Grieman
- 1. Deconstructing the Big Dig: Lessons Learned from the Country’s
Largest Mega Project
NASA PM Challenge 2010 Above and Beyond, Galveston, Texas
Presented By:
Virginia A. Greiman, Assistant Professor, Boston University
© 2009 V. Greiman
Used with permission
- 2. Presentation of Research
Literature review of cost escalation on mega
projects and comparison to Big Dig
Detailed analysis of cost and schedule data over life
of project
Presentation of techniques for analyzing data
Discussion of lessons learned
Recommendations for mega project managers
© 2009 V. Greiman
- 3. Existing Literature
Focus on causes of mega project cost
increases
Techniques for estimating costs
Governance and support mechanisms
Frameworks used in different countries
Little comparative research on strategies and
methodologies for cost estimation
management
© 2009 V. Greiman
- 4. Why Study Mega Projects? R & D
Laboratories
Major driver of economic development and globalization
Largest Investment of Capital Worldwide
Output of Technology and Innovation
Critical cause of poverty is lack of access to infrastructure
Resolution of political, legal and financial challenges
Absence of research on cost estimation management
Interdisciplinary
© 2009 V. Greiman
- 5. Transportation Research Board
In 2006, the Transportation Research Board’s
Final Report for Cost Estimation and
Management for Highway Projects, identified
eight strategies to address cost escalation,
and linked these strategies to 18 different
causes of cost escalation on highway
projects in the United States. Notably, the
research concluded that most efforts in cost
estimation have focused on creating tools to
improve cost estimates with less emphasis
on tools for cost estimation management.
(Anderson et. al. 2006).
© 2009 V. Greiman
- 6. Why the Big Dig?
I-90 Never Finished in 1952
10-14 Hours of Gridlock Per Day
Accident Rate Four Times National Average
Rapidly Deteriorating Structure
Improve Regional Network
Economic Stimulation
Environmental Improvements
© 2009 V. Greiman
- 9. Project Structure
State Funding Public Government
Relations/ Agency Community Regulatory
Joint Venture
Media Interests Interests And Audit
Federal Funding Board of Directors
Project Financing
TIF, GANS, GOBs
SHAREHOLDERS
(Taxpayers)
58% 100%
42%
Professional
Services Insurance
Input Project Company Output:
Labor and Materials (CA/T Project) Infrastructure
and Technology
Right of
Technology
Way Con-
Design Construction tracts
Operating &
Contracts Contracts Maintenance
1CA/T Project Structure”
Contract
© 2009 V. Greiman
- 10. Project Organization
Central Artery / Tunnel Project
Interface MTA Chairman
MTA Positions
MTA MTA Project MTA General
Headquarters Director Counsel
Legal
B/PB Program
Quality
Manager
Risk
Management
Claims &
Design Construction
Changes
Public
Information Design Chiefs Design Mgmt.
Construction Construction
Geotech Human Services Management
Fiscal Area Area
Resources
Civil/Structural
Tech Support
P.E. P.E. Safety Area Area Area Area
Bridge
Lab
Accounting Architecture P.E. P.E. R.E. R.E. R.E. R.E.
Cost &
IPCS P.E. P.E. Schedule Experts - R.E. R.E. R.E. R.E.
Internal Means/Methods
Controls Traffic Engr.
P.E. P.E. R.E. R.E. R.E. R.E.
Metals
Traffic Mgmt. Closeout/Training
Procurement R.E. R.E. R.E. R.E.
Environmental
Administrative Rowars Utility Maint./Cond. T.O.
Services Elect./Mech. Contractors
Special Projects
© 2009 V. Greiman Information Tech.
Maint. of Traffic Milestone
Engr. Services Managers
- 11. Cost History And Scope Evolution
The Central
Artery/Tunnel Budget
1985-2007 - $12B 14,475 14,625 14,785
14,075 Owners
Growth from 2.5 B - Contingency
$14.789
10,468 10,841
Inflation
7,886 7,972 8,000
7,658 Accounting
7,740 Changes
5,810
5,780 5,187 5,597 Scope,
Schedule
and
Pricing
4,436 4,317
3,963 Changes
3,708 (1982 $)
2,564 3,409
Original
Scope
1985 1989 1991 1992 APF 1994 1994 2000 2001 2002 2006
ICE
EIS © 2009 V. Greiman APF w/NCRC CSU6 CSU6 CSU7 CSU8 CSU8 CSU9
w/Inflation 1997
Rebaseline
- 12. Eurotunnel Facts
Project cost twice as much as original estimates.
Project finance included a suspension of interest
payments and conversion of debt to bonds.
Project risks included a fire that damaged image and
revenues.
Enhanced environmental, safety, and security
demands increased cost.
Project was initially weakly staffed through
seconded employees.
Contracts were less tight than normal for a project
financing of this size.
Bent Flyvbjerg, Megaprojects and Risk, p. 97-98
© 2009 V. Greiman
- 13. Why are Mega Projects Consistently
Underestimated?
A review of large public works projects
over the last century concluded that
costs are consistently underestimated,
a phenomenon attributed to the desire
of the project advocates to have their
projects approved.
(Flyvjberg 2002)
© 2009 V. Greiman
- 14. Underestimation of Costs is the
Rule Rather than the Exception!
“The difference between actual and
estimated investment cost is often 50-
100 per cent, and for many projects cost
overruns end up threatening project
viability. Underestimation of costs at the
time of the decision to build is the rule
rather than the exception for
transportation infrastructure projects.”
(Flyvjberg 2002 and 2006)
© 2009 V. Greiman
- 19. Jacked Tunnel
Process
•Jacking Pit Constructed
•Freeze Pipes Placed
•Ground Frozen over 3-4 mo.
•Tunnel Segments built
•Tunnels Jacked 3 ft/day
© 2009 V. Greiman
- 22. Modification Cause by
Volume 13,490
Scope Transfer
Change
Different Site 695 - 5%
Condition
Design
2,411 - 18%
Development
4,975 - 37%
3rd Party
966 - 7%
Schedule
Adjustment
Other 372 - 3%
© 2009 V. Greiman
As of September 30, 2004
- 24. Common causes for cost escalation
Failure to include a cost for inflation in each
contract and actual rate of inflation greater
than planned estimate
Delays in project completion
Financing shortfalls and interest rates
Scope changes
Shortages of materials and labor
© 2009 V. Greiman
- 25. More causes for cost escalation
Price increases and market changes
Weak project managers
Technical and design complexity
Unexpected events and force majeure
© 2009 V. Greiman
- 26. Unique Factors in Big Dig Cost
Estimating
Impact of Long Term Agreement
Demands of Public Relations
Subsurface Conditions
Enormous volume of claims and changes
Enforcement of safety, quality, budget, and
schedule
Management of Political and Regulatory Risk
© 2009 V. Greiman
- 27. Unanticipated Site Conditions
Uncharted utilities
Obstructions
Ground water conditions
Environmental problems
Archeological discoveries
Weak soil and hazardous materials
Design changes
Change in milestones
© 2009 V. Greiman
- 28. Cost History And Scope Evolution
Environmental / Mitigation
15%
Scope
Growth/Claims
& Changes
15%
Inflation
55%
Traffic
5%
Schedule
Contingency
Maintenance
Other for
3%
5% Unknowns
2%
© 2009 V. Greiman
Total change from $2.6B to 14.6B = $12.0B
- 33. Lessons Learned
The importance of calculating inflation
from the inception of the project
Monitoring and managing the impact of
changes
Critical factors analysis
Similar factors cut cross all projects
© 2009 V. Greiman
- 34. Recommendations
Study the historical data from mega project
– the patterns in the data are valuable indicators of trouble.
– Recognize the limitations of the assumptions in
historical projects with comparable
characteristics.
Identify the attributes of the project that will grow
and change over time.
Recognize that the accuracy of cost estimates vary
throughout the project.
Adopt a baseline for cost control during inception
and update the baseline when schedule, scope and
quality change.
© 2009 V. Greiman
- 35. More Recommendations!
Enforce project standards and
requirements on all project contractors.
Utilize contingency reserves and
management reserves solely within the
framework for which they are
maintained.
© 2009 V. Greiman
- 36. The Most Important Recommendations!
Establish an open and transparent process!
– Throughout the project
– Necessity for accurate and realistic estimation and
budgeting
Plot instantaneous data
– No matter what the accountants say!
– Every blip is a management decision
Do your own analysis
– Use the primary data
© 2009 V. Greiman
- 37. References
Anderson, S., Molenaar, K., Schexnayder, C. (2006, September) Final Report
for NCHRP Report 574: Guidance for Cost Estimation and Management for
Highway Project During Planning, Programming, and Preconstruction. National
Cooperative Highway Research Program, Transportation Research Board of the
National Academies. 52, 55, 56
Flyvjberg, B., Holm, M. and Buhl, S. (2002). Underestimating Costs in Public
Works Projects, Error or Lie?, Journal of the American Planning Association,
Vol 68, No. 3, American Planning Association, Chicago, Illinois 279-295
Flyvbjerg B., Bruzelious, N., and Rotherngatter, W., (2006) Megaprojects and
Risk, Cambridge University Press
© 2009 V. Greiman
- 38. Contact Information
Virginia A. Greiman
Assistant Professor
Boston University
617-353-6860
ggreiman@bu.edu
© 2009 V. Greiman
