at the expense of others, and selecting project managers from the project initiating organization who may not the most qualified managers
6. The exclusion of valuable skills and expertise due to the internal, competing interests and politics of the project sponsor company
7. Unreasonable timelines, misguided objectives, wrong assumptions driving project finance processes, and duplication of work trying to reconcile different process outputs

3.2.6 Project Economics

A major part of project finance failures is due to insufficient and unsatisfactory economic evaluations; that is, inadequate project cost/benefit analyses. Deficient or faulty project economic evaluations are the direct result of poor environmental assessment, lack of megatrend and subtrend evaluations, and scanty market, industry, and competitor analysis; underestimated creeping project costs, and overestimated revenues. Inadequate economic evaluations can be due to erroneous data and information which, in turn, cause wrong assumptions, the effect of which is to contaminate the results of forecasting and financial models. However, it is not only deficient or unreasonable assumptions that cause the failure of projects; it is also the casual use of assumptions without reality checks and an absence of reasonableness checks of the resulting analyses and assessments.

Deterministic project cost modeling may be appropriate under conditions of certainty of project specifications and requirements and stability of economic and market conditions of the host government and the sponsor countries. In the absence of those conditions, miscalculations and underestimation of cost overruns become common and significant. Also, limited consideration to possible specification, technology, design revisions, and cost changes, and their inclusion in cost analyses along with lack of provisions to handle cost escalations, lead to wrong cost projections. More important, however, are project finance failures related to deterministic project revenue modeling using overly optimistic operating scenarios and optimistic pricing and project‐output demand that yields unjustifiably high revenue projections.

Inadequate economic evaluations are frequently traced back to deficient screening in feasibility studies, weak due diligence reports, and erroneous risk assessment assumptions and ineffective risk allocation. These factors lead to project failures in the presence of incomplete, and inaccurate financial models and evaluations that are usually coupled with inadequate or optimistic project company business plans. In many projects, little attention is paid to performing sensitivity analysis of financial results to changes in controllable factors. This is a problem because good project forecast realization plans cannot be developed for simulated scenarios that do not capture the effects of the sensitivity of revenue drivers under less optimistic views. The end result is untested and unreasonably high estimates of project value creation that cannot materialize.

Repeatedly, the point has been made that inadequate reasonableness checks of assumptions and evaluations result in project failures. This is a crucial requirement in the project economic evaluation and financial model development well ahead of the due diligence report, prior to the start of operations, and also in the operating stage. Checking the reasonableness of assumptions in the operating stage presumes development of a sound business plan and an early warning system to alert the project company's management team of risks appearing on the horizon so that measures are taken to course correct and avoid invalidation of the economic evaluation which was the basis of decisions to implement the project. Lastly, an obsession with project risk management and security arrangements and insufficient attention paid to sound project economic evaluation also causes project finance failures.

3.2.7 Technical Issues

Technical factors contributing to project failures begin with unclear, conflicting, wrongly stated, unreasonable, misinterpreted, or misunderstood project requirements and specifications. In this case, sponsors and the host government ceding authority share responsibility equally, but lack of host‐government project team technical know‐how and an unwillingness to invest in getting technical knowledge accentuates the likelihood of technical issues causing project failures. Faulty project design and engineering are factors that lead to project failures when cost considerations create rigid designs that require subsequent modifications, expensive changes, and protracted negotiations.

Project scope creep and associated changes of requirements are failure factors because of capital cost overruns and schedule delays well beyond planned levels. Overlooked physical project‐asset security needs and cyberspace security protection end up increasing costs when projects are retrofitted and cause operational disruptions, which mean revenue losses. Additionally, new and untested technologies intended to increase productivity and project efficiency can lead to project failures because they require changes, schedule slippages, and cost overruns. At other times, the poor reliability of technology components used causes construction delays and cost increases beyond insured levels, as does the problem of technology, equipment, and systems integration in large, complex projects.

Conflict between technology suppliers and noncooperation or sabotage during construction lead to project completion delays and, often, to price increases in the operations stage of the project. Another factor related to technology is the inability to attract qualified talent to manage technology update issues in the operations stage and this leads to higher operating costs and revenue loss. As importantly, underestimating technology transfer costs and long training periods of local personnel cause large adjustments to the project company business plan projections which alter the project's profit profile. Finally, inadequate monitoring and management of technology issues throughout a project's lifetime, the absence of reserves to cover cost increases, and provisions to handle schedule delays throw projects off the planned track and into eventual failure.

3.2.8 Risk Management

Project risks are events, developments, or changes whose occurrence adversely affects a project's ability to achieve expected objectives. Risk management is the process of identifying those factors, assessing their impact, analyzing and prioritizing, mitigating, and monitoring them to control chances of occurrence and manage their impact. One of the risk management factors is the reality that not all project risks are knowable before agreements are negotiated and signed in order to subject them to the risk management process. Also, the inability to identify sources of new risks in the operations stage has the same effect and sometimes projects fail because there is no ongoing, proactive risk management for the duration of the project and only reactive and inadequate risk management. In other projects, risk management processes and activities are poorly carried out and end up in construction delays and the project risk management in the operations stage relying entirely on signed contracts and insurance, which causes friction among project stakeholders and further delays.

Disconnects between corporate risk tolerance and project risk levels lead to internal sponsor organization frictions, project changes, and delays. This happens partly because of incomplete risk identification and assessment or due to a lack of skills and experiences across the management structure, both of which are project failure factors. Frequently, inadequate risk management happens because it is based on shaky assumptions and erroneous feasibility studies and due diligence reports. While these are the main reasons that risk assessments are inadequate, in some instances it is the inability to quantify correctly the likelihood and impact of risks that result in inadequate risk mitigation. Also, incorrect risk identification and assessment are sometimes due to incomplete or flawed external environment and project analyses and evaluations.

Project failures can also be due to inadequate risk allocation; that is, imbalanced, inequitable, disproportional allocation to benefits obtained; or allocation to parties other than those best able to handle them. Often, inadequate risk mitigation factors that cause project failures have to do with weak security packages, insurance, and hedging contracts. Occasionally, some risks considered small are left uninsured, but their occurrences in conjunction with other factors lead to failures. Unbalanced or inequitable risk allocation creates resentments among the stakeholders bearing the risks, noncooperation, and delays in completing project negotiations. This is often a reason for intervention by regional development banks or multilateral institutions to remedy the situation and improve the project risk profile by a more equitable allocation of benefits and risks. Delays associated with multilateral agency intervention may sometimes produce residual resentment and reduced cooperation can then lead to project delays.

A good part of risk‐related failure factors has to do with insufficient attention to managing project design, changes to requirements and specifications, scope creep and subsequent cost overruns, and project‐site conditions risks. In the operating stage, an inability of the project company to compete in changed regulatory or commercial environments leads to project failures due to the lack of using a business plan realization strategy as a risk minimization tool. More importantly, risk‐related project failures occur because far more attention is given to risk management issues than to sound assessment of project economics. In an effort to improve risk management and reduce project failures, sponsors are initiating efforts such as education, increased senior management engagement, communication of the approval risk framework, and alignment of project risk with organizational risk framework (KPMG, 2013).

3.2.9 Project Management

Many project management‐related failure factors have to do with knowledge and experience deficits, which is further aggravated by the lack of project management infrastructure systems and tools. Another significant factor is the assignment of the project management responsibility to associates who initiated the project instead of assignment to the best‐qualified project managers in the sponsor company. Inadequate project management governance is a failure factor that goes beyond the project management team skill and competency deficits and includes issues related to the processes used and inadequate resources allocated to the project‐management function.

Unclear roles and responsibilities and overlaps create confusion and resistance to cooperate during handoffs of responsibilities and deliverables and in inability to project manage effectively large capital investment projects. However, most project management‐related failure factors have their origin in the following:

1. Conflicting or inconsistent project stakeholder expectations and objectives
2. Inconsistent or flawed project stakeholder processes across all participants
3. Poor project management of individual project stakeholder processes and their integration with those of the sponsor project team
4. Impeded and ineffective communication, coordination, cooperation, and collaboration among different stakeholder project managers
5. Difficulties in coordinating individual process outputs with input requirements of other project stakeholder processes

At times, poor management of project stakeholder expectations from the start is a root cause of project management inadequacies, especially in the presence of inadequate project monitoring capabilities and strong project controls. Aggressive and unrealistic project schedules and inadequate staffing with qualified project management associates and support cause coordination problems that translate into project failures. Also, creeping project scope causes project management problems that are magnified by personnel turnover over long periods. Additionally, motivational issues over long periods of project management occur due to stressful confrontations in project evaluations, coordination, and negotiations that lead to project management ineffectiveness that take attention away from project financing needs and lead to project failure.

3.2.10 Contracts and Agreements

One of the first reasons usually cited for project failures is related to contracts and agreements; namely, weak host‐country legal and regulatory systems and enforcement of contracts. Differences in sponsor country and host country languages and laws complicate effective negotiation, implementation, and arbitration of contractual agreements due to misinterpretations or inability to grasp the impact of differences in legal intervention for conflict resolution. International project contract development and negotiation is a highly specialized discipline that needs input and validation of facts, assumptions, analyses, and assessments by external, independent experts. Yet, at times contracts and agreements are based solely on the project due diligence report findings and risk allocations, and the result is deficient contracts that do not provide protection against project failures.

Contractual misunderstandings are a cause of project construction delays and financial closings, which lead to a failure to negotiate reasonable, balanced, and sustainable contracts with acceptable terms for the parties involved. The lack of a contract that balances project costs, benefits, and its sustainability are linked to eventual project failure. Furthermore, aggressive contract schedule pressures to complete construction and financing can lead to drafting weak or faulty agreements, especially concerning contract enforceability of offtake agreements which are commonly thought of as viable and fairly secure arrangements.

Legal teams involved in drafting and negotiating project contracts are primarily composed of external legal expertise with the sponsor legal group taking a lesser role in the creation and management contracts unless, of course, there is a critical mass of projects in the pipeline and the required in‐house expertise is developed. This makes the integration of the various legal processes and analyses, evaluations, and desired terms and conditions with those of other project stakeholders difficult. Lack of harmony and cohesion in legal document development leads to project failures, especially when sound contract management systems and required specialized expertise are absent. Also, complications in managing a multitude of contracts by reams of paper make it impossible to effectively handle changes to the web of the contractual project basis without major delays.

In some projects, there is an excessive focus on contracts and agreements to manage sponsor risks and lesser attention to project economics and funding needs, sources, and implements. In the midst of such excessive focus, inadequate insurance contracts are concluded because of misguided and misinterpreted project objectives. At times, insufficient insurance and interest rate and foreign exchange hedging contracts are signed that expose the project company to adverse costs and the sponsor company to profit variability. It would be a serious omission if the high costs of project contract development, negotiations, changes and revisions, and renegotiations are not included in contract‐related factors that lead to project cost underestimation and a failure to meet financial expectations.

3.2.11 Project Financing

Universal project failures across all types of projects, host countries, sizes, and complexities begin with two major factors: Inadequate project finance skills and competencies in the sponsor company and the host‐government organizations, with overoptimism permeating all aspects of project development, assessment, financing, and operations. The next factor is insufficient, upfront project sponsor equity investment resulting in an unwillingness among lenders to provide debt financing, which results in delays and higher loan costs, and more stringent loan covenants. But, so does the host‐government's inability to make debt or equity contributions in hard currency and deliver on agreed‐to terms of contracts and agreements. These situations are further worsened by the inability to deliver on future obligations and credit support to raise permanent financing. The result is project failure on several dimensions.

The lack of strong project‐sponsor senior management commitment and host‐government political support, along with failure to dedicate sufficient and properly qualified resources to do the project right at the start of the project, are common causes of project failures. Again, inconsistent and conflicting project stakeholder objectives, the misinterpretation of requirements and deliverables, and even unintentional misrepresentations lead to delays in drafting and wrapping up financial documentation negotiations. These factors cause increases in project costs and more expensive debt financing, which are cited as common factors of project failures.

PFOs of sponsors with a critical mass of projects are staffed with competent and experienced associates who develop individual project plans and processes. But, an absence of standardized project financing templates is often given as a reason for the financing failures of small and inexperienced PFOs. A lack of project finance experience is linked with the use of erroneous, untested, and overly optimistic assumptions that generate unreasonable project forecasts that are not realized. Also, inadequate feasibility studies and project economic evaluations are characterized by omissions and errors and incomplete financial modeling, and the evaluation of financial model outputs that give a false sense of cash‐flow adequacy. In some instances, shaky project company business plans and operational models are used to support financing and end up not enabling the project company to realize its potential value creation and benefits in all areas, including sponsor tax advantages and increased tax revenues to the host government.

Poorly structured projects fail to make projects bankable because of their opportunistic nature, expedience, and unwarranted optimism. Such projects experience delay eventualities and unfavorable consumer or user acceptance of the project company's product or service, competitor entry to its industry, and disappointing regulatory rulings. Structural, financial, and operational weaknesses lead to poorly structured projects and higher financing costs and such projects fail to negotiate advantageous loan terms and conditions. Additionally, the absence of good sponsor‐project team working relationships with associates and decision makers of funding sources precludes getting the benefit of their sound, early advice and guidance. A more important factor, however, is a lack of experience in integrating technical, contractual, and financing facilities and instruments in the marketing of projects to investors effectively. Projects marketed ineffectively take longer to complete financing and at higher costs and have lengthy sponsor, host government, ECA, and multilateral agency approval times.

Earlier, we mentioned that a number of project finance failure factors have to do with inadequate project risk identification, assessment, and mitigation. Some failures occur because not all risks are identifiable or because risks viewed as having a small impact that can be easily absorbed and should not affect financing may turn out to have larger than expected impacts. Large impact risks cause project failures if not all their sources and timing of occurrence are identified correctly and financing proceeds based on shifting conditions. There is a lack of a common standard among stakeholders to judge risk‐mitigation effectiveness and a clear measure of successful risk coverage; however, having adequate coverage is a requirement. When the inadequacy of security packages and insufficient risk coverage are present in the interest rate, exchange rate, and local currency convertibility and commodity hedging contracts, project failures often occur. Likewise, weak guarantees, insurance contracts, and host‐government support used to raise financing can lead to project finance failures. This is especially true in the absence of early warning systems for risks and corrective steps to be implemented.

3.2.12 Organizational and Operational

There are project finance failures caused by organizational and operational factors, starting with the many decision‐making layers in sponsor and host‐government organizations that have different views of organizational risk tolerance versus those present in the project. This results in long project duration and additional delays, which leads to decision maker and project‐team weariness, which is pronounced when there is impeded all‐around communication, coordination, cooperation, and collaboration. Additionally, high project team and senior management turnover in project stakeholder organizations creates discontinuities in handoffs of responsibilities, earlier work, and deliverables. Agreements come into question, it takes more time to understand and accept what was decided earlier, and such discontinuities and delays contribute to project failures.

Weak organizational structures, a lack of project‐finance knowledge, and a lack of interdisciplinary training and development in the technical, legal, project finance, and project management areas can cause project failures. Also, shortages of qualified local talent cause expensive international human‐resource searches and costly local personnel training and technology transfers that result in cost overruns and less effective management of the project company. Furthermore, an unwillingness to fund project‐company management and leadership development amplifies shortages in the effective monitoring of large project performance and the inability of the project company to course correct when faced with adverse commercial developments. Occasionally, poor living and educational conditions for expatriates in the host country necessitate reliance on contracts with the O&M company for required project performance and costly incentives to achieve it.

Shortages and a low quality of production inputs and materials result in poor project‐company performance, as do some host government requirements to use local resources and materials. Project‐company management complacency and their heavy reliance on regulations that protect them cause an inability to effectively address changes in capacity and output requirements, or to respond to the entry of new competitors and variations in user or consumer needs. These factors are often cited as factors for project failure as well as for the inability of the project companies to implement business plans, especially under host‐government regulatory authority interference. Lastly, project stakeholder misrepresentations of facts and requirements due to their lack of experience working with different cultures also creates conditions for project failure.