CIMFP Exhibit P-00134 Page 1 What You Should Know About Megaprojects and Why: An Overview PAPERS Bent Flyvbjerg, Saïd Business School, Oxford University, Oxford, United Kingdom

ABSTRACT ■ Mega, Giga, Tera: How Big Are Megaprojects? Megaprojects are large-scale, complex ventures that typically cost US$1 bil- lion or more, take many years to develop and build, involve multiple pub- This paper takes stock of megaproject man- lic and private stakeholders, are transformational, and impact millions of agement, an emerging and hugely costly people.1 Hirschman (1995, vii, xi) calls such projects “privileged particles of field of study, by first answering the question the development process” and points out that often they are “trait making”; in of how large megaprojects are by measuring other words, they are designed to ambitiously change the structure of society, them in the units of mega, giga, and tera, and as opposed to smaller and more conventional projects that are “trait taking,” concluding with how we are presently enter- that is, they fit into pre-existing structures and do not attempt to modify these. ing a new “tera era” of trillion-dollar projects. Megaprojects, therefore, are not just magnified versions of smaller projects. Second, total global megaproject spend- Megaprojects are a completely different breed of project in terms of their level ing is assessed, at US$6 to US$9 trillion of aspiration, lead times, complexity, and stakeholder involvement. Conse- annually, or 8% of the total global gross quently, they are also a very different type of project to manage. A colleague domestic product (GDP), which denotes the of mine likes to say that if managers of conventional projects need the equiva- biggest investment boom in human history. lent of a driver’s license to do what they do, then managers of megaprojects Third, four “sublimes”—political, technologi- need the equivalent of a pilot’s jumbo jet license.2 And, just like you wouldn’t cal, economic, and aesthetic—are identified want someone with just a driver’s license to fly a jumbo jet, you wouldn’t want and used to explain the increased size and conventional project managers to manage megaprojects. frequency of megaprojects. Fourth, the “iron Megaprojects are increasingly used as the preferred delivery model for law of megaprojects” is laid out and docu- goods and services across a range of businesses and sectors, including infra- mented: Over budget, over time, over and structure, water and energy, information technology, industrial processing over again. Moreover, the “break–fix model” plants, mining, supply chains, enterprise systems, strategic corporate initia- of megaproject management is introduced tives and change programs, mergers and acquisitions, government adminis- as an explanation of the iron law. Fifth, Albert trative systems, banking, defense, intelligence, air and space exploration, big O. Hirschman’s theory of the “Hiding Hand” science, urban regeneration, and major events. Examples of megaprojects is revisited and critiqued as unfounded and are high-speed rail lines, airports, seaports, motorways, hospitals, national corrupting for megaproject thinking in both health or pension information and communication technology (ICT) sys- the academy and policy. Sixth, it is shown tems, national broadband, the Olympics, large-scale signature architecture, how megaprojects are systematically subject dams, wind farms, offshore oil and gas extraction, aluminum smelters, the to “survival of the unfittest,” which explains development of new aircraft, the largest container and cruise ships, high- why the worst projects get built rather than energy particle accelerators, and the logistics systems used to run large sup- the best. Finally, it is argued that the conven- ply chain–based companies like Amazon and Maersk. Below, we will see just tional way of managing megaprojects has how big megaprojects and the megaprojects business are. We will also try to reached a “tension point,” in which tradition understand what drives scale. is being challenged and reform is emerging. To illustrate just how big megaprojects are, consider one of the largest dol- lar figures in public economic debate in recent years—the size of the U.S. debt KEYWORDS: megaproject management; to China. This debt is approximately US$1 trillion and is considered so large scale; four sublimes; iron law of mega- it may destabilize the world economy if the debt is not managed prudently. projects; break–fix model of megaprojects; With this supersize measuring rod, now consider the fact that the combined Hirschman’s Principle of the Hiding Hand; cost of just two of the world’s largest megaprojects—the Joint Strike Fighter survival of the unfittest; tension points aircraft program and China’s high-speed rail project—is more than one half of this figure, US$700 billion (Figure 1). The cost of a mere handful of the largest

Project Management Journal, Vol. 45, No. 2, 6–19 © 2014 by the Project Management Institute 1As a general rule of thumb, “megaprojects” are measured in billions of dollars, “major projects” in hundreds of millions, and “projects” in millions and tens of millions. Megaprojects are sometimes also called “major programs.” Published online in Wiley Online Library 2 The colleague is Dr. Patrick O’Connell, Practitioner Director of Major Programme Management at Oxford University’s (wileyonlinelibrary.com). DOI: 10.1002/pmj.21409 Saïd Business School.

6 Metaphors used and views expressed in all articles published in the Journal are the author’s alone and do not refl ect PMI’s perspective.

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of measurement meaning one billion. USD, billions However, the term “gigaproject” never 1,190.0 really caught on. A Google search reveals Measuring rod that the word “megaproject” is used 27 times more frequently on the Web than Megaprojects the term “gigaproject.” For the largest of this type of project, a price tag of US$50

400.0 to US$100 billion is now common (e.g., 300.0 the California and UK high-speed rail 150.0 projects), and a price above US$100 bil- 51.0 26.0 18.3 11.5 lion is not uncommon (e.g., the Inter- US Debt to Joint China International Sochi 2014 London’s UK NHS IT Athen’s national Space Station and the Joint China Strike HSR Space (estimate) Cross Rail Olympics Fighter Station Strike Fighter). If these were nations, projects of such size would rank among Figure 1: Size of selected megaprojects, measured against one of the largest dollar- the world’s top 100 countries measured figures in the world, the accumulated U.S. debt to China. by gross domestic product, larger than the economies of, for example, Kenya or Guatemala. When projects of such megaprojects in the world will dwarf constant and pressing issue in mega- size go wrong, entire companies and almost any other economic figure and project management. national economies suffer. certainly any investment figure. “Mega” comes from the Greek word “Tera” is the next unit up, and is the Not only are megaprojects large, “megas” and means great, large, vast, measurement for one trillion (one thou- however, they are constantly growing big, high, tall, mighty, and important. As sand billion). Recent developments in ever larger in a long historical trend a scientific and technical unit of mea- the sizes of the very largest projects and with no end in sight. When New York’s surement, “mega” specifically means programs indicate we may presently be Chrysler Building opened in 1930 at 319 one million. If we were to use this unit of entering the “tera era” of large-scale meters, it was the tallest building in the measurement in economic terms, then project management. If we consider as world. The record has since been sur- strictly speaking, megaprojects would projects the stimulus packages launched passed seven times and from 1998, the be million-dollar (or euro, pound, etc.) by the United States, Europe, and China world record for height has significantly projects; indeed, for more than one to mitigate the effects of the 2008 finan- been held by emerging economies, with hundred years, the largest projects in cial and economic crises, then we can Dubai’s Burj Khalifa presently hold- the world were measured mostly in speak in terms of trillion-dollar projects ing the record at 828 meters. This is a the millions. This changed with World and thus of “teraprojects.” Similarly, if 160% increase in building height over War II, the Cold War, and the Space the major acquisition program portfo- 80 years. Similarly, the longest bridge Race. Project costs had now escalated lio of the United States Department of span has grown even faster, by 260% to the billions, led by the Manhattan Defense (valued at US$1.6 trillion in over approximately the same period. Project (1939–1946), a research and 2013) is considered a large-scale project, Measured by value, the size of infra- development program that produced then this, again, would be a teraproject structure projects has grown by 1.5% the first atomic bomb, and later the (United States Government Account- to 2.5% annually in real terms over the Apollo program (1961–1972), which ability Office [GAO], 2013). Projects of past century, which is equivalent to a landed the first humans on the moon this size compare with the GDPs of the doubling in project size two to three (Morris, 1994; Flyvbjerg, 2014). Accord- world’s top 20 nations, similar in size to times per century (author’s megaproj- ing to Merriam-Webster Dictionary, the the national economies of, for example, ects database). The size of ICT proj- first known use of the term “megapro- Australia or Canada. There is no indica- ects, the new kid on the block, has ject” was in 1976; but before that, from tion that the relentless drive to scale is grown much faster, as illustrated by 1968, “mega” was used in “megacity”; abating in megaproject development. a 16-fold increase between 1993 and and later, from 1982, as a standalone Quite the opposite—scale seems to be 2009 in lines of code in Microsoft Win- adjective, indicating “very large.” accelerating. dows, from 5 to 80 million lines. Other Thus, the term “megaproject” caught types of megaprojects, ranging from on just as the largest projects were tech- How Big Is the Megaprojects the Olympics to industrial projects, nically no longer megaprojects but, to Business? have seen similar developments. Cop- be more accurate, were evolving into Megaprojects are not only large and ing with increased scale is therefore a “gigaprojects”—”giga” being the unit growing constantly larger, however, they

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Type of Sublime Characteristic PAPERS Technological The excitement engineers and technologists get in pushing the envelope for what is possible in “longest-tallest-fastest” types of projects Political The rapture politicians get from building monuments to themselves and for their causes, and from the visibility this generates with the public and media Economic The delight business people and trade unions get from making lots of money and jobs off megaprojects, including money made for contractors, workers in construction and transportation, consultants, bankers, investors, landowners, lawyers, and developers Aesthetic The pleasure designers and people who love good design get from building and using something very large that is also iconic and beautiful, such as the Golden Gate Bridge Table 1: The “four sublimes” that drive megaproject development.

are also being built in ever greater num- product. To put this into perspective, The Four Sublimes bers, at ever greater value. The McKinsey consider this is the equivalent of spend- What drives the megaproject boom Global Institute (2013) estimates global ing five to eight times the accumulated described above? Why are megaproj- infrastructure spending will be US$3.4 U.S. debt to China, every year. That’s big ects so attractive to decision makers? trillion per year between 2013 and business by any definition of the term. The answer may be found in the so- 2030, or approximately 4% of the total Moreover, megaprojects have proved called “four sublimes” of megaproject global gross domestic product, mainly remarkably recession proof. In fact, the management (see Table 1). The first delivered as large-scale projects. The downturn from 2008 has helped the of these, the “technological sublime,” Economist (2008) similarly estimated megaprojects business grow further by is a term variously attributed to Miller infrastructure spending in emerging showering stimulus spending on every- (1965) and Marx (1967) to describe the economies at US$2.2 trillion annually thing from transportation infrastructure positive historical reception of tech- for the period between 2009 and 2018. to ICT. From being a fringe activity— nology in American culture during the To illustrate the accelerated pace at albeit a spectacular one—mainly nineteenth and early twentieth centu- which spending is taking place, consider reserved for rich, developed nations, ries. Frick (2008) introduced the term that in the five years between 2004 and megaprojects have recently transformed to the study of megaprojects and here 2008, China spent more on infrastruc- into a global multi-trillion-dollar busi- described the technological sublime as ture in real terms than during the entire ness that affects all aspects of our lives, the rapture engineers and technologists 20th century, which is an increase in from our electricity bill to how we shop, get from building large and innovative spending rate of a factor of 20. Similarly, what we do on the Internet to how we projects, with their rich opportunities between 2005 and 2008, China built as commute. for pushing the boundaries for what many kilometers of high-speed rail as With so many resources tied up in technology can do, such as building the Europe did in two decades; Europe was ever-larger and ever-more megaproj- tallest building, the longest bridge, the extraordinarily busy building this type ects, at no time has the management fastest aircraft, the largest wind turbine, of infrastructure during this period as of such projects therefore been more or the first of anything. Frick applied the well. Not at any time in the history of important. The potential benefits of concept in a case study of the multi-bil- mankind has infrastructure spending building the right projects in the right lion-dollar New San Francisco–Oakland been this high, measured as a share of manner are enormous and are only Bay Bridge, concluding “the techno- world GDP, according to The Economist, matched by the potential waste from logical sublime dramatically influenced (2008), who calls it “the biggest invest- building the wrong projects, or building bridge design, project outcomes, public ment boom in history.” And that’s just projects erroneously. Never has it been debate, and the lack of accountability for infrastructure. more important to choose the most fit- for its [the bridge’s] excessive cost over- If we include the many other fields ting projects and get their economic, runs” (p. 239). in which megaprojects are a main social, and environmental impacts right Flyvbjerg (2012; 2014) proposed delivery model—oil and gas, mining, (Flyvbjerg, Bruzelius, & Rothengatter, three additional sublimes, beginning aerospace, defense, ICT, supply chains, 2003). Never has systematic and valid with the “political sublime,” which here mega events, and so forth—then a con- knowledge about megaprojects there- is understood to be the rapture politi- servative estimate for the global mega- fore been more important to inform cians get from building monuments to project market is between US$6 and policy, practice, and public debate in themselves and for their causes. Mega- US$9 trillion per year, or approximately this highly costly area of business and projects are manifest, garner attention, 8% of the total global gross domestic government. and lend an air of pro-activeness to

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their promoters; moreover, they are sound replace infrastructures that 5. Frequently there is overcommitment media magnets, which appeals to poli- aren’t (Helm, 2008, p. 1). to a certain project concept at an ticians who seem to enjoy few things early stage, resulting in “lock-in” or better than the visibility they get from There is a big “if” here, however, “capture,” leaving analyses of alter- starting megaprojects, except, perhaps, as in “if done right.” Only if this is natives weak or absent, and lead- the ceremonious ribbon-cutting during disregarded—as it often is by promot- ing to escalated commitment in later the opening of one in the company of ers and decision makers for megaproj- stages. “Fail fast” does not apply; “fail royals or presidents, who are likely to ects—can megaprojects be seen as an slow” does (Cantarelli, Flyvbjerg, be present, lured by the unique monu- effective way to deliver infrastructure. & Rothengatter, 2010; Ross & Staw, mentality and historical import of many In fact, conventional megaproject deliv- 1993; Drummond, 1998). megaprojects. This is the type of public ery, infrastructure and other, is highly 6. Due to the large sums of money exposure that helps get politicians re- problematic, with a dismal performance involved, principal-agent prob- elected; so, therefore, they actively seek record in terms of actual costs and ben- lems and rent-seeking behavior it out. efits, as we will see below. The following are common, as is optimism bias Next, there is the “economic sub- characteristics of megaprojects are typi- (Eisenhardt, 1989; Stiglitz, 1989; lime,” which is the delight business peo- cally overlooked or glossed over when Flyvbjerg, Garbuio, & Lovallo, 2009). ple and trade unions get from making the four sublimes are at play and the 7. The project scope or ambition level lots of money and jobs from megaproj- megaproject format is chosen for the will typically change significantly ects. Given the enormous budgets for delivery of large-scale ventures: over time. megaprojects, there are ample funds 8. Delivery is a high-risk, stochastic to go around for all, including con- activity, with overexposure to so- 1. Megaprojects are inherently risky due tractors, engineers, architects, consul- called “black swans”; i.e., extreme to long planning horizons and com- tants, construction and transportation events with massively negative out- plex interfaces (Flyvbjerg, 2006). workers, bankers, investors, landown- comes (Taleb, 2010). Managers tend 2. Often, projects are led by planners ers, lawyers, and developers. Finally, to ignore this, treating projects as if and managers without deep domain the “aesthetic sublime” is the pleasure they exist largely in a deterministic experience who keep changing designers and people who appreciate Newtonian world of cause, effect, and throughout the long project cycles good design get from building, using, control. that apply to megaprojects, leaving and looking at something very large 9. Statistical evidence shows that such leadership weak. that is also iconically beautiful (e.g., San complexity and unplanned events 3. Decision making, planning, and Francisco’s Golden Gate Bridge or Syd- are often unaccounted for, leav- management are typically multi- ney’s Opera House). ing budget and time contingencies actor processes involving multi- All four sublimes are important inadequate. ple stakeholders, both public and drivers of the scale and frequency of 10. As a consequence, misinformation private, with conflicting interests megaprojects described above. Taken about costs, schedules, benefits, and (Aaltonen & Kujala, 2010). together they ensure that strong coali- risks is the norm throughout proj- 4. Technology and designs are often tions exist of stakeholders who benefit ect development and the decision- non-standard, leading to “unique- from megaprojects and who will there- making process. The result is cost ness bias” among planners and fore work for more such projects. overruns, delays, and benefit short- managers, who tend to see their For policymakers, investing in infra- falls that undermine project viability projects as singular, which impedes structure megaprojects seems particu- during project implementation and learning from other projects.3 larly coveted because, if done right, operations. such investing: 3”Uniqueness bias” is here defined as the tendency of plan- In the next section, we will see just • Creates and sustains employment; ners and managers to see their projects as singular. This how big and frequent such cost over- particular bias stems from the fact that new projects often use • Contains a large element of domestic non-standard technologies and designs, leading managers to runs, delays, and benefit shortfalls are. inputs relative to imports; think their project is more different from other projects than • Improves productivity and competi- it actually is. Uniqueness bias impedes managers’ learning, The Iron Law of Megaprojects because they think they have nothing to learn from other proj- tiveness by lowering production costs; ects because their own project is unique. This lack of learning Performance data for megaprojects • Benefits consumers through higher- may explain why managers who see their projects as unique speak their own language. Nine out quality services; and perform significantly worse than other managers (Budzier & of ten such projects have cost over- Flyvbjerg, 2013). Project managers who think their project is • Improves the environment when infra- unique are therefore a liability for their project and organiza- runs; overruns of up to 50% in real structures that are environmentally tion. For megaprojects this would be a mega-liability. terms are common, over 50% are not

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Project Cost Overrun (%) 50% are also common and above 50% PAPERS not uncommon, again with no signs of Suez Canal, Egypt 1,900 improvements over time and geography Scottish Parliament Building, Scotland 1,600 (Flyvbjerg, Holm, & Buhl, 2002, 2005). Sydney Opera House, Australia 1,400 Combine the large cost overruns Montreal Summer Olympics, Canada 1,300 and benefit shortfalls with the fact that business cases, cost–benefit analyses, Concorde Supersonic Aeroplane, UK, France 1,100 and social and environmental impact Troy and Greenfield Railroad, USA 900 assessments are typically at the core Excalibur Smart Projectile, USA, Sweden 650 of planning and decision making for Canadian Firearms Registry, Canada 590 megaprojects and we see that such anal- Lake Placid Winter Olympics, USA 560 yses can generally not be trusted. For example, for rail projects, an average Medicare transaction system, USA 560 cost overrun of 44.7% combines with Bank of Norway headquarters, Norway 440 an average demand shortfall of 51.4%, Furka Base Tunnel, Switzerland 300 and for roads, an average cost overrun Verrazano Narrow Bridge, USA 280 of 20.4% combines with a 50-50 risk Boston’s Big Dig Artery/Tunnel project, USA 220 that demand is also incorrect by more than 20%. With errors and biases of such Denver International Airport, USA 200 magnitude in the forecasts that form the Panama Canal, Panama 200 basis for business cases, cost–benefit Minneapolis Hiawatha light rail line, USA 190 analyses, and social and environmental Humber Bridge, UK 180 impact assessments, such analyses will Dublin Port Tunnel, Ireland 160 also, with a high degree of certainty, be strongly misleading. (Flyvbjerg, 2009) Montreal Metro Laval extension, Canada 160 “Garbage in, garbage out,” as the saying Copenhagen Metro, Denmark 150 goes. Boston–New York–Washington Railway, USA 130 As a case in point, let’s consider the Great Belt Rail Tunnel, Denmark 120 Channel Tunnel in more detail. This project was originally promoted as highly London Limehouse Road Tunnel, UK 110 beneficial both economically and finan- Brooklyn Bridge, USA 100 cially. At the initial public offering, Euro- Shinkansen Joetsu high-speed rail line, Japan 100 tunnel, the private owner of the tunnel, Channel Tunnel, UK, France 80 tempted investors by telling them that Karlsruhe–Bretten light rail, Germany 80 10% “would be a reasonable allowance for the possible impact of unforeseen London Jubilee Line extension, UK 80 circumstances on construction costs” Bangkok Metro, Thailand 70 (The Economist, 7 October, 1989, 37–38). Mexico City Metroline, Mexico 60 In fact, costs went 80% over budget for High-speed Rail Line South, The Netherlands 60 construction, as mentioned above, and Great Belt East Bridge, Denmark 50 140% over budget for financing. Rev- enues have been one half of those fore- Table 2: Large-scale projects have a calamitous history of cost overrun. casted. As a consequence, the project has proved non-viable, with an internal uncommon. The cost overrun for the Overrun is a problem in private as well rate of return on the investment that is Channel Tunnel, the longest under- as public sector projects, and things are negative, at minus 14.5% with a total loss water rail tunnel in Europe, connect- not improving; overruns have stayed to the British economy of US$17.8 bil- ing the United Kingdom and France, high and constant for the 70-year period lion; thus, the Channel Tunnel detracts was 80% in real terms. The cost over- for which comparable data exist. Geog- from the economy instead of adding to runs for the Denver International Air- raphy doesn’t seem to matter either; it. This is difficult to believe when you port were 200%; for Boston’s Big Dig, all countries and continents for which use the service, which is fast, convenient, 220%; and for the Sydney Opera House, data are available suffer from overruns. and competitive with alternative modes 1,400% (see more examples in Table 2). Similarly, benefit shortfalls of up to of travel. But, in fact, each passenger is

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heavily subsidized—not by the taxpayer ects; they found that, on average, a the causes of success and test whether this time, but by the many private inves- one-year delay or other extension of the success may be replicated elsewhere. It tors who lost their money when Eurotun- implementation phase correlates with is far easier, however, to produce long nel went insolvent and was financially an increase in percentage cost overrun lists of projects that have failed in terms restructured. This drives home an of 4.64 percentage points. of cost overruns and benefit shortfalls important point: A megaproject may well To illustrate, for a project the size of than it is to produce lists of projects be a technological success, but a finan- London’s US$26 billion Crossrail proj- that have succeeded. To illustrate this, cial failure, and many are. An economic ect, a one-year delay would cost an as part of ongoing research on suc- and financial ex post evaluation of the extra US$1.2 billion, or US$3.3 million cess in megaproject management, this Channel Tunnel, which systematically per day. The key lesson here is that in author and his associates are trying to compared actual with forecasted costs order to keep costs down, implementa- establish a sample of successful projects and benefits, concluded that “the British tion phases should be kept short and large enough to allow statistically valid Economy would have been better off delays small. This should not be seen answers; but, thus far have failed. Why? had the Tunnel never been constructed” as an excuse for fast-tracking projects, Because success is so rare in mega- (Anguera, 2006, p. 291). Other examples in other words, rushing them through project management that, at present, of non-viable megaprojects are Sydney’s decision making for early construc- it can only be studied as small-sample Lane Cove Tunnel, the high-speed rail tion start. Front-end planning needs to research; whereas, failure may be stud- connections at the Stockholm and Oslo be thorough before deciding whether ied with large samples of projects. Airports, the Copenhagen Metro, and to give the green light to a project or Success in megaproject manage- Denmark’s Great Belt Tunnel, the sec- stopping it before it starts (Williams ment is typically defined as projects ond-longest underwater rail tunnel in & Samset, 2010). But often the situa- being delivered on budget, on time, and Europe, after the Channel Tunnel. tion is the exact opposite. Front-end with the promised benefits. If, as the Large-scale ICT projects are even planning is scant, bad projects are not evidence indicates, approximately one more risky. One in six such projects stopped; implementation phases and out of ten megaprojects is on budget, becomes a statistical outlier in terms delays are long; costs soar, and benefits one out of ten is on schedule, and one of cost overrun, with an average over- and revenue realization recedes into the out of ten delivers the promised ben- run for outliers of 200% in real terms. future. For debt-financed projects this efits, then approximately one in one This is a 2,000% over incidence of outli- is a recipe for disaster, because project thousand projects is a success, defined ers compared with normal and a 200% debt grows, whereas there is no revenue as “on target” for all three. Even if the over incidence compared with large stream to service interest payments, numbers were wrong by a factor of construction projects, which are also which are then added to the debt, which two—so that two, instead of one out plagued by cost outliers (Flyvbjerg & increases interest payments, and so on of ten projects were on target for cost, Budzier, 2011). Total annual project in a vicious cycle. As a result, many schedule, and benefits, respectively— waste from failed and underperforming projects end up in the so-called “debt the success rate would still be dismal, ICT projects for the United States alone trap,” where a combination of escalating now eight in one thousand. This serves has been estimated at US$55 billion by construction costs, delays, and increas- to illustrate what may be called the “iron the Standish Group (2009). ing interest payments makes it impos- law of megaprojects”: Over budget, over Delays are a separate problem for sible for income from a project to cover time, over and over again (Flyvbjerg, megaprojects and they cause both cost costs, rendering the project non-viable. 2011).4 Best practice is an outlier, aver- overruns and benefit shortfalls. For That is what happened to the Channel age practice a disaster in this interesting example, preliminary results from a Tunnel and Sydney’s Lane Cove Tunnel, and very costly area of management. study undertaken at Oxford University, among other projects. based on the largest database of its kind, This is not to say that there are no The “Break–Fix Model” suggest that delays on dams are 45% on projects that were built on budget and of Megaproject Management average. Thus, if a dam was planned on time and delivered the promised The above analysis leaves us with a to take 10 years to execute, from the benefits. The Guggenheim Museum Bil- genuine paradox, the so-called “mega- decision to build until the dam became bao is an example of that rare breed of projects paradox,” first identified by operational, then it actually took 14.5 project. Similarly, recent metro exten- years on average. Flyvbjerg, Holm, and sions in Madrid were built on time and 4 The Economist (March 10, 2012, p. 55) describes the near- Buhl (2004) modeled the relationship to budget (Flyvbjerg, 2005), as were certainty of large cost overruns and delays in transportation between cost overrun and length of a number of industrial projects (Mer- infrastructure projects as “the iron law of infrastructure proj- implementation phase based on a large ects.” Our data show the iron law is not limited to infrastruc- row, 2011). It is particularly important ture; it applies to megaprojects in general and covers benefit data set for major construction proj- to study such projects to understand shortfalls in addition to cost overruns and delays.

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Flyvbjerg et al. (2003, pp 1–10). On one both organizations and society, for the project. So get off it. In the world of

PAPERS side of the paradox, megaprojects as simple reason that under this model civic projects, the first budget is really a delivery model for public and pri- decisions to go ahead with projects are just a down payment. If people knew vate ventures have never been more in based on misinformation more than on the real cost from the start, nothing demand, and the size and frequency of information. The degree of misinforma- would ever be approved. The idea is to get going. Start digging a hole and megaprojects have never been larger. tion varies significantly from project make it so big, there’s no alternative to On the other side, performance in mega- to project, as documented by the large coming up with the money to fill it in.” project management is strikingly poor standard deviations that apply to cost and has not improved for the 70-year overruns and benefit shortfalls (Flyvb- Rarely has the tactical use by proj- period for which comparable data are jerg et al., 2002; 2005). We may therefore ect advocates of cost underestimation, available, at least not when measured in not assume, as is often done, that on sunk costs, and lock-in to get projects terms of cost overruns, schedule delays, average all projects are misrepresented started been expressed by an insider and benefit shortfalls. by approximately the same degree and, more plainly, if somewhat cynically. It Today, megaproject planners and therefore, we are still building the best is easy to obtain such statements off managers are stuck in this paradox projects, even if they are not as good the record, but few are willing to offi- because their main delivery method as they appear on paper. The truth is, cially lend their name to them, for legal is what has been called the “break–fix we don’t know, and often projects turn and ethical reasons, to which we will model” for megaproject management.5 out to bring a net loss to the economy, return later. Nevertheless, the nothing- Generally, megaproject planners and rather than a gain. The cure to the would-ever-get-built argument has managers—and their organizations— break–fix model is to get projects right been influential with both practitioners do not know how to deliver success- from the outset so they don’t break, and academics in megaproject manage- ful megaprojects, or do not have the through proper front-end management. ment. The argument is deeply flawed, incentives to do so, and therefore such however, and thus deserves a degree of projects tend to “break” sooner or later, Hirschman’s Hiding Hand, attention and critique. Hirschman’s text for example, when reality catches up Revisited contains the classic formulation of the with optimistic, or manipulated, esti- One may argue, of course, as famously argument and has served widely as its mates of schedule, costs, or benefits; done by Hirschman (1967a, pp 12–13) theoretical justification, as has Sawyer delays, cost overruns, and benefit short- that if people knew in advance the real (1952), who directly inspired and influ- falls follow. Projects are then often costs and challenges involved in deliv- enced Hirschman.6 A recent celebration paused and reorganized—sometimes ering a large project, “they probably of Hirschman’s thinking on this point also refinanced—in an attempt to “fix” would never have touched it” and noth- may be found in Gladwell (2013). problems and deliver some version ing would ever get built; so, it is better Hirschman (1967a, pp. 13–14) of the initially planned project with a not to know, because ignorance helps observed that humans are “tricked” into semblance of success. Typically, lock- get projects started, according to this doing big projects by their own igno- in and escalation make it impossible argument. The following excerpt is a rance. He saw this as positive because, to drop projects altogether, which is recent and particularly candid articu- just as humans underestimate the dif- why megaprojects have been called the lation of the nothing-would-ever-get- ficulties in doing large-scale projects “Vietnams” of policy and management: built argument, by former California they also underestimate their own cre- “easy to begin and difficult and expen- State Assembly Speaker and Mayor of ativity in dealing with the difficulties, sive to stop” (White, 2012; Cantarelli San Francisco, Willie Brown, discussing he believed, and “the only way in which et al., 2010; Ross & Staw, 1993; Drum- a large cost overrun on the San Fran- we can bring our creative sources fully mond, 1998). The “fix” often takes place cisco Transbay Terminal megaproject in into play is by misjudging the nature of at great and unexpected cost to those his San Francisco Chronicle column (27 the task, by presenting it to ourselves as stakeholders who were not aware of July 2013, with emphasis added): more routine, simple, undemanding of what was going on and were unable or genuine creativity than it will turn out “News that the Transbay Terminal lacked the foresight to pull out before to be.” Hirschman called this the “prin- is something like $300 million over the break. budget should not come as a shock The break–fix model is wasteful and to anyone. We always knew the initial 6 Two versions of Hirschman’s text exist (1967a, 1967b). The leads to misallocation of resources, in estimate was way under the real cost. version of the text referenced here is the one published Just like we never had a real cost for the in Development Projects Observed (Hirschman, 1967a), [San Francisco] Central Subway or the which is the original text. The differences between the two 5 The author owes the term “break-fix model” to Dr. Patrick texts are minor and are mainly due to the editing of Irving O’Connell, Practitioner Director of Major Programme [San Francisco–Oakland] Bay Bridge Kristol, editor of The Public Interest at the time of publication Management at Oxford University’s Saïd Business School. or any other massive construction (Adelman, 2013, p. 405).

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ciple of the Hiding Hand” and it consists The head of the World Bank’s Eco- Opera House, not premier Joe Cahill’s of “some sort of invisible or hidden nomics Department told Hirschman: deliberate deception about the cost— hand that beneficially hides difficulties “You’ve helped in part to remove the to get approval in Parliament—and for us”—where the error of underesti- unease that I have had in reflecting the consequential huge cost overrun mating difficulties is offset by a “roughly on the fact that if our modern project (Flyvbjerg, 2005). similar” error in underestimating our techniques had been used, much of In a meeting held in support of ability to overcome the difficulties, thus the existing development in the world Utzon at Sydney Town Hall in March helping “accelerate the rate at which would never have been undertaken” 1966—six weeks before the controversy ‘mankind’ engages successfully in prob- (Adelman, 2013). Hirschman’s thinking made Utzon leave Australia and the lem-solving.” also eventually penetrated academia. Opera House, in the middle of construc- Sawyer (1952, pp. 199, 203), in a Teitz and Skaburskis (2003) follow the tion and never to return—the Vienna- study of early industrial infrastructure Hiding Hand logic when they ask of the born Australian architect Harry Seidler projects that he called a work “in praise huge cost overrun on the Sydney Opera said, “If Mr. Utzon leaves, a crime will of folly,” similarly identified what he House: “Did people really think that the have been committed against future called “creative error” in project devel- Sydney Opera House would come in on generations of Australians” (Murray, opment as, first, “miscalculation or budget? Or did we all agree to accept the 2004, p. 105). Seidler was more right sheer ignorance” of the true costs and deception and engage in wishful think- than he could have imagined, except the benefits of projects; second, such mis- ing in order to make something that we crime would not be limited to Austra- calculation being “crucial to getting really wanted happen? ... [D]o Austra- lians—it became a crime against lovers an enterprise launched at all.” Sawyer lians really regret those dramatic sails in of great architecture everywhere. After argued that such “creative error” was the harbour? Or would they have regret- winning the Pritzker Prize, the Nobel the key to building a number of large ted more the decision [not to build] for architecture, in 2003, Utzon again and historically important projects, that would most reasonably have been became widely acclaimed, even in Aus- including the Welland Canal between based on a fair prediction of costs?” tralia, where the Sydney Opera tour Lake Erie and Lake Ontario, the Pan- The logic is seductive, yet precari- guides for years had been forbidden ama Canal, the Middlesex Canal, the ous. In retrospect, of course Austra- to even mention his name. But it was Troy and Greenfield Railroad, and early lians do not regret the Sydney Opera too late. Utzon was now 85 years old Ohio roads. For these and other proj- House, given what it has done for Aus- and had not built anything major for ects, Sawyer found that “the error in tralia though, at first, the building was decades. So instead of having a whole estimating costs was at least offset by a not called “dramatic sails in the har- oeuvre to enjoy, as we have for other corresponding error in the estimation bour,” but “copulating white turtles” architects of his caliber, we have just the of demand” (p. 200). Hirschman (1967a, and “something that is crawling out of one main building. Utzon was 38 when p. 16) explicitly mentioned Sawyer as an the ocean with nothing good in mind” he won the competition for the Opera inspiration and his “creative error” as designed by an architect with “lousy House. How would other works by the a close “approximation” to the Hiding taste” (Reichold & Graf, 2004, p. 168). mature master have enriched our lives? Hand principle. Non-Australians may feel regret, how- We will never know. It is easy to understand why ever; for example, the architect of the As a thought experiment, consider Hirschman’s and Sawyer’s theories Opera House: What’s his name? Does the collected works of architect Frank have become popular, especially with anybody know? Only few do, which Gehry, who is in the same league as people who benefit from megaprojects. seems surprising given we are talking Utzon; then consider which building The theories encourage promoters and about the architect of arguably the most you would choose, if you could choose decision makers, such as Willie Brown iconic building of the 20th century. And, only one, and the rest would have to go. quoted above, to just go ahead with if anybody knows the architect is the So if you chose, say, the Guggenheim projects and not worry too much about Dane Jørn Utzon, how come they can Museum Bilbao, then Los Angeles’ Dis- the costs or other problems, because hardly ever mention another building ney Concert Hall, Chicago’s Jay Pritz- the Hiding Hand will take care of them, designed by him? Because the overrun ker Pavilion, Prague’s Dancing House, eventually. And, in any case, who wants on the Opera House, and the contro- and Seattle’s Experience Music Proj- to be the killjoy stopping large projects versy that followed, destroyed Utzon’s ect Museum would be eliminated. This from going ahead by an overdose of career and kept him from building illustrates the high price the govern- truth? Hirschman (1967b) was an more masterpieces. He became that ment of New South Wales has imposed immediate hit with practitioners—from most tragic figure in architecture: the on the world by mismanaging the plan- Washington’s policy establishment to one-building-architect. This is the real ning of the Sydney Opera House and the United Nations, to the World Bank. regret—and real cost—of the Sydney deliberately playing the game of cre-

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ative error and Hiding Hand. Even if the by similarly large or larger underes- law of megaprojects, described above,

PAPERS Opera House is an extreme case, Syd- timates of demand. Some would call trumps Hirschman’s Hiding Hand at a ney drives home an important point: this dubious data fishing, and the only high level of statistical significance, and managing by creative error is risky and redeeming factor is that Sawyer was dis- we know why. The Hiding Hand is itself disruptive, sometimes in drastic and armingly honest and tongue-in-cheek an example of optimism and does there- unexpected ways, and the Hiding Hand humoristic about it. He appears to not fore not capture the reality of megapro- isn’t big enough to hide all, or even have expected to be taken wholly seri- ject management. For such capture, and most, errors. ously, which he unfortunately was by true explanatory power, we must turn to Hirschman’s and Sawyer’s theories some, including Hirschman. theories of optimism bias, the planning are also flawed on a more basic level, Today we have much better data and fallacy, strategic misrepresentation, and that of validity. A close look reveals the theories on megaproject performance principal–agent behavior. theories to be based on small samples than at the time of Hirschman and and biased data. Hirschman studied Sawyer. We now know that, although Survival of the Unfittest only 11 projects or a few more if we there may be elements of truth in these In sum, one does megaprojects—and take into account the subprojects, and authors’ theories for certain types of megaproject management—a disser- Sawyer studied 10 to 15. This important projects and contexts, their samples and vice if one claims they can only be fact is typically ignored when the Hiding conclusions are not representative of done through the Hiding Hand, cre- Hand principle is discussed. Hirschman the project population. In particular, ative error, or downright deception. (1967a, pp. 7, 14) seemed aware of the their odd asymmetrical assumption that It is, undoubtedly, quite common for weak foundations and limited applica- optimism would apply to cost estimates, project promoters and their planners bility of the principle when he called yet pessimism to estimates of benefits, and managers to believe their projects it “speculative” and useful only “[u]p has been solidly disproved by Kahne- will benefit society and they, therefore, to a point.” To a colleague he admitted man and Tversky (1979a, 1979b) and by are justified in “cooking” costs and at the time of publication that his book behavioral economists building on their benefits to get projects built (Wachs, was “an exploration, an experiment”; work. They found that optimism bias 1990; Pickrell, 1992). Such reasoning is to another he said he had deliberately applies to estimates of both costs and faulty, however. Underestimating costs biased his analysis “to emphasize unex- benefits. An optimistic cost estimate is and overestimating benefits for a given pected successes” (Adelman, 2013, pp. low and leads to cost overrun, whereas project (which is the common pattern, 404–405). Even so, Hirschman went on an optimistic benefit estimate is high as described above) leads to a falsely to call the Hiding Hand a “general prin- and results in benefit shortfalls. Thus, high benefit–cost ratio for that project, ciple of action” and brazenly used a errors of estimation do not cancel each which in turn leads to two problems. name for it with clear connotations to other out, as Hirschman would have First, the project may be started despite Adam Smith’s famous Invisible (Hid- it; the exact opposite happens—errors the fact it is not financially and eco- den) Hand. Evidently, the temptation generally reinforce each other. nomically viable. Or, second, it may to formulate an “economic law” was Megaproject planners and manag- be started instead of another project, too strong, despite the weak and biased ers would therefore be ill advised to which would have shown to yield higher data. Sawyer (1952, p. 204) warned the count on Hiding Hands, creative errors, returns than the project started had the reader up front that his study must be or any other general principle according real costs and benefits of both projects considered a “marginal and distinctly to which underestimates of costs would been known. Both cases result in Pareto limited note.” He admitted the study be balanced by similar underestimates inefficiency; that is, the misallocation of considers only a “quite special kind of of benefits. We also now know it would resources and, for public projects, waste case” and neglects projects that were be equally foolhardy to assume that of taxpayers’ money. Thus, for reasons “failures” in order to focus on proj- downstream human creativity may be of economic efficiency alone, the argu- ects that were “successful” in the sense generally counted on to solve problems ment must be rejected that cost under- that “an original gross miscalculation that planners and managers overlook estimation and benefit overestimation as to costs ... was happily offset by at or underestimate when the decision is are justified for getting projects started. least a corresponding underestimation made to go ahead with a project. The But the argument must also be of demand.” Sawyer’s results, thus, do data show that for too many projects rejected for legal and ethical reasons. not describe a general characteristic of with front-end problems, such creativ- In most democracies, for project pro- large projects, but a characteristic of ity never materializes and projects end moters, planners, and managers to his biased sample that includes only up seriously impaired or non-viable. deliberately misinform legislators, projects lucky enough to have had large Initial problems, if not dealt with up administrators, bankers, the public, underestimates of costs compensated front, tend not to go away. The iron and the media about costs and benefits

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would not only be considered unethical Basque Abandoibarra urban regenera- Association, has stated that “too many but, in some cases also illegal, for exam- tion project, including the Guggenheim projects proceed that should not have ple, where civil servants would inten- Museum Bilbao, which is as complex, done” (Morris & Hough, 1987, p. 214). tionally misinform cabinet members, or innovative, and iconic as any signa- One might add that projects also exist cabinet members would intentionally ture architecture, and was built on time that do not proceed but should have, misinform parliament. In private corpo- and budget. Complex rail projects, too, had they not lost out, not to better proj- rations, Sarbanes-Oxley-like legislation including the Paris–Lyon high-speed ects but to projects with “better” cre- similarly makes deliberate misrepre- rail line and the London Docklands ative error; that is, “better” manipulated sentation a crime under many circum- light railway extension have been built estimates of costs and benefits. stances, which in the United States is to budget. The problem is not that proj- punishable by imprisonment of up to ects worth undertaking do not exist or Light at the End of the Tunnel? 20 years.7 There is a formal “obligation cannot be built on time and on budget. Fortunately, signs of improvement in to truth” built into most democratic The problem is that the dubious and megaproject management have recently constitutions—and now also in legis- widespread practices of underestimat- appeared. The tacit consensus that mis- lation for corporate governance—as ing costs and overestimating benefits representation is an acceptable busi- a means for enforcing accountability. used by many megaproject promoters, ness model for project development is This obligation would be violated by planners, and managers to promote under attack. Shortly after taking office, deliberate misrepresentation of costs their pet project create a distorted hall- U.S. President Barack Obama openly and benefits, whatever the reasons for of-mirrors in which it is extremely dif- identified “the costly overruns, the such misrepresentation may be. Not ficult to decide which projects deserve fraud and abuse, the endless excuses” in only would economic efficiency suffer undertaking and which do not. public procurement for major projects but also democracy, good governance, In fact, the situation is even worse as key policy problems (White House, and accountability. than that. The common practice of 2009). The Washington Post rightly A first answer to the skeptics’ ques- depending on the Hiding Hand or called this “a dramatic new form of dis- tion of whether enough megaprojects creative error in estimating costs and course” (Froomkin, 2009). Other coun- would be undertaken if some form of benefits, thus “showing the project at tries are seeing similar developments. misrepresentation of costs and benefits its best” as an interviewee put it in a Before Obama came into office, it was was not involved is, therefore, that even previous study, results in an inverted not common in government or business if misrepresentation was necessary in Darwinism, i.e., the “survival of the to talk openly about overruns, fraud, order to get projects started, such mis- unfittest” (Flyvbjerg, 2009). It is not and abuse in relation to megaproj- representation would typically not be the best projects that get implemented ects, although they were as widespread defensible in liberal democracies—and in this manner, but the projects that then as now. The few who did so were especially not if it was deliberate—for look best on paper, and the projects ostracized; however, as emphasized by economic, legal, and ethical reasons. that look best on paper are the projects Wittgenstein (2009), we cannot solve A second answer to the skep- with the largest cost underestimates problems we cannot talk about. So talk- tics’ question is that misrepresenta- and benefit overestimates, other things ing is the first step. tion is not necessary to undertaking being equal. But the larger the cost A more material driver of improve- projects, because many projects exist underestimate on paper, the greater ment is the fact that the largest projects with sufficiently high benefits and low the cost overrun in practice; and the are now so big and consequential in enough costs to justify building them. larger the overestimate of benefits, the relation to individual businesses and Even in the field of innovative and com- greater the benefit shortfall. Therefore, agencies that cost overruns, benefit plex architecture, which is often singled the projects that have been made to shortfalls, and risks from even a single out as particularly difficult, there is the look best on paper become the worst, or project may bring down executives and unfittest, projects in reality, in the sense whole corporations. This happened 7 The Sarbanes-Oxley Act of 2002 pioneered this area in the that they are the very projects that will with the Airbus A380 superjumbo jet, United States, but many other countries have since followed suit with similar legislation. Section 802[a] (18 U.S.C. § 1519) encounter the most problems during when delays, cost overruns, and rev- of the original act states that whoever knowingly alters, construction and operations in terms enue shortfalls cost the CEO and other destroys, mutilates, conceals, covers up, falsifies, or makes a of the largest cost overruns, benefit top managers their jobs. The CEO of false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence the investigation shortfalls, and risks of non-viability. BP was similarly forced to step down or proper administration of any matter within the jurisdiction They have been designed like that—as and the company lost more than half of any department or agency of the United States or any case disasters waiting to happen. its value when the Deepwater Horizon filed under title 11, or in relation to or contemplation of any such matter or case, shall be fined, imprisoned not more than The result is, as even the industry’s offshore oil drilling rig caught fire and 20 years, or both. own organization, the Major Projects caused the world’s largest oil spill in

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the Gulf of Mexico in 2010. At Kmart, gets suffered, leading the chancellor to healthy fact that different stakehold-

PAPERS a large U.S. retailer, the entire com- order a Green Book on the problem and ers hold different forecasts and that pany went bankrupt when a new multi- how to solve it (HM Treasury, 2003). forecasts are not only products of data billion-dollar ICT enterprise system, This move inspired other countries to and mathematical modeling but also which was supposed to make Kmart follow suit. Lawmakers and govern- of power and negotiation. And why is competitive with Walmart and Target, ments have begun to see that national this healthier? Because it undermines went off the rails (Flyvbjerg & Budzier, fiscal distress and unreliable national trust in the misleading forecasts often 2011). In China, corruption and related budgets are too high a price to pay produced by project promoters. safety issues on the country’s US$300 for the conventional way of managing Moreover, democratic governance billion high-speed rail program have megaprojects. In 2011, the UK Cabinet is generally getting stronger around the caused massive reputational damage, Office and HM Treasury joined forces world. Corporate scandals, from Enron, and cost the railway minister his politi- to establish a Major Projects Authority, WorldCom, and onward have triggered cal career in 2011. Today, if you are a with an enforceable mandate directly new legislation and a war on corpo- CEO, minister, permanent secretary, from the Prime Minister to oversee and rate deception that is spilling over into or other top manager and want to be direct the effective management of all government with the same objectives: sure to keep your job, you will want to large-scale projects that are funded to curb waste and promote good gov- manage your megaprojects properly. and delivered by central government. ernance. Although progress is slow, Episodes such as these have triggered In 2012, the Authority established, in good governance is gaining a foothold leaders to begin looking for better collaboration with Oxford University, a even in megaproject management. The megaproject delivery. Major Projects Leadership Academy— main drivers of reform come from out- Even the wealth of whole cities and the first of its kind in the world—to side the agencies and industries con- nations may be affected by a single train and authorize all UK civil servants ventionally involved in megaprojects megaproject failure. In Hong Kong, in charge of central government major and this is good because it increases months of obstacles during the open- projects.8 the likelihood of success. For example, ing of a new international airport made Outside of government, private the UK Treasury now requires that all traffic go elsewhere, resulting in a fall in finance in megaprojects has been on ministries develop and implement pro- GNP for the entire city state. For Greece, the rise over the past twenty years, cedures for megaprojects that will curb a contributing factor to the country’s which means that capital funds, pen- so-called “optimism bias” (Flyvbjerg, 2011 debt default was the 2004 Olympic sion funds, and banks are increasingly 2006). Funding will be unavailable for Games in Athens, for which cost over- gaining a say in management. Private projects that do not take into account runs and incurred debt were so large capital is no panacea for the ills in such bias, and methods have been they negatively affected the credit rat- megaproject management, to be sure; developed for doing this (UK Depart- ing of the whole nation, substantially in some cases, private capital may even ment for Transport, 2006). Switzerland weakening the economy in the years make things worse (Hodge & Greve, and Denmark have followed the lead of before the 2008 international financial 2009). But private investors place their the United Kingdom (Swiss Association crisis. This resulted in a double dip— own funds at risk; therefore, funds and of Road and Transportation Experts, and disaster—for Greece, when other banks can be observed to not automati- 2006; Danish Ministry for Transport and nations had only a single dip. Likewise, cally accept at face value the cost and Energy, 2006, 2008). In Australia, the in Japan in 2011, the nuclear tragedy at revenue forecasts of project managers Parliament of Victoria has conducted Fukushima significantly and negatively and promoters. Banks typically bring an inquiry into how government may impacted the national economy as a in their own advisers to do indepen- arrive at more successful delivery of whole. It is becoming increasingly clear dent forecasts, due diligence, and risk significant infrastructure projects (Par- that when megaprojects go wrong they assessments, which are important steps liament of Victoria, 2012). Similarly, are like the proverbial bull in the china in the right direction (Flyvbjerg, 2013). in the Netherlands, the Parliamentary shop: it takes just one bull to smash up The false assumption that one forecast Committee on Infrastructure Projects the entire store. It is becoming similarly or one business case may contain the did extensive public hearings to identify clear to many involved that something whole truth about a project is prob- measures that will limit the misinforma- needs to be done about his. lematized. Instead, project managers tion about large infrastructure projects In the United Kingdom, at the and promoters are getting used to the presented to the Parliament, public, and beginning of the century, cost underes- media (Dutch Commission on Infra- timation and overrun were rampant in structure Projects, 2004). In Boston, the 8 For full disclosure: The author was involved in the planning, so many projects and in so many minis- start up, and delivery of the UK Major Projects Leadership government sued to recoup funds from tries that the reliability of national bud- Academy. contractor overcharges for the Big Dig

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related to cost overruns. More countries scholar, student, owner, or interested på Transportministeriets område, and cities are likely to follow the lead of citizen.9 herunder om økonomistyrings–model the United Kingdom, Australia, Switzer- og risikohåndtering for anlægsprojekter, land, Denmark, the Netherlands, and References Copenhagen, November 18. the United States in coming years. Aaltonen, K., & Kujala, J. (2010). Drummond, H. (1998). Is escalation Finally, research on how to reform A project lifecycle perspective on always irrational? Organisation Studies, megaproject management—examples stakeholder influence strategies in 919–929. of which have been referenced above— global projects. Scandinavian Journal Dutch Commission on Infrastructure is beginning to positively impact prac- of Management, 26, 381–397. Projects, Tijdelijke Commissie tice. Such research has recently made Adelman, J. (2013). Worldly philosopher: Infrastructuurprojecten. (2004). Grote great strides in better understand- The odyssey of Albert O. Hirschman. projecten uitvergroot: Een infrastructuur ing what causes the many failures in Princeton, NJ: Princeton University Press. voor besluitvorming (The Hague: Tweede megaproject delivery and how to avoid Anguera, R. (2006). The Channel Kamer der Staten-Generaal). them. For example, we now understand Tunnel: An ex post economic evaluation. The Economist. (1989, October 7). that optimism bias and strategic mis- Transportation Research Part A, 40, Under water over budget, pp. 37–38. representation are significantly better 291–315. explanations of megaproject outcomes The Economist. (2008). Building BRICs Brown, W. (2013). “When warriors travel than previous explanations, including of growth, June 7, p. 80. to China, Ed Lee will follow,” SF Gate, Hirschman’s Hiding Hand and Sawyer’s The Economist. (2012, March 10). P. 55. San Francisco Chronicle, 27 July. creative error discussed above. And Eisenhardt, K. M. (1989). Agency theory: with a better understanding of causes Bruzelius, N., Flyvbjerg, B., & An assessment and review. Academy of a better grasp of cures has followed, Rothengatter, W. (1998). Big decisions, Management Review, 14(1), 57–74. big risks: Improving accountability in from front-end management (Williams Flyvbjerg, B. (2005). Design by decep- mega projects. International Review of & Samset, 2010) to reference class fore- tion: The politics of megaproject Administrative Sciences, 64(3), 423–440. casting (Kahneman, 2011, pp 243–254; approval. Harvard Design Magazine, 22, Flyvbjerg, 2006) to institutional design Budzier, A., & Flyvbjerg, B. (2013). Spring/Summer, 50–59. Making sense of the impact and for better accountability (Scott, 2012; Flyvbjerg, B. (2006). From Nobel Prize importance of outliers in project Bruzelius et al., 1998). Moreover, re- to project management: Getting risks management through the use of power search is beginning to help us under- right. Project Management Journal, 37(3), laws. Proceedings of the 11th International stand success and how to replicate it. 5–15. Perhaps most importantly, researchers Research Network on Organizing by Flyvbjerg, B. (2009). Survival of the have begun to take seriously the task of Projects (IRNOP) Conference, June 16–19, unfittest: Why the worst infrastructure feeding their research results into the Oslo, 28 pp. gets built, and what we can do about it. public sphere so they may effectively Cantarelli, C. C., Flyvbjerg, B. van Wee, Oxford Review of Economic Policy, 25(3), form part of public deliberation, policy, B., & Molin, E. J. E. (2010). Lock-in and 344–367. and practice (Flyvbjerg, 2012; Flyvbjerg its influence on the project performance et al., 2012). of large-scale transportation infrastruc- Flyvbjerg, B. (2011). Over budget, over With these developments, things are ture projects: Investigating the way in time, over and over again: Managing moving in the right direction for mega- which lock-in can emerge and affect cost major projects. In Peter W. G. Morris, project management. It is too early to overruns. Environment and Planning B: Jeffrey K. Pinto, and Jonas Söderlund, tell whether the reform measures being Planning and Design, 37, 792–807. eds., The Oxford handbook of project management (pp. 321–344). Oxford, implemented will ultimately be suc- Danish Ministry for Transport and England: Oxford University Press. cessful. It seems unlikely, however, that Energy (2006). Aktstykke om nye the forces that have triggered the mea- budgetteringsprincipper (Act on New Flyvbjerg, B. (2012). Why mass sures will be reversed, and it is those Principles for Budgeting), Aktstykke media matter, and how to work with forces that reform-minded individuals nr. 16, Finansudvalget, Folketinget, them: Phronesis and megaprojects, in and groups need to support and work Copenhagen, October 24. Flyvbjerg, B., Landman, T, Schram, S., eds., Real social science: Applied phro- with in order to improve megaproject Danish Ministry for Transport and nesis (pp 95–121). Cambridge, England: management. This is the “tension Energy. (2008). Ny anlægsbudgettering point,” where convention meets reform, Cambridge University Press. power balances change, and new things Flyvbjerg, B. (2013). Quality control and 9 See Flyvbjerg et al. (2012) regarding the use of tension points are happening. In short, it is the place to for triggering change in policy and practice, including for due diligence in project management: be as a megaproject planner, manager, megaprojects. Getting decisions right by taking the

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outside view. International Journal of house-watch/financial-crisis/obamas- Miller, P. (1965). The life of the mind in

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information and markets. New York, NY: Wachs, M. (1990). Ethics and advo- Wittgenstein, L. (2009). Philosophical W. W. Norton. cacy in forecasting for public policy. investigations. Hoboken, NJ: Wiley- Swiss Association of Road and Business and Professional Ethics Journal, Blackwell. Transportation Experts. (2006). Kosten- 9 (1 and 2), 141–157. Nutzen-analysen im strassenverkehr, White, R. (2012). A waste of Grundnorm 641820, valid from August 1. money, for years to come. The New Bent Flyvbjerg is the first BT Professor Zürich, Switzerland: Author. York Times, January 27. Retrieved and founding Chair of Major Programme Management at Saïd Business School, Taleb, N. N. (2010). The black swan: The from http://www.nytimes.com/ Oxford University and is Director of the BT impact of the highly improbable, Second roomfordebate/2012/01/26/does- Centre for Major Programme Management. edition. New York, NY: Penguin. california-need-high-speed-rail/ Flyvbjerg is principal author of Megaprojects Teitz, M., & Skaburskis, A. (2003). high-speed-rail-is-a-waste-of-money-for- and Risk: An Anatomy of Ambition. His Forecasts and outcomes. Planning decades-to-come many books and articles have been trans- Theory and Practice. December, pp. The White House. (2009). Remarks by lated into 19 languages and his research has 429–442. the President and the Vice President at been covered by Science, The Economist, Opening of Fiscal Responsibility Summit, UK Department for Transport. (2006). The Wall Street Journal, The Financial Times, 2–23–09. Office of the Press Secretary, The estimation and treatment of scheme The New York Times, The BBC, and many February 23. Retrieved from http:// costs: Transport analysis guidance, TAG others. Flyvbjerg has worked as advisor to www.whitehouse.gov/the-press-office/ Unit 3.5.9. Retrieved from http://www. government and business, including the UK remarks-president-and-vice-president- dft.gov.uk/webtag/documents/expert/ and U.S. governments and several Fortune opening-fiscal-responsibility- unit3.5.9.php 500 companies. Flyvbjerg has received summit-2–23–09 United States Government Account- numerous honors and awards. He was ability Office (GAO). (2013). Defense Williams, T., & Samset, K. (2010). Issues twice a Fulbright Scholar and holds the acquisitions: Assessments of selected in front-end decision making on projects. Knighthood of the Order of the Dannebrog. weapon programs. Report GAO-13–294SP Project Management Journal, 41(2), He can be contacted at bent.flyvbjerg@sbs. (Washington, DC: GAO, March 28). 38–49. ox.ac.uk

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