Reshape how we build cost-effective mega-projects

Krishniah N. Murthy, P. E., F. ASCE, worked at Parsons Brinckerhoff for 34 years, including a role as senior vice president and principal project manager, managing multibillion-dollar transit projects for the firm. He was recruited by Los Angeles Metropolitan Transportation Authority to be its executive director for transit projects delivery and served in that capacity for seven years. Later, he served as interim CEO and executive director at Honolulu Rail Transit, retiring in 2019.

In today’s Member Voice article, Murthy draws on his wealth of executive project-management experience to give readers an unvarnished view of what he sees to be some of the impediments to and inefficiencies in the way many mega-projects are developed, before providing his own set of suggested improvements and solutions.

<>

Civil engineering megaprojects are marvelous achievements of innovation for which our entire industry should be proud.

However, these same megaprojects often come with cost increases, construction delays and concerns over management.

As an industry, it is time to address the root causes of these problems, and collectively find solutions for them, rather than focusing on the project implementation folks and making changes in the leadership of projects, as if the entire responsibility for the problem rested with them.

By changing top project executives, we not only add more potential costs, we also lose project history and experienced personnel. Project leadership changes are certainly important and, when necessary and appropriate, they should be done.

But top project executives are rarely the cause, or the only cause, of cost escalations and delays among the multiple agencies sharing responsibilities or contributing to the setting up of a big project. Just asking a veteran expert to leave the project shouldn’t be the only remedy.

Let’s look more closely at the complete picture.

Project origin

Mega-projects are conceived years before their execution starts, and their beginnings often follow a familiar model: political champion(s) initiate a concept and seek support from fellow politicians, local authorities and businesses. Usually, some quick concepts are drawn, preliminary engineering and environmental studies are looked into and dollar figures are matched to the requirements and projected completion date. At this early stage it’s obviously premature to forecast the project’s final engineering definition and costs meaningfully. But, surprisingly, the project gets sold only on the basis of these early projections of total cost and completion time. And these essentially tentative figures get etched in everyone’s mind as the final ones for the complete project!

Once the project is accepted in this manner, we determine all the factors influencing its execution, starting with preliminary studies for developing environmental documents for approval. At this stage, changes are made in the project’s estimates on the basis of inputs and demands submitted by local municipalities, businesses, homeowners and funding agencies. As preliminary engineering studies can’t provide much clarity about all that is involved in the project, the engineering content and requirements get modified as design work progresses. The time lapse between preliminary engineering and the start of the final design is significant. Once the final design is done, the costs for completion of the project logically go up, and the schedule logically extends.

But logic is often the first casualty in the project sponsors’ and backers’ understanding of things: they demand that the budget level be just as indicated when the concept was first proposed – it may not move forward if higher costs and delays are projected. First red flag for cost increase.

Engineering development

The preparation of environmental documents to initiate preliminary engineering commences with the determination of project alignment, utility relocations, right-of-way requirements and the project execution schedule. At this stage there are no agreements on right-of-way acquisitions, final relocation details for utilities, the exact nature of underground soil conditions, and means and methods for the actual execution of the project. But, surprisingly, despite decades of experience of big projects, seasoned politicians, administrators and professionals in public works continue to expect that the actual project costs and schedule will remain in the ranges projected years back Second red flag for cost increase.

Usual culprits for cost growth

A close look at the cause of delays and cost growth in many projects shows that the culprits are essentially the same: right-of-way acquisitions, utility relocations and underground soil conditions.

Right-of-way acquisitions 

Even though the alignment is fairly known, the precise right-of-way requirements are uncertain until the final design is completed. There are good arguments not to jump on to the acquisition process while the preliminary and final design works are in progress. This caution will also deny attorneys an unnecessary opportunity to argue that the process is flawed and premature.

Invariably, a majority of property owners argue that their properties are worth a lot more than what was budgeted, with some even going to the extent of showing their intended property development plans to demand much higher value than was budgeted for. The acquisition of properties from state and federal agencies is equally challenging and cumbersome. I have found that any acquisition talks with railroads always take an inordinate amount of time as, very often, there are many unexpected demands made right up to the time the agreements are signed. Remaining within the optimistic forecasts of property acquisitions within the original budget is thus a rarity. Third red flag.

Utility relocations                

Volumes have been written on this subject, but it still continues to be a major culprit for cost increases and delays. Suggested relocations can often be time-consuming and cost-escalating. Fourth red flag.

Underground soil conditions

The industry practice has been to use available soil data, do some soil samplings in the areas deemed appropriate and base the preliminary engineering design on that information. It is only during the final design stage that extensive or adequate borings are done to provide designers data. In mega-projects it is not practical to explore every foot of the ground. Because different soil conditions are likely, the increased cost for such unknowns is usually factored in, in the documents. Lessons learned from past projects teach us that it is best to include a clause in the documents that unknown ground conditions will require modifications to the awarded contract. Fifth red flag.

Politics and project implementation

The current approach for the implementation of mega-projects, especially in the United States, has been to create an independent agency overseen largely by elected officials, with the CEO/executive director chosen based on track record and good communicative and other skills to deal with their board. These individuals normally spend most of their time attending to board needs, at public events and managing the project staff.

Here one senses a barrier between the top echelons of management and the staff at the front line, which prevents open and frank discussions. This lack of unrestricted communication often makes the upper levels of management unaware of the requirements, problems and priorities of the front-liners.

Sensitivity to cost and schedule needs to be sharpened among the project executives. The challenge is to create an organization that can deliver better results than what we have been getting.

Based on the many costly lessons learned, it is time for reflection and fixing of responsibility and accountability where they should rightfully rest. It is also time to look more closely at mega-projects’ historical records to better manage project implementation. And we should be careful not to set the bar too high but at a realistic level.

The medical field has long used terms like “control and prevention” to deal with various known and unknown diseases. We can adopt that policy in our organizational setup and execution.

Organizational structure for mega-projects implementation

A closer look at many mega-projects makes it abundantly clear that we should separate a project’s political side from its implementation side. There are probably very few individuals in the industry who can successfully manage both. It is a challenging balancing act.

Project sponsors have tried different approaches while looking for an optimum one. This challenging task requires consensus. What we have learned is that the top executive must spend most of their time dealing with project sponsors, oversight boards, each stakeholder, plus citizens who may want the project stopped.

Frankly, the time required for the critical part of his or her responsibility – execution of the project and related issues – is not available to the top executive.  Thus, it is time we place the implementation responsibility under a leader whose portfolio is “project implementation,” with a small committee appointed to oversee it. The committee members can be chosen for their expertise relevant to the project. Such a group should provide guidance to the project executive.

It is also time to revisit the current guidelines in the form of policies and procedures that have become more of a hindrance than a help for speedy project execution. The five red flags identified above must be addressed in the policies and procedures of the project.

Address red-flag issues

Mega-projects get launched because of the support they initially get from elected officials. The project leaders, whoever they are, must address the hard task of defining a method or formula for allocating costs and time-impact for the red flags identified above. Leaving this most important task to the project implementation team has been the main reason for many articles and reports on mega-project cost delays.

It is time to consider an overview, or an independent review, of project costs and their validation so that a project can indeed be delivered as proposed. Collectively, the two groups should agree upon risk, risk-allocations and adequate time and money allocations.

This is also the time for stakeholders to be included in the discussions. Their inclusion will help do away with many of the surprises and shocks they voice in the matter of construction and time-delay costs. With such a setup in place, the project is ready to be handed over to the execution team.

Conclusion

Population growth, economic growth, worsening traffic conditions, climate changes and the desire for a better quality of life will increase demand for complex solutions and mega-projects. But the examples and reports cited above have eroded some of the trust and the abilities of professionals to deliver projects as promised during the initiation of the project. An honest and open-minded evaluation of mega-projects and the challenges that led them to higher cost and extended delays indicates we must first set up an organizational structure that has a higher probability of success.

Separation of handling of the politics from project implementation will certainly go a long way in allowing the executive in charge of the project to concentrate on implementation. The skill sets required for the politics and project execution are distinct. The type of structure suggested will breathe new life into project implementation as the top executive chosen for implementation will have the experience, knowledge and the time required to address the day-to-day project challenges. The sponsors for the project should develop policies and procedures to provide the project executive all the needed tools and personnel.

There is also a need to incentivize key employees by raising their compensation for maximizing their effort toward all-round success.  To deal with exigencies, the project’s top executive should be given financial authority to approve changes within the contingencies of the project budget, that is, within the funds and the time allocated. This is where the committee overseeing project implementation can exercise its authority.

The chief appointed to manage the politics of the project should know the pulse on its financial state, the hurdles put in front of the project by interested parties, demands for changes, and unreasonable real estate owners’ demands, etc., besides engaging with the public and media on the project’s true status. This chief should also be exploring and seeking additional financial resources in the form of grants wherever available, particularly from stakeholders who draw financial benefits from the project, in addition to promoting the project among the legislative bodies.

There have always been blame-games because of the present organizational structure. It is thus prudent to seriously consider changes in the existing structure so that professionals can do their job and be proud of their hard work and good results. Bad publicity, deserved or otherwise, can force project execution professionals to rethink their future because such bad publicity can push them out of the market.

Technology alone can’t solve this problem. We need seasoned and highly competent professionals on the job to succeed.