Panama Canal

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A Tale of Two Projects: The Panama Canal and the Birth of Project and Risk Management Tom Kendrick, PMP, Program Manager San Carlos, CA TKendrick@FailureProofProjects.com Abstract The construction of the Panama Canal nearly 100 years ago was the most risky, high-tech project of its day. Much of the engineering required was developed for the project. The construction was breathtakingly expensive—until the late twentieth century the Panama Canal represented the single largest project investment in modern times. Stretching over several decades and requiring a series of project leaders, the construction effort and other contemporary projects represented the birth of modern project management. The Panama Canal story is particularly interesting for project managers because it is actually the story of two attempts at the same project. The first effort to build the Canal, by Ferdinand de Lesseps in the 1880s, was a project failure of epic proportions. The disastrous outcome was due to a number of factors, but lack of good project and risk management were front and center. The second project in the early 1900s, planned and led by John Stevens and George Goethals, succeeded largely because of the rigorous and disciplined application of good project practices, especially risk management. Material for this presentation is based in part on content from Identifying and Managing Project Risk (Tom Kendrick, AMACOM, 2003), where the Panama Canal projects are used to show the value and durability of project risk management principles. The ideas that ultimately made the Canal possible—what worked and what didn’t work—are ideas that are very much alive and valid today. The first Panama Canal project Although there was speculation much earlier, the first serious consideration of a canal in Central America was in the mid-1800s. Estimates were that such a canal would provide $48 million a year in shipping savings, and might be built for less than $100 million. Further study of a canal on-site was less optimistic, but construction of a railroad across the Isthmus of Panama was begun in 1850. This railroad was ultimately completed, but the $1.5 million, two-year project swelled to $8 million before it was finished, three years late in 1855. Eventually the railroad was able to generate a profit, but its construction problems held lessons for the canal construction efforts to come. Shortly after successfully completing the Suez Canal in 1869, Ferdinand de Lesseps and his backers were eager to take on new challenges. This financial and technical triumph earned de Lesseps the nickname “The Great Engineer,” although he was actually a diplomat by training, and had no technical background at all (and only modest skills as an administrator). He had, however, completed a project many thought to be impossible, and

was now world famous. Examining the world map, de Lesseps decided a canal at Panama would be his next project. Working from Paris in the late 1870s, he negotiated the necessary agreements in Bogota, Colombia (Panama was then the northernmost part of Colombia), securing the rights to build and operate a canal there in exchange for a small percentage of the revenue to be generated over 99 years. While it might seem curious today that these Middle Eastern and Central American projects originated in France, in the late 1800s Paris was the center of the engineering universe. The best schools in the world were there, and many engineering giants of the day lived in Paris, including Gustav Eiffel (then planning his tower). Engineering projects such as these could hardly have arisen anywhere else. Prior successes and good intentions notwithstanding, the initial undertaking to construct a canal at Panama was, in retrospect, very premature. It was a massive challenge for the technology of the late 1800s. In addition, a lack of project management expertise, just emerging at that time, compounded their difficulties. Precise project definition was never...
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