Managing Gigaprojects - Advice from Those Who’ve Been There, Done That

471 Pages·2013·6.56 MB·English

by  Galloway

Managing
Gigaprojects
Advice from Those Who’ve
Been There, Done That
Edited by
Patricia D. Galloway, Ph.D., P.E.
Kris R. Nielsen, Ph.D., J.D.
Jack L. Dignum
Library of Congress Cataloging-in-Publication Data
Managing gigaprojects: advice from those who’ve been there, done that / edited by Patricia D.
Galloway, Ph.D., P.E., Dr. Kris R. Nielsen, Ph.D., J.D., Jack L. Dignum.
pages cm
Includes bibliographical references and index.
ISBN 978-0-7844-1238-1 (pbk.) — ISBN 978-0-7844-7693-2 (ebook)
1. Engineering—Management. 2. Project management. 3. Civil engineering. 4. Construction industry—
Management. I. Galloway, Patricia D. II. Nielsen, Kris R. III. Dignum, Jack L. IV. Title: Managing giga
projects.
TA190.M375 2012
624.068’4—dc23
2012019880
Published by American Society of Civil Engineers
1801 Alexander Bell Drive
Reston, Virginia 20191
www.asce.org/pubs
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ISBN 978-0-7844-1238-1 (clothbound)
ISBN 978-0-7844-7693-2 (e-book)
Manufactured in the United States of America.
18 17 16 15 14 13 1 2 3 4 5
Preface
This book is the brainchild of Patricia Galloway, Kris Nielsen, and Jack Dignum. In
their 35 years in the construction industry working on some of the world’s largest
projects, they have truly seen the bold and beautiful as well as the good, the bad, and
the ugly. All three had a vision to write a book that would share with senior execu-
tives and government leaders the lessons learned and best practices used on the
megaprojects and gigaprojects in which they were fortunate to take part. Both
Galloway and Nielsen have worked in more than 80 countries. Dignum isn’t far
behind, having worked in some of the far corners of the earth on major infrastruc-
ture and energy projects. As team members, they have seen what can go wrong and
right with every phase of megaprojects and gigaprojects.
Expanding on their vision and dream, Galloway, Nielsen, and Dignum reached
out to those around the world “who have been there and done that” on some of the
world’s largest projects, including those who have served in the roles of financier,
owner, program manager, consultant, designer, contractor, and legal counsel, to
ascertain what they too feel were lessons learned and best practices.
Having served in various roles as consultants, dispute review board members,
independent experts, and arbitrators, their broad knowledge of global practices and
expertise complements well the experiences of their 22 coauthors. Every one of the
contributors has “been there, done that,” and every author brings his or her unique
voice to a book that should serve as one source of information for those who are
embarking on the world’s next megaproject or gigaproject.
Galloway, Nielsen, and Dignum over their careers have worked on some of the
world’s largest projects, two of which are included in ASCE’s listing of the Wonders
of the Modern World. Although the list is too long to include here, some of the
recent and more well-known mega- or gigaprojects on which they have been involved
include the following:
• Vogtle Nuclear Power Plant, Units 3 & 4, Georgia, United States;
• Edwardsport Integrated Gasification Combined Cycle (IGCC) Project, Indiana,
United States;
• London Crossrail Project, United Kingdom;
xv
xvi PREFACE
• Venice Lagoon Floodgate Project, Venice, Italy;
• Sakhalin Island Pipeline Project, Russia;
• Panama Canal, Panama;
• Xiaolangdi Dam, China;
• Guri Dam and Hydroelectric Complex, Venezuela;
• California Courthouse Construction Program, California, United States;
• Murrin-Murrin Nickel Cobalt Refinery, Australia;
• Toronto Transit Commission Subway Line Expansion, Toronto, Canada;
• Tsing Ma Bridge, Hong Kong;
• Kuala Lumpur International Airport, Malaysia;
• Minerva Gas Project, Australia;
• Casecnan Multi-Purpose Tunnel, Irrigation and Power Project, Philippines;
• Melbourne City Link and City to Airport toll road, Australia;
• Oman LNG Project, Oman;
• HBJ Gas Pipeline, India;
• Combisa Cantarell EPC 22, off-shore oil platform, Mexico; and
• Milwaukee Water Pollution Abatement Program, Wisconsin, United States.
If the individual projects of the chapter contributors were included, the list would be
exhausting.
Galloway, Nielsen, and Dignum, as well as their coauthors, have written exten-
sively on the subjects of governance, project and program management, risk man-
agement, prudence and performance audits, project delivery, project controls, and
dispute resolution, and their papers have been published in numerous journals,
magazines, and conference proceedings throughout the world. They have either ana-
lyzed or sat through countless cases where in retrospect it seemed that issues should
have been obvious but were virtually undetected in real time. To paraphrase
Dignum, “Today’s megaprojects live on the edge of risk. They also live on the edge
of innovation and creativity.”
There have been only a handful of books written on megaprojects over the past
decade, and only recently have gigaprojects been recognized as yet another com-
plexity of megaproject construction. However, the subject has heretofore been
approached from either an academic viewpoint or has been written from a perspec-
tive of a how-to guide. And some have been blatantly critical, ignoring the techno-
logical and social benefits that megaprojects bring to our lives while offering no
solutions. The three authors decided that it was time for a new approach to the analy-
sis of megaprojects and gigaprojects, an approach that would combine the expertise
and experience from others around the world who have been active in the develop-
ment of many of the solutions to problems encountered on both megaprojects and
gigaprojects.
Galloway, Nielsen, and Dignum sought those individuals, all of whom they have
worked with intimately, who could tell the personal stories of what makes megaprojects
and gigaprojects successful and could present examples of how success was achieved
in their own voices and in their own ways. Unlike the other books published on this
topic of megaprojects and gigaprojects, this book is not written as a textbook, a how-to
PREFACE xvii
guide, or even as a critical piece, but rather it is written in the voices of those who
wanted to share their experiences with others. This book will be a success if the les-
sons learned from megaprojects herein can provide a platform from which to launch
into the future world of gigaprojects. Over the years and through all the projects, the
authors have learned much from each other and they hope you will be able to learn
from them, too.
Acknowledgments
We wish to thank Brenda Pearson, Kim Williams, and Jeremy Clark of our firm,
Pegasus Global Holdings, Inc., because without their patience and assistance in
working with the authors and their follow-ups, references, and reviewer comments,
this work would not be possible. We also wish to thank all the authors, who have
devoted a significant amount of their time to prepare their chapters and share with
us their personal experience with megaprojects and gigaprojects worldwide.
Contents
Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ix
John J. Reilly
Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xv
List of Acronyms and Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .xix
Part 1 Megaprojects to Gigaprojects: The Way of the 21st Century . . . . . . . .1
Chapter 1. Governance of the Megaproject . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
Kris R. Nielsen
Chapter 2. Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31
Kris R. Nielsen, Jack L. Dignum, and John J. Reilly
The Importance of Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Risk Management in a Public Context . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
Chapter 3. Megaprojects and the Financial Markets . . . . . . . . . . . . . . . . . . . . . .69
Christyan F. Malek
Chapter 4. Project Delivery Methodologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77
Peter Hughes
Chapter 5. Are Public–Private Partnerships a Solution
to Megaproject Delivery Problems? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .105
Richard G. Little
Chapter 6. The Program Manager’s Role . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .123
Robert Prieto
Chapter 7. Financing Megaprojects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .143
Gerald Tucker
vii
viii CONTENTS
Chapter 8. Six Challenges to Controlling Megaprojects . . . . . . . . . . . . . . . . . . .151
Patricia D. Galloway and John J. Reilly
Chapter 9. Managing the Design of Megaprojects . . . . . . . . . . . . . . . . . . . . . . . .187
Thomas R. Warne
Chapter 10. Procurement and Construction Management . . . . . . . . . . . . . . . .197
James Crumm
Chapter 11. What about Culture and Ethics in Your
Multinational Megaprojects? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .219
William P. Henry
Chapter 12. Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .229
John Hinchey
Part 2 Recognizing Cultural Differences in Managing Megaprojects . .263
Chapter 13. Megaprojects in the Middle East . . . . . . . . . . . . . . . . . . . . . . . . . . .267
William Kerivan
Chapter 14. Megaprojects in the São Paulo Metropolitan Region . . . . . . . . . .279
Cláudio Dall’Acqua and André Steagall Gertsenchtein
Chapter 15. Megaprojects in Asia in the 21st Century . . . . . . . . . . . . . . . . . . . .291
Shunji Kusayanagi and Rajendra Niraula
Chapter 16. Megaprojects in Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .313
Antonino de Fina
Chapter 17. Delivery of UK Megaprojects within a European Context . . . . . .327
Steve Rowsell and John Mason
Chapter 18. Strategic Considerations in North American Megaprojects . . . . .349
Albert Bates Jr.
Chapter 19. The Ultimate Gigaproject: Nuclear Power Plant Construction . . . .371
Charles W. Whitney, Annalisa M. Bloodworth, and Antony L. Sanacory
About the Contributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .407
About the Editors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .417
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .421
Part 1
Megaprojects to
Gigaprojects
The Way of the 21st Century
The definition of a megaproject has evolved over the years. It is fair to say that the
concept of the modern megaproject began with the post–World War II expansions
of nuclear power plants. It is also fair to say that huge projects from the Colossus of
Rhodes and the Cathedral at Chartres to the Vietnam War Memorial contain many
of the technological and societal issues and problems that a modern project manager
of a megaproject would recognize instantly.
Dr. Galloway describes megaprojects as any undertakings that are
generally defined within the industry as very large capital investment projects
(costing more than US$1 billion) that attract a high level of public attention
or political interest because of substantial direct and indirect impacts on the
community, environment, and companies that undertake such projects.
Other attributes of a megaproject include the following:
• attracts a high level of public attention;
• is the execution of an engineered facility or structure that is complex or unusual;
• has an extended execution schedule (more than four years measured from ini-
tialconcept development to final completion);
• involves multiple equipment and material suppliers;
• involves multiple specialty trade contractors;
• involves multiple project stakeholders and investors; and
• may have multinational party stakeholder involvement.
1
2 MANAGING GIGAPROJECTS
Although many people have their own definitions of what a megaproject may be,
it is typically defined as a project that is designed and constructed over a period of
at least four or more years and at a cost of more than US$1 billion. Gigaprojects rep-
resent the natural step beyond a megaproject; as we continue into the 21st century,
the term is taking a more definitive state. Generally, a gigaproject is a project with a
cost of at least US$10 billion. In 2012, we have already seen projects near the US$40
billion mark. These gigaprojects take a minimum of 10 years to complete and fre-
quently include multinational stakeholders. The projects are typically so large that
no one company can provide the sufficient personnel for all aspects of the project.
Nor can it afford to finance or absorb all the risks associated with the physical proj-
ect magnitude or extended time periods over which most megaprojects and giga-
proje cts operate. Throughout this book, the authors describe their experiences with
megaprojects. However, in most instances the word “megaprojects” could be used
interchangeably with “gigaprojects” because the same management concepts dis-
cussed throughout the book can be applied to both megaprojects and gigaprojects.
Indeed, many of the original project team members in today’s megaprojects and
gigaprojects may not even be around to see the ribbon-cutting ceremonies celebrat-
ing their final completion.
Today’s large projects evolve around some common themes. Perhaps a further
definition of a megaproject might be that it is almost a certainty that many of the
technological and physical systems, operating systems, management systems, and
even the major stakeholders, as described in Chapter 1, change through the lifetime
of the project. That fact means that those controls and systems must be dynamic, not
static, and that everything from regulatory environments to financing and risk assess-
ment change over time.
It is also apparent that the financial models are changing—in the past the major-
ity of public infrastructure megaprojects were publicly financed. Now many of the
largest projects are privately financed through multiple financial partnerships under
various delivery methods and various investment structures, with many of the finan-
cial participants foreign to the country in which the project is being built.
Additionally, the list of stakeholders in a large project has climbed from a few
immediately affected parties to intervenors that may never see the final project or be
directly affected by its presence and operation. It is not abnormal to see advocacy
groups from foreign countries becoming involved with the preliminary planning and
execution of many of these projects.
Considering the financial constraints, inherent risks, and extended performance
period involved with executing these projects, why are megaprojects evolving into
gigaprojects and becoming larger and more prevalent as we move into the 21st cen-
tury? Is it the result of the increasing supply of the world’s aging infrastructure and
the need to replace that infrastructure on larger scales? Are they implemented by
some governments seeking to demonstrate their ability to be top players in the
world’s markets? Some observe that to satisfy demand, whether demand for
increased power availability or quicker, more available mobility, a modern project
has to serve so many people on such a vast scale that it becomes a megaproject or
gigaproject because of circumstances rather than specific merit.
MEGAPROJECTS TO GIGAPROJECTS 3
One thing is clear: There will be more and more large projects as an emerging
middle class in Africa, India, and China begin to demand modern transportation
and the basic necessities of a civilized middle class life.
In Part 1, our authors, from a wide array of disciplines, bring us their knowledge
of execution strategies. They offer a firsthand look at some of the problems they
have solved and give us their on-the-ground experiences with those problems.
• Kris R. Nielsen writes about governance and what senior management, direc-
tors, and government overseers should do to meet stakeholder expectations.
• Kris R. Nielsen, Jack L. Dignum, and John J. Reilly address risk and the need
for dynamic risk modeling systems.
• Christyan F. Malekoffers some thoughts on international investment and trans-
parency.
• Peter Hughes discusses project delivery methodologies and talks about the
change in relationships in international financing and construction consortia.
• Richard G. Littlecovers public–private partnerships and their possible solution
to megaproject delivery problems.
• Robert Prietogives us some background on the program manager’s role and im-
portance in megaproject management systems.
• Gerald Tuckertalks about public–private financing in transportation projects.
• Patricia D. Galloway and John J. Reillyaddress project control systems and six
challenges to controlling megaprojects.
• Thomas R. Warne gives us his thoughts on design management and its impor-
tance to the bottom line.
• James Crumm offers his unique outlook on megaprojects and their associated
procurement and construction issues.
• William P. Henry addresses the different concerns of culture and ethics in a
multinational megaproject.
• John Hinchey gives us an exhaustive overview of dispute resolution from his
unique legal perspective.