Why London leads the world at Megaprojects

A decade ago anyone suggesting that the UK construction industry was a world-beater at bringing major projects in on time and within budget would have found themselves ridiculed.

In 2007, the national embarrassment that was the new Wembley Stadium finally opened a year late, and more than £300m over its fixed-price budget of £458m. That same year also saw the completion of the new £6.2bn High Speed 1 (HS1) channel tunnel rail link, delivered slightly late and 18% over its original budget.

Fast forward 10 years and the UK, and in particular London, is seen as an exemplar of best practice when it comes to managing major projects – defined as any construction project costing more than US$1bn.

Governments from around the world are sending people to the British capital to find out how projects such as the London 2012 Olympics and Crossrail were successfully delivered.

The Bartlett is one of the leading academic institutions researching the success of these projects. Among its researchers is PhD candidate Juliano Denicol, whose work has been funded by the Brazilian government seeking insight from the UK’s experience and to apply to its own infrastructure development.

Denicol has subsequently been awarded a prestigious research grant by the US-based Project Management Institute (PMI) to further fund his work looking at how clients create delivery models that can successfully deliver megaprojects on time and on budget.

“When the PMI awarded me the thesis research grants, they selected my work as one of the few pieces of research in this area that would create a real impact in the world,” says Denicol.

It is easy to see why understanding how megaprojects can be brought in on time and within budget is of global significance. According to a 2016 McKinsey Global Institute Report, the world needs to spend US$49trn on infrastructure between 2016 and 2030. And yet, according to one estimate, 90% of megaprojects end up delayed and over budget.

Indeed, the problems major projects faced in the UK 10 years ago were also experienced at construction sites across the globe. Perhaps most notable at the time was the US project known as the Boston Big Dig. This tunnel was originally estimated at $2.8bn when work began in 1991, but was eventually completed in 2007, nine years behind schedule at a cost of $14.6bn.

And these problems persist today: even in Germany – a nation traditionally regarded as representing the pinnacle of industrial efficiency – the country is reeling from two hugely delayed and over-budget public projects. The Berlin Brandenburg Airport was originally scheduled to open in 2011 at a cost of €2.5bn, but is currently scheduled to open in the second half of 2017 at a cost of €6.6bn. The Hamburg Opera House, meanwhile, was finally completed in 2016, six years late and costing €789m – more than 10 times the original budget.

Anything that can reverse the trend of bloated and delayed megaprojects could have a huge effect not only from a fiscal perspective, but also a political one. As Denicol points out: “The government’s main job is not building assets, but a great part of government policies are delivered through projects.”

T5 turning point

So why is London the focus of so much attention? The story of London’s success begins with a project that opened just a year after the disastrous Wembley Stadium – Heathrow Terminal 5 (T5).

While problems with its baggage-handling systems marred the opening of the £4.2bn airport terminal, its actual construction was a success, delivered on time and on budget. “Today when you look at megaprojects, you look at life before T5 and life after T5,” says Denicol. “As a delivery model, it’s a breakthrough project.” This success was achieved thanks to the client, BAA, eschewing the long-held belief in engineering and project management that “change is the enemy”.

In a paper co-written with colleagues from Imperial College London and the University of Queensland, Bartlett School of Construction and Project Management (CPM) Professor Andrew Davies says that T5 was a success because it defied conventional thinking.

‘Conventional project logic seeks to predefine all requirements and banish change once the project has started,’ says the paper, called Five Rules For Innovation In Megaprojects. ‘Such an approach, we believe, is the cause of many of the problems managers confront in megaprojects.’

Following a review of international airports opened in the previous 15 years and UK construction projects worth more than £1bn in the past 10 years, plus fact-finding exercises from other sectors such as oil and gas, BAA came at things differently. It ditched the traditional approach of a fixed-price contract that takes all the risk away from the client and puts it on the construction supply chain. Why? It found such an approach would have meant the terminal being £1bn over budget, a year late, and cost six lives through industrial accidents.

Instead, says Five Rules For Innovation In Megaprojects, ‘T5 created a radically new megaproject delivery model based on a collaborative, innovative and flexible process that avoided these potential failures.’ Allowing the construction supply chain the flexibility to deal with challenges in innovative ways was key to the project’s success. Also key was the client’s involvement in the scheme, with integrated project teams of both BAA staff and contractors working side by side.

The close working between the client and supply chain has been a key trend on major projects in London since T5. While construction of the London 2012 Olympics couldn’t be run by an experienced owner-operator like BAA at T5, the Olympic Delivery Authority (ODA) created the role of a Delivery Partner filled by a consortium of CH2M, Laing O’Rourke and Mace. Like at T5, ODA and Delivery Partner staff worked on integrated project teams.

This delivery partner model developed for the London 2012 construction was then adopted and adapted for the delivery of Crossrail, a 118km cross-London railway, including 42 km of tunnel underneath Central London and 37 new stations.

Project ecology

It is not only the concepts of an intelligent client, delivery partner and integrated project teams that have transferred across London megaprojects. The steady pipeline of schemes has meant that many of the people working on the various projects are the same. For example, the leader of T5 became CEO of Crossrail; a London 2012 construction director became programme director of Crossrail; the director they replaced became CEO of London’s new super sewer, the Thames Tideway Tunnel.

‘London has benefitted from a project ecology,’ says Davies in his forthcoming book, Projects: A Very Short Introduction. ‘There is an ecology of firms, people and ties that is increasingly much more dense and interesting in London. We have seen programme directors on one project move to become chief executives on another. You are seeing organisations like the same contractors continually reappearing. The ties between people and companies are getting closer and closer. Traditionally, we have treated projects as islands, but you have to move beyond that and see the connections.’

Davies’ colleague, Dr Vedran Zerjav, Lecturer in Infrastructure Project Management at CPM, says that while such an ecosystem is welcomed, the key to success is making sure that clients retain the lessons learned from each project and aren’t solely reliant on a few experienced individuals. “The question clients should be asking themselves is: how can I capture and retain that knowledge so that on my next project I don’t have to start from scratch.”

Driving innovation

What is significant about London is that the ideas that work on one project are not treated in isolation and forgotten on completion – they are applied and improved on every new project.

An example of this is the innovation management system developed for Crossrail that is now being used on Thames Tideway. Called ‘Innovate18’, this online platform is designed to provide a mechanism for the supply chain to submit ideas for innovative solutions, and then track and report on their progress. The programme attracted more than 800 ideas by mid-2015, and supported innovations ranging from the use of high definition drone-mounted cameras for site inspections through to the repurposing of grout shafts to cool the train tunnels via geothermal heat production. When Crossrail programme director Andy Mitchell became Thames Tideway CEO in 2018, he brought the Innovate18 platform with him.

It is this focus on innovation that marks the next frontier in megaprojects. The Five Rules For Innovation In Megaprojects paper makes calls for this focus on innovation to extend beyond the construction phase to an asset’s entire life cycle. To this end, Dr Zerjav was awarded a grant in 2016 by the Economics and Social Research Council to look at Business Innovation Dynamics in Infrastructure Projects.

“We want to transfer knowledge from the world of startups,” says Dr Zerjav. “Infrastructure is seen as much slower and complicated – completely the opposite of the entrepreneurial space. But we want to look how we capture the value of what happens in a megaproject, and how that value is transferred across the notional boundaries in a project’s lifecycle, such as the move from construction to operation. Infrastructure is about creating value and we need to look at how we capture that value and funnel it back into the business to create a revenue stream.”

In London, they can talk confidently about megaprojects in terms of value, and not cost. That’s why the world’s eyes are on the city.

Read the research

• Five Rules for Innovation in Megaprojects (Davies, Dodgson, Gann, MacAulay, 2016)

• Lessons learned from the London 2012 Games construction project (Mackenzie, Davies, 2011)

• Projects: A Very Short Introduction (University Oxford Press, Davies, 2017)

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