Megaprojects and Risk: An Anatomy of Ambition

Citation

Cairns, G. (2004), "Megaprojects and Risk: An Anatomy of Ambition", International Journal of Public Sector Management, Vol. 17 No. 3, pp. 275-277. https://doi.org/10.1108/09513550410530199

This is a joint review with Megaprojects: the Changing Politics of Urban Public Investment

Having been asked to review these two books with a seemingly similar theme, I thought at first that I would be adopting a cross‐case comparative approach to the respective authors' handling of the subject, and perhaps, some of the same cases. However, that has turned out not to be the case. I will deal with the texts sequentially, since that is how they seem to me to fit together, inasmuch as Altshuler and Luberoff adopt an approach that uses historical analysis and case studies from the past century, in order to arrive at conclusions that relate to understanding of the present within the specific geographical context of the USA. Flyvbjerg et al., by comparison, use critical analysis of recent projects over a wider geographical context in order to draw more general inferences on an approach to megaproject management for the future. Having reviewed each text in turn, I will attempt to draw some general conclusions for those interested in further study of the topic.

In Mega‐projects: the Changing Politics of Urban Public Investment, Altshuler and Luberoff provide an historical study of the growth and development of large‐scale urban projects in the USA. In particular, they deal with three specific types of mega‐project: the highway, the airport, and the rail transit system. In setting the scene for their analysis of each of these categories, they provide an overview of four political eras that they see as defining the growth of the American mega‐project. They then they set out “five theories” of American politics that they see as being of relevance to analysis of mega‐projects, before moving on to discuss each of the three types of project in relation to these eras and theories.

The four historical eras are defined as “the pre‐1950 era”, which is one of infancy for urbanization, rapid growth in population and investment in infrastructure through the New Deal, but with the impacts of the Great Depression and World War ll leading to “aspiration rather than serious action plans” (p. 12) by 1950. The second era is that of “the great mega‐project”, in the 1950s and early 1960s, when there was vast expenditure on highway infrastructure, and on new sports and convention centres in out‐of‐town locations, with little or no questioning of the impacts on society, environment, etc. The “era of transition” that followed from the late 1960s was one of questioning the previously unproblematized (re)development of urban areas, with a “spreading awareness of the disruption associated with urban mega‐projects”, and growth of “the movements for civil rights, citizen participation, and … environmental protection” (p. 22). The final era discussed is that of “do no harm”, in which there has been continuing mega‐project development, but with greater questioning of the social, economic, environmental, etc. impacts of each proposal.

The authors draw upon American political and urban political theories that adopt “hard” and “soft” theoretical stances, and a range of pluralistic and elitist perspectives, in order to hypothesise on the nature of mega‐project development. However, they point out that mega‐projects have not been a focus of the theorists and, whilst addressing this “void”, they say that they “make no claim to have ‘tested’ any of the theories reviewed (since their) focus is too broad and (their) evidence too qualitative for that” (p. 75).

Each of the typologies of mega‐project is covered by discursive case studies, which are very well referenced to a wide range of original sources for those readers who may wish to know more. Each covers the development through the historical eras to bring us (almost) to the present. As Altshuler and Luberoff draw their text to its conclusion, they consider the ongoing conflict of interests between those that seek to benefit from development of further mega‐projects, and those that seek to protect the environment, and they propose that there is a need for consideration of these diverse interests through the democratic process. They do, however, state that “(p)roject merits have not been a central concern of this book, but it seems clear that a large proportion of recent mega‐projects fail any reasonable benefit‐cost test” (p. 288). This closing statement leads very neatly into the core of Flyvbjerg et al.'s text.

Megaprojects and Risk: An Anatomy of Ambition is very much concerned with assessment of megaproject merits, and with the notion that traditional forms of cost‐benefit analysis are, in themselves, insufficient measures of megaproject benefits. This text takes over from where Altshuler and Luberoff end, in relation to analysis and theorizing about the nature of megaprojects. The authors of this text also use case studies in order to illustrate their key points of discussion, drawing upon a wide range of data from several hundred projects from 20 nations across the globe, but with in‐depth analysis related to three projects; the Channel Tunnel that links the UK to mainland Europe, The Great Belt link that connects East Denmark with mainland Europe, and the Øresund link that connects Scandinavia with continental Europe via Denmark.

The analysis in this book covers economic assessment of megaprojects, in particular the failure of traditional forms of risk assessment in offering inadequate and incomplete data to key decision makers at governmental levels. Flyvbjerg et al.'s analysis is grounded in the proposition that the pre‐planning of megaprojects is subject to dramatic and deliberate underestimation of the cost and timescale for completion, and in over‐estimation of the demand for, and likely usage of the completed projects. Through analysis of the selected projects, and critical comparison with historical data, the authors posit that cost and time overrun for contemporary megaprojects is no less, as a percentage, than it was “ten, 30 or 70 years ago”. On the basis of empirical study, they state that for the majority of megaprojects the costs that are attributed to them at the planning stage are “highly, systematically and significantly deceptive” (p. 20), in that they are derived of a process of “strategic misrepresentation, namely lying” (p. 16). On the basis of their analysis, they propose that “an equilibrium has been reached: strong incentives and weak disincentives for cost underestimation and thus for cost overrun may have taught project promoters what there is to learn, namely that cost underestimation and overrun pay off. If this is the case, cost overrun must be expected and it must be expected to be intentional” (p. 16). The authors question whether governments can act both as promoters of megaprojects and as guardians of public interest, and conclude that they cannot. They then discuss the complexities of private sector involvement in such projects and, whilst considering that it is not a panacea for all the ills of public sector projects, they do consider private sector involvement an essential element of future megaproject success.

The main project of this book is to propose a revised set of processes and parameters for the early appraisal of megaproject proposals, in order to reduce the risks to the public purse in their subsequent implementation. The authors propose “four basic instruments of accountability” (pp. 107‐124) by which this risk reduction might be achieved, these being; improved and real transparency in the availability of documentation for public scrutiny and for challenge by stakeholder and civil society groupings through formalised forums for debate, detailed performance specifications that are open to goal‐driven appraisal, audit and monitoring, the formulation of an explicit regulatory regime that defines the economic rules of the game and seeks to eliminate political risks and, finally, a requirement for a minimum of one third of the risk capital to be raised within the private sector, without public sector guarantees over its recovery.

The authors propose that the implementation of these instruments will lead to a new form of accountable megaproject decision making that will address the “megaproject paradox”, where as more and more megaprojects are proposed and supported around the world, there is evidence that such projects continue to show massive cost and time overruns, and fail to gain public support.

In conclusion, I would state my view that both of these books offer considerable insight into the nature of the mega‐project/megaproject that will be of relevance not only to students and researchers, but also to all involved in their inception, design, implementation and management, from politicians to designers, funders, and those members of the general public who wish to know more about the ways in which so much of their tax money has been spent. In this respect, both books are highly accessible and very readable. For those interested primarily in the history of the mega‐project, and primarily in its development in its “natural” home, the USA, Altshuler and Luberoff offer more. For those who seek a critical reappraisal of the nature and merits of the megaproject and a future‐oriented analysis, Flyvbjerg et al. will be of greater interest. The books complement each other to the extent that the serious student will benefit from reading both, in the order outlined above.