Project Management Institute

It's a mega world

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BY TEGAN JONES
               ILLUSTRATION BY OTTO STEININGER

There's no denying the allure of working on a mega-project—the power, the prestige, the glamour, and, of course, hopefully, the payoff. From Chile to China, and all points in between, public and private organizations alike are pouring billions into massive projects that aim to do more than meet market demand. They're out to set the standard for years to come. They won't settle for just being bigger. They want to be better, too.

But that doesn't always happen.

Mega-projects have become somewhat infamous for ballooning budgets and extended deadlines. It's not always a fair assessment. Yet given the staggering level of resources required to take the leap from proposal to plan, some stakeholders and sponsors can be somewhat skittish about mega-projects.

Projects of this magnitude take a distinct breed of project leader. Often overseeing several multimillion-dollar contracts simultaneously, these project executives must be able to focus on the big picture while still making sure individual initiatives stay on deadline and within budget.

Around the World in 8 Mega-Projects

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Project: Panama Canal Expansion

Location: Panama

Timeframe: 2007–2014

Budget: $5.25 billion

Scope: Five miles of new channels, two new sets of locks and wider shipping lanes

Key Challenge: Remain agile while managing international contractors, large-scale construction and a global shipping hub

Solution: Reorganize the Panama Canal Authority to focus on the highest priority tasks

Project: Iskandar Development Region

Location: Johor, Malaysia

Timeframe: 2006–2025

Budget: $116 billion

Scope: Five development zones covering 2,216.3 square kilometers (855.7 square miles)

Key Challenge: Centralize and coordinate investor and developer activities to improve project efficiency

Solution: Increase cooperation between key stakeholders through promotions and seminars

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Project: Three Gorges Dam

Location: Sandouping, Hubei Province, China

Timeframe: 1993–2009

Budget: $25 billion

Scope: What might rank as the world's largest dam encompassing one of the world's largest power plants

Key Challenge: Adequately address the project's impact on the region's environment and communities

Solution: Conduct a continuous analysis of environmental factors and resettlement stipends for displaced residents—with only moderate success

Project: Metropolitan Transit Authority Rail Expansion

Location: New York, New York, USA

Timeframe: 2003–2014

Budget: $15 billion

Scope: Construct a rail line and extend two others, build a ferry terminal and a transit center

Key Challenge: Manage stakeholder expectations and address community concerns without halting the project's progress

Solution: Compromise with communities over controversial project plans and educate residents about the initiative's benefits

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Project: Crossrail

Location: London, England

Timeframe: 2010–2017

Budget: $31.2 billion

Scope: Lay 118.5 kilometers (73.6 miles) of track and build 41.5 kilometers (25.8 miles) of tunnels to provide a single rail line that connects the east and west sides of London

Key Challenge: Connect an intricate system of existing rail lines to large sections of new track without disrupting national transit traffic

Solution: Provide commuters with information about alternate routes and schedule the most disruptive work during off-peak times

Project: Hidroelectrica La Confluencia

Location: Tinguiririca Valley, Chile

Timeframe: 2007–2010

Budget: $300 million

Scope: Create enough carbon-free fuel to power roughly 386,000 homes

Key Challenge: Coordinate the efforts of a multicultural and multidisciplinary project team

Solution: Appoint project leaders with strong communication skills and experience leading diverse teams

Project: Horizons Oil Sands

Location: Wood Buffalo, Alberta, Canada

Timeframe: 2005–2011

Budget: $10.8 billion (2005 estimate)

Scope: Construct an oil field capable of extracting 500,000 barrels of synthetic crude oil per day

Key Challenge: Maintain the project schedule and budget despite rising supply costs and a series of labor negotiations

Solution: Attempted to use a phased project management approach for greater flexibility and include a contingency fund as a budget buffer, but issues remain

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Project: Al Maktoum International Airport

Location: Jebel Ali, Dubai, United Arab Emirates

Timeline: 2006-2015

Budget: $8.1 billion

Scope: Build what would rank as the world's largest airport, capable of handling up to 150 million passengers and more than 12 million tons of cargo per year

Key Challenge: Accommodate a steady flow of commercial airline traffic while much of the airport is still under construction

Solution: Design the final stages of the airport's construction around the completed terminal, giving it enough room to operate

POWER CENTER

Looking to ensure its approximately $15 billion project portfolio was managed efficiently, the Metropolitan Transit Authority (MTA) in New York, New York, USA, centralized the work of its agencies under a single entity called Capital Construction Co. in 2003. Mysore Nagaraja was named president, and since taking charge of the portfolio he has secured federal, state and local funding and approval for two long-imagined mega-projects: a $6.3 billion extension of the Long Island Rail Road, also known as East Side Access, and the $4 billion initial phase of the new Second Avenue Subway.

After decades of deliberation, the projects received $2.6 billion and $1.3 billion respectively, the largest U.S. federal grants ever awarded to individual projects. While managing these initiatives, Mr. Nagaraja also supervises the $2.1 billion extension of another rail line as well as the construction of a $900 million ferry terminal and a $950 million transit center.

To keep the rail projects on track, Mr. Nagaraja meets with program managers and the MTA executive board on a regular basis. These conversations connect the work of the MTA's program managers, who are accountable for every aspect of their initiatives from planning to close-out, to the executive managers, who provide strategic and financial support.

And it's program managers who are more likely to have a better understanding for how stakeholders feel about the project, he says.

Local church members, for example, initially objected to the construction of an East Side Access ventilation plant, claiming it would be an eyesore. So Mr. Nagaraja and his team went back to the designers, who moved most of the facility underground and attached a park to the plan. When he took the new design back to the church members, they gave it their okay.

“In a mega-project, you have to be more than a project manager,” Mr. Nagaraja says. “You're not managing just a contract or two. You're managing the politics of it, the financing of it and also making sure that the communities are behind you. You've got to be able to look people in the eye and get their nod that you can deliver.”

Leaders must also increasingly pay attention to the toll their mega-projects will take on the environment.

In Sandouping, Hubei Province, China, project leaders have come under heavy criticism for miscalculating the damage the Three Gorges Dam would have on the surrounding communities. Measuring 1.4 miles (2.25 kilometers) long and 607 feet (185 meters) tall, the dam is believed to be the world's largest.

The project's benefits are obvious. The dam will use 26 hydropower turbines to produce up to one-ninth of China's power and is expected to protect 1.5 million hectares (3.7 million acres) of farmland and towns inhabited by roughly 15 million people from devastating seasonal floods.

But the dam's long-term impacts on the environment remain unclear. As the water level in the 660-kilometer-long (410-mile-long) reservoir continues to rise, landslides in the area have become increasingly destructive. The project's critics fear even more local residents will be displaced, adding to the 1.2 million people already relocated at the project's inception.

The Chinese government seems committed to the effort, but project leaders are also keenly aware of the need to tackle the lingering sustainability issues. At a September 2007 forum discussing the dam, Wang Xiaofeng, director of the government's Three Gorges Project Construction Committee, said addressing environmental concerns would be a “long and hard road” and that environmental work was necessary to prevent “future disasters.”

PLAYING POLITICS

Beyond securing public support, understanding an area's political landscape can help project leaders decide when and where to unveil their mega-vision. In London, England, for example, identifying where public interest and political agendas aligned helped get another long-debated transit mega-project off the ground.

For years, business owners in London's Canary Wharf district complained about the inefficient transit routes linking the city's economic center to Heathrow airport. Looking to improve traffic flow, the Department for Transport submitted a bill to the U.K. Parliament in February 2007 that proposed connecting 118.5 kilometers (73.6 miles) of existing rail lines and 21 kilometers (13 miles) of twin tunnels across central London. The idea was to create a direct route from Essex to Heathrow via the city's business hub. Yet, without strong support from the government, the project couldn't get the funding it needed to proceed.

But when the Secretary of State for Transport, Alistair Darling—a supporter of the rail-expansion project—was appointed Chancellor of the Exchequer last June, he seemed to jumpstart the process.

The initiative also got a major boost from a stakeholder consultation campaign launched by Cross London Rail Links (Crossrail), a joint venture between Transport for London and the Department for Transport formed to promote and develop rail links across the city.

Simon Bennett, consultation and petitions manager for Crossrail, organized a number of sub-projects that created consultation documents, public-awareness exercises and exhibitions aimed at building acceptance of the initiative.

After four more months of debate and discussion with constituents, investors and stakeholders, his team's work paid off. Last October, the Prime Minister announced a £16 billion funding package. The deal included a compromise: The national government and London's transportation authority would fund most of the project, while a new business levy and revenue from fares would make up the difference.

ONE VISION

Although the Crossrail compromise cooled many fiscal concerns, there are fears the project will strain the city's skilled trade industry and overburden its infrastructure as London prepares for the 2012 Olympics.

Project leaders have adjusted accordingly. The design and execution of the project has been planned so the two initiatives will scarcely overlap, Mr. Bennett says.

“We work closely with the Olympics Delivery Authority to anticipate and manage interface issues,” he says.

This type of cooperation, however, is difficult for mega-project managers working with limited or incomplete infrastructure. When one part of a mega-project is pitted against another for access to resources such as roads, ports and materials, collaboration can quickly break down.

Aware of such risks, project leaders for the Iskandar Development Region, a massive economic zone in Johor, Malaysia, have focused on building a unified project community. With the project scheduled to close in 2025, much of the region's infrastructure is developing alongside its commercial, residential and industrial initiatives. And because the $116 billion project encompasses a wide range of independent organizations, they all have to figure out the best way to allocate resources.

Educating investors and contractors about collaborative opportunities is one of the best ways to help them look beyond their individual projects to the mission of the Iskandar region as a whole, says Noor Azwa Mohd Noor, senior vice president, economics and business, Iskandar Regional Development Authority, Kuala Lumpur, Malaysia.

The group holds joint seminars and discussions aimed at connecting key players and providing strategic interpretations of their project goals.

“At the end of the day, we would like to ensure that every stakeholder knows our role and how we can work together to achieve the overall target of developing Iskandar,” he says.

At Dubai World Central, one of the largest urban planning projects in the United Arab Emirates, project leaders must address similar access issues. With mega-projects dotting almost every inch of Dubai's landscape, the emirate's infrastructure is often operating at or above capacity.

And that level of developmental density can frequently leave project and program managers scrambling to secure the resources they need.

“The way to remedy that is to be able to track the value,” says J. Garrett Ralls, managing director of TTech LLC, a consultancy with offices in Los Angeles, California, USA, and Jeddah, Saudi Arabia. “What is the opportunity cost for not having that? And when you start tracking those costs you begin to understand that it may justify additional expense or investment to smooth the logistics out.”

Dubai World Central's Al Maktoum International Airport is a prime example of how addressing big-picture logistics can help ensure mega-projects in highly compressed areas can still be completed quickly. At what's slated to become the world's largest passenger and cargo hub, the first runway was completed in 600 project days, which project leaders say is a record for a landing strip of that size.

Yet, Dubai World Central's challenges don't stop there. When the first passenger terminal is completed near the end of the year, project leaders will have to maintain the project schedule while the hub services an estimated 7 million passengers annually. It's a common obstacle for many mega-projects, which must work in harmony with existing enterprises while still affecting large-scale change.

CULTURAL AFFAIRS

Dubai perhaps snares the lion's share of attention for its exorbitant and lavish initiatives. But in this era of massive globalization, mega-projects are popping up just about everywhere—often with multicultural crews.

In Tinguiririca Valley, Chile, the Hidroelectrica La Confluencia hydro-power plant promises to produce 700 gigawatt hours per year, enough to power roughly 386,000 of the country's homes. The project is expected to create 1,200 jobs for local residents, but many of the construction and engineering firms involved in the initiative are based outside of Latin America. So Héctor Llanos, project manager for La Confluencia Tinguiririca, spends a lot of his time making sure nothing gets lost in translation.

“The biggest challenge in managing this project is the cultural diversity of the people who are involved in it,” he says. “We need to gather together different interests and transform them into a common goal suitable with the project goal.”

Any contractor or project leader working outside of his or her own region has to work closely with local subcontractors to understand the legal, environmental and labor challenges unique to a given location, says Jorge Quijano, executive vice president, engineering and program administration for the Panama Canal Authority (ACP), Balboa-Ancón, Panama.

The agency is leading the $5.25 billion project to expand the canal, but realized it also had to pay attention to cultural issues within the organization as well. The ACP determined its tendency to divide its focus among several initiatives could put the project budget and schedule at risk. So before the project broke ground, the agency underwent a reorganization aimed at centering its functions exclusively around the expansion and operations.

Performing an extensive risk analysis in the initial planning stages helped give the project an early edge in terms of readiness and foresight. And risk assessment continues to be an integral part of every project process, Mr. Quijano says.

“Risk management starts with the concept. It isn't just started it when you start construction,” he says. “There is a risk register that guides us into what areas we should focus on and we update that register to ensure we take care of those risks as they pop up during the execution phase.”

And even on projects of this magnitude, organizations must be flexible enough to make both targeted and sweeping changes when necessary. “Agility to make decisions is very important to the organization so that it can respond in a timely manner to questions or issues brought up by the contractor,” Mr. Quijano says.

Even the most elaborate of risk assessments and contingency plans can sometimes come up short, though.

For the Horizons oil sands project in Wood Buffalo, Alberta, Canada, not even a C$700 million contingency fund could keep the project on budget. The rising cost of oil-production supplies and a series of labor negotiations across Alberta have pushed the project nearly C$1 billion into the red.

It's hardly alone. Mega-projects have a bit of a reputation—deserved or not—for running over budget and far beyond deadlines.

Itemizing the possible contingencies can help prevent unforeseen circumstances from throwing a project off course, Mr. Bennett says. “The main way [to stay within budget] is making sure you have a good estimate before you start,” he says.

The Horizons project is just one example of why risk mitigation in mega-projects must cover a wider range of governmental, environmental and economic factors to be truly effective.

“Risk mitigation in large projects and in mega-projects is going to entail more variables,” Mr. Ralls says. “Risk mitigation has to take a broad view of the landscape.”

Ultimately this means that mega project leaders need a wide-lens view of their project, better reporting from the ground and a much more flexible approach to change, he explains. Creating a virtual command center where individuals can log and track specific project tasks is one way executives, program managers and project managers can identify changes, problems and opportunities as they arise and make effective decisions in a timely manner.

“Nothing ever happens as the engineers intend it to, so you have a lot of reporting by people,” Mr. Ralls says. “And the easier you make that reporting and the more you steward it, the higher the probability you will approach any bottleneck with a good, adaptive solution—or you'll avoid the bottleneck altogether so it doesn't impact you.”

Otherwise, you just might end up with a mega-problem. PM

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

ALL FIGURES QUOTED ARE IN U.S. DOLLARS UNLESS OTHERWISE NOTED.
APRIL 2008 PM NETWORK

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