The Panama Canal

A Tale of Two Projects: The Panama Canal and the Birth of Project and Risk Management
Tom Kendrick, PMP, Program Manager San Carlos, CA [e-mail] 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
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
After repeated failures to raise funding, de Lesseps liquidated the Compagnie Universal du Canal Interoceanique, and the project ended. This collapse caused complete financial losses for all the investors. By 1892 scandals were rampant, and the bad press and blame spread far and wide. Soon the lawyers and courts of France were very busy dealing with the project’s aftermath. The French do not seem to have done a formal postproject analysis, but looking at the project in retrospect reveals over a decade of work, more than $300 million spent, lots of digging, and no canal. Following the years of effort, the site was ugly and an ecological mess. The cost of this project also included at least 20,000 lives lost (many workers who came to Panama died so soon after their arrival that their deaths were never recorded; some estimates of the death toll run as high as 25,000). Directly as a result of this project failure, the French government fell in 1892, ending one of the messiest and most costly project failures in history. The leader of this project did not fare well in the wake of this disaster. Ferdinand de Lesseps was not technical, and he was misguided in his beliefs that equipment and medicines would appear when needed. He also chronically reported more progress than was real (through either poor analysis or deception; the records are not clear enough to tell). He