The Strategic Management of Large Engineering Projects - A Review
Shaping Institutions, Risks, and Governance - By Roger Miller and Donald Lessard
Few studies on Large Engineering Projects (LEPs) are as rigorous and insightful as the IMEC (International Program in the Management of Engineering and Construction) Research Program, which is the focus of The Strategic Management of Large Engineering Projects.
The IMEC study is quite unique. It was formed through the sponsorship of multiple stakeholders, who shared data and knowledge across different projects, that is then studied an interpreted by multiple scholars from various specialties. Therefore, minimizing host of biases in both data collection and result interpretation.
It is that rare instance where the proverbial elephant was well-identified in a well-lit room, where perceptive observers examined it together and discussed their perceptions too.
The Strategic Management of Large Engineering Projects by Roger Miller and Donald Lessard is a distillation of the outcomes of IMEC’s (International Program in the Management of Engineering and Construction) extensive study of sixty major projects across diverse sectors and geographies.
The IMEC program was commissioned in 1995 to study the strategic dimensions of large engineering projects (LEPs), and the book is published by MIT Press at the year 2000—25 years ago.
The program originated from the Hydro-Québec/CAE Chair in the Management of Technology at Université du Québec à Montréal and brought together academic institutions, industry leaders, and government agencies. The program was sponsored by organizations such as Atkin Realis (formerly SNC-Lavalin), Ontario Hydro, and the Project Management Institute.
The book, comprising ten chapters authored by different scholars, argues—at the beginning of the 21st century—that the foundation of project success lies in the early strategic design of institutional arrangements and governance structures.
In this review we cover:
What are Large Engineering Project (LEPs)
LEPs’ Main Strategic Dimensions
General Types of Project Sponsors
Risk Allocation by Project Financial Structuring
Strategizing to Face Risks and the Risk Layering Model
Project Shaping
Strategizing Against Risks
Iterative Process of Refinement
Creation and Exercise of Options
Question then Becomes
The book explores the second-order strategic thinking, that is, deliberating actions that expand future response options in the face of unexpected events.
Several excellent chapters, such as Chapter 7 on building governability and Chapter 9 on partnerships, fall outside the limits this review. I encourage you to read the book firsthand, both for its extensive insights and as a thought experiment on how the management of Large Engineering Projects (LEPs) has evolved over the past 25 years.
What are Large Engineering Projects (LEPs)
The evolution in the meaning of engineering megaprojects and the complexities they face was recognized and highlighted by the authors in the early 2000s.
The authors defined Large Engineering Projects (LEPs) as massive, high-stakes ventures that shape economies and societies, and emphasize that the landscape of LEPs is shifting from centralized, government-led initiatives to complex partnerships involving private investors, regulators, and affected communities.
These projects must navigate regulatory hurdles, financial constraints, and political opposition while maintaining strategic flexibility.
The ability to shape institutions, forge alliances, and anticipate risks is what ultimately determines project success.
The book highlights six major hallmarks of LEPs and argues that by understanding these hallmarks, project leaders can shift from reactive management to proactive strategic positioning.
Product of Negotiated Compromise – LEPs evolve through complex negotiations among sponsors, investors, and regulators, requiring alignment of diverse interests and creative problem-solving.
Socially Contested Ventures – LEPs face political, environmental, and community challenges, with stakeholders competing for influence, making legitimacy and public approval critical.
Political Risks – LEPs are deeply intertwined with government policies, elections, and political shifts. Changes in leadership, national priorities, or public sentiment can drastically alter project viability.
Slow Development Cycles – Projects take decades to shape, finance, and execute, requiring patience and adaptability to shifting policies, economies, and market conditions.
Irreversible Investments – LEPs demand massive, non-recoverable capital commitments, making early-stage strategic planning crucial to avoid financial and operational deadlocks. Average investment at early 2000s timeline amounted to more than $1B.
Regulatory Complexity – Securing permits and approvals requires navigating layers of bureaucracy, often dealing with conflicting regulations across multiple agencies. Misalignment with regulatory frameworks can cause costly delays or outright cancellations.
LEPs’ Main Strategic Dimensions
In Chapter 1, the authors (Roger Miller and Donald Lessard) recount the main strategic dimensions and levers of LEPs.
They argue that successful Large Engineering Projects (LEPs) depend not just on technical expertise but on strong institutional arrangements. Institutional frameworks—laws, regulations, and governance structures—play a more crucial role in determining project performance than traditional planning and execution methods.
Projects anchored in stable and coherent institutions and predictable regulatory environments benefit from reduced risks, and clearer pathways for stakeholder engagement. In contrast, projects in weak institutional settings often struggle with instability, opportunism, and regulatory ambiguity, increasing their chances of failure.
Beyond institutions, the quality of sponsorship is a decisive factor in project success. Sponsors are responsible for shaping, financing, and managing risks across a project’s lifecycle. The authors posit that effective sponsors must master five essential skillsets:
Ownership Competency – Effective sponsors take full responsibility for project outcomes, ensuring strategic decisions align with long-term operational realities. They oversee engineering choices and contractual commitments to minimize future risks.
Strategic Evaluation – Sponsors must quickly assess project feasibility, sorting viable opportunities from high-risk ventures. This requires experience in financial modeling, regulatory analysis, and market forecasting.
Stakeholder Engagement – Building relationships with governments, regulators, and communities is crucial. Strong sponsors proactively manage public perception and political risks through transparent communication and negotiation.
Coalition-Building – Successful sponsors cultivate partnerships with investors, financial institutions, and industry specialists. These alliances help secure funding, manage risks, procure packages, construct project, operate them and navigate regulatory landscapes.
Resilience and Survivability – Sponsors must sustain long-term commitments, enduring financial setbacks and political shifts. A diversified project portfolio and strong financial backing increase their ability to adapt to crises.
General Types of Project Sponsors
The book identifies three major types of sponsors—network operators, concessionaire-developers, and ad hoc alliances. These sponsor types shape how LEPs are structured, funded, and executed, influencing their overall chances of success in volatile economic and regulatory environments.
Network Operators – Large, established firms that own and manage infrastructure networks, such as utilities or transportation systems. They bring financial stability and technical expertise but may struggle with bureaucratic inefficiencies.
Example: Endesa, a private utility in Chile, retained about 60% of the country’s power production even after deregulation. Their network ownership provided stability, but they had to navigate shifting regulatory landscapes.
Concessionaire-Developers – Private firms that specialize in financing, developing, and managing infrastructure projects, often operating across international markets. They are skilled at structuring financial deals and managing risks but can be vulnerable to political instability.
Example: INTERGEN, a joint venture between Bechtel and Pacific Gas & Electric, develops thermal power plants globally. Their expertise in risk allocation and international partnerships enables them to succeed in complex regulatory environments.
Ad Hoc Alliances – Temporary partnerships formed by entrepreneurs or engineering firms to develop specific projects. While agile and innovative, they often lack the financial backing and long-term credibility required for sustained success.
Example: The M1-M15 Toll Highway project between Vienna and Budapest was developed by an alliance between Transroute, Strabag, and European banks. The sponsors came together to finance and execute the project but had no long-term stake beyond its completion.
Risk Allocation by Project Financial Structuring
In Chapter 8, the authors (Richard Brealey, Ian Cooper, and Michel Habib) provide a coherent view of how financing large projects can help in dealing with risks.
Effective risk allocation in large infrastructure projects hinges on a delicate balance between control and risk-bearing capacity. Here, control refers to the ability of a party to directly influence, mitigate, or manage a specific risk through decisions, expertise, or operational actions.
For instance, contractors have control over construction risks because they oversee project execution, select materials, and manage timelines. Operators control operational risks through maintenance, efficiency improvements, and performance monitoring.
However, the capacity to control a risk does not always align with the ability to financially absorb its impact. Overexposure can lead to collapse when those managing the risks also bear excessive financial burdens. This creates a trade-off: fragmenting risk across multiple parties reduces individual exposure but weakens incentives for active risk management.
The capacity to control a risk does not always align with the ability to financially absorb its impact.
Concurrently, fragmenting risk across multiple parties reduces individual exposure but weakens incentives for active risk management.
Some risks, such as currency fluctuations, cannot be controlled at the project level and are best transferred to financial markets. Others require a strategic alignment of ownership and responsibility so that parties both bear the consequences of risk and have the authority to mitigate it.
When direct risk allocation through contracts is impractical, financial architecture provides an alternative mechanism for distributing and renegotiating risks.
Unlike contracts that govern individual project aspects, financial structuring shapes control by determining who has decision-making power over financial resources or stands to gain or lose from the risk.
For instance, large banks or multilateral institutions with financial stakes in a project not only provide capital but also wield influence that can deter opportunistic renegotiation by governments or stakeholders, i.e., managing political risks. Since ownership confers control, financing structures, also, dictate who holds power in renegotiation scenarios.
Strategizing to Face Risks
In Chapter 3, the authors (Donald Lessard and Roger Miller) emphasize that risks in major projects are not isolated but interact dynamically, shifting in intensity over the project's life cycle.
The risk profile changes as the project evolve. Some risks, like regulatory approvals, diminish after initial hurdles are cleared, while others, such as financial and market risks, persist and evolve with economic conditions.
Technical uncertainties may be resolved after construction, but operational risks continue throughout a project’s lifespan.
Moreover, external shocks—macroeconomic instability, exchange rate fluctuations, or global financial crises—can compound multiple risk factors simultaneously. Institutional risks, particularly sovereign and regulatory uncertainties, can reignite financial and market vulnerabilities, making risk management an ongoing, adaptive process rather than a one-time mitigation effort.
These interdependencies highlight the need for robust contingency planning and flexible project structures to navigate uncertainty effectively.
The authors develop a taxonomy of risks in LEPs, categorizing them into market-related risks (market, financial, and supply risks), completion risks (technical, construction, and operational risks), and institutional risks (regulatory, social acceptability, and sovereign risks).
It is interesting to consider how certain risk categories, such as environmental risks, were not distinctly recognized as a separate entity in this risk taxonomy at early 2000s. Instead, they may have been subsumed under regulatory and social acceptability risks, reflecting the evolving understanding of sustainability and environmental concerns in project management.
The Risk Layering Model
Some risks can be anticipated and quantified, allowing sponsors to integrate mitigation strategies from the outset. Others, however, arise dynamically—triggered by political shifts, stakeholder opposition, or macroeconomic turbulence—forcing project sponsors to adapt and renegotiate their strategies in real time.
The key challenge is not merely to identify risks but to develop strategic responses that align risks with the capacities of different stakeholders.
Authors argue that traditional risk models, which rely on probabilistic forecasting, often fall short in capturing the complex interdependencies that shape project outcomes. Instead, successful sponsors approach risk as an active management challenge, layering their strategies to create resilience, adaptability, and long-term viability.
To navigate this uncertain terrain, project sponsors must layer their risk strategies, balancing direct risk allocation through contracts with indirect risk management through financial and governance structures.
The layering model breaks down risk management into six core strategies: (1) assessing and understanding risk, (2) shifting risks through financial instruments, (3) diversifying risk exposure, (4) creating options for adaptive responses, (5) transforming risks through institutional engagement, and (6) bearing residual risks as a calculated choice. Risks are not simply avoided but strategically assigned, diversified, transformed, or embraced, depending on their nature and controllability.
Figure 1 illustrates these six layers of strategies for managing risks. The book elaborates on each of these strategies in valuable details. By integrating these layers, project sponsors do not merely react to risk—they shape project trajectories, ensuring that risks are embedded within a structured framework that enhances governability and long-term project success.
Project Shaping
In Chapter 4, the authors (Roger Miller and Xavier Olleros) define project shaping as an active and iterative process where sponsors do not merely react to uncertainties but strategically engage with risks to influence outcomes, that unfolds over multiple episodes, typically lasting six to seven years.
Successful shaping requires expertise in organizational strategy, law, diplomacy, and public affairs. Sponsors must navigate complexity by forming alliances and coalitions, leveraging prior experience, and incorporating expert advice. This approach transforms significant uncertainties into manageable challenges by distributing responsibilities and aligning incentives across stakeholders.
Sponsors start with a configuration hypothesis, testing and adjusting it through strategic interventions. Each shaping episode addresses specific challenges, such as market uncertainties, regulatory hurdles, or stakeholder opposition, leading to incremental refinements.
This procedural rationality—where adaptation takes precedence over rigid planning—allows projects to evolve dynamically, ensuring that unforeseen disruptions do not derail long-term goals.
The authors make an interesting observation: effective shaping means balancing control with flexibility, ensuring that projects remain adaptable while maintaining strategic momentum. By continuously refining their approach through successive shaping episodes, sponsors gradually bring projects to full momentum and closure, creating structures that are resilient, governable, and primed for long-term success.
Project shaping arises from the mindset of not avoiding complexity but embracing it when it is worth doing so. Sponsors must manage nonlinear interactions, interdependencies, and shifting institutional landscapes, making strategic decisions that account for emergent risks.
Chapter 4 sets the book’s narrative in developing strategic moves to anticipate uncertainty and risks through out the project within the context of project shaping.
The idea of project shaping is discussed through the book in three main contexts of Strategizing Against Risks, Iterative Process of Refinement, and Creation and Exercise of Options, albeit, in different chapters. Here is my attempt to summarize them accordingly.
Project Shaping as Strategizing Against Risks
Project shaping as strategizing against risks integrates risk management into the foundation of large engineering projects (LEPs), ensuring resilience and adaptability. Effective sponsors use risk-layering strategies—assessing, shifting, diversifying, creating options, transforming, and bearing risks—to proactively align projects with emerging uncertainties. By engaging stakeholders early, they identify disruptions, align incentives, and refine project configurations to minimize failure risks.
Risk layering distributes uncertainties strategically, enhancing project adaptability. Assessing risks ensures informed decision-making, while shifting and diversifying risks limit exposure. Creating options, such as modular investments, builds flexibility, and transforming risks through regulatory influence secures legitimacy. Bearing residual risks maintains control, allowing sponsors to influence outcomes effectively.
By applying these strategies, sponsors shape projects into robust, governable entities rather than leaving them vulnerable to uncertainty. Successful LEPs engage with risk strategically, using uncertainty as a tool for coalition-building, financial stability, and long-term viability. Project shaping, therefore, is less about avoiding risks and more about structuring uncertainty to create sustainable, high-value ventures.
Project Shaping as an Iterative Process of Refinement
Project shaping is not a singular decision but an evolving sequence of progressive refinements, where sponsors navigate multiple shaping episodes to align technical feasibility, financial viability, regulatory compliance, and stakeholder expectations. Each episode serves as a hurdle, requiring adaptation and negotiation to maintain project momentum.
Figure 2 depicts a decision tree for navigating project hurdles over multiple episodes.
Sponsors begin with broad conceptual assumptions and, through successive cycles of coalition-building and risk assessment, refine their approach to meet emerging challenges.
This process is dynamic, often facing early lock-in risks that can restrict future flexibility or require renegotiations when unforeseen issues arise. Effective shaping involves continuous stakeholder engagement, ensuring that governance structures, financial agreements, and technical designs remain adaptable while balancing competing interests.
In doing so, shaping becomes a form of strategic maneuvering—aligning incentives, mitigating risks, and integrating social and environmental considerations to transform uncertainty into governable structures.
Project Shaping as Creation and Exercise of Options
Beyond iterative refinement, shaping is a mechanism for creating optionality, allowing sponsors to respond dynamically to changing conditions rather than committing prematurely to fixed solutions.
The real-options framework, drawn from financial theory, is useful to conceptualize how uncertainty can enhance project value if structured decisions are made sequentially rather than in a single, irreversible move.
By keeping strategic choices open—whether in financing, technology selection, or stakeholder agreements—sponsors can delay critical commitments until more information is available, reducing downside risks while maximizing upside potential.
This approach demands flexible governance, where partnerships are structured to support adaptability rather than rigid control. The authors recount a few examples to clarify this idea. Premature lock-in, such as the early drilling technology choice for the English Channel Tunnel, demonstrates the risks of closing options too soon, while the Brazilian ITA project illustrates how deferring financial decisions until the right conditions emerge can lead to a more sustainable outcome.
The key to financial shaping lies in maintaining the ability to recalibrate commitments—whether through staged investments, contingent financing agreements, or leveraging contractual safeguards—ensuring that projects not only secure initial funding but remain resilient against evolving economic and political landscapes.
Question then Becomes
Nearly 25 years after the IMEC research was published, its insights remain foundational, demonstrating remarkable foresight in anticipating the evolving landscape of LEPs. The study not only captured the complexities of its time but also laid out the direction of more than two decades of industry transformation.
At the same time, the evolving landscape of large engineering projects demands adaptation. Sustainability mandates, digital transformation, and geopolitical shifts are reshaping project governance, risk management, and financial structuring.
The rise of green bonds and impact investing calls for new financial models that balance economic viability with environmental imperatives. Meanwhile, stakeholder dynamics are more complex than ever.
What are the most important dimensions in which IMEC’s strategic framework must evolve to stay relevant? How can lessons from IMEC guide energy transition projects in navigating regulatory hurdles, community engagement, and Indigenous partnerships?
The genius of the IMEC program lies not only in its findings but in its very existence—the fact that such a comprehensive, multi-stakeholder collaboration actually took place.
The book leaves the reader contemplating whether a similar large-scale study could be conducted today and, if so, what its outcomes might be.
I cannot help but wonder: what conditions would be necessary to foster a similarly ambitious initiative today?
Notes
This book review is a reading material for the “Strategy in Project Management: Game Theoretic Approach,” course at the University of Calgary, Department of Civil Engineering.
Refer to this article as below:
Zangeneh, P. (2025), “The Strategic Management of Large Engineering Projects: Shaping Institutions, Risks, and Governance by Roger Miller and Donald Lessard,” EPM Research Letters.
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