Challenges for large infrastructure projects in Germany

Chair of Project Management Prof. Dr.-Ing. K. Spang Challenges for large infrastructure projects in Germany Prof. Dr.-Ing. Konrad Spang Chair of Pro...
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Chair of Project Management

Prof. Dr.-Ing. K. Spang

Challenges for large infrastructure projects in Germany Prof. Dr.-Ing. Konrad Spang Chair of Project Management University of Kassel, Germany

SIG Mega Projects, Primosten 04.09.2015

MP in Germany: Situation (1)

Chair of Project Management

Prof. Dr.-Ing. K. Spang

3 internationally wellknown MP with negative publicity:

• Elbphilharmonie Hamburg: cost explosion, big delay • Airport Berlin Brandenburg BER: cost explosion, big delay • Railway Mainstation Stuttgart 21 : cost explosion, people against project

SIG Mega Projects, Primosten 04.09.2015

MP in Germany: Situation (2)

Chair of Project Management

Prof. Dr.-Ing. K. Spang

„Public“ Conclusions:  These projects have all failed!  German engineers are not or no more capable to plan and build large projects! For experts some questions:  Is there a systematic problem? …. processes, project management, strategy ….  Is there a political problem? …… democracy, responsibility ………  Is there an expert problem? … knowledge, experience, empowerment …  Are these 3 projects typical for MP in Germany generally?  Is there a German problem? And further on:  What is the base for an „overflow“?  What is project failure?  Cost overflow = inefficient projects or more money for more value???  What are the project specific reasons for the cost overflows? SIG Mega Projects, Primosten 04.09.2015

MP: International investigations + research

Chair of Project Management

Prof. Dr.-Ing. K. Spang



Flyvberg et. al. (2002): 258 Road and Railway projects:  86% of the projects had cost overflow

 mean value 26% overflow  systematic under-estimation (politics, „project competition“)  problem of personal responsibility  no learning (…. reduction of overflow ….) ! •

Odek (2004): 620 road projects in Norway: 7,9% overflow



Supianek (2015): Meta study + study of german road projects  more projects  lower cost overflow …….. Scale effect, mean value!?  few projects  projects with „bad“ results?  international study  specific national reasons not visible  most cost increase in early project stages  importance of (the same!) base!  no learning!

,

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MP: influence of number of investigated projects

Chair of Project Management

Prof. Dr.-Ing. K. Spang

Cost overflow [meanvalue in %]

Supianek, 2015

Number of projects

SIG Mega Projects, Primosten 04.09.2015

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MP: influence of base

Chair of Project Management

Prof. Dr.-Ing. K. Spang

deduced from: Supianek, 2015

200 180

160

cost index 1 cost index 2 cost index 3

140 120 100 EP

PD

LPF

End

EP …. Early project phase PD …. preliminary design finished

LPF ….Legal process finished End …. Project finished/Start of service

SIG Mega Projects, Primosten 04.09.2015

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MP in Germany: project competition

Chair of Project Management

Prof. Dr.-Ing. K. Spang

German federal roads: necessity of investment / annual budget

Treasury plan 2015

necessity lack = 2,8 Bill. €

 Competition between projects SIG Mega Projects, Primosten 04.09.2015

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MP in Germany: study in in road and railway authorities

Chair of Project Management

Prof. Dr.-Ing. K. Spang

Sözüer, Spang (2014)

SIG Mega Projects, Primosten 04.09.2015

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MP (in Germany): Cost and time overflow: First conclusions

Chair of Project Management

Prof. Dr.-Ing. K. Spang

• Statement 1: there is not one reason, there are many/various reasons • Statement 2: cost overflow or time overflow does not mean „project failure“

• Statement 3: „overflow“ depends strongly from the base (phase, quality) • Statement 4: overflow or underflow depends from culture (org./nat.) • Statement 5: cost under estimating often has political = strategic reasons

• Statement 6: long term projects have a big portion of price increase (20y-50%!) • Statement 7: no learning effect! Knowledge management? • Statement 8: personal responsibilty of deciders is necessary!  Transparency

SIG Mega Projects, Primosten 04.09.2015

MP: Reality in Germany: public acceptance?

Chair of Project Management

Prof. Dr.-Ing. K. Spang

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MP in Germany: Examples (1)

Chair of Project Management

Prof. Dr.-Ing. K. Spang

• 3 examples of projects:  In service and daily use since many years  Everybody is happy and can´t imagine a situation without them  nobody is discussing about former problems MP Examples: Waldschlösschen Bridge Dresden: 181 mio €

MP Examples: Mainstation Berlin: 1 billion € (with rail net) MP Examples: Airportstation Frankfurt: 225 mio € SIG Mega Projects, Primosten 04.09.2015

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MP in Germany: Examples (2)

Chair of Project Management

Prof. Dr.-Ing. K. Spang

• 3 examples of projects: Large Projects in work

SIG Mega Projects, Primosten 04.09.2015

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MP Elbphilharmonie – Project

Chair of Project Management

Prof. Dr.-Ing. K. Spang



Multifunctional building in the harbour area of Hamburg („Harbour City“)



3 Concert halls (2150, 550, 170)p, Hotel, Restaurants, 45 appartments, plaza on 37m, car park



110 m high x 22/68 m, 26 floors,



29 elevators and 82m long curved escalator



based on an old granary, glass on brick with 1096 different glass elements



Architect: Herzog & de Meuron, Basel/CH

SIG Mega Projects, Primosten 04.09.2015

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MP Elbphilharmonie: cost development

Chair of Project Management

Prof. Dr.-Ing. K. Spang

Total cost [€]

2003 project description

116

2005 feasibility study

187

2006 2nd cost estimate

229

2006 contracting

352

2008 contract amendment

561

2013 new contract

865

SIG Mega Projects, Primosten 04.09.2015

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MP Elbphilharmonie – Causes for Cost overrun

Chair of Project Management

Prof. Dr.-Ing. K. Spang

Using „Hertie School of Governace, Working paper 2, 2015“



optimism bias



Deception



Both fostered by public + political pressure + high expectations



Manifested in insufficient risk management



Unfinished planning (i.e. detailed sollutions!) before contracting + start of construction



Weak oversight



Inadequate project organisation, project + stearing level



Large projct changes as f.ex. increase of gross floor area of 42%, 3rd concert hall



Expensive sollutions of architects + specialists as „king of accoustics“ Yasuhisa Toyota



Many disputes between client + architect and contractor



Inadequate anti-claim management by the client



Not profitable project forces contratcor to strong claim management

SIG Mega Projects, Primosten 04.09.2015

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Example: Railway Mainstation Stuttgart 21

Chair of Project Management

Prof. Dr.-Ing. K. Spang



From dead end station to throug station,



high speed connection from Frankfurt – Stuttgart/ S-Airport – Munich



Planning from the 80´s to 2010 …. 30 years!



Start of construction 2010  2022



Cost from 2,5 to 6 billion € (1,8 bill € riskbuffer)



Early cost information …. No risk buffer, no detailed planning, cost level from 1994



Big part of the inhabitants of Stuttgart where against when the construction should start – nevertheless all stakeholders had participated in the legal process



Many opponents were not formal stakeholders, they were „simply against“



Conservative people didn´t want to sacrifice their „old“ town and park for a modern station



People were against such a large investment



People were against the recent state government



Referendum gave majority in favor of the project



Elections brought a change of government (from black/yellow to green/red)

SIG Mega Projects, Primosten 04.09.2015

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Example 3: HS Railway project Berlin – Nürnberg 12 Bill. €

Chair of Project Management

Prof. Dr.-Ing. K. Spang

SIG Mega Projects, Primosten 04.09.2015

Example: HS Railway project Berlin – Nürnberg

Chair of Project Management

Prof. Dr.-Ing. K. Spang

SIG Mega Projects, Primosten 04.09.2015

Example: HS Railway project Berlin – Nürnberg

Chair of Project Management

Prof. Dr.-Ing. K. Spang

Travel time from city center to city center Train 1993 Train 2011

Train 2017 Car Plane

SIG Mega Projects, Primosten 04.09.2015

Example: HS Railway project Berlin – München: 500km

Chair of Project Management

Prof. Dr.-Ing. K. Spang

Megaprojects are „technically“ complexe projects

• 8.1, ABS Nürnberg-Ebensfeld: 83 km/230km/h …… upgrade, under service • 8.1, NBS Ebensfeld-Erfurt-: 107 km/300km/h …. greenfield • 8.2, NBS Erfurt-Halle/Leipzig: 123 km,/300km/h …. greenfield • 8.3, ABS Halle-Berlin: 187 km/200 km/h ……. Upgrade, under service • 3 large interchanges …….. Change all under service  1.200 km power cable  520 „normal“ bridges + 37 large bridges (ca 28km) .. Saale-Elsterbridge 8,6 km

 27 Tunnel (ca 64km), 22 electronic railway control centers,  81 railway level crossings, 37 stations  36.000 parcels of land

SIG Mega Projects, Primosten 04.09.2015

Example: HS Railway project Berlin – München: 500km

Chair of Project Management

Prof. Dr.-Ing. K. Spang

 Megaprojects are „financally“ complexe projects • National money (FRG) …… Ministries of transport + treasury, court of audit! • European money (TEN; EFRE) ……. regulations,europ. court of audit • 6 Federal states (GVFG ... Regional traffic) … Ministries of economy +treasury • Municipalities (EKRG ….. Crossing railway/roads) …….. • Company money (DB….. Nework/energy/stations) • 12,3 bill. € to handle with • Tendering + contracting for 12,3 bill. € • 12.000 contracts

SIG Mega Projects, Primosten 04.09.2015

Example: HS Railway project Berlin – München: 500km

Chair of Project Management

Prof. Dr.-Ing. K. Spang

MP are „technically“ + economically complexe projects  Cost increase! Start (Design): 1990 finish (service): 2017 = 27years!

Planned costs

Cost increase

1993: 12,3 bill DM

Interchanges Leipzig, Halle and Erfurt: 1,5 bill. €

1996: 14,5 bill DM

Extensions for freight trains: 700 mill €

2006: 10,3

New railway technic:ETCS, ……. New saftey standards, especially in tunnels

2011: 12.1 bill € 2017: 12,6 bill €

SIG Mega Projects, Primosten 04.09.2015

New EU obligations (natura 2000) Planing + working for 27 years: price increase about 70%

MP: HS Berlin – München: landscape and nature

Chair of Project Management

Prof. Dr.-Ing. K. Spang

SIG Mega Projects, Primosten 04.09.2015

MP: HS Berlin – München: bridges

Chair of Project Management

Prof. Dr.-Ing. K. Spang

SIG Mega Projects, Primosten 04.09.2015

MP: HS Berlin – München: working and travelling

Chair of Project Management

Prof. Dr.-Ing. K. Spang

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MP: HS Berlin – München: Infopoint

Chair of Project Management

Prof. Dr.-Ing. K. Spang

SIG Mega Projects, Primosten 04.09.2015

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MP in Germany

Chair of Project Management

Prof. Dr.-Ing. K. Spang

Conclusions

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MP in Germany: Cost and time overflow: First(?) conclusions

Chair of Project Management

Prof. Dr.-Ing. K. Spang

 Statement 1: There is not one reason, there are many/various reasons  Statement 2: Cost overflow or time overflow does not mean „project failure“

 Statement 3: „Overflow“ depends strongly from the base (phase, quality)  Statement 4: Overflow or underflow depends from culture (org./nat.)  Statement 5: Cost under estimating often has political = strategic reasons

 Statement 6: Long term projects have a big portion of price increase (20y-50%!)  Statement 7: No learning effect! Knowledge management?  Statement 8: Personal responsibilty of deciders is necessary!  Transparency

SIG Mega Projects, Primosten 04.09.2015

MP : Conclusions for Germany

Chair of Project Management

Prof. Dr.-Ing. K. Spang



Quality of base variies strongly



Many (political/business case) changes / lack of systematic change management



Lack of „risk and failure culture“ and no or not enough systematic risk management



„special“ treasury regulations, which forbid risk reserves in the budget



Complexe (very democratic) legal process for infrastructure + energy projects



Strong influence of green groups



Devised organisation (costs!) for national infrastructure projects



Many companies in the construction market/hard competition/ price decision



Relationship client – contractor more adverserial than cooperative



Cost estimations generally do not include price increase

SIG Mega Projects, Primosten 04.09.2015

MP in G: What should we do

Chair of Project Management

Prof. Dr.-Ing. K. Spang

1. 2. 3. 4. 5.

Stable base /preliminary design Consequent risk identification and management - up from preliminary design Risk buffer within budget „second opinion“ = additional expert forecast Incentives for cost reduction, optimisation, good cost performance (f.ex. Value engineering) 6. Consequent controlling (cost, scope changes) 7. Consequent and transparent change management 8. Intensive + early started stakeholder management 9. Project specific holistic organisation with a powerfull project manager 10. Gates, where 2, 3, 5, 6, 7, 8 has to be proofed 11. Cooperative contracts and not price focused procurement 12. Systematic Knowledge management

SIG Mega Projects, Primosten 04.09.2015

MP in G: What should we not do

Chair of Project Management

Prof. Dr.-Ing. K. Spang

• Systematic underestimating (politics, orgaisational culture) • Deliver cost forecast to early • Not to start bevor really clear and final scope • Underestimate new technology / pioneer projects • Project changes without systematic and transparent change management

SIG Mega Projects, Primosten 04.09.2015

Chair of Project Management

Prof. Dr.-Ing. K. Spang

Prof. Dr.-Ing. Konrad Spang Chair of Project Management University of Kassel, Germany Mail [email protected] ph +49-561-8044681

SIG Mega Projects, Primosten 04.09.2015

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