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6 Metaphors used and views expressed in all articles published in the Journal are the author’s alone and do not reflect PMI’s perspective.
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
• 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
perform significantly worse than other managers (Budzier & of ten such projects have cost over-
quality services; and
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
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-
ects.” Our data show the iron law is not limited to infrastruc-
implementation phase based on a large 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.
Flyvbjerg et al. (2003, pp 1–10). On one both organizations and society, for the project. So get off it. In the world of
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
would ever be approved. The idea is
demand, and the size and frequency of information. The degree of misinforma-
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
lacked the foresight to pull out before “News that the Transbay Terminal
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),
which is the original text. The differences between the two
5 The
[San Francisco] Central Subway or 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).
ative error and Hiding Hand. Even if the by similarly large or larger underes- law of megaprojects, described above,
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
the Gulf of Mexico in 2010. At Kmart, gets suffered, leading the chancellor to healthy fact that different stakehold-
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 8 For
structure Projects, 2004). In Boston, the
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
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