Do the sheer size and scope of public megaprojects doom them to fail?

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biggerisn’t always

betterBY SARAH FISTER GALE ---- ILLUSTRATION BY MATT KENYON

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With the global influx of government stimulus money, there has been no shortage of publicly funded megaproj-ects. The blitz of multi-year, ultra-expensive endeavors all came wrapped in promises to spur growth, create jobs and extend urban infrastructure.

If they succeed, that is. And that’s looking like an awfully

big “if,” judging by some recent spec-tacular government-funded flameouts.

The United States heralded the US$8.7 billion project to build a tun-nel connecting New Jersey and New York City as the country’s largest pub-lic works project. It was awarded more than US$3 billion in federal funds at a time when President Barack Obama’s administration has made infrastructure spending a cornerstone of its economic stimulus efforts. Yet despite entreat-ies from his administration and offers of additional funds, the much-hyped megaproject was shut down by New Jersey Gov. Chris Christie in response to predictions that the final price tag would run US$5 billion over budget.

As in the corporate realm, govern-ments around the world are demand-ing ROI and accountability. A recent report from the United Kingdom will probably only add fuel to the fire there. Released in December by Infrastruc-ture UK, an offshoot of the govern-ment’s Treasury, the report found that Britain could save up to £30 billion

over the next decade on infrastructure spending if it improves project plan-ning, commissioning and procurement of projects and programs. Lord Sas-soon, commercial secretary to the Trea-sury, said the report was part of the government’s drive to get “more infra-structure bang for our limited buck” at a time of public spending cuts.

MISSION: IMPOSSIBLE?With governments feeling the pinch, politicians and everyday citizens are keeping a close eye on all those yen, euro, dollars and pesos being poured into infrastructure projects.

“Political wrangling, threats of budget cuts, market fluctuations and intense public scrutiny are everyday issues for megaproject managers,” says Tom Sheives, PhD, PMP, CEO of Unstuck Company, a project manage-ment consultancy in Arlington, Texas, USA. “How a leader manages these issues and makes decisions is the big-gest challenge on a megaproject.”

Yet given the transient nature of politics, the fate of public works proj-ects often lies with whoever happens to be in office when the inevitable roadblocks appear, says Patricia D. Galloway, PhD, PMP, CEO of Pegasus Global Holdings Inc., a Cle Elum, Washington, USA-based management consultancy for the energy and infra-structure industries.

The U.S. National Ignition Facility,

PMI 2010 Project of the Year, lasted

nearly 13 years, and wrapped up

US$2 million under budget and three

weeks ahead of schedule.

>>Watch a video on this exemplary

megaproject at PMI.org/PMNetwork.

MARCH 2011 PM NETWORK 29

1 High Speed 2, England: US$45.6 billion. The United Kingdom plans to create a high-speed railway connecting London and the West Midlands and linking London, northern England and Scotland.

2 Gorgon Liquefied Natural Gas, Australia: US$37 billion. The megaproject will provide gas and liquefied natural gas through the creation of a series of pipelines and a domestic gas plant.

3 South Stream Pipeline, Russia: US$20 billion. A gas pipeline stretching from Russia, through the Black Sea, to the coast of Bulgaria will supply natural gas to the region.

4 London Crossrail, England: US$25.5 billion. This railway system under central London will connect existing routes and provide additional transport for the commuter rail.

5 GCC Rail, United Arab Emirates: US$25 billion. This high-speed Gulf Cooperation Council rail system runs from Kuwait to Oman, linking six nations.

6 Masdar City, United Arab Emirates: US$22 billion. Abu Dhabi’s project to create a city reliant entirely on renewable energy will also include a focus on clean technologies.

7 NextGen Air Traffic Control System, USA: US$20 billion. Tweaks to the national air trans-portation system include reducing environmen-tal impact and increasing national security.

8 Rio-Sao Paulo-Campinas High Speed Rail, Bra-zil: US$20 billion. Brazil plans to build a high-speed rail system to connect Sao Paulo and Rio de Janeiro, its two biggest cities.

9 Round 3 Wind Farm Zone, England: US$18 billion. The United Kingdom has begun an effort to use offshore wind power to deliver electric-ity to nearly a quarter of the country.

10 Port of Qingdao, China Expansion: US$15 billion. Located on the Yellow Sea, this seaport is China’s second largest. The megaproject involves a new dock and renovations to the existing port.

11 Vogtle Nuclear Power Plant Units 3 and 4, USA: US$14.4 billion. This U.S. power plant has begun construction of two additional nuclear reactors.

12 2016 Rio Olympics, Brazil: US$14 billion. Rio de Janeiro is hosting the Summer Olympic Games and will begin construction of venues as well as the Olympic Village, which houses athletes.

13 Green Power Express, USA: US$12 billion. ITC Transmission is creating a series of high-voltage electric transmission lines using wind and other renewable resources.

14 Jinghu High Speed Railway, China: US$12 bil-lion. Connecting the economic zones of the Bohai Sea Rim and Yangtze River Delta, the new high-speed railway is expected to open next year. Some estimates say the budget has grown to US$32 billion.

15 Nord Stream, Switzerland: US$12 billion. Running from Russia through the Baltic Sea, this pipeline aims to supply 26 million homes in Europe with natural gas.

16 Izmir-Istanbul Highway, Turkey: US$11 billion. Creation of this highway system between Izmir and Gebze in Istanbul is expected to reduce travel time by half.

17 Nabucco Pipeline, Turkey: US$11 billion. This natural gas pipeline will connect Turkey and Austria via Bulgaria, Hungary and Romania.

18 Trans-Saharan Gas Pipeline, Algeria: US$10 billion. A natural gas pipeline running from Nigeria to Algeria is expected to open by 2015, diversifying European natural gas sources.

19 Al Maktoum International Airport, United Arab Emirates: US$8.1 billion. This travel and com-merce hub opened in June 2010.

20 Mexico 7th National Refinery, Mexico: US$7 billion. Pemex, a state-run energy company, plans to open a new oil refinery.

the biggest of the bigThe top 20 infrastructure megaprojects around the world:

Source: Top 100 Global Infrastructure Projects, CG/LA Infrastructure, November 2010

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“Because of their extensive length, all megaprojects go through some sort of economic crisis that usually has an impact on funding,” she says.

When that happens, the projects’ continued success can fall prey to political maneuvering. “Often those who were in favor of the project when it was launched aren’t in office a few years later when budget decisions are made,” Dr. Galloway says.

It’s one of the many uncertainties megaproject managers face as they try

to steer their lengthy endeavors toward completion.

Dr. Galloway served on a team appointed to review the US$10 billion Columbia River Crossing megapro-ject to build a bridge connecting the U.S. states of Washington and Oregon. “The project has been going on for 10 years, and the designs aren’t even off the table,” Dr. Galloway says.

The bridge faces many problems typical to megaprojects. Along with funding concerns, there are numerous

Megaprojects require a strong leader who can bring all of the stakeholders to the table and ensure that risk management addresses all of their conflicting needs.—Patricia D. Galloway, PhD, PMP, Global Holdings Inc., Cle Elum, Washington, USA

Columbia River Crossing, Portland, Oregon and Vancouver, Washington, USA

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stakeholders in competing jurisdic-tions, including the governors, city officials and port authorities in both states, federal regulators, light-rail transit authorities, and local leaders on Hayden Island, which sits in the middle of the river. Every one of these stakeholders has a vested finan-cial interest in the project and comes with his or her own agenda, risks and expectations.

The height of the bridge alone sparked much debate. The design must take into account air-space issues (it can’t be too tall) and shipping lanes (it can’t be too low). It also must accommodate a nearby railroad bridge and swinging marine cranes. Designers must factor in the possibility of earthquakes, volcanic activity and unstable soil around the bridge’s footings. Oh, and the public would like an iconic design comparable to the Golden Gate Bridge in San Fran-cisco Bay, California, USA.

“There are so many technical con-siderations on these projects that most people don’t think about,” Dr. Gal-loway says. “It requires a strong leader who can bring all of the stakeholders to the table and ensure that risk man-agement addresses all of their conflict-ing needs.”

With every decision they make, megaproject managers must assess the impact on all stakeholders and throughout the project life cycle.

“If you only listen to one group, you may go down a completely dif-ferent path than if you analyze the needs of all the key stakeholders,” says Dr. Sheives, who also teaches project management at the graduate level at The University of Texas at Dal-las and Embry-Riddle Aeronautical University.

And that path isn’t always clearly marked.

LARGE AND IN CHARGESuccessful execution of a megaproject takes the guidance of a strong project leader with just the right mix of experi-ence, authority and charisma.

Not every project manager has the right stuff.

“You can do formal training all day long, but megaproject leaders need on-the-job experience and mentor-ing,” says Craig Connell, vice presi-dent and director of the corporate project management office for Black & Veatch, a global engineering, con-struction and consulting firm in Kan-sas City, Missouri, USA. “They’ve got to be able to manage dozens of stakeholders: clients, contractors, sub-contractors and partners. If you can’t handle that and control stakeholder expectations, you won’t be a good megaproject manager.”

To better groom its future megapro-ject managers, Black & Veatch devel-

>TIP Megaproject managers should be ready to contend with global currency issues. Faiez Grati, PMP, Ovivo, Tunis, Tunisia, is helming a massive desalination project in Algeria. The contractor is paid in euro, but much of the equipment the com-pany buys is in U.S. dollars. That means he has to take exchange rates into account during procurement.

“Managing the risks and opportunities around this aspect of the project to identify the best time to buy equipment could be decisive for project success,” Mr. Grati points out.

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oped project leadership courses and mentoring programs, along with a career path aimed at offering opportu-nities to lead steadily larger initiatives.

Megaproject managers also need global experience, particularly when they deal with contractors and team members who span international borders, says Faiez Grati, PMP, proj-ect manager for Ovivo, an engineered water-treatment solutions company in Tunis, Tunisia. Mr. Grati is cur-rently working on a megaproject to roll out nine desalination plants in Algeria, with the financial group in Canada, the engineering team based in Austria and the project manage-ment team in Tunis.

“In this situation, a strong commu-nication management plan is manda-tory,” he says. “The project manager must listen to all stakeholders and clearly communicate roles and respon-sibilities to everyone.”

Khaled Ahmed Hamdy, PhD, PMP, is also dealing with a cross-cultural team as projects advisor at the govern-mental Roads & Transport Authority (RTA), Dubai, United Arab Emirates. He helped to manage the Dubai metro program, working to construct one of the longest driverless subway systems.

Government sponsors give you

authoritative power that privately owned

sponsors can’t do. We wouldn’t be able

to redirect traffic, for example, on

a private project.—Khaled Ahmed Hamdy, PhD, PMP, Roads &

Transport Authority (RTA), Dubai, United Arab Emirates

Dubai Metro, Dubai, United Arab Emirates

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Launched in 2005, the megaproject had more than 30,000 people working on it during its peak.

Along the way, Dr. Hamdy has had to battle communication prob-lems within his multinational project team, which includes four Japanese contractors, a Turkish engineering contractor, American and French consultants, and a project manage-ment company in Australia and the United Kingdom.

“We conduct meetings in English, but not everyone understands at the

same level,” he says. To minimize con-fusion, notes are shared with partici-pants and the team reviews key metrics before decisions are made.

PUBLIC ACCESSFor all the challenges, public mega-projects do come with some benefits compared to their privately funded counterparts.

“Government sponsors give you authoritative power that privately owned sponsors can’t do,” Dr. Hamdy notes. The government authority backing the Dubai metro project helped gain the support of utility companies, for example, and gave his team the power to redirect traffic in the bustling Dubai metropolitan area when needed. “We wouldn’t be able to achieve that on a private project,” he adds.

Despite economic uncertainties, financing for public projects is also more reliable than private endeavors, says Larry Zimmerman, Gaithersburg, Maryland, USA-based program man-agement practice leader at Black & Veatch’s water business.

“Typically, municipalities allocate cash before they allocate contracts, so those budgets are pretty secure,” he says. “With a private company, if stakeholder value drops, budgets can be pulled and projects can be canceled.”

However, that doesn’t mean that managers of public megaprojects can simply operate in a vacuum once they have money in place.

“Public projects need public con-sensus because citizens pay for them,” Mr. Zimmerman says.

That means project teams must constantly communicate about their progress and make sure people are educated about how the megaproject will benefit them.

Defining the benefit of a public project can be trickier, though, Mr. Connell says. Most privately funded projects are motivated by profit, which

Political wrangling,

threats of budget cuts,

market fluctuations and

intense public scrutiny

are everyday issues for

megaproject managers. —Tom Sheives, PhD, PMP, Unstuck Company,

Arlington, Texas, USA

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means ROI is fairly easy to quantify. “If a project makes the client company money, it’s easier to measure success. But it’s harder to measure the value of a tunnel or a road.”

Sometimes project managers have to figure out which project element is the most valuable to the sponsor. On Dr. Hamdy’s megaproject, he knew one piece of the triple constraint had to be met: The government insisted the rail stations start service on 9 September 2009. As the deadline loomed, Dr. Hamdy realized the cost and scope would have to be renegotiated. The budget ballooned from US$5 billion to US$8.1 billion, part of which involved paying contractors more to meet the accelerated schedule.

In addition, he decided to dra-matically decrease the project’s scope,

aiming to open only 10 of the original 29 stations planned. The team met its deadline, and the metro now trans-ports 150,000 people a day, up from 40,000 in 2005.

Megaprojects rarely stick to the original plans. Quite often, the bud-get increases exponentially and scope changes drastically. Sometimes the schedule gets pushed back—by months or even years. Those who manage these massive initiatives should realize such deviations don’t equal failure.

“Megaproject leaders must have a clear vision and must also have influ-ence over every aspect of the project,” Dr. Hamdy says. “To succeed in that role, they need to be determined and clear about what they want, and they need to push people to deliver their best work every day.” PM

US$5 billionThe estimated cost overrun to build the New York-New Jersey, USA tunnel, which led to its cancelation >

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