Megaprojects are large‐scale, complex ventures that typically cost a billion dollars or more, take many years to develop and build, involve multiple public and private stakeholders, are transformational, and impact millions of people. Examples of megaprojects are high‐speed rail lines, airports, seaports, motorways, hospitals, national health or pension information and communications technology (ICT) systems, national broadband, the Olympics, largescale signature architecture, dams, wind farms, offshore oil and gas extraction, aluminum smelters, the development of new aircrafts, the largest container and cruise ships, high‐energy particle accelerators, and the logistics systems used to run large supply‐chain‐based companies like Amazon and Maersk.
For the largest of this type of project, costs of $50–100 billion are now common, as for the California and UK high‐speed rail projects, and costs above $100 billion are not uncommon, as for the International Space Station and the Joint Strike Fighter.
If they were nations, projects of this size would rank among the world’s top 100 countries measured by gross domestic product. When projects of this size go wrong, whole companies and national economies suffer.
But megaprojects are not only large and growing constantly larger, they are also being built in ever greater numbers at ever greater value. The McKinsey Global Institute estimates global infrastructure spending at $3.4 trillion per year for 2013 to 2030, or approximately 4 percent of total global gross domestic product, mainly delivered as large‐scale projects.
THE FOUR SUBLIMES
Why are megaprojects so attractive to decision makers? The answer may be found in the so‐called “four sublimes” of megaproject management. Karen Trapenberg Frick first introduced the term to the study of megaprojects, describing the technological sublime as the rapture engineers and technologists get from building large and innovative projects, like the tallest building or the longest bridge.
I proposed three additional sublimes, beginning with the “political sublime,” which is the rapture politicians get from building monuments to themselves and their causes. Megaprojects are tangible, garner attention, and lend an air of proactiveness to their promoters. Moreover, they are media magnets, which appeals to politicians who seem to enjoy few things better than the visibility they get from starting megaprojects — except maybe cutting the ribbon of one in the company of royals or presidents, who are likely to be lured by the unique historical import of these projects. This is the type of public exposure that helps get politicians reelected. They therefore actively seek it out.
Next there is the “economic sublime,” which is the delight business people and trade unions get from making lots of money and jobs off megaprojects. Finally, the “aesthetic sublime” is the pleasure designers and people who appreciate good design get from building, using, and looking at something very large and iconically beautiful, like San Francisco’s Golden Gate Bridge or Sydney’s Opera House.
Taken together the four sublimes ensure that strong coalitions exist of stakeholders who benefit from megaprojects and who will therefore work for more such projects. But in fact, conventional megaproject delivery — infrastructure and other — is highly problematic with a dismal performance record in terms of actual costs and benefits. The following characteristics of megaprojects are typically overlooked or glossed over when the four sublimes are at play:
1. Megaprojects are inherently risky due to long planning horizons and complex interfaces.
2. Often projects are led by planners and managers without deep domain experience who keep changing throughout the long project cycles that apply to megaprojects, leaving leadership weak.
3. Decision making, planning, and management are typically multi‐actor processes involving multiple stakeholders, public and private, with conflicting interests.
4. Technology and designs are often nonstandard, leading to “uniqueness bias” among planners and managers, who tend to see their projects as singular, which impedes learning from other projects.
5. Frequently there is overcommitment to a certain project concept at an early stage, resulting in “lock‐in” or “capture,” leaving alternative analysis weak or absent, and leading to escalated commitment in later stages.
6.Due to the large sums of money involved, principal‐agent problems and rent‐seeking behavior are common, as is optimism bias.
7. The project scope or ambition level will typically change significantly over time.
8. Delivery is a high‐risk, unpredictable activity, with overexposure to so‐called “black swans,” that is, extreme events with massively negative outcomes. Managers tend to ignore this, treating projects as if they exist largely in a deterministic Newtonian world of cause, effect, and control.
9. Statistical evidence shows that such complexity and unplanned events are often unaccounted for, leaving budget and time contingencies inadequate.
10. As a consequence, misinformation about costs, schedules, benefits, and risks is the norm throughout project development and decision making. The result is cost overruns, delays, and benefit shortfalls that undermine project viability during project implementation and operations.
THE IRON LAW OF MEGAPROJECTS
Performance data for megaprojects speak their own language. Nine out of ten such projects have cost overruns. Overruns of up to 50 percent in real terms are common, over 50 percent not uncommon. Cost overrun for the Channel Tunnel, the longest underwater rail tunnel in Europe, connecting the UK and France, was 80 percent in real terms. For Boston’s Big Dig, 220 percent. The Sydney Opera House, 1,400 percent. Similarly, benefit shortfalls of up to 50 percent are also common, and above 50 percent not uncommon.
As a case in point, consider the Channel Tunnel in more detail. This project was originally promoted as highly beneficial both economically and financially. In fact, costs went 80 percent over budget for construction, as mentioned above, and 140 percent for financing. Revenues have been half of those forecasted. The internal rate of return on the investment is negative, with a total loss to the British economy of $17.8 billion. Thus the Channel Tunnel detracts from the economy instead of adding to it. This is difficult to believe when you use the service, which is fast, convenient, and competitive with alternative modes of travel. But in fact each passenger is heavily subsidized. Not by the taxpayer this time, but by the many private investors who lost their money when Eurotunnel, the company that built and opened the channel, went insolvent and was financially restructured. This drives home an important point: A megaproject may well be a technological success but a financial failure, and many are. An economic and financial ex post evaluation of the Channel Tunnel, which systematically compared actual with forecasted costs and benefits, concluded that “the British economy would have been better off had the tunnel never been constructed.”
If, as the evidence indicates, approximately one out of ten megaprojects is on budget, one out of ten is on schedule, and one out of ten delivers the promised benefits, then approximately one in a thousand projects is a success, defined as on target for all three. Even if the numbers were wrong by a factor of two, the success rate would still be dismal. This serves to illustrate what may be called the “iron law of megaprojects”: over budget, over time, over and over again.
HIRSCHMAN’S HIDING HAND, REVISITED
One may argue, of course, as was famously done by Albert Hirschman, that if people knew in advance the real costs and challenges involved in delivering a large project, nothing would ever get built — so it is better not to know, because ignorance helps get projects started. A particularly candid articulation of the nothing‐would‐ever‐get‐built argument came from former California State Assembly speaker and mayor of San Francisco Willie Brown, discussing a large cost overrun on the San Francisco Transbay Terminal megaproject in his San Francisco Chronicle column: