Why 70% of IT Projects Fail: A Brutal Honest Assessment

Have you ever wondered – Why 70% of IT Projects Fail: A Brutal Honest Assessment?

“Only 30% of our projects and programmes are successful.”

That stark admission from Joe Harley, programme and systems delivery officer at the UK’s Department for Work and Pensions, captures a brutal truth about IT project delivery. It’s not just the UK—here in Australia and New Zealand, we’re seeing the same devastating patterns.

A KPMG survey of New Zealand organisations found that 70% suffered at least one project failure in the prior 12 months. Meanwhile, Australia has witnessed spectacular failures: Victoria’s myki transport system ($1.4 billion over budget), the Australian Customs cargo system ($225 million write-off), and the 2016 Census debacle that left millions unable to complete their census online.

But here’s what the post-mortems consistently miss: the connection between contract structure and failure rates. After managing dozens of troubled projects across Australia and New Zealand, I’ve identified a pattern that explains why some projects are almost doomed from the start.

The Hidden Truth: It’s Not Just Poor Requirements

Every failed project inquiry mentions the usual suspects: unclear requirements, scope creep, poor stakeholder management, and inadequate testing. These are symptoms, not causes.

The real question is: What type of project management approach gives projects the best chance of success?

The answer lies in understanding how contract structure fundamentally shapes project outcomes—something most failure analyses completely overlook.

The Fixed Price Trap: Why Small Projects Become Big Failures

Here’s a confronting reality from my experience: fixed-price IT projects fail at dramatically higher rates than time and material engagements.

Why fixed-price projects are set up to fail:

1. The Estimation Impossibility

Fixed-price contracts require accurate estimation upfront—when you know least about the project. Vendors must guess not just the technical complexity, but also:

• Integration challenges with existing systems
• Change management across diverse user groups
• Political dynamics within the client organisation
• Evolving business requirements during delivery

The maths doesn’t work: Vendors either under-estimate (leading to financial losses) or over-estimate (pricing themselves out). Neither outcome serves anyone well.

2. The Innovation Killer

Fixed-price structures incentivise delivering the minimum viable solution that satisfies contractual requirements. When teams discover better approaches during development, the contract prevents implementation.

I’ve watched brilliant technical teams abandon superior solutions because “it wasn’t in the fixed-price scope.” The result? Technically compliant but operationally mediocre systems.

3. The Change Management Disaster

Australian and New Zealand organisations—particularly government entities—operate in highly dynamic environments. Legislation changes, priorities shift, new compliance requirements emerge.

Fixed-price contracts treat these realities as “scope creep” rather than legitimate business needs. The resulting change order negotiations consume more time than the original work.

The Project Manager Capability Mismatch

Here’s another brutal truth: most project failures stem from mismatching project manager capabilities with project types.

Fixed-price projects require different skills than time and material projects:

Fixed-Price Project Managers Need:

• Forensic contract management skills
• Experience managing vendor disputes
• Ability to navigate the change order bureaucracy
• Strong legal and commercial acumen
• Risk mitigation focus

Time and Material Project Managers Need:

• Collaborative stakeholder management
• Agile delivery experience
• Adaptive planning capabilities
• Business outcome focus
• Continuous improvement mindset

The problem: Most organisations assign project managers based on availability, not capability match. A collaborative T&M specialist managing a fixed-price contract is heading for disaster—and vice versa.

Government vs. Corporate: Different Failures, Same Patterns

Government Project Challenges

Australian and New Zealand government projects face unique complexity:

Process Obsession: Government agencies often maintain processes that haven’t been reviewed in decades. I’ve seen projects derailed by procurement procedures that were designed for purchasing photocopiers being applied to complex system integration.

Political Risk: Projects spanning electoral cycles face changing priorities and funding pressures. The Victorian government’s health IT system debacle exemplifies how political considerations override technical realities.

Federal Complexity: Australia’s federal structure means projects often require coordination between Commonwealth, state, and local government systems—each with different technical standards and approval processes.

Corporate Project Reality

Large corporations face their own set of project killers:

Reputation Paralysis: Fear of public humiliation leads to over-conservative approaches that stifle innovation. I’ve seen companies reject proven solutions because they seemed “too risky” for their brand.

Integration Nightmares: Corporate projects must integrate with decades-old legacy systems that nobody fully understands anymore. The technical debt creates exponential complexity.

Board Pressure: Quarterly reporting cycles create artificial deadlines that force premature go-live decisions. Systems launched to meet board commitments rarely deliver promised business value.

The Scale and Consequences

The financial impact is staggering:

• Australia: Estimated $5.4 billion wasted annually on failed IT projects
• McKinsey research: 17% of large IT projects go so badly they threaten company survival
• Average overrun: Large projects run 45% over budget and deliver less than 56% of planned benefits

But here’s a crucial point most people miss: project failure isn’t just about time, budget, or scope. It’s about outcomes.

Consider Sydney’s Harbour Tunnel. Whilst delivered on specification in 1992, traffic volumes fell so far below projections that the NSW government had to provide revenue guarantees totalling $1.1 billion from 2008 to 2022. The tunnel was technically successful but commercially disappointing—illustrating how you can deliver exactly what was specified and still create a strategic failure.

This pattern appears repeatedly in IT projects—systems that meet every technical requirement but fail to achieve business objectives.

Real project failure includes:

• Systems delivered but never adopted by users
• Technology that works perfectly but doesn’t solve business problems
• On-time, on-budget implementations that don’t generate expected ROI
• Projects that satisfy contracts but disappoint stakeholders

The real cost isn’t financial—it’s organisational trust. Every failed project makes the next transformation initiative harder to fund and staff.

In extreme cases, project failures have resulted in:

• Criminal investigations (particularly in government)
• Company reputation damage lasting years
• Executive career termination
• Regulatory intervention
• Public inquiry and media scrutiny

What Actually Works: The T&M Advantage

Time and material projects succeed more often because they align with project reality:

Adaptive Scope Management

Instead of treating changing requirements as failures, T&M contracts embrace iteration. Teams can pursue better solutions as they emerge, leading to superior outcomes.

Collaborative Delivery

T&M structures incentivise vendor-client collaboration rather than adversarial contract enforcement. Problems get solved jointly instead of becoming legal disputes.

Risk Distribution

Rather than forcing vendors to price unknown risks into their bids, T&M distributes risk appropriately. Clients retain control over scope and quality decisions.

Quality Focus

Without fixed-price pressure to cut corners, teams can prioritise sustainable, maintainable solutions that serve long-term organisational needs.

The Hybrid Model: Best of Both Worlds

For organisations needing budget certainty, hybrid models offer a middle path:

• Phase-based delivery with fixed prices for defined increments
• Scope flexibility within each phase
• Regular checkpoint reviews to adjust subsequent phases
• Risk sharing between client and vendor

This approach maintains budget predictability whilst allowing adaptive delivery.

What This Means for Your Organisation

If you’re planning an IT project:

1. Match Contract Type to Project Reality

• Choose fixed-price for: Simple, well-defined projects with minimal change risk
• Choose T&M for: Complex transformations requiring adaptive delivery
• Consider hybrid for: Large projects needing both budget certainty and delivery flexibility

2. Match PM Skills to Contract Structure

Don’t assign project managers based on availability. Match their experience and skillset to the contract approach.

3. Accept the Planning Paradox

The projects that most need detailed upfront planning (complex, uncertain ones) are least able to be planned accurately. Design your approach accordingly.

4. Prepare for Political Reality

Government projects will face political pressures. Corporate projects will face market pressures. Build delivery approaches that acknowledge these realities.

The Path Forward

The 70% failure rate isn’t inevitable. Organisations succeeding consistently share common approaches:

• Strategic contract selection based on project characteristics
• PM capability matching to contract and project type
• Stakeholder education about project realities and trade-offs
• Adaptive governance that supports evolution rather than enforcing rigidity
• Honest progress reporting that enables course correction

The choice isn’t between perfect planning and chaotic execution. It’s between approaches that acknowledge project reality and those that fight against it.

Your next IT project doesn’t have to join the 70% failure statistic. But success requires honest assessment of what actually works versus what sounds good in boardroom presentations.

Ready to improve your project success rate? I’ve created a comprehensive Project Health Assessment Framework that helps organisations identify early warning signs and implement corrective actions before projects fail. [Download your free copy here] and start protecting your IT investments.

Facing a struggling project? Let’s discuss how strategic project recovery can turn around failing initiatives and deliver the business value you need.