The Three Gorges Dam, the Water Cube, the Bird’s Nest (all in China); the Burj Khalifa in Dubai; the Boeing 787 Dreamliner and Lockheed Martin F-35 Joint Strike Fighter — what do they have in common?
All are among some of the greatest engineering and architectural masterpieces of our times. But they have also become symbols of institutional excess that provide cautionary tales for cities like Atlanta building large stadiums and mulling other ambitious projects.
For one, these complex, expensive and ambitious ventures, known as “megaprojects,” can be viewed as the legacy of the leaders behind them. Chinese leaders took special pride in displaying the Bird’s Nest Olympic Stadium for a worldwide audience.
Turkey’s Prime Minister, Recep Tayyip Erdogan, another political figure vying for world attention, has launched such projects as the third bridge over the Bosphorus,and the third airport in Istanbul, which is planned to have the world’s largest passenger capacity. He even proposed a Channel Istanbul project, a massive canal which would make Istanbul one of few cities in the world with a sea passage, connecting the Marmara Sea to the Black Sea. If completed, this self-proclaimed “wild project” would surely figure prominently in his legacy.
Megaprojects are often carried out by leading contractors in collaboration from multiple countries. The Lockheed Martin F-35 Joint Strike Fighter is primarily funded by the U.S., with the participation of the United Kingdom and seven other countries: Italy, the Netherlands, Turkey, Australia, Norway, Denmark and Canada. These global partnerships provide essential technology transfer and innovation and make a positive economic impact on the economies of partnering countries. They also improve opportunities for industrial participation worldwide.
Yet they’re also fraught with many problems, including complexity and uncertainty that often lead to cost overruns, significant delays, corruption and negative environmental impacts. These often create simmering social conflicts. In Turkey, dissension over the construction of a third airport has led an Istanbul court to order it suspended.
Brazil is another country finding out the limitations of economic development projects for quelling social unrest. Just days away from hosting the 2014 FIFA World Cup, many stadiums, roads and airports are yet to be completed. The most expensive FIFA World Cup in history is likely to cost the Brazilian government about $14 billion. But the social costs could be even higher. Overspending on the World Cup has sparked street protests, which led the government to announce a $900 million investment in its security forces to make the 2014 World Cup “one of the most protected sports events in history.” Unfortunately, this could create a vicious cycle of problems.
Our team of researchers recently put together some recommendations to help governments and project operators ensure they’re managing megaprojects efficiently and mitigating risks. In this paper, we outline some of roadblocks leaders face as they attempt to recruit and sustain these landmark projects.
Take the “sunk cost” effect. After investing billions of dollars into the project, the operators or governments often choose to complete the project at all costs and become reluctant to leave the project or make adjustments. They plow ahead without realizing that money spent already is a sunk cost that cannot be recovered.
Others go to extreme and sometimes illicit measures to win bids. One prime example of an international scandal that recently hit the headlines: allegations that a Qatari official paid more than $5 million in bribes to FIFA members to gain the bid of the 2022 World Cup.
There will always be new proposals for big construction projects around the world. Sponsors of these projects should heed the lessons learned from past failures and successes. Our new study offers a prescription based around “the Three C’s”: Control, Communication, and Caution.
Keeping constant control over the costs and timeline, communicating steadily with partners and stakeholders, and staying cautious and prepared against potential environmental and internal risks will increase the chances of success for these substantial undertakings.
As the Atlanta economic development community is finishing a streetcar, fighting for a port deepening in Savannah and readying to build two new stadiums by 2017, leaders ought to be ready to defend against these potential challenges.
Read the full study in International Business Review: Managing Global Megaprojects: Complexity and Risk Management
Ayse Ozturk is a Ph.D. Candidate in Marketing & International Business at Georgia State University. She can be reached by email at firstname.lastname@example.org.
S. Tamer Cavusgil is executive director of the CIBER at Georgia State University, where he is also Fuller E. Callaway Professorial Chair. He can be reached at email@example.com.