Governments must accept they are owners not clients, says megaproject specialist

Getting multi million pound infrastructure projects right requires Governments to recognise they can’t lay off their responsibilities. Interview with Professor Ed Merrow.

Devolution for England as well as Scotland, Northern Ireland and Wales is firmly on the agenda and will only add to the complexity of managing, planning and executing major infrastructure schemes for the benefit of the whole nation? Are there lessons from worldwide megaprojects that can help write a rule book?

“You have to define the scope completely before you make promises as to how much it will cost and when it will be delivered."

Leading US Professor Ed Merrow has been studying megaprojects for almost the last 30 years through his Independent Project Analysis organisation and says there are key things to learn from the successes and failures that can equally apply to infrastructure.

He was at Manchester Business School last week helping executives do just that and in his  book – Industrial Megaprojects - shares the results of research into over 300 megaprojects, 65% of which failed (see review).

Merrow: Seven reasons why megaprojects fail

1.     I  want to keep it all!! – the lead sponsor wanting to keep the whole investment to themselves and is not prepared to share risks and rewards with others.

2.     I want it now!! – unrealistic schedules.

3.     Don’t worry, we’ll work out the details of the deal later – insufficient preparation of the investment proposal and definition of the relationships between the investors before committing to delivery. 

4.     Why do we have to spend so much up front? – insufficient investment in preparation.

5.     We need to shave 20% off that number – unrealistic budget reductions.

6.     The contractor should carry the risk; they’re doing the project – “Most of the time, however, relatively little risk is actually passed (to the contractor) but a substantial premium is paid nonetheless.”

7.     Fire those project managers who overrun our projects! – “If you beat up project managers for overruns, they will find ways to hide the money so you can never find it.”

“A project, is a project is a project,” Merrow said when he met with Infrastructure Intelligence. “We find no difference by industry sector, public or private. And there are very few very large projects that are solely private undertakings. Most have government involvement.

“But what is important on smaller projects becomes critical with larger projects. Small bungles become intractable and that is why they often collapse.”

He tells an entertaining story around point 4 above about the impact of not doing the site investigation properly, for instance. “On a small project, if you don’t do the soils analysis it can be resolved. But one very very large scheme didn’t do the soils – they swore they did but they’d just done samples.  When the spades went in the ground they uncovered contaminated land. Unfortunately the whole scheme was being constructed in modules being delivered just in time. The modules were on the road, or the railway; the factories carried on building them as they were being paid to deliver on time;  and so at the site they had to be stored out on the river on barges where they rusted. 

“The project collapsed.

“When we asked why they hadn’t done a better job with the soil analysis, the answer was, well we know this site…But successful megaprojects are all about the details.”

They are also, he says, about ownership. “And governments tend to be weak owners.  They tend to think of themselves as clients. They are not clients; the clients are the users. Governments are the owners. They must control the projects.”

Because of governments’ perception of themselves as clients all their energy goes into constructing the transaction with the private sector. Wrong, says Merrow. Contractors will always win that one, they are highly motivated and very experienced so it is all good for them. But contractors are the last 30% of the project cycle. The focus of government needs to be on the first 70%, what Merrow calls the ‘shaping’.

That’s a job no one in government wants to do, but has to do, he says. Delivery organisations are good as far they go, he says, but would be better if they were also the ultimate owner/operator.

“You have to define the scope completely before you make promises as to how much it will cost and when it will be delivered. That requires agreement from all of the stakeholders – anyone who can kick up and stop the scheme is a stakeholder.

“And define doesn’t mean the engineering. It means all the elements of the scope have been identified and you have put a reasonable cost on them.

“What the public sector does is promise first and figure it out later. And then it is always amazed when it finds the promises it has been made can’t be delivered.

“So keep things provisional until you have established all the scope. It is very hard to put a cost and a schedule on something that has not been identified.

“Then when you have the scope, you can ask ‘can we afford it?’. If the answer is Oh My God, then no you can’t!”

Read Simon Murray's review of Professor Merrow’s book Industrial Megaprojects here

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