Managing risk in megaprojects

By Steve Cooper, general manager UK and Ireland at Aconex

‘Megaproject’ is the term applied to multibillion-dollar investment projects such as vast railways, airports, highways or huge entertainment venues. Such schemes can be economically transformative for a country.

Consider the Panama Canal : it accounts for a significant share of the country’s GDP. And Hong Kong’s transport network would be severely challenged without its clean and speedy subway system, the MTR. Perhaps that’s the reason why newly-elected governments aim to launch a fresh megaproject – large developments can create a legacy for the administration in power as political leaders effectively stake their reputations on their successful delivery.

Looking back, in 1979, the project for the creation of the Channel Tunnel – dubbed initially the ‘Mouse-hole Project’ – was suggested when the Conservatives came to power in Britain. Two decades later, when Tony Blair’s Labour government built on John Major’s idea for a World Fair and expanded it to conceive the Millennium Dome. Under Gordon Brown, plans for HS2 took root. More recently, David Cameron’s Conservatives set the wheels in motion for Hinkley Point C, a project which achieved final sign off from Theresa May after she took control in the summer.

Mega risks

However, with a megaproject comes a mega risk. As more activities ramp up, complexity increases resulting in poor coordination and control of design and construction work, with substantial delays and cost overruns. In fact, nine out of 10 projects experience finance and time difficulties. Megaprojects can be run at minimal risk, on time and budget, but effective collaboration is required.

Failing megaprojects is not a new phenomenon. Danish economic geographer Bent Flyvbjerg argued in 2009 that “wherever we go in the world, we are confronted with a new political and physical animal: the multi-billion dollar mega infrastructure project.”

In many countries, megaprojects have experienced cost overruns or have offered meagre returns to the economy.
The Channel Tunnel, which opened in 1994, exceeded its budget by £4.7 billion – 80 per cent higher than projected – which forced several companies near bankruptcy. More recently the Stop HS2 campaign revealed that cost for the second phase of the line has increased by 39 per cent to £17.4bn from £12.5bn.

Unwanted change

Megaprojects are initiated not by a single organisation, but by a network of private and public entities following goals and strategies forged by a core group of key stakeholders.  Each has its own leadership and planning teams, its own goals and pressures that are not always coordinated other project partners, and very little change is needed for a project to be derailed.
Take Pakistan’s Tarbela Dam. Because the build took longer than expected – eight years longer, to be precise – inflation increased 380 per cent, far exceeding the budgeted amount, leading to a quadrupling of costs. Change is where much of the risk arising from a megaproject comes from. Being able to gain early visibility of all potential changes and the resulting risks is key – as is having the information available to support decision-making.

The best way to interconnect all project activities is through using an appropriate cloud collaboration platform. Offering robust governance to the way people and companies interact with each other helps alleviate project issues, or prevents them from arising in the first place.

Successful collaboration

Typically, the number of people involved in the execution phase of a megaproject is more than 10,000 across a broad supply chain. During the building of Heathrow Terminal 2, teams used collaboration technology to successfully manage and coordinate a high volume of communication and project information exchanged between hundreds of companies.

Because that software was cloud-based, the teams gained the flexibility to meet fluctuations in demand during peak phases of construction allowing the terminal to be completed on time with minimum disruption. Cloud-based collaboration software was used to simplify and manage this complex and vast project; collaboration is about knowing what’s happening at any point in time for any aspect of the project and being able to act on that knowledge.

Collaboration helps mitigate not just the financial risk but also to enable everyone involved in a project to take a disciplined approach in order to share, control and update actions, promote productivity and manage change.

Consider the impact a collaboration platform can have on Requests For Information (RFI), and the whole change process. Quite often tens of people will be involved in the drafting, completion and approval of an RFI. And with so many cooks, delays, reworks, and cost overruns are common, especially when each person approaches the application in a different way.

A collaborative cloud platform can be used to standardise, optimise, and visualise entire processes online.  A single shared system can ensure changes are robustly controlled across complex supply chains; it can simplify searches and KPI reporting, making it easy for each team member to understand the status of every individual piece of information.

The megaproject paradox is a risk which can be mitigated. The social, economic and geographical factors of these projects make them notoriously hard to manage, but effective collaboration platforms and strategies will increase visibility of activities and risks spanning an entire project or programme.