Berlin Brandenburg ACE225 Project Management in Construction

Assignment 2 - Case Study

Group 4

Handed in: 2020-08-11

Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas

ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study

Introduction to the BER airport case

Immediately following the Fall of The Berlin Wall 1989 there were plans to build a new airport but it would take until 1996 before a final decision to build Schoenefeld as the ‘single’ airport whilst closing Tempelhof and Tegel (Fiedler & Wendler, 2015). The airport holding was decided by the government to be privatized and thereafter called Berlin Brandenburg Flughafenholding (later renamed to Flughafen Berlin Brandenburger GmBh); to be built by private actors (Fiedler & Wendler, 2015). It is further explained however that the results of the tendering in 1999 were contested which resulted in a collaboration between three companies, only to have the whole privatization process terminated in 2003. The go-ahead for the project under public undertaking was then given in 2006.

Berlin Brandenburg Airport (“BER” or the “Airport Project”) is a large infrastructure project which is behind schedule by more than 4 years and at least 70% above budget (Fiedler & Wendler, 2015). Schuetze (2020) reports that the planning for the project began in 1996 and that the opening was originally envisioned for 2006. The latest update about the airport is that it will open on the 31st of October 2020 (BER, 2020).

Holgeid & Thompson (2013) define the success of a project in the following way: “Project Success: The project is completed on-time and on-budget,delivering the expected value; Project Failure: The project is either terminated or not completed on-time, or not on budget, or not providing the value aimed for.” As such we can conclude that the project cannot be considered as a success. In their paper on the airport Fiedler & Wendler (2015) directs harsh critique at BER; They state that it is a high-profile failure which continues to severely damage the reputation of all involved actors and that the failure was expected but not necessary. They bring up Airports Terminal 2 and Airport’s Terminal 1 as recent examples and evidence that developments can be successful. So in this assignment the following questions will be investigated: Why did the project fail? What could have been done differently to avoid such a failure? What general cost management lessons can be derived?

Formal setup of the project

Originally the project organization was set up in a “traditional” way for a construction project. The idea was to have an experienced project manager from the private sector work as the general manager of the project, this person would report to the Flughafen Berlin Brandenburger GmBh (FBB) management board, who would report to the supervisory board (Fiedler and Wendler, 2015). The project would then have a general planner who would do the initial design and design planning, preparing building permits, design documents and programme documents for the general contractor (Fiedler and Wendler, 2015). The general contractor would be responsible for the detailed design, the construction planning and the construction work (Fiedler and Wendler, 2015). There would also be a reviewer who would supervise the general contractor’s detailed design and ongoing construction performance

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ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study

(Fiedler and Wendler, 2015) to make sure it was done according to the initial design. Early on the work of general planner and reviewer was given to the same company (Fiedler and Wendler, 2015). However the project failed to appoint a general contractor (as the offers in the tendering were considered too pricey) and the project was instead to be divided into 7 lots (Fiedler and Wendler, 2015). FBB (the client) took on the responsibility of detailed design and construction planning, but did not take the full role of a general constructor as the construction work of the seven lots would be tendered out (Fiedler and Wendler, 2015). The detailed design ended up being tendered out to the same company that did the general planning and reviewing (in essence they planned, reviewed, conducted and supervised their own work) (Fiedler and Wendler, 2015). The construction planning and controlling was also tendered out, to another company basically acting as a construction manager (Fiedler and Wendler, 2015). The company occupying the role of construction manager during the first year made an analysis where the conclusion was that the project would still be delayed and cost more than first anticipated and made 3 proposals on how to handle the situation with as few delays and cost changes as possible (Fiedler and Wendler, 2015). Even though they were replaced in the project, one of their suggestions was selected: to divide the 7 lots into smaller pieces (Fiedler and Wendler, 2015). It ended up being around 35 lots to be tendered out, where FBB would be responsible for the interface between them (Fiedler and Wendler, 2015), instead of only being the interface to a general contractor who would be the interface to sub supplier as would have been the case in a more “traditional” construction setup.

The supervisory board was to be the control function of the project (Fiedler and Wendler, 2015). They met 4-5 times per year and consisted of representatives of the company's employees and the shareholders of FBB (which were mostly politicians as FBB never was privatized) (Fiedler and Wendler, 2015).

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ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study

Project management issues in the case

The following table brings up the 10 PMBOK categories PMI (2017) and relates them with ​ ​ issues in the BER project. It is worth noting that in this project there were several issues in all the PMBOK categories.

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ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study

Analysis

The BER project made many decisions based on time and budget limitations, that in hindsight had the opposite effect than desired. In this chapter we will explain what was done in the project, what went wrong and what should have been done instead (based on the knowledge areas from the PMBOK). The focus will be on the project cost management, with a base in the literature review previously handed in.

What did they do?

Expert judgment and communication When the project started the idea was to include an external experienced party from the private sector as the project manager, to avoid common issues for large infrastructure projects like for example big cost blows (Fiedler and Wendler, 2015). The person appointed to this position set up a project with a traditional project organization (using a general contractor among others). Unfortunately this person left the project quite soon after it was decided to not have a general contractor (Fiedler and Wendler, 2015). After the second postponement of the project the replacement was dismissed and a third project manager was appointed (Fiedler and Wendler, 2015). As there were many changes to the project setup, where at last the owner (FBB) of the project was supposed to take the responsibility of the general contractor in the project, but in reality did not as it was divided between them and another company (Fiedler and Wendler, 2015), the project had no clear escalation path. It can also be shown from the project documentation that only parts of the advice given from the company acting as construction manager was taken by FBB (Fiedler and Wendler, 2015).

The steering group for the project (called the steering board) consisted of the wrong kind of people to effectively be able to steer the project. The fact that there were mostly politicians and no experts with construction knowledge on the board (Fiedler and Wendler, 2015) made it even harder. Experts on financing were added to the steering board later on in the project (Fidler and Wendler, 2015). It is also worth noting that the project did not report straight to the board but reported to the FBB management board who reported to the board, meaning that the communication was of a second hand nature. Allegations have been made that the information the board received was filtered or even altered (Fiedler and Wendler, 2015).

Cost estimates, determine budget, and scope increase The project owner (the client) FBB expected the budget from a general contractor to be around 630 million euro, but during tendering only 4 bids came in, all of which exceeded the expected budget with roughly 400 million euro (Fiedler and Wendler, 2015). FBB saw the offers as uneconomical and annulled the tender (Fiedler and Wendler, 2015). Even though the annulment was challenged by one of the tenders, FBB rejected the calculations of all of

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ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study the 4 bids based on; it’s advisors, the fact that the bids included large contingencies and allegations on price collusions between the bidders (the allegations came from contractors too small to bid on the tender) (Fiedler and Wendler, 2015). The challenge was dismissed by the procurement chamber (Fiedler and Wendler, 2015) and FBB divided the project into 7 lots instead (with an increase of scope as well). The tenders on the 7 lots returned costs that were between 55-175% higher than expected, where claims were that this was because the lots were too big still for true competition to form, plus that the lack of detailed design and the big risks of so many interfaces between the lots resulted in high contingencies (Fiedler and Wendler, 2015). The project was then divided again, to 35 lots in total, based on a recommendation by a firm that had been consulted as the construction manager. The advice was however taken without the amendments also advised; delaying the completion date and making sure that the detailed design and planning phase was finished before taking on so many new tenders (Fiedler and Wendler, 2015). The budget around this time was for 2.4 billion euros.

The project budget and timeline had to be adjusted during the course of the project as new unanticipated costs arose. The bigger delays and cost blow outs in the project were officially caused by new regulations that could not have been anticipated by the project. An example is the fact that the first delay of opening of the airport was officially due to the new security check regulation changes because of 9-11. The decision of delaying the airport opening was taken in 2010, but the regulation changes were actually discussed with the airport community already in 2008 (Fiedler and Wendler, 2015), which means that it could have been included when the scope changes and division of the project into 7 lots happened the same year. Another is the new noise regulations that required the project to install sound insulation in residence homes close to the airport (Fiedler and Wendler, 2015). According to the official story of the project, new fire regulations caused a lot of cost and delays for the project, though some of these consequences seems to have been caused by other issues such as interfaces between different parties in the project and getting rid of key players in the project , such as the design firm in 2013 that caused a total construction stop for a couple of months (Fiedler and Wendler, 2015).

Another reason for the big cost blowouts for the project was all of the change requests that were done, as many as 487 were ordered by FBB (Fiedler and Wendler, 2015). Many of these can be thought to be because the design and the construction was being done simultaneously i.e. when the design was actually finalized the construction needed to be redone or the design needed to be redesigned as something else had been constructed in another way and could not be changed.

The scope increased, when the project was divided into 7 lots, to also include the north and south piers in addition to the original scope of the main terminal building (Fiedler and Wendler, 2015). Deciding to do many tenders, before the detailed design was ready, meant that the design and construction sometimes happened simultaneously - which led to many errors and alot of rework (Fiedler and Wendler, 2015).

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ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study

Financing The project had a very long starting phase, from investigations in 1990 to final approval of the project in 2006 (Fiedler and Wendler, 2015). The intention from German government in the beginning was that the airport would be developed, managed, operated and owned by a private company but the privatization process was eventually abandoned which meant that the airport would be handled by public sponsorship (Fiedler and Wendler, 2015), which means that the projects financing was something that the German government needed to handle somehow. As the privatization seems to have been one of the foundations in the decision to do the initial investigation, this outcome gives an indication that the project came off on a strange start. The financing of the project cannot be said to have been done in a “traditional” way, as the shareholders of FBB (basically the state of ) guaranteed the loan of 2.4 million Euro, which meant that the loan givers saw it as basically risk-free and did therefor not care about the feasibility of the project and the financial outcome of it (Fiedler and Wendler, 2015). The total funding for the project adds up to around 5.4 billion euros by 2014 (Fiedler and Wendler, 2015).

The contracts of the project were first formed with a fixed time and a fixed price, but with the change to many small lots the contracts were also changed (Fiedler and Wendler, 2015). Instead fixed unit rates without penalties were used to be able to decrease the contractors contingencies in their tender offers (Fiedler and Wendler, 2015).

Control Costs The fact that the loan givers to the project viewed the project as risk-free ment that they did not conduct the usual scrutiny of the project and control how the loan was used. The shareholders set up an accounting firm to control the project in the absence of the loan givers control, the accounting firm used different techniques and processes than the methodologies applied by banks for commercial loans (Fiedler and Wendler, 2015).

As previously mentioned, the steering group for the project (called steering board) consisted of the wrong kind of people to effectively be able to steer the project. There has been critique raised that the board spent it’s time on minor issues and details (Fiedler and Wendler, 2015) instead of the bigger issues of the project (like controlling the costs). There are also indications that the steering board got hold of financial information such as budgets very late and even though the project was ordered by the state of Germany only high- numbers on equity injections have been made public (Fiedler and Wendler, 2015). There has been basically no transparency with regards to the project's cost situation. On top of that FBB did not change their internal processes or their organization (Fiedler and Wendler, 2015) to match this very large project they had undertaken.

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ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study

What went wrong?

Expert judgement and communication Even though it is claimed that the architects, some contractors, and project managers were among the best, there was a lack of expert involvement in the project because they did not have enough influence in the project and their voices were not heard (Fiedler and Wendler, ​ 2015). The critical knowledge gap that was constructed led to generating high-risk rates in ​ the project overall (Fiedler and Wendler, 2015). It would be better to utilize expert judgment ​ ​ during the whole planning and construction phase. Experts should also be involved in the decision making process in order to be able to steer the project in a more feasible direction. Harald Wolf, member of the FBB supervisory board stated that there was a lack of expertise in many areas (Fiedler and Wendler, 2015). ​ ​

According to (Fiedler and Wendler, 2015) another aspect of wrongdoing is the amount of ​ ​ political involvement in the project. A main example is the board of the project that consisted of two politicians, the Governing Mayor of Berlin and the Premier of Bradenburg. As stated above experts were not assigned to the board. On the other side there was also mismanagement and sloppy business practices that led to spending money without giving anything back (Fiedler and Wendler, 2015). ​ ​

Another issue is that there was a lack of transparency. The information flow was limited, not providing the requested information to the parliament or the public (Fiedler and Wendler, ​ 2015). Another issue was regarding the way that unwelcome information (that did not fit into ​ the official story of the project) that was provided by consultants, was neither confronted nor passed on (Fiedler and Wendler, 2015). ​ ​ Estimating costs, creating a project budget and Financing Having to keep the timetable, the different and many tenders were undertaken before the detailed design was in place (Fiedler and Wendler, 2015). That led in a process that required ​ ​ parallel planning and consulting without having the required guidelines. Lack of communication and the need to keep with the timetable lead to generating a vast amount of design changes (Fiedler and Wendler, 2015). Those changes would affect the cost, the time, ​ ​ the contractors, and overall, the project requirements. Those changes were caused also by the insolvency of the designers, the design changes due to EU guidelines and the massive quality problems like the fire safety system that cause delays and a vast amount of money (Fiedler and Wendler, 2015).. ​

The later investigation of the project pointed out that the flaws in the governance structure was at the heart of the disaster. Overall, the project wasn’t embedded in the project governance framework that would ensure expertise on all levels and a degree of assurance regarding the amount and the way the public money was spent. A project board or project

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ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study steering group was missing, leaving the hiring, firing, and monitoring procedures to the management team (Fiedler and Wendler, 2015). According to (Fiedler and Wendler, 2015) ​ ​ ​ this megaproject was forced into an existing corporate governance framework. All the ongoing changes created a great amount of problems. Even though the project scope was increased the planned delivery date remained the same.

In general, planning seems to be one of the most important factors that led to cost and time raise. In all phases there were decisions that led to higher costs and required more time to be spent on the project.

Controlling costs The lack of input, feedback and critical review of the project’s initial setup and budget from the loan givers most probably had a bad effect on the project (Fiedler and Wendler, 2015). Not having the bank as actors and corrective lenders probably made it even worse: in the ​ BER project, the lenders (the banks) had no interest in the project's success. That is because of the virtually risk-free loans that were provided to the airport company (Fiedler ​ and Wendler, 2015). Removing the influence of the bankers in the project resulted in a ​ reduced pressure that could effectively turn the project in a more fruitful direction.

What could/should they have done?

Being a megaproject the project managers should look out to other similar megaprojects in order to find good practices. Paying attention to other successful megaprojects and implementing good practices could create a good base in order to succeed. Utilizing data regarding similar projects, using expert judgement, listening to this judgment and adjusting the organizations processes and internal structure to fit this specific project could ​ be vital.

Expert judgement and communication As seen in the literature review, expert judgement is a tool that is highly valued both in PMBOK and in other articles related to project management and cost management. In the BER project there are unfortunately many instances where the project failed to consider the expert knowledge of the people surrounding the project. This could have been because they failed to see who were the experts in those instances, for example; the bidders on the tender had more experience than FBB on how to estimate construction projects and the differences between FBB and the bidders estimated costs should have been seen as an indication that more experts were needed in estimation. Another example is that many key people within the project left or were dismissed during the project, as FBB failed to see them as experts on the actual project. These people's knowledge should have been valued higher, and instead of dismissing them when the project was not going the way it was anticipated, more support could have been put in to still make sure that the competence of these people stayed within the project and still try to push for the anticipated outcome.

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ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study

Estimating costs and creating a project budget The fact that the BER project ended up doing the detailed design and the construction at the same time is probably a root cause to many of the issues the project experienced. Even though, from the writers’ experience, this is unfortunately a quite common way of handling delayed construction projects. In project management, speeding up the project by designing the solution with one hand while building it with the other almost always leads to more issues and more time spent figuring those out than it would have if it was done in the sequential way. Even in agile methods there is still a sequential way of first understanding the requirements before building the software even if it is divided into smaller time periods (Barbee, 2013). Or at least making sure there is a proper approval process before continuing in those cases (Potts, 2008). An even more successful way would be to do like in the Heathrow T5 project; to include as many of the suppliers as possible in the project in the early stages (Potts, 2008). In this way they can help both impact the time schedule, help estimate the activities, their lengths and costs while at the same time find potential issues and errors before they arise. On top of that it also means that less time is needed on onboarding and giving suppliers information later on in the project. This way of working would most likely have meant fewer mistakes to correct and fewer change requests in the BER project. This way of working could also have addressed a lot of the risks in the project earlier on with the suppliers, which could have made the contingencies in their offers go down, as more of the project was known for them.

Financing The fact that the loan was considered risk-free by the loan givers can be seen as an issue for the entire project. Having loan givers who are interested in the projects means getting more critical views on the project both in an initial phase and during the project, as a means of control. This could have helped the BER project already in the starting phase, to get a more realistic budget and time plan as well as having a true follow-up on how the money was being used in the project.

Controlling costs The fact that the project was divided into many smaller lots, is not something that necessary needs to be a bad thing. For example the construction of Heathrow Terminal 5 was a project that was divided into 16-18 major projects and roughly 140 sub-projects (Davies, Gann and Douglas, 2009; Potts, 2008) but it still managed to be on time and on budget. Where the BER airport project failed is in the governance and interfaces between parties in the project. If we keep comparing with the T5 project, we see that in they built their project culture on collaboration and an open book policy (Davies et al, 2009). They also worked hard to keep the capabilities of integration and the responsibility of the project in-house, while still outsourcing many of the key knowledge areas such as design and construction (Davies et al, 2009). What the BER project failed to do was to have integration and responsibility fully in-house, as this was a completely new area for them they outsourced part of it and this in-between seems to have caused that the structure, escalation path and

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ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study governance for the project was very unclear. Maybe if they would have been successful in appointing a general contractor for the project at least some of these issues would have been solved.

With regards to risk FBB, the owner of the BER project, did not manage to keep it under control. Too much of the risk as well as the responsibility was outsourced to different companies and it seems, without FBB understanding the consequences of it. Even though the contracts were changed to a fixed rate without penalties later on in the project, as there was no transparency in the project this did not help to reduce contingencies, for each supplier the risk of “unknowns” had not really changed. In the T5 project the client took on the total risk of all the contracts in the project under the agreement that all parties in the project work as one company during the project i.e. share all information and knowledge between each other (Pott, 2008). This kind of cooperation would most probably have helped the BER project tremendously.

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ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study

Reflection

In this chapter a reflection will be made with relation to three lectures given on the course. The chosen subjects are Digitalization, Project Governance and Institutions, Power and Authority.

Digitalization

To use digitalization as a tool to improve collaboration and reduce costs is getting more and more common in construction, especially with regards to BIM. This is a tool that the BER project does not seem to have used at all, while for example the T5 project relied on it. In T5 they put a lot of emphasis on having on collaboration software where all risk reports and time tables could be found, as well as using one 3D-model for all to review the design, the build and the maintenance of the project (Potts, 2008). Using one single model for all suppliers in the BER project could have made sure that some errors would have been seen before they were constructed. It also seems that any help for collaboration with the interfaces of different parties within the project would have helped the BER project a lot. Both in the lecture from Antoine Manés on the 26th of June 2020 and in the T5 project claims were made that using BIM can save ~10% of construction costs. That percentage alone should be a big reason for incorporating BIM in projects in general and in the BER project in particular.

Project Governance

Winch (2009) illustrates three levels which constitute The tectonic approach in Managing ​ ​ construction projects, from top to bottom there is the institutional level, governance level, and ​ the process level. It can be argued that the Institutional level (for example industry standards) was satisfactory at the time when the BER-project got its go-ahead and that the case as such could have been a success, especially when for example comparing with Heathrow T5. The following level from the top would then be the governance level, which could be where the BER-project failed.

When understanding project governance, a good place to start could be by identifying the differences between project management and project governance. In the lecture on Governance held by Stefan Gottlieb (2020-08-10), it was explained that project governance ​ is a way of managing the project management; in other words, a way to provide a framework to work off of. There are several ways in which project governance can be used to analyze the BER-project. For example governors could be associations and professional bodies, in example PMBOK. This would mean that following the PMBOK as a governance mechanism could have been a way to establish some sort of governance and in doing so establish a framework to set a basic boundary for the project and provide some guidelines.

In Governance frameworks for public project development and estimation by Klakegg, ​ Williams, Magnussen, and Glasspool (2008), it is brought up that several developed

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ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study countries are looking at ways to improve the managing and controlling of major public investments projects (megaprojects). They also state that “The governance framework, including government roles, policies, regulations, and so on, is documented to have vital importance to the planning and management of projects” (Klakegg et al., 2008: s27). The use of governance mechanisms within projects was explained in the Governance lecture to ​ ​ be a way to reduce ambiguity, in other words, to decrease the level of complexity of a project by having standard ways of addressing standard issues which arise. It could be speculated that establishing such standards could act as a safety net in case expert knowledge was missing or not being heard; the standards might then ensure that certain processes were still in place. On the other hand, expert knowledge would still be needed in order to be aware of, and adhere to, the standards that exist. Yet another point to be made is that better governance, and a more explicit framework might have served to minimize the damage done by the switching of project managers which occurred more than once in the BER-project, because they would still have a framework to work off of.

As mentioned earlier, FBB did not change their processes or the organization, (Fiedler and Wendler, 2015) even with consideration to the size of the project. They could have instead divided the company to have a business part and a support part respectively, where the support structures determine the governance. Had they done so, maybe many of the issues with the project could have been avoided thanks to the improved governance of the project. The point of departure for Klakegg et al. (2008) paper was that there has been widespread criticism of megaprojects and that such projects often suffer from cost overruns and fail to meet deadlines. In the lecture on Governance it was also brought up that effective ​ governance of project management ensures that the organizations portfolio is aligned with its objectives, and that the projects themselves are delivered more efficiently. As such, and with considerations to the other points raised in this reflection, we think it is obvious that governance was indeed a ‘vital’ part of the project and that better project governance could have led to a different public perception of the BER-project.

Institutions, power and authority

In our lecture on institutions, power, and authority, which was held by Christian Koch (2020-07-01), we were asked to reflect upon the following questions “Why would we need to think about power in a project management context?” and respectively “Why would we need to think about politics in a project management context?”.

The first question can be related to our finding that one of the biggest issues with the Berlin Brandenburg Airport project was the lack of expert knowledge. This does not mean that there necessarily was no expert knowledge available, but rather, that it was not implemented sufficiently; the advice given was not heeded. The people in charge did not listen enough to the people with the expert knowledge, and the actors in possession of the expert knowledge did not have sufficient power to enforce what they knew would benefit the project. As such it is easy to understand what a vital part the power structures can have in a project management context. Another possible explanation lies within a statement from the lecture

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ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study

Disciplining the project management: “Formal authority is insufficient and informal authority ​ patterns overlay the formal structure”. In case the people with expert knowledge had enough formal authority that still might not be enough to influence the project to a satisfactory degree; the informal authority patterns could negate the effects of the chain of command.

The way politics influence a project can also be derived when looking at the BER-project. In the lecture Politics in projects, different approaches to change are presented. As explained, ​ ​ change can be implemented and planned for in a rational way, be viewed as unfortunate and therefore driven by external forces, or the organization can be forced to adapt quickly in order to restore stability. In relation to the BER-project, FBB did not change their internal processes or their organization (Fiedler and Wendler, 2015), despite how large the project they had undertaken was. Our understanding then becomes that the leadership in FBB at least did not act in accordance with the most favorable “implemented and planned for in a rational way”. Furthermore Kotter's list of eight classical mistakes in change projects is explained in the lecture, where “not establishing a great enough sense of urgency” is one. Although the list probably mainly refers to why change-projects fail, the sentiment might help explain why there was no change-project implemented at all; maybe FBB did not have a great enough sense of urgency with regards to their big undertaking, and therefore did not see the need for a structural change of the company.

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ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study

Assignment 2b) Reflection and evaluation of project management models and practices

Throughout the course we have had lectures about many different aspects of Project Management, with a clear base in the guidelines provided by PMBOK. With that said, the views and thoughts expressed in PMBOK have been challenged as well, not least by the concerns raised by Flyvberg, Holm, Buhl (2002). In the first assignment we were divided into groups which we stayed in for the duration of the course, and each group was assigned a specific knowledge area within PMBOK which was to be the main focus for that group. For us that knowledge area was Project Cost Management, and in this section we will talk about some of the many things we learned through this course and the assignments within it.

For us it was interesting that we found so few articles related to creating a budget (when doing assignment 1) which to us seems to be an area where there should be many things to say; as it is finances, an area which many people look to understand both in projects and in companies. The finances is also a reasonable way to measure the success of failure of a project, relating to the way Holgeid & Thompson (2013) define the success of a project: “Project Success: The project is completed on-time and on-budget,delivering the expected value; Project Failure: The project is either terminated or not completed on-time, or not on budget, or not providing the value aimed for.” which was also brought up in an earlier part of assignment 2. What we did find was that the common practice is to estimate costs on activities and then summarize them to the project budget. In this course we actually got to try out such a practice, as we ourselves have tested it throughout the assignments, where our budget was time, and as such we did time estimation for the different work packages needed for the handins in this course. In the area of cost estimates the article that gave us the most new ideas was the one by Flyvbjerg et al (2002) who talked about the constant underestimation of costs. The article’s argument made us really think about how cost estimates are done and how it is possible that they are so rarely met in projects. In PMBOK the proposed way to overcome this underestimation is through the use of knowledge from previous projects both in the sense of making use of expert knowledge, as well as analysing historical data that can be quantified to calculate new costs. This sounds like common sense, but from Flyvbjerg et als’ (2002) article we can see that the outcome is still not the desired one. We did understand from the lectures that not all agree with the claims from Flyvbjerg et al (2002), but for us it was the article that led to the most discussions in our group.

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ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study

Figure 1. Showing development of different aspects of digitalization for different sectors. Taken from the lecture slides of “PM - Digitalization Strategy” - “Digital Strategy” 2020-06-29 held by Antoine Manès.

We think that Figure 1, showing digitalization within different industries during the later centuries, is a somewhat sad picture. The picture is color-coded where a deeper green reflects that the specific point is more digitized and a deeper red is the absence of such characteristics. As we can see, construction is quite red across the board. As a matter of fact, you will find the construction industry at the bottom together with hunting and agriculture. The fact that construction is so far down in this picture is both a surprise and not at the same time. We do know that the construction industry is considered very traditional, but that is usually mentioned from a gender equality point of view. Here we instead had to learn that this also relates to how the work is being done, which came as a small surprise with regards to how much BIM is being discussed in the media at the moment. We had interpreted BIM as the salvation of the construction industry, a way to digitize it. But with regards to this course we learned that there seems to be a lot left to do. And maybe BIM is painted out to be the knight on a white horse, when in fact the industry as a whole would need to look at more changes to their way of working and not just how the information

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ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study created in the project is stored. But of course, we need to start somewhere, and making sure that all the information related to the construction project is stored digitally in one place is a great way to start! Especially if it’s not only the “planned” information that is stored but what actually happens in the project is included as well, so we get a complete digital copy of our project. The possibilities from that kind of updated digital twin seem endless, at least with regards to the undigitized reality we are starting from.

Another interesting finding is that projects keep failing even though there is so much knowledge in the field of project management that is built in practice and also in academia. It is often said that each project is unique but, most of the time, there are a lot of similarities in projects around the world. It doesn’t have to be one project that is similar with the other but more projects that some parts together can be similar with the other project. The projects are being saved down as individual, unique projects, rather than being looked at as a package of several processes. Maybe this is why it is so difficult for project managers to be successful in the planning phase. Having to search for specific projects around the world where some similarities may appear will require a ton of work. Having access to a knowledge tank where project characteristics are systematically assessed would be really helpful. Processes could then be identified and after that standardised, allowing the whole “package” that is the construction of that specific type of project, to be industrialised. From our experience this is difficult to do today. We faced a lot of difficulties finding information for several projects when we had to select a subject for the case study assignment. Even though we could find really interesting projects that were very successful we could not access the information regarding the good practices that led to this success. Maybe this is because of each company's policy to keep the internal structure, decision making tools and practices hidden so that it is difficult for other companies to reveal the information. In any case it would be really helpful as a tool to have access to all those data, both numerical but also qualitative. This could be a future challenge for artificial intelligence. A way to systematically build, manage, and file information for projects around the world aiming to create a tool that would help project managers to access this valuable information.

There is another way around to access this kind of information and it relates to knowledge that comes from people. As it is clearly stated in the PMBOK expert knowledge is a really important aspect among the different PMBOK categories. Those experts can be people that have experience in the same type of projects or people that have a specific interest and knowledge in a specific field. As we show in the BER project one of the key aspects of failure was that experts were not included in the decision making process. Having the expert judgement is not what adds value to a project. Implementing this knowledge and adjusting it so that it fits the organization's culture is the part which could really make a difference. There is an issue that comes from all the above. How can we really know that someone is an expert and to what extent can we listen and implement the input that is given? This is something that is not mentioned in the PMBOK taking experts as granted. There are examples that come not only from projects but from any area where expert knowledge was not just wrong but catastrophic (such as the famous example of Kodak deciding not to launch a digital camera, as their experts deemed it not necessary) . It seems, however, that

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ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study it would be difficult for the project managers to find expert knowledge; you would have to evaluate and select people who are experts in areas which you yourself might not master, and as such, the difficulty of the assignment is apparent.

A connection can be made with lean product development where one of the most important things is to build knowledge first and only after that, planning and implementation can begin. It was clear throughout the course lectures and also through the literature review and case study that the planning phase is really important. As seen on the BER project, having a scope that is becoming wider and wider results in a project that will definitely exceed the time and money limits. The need of adding features can come either from something as expected like a new safety guideline or from an error during the planning phase. In the first case the resource allocation can happen through the management reserve but on the second case there will be a time and cost overrun. Such issues can be avoided by spending a bit more time and money in the planning phase to make sure that the project goals are scoped correctly and thus making the project goals more likely to be achieved within the estimated budget.

It is interesting that so many of the common practices for project management, including the ones that can be found in PMBOK, so often seem to be just common sense in many ways (much like lean). And still there are so many projects that fail all over the world. That gives us a sign that it is not only about the tools and techniques listed in said practices, but actually about building a culture and a governance that gives the project the surroundings to be able to succeed. When reviewing the articles and cases in this course we found that many talked about governance of the project, with examples of both failed and successful projects. However the difference between the projects that failed and the ones that succeeded were not always easy to spot at a glance. With that said, one common denominator seems to be to have engagement for the project, on an individual level, especially with regards to the governance group! Engagement from employees is not something that can easily be built when creating a project, it requires hard work, but that work is worth the effort. This would however indicate that some companies should have more successful projects in general than others, as they already have engaged employees. Unfortunately we have not found any articles that mentioned that during this course, so we leave that interesting subject to later investigations. From our personnel experience we see that projects portfolios and/or companies that are not managed well on a higher (organizational) level often fail in projects on lower levels. It does not matter how good the project is, how good the project team is; if the surrounding support is not there it is most likely going to fail anyway. One could argue that it is in human nature to only do the things that someone will follow up on.

After attending the course lectures, going through the course literature and working with the assignments we would like to look back at a question that was asked by Dimosthenis Kifokeris in one of the very first lectures. “If someone strictly follows the PMBOK will she/he be a good project manager?” Having gone through this course we have learned the great value of PMBOK, not least we saw that it’s directions and suggestions could have really

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ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study helped the BER-project which was the subject of our case study. But we can problematise how being a good project manager is not just about the methods or the tools you use, but more than that it is dependent on how those methods and tools are implemented to deliver a great result. As stated above engagement of employees and general managing of people can be the key to successful project management. Of course the tools are really helpful but require a deep understanding in order to use them correctly and in relation to the requirements each project has. It seems to us that one of the most important skills project managers need to develop are their interpersonal skills and in doing so, that will empower their communication skills and the way they interact with people.

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ACE225 Project Management in Construction Helena Aurell, Gustav Thorsell, Dimitrios Zarkadas Assignment 2: Case Study

References

Barbee, D. (2013). Agile Practices for Waterfall Projects: Shifting Processes for Competitive Advantage: 14.6 Agile Budgeting and Forecasting. J. Ross Publishing, Inc.. Retrieved from https://app.knovel.com/hotlink/pdf/id:kt00U8X1HR/agile-practices-waterfall/agile-budgeting-f orecasting

BER (2020) Flughafen Berlin Brandenburg webpage https://ber.berlin-airport.de/en ​ information retrieved 2020.08.03

Davies, Andrew; Gann, David and Douglas, Tony (2009), Innovation in Megaprojects, ​ system integration at London Heathrow terminal 5 California Management Review vol. 51 ​ no. 2 Winter 2009

Fiedler, Jobst and White, Alexander (2015) Public Infrastructure project planning in ​ Germany: The case of the BER Airport in Berlin-Brandenburg Hertie School of Governance, ​ Large Infrastructure Projects in Germany - Between Ambition and Realities, Working paper 3, May 2015

Holgeid, Kjetil and Mark Thompson. (2013) “A Reflection on Why Large Public Projects Fail”. in: Andrea Roemmele and Henrik Schober (Eds.). The Governance of Large-Scale Projects: Linking Citizens and the State. Nomos Verlagsgesellschaft. 2013.

Klakegg, O.J., Williams, T., Magnussen, O.M., & Glasspool, H. (2008). Governance frameworks for public project development and estimation. Project Management Journal, 39(1_suppl), S27-S42.

PMI (2017). A guide to the project management body of knowledge (PMBOK guide. ​ ​ Newtown Square, PA: Project Management Institute (PMI).

Potts, Keith (2008) Construction Cost Management: Learning from case studies Taylor and ​ ​ Francis 2008 ISBN 0-203-93301-X Case study: Heathrow Terminal 5 pp. 281-292 ​ ​

Schuetze, Christopher F. 2020. Berlin’s Newest Airports Prepares for Grand Opening. Again. ​ The New York Times. Taken from: https://www.nytimes.com/2020/04/29/world/europe/berlin-brandenburg-airport-opening.html retrieved 2020.08.06

Winch, G. M. (2009). Managing construction projects. Taken from ProQuest Ebook Central ​ ​ https://ebookcentral.proquest.com

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