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MegaProjects and Risk: An Anatomy of Ambition
Abstract
Megaprojects and Risk provides the first detailed examination of the phenomenon of megaprojects. It is a fascinating account of how the promoters of multi-billion dollar megaprojects systematically and self-servingly misinform parliaments, the public and the media in order to get projects approved and built. It shows, in unusual depth, how the formula for approval is an unhealthy cocktail of underestimated costs, overestimated revenues, undervalued environmental impacts and overvalued economic development effects. This results in projects that are extremely risky, but where the risk is concealed from MPs, taxpayers and investors. The authors not only explore the problems but also suggest practical solutions drawing on theory, experience and hard, scientific evidence from the several hundred projects in twenty nations and five continents that illustrate the book. Accessibly written, it will be the standard reference for students, scholars, planners, economists, auditors, politicians and interested citizens for many years to come.
... The reason for many of the overruns is attributed to "insufficient realism in the original estimates" [1], which do not take into account unforeseen costs, or do not take into account, but not significantly, the cost of stoppages during construction, which may occur not only for organizational reasons, but also due to technological difficulties arising during the construction, a unique object. Safety and environmental compliance costs are not fully taken into account and since each project is unique, modern forecasting tools are unable to account for all the possible factors that may affect the progress of the project. ...
... The results of these studies are similar to those conducted earlier, namely it was shown that among those projects, which were involved in the analysis, in nine out of ten there is cost overrun, the real cost of all types of projects is higher by 28% than the estimated. At the same time, for railway projects the excess is 45% [1]. ...
... Considering the cost structure related to appreciation of actual costs against estimated ones, ac-cording to Sibgiprotrans data it is the following: provision of new railway lines with high carrying capacity -30%; difficult accessibility and uninhabited regions of development -27%; unfavorable topographic, climatic, engineering and geological conditions -22%; permafrost and high seismicity -21% [14, p. 558]. However, the authors of the monograph [1] list seven more significant reasons for failed forecasts: inadequacy of the effectiveness assessment methodologies used; lack of accumulated data on similar projects; inconsistent model of human behavior and, as a consequence, demand and supply; changes in external influencing factors; changes in the political situation; subjectivity of those interested in implementing the project. All these factors in one way or another represent the game of a person with the external environment. ...
The article presents the results of comparing the estimated cost with the actual costs of a number of large-scale transportation projects that have been implemented in Russia. The conclusion about the necessity of system analysis in evaluating the efficiency of such projects is made. The conclusion is that the external environment makes significant adjustments in any project, especially the large-scale one, which involves many aspects: economic, ecological, political, technological, demographic and others. Projects of such type are mainly financed from public funds, as they are of public importance, and those who promote them are not always interested in the accuracy of forecast values of the project. Mechanisms of responsibility regulation are absent, and institutional environment is not ready for error-free efficiency forecasting, there are no examples of successful practice in this direction. In the course of the study, the author concludes that the statistics of cost overruns in Russian transport projects corresponds to the global practice. The author concludes that it is necessary to use the system analysis to assess the effectiveness of large-scale projects, because the problem of assessment is poorly structured to take into account quantitative and qualitative project parameters.
... In fact, 'the traditional vision of the city as a bounded, universally replicable settlement type now appears as no more than a quaint remnant of a widely superseded formation of capitalist spatial development' (Brenner & Schmid, 2015: 152). Neoliberal planning has become big business (Flyvbjerg, 2003;Taşan-Kok & Beaten, 2012;Hall, 2014). Its main objective is to accumulate and secure capital rather than counterbalance the adverse effects of capitalism for the common good and people in need. ...
... Taking the city to the market benefits those who can pay for it and leaves those who cannot on the streets. Megaprojects are typical for neoliberal planning (Flyvbjerg, 2003;Brenner & Schmid, 2015). Urban developments like the Docklands in London open up a value chain of profits from a tremendous increase in land value (by 5000% in eight years) to reimagined upscaling of the built environment, attracting global investors and private equity. ...
This thesis identifies and understands how some cities have greater success in helping immigrants and ethnic communities become part of the urban community, while others have less success. Its objective is to propose a people-centred neighbourhood planning approach to assist immigrants and ethnic groups to better become part of the urban community. This thesis describes and interprets the complex response of neoliberal society to immigrants and ethnic minorities. It uses the experience of selected German cities as a case study. The thesis draws on critical theory and uses a mixed methods approach to examine local projects that include migrants and immigrants in urban planning. It takes a social constructionist perspective to explore polyrational urban perspectives. The research includes a range of relevant insights from recent approaches in planning theory towards more flexibility, diversity and inclusion. It refers to Foucault's understanding of power relations and governmentality as well as Gunderson and Hollings' social-ecological systems concept as part of resilience theory. The research describes the social implications of urban segregation of ethnic groups due to hegemonic neoliberal planning regimes in general and specifically as applied in Germany. It highlights the influence of German national identity on planning policies and the conflict of claiming rights and freedoms for Germans while denying them to non-Germans. The intensifying German integration debate indicates a society in transition from a folk nation to a diverse society. Findings include the observation the case study projects' struggle between the social ambition of local initiatives and the structural neglect of national planning policies and funding, knowing that strengthening local engagement is needed to promote successful urban diversity in a diversifying world. In response to this, a multilevel planning model is developed and tested against the case study projects. It consists of a nomocratic national level, a teleocratic municipal level and a newly introduced people-centred neighbourhood level. This level is finally sketched up in an attempt to develop a local adaptive and people-centred planning approach to better answer the polyrational realities of increasingly diverse neighbourhoods.
... Therefore, mega-dam projects can have a great impact on society, both positively (Agrawala et al. 2003;Kim 2006) and negatively (Ansar et al. 2014;Flyvbjerg et al. 2003). Numerous developing countries have deployed mega-dams as a mean to generate electricity, irrigation, and water storage and to support cities and manufacturing industries. ...
... Mega-dam studies have used cost-benefit analysis and quantitative methods as a means of analyzing the macro-economic effect of dams, using standard massive data while offering partial consideration to situations of affected communities' and their perceptions (Ansar et al. 2014;Flyvbjerg 2009;and Flyvbjerg et al. 2003). Likewise, character of the economy, phases of development, agency of society, economic development needs, stage of institutional maturity, geopolitics and socio-cultural aspects of mega dam projects have been given little consideration (Dogra 1992;Varma 1999). ...
The paper assesses social impacts of a mega-dam project (Merowe Dam in Sudan) as perceived by host and affected communities (i.e., upstream, downstream, and relocated residents), which is not commonly seen in the literature. Primary survey and interviews were conducted with 300 residents, government officials, the Dam Implementation Unit (DIU), NGOs and other key informants. Five inter-related areas of impact were scrutinized: (a) displacement of communities; (b) resettlement of displaced communities in a new location; (c) technological factors; (d) social mobility factors; and (e) economic and political institutions. Results show that Merowe Dam exerted positive as well as adverse social impacts on local communities. Increase in home sizes, opportunities for children’s schooling and quality of life improvement ranked as the top three positive impacts with residents located downstream scoring relatively higher than relocated and upstream residents. Relocated residents also showed positive attitudes towards the provision of essential services (schools, health facilities, availability of running water, electricity, marketplace, etc.), thereby enabling them to enjoy and flourish in their social lives. The adverse impacts are centered on intangible factors, such as, sentimental effects closely related to their feelings, loss of history, memories, nostalgia about the old place, and grievances regarding compensation packages and its management. Therefore, it is important to recognize the need for long-term monitoring of the resettlement process and provide emotional support to those displaced and resettled. Furthermore, there is also a need to address the livelihood requirements of local communities in the affected region.
... The single case study presented in this paper highlights the behaviour of key politicians using the theoretical lenses offered by the EoC. This theoretical perspective permitted us to compare and contrast the behaviour of President Enrique Peña Nieto (EPN) and PRI (Flyvbjerg, 1998;(Flyvbjerg, Bruzelius, & Rothengatter, 2003;Anand et al., 2018;Davies, MacAulay & Brady, 2019;Qiu, Chen, Sheng & Cheng, 2019;Shenhar & Holzmann, 2017). ...
... The lack of long-term socio-political vision in which the population manifests their requirements, and the Government executes such infrastructure, which usually develops or reinforces mistrust of the institutions and how taxpayer resources are utilized without satisfying the population's needs. We found that public IMs can be pushed to fail, even if this represents a significant cost for taxpayers (Qiu et al., 2019;Zhai, Ahola, Le & Xie, 2017; According to Flyvbjerg et al. (2003), IMs are political and physical animals, as they are not only attractive for politicians due to their magnitude but their symbolism during their political periods. Both the NAIM project and the Santa Lucia alternative are significantly relatable to the political sublime of Flyvbjerg (2014). ...
Polarized political debates can lead to infrastructure megaprojects in advanced stages of construction being left unfinished. Although this scenario is uncommon, there are relevant examples that negatively impact the economy and society. Despite their relevance, unfinished megaprojects are scarcely discussed in project studies. However, political events such as a referendum or government transitions jeopardize the continuation of the megaproject, leading to its termination. This paper focuses on unfinished infrastructure megaprojects and employs the escalation of commitment as a theoretical perspective. It addresses the following research question: How political polarization fosters escalation of commitment leading to unfinished infrastructure megaprojects? The paper employs a longitudinal case study, the USD 13 billion Mexico City New International Airport, recently terminated during the construction phase due to a political decision. The paper describes the interplay between the development of infrastructure megaprojects and political polarization. It shows how political narratives can portray a misleading escalation of commitment to justify project termination, even when it is not rational.
... During the land acquisition phase, the projects are vulnerable to cost and time overruns due to lengthy and protracted land acquisition processes, particularly when the land acquisitions are carried out simultaneously with construction activities (Bagui and Ghosh, 2013;Babatunde, Adeniyi, and Awodele, 2017;Le et al., 2019). During the design and construction phases, there are many construction-related risk events, including unclear output specifications (Akintoye and Beck, 2009;Javed, Lam, and Chan, 2014); increase in construction costs (Flyvbjerg, Bruzelius, and Rothengatter, 2003;Bain, 2007); and changes in the scope of work after the contract is signed (Tan, 2009;Walker and Jacobsson, 2014;Permatasari, Hardjosoekarto, and Salomo, 2020). ...
The Government of Indonesia implemented the Build, Operate, and Transfer (BOT)
model, relying on private investment to bridge the financing gap in developing public
infrastructure facilities, including toll roads. Toll road investments, like other greenfield infrastructure projects, are typically characterized by high project risk, which discourages private sector investment. Many previous studies have investigated the various risk events in toll road investment projects, but only a few have assessed the interrelationships of risk events in the Indonesian context. This study fills this knowledge gap by determining which risk event influences other events most. Fuzzy interpretive structural modelling combined with the matrix impact of cross-references multiplication applied to a classification method was used to determine the hierarchy of risk events and analyze their influences on
other risk events. A total of fourteen risk events were identified and analyzed. An unclear output specification was found to be the most significant risk event, with the biggest driving power affecting other risks. The findings and limitations of this study point the way forward for future research.
... During the land acquisition phase, the projects are vulnerable to cost and time overruns due to lengthy and protracted land acquisition processes, particularly when the land acquisitions are carried out simultaneously with construction activities (Bagui and Ghosh, 2013;Babatunde, Adeniyi, and Awodele, 2017;Le et al., 2019). During the design and construction phases, there are many construction-related risk events, including unclear output specifications (Akintoye and Beck, 2009;Javed, Lam, and Chan, 2014); increase in construction costs (Flyvbjerg, Bruzelius, and Rothengatter, 2003;Bain, 2007); and changes in the scope of work after the contract is signed (Tan, 2009;Walker and Jacobsson, 2014;Permatasari, Hardjosoekarto, and Salomo, 2020). ...
The Government of Indonesia implemented the Build, Operate, and Transfer (BOT) model, relying on private investment to bridge the financing gap in developing public infrastructure facilities, including toll roads. Toll road investments, like other greenfield infrastructure projects, are typically characterized by high project risk, which discourages private sector investment. Many previous studies have investigated the various risk events in toll road investment projects, but only a few have assessed the interrelationships of risk events in the Indonesian context. This study fills this knowledge gap by determining which risk event influences other events most. Fuzzy interpretive structural modelling combined with the matrix impact of cross-references multiplication applied to a classification method was used to determine the hierarchy of risk events and analyze their influences on other risk events. A total of fourteen risk events were identified and analyzed. An unclear output specification was found to be the most significant risk event, with the biggest driving power affecting other risks. The findings and limitations of this study point the way forward for future research.
... Secondly, the benefit of investment is positively correlated with economic growth. This means that if the growth is promising, the project will go well; if the growth is low, the project will perform poorly [7] . ...
The development of large infrastructure projects requires the consideration of many different risks in advance, of which the two common risks are strategic risk and project risk. This study provides an overview of the different relevant literature on risk management of large infrastructure projects. Based on the Hong Kong section of the Guangzhou-Shenzhen-Hong Kong high-speed rail, this study identified the project’s main strategic risks and project risks, and provided suggestions for risk management.
... The unsuccessful start is explained by: 1) permanent limited investment resources and generic defects in the project financing system, 2) corruption, 3) lack of transparency in the work of public services, 4) low professional training of government officials, 5) ineffective investment decisions. In other countries, the situation is somewhat different, but even there, judging by the monograph [2], the assessment of the consequences of the megaproject implementation for the economy and society is ambiguous, fluctuating in the negative -positive range. In general, in the monograph there is no constructive answer to the question "what to do?" in a turbulent developing world. ...
The implementation of large-scale projects affects the gross domestic product, the end-use fund, and making a decision on investing in a particular project is an extraordinary task. Projects of this scale are associated with a high degree of uncertainty and traditional methods are unacceptable as a tool for assessing their effectiveness. In the process of research, the author uses both well-known methods of system analysis and methods of neo-systemic analysis (it is proposed to use a hybrid model of verbal and non-verbal assessment models). The objects of comparative assessment are railway projects: the Subpolar Mainline, the Lensko-Kamchatka Mainline and the railway crossing to the island Sakhalin. To assess the achievement of the general goal, sub-goals were formed: military-strategic, social and economic. At the same time, the goal tree was considered in the framework of three scenarios: optimistic, intermediate and pessimistic. As a result of processing the opinions of experts, it was possible to obtain the coefficients of the relative importance (priorities) of each sub-goal in three different scenarios. At the next stage, the experts were asked to compare compositions - “alternative-scenario”, within the framework of the constructed goal tree. This approach to processing the results of the goal tree allows one to take into account the “scale” of the project, since the projects under consideration have a significant impact on the entire economy, thereby influencing the scenarios themselves, in contrast to the widely used method of hierarchy analysis, which does not take into account such impact.
... Studies, most notably the World Commission on Dams (WCD) report Dams and Development (WCD, 2000), have demonstrated that these benefits are unevenly distributed with high social and/or environmental costs. Dams are often justified with projections that are unattainable by erring on the risky side of planning and relying on overly positive assessments of future gains and benefits (Flyvbjerg et al., 2003;WCD, 2000). By the end of the 20th century, large dams had fallen out of favour due to growing opposition coupled with their disappointing performance (McCully, 2001;A. ...
In this article we investigate why environmental debates swing in one direction or another by analysing the discursive construction of water security surrounding the Waimea Community Dam in Aotearoa New Zealand. Using narrative policy analysis based on interview and documentary data, we show how an initial dominant rural water security story was reshaped into a new win‐win‐win metanarrative by absorbing concerns relating to environmental and urban water security. Opposition to the dam, in contrast, failed to gain traction because it did not sufficiently engage with the question of water security, thus increasing uncertainty and paradoxically strengthening the new metanarrative.
... Years of research in environmental justice has shown that high-polluting forms of land uses, such as hazardous waste sites and power plants, are often sited near marginalized and impoverished neighborhoods (Anguelovski et al., 2016;Mohai, Pellow, and Roberts 2009;Walker & Bullard, 1992). There is also substantial evidence that flood-induced damages and displacements mostly affect low-income population groups (Flyvbjerg et al., 2003;Bararu, 2013;Chen et al., 2013;Fahy et al. 2019), especially with the growing number of private property development in vulnerable floodplains. Thus, consideration of social vulnerability is key to understanding potential losses from environmental hazards. ...
Flooding is a serious form of natural hazard in Alaska, USA. Two of Alaska’s biggest cities, Anchorage and Fairbanks, have experienced flooding of varying magnitude since the cities were first settled in the early 20th century. Although flood mitigation measures such as blue-green infrastructure (BGI) are rising in prominence, the spatial relationship of BGI, urban pluvial flood (UPF) zone, and social vulnerability remains understudied. This study delineates the UPF zone of Anchorage and Fairbanks using the Blue Spot modeling and correlates it with the distribution of BGI at Census Block Group (CBG) scale, focusing on underlying social vulnerability using a set of indicators. Anchorage shows a positive correlation (r = 0.53, p < 0.01) between percentage of UPF area and density of BGF, whereas Fairbanks shows an insignificant negative correlation. In Anchorage, more socially vulnerable CBGs (n = 10) intersect with high blue spot CBGs (n = 33), compared to Fairbanks where those numbers are 1:6. The results indicate that while BGI is equitably and proportionally distributed within the Anchorage UPF zone, the same is not true in Fairbanks, where distribution is equitable, but not proportionate to pluvial flood risk. The study emphasizes that both types of distribution present their unique challenges and opportunities, but the relative absence of BGI increases flood risk for residents. The results are useful for spatial planners to better inform flood mitigation strategies in urban areas, especially to reduce the gap between equitable and proportional distribution of BGI.
The effect of transport investment on stimulating economic activity has only been partially studied by researchers. Because of the scale of the topic, research has tended to concentrate on particular types of investment, geographical area or development activity. One thorough review by Parkinson in 1981 did however reach two major conclusions. First, transport costs are a small proportion of total production costs and thus transport investment is unlikely to have more than a weak efect on national economic growth. Second, transport investments are unlikely to have a major impact on regional patterns of economic activity. However, it is concluded that the coordination of land use and transport policies is vital. -A.Gilg
Public investments in transportation have always been seen as a spur to growth in the immediate localities where the new transportation facilities are located. What has not always been recognized is that these investments, taken as a whole, produce a network that benefits all other parts of the system, including economic activities far removed from the location of the investment. A recent study of the returns from highway investments in the last 40 years found surprisingly high rates of return in the 1950s and 1960s, the years when the Interstate System was being built. Those rates declined in the two most recent decades. Analysis of these past patterns can help target future transportation investments to achieve the greatest economic impact. In particular, those programs that have the potential to produce network effects are the key. Future investments can produce the greatest economic return if they are targeted to programs that will preserve or expand network capacity. Four areas of the surface transportation program appear particularly well matched to this objective: • preservation of the Interstate System; • channeling available funds into the National Highway System; • targeting investment in intermodal gaps; and • developing Intelligent Transportation Systems.
Comparative evaluation of the environmental impact statement (EIS) systems in the US, California, the UK, the Netherlands, Canada, the Commonwealth of Australia, Western Australia, and New Zealand demonstrates that shortcomings exist in current environmental impact assessment (EIA) practice and that there is a need for further guidance, training and research to increase its effectiveness. This article presents a set of EIA system evaluation criteria, and against these criteria, summarizes trends in EIA practice and suggests several ways of improving the effectiveness of EIA. -from Author
The Eno Transportation Foundation's annual conference held on November 16, 1995, featured distinguished experts who participated in a forum on transportation financing. Eno's policy forum addressed three approaches which might be used to change Virginia's transportation highway and transit financing mechanisms. These include a stronger state financial role, strong private role and sectoral funding roles.
A major river navigation project, the Paraguay-Parana Hidrovia, is being considered by the governments of Argentina, Bolivia, Brazil, Paraguay and Uruguay. The recently completed feasibility study for this project is seriously flawed and the errors systematically contribute to overestimating benefits and underestimating costs. The errors include overestimating the probability of a collapse in navigation, ignoring alternative forms of transportation, overestimating growth in regional shipments, omitting relevant construction costs, and perhaps most importantly, ignoring significant negative impacts to the environment. Correcting these errors, either individually or in concert, leads to the project not being economically feasible. Also provided is a method for including unspecified costs, such as those to the environment, in the analysis without further expensive and time-consuming studies.
In many countries monitoring impacts and associated mitigation measures, after the decision on a project, is often a weak and discretionary element in the environmental impact assessment (EIA) process. UK experience provides examples of a fragmented approach to monitoring, and a Sizewell B case study provides a more detailed example. But without mandatory procedures such as those in place in California, it is unlikely to be undertaken comprehensively. -Author
Public private partnerships (PPPs) constitute a promising approach to the development of public-use toll gates. Public/private partnerships represent an evolving approach to government-private sector relationships for toll road development that has certain advantages over the conventional Built-Operate-Transfer (BOT) consession. Recent examples present a range of sharing options that are proving valuable in the variety of contexts around the world.
For a variety of reasons the construction of large-scale industrial plants or infrastructure projects such as roads, railways or airfields, which have a considerable impact on the local community and its environment, are often controversial and strongly contested. This article addresses the responses of the local community to the building of a huge railway tunnel through the Hallandsas ridge in the south of Sweden. One of the crucial issues in contemporary industrial societies is how nationally designed and conceived projects deemed necessary for economic growth can be implemented in a local environment, situated in a specific, historically and traditionally conditioned context of time and space. Issues of risk perception, trust in authorities, industry and managers, as well as the related issue of what kinds of knowledge are deemed relevant by various groups are discussed with reference to the Hallandsas tunnel case.