James Stewart (JS): Given your combined experience in megaprojects around the world, can you tell me what makes these projects so transformational in the region or country in which they are developed?
Douglas Oakervee (DO): Most megaprojects are tied to public funding in some way, which invariably means that they are going to transform society to some extent. In most cases, the transformation is for the better, but there are also other cases where it is not, particularly when the strategy or sequencing of the project is not fully developed.
Tony Ridley (TR): One also tends to find that these projects become transformational as a result of their size, complexity and duration. The underground metro developments in Hong Kong and Singapore, for example, were bound to be transformational simply because of the way they changed the patterns of movement, focus of development and land-use trends within a very restricted land mass.
Keith Clarke (KC): Absolutely right. Take, for example, the Hong Kong airport which I know Doug played a key role in developing. You could argue that the real benefit of the airport was that it released several hundred million square feet of development right in Kowloon and Central that really changed the dynamics of the city and allowed it to continue to grow.
Mike Nichols (MN): The best megaprojects catalyze change far beyond the scope of the physical asset. Ultimately, megaprojects are really big change programs that require a change in attitudes, behaviors, and stakeholder views to be successful. Those that think of megaproject development as a fundamental transformation program are more likely to get it right.
JS: Do you believe there is a tendency to underestimate the benefits of megaprojects?
MN: I think so, yes. Mostly because we tend to be far too narrow in our view, which is driven by business planning models and often look at a very narrow horizon. But it’s not just about taking a longer-term view, it is also about having the imagination to think about what the potential impact of a major infrastructure investment will be to the region or community in which it is being developed. In my mind, the classic example is the initial phase of the Docklands Light Railway, a GBP77 million project in the derelict London Docklands area which, laid the ground work for the Canary Wharf Development to proceed and helped London regain its premiere position as a global financial center.
KC: That’s certainly true, but I also think it involves a certain amount of faith. The truth is that it is incredibly hard to determine with a high degree of certainty what will happen in the next 30 to 50 years in areas like technology, land use and economic cycles. Without some degree of faith, you’ll end up doing nothing while you try to prove everything.
TR: It is also worth noting that sometimes the benefits are dramatically over-estimated. Far too many of the world’s metro lines, for example, have been created as a legacy monument to a politician or leader and, if that is the objective, then the odds are good it will fail in almost every respect.
JS: So what are some of the challenges that make megaprojects so difficult to develop and deliver?
TR: Megaprojects are technologically complex, politically complex and systemically complex. Simply look at the timelines attached to many of these projects and you start to realize that they will go way beyond the political and technological life-cycle, leading to added complexity and challenges.
DO: I’d agree with that and would add that the heightened complexity of megaprojects require increased work at the strategic level to properly consult with all stakeholders and understand how this is going to impact or benefit society and the economy as a whole. Scope creep is also a significant challenge for megaprojects, because size means that even the smallest change in scope can lead to significant cost overruns and delays.
MN: The other challenge is a general lack of systems-thinking in these projects. We tend to break complex projects up into silos or packages and then fail to properly integrate them from the start, which leads to more complexity down the road.
JS: Keith, you have been called an ‘eco-warrior’ and a ‘climate change evangelist’ when it comes to infrastructure. What is the climate change imperative here?
KC: I think the growing challenge for megaprojects – and one that will become increasingly important over the next decade or so – relates to environmental regulation and targets. There is really no universal understanding of the future cost of carbon and so there is a real problem in applying and measuring the carbon cost over the whole life of the asset. Given the expectation of set targets for carbon reduction by 2050, this is going to become much more important in the near future.
What this means is that we need to dramatically alter the way we design megaprojects so that we are planning for a world where energy is scarce and very highly priced. That’s a big challenge for engineers. We have about two knowledge cycles to get this perfected and into the market if we hope to have a valuable impact on our environment through infrastructure.
JS: Do you think that the industry has enough of the right skills and capabilities to overcome these challenges?
MN: I think one of the most important yet notably lacking areas is program integration. It’s the ability to look across different activities that make up a single megaproject and then join them together properly that is the biggest challenge in regards to skill sets for megaprojects. To secure funding and land use planning consents also requires a good feel for what works politically.
DO: Agreed. Not to say that we don’t need technocrats in every aspect of megaproject delivery, but we also need people who can stand back and look at the strategic plan, which happens less frequently than one would like.
KC: I’d like to add that all is not lost. When I look at the graduates of today, they seem to be much more sophisticated than in years gone by. They are motivated, well read, strategic, and tend to have a better view of the world than I did coming out of college. If we give them the opportunity, I am confident that they will perform for us.
JS: Mike, Tony and Douglas, I understand that – very early in your careers – you all worked together on projects in Hong Kong and particularly the Metro. What did you learn from that experience?
MN: The Hong Kong Mass Transit project really was a defining moment for the three of us, but also for Hong Kong itself. It would be hard to see how Hong Kong could have developed without the Metro project. At that time, it was the most exciting project in the world and attracted some of the very best people. The breadth of experience and perspectives was exhilarating and had much to do with our ultimate success. I would argue, however, that the crucial factor was that the MTR Chairman – and indeed everyone involved – never doubted that the project would be a total success.
TR: In the 1970s, Hong Kong was managed by the British Colonial Administration which – for better or for worse – meant that the authorities were primarily focused on getting the job done regardless of other challenges the project faced. Nothing was allowed to stand in the way of the project being delivered. And while that’s just not a viable position in other circumstances, it does demonstrate the importance of motivated and supportive government leadership in cutting through the challenges that often trip up urban megaprojects. DO: Much of the credit really has to go to Norman Thompson who was the first Chairman of the MTR. Not only was he a real visionary at that time, but he also strongly believed in short lines of communication. When his team faced a major challenge – they could always go directly to the right person to help overcome the problem. But they also had the authority and responsibility to just get on with the job. That mix of independence and support really helped the team move the project forward.
JS: Based on your experience, what advice would you give others who may be setting out on a megaproject development?
DO: I think one of the most important – and it ties to what we have all said earlier – is the need to develop an integrated strategy that not only brings together the various packages of work across the full asset life-cycle, but also considers the wider benefits of the project and how they can be maximized to both improve the investment potential and transformational impact on society.
MN: Having the right project leadership is critical. A leader that has some understanding of the nature of the project and the need for integration of the type Doug is talking about is vital. Many organizations attempt to apply ‘business as usual’ principles rather than the skills that are necessary to develop and deliver major projects and that, quite frankly, is a mistake.
KC: While we’re at it, I’d also suggest that project leaders need to enjoy the project they are working on while also understanding there are other views that must be taken into consideration. You need to respect the rest of the world around you and be able to explain yourself and your project in a way that resonates with others.
TR: If I could just add two things: always strive for clarity in both objectives and scope, and focus on your interpersonal relationships. These are two things that will reduce complexity in the long-run and help facilitate project success.
By James Stewart, KPMG in the UK