mega-projects: dealing with pitfalls
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Mega-projects: Dealing with PitfallsHugo Priemus aa Faculty of Technology, Policy and Management , OTB ResearchInstitute for the Built Environment, Delft University ofTechnology , Delft, The NetherlandsPublished online: 07 Jun 2010.
To cite this article: Hugo Priemus (2010) Mega-projects: Dealing with Pitfalls, European PlanningStudies, 18:7, 1023-1039
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Mega-projects: Dealing with Pitfalls
HUGO PRIEMUS
Faculty of Technology, Policy and Management, OTB Research Institute for the Built Environment, Delft
University of Technology, Delft, The Netherlands
(Received March 2008; accepted March 2009)
ABSTRACT This paper is about the many pitfalls in the decision-making process on mega-projects,and how to deal with them. I present first a summary of the pitfalls, derived from hands-on experienceand recent publications on large-scale projects in transport infrastructure. Then I explain howexperts and the author of this contribution think these pitfalls should be tackled. Finally, Iformulate some conclusions and recommendations. The basic idea behind the recommendations isthat the decision-making process on mega-projects could be defined as a learning process, inwhich many stakeholders are involved. As early as possible alternatives have to be consideredand options have to be maintained to guarantee flexibility, which enables the initiators to copewith changing markets, a changing political landscape, new technologies and new insights.Although not an exhaustive picture of all potential pitfalls and remedies is presented, I expectthat the presentation adds to the knowledge on mega-projects and will assist an adaptivedecision-making processes.
1. Introduction
Mega-projects cast a powerful magnetic spell on ambitious politicians. The thought of
going down in history as the person who had the vision to start and perhaps even
realize a mega-project is both tantalizing and irresistible. Many politicians will not have
the good fortune to do both, because several decades are likely to elapse between the
initial proposal, the decision to realize and the handover.
Recently, research and management practices have exposed other dimensions. Studies
by Short and Kopp (2005), Altshuler and Luberoff (2003), Flyvbjerg et al. (2003), Pickrell
(1992), Wachs (1989, 1990) and many others have revealed that mega-projects mostly do
not generate the political success that they should because so many things go wrong along
the way. Hall (1981) even uses the expression “great planning disasters”. A lot has been
written about the fact that, initially, the costs are often grossly underestimated and the
(transport) benefits grossly overestimated. The result is usually a scenario of the “survival
of the unfittest” (Flyvbjerg, 2007): in other words, the project with the most underestimated
Correspondence Address: Hugo Priemus, Faculty of Technology, Policy and Management, OTB Research
Institute for the Built Environment, Delft University of Technology, Delft, The Netherlands. Email: h.priemus@
tudelft.nl
European Planning Studies Vol. 18, No. 7, July 2010
ISSN 0965-4313 Print/ISSN 1469-5944 Online/10/071023–17 # 2010 Taylor & FrancisDOI: 10.1080/09654311003744159
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costs and the most overestimated benefits is best placed to win political approval at an early
stage. From the democratic perspective it is crucially important in the stages before the
political decision-making to have reliable information on costs and benefits. Flyvbjerg
has argued on numerous occasions for reference class forecasting (Kahneman, 1994),
namely, the quantification of costs and benefits based on information from a series of com-
parable completed projects instead of an interim budget forecast that relates specifically to
the project in hand.
It would however be naive to expect that all the pitfalls in the decision-making on mega-
projects could be prevented or solved by following these words of advice. Experience has
shown that there are many pitfalls that need to be identified and as far as possible removed.
This paper is about these pitfalls and how to deal with them. It is based on a literature
review, discussions with experts and my own experience as research coordinator for the
Temporary Commission on Infrastructure Projects (TCI, 2004), a body set-up by the
Dutch Parliament in 2004 to investigate the decision-making on the Betuwe Line, the dedi-
cated freight rail line connecting Rotterdam and the German hinterland, and HSL-South,
the dedicated high-speed railway connecting Amsterdam and the Belgian border on the
Brussels–Paris route. The position of Dutch Parliament stood at the centre of this
inquiry. The paper also draws on Hertogh et al. (2008), a report on best practices and
lessons learnt in large infrastructures in Europe, from the Netlipse knowledge network.
The basic idea in this paper about the way mega-projects should be prepared and
political decisions should be taken is that the process between initiative and start of the
construction is regarded as a knowledge-intensive learning process, in which many
stakeholders and citizens are involved, in which both knowledge and critical reflections
are mobilized and in which many options remain open. This guarantees flexibility and
adaptivity as long as possible to cope with changing markets, changing political land-
scapes, changing technologies and changing knowledge and insights. This improves the
quality of the outcome and it strengthens the democratic dimensions of the decision-
making process. To my knowledge such an integrated view on the decision-making on
mega-projects has not been presented earlier.
Section 2 presents a summary of the pitfalls with information derived from hands-on
experience and recent publications on large-scale projects in transport infrastructure.
Section 3 explains how these pitfalls should be tackled. Section 4 presents some con-
clusions and recommendations.
I do not claim to provide a full and exhaustive picture of all potential pitfalls. Nor do I
guarantee that the recommendations presented will bring a perfect ending. I expect,
however, that this paper will add to the knowledge on mega-projects and assist the
decision-making processes.
2. A Summary of Pitfalls
2.1. Absence of an Adequate Problem Analysis
It is not uncommon for a solution to present itself early in mega-projects—the solution
which suits the initiators and then heads off in search of a problem. Hence, the process
rarely begins with a proper problem analysis and an impartial appraisal of alternatives
(Priemus, 2008). Samset (2008, pp. 173–188) illustrates this phenomenon with an
onshore torpedo battery and a regional aviation control centre, both in Norway, which
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he considers as complete failures because they were never operated shortly after
completion.
Often, in the earliest phases, we see lobby groups hard at work mobilizing support for
a particular solution that is thought to be superior. Feasible alternatives are not even
put forward, let alone analysed. Any alternatives proffered by opposing camps further
down the line are usually too late. It is not unusual for the government to back the—
supposedly—superior solution at an early stage. Alternatives that are suggested by
others in the later stages of the process are often whittled down to nothing.
The absence of an adequate problem analysis often goes together with a supply-driven
approach. Each mega-project considered should meet the current and future demands. So
one of the first questions which should be addressed is which demands are at stake and how
are those demands going to develop in the future?
2.2. Lack of Alternatives
In order to arrive at good political and social decisions, it is essential to develop alterna-
tives and allocate costs in each alternative at an early stage (Priemus, 2007). The various
alternatives can be weighed up in a responsible manner if the cost-benefit ratio has already
been worked out in each case. In a democratic environment it is important that people
know which alternatives were discarded in favour of the ultimate choice.
2.3. Absence of a Functional Programme
Contracting authorities tend to mark out the contours of a project at an early stage. Seldom
is there a well-organized functional programme which sets out what needs to be firmly
established (programme, minimum performance, public values) and which leaves plenty
of openings to tap into the creativity of the parties competing for the tender.
2.4. Ambiguities about the Scope of the Project
Some pitfalls are connected with the scope of the project. It is imperative to decide on the
“right” scope at an early stage. In general, the scope will not be limited to the line infra-
structure, but will extend to the development of a wider area. Hence, it is important to
develop nodes near and around stopping places or junctions, as the anticipated increase
in the value of land around these nodes can be used to finance unprofitable constituents
and/or enhance the quality of the plan. The Japanese experience to combine rail infra-
structure planning and real estate development is based on a scope which is mostly
more fruitful than the planning of rail infrastructure in isolation (Priemus & Konings,
2001).
Often, it takes a lot of brain-racking to spatially accommodate a mega-project. It is all
about finding the best fit between the infrastructure and the city, the landscape and the
natural environment and therefore involves questions relating to noise pollution, eyesores,
conservation and harmful emissions (such as CO2, NOx and particulate matter).
One crucial question is whether a mega-project should be prepared and realized in one
single process or whether it is more prudent to split it into manageable constituents and
take the political decisions in phases. Admittedly, the latter might lead to incomplete,
less-than-optimal pieces of infrastructure, but it usually makes for greater flexibility.
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It would also keep various options open and perhaps facilitate the decision-making at later
stages (Miller & Lessard, 2008). Flexibility is extremely important in order to cope, for
example, with changing markets and changing policies. In practice, sometimes the scope
of a project is modified in a rather later stage in order to reduce costs. This happened for
instance in the tunnelling work of the Unterinntalbahn in Austria, the Brenner Base
tunnel of 40 km length for rail transport which will be in operation in 2012/2013
(Hertogh et al., 2008, p. 236). The costs of the Gotthard Base Tunnel between Zurich and
Milan could be reduced by a reduction of the project scope (Hertogh et al., 2008, p. 1166).
On the other hand, many cost overruns are the result of changes in the scope during the
process (Hertogh et al., 2008, p. 36).
2.5. Flawed Process Architecture
In general, agreement will have to be reached on the process architecture either beforehand
or along the way. In particular the question is important, which space can and will be
presented in which stage to the public, the politically elected and empowered bodies
(especially local authorities) and the potential private players. When creating this space
the project managers will have to be prepared for strategic moves from all parties who
are—in principle—involved. They will, at all events, have to consider the official
regulations at EU, national, regional and municipal level.
The Design & Construct (D&C) model has been specifically developed to give the
contractors competing for the tender, plenty of scope (ideally within the framework of
the functional programme) to work out their own solutions and come up with smarter
alternatives for the execution of the project.
Frequently, the parties have to be selected via market forces. This calls for a level
playing field where candidates do not enjoy an unfair advantage because of state
support and/or inside knowledge. Market recruitment and political decision-making are
a complex combination which often creates difficulties. How can one prevent (overly)
transparent public decision-making from damaging the market position of the govern-
ment? And how do you stop parties who feel bypassed or unfairly treated from filing
claims for damages? It is not a superfluous luxury to seek legal advice on the intended
process architecture.
Most of the time, the actual process is soon dominated by concerns about costs. An
approach is needed which precludes lopsided emphasis on cost reduction and clears the
way for more quality and innovation.
2.6. Questions Regarding Cost-Benefit Analysis
We are still coming across methodological shortcomings in the ex-ante appraisal of mega-
projects. Network effects are often underestimated in the social cost-benefit analysis, not
least because they are difficult to quantify beforehand. Talks are held between researchers
and policy officers about the internal interest rate and the deadline for working out the net
cash value of costs and benefits. Calculations to measure the effects on the sustainability
aspects of alternatives are particularly susceptible to shifts in assumptions about the
internal interest rate. There is a persistent problem in monetarizing external and indirect
effects like impacts on social cohesion, exclusion of groups of people, impacts on the
value of landscapes, biodiversity and emissions of greenhouse gases.
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2.7. Contested Information
Many pitfalls are tied in with the process architecture and the interaction between the
players. It appears that misinformation—and sometimes even blatant lies—is dissemi-
nated on a large scale (Wachs, 1989, 1990; Flyvbjerg et al., 2003). Leijten and De
Bruijn (2008) call this “contested information”, that is, information that is explained in
different ways by the different players. They recommend that agreements be reached
beforehand on how the parties will deal with the information as it becomes available.
2.8. Problems with Land Acquisition
One well-known factor that can undermine market forces in the construction sector is the
land position of parties who appeal to the principle of self-realization under the Expropria-
tion Act. Land owners cannot be dispossessed if they are able, and prepared, to develop the
land in accordance with the government’s wishes. But the government may have ideas
about the designation and organization of the land, which are not the same as those of
the owners. The government can then stand its ground and make demands on the cost
recovery, whereby an expropriation procedure can be set in motion. Theoretically, land
positions have no influence on zoning plans or on the recovery of land costs, but things
are different in practice, largely because expropriation may cause substantial delays and
many local officials and politicians do not know enough about the law to put up a fight
and appear to have insufficient negotiating capacity. Land acquisition caused delays in
the realization of the Leziria Bridge over the Tangus river (Portugal), opened in 2007
(Hertogh et al., 2008, p. 184). To speed-up land acquisition legislation had to be improved
for the A2 and A4 motorways in Poland (Hertogh et al., 2008, pp. 210 & 214).
2.9. Nature of the Technology
The choice of technology is also important. Often, a decision has to be made between, on
the one hand, innovative, relatively unknown technologies and, on the other, proven, less
risky technologies, which may be regarded as outdated by some parties. If possible, it is
better to postpone the choice of technology until the phase in which the competing
parties submit a tender for the execution of the project.
Engineers are often in favour of the most innovative, not yet proven technology. This
had a dramatic impact on the decision-making process of the Bay Bridge near
San Francisco (Trapenberg Frick, 2008) and the further delays in starting the operation
of the HSL-South Line between Amsterdam and Belgium, where the officials decided
to adopt an advanced, but not yet operational safety level of the European Rail Traffic
Management System (Stoop et al., 2007). In the decision-making process on the
Lotschberg Base Tunnel, south of Bern (Switzerland), the experts decided to add a
fallback solution, which meant the installation of a traditional signalling system and a
considerable reduction of risks (Hertogh et al., 2008, pp. 192–197).
2.10. Changing Markets
Mega-projects figure in different phases of decision-making in certain markets and spill
over into many other markets in the meantime. Facts that can be empirically established
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usually have only limited validity in different market constellations. In general, prognoses
and estimates—implicit and explicit—are based on assumptions about the trend in supply
and demand, and hence the price developments in a number of relevant markets. A whole
host of factors come into play, such as the availability of engineers and other experts for
the preparation phase, the supply of tradesmen, building materials, installations and raw
materials for the execution phase, developments in energy prices, the overall economic
situation, the capital market (including trends in long-term interest rates), inflation,
changes in currency exchange rates in the case of international projects (Hertogh et al.,
2008, p. 44) and the land market (important in the programming phase and the preparation
and execution phase). All these uncertainties can be “put in cold storage” until a later date,
but this is no guarantee that crucial factors will follow the anticipated pattern. Moreover,
certain deviations can have a profound impact on the final analysis of costs and benefits.
Mobility patterns can change within the course of a single decade as a result of, among
others, competition from other modes of transport than those envisioned in the project.
Inland shipping, for example, is competing strongly with rail and road for the transport
of goods to and from Rotterdam and Antwerp. And one can safely assume that the
advent of budget airlines such as Easy Jet is undermining the demand for transport by
high-speed trains in Europe.
2.11. Political Discontinuity and Inconsistencies
One very well-known pitfall in the decision-making on mega-projects is the frequent
changes that occur in the political affiliations of the government responsible for the
project. In relation to the Lisboa-Porto High Speed Line in Portugal, Hertogh et al.
(2008, p. 189) state that “Political changes have brought significant changes to the
project”. This is certainly not an exception.
Mostly, mega-projects take a longer period than the length of one government (Hertogh
et al., 2008, p. 39). As the entire process, from proposal to handover, takes decades rather
than years, every mega-project has to endure government elections and—more often than
not—shifts in the balance of political power. Some mega-projects are so emotionally
charged and so bound up with differences in political ideologies that they are used as
part of the stakes during elections and the formation of coalitions. This happens not
only at federal or national level (parliament, cabinet), but also at regional and local
level and—most crucially—around the political consensus or dissensus between different
tyers of governments (central, regional and local). In Europe, the projects often cross
national borders and thus involve international negotiations and treaties, and sometimes,
international tension. Crossing borders may push up the costs. Hertogh et al. (2008,
p. 234) write about the Øresund link: “(T)he Swedish and Danish rail systems operate
at different voltages”. (. . .) As a result: “All trains that operate on the line need to be
equipped with dual electrical systems”.
In some cases the European Commission is also involved in the decision-making with a
view to subsidy arrangements and/or specific EU themes such as the Trans European
Networks. Lack of political continuity and public consensus can have a direct effect on
a mega-project; this may stem from diametrically opposed backgrounds and exert an
adverse influence on the decision-making as well. When this happens the parties are
confronted with tensions which have spilled over from other domains. Fortunately, this
can also work in the other direction: if the government units collaborate well in other
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spheres and if they share similar views, there may be more consensus. The Oresund link
could be realized, partially as a result of positive political relations between Sweden and
Denmark (Hertogh et al., 2008, pp. 228–234). The rallying cry of “One subject at a time
please”, which is emblazoned across the stationery of many public sector organizations,
does not mostly apply to political–administrative business.
2.12. Changing Standards and Changing Legislation
Mega-projects need a long period of preparation. Legislation can lead to planning delays
and cost overruns (Hertogh et al., 2008, p. 42). Standards can change in the meantime,
sometimes resulting in a radical revision of the plans and unforeseen costs. For
example, tighter safety demands after severe accidents in road and railway tunnels in
the Alps pushed up the costs and postponed the completion date of the Gotthard Base
Tunnel (Hertogh et al., 2008, p. 169), the Betuwe Line and the HSL-South Line (Stoop
et al., 2007). The postponement of the completion date generated even more additional
costs as it meant that the rail link would become operational later than anticipated.
Secondly, the E18 Muurla-Lohja highway in Finland (51 km, including seven tunnels)
experienced a delay of 3 years as a result of new EU regulations governing the protection
of endangered species (Hertogh et al., 2008, p. 216). Also in this case cost overruns were
the outcome.
A third example is the intensification of the European legislation on air quality, particu-
larly in the case of Particulate Matter. These new measures took Dutch planners totally by
surprise and enabled environmentalists to successfully protest against many infrastructure
projects whose promoters had failed to show that they complied with the new criteria. The
ensuing situation created long delays and necessitated adaptations to the plans (Priemus &
Schutte-Postma, 2009).
One particularly memorable example of inconsistent policy occurred in the planning of
HSL-South in the Netherlands. This is extensively documented in the reports by the Par-
liamentary Commission on Infrastructure Projects (TCI, 2004). Around 1990, the Ministry
of Transport had decided that the line would follow the most direct route between Schiphol
and Rotterdam, which cuts right across the Green Heart. In the same year the Fourth
Spatial Planning (VINEX) Memorandum (Ministerie van VROM, 1990) was published,
but without the railway line. Indeed, the Memorandum reflected Dutch planning tradition
and continued to protect the Green Heart against the encroachment of spatial planning.
The Second Chamber quickly spotted this contradiction in Cabinet policy and threatened
to support a route along existing highways A4 and A13 that would save the Green Heart.
The then Prime Minister Wim Kok, after more or less threatening a government crisis,
saved the day by proposing the construction of a long tunnel running underneath the
Green Heart so that the initial route could go ahead without affecting the landscape.
This change of plan pushed up the costs by approximately 700 million euros and was
partly to blame for the substantial excess costs of HSL-South.
2.13. Prioritization of Mega-projects
Lastly, governments are often faced with the implicit or explicit need to prioritize different
mega-projects. There is simply not enough public money to fulfil all the proposals. Then,
the government has to take account of the anticipated capacity in the construction market
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and (sometimes) factor markets. How should the government handle competition among
projects? At what stage can or should it categorically state that the project will go ahead?
Could the uncertainty during the preparation process perhaps be utilized to keep the par-
ticipants on their toes and to optimize the conditions for private participation? Experience
has shown that early confirmation encourages passivity among market players, weakens
the motivation for private finance and reduces the willingness of private parties to
accept risks.
The TCI (2004) refers explicitly to the last of these three problems in its recommen-
dations for better decision-making procedures in large-scale infrastructure projects.
3. How to Deal with Pitfalls: Maintaining Uncertainties
Most politicians, managers and consultants prefer to speed-up decision-making processes,
take firm decisions after hearing the opinions and suggestions of the stakeholders and offer
certainty at a relatively early stage. For many people the problem lies in the failure to
provide certainty in good time (WRR, 1994; Commissie-Elverding, 2008). However, in
order to deal effectively with the pitfalls in Section 2, we need to increase uncertainty
instead of certainty. This approach creates time and space for learning processes and
for reaching consensus, it encourages people to organize private funding and other
private commitments, it offers the government a better opportunity to benefit from the
competition between projects and it enhances the probability that the commitments at
the start of a mega-project can be optimally aligned with the state of public finance and
conditions on the markets. This kind of scenario presupposes an open culture within
and between the project delivery organizations and between internal and external
players (Hertogh et al., 2008, p. 37). The Dutch government needs to be able to temporize,
adapt or even cancel a project at different strategic moments. This strategy will form the
main discussion topic in the next sections.
To create structure and increase flexibility the decision-making process should be split
into the following phases:
(1) The problem analysis: What is the problem and whom does it affect?
(2) The compilation of a functional programme of requirements: What criteria does the
project have to meet?
(3) Elaboration of the technical, functional and economic aspects and preparation of the
project until it is ready for execution.
(4) The realization of the project from the moment the first spade hits the soil to the handover.
(5) The operation of the infrastructure after completion.
When an initiative is launched to prepare and realize a mega-project, it is prudent to
approach the entire decision-making process (in particular, Phases 1, 2 and 3 above) as
process with a learning curve. Also, Phases 4 and 5 can take advantage of learning,
within the definitions at the end of Phase 3. Much can be learned from realization and
operation of other mega-projects.
The brief is to gather as much relevant information as possible about the investment
and management costs, the technical requirements and possibilities, the characteristics
of the area that will be occupied and crossed by the project, the wishes, concerns,
knowledge, determination and stalling capacity of the stakeholders, and the expected
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and sought-after development of transport flows and performances. The decision-makers
will also have to investigate the options for reducing costs, increasing the contribution of
private finance and private risk acceptance, to identify the risks, uncertainties and oppor-
tunities in different stages and different areas, and to ascertain the expected levels of
energy consumption, noise and emissions and determine how these negative external
effects can be reduced to protect local residents, travellers and personnel.
4. Problem Analysis
4.1. Do Not Start with a Solution
An infrastructure project is—at best—a solution. This statement implies that there are goals,
objectives and ambitions and there are one or more problems to which an infrastructure
project is the most expedient response. A valid problem analysis is essential in order to deter-
mine whether a proposed alternative is effective, efficient and legitimate. The first question
that should be asked is, “What is/are the problem(s)?”. Then, “What is the problem ‘now’
and what is it likely to become in the short and the long term?”. And finally, “Who is affected
by the problem?”. One actor’s problem might be another actor’s solution.
Pretty soon the problem will emerge in the form of locations that are insufficiently
accessible at present or in the future. This may go hand-in-hand with an increased risk
of stagnation (measured in lost vehicle hours) due to growing congestion. Sometimes
there are additional health and/or safety problems as a result of emissions (air quality).
As all of this impinges on mobility, people tend to see the problem in wider terms than
just accessibility or stagnation. They point to the decline in residential and commercial
appeal and the prospect of a deteriorating living climate, reduced quality of life and a
decline or stagnation in business leading to job insecurity and uncertain economic
growth. This implicit connection between mobility and the living and economic climate
is usually difficult to substantiate and often bears witness to a long list of policy ambitions
which cannot be supported by valid insights.
Mostly a supply-side approach is dominating above a demand-driven attitude. In prac-
tice, it is barely possible—and usually impossible—to establish a causal relationship
between improved accessibility and an upturn in the regional economy (Rietveld, 1989;
Vickerman, 1989, 2000; Banister & Berechman, 2000). A positive exception is the fast
growth of the Skane region in Sweden (2000–2007) after the completion of the
Øresund crossing in 2000 between Denmark and Sweden (Hertogh et al., 2008, p. 231).
As problems are often perceived differently by different parties, it is not only essential
to conduct a problem analysis but also to reach the strongest possible consensus. A shared
problem analysis enhances the possibility that the selected alternative will still be endorsed
by everyone at a later stage. If there is still a difference of opinion on the analysis, it is
usually the authorized political body that decides on the problems that will serve as the
departure point.
Any later alternatives must be tested against the problem analysis. Hence, certain
aspects need to be concretely and promptly specified:
. the values and criteria adopted;
. the objectives of the parties and the political bodies who bear responsibility;
. the boundaries and constraints.
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The various parties may have different ideas about these issues, so conflicts can easily
arise. The best approach is to identify potential stumbling blocks at an early stage and to
establish a workable consensus, not so much about one preferred solution, but about a
range of solutions which deserve further investigations.
4.2. Project Alternatives
Once the problem analysis has been sorted out, it is time to think seriously about potential
solutions. It is best to appraise alternatives in the initial stages. After all, more than one
road leads to Rome. An investment project is not always the right answer, so the Dutch
Ministry of Transport, Public Works and Water Management (Ministerie van Verkeer
en Waterstaat, 2004) differentiates between three types of solution for transport infrastruc-
ture: utilization, pricing and building. First, attempts can be organized to make better use
of the capacity of the existing infrastructure. Congestion might easily arise on certain
routes during the rush hour. But has the capacity in the opposite direction to be enlarged?
Or the capacity outside rush hours? That is the first question. The second is whether a price
tag can be attached to the use of infrastructure in the form of a user charge, such as road
pricing. Experience has shown that people curtail their use of infrastructure if it hits their
pocket. If the price is differentiated in terms of time and place, pricing can lead to better
utilization. If utilization and pricing are not enough, then new infrastructure or expansions
to the current infrastructure can be considered.
The “construction” category embraces various alternatives: different routes, different
modalities (e.g. road, rail, inland shipping), different cross-sections (e.g. two-lane, four-
lane, six-lane) and different types of spatial integration (for instance, to conserve nature
or prevent urban pollution).
Situations must be avoided in which alternatives are put forward at the last minute by,
for example, only those opposed to the government-favoured plan. Alternatives must be
systematically recognized at a very early stage.
5. Functional Programme
5.1. Programme of Requirements
It is crucial to think first mainly in terms of a functional programme of requirements: What
criteria does the project have to meet? And which public values need to be secured? Only
in the second stage is concretization addressed. It is best to spend some time thinking of
alternative solutions and even to consciously generate and design extra ones. Then the
various options can be tested against the functional programme and the social costs and
benefits can be determined in each case. The options can be ranked, starting with the
project with, on balance, the best score and finishing with the project with the lowest
score. The empowered authority takes a decision on the basis of this information. If the
authority gives the go-ahead the work can begin. Once the project has been given the
go-ahead, the rest of the decision-making is much more demarcated and structured.
A process which uses a concrete functional programme of requirements as its starting
point creates space for a tendering procedure in which candidates compete in terms of
quality and innovation as well as price.
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5.2. Scope of the Project
The scope of the project is decided during the initial phases of the decision-making. Which
area will form part of the project, that usually extends beyond the line infrastructure alone?
Particular attention will be paid to intersections and junctions, where amenities such as
offices, homes, hotels, shops and conference space can be built. In many cases, the land
at, and near, the intersections will rise in value. The question is whether this extra value
can be used to co-fund the line infrastructure.
More generally, the spatial accommodation of various plan alternatives will have to be
considered. The best alternative is often selected with a view to the best possible spatial
accommodation.
The decision-makers will have to decide whether the mega-project is to be realized in
one production process or split into phases so that the implementation and details of later
phases are decided further down the line. In later stages one can take advantage of more
up-to-date knowledge.
5.3. Process Architecture
The recurrent risk of strategic behaviour can be contained by linking as many benefits
and burdens as possible for each player and by reducing opportunities for passing the buck.
In an early stage, sustainable stakeholders have to be identified and a consistent stakeholder
management is needed to take advantage of the knowledge of these stakeholders and to be
informed about their interests and preferences (Hertogh et al., 2008, p. 45). Stakeholders
management is an important aspect of project management and process management.
Obviously, project managers should also be aware of the European, national and local
rules and regulations in all relevant domains, from fair competition to air quality.
Public players are increasingly displaying a preference for public–private partnerships.
Private players are recruited in areas where they are quite simply superior to government
organizations, namely entrepreneurship, creativity and risk-awareness. Time and again the
question arises as to how the various tasks and activities—and more importantly—the risks
and opportunities are divided between the public and private players beforehand. This presup-
poses that each party already has a valid idea of the nature and extent of the risks. This
presupposition is rarely borne out in practice. Hence, when a mega-project is split into
components, overlap risks often emerge (which can be reduced by interface management)
which tend to be underestimated (not to say neglected) by governments and are sometimes
overestimated by market players (whether or not on the basis of strategic considerations).
Contracted alliances in which benefits and risks are shared are gaining in popularity.
This is where a new complication crops up. If innovative forms of tendering are
considered (D&C, risk-sharing, tenders that include several decades of management and
maintenance) there is a fair chance that there will soon be very few serious candidates
who can guarantee healthy competition. A shortage of competent and available construc-
tion firms/consortia can turn a system that was intended to stimulate market forces into a
constraint. One question which can better be asked once too often than not at all is, “What
exactly happens if a business goes bankrupt during the contracted management period?”.
This happened in the case of the West Coast Main Line in the UK, Europe’s busiest
mixed-use railway linking London with Scotland. During the decision-making process,
Railtrack went bankrupt, the privately owned infrastructure owner, which complicated
the development of the project considerably (Hertogh et al., 2008, p. 243). In such
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situations often the government is asked to do the bailing out. It would be worth taking the
trouble to find out which risks can be insured. In more general terms, construction firms
can learn a lot from the methods of insurance companies, who are better at identifying
and quantifying risks than many other organizations.
5.4. SCB Analysis
Ongoing improvement and more realistic social cost-benefit ratios are still key areas of
research. The results would benefit parties who are directly involved in the development
of mega-projects and would be particularly helpful when the urgency levels for different
mega-projects are being weighed up. The TCI (2004) recommendations could be used for
this purpose. The government can only guarantee public (co-)funding when the costs and
benefits of the project are definitive, when the benefits are larger than the costs and when
the parties are ready to start work.
5.5. Contested Information
The risk of misinformation can first be curtailed by deciding together at an early stage on
how information is to be treated. Supporters and opponents can agree in advance which
sources of information to accept as authoritative. If conflicting information is mobilized
by both the supporters and the opponents, those involved can decide which independent
expert or institute is to be consulted. Are there any underlying uncertainties? Is it possible
to pursue a no-regret policy which takes these uncertainties into account? Is it clearly under-
stood who bears the risks of underestimations or overestimations? Can these risks still be
allocated, if necessary? Does awareness of individual responsibility for risks result in
revised estimates for investment costs, management costs and transport performance?
6. Preparation and Realization of the Project
6.1. Problems with Land Acquisition
The problem of land acquisition can be solved by negotiations. This problem is mentioned
for Eastern European countries in particular (Hertogh et al., 2008, p. 43). Very satisfying
projects can be realized by combining the interests of private and public players. One
could also consider legislation to regulate cost recovery and thus nip free-riding in the
bud. This concerns the way to deal with planning gain: financial contributions towards
greenery, water, neighbourhood roads and so forth from cost-bearers such as owner-occu-
pier dwellings, shops and offices. Finally, the solution can be sought in disconnecting land
ownership from building and development rights (Healey, 1997; Priemus & Louw, 2003).
If this were the case, building rights could not be derived from the ownership of land and
competition on the building market would be stimulated.
6.2. Technology
Once the optimal proposal has been selected, the next question concerns the kind of tech-
nology. It is best to be wary of anything resembling a “technological sublime” (Trapenberg
Frick, 2008), a fascination with modern, futuristic technology or dubious technologies
adopted to reduce costs, which often brings high risks and crippling costs.
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A specific technological problem is the nature of the soil, where tunnels are planned. In
the preparation of the A2 Motorway (Nowy Tomysl-Konin) in Poland problems associated
with soft ground conditions occurred (Hertogh et al., 2008, p. 210). In the case of the
Nurnberg-Ingolstadt High Speed Rail Line in Germany complications with Karst-
ground in tunnelling were mentioned (Hertogh et al., 2008, p. 226). Recent complications
with soft soil in densely built urban areas occurred with the construction of deep
underground lines in Koln and Amsterdam.
6.3. Changing Markets
During the elaboration, the realization and the operation of the mega-projects, markets and
policies may (and will) change.
The best way to deal with unforeseen changes in the market is to apply scenario
techniques, to conduct sensitivity analyses and to maintain options to safeguard flexibility.
Changes in policy are often intertwined with changing markets. The introduction of a user
charge (policy) on rail and/or road infrastructure can have an immediate and profound
impact on the mobility market.
Full protection against the impact of changing markets is not possible. The management
of mega-projects will always entail uncertainties and risks.
It may be possible to ascertain on a case-by-case basis whether some risks are insurable
or whether hedging is possible. Insurance companies have built up extensive experience in
the identification and quantification of risks. Any risks that a promoter decides to bear
himself must be included in the budget.
In the contractual relations between the parties it is vitally important that potential
uncertainties and risks be identified and quantified so that the risks can be allocated as
far as possible. Each player will try to determine the nature and extent of the risks and
to incorporate them in his price. If such issues are not settled (on time) there may be
huge surprises in store. For example, in the public tender for the five-part substructure
of HSL-South there were price overruns of approximately 40% between the externally
verified budget of the Ministry of Transport and the bids from the private consortia.
The causes were collusion between the building firms, an overheated building market
(too many mega-projects in the same period) and serious underestimation of the overlap-
ping risks on the part of the Ministry of Transport (and, presumably, serious overestima-
tion on the part of the construction firms) (TCI, 2004).
6.4. Political Discontinuity and Inconsistency
In Section 2, we noted that those involved in the decision-making on mega-projects have
no weapons against political discontinuity and inconsistency. Even so, there are still
lessons to be learned in this domain. The experience with the fast decision-making on
mega-projects in China is tempting. One can, however, hardly object to the workings of
democracy even though the results may not be to one’s liking. Sometimes attempts can
be made to depoliticize parts of the decision-making; for example, when empirical or tech-
nical data are being collected. There are useful tasks here for independent researchers and
consultants. It is also important to consistently pass on useful and relevant information to
the public and private players, the professional world at large and the general public,
including the press. This raw information may generate some opposition, but it is better
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to amend or even call off a mega-project for valid reasons instead of going ahead with it on
the basis of loosely founded insights.
In the investigatory stage it is desirable—but not always easy—to keep a step ahead of
the collection and dissemination of information. It is better not to confront political bodies
or the public with surprises, but to mention in good time the (strategic) choices which will
present themselves in the near future and to state the case for and against them. It is also
advisable to share the dilemmas with these political bodies and the public and to invite
them to consider and put forward arguments. In the long run political continuity and con-
sistency will be enhanced by prompt and relevant insight into facts, prognoses, scenarios
and circumstances. Evidence-based policies are a godsend for decision-making on mega-
projects (regardless of the nature of the final decision) and for democracy (TCI, 2004).
A number of frequently cited pitfalls—also mentioned in this paper—are often, upon
closer examination, caused by a lack of political continuity and consistency. Many of
the notorious interim rises in the costs of mega-projects are the result of fresh insight
by the competent political bodies, who change the scope of the project along the way to
make it fit more neatly into the spatial planning and to protect the environment against
noise and air pollution, blots on the landscape and other negative effects. Missed deadlines
and deteriorations in the cost-benefit ratios are often the result of changing political views
or a perceived need for political compromises. A promising approach of course is to seek
“all party support” for ambitious mega-projects (Hertogh et al., 2008, p. 39). In such cases,
the change of government will not disturb the continuity of the project.
There are no universal recipes for preventing political complications. The watchword is
“Be alert at all times!”.
6.5. Changing Standards and Changing Legislation
Sometimes, changes to standards are like “Acts of God” insofar as there is no way of insur-
ing against them. National governments and professional sectors are often unaware that
the European Commission has made any such changes. The changing air quality standards
and tunnel safety are notorious examples.
Standard-setting governments should be asked to desist from formulating absolute stan-
dards, to observe reasonably long transition periods and, in certain incontestable cases, to
compensate anyone damaged by these new standards, particularly those who were unable
to prepare for them.
The importance of information and communication about new standards cannot be
underestimated. The parties involved must be informed in good time of any (likely)
changes. This happened in the case of the Nurnberg-Ingolstadt High Speed Rail Line in
Germany, where changes to safety rules and regulations had to be embraced during the
construction period (Hertogh et al., 2008, p. 227).
Then, once the change comes into effect, information and training programmes should
be organized to bring them up to speed. This did not happen or barely happened in the
cases referred to in Section 2: the standards were prescribed in absolute terms far too
soon (despite numerous uncertainties about safety and environmental problems), there
was no transition period and no information or training. Even Dutch ministries who
were closely involved with the ministry in question had no idea what had been cooked
up in Brussels (Rood et al., 2005). Project managers need to be alert to surprises like
these. Managers of mega-projects also need eyes in the back of their head.
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7. Operation of the Project
The call for tenders, which precedes the selection of the contracting consortium and sets
out the price, quality requirements and timescale for the project, can stretch across one or
more decades of operation. Combining investment with maintenance can payoff in terms
of sustainability. Political empowerment to, for example, set and approve user charges can
also play an important role in the operational phase.
The risk-sharing, the governance of the operation and the role of public and private
players in the operational phase will have to be explored and ascertained during the pro-
gramme phase and the preparation phase. On the basis of the anticipated cash flows,
returns, costs and risks, a decision will have to be taken with the private parties in particu-
lar on whether the operation constitutes a business case that promises an attractive ratio
between risk and return. More and more, a life cycle analysis is needed to ascertain a sus-
tainable solution.
8. Conclusions
The preparation and execution of mega-projects are plagued by pitfalls. This paper pre-
sents a brief summary of some of these pitfalls and suggests ways of dealing with them.
The pitfalls which often occur in the decision-making on mega-projects are as follows:
. no adequate problem analysis;
. lack of project alternatives;
. no functional programme;
. uncertainty about the scope of the project;
. inadequate process architecture;
. questions on the SCB analysis;
. contested information;
. land acquisition;
. type of chosen technology;
. changing markets;
. political discontinuity and inconsistencies;
. changing standards and changing legislation.
Finally, there are also questions that need to be asked when comparing different mega-
projects.
In practice the decision-making is usually pretty chaotic; sometimes steps are retraced
and decisions are reconsidered. It is absolutely crucial that a process architecture be
designed beforehand and agreed by the parties. The above-mentioned division into five
phases can help point the way. Each phase ends with a go/no-go decision. The problem
analysis delivers a document which enables the competent authority to decide whether
the next phase can begin: the programme phase, leading to a functional programme includ-
ing the first estimate of costs, based on a reference class. If the functional programme leads
to a “go” decision, the “preparation phase” which leads to an execution decision (go/no
go) can begin. A “go” decision gives rise to fundamental commitments: the public and
private funding is made available and the project is fleshed out in minute detail. The
“execution phase” is followed by the operation decision and the “operation phase”.
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It is not inconceivable that part of a phase may have to be repeated; for example, the
functional programme may need some adjustments to keep pace with insights that have
emerged later. The phasing must always make clear which stage the infrastructure
project has reached.
The preparation of mega-projects is for a large part a matter of knowledge management.
In practice, we observe a lack of interest in learning from other projects. Nevertheless, the
actors involved in the decision-making on the Lisboa-Porto High Speed Line (305 km) in
Portugal explicitly state that they have learned a lot from other High Speed Rail Lines in
France, Spain, the UK and the Netherlands (Hertogh et al., 2008, p. 189). Learning from
best practice of course does not mean that it is useful to copy automatically a best practice
(Hertogh et al., 2008, p. 47).
It is very important to keep open as many options as possible so that unexpected surprises,
new insights and changed circumstances can be tackled in a flexible way (Miller & Lessard,
2008). In the early stages alternatives have to be generated, first in the form of functional
programs, later in technological specification and finally in the hardware of the mega-
projects. During the preparation and elaboration of the mega-projects it is crucial to maintain
many options, which give the opportunity, at least at a number of strategic moments to
make choices: adapt to changing environments, changing insights and improved knowledge,
changing the scope or changing the time planning (WRR, 2008).
There must be a continuous pressure on increasing private finance, increasing private
commitment and increasing the share of the risks, accepted by private actors. As long
as there is uncertainty, there is flexibility and there are opportunities to take into
account changing markets and changing political environments. After 70 years with no
lessons learned (Flyvbjerg et al., 2003), it is time to get down to some serious work.
Acknowledgements
The author is grateful for the comments and suggestions by two anonymous referees. The
usual disclaimer applies. A first version of this paper was presented at the international
research conference “Governance of Major Investment Projects”, Trondheim (Norway),
25–26 September 2008.
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