elevated city train stationThere are many examples in the field of construction where the final cost of public infrastructure has far exceeded the initial budget. In this article, we will comment on some of the most striking cases of Spanish architect Santiago Calatrava and how adequate project management could have solved the budgetary problems derived from poor administration of the resources. 

Santiago Calatrava is a Spanish architect born in the early 50's in the city of Valencia. His main creations include large urban structures that redefine the landscape and the city environment. In the beginning, his work begun to reap a lot of success in Spain, especially in his home town of Valencia. Now his work can be seen in European capitals and other parts of the world.

As a result of his brilliant career, he has received awards of international esteem such as the Prince of Asturias Award (1999) or the National Architecture Prize (2005).

However, his career has also been littered with controversial media related to the low functionality and high overhead of his buildings. We will review some examples.

Ground zero station (New York)

After the fateful attacks of 11 of September of 2001, the City council of New York and of New Jersey wanted to construct a new terminal station designed to connect the PATH to the New York City Subway.

The original concept of the project was a structure that evoked the wings of a Phoenix. In the same way a phoenix resurges from its ashes, New York City in particular and the United States would be able to re-construct from the personal and institutional damage produced by the attacks.

Originally, the Valencian architect presented an estimated project of 1.8 billion dollars. After a series of extensions and extra costs, the construction ended considerably later than planned and with an extra cost that almost doubles the original forecasts.

For its final cost, it earned the "honorable" title of being the most expensive station in the world. Compared to New York’s famous Grand Central Station, after taking into account the original budget of this station and adjusted for inflation in the years since its construction began, Calatrava’s station has doubled the cost of Grand Central Station.

On the other hand, if we compare this with other public infrastructures, such as the George Washington Bridge, known as the most crossed bridge in the world in terms of people and vehicles, we see that it presented an overrun of approximately four times more. Of course, for these calculations we have adjusted the cost of the bridge for inflation.

It could be argued that a higher cost might be justified by greater utility or the expectation of obtaining a higher economic return from its use. Analyzing the specific case, the New York station built by Calatrava does not meet this criterion.

Calatrava’s station amasses a daily passage of approximately 42,000 passengers, which is hugely contrasted by the 208,000 that transit through Grand Central Station.

Taking into account the data previously used stating that Calatrava’s station is double the cost of Grand Central Station, we can deduce that the daily cost per passenger ends up being approximately 10 times more.

In short, this project, despite resulting in a spectacular monument, has failed to meet the needs of customers and has not respected the original budgets.

Other monuments by Calatrava with similar problems

Although the works of Calatrava are spread throughout the world, some of the most representative works at national and international level and that have presented management problems similar to those of the Ground Zero Station in New York, are the following:

  • The Reina Sofía arts palace and the Agora of the City of Arts and Sciences in Valencia. The construction, currently part of the landscape of Valencia, involved a significant overrun with respect to the original budget and at the time, also had serious maintenance problems.

  • Puente Zubizuri (Bilbao), Vistabella bridge (Murcia), Alamillo bridge (Seville), suspension bridge (Jerusalem) and some others. All of these bridges have presented problems soon after construction. In some cases, the stability of the structures was affected, which has meant it necessary to introduce components that were not in the original plans. In other cases, the problem lay in practical utility. For example, the floors had been constructed of glass, with the consequent risk of slips for pedestrians. After some denunciations by these, the usual solution established by the municipalities has been to cover them with carpets, which again increases the cost of the project and also subtracts aesthetic beauty from the result.

  • Obelisk of the Caja in Plaza Castilla (Madrid). This monument, commissioned by Caja Madrid to celebrate the 300th anniversary of its foundation. It was originally designed to be moving. Just two days after its inauguration, the mechanism began to fail, so it had to be stopped. Since then, he has been stationary.

How to solve these problems through project management?

Proper project management has much to contribute in cases such as these. Some of the tasks that a project team can perform through the appropriate systems are:

  • Construct realistic budgets, that satisfy the needs of the project without extra costs.

  • Carry out useful projects for the intended end result. Synchronizing the complexity of a project to the practical needs. The correct alignment between the project and the needs of the clients is what guarantees the final satisfaction and allows for entering issues into the budget that are going to imply an added value in the face of customer satisfaction.

  • Make constant measurements of the budgetary status, to ensure that, throughout the evolution of the project, it continues to be respected. If this is not the case, detecting deviations early will allow the appropriate corrective measures to be taken.

  • Getting a project to have the desired reach not only in utility and functionality, but over time. Selecting the materials and methods of construction that obtain a satisfactory product for the client, also in terms of its usefulness.

  • Predict possible difficulties or risks that may arise during the execution of the project, and take the necessary measures to mitigate their effects or to look for alternatives in case they arise.

  • Provide solidity and reliability for the company during this project and for future projects. A company that fulfills its word in terms of budgets and quality of the final product supplied has guaranteed customer satisfaction and a greater brand image that will in turn attract more clients in the future.

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Throughout the history of mankind, there have been various ecological catastrophes that have shaken public opinion because of the serious effects they have had on natural resources and human health. Surely some of these would come to mind: The Exxon Valdez disaster, which affected the coasts of Alaska, Fukushima or Chernobyl and their respective nuclear accidents; or the depletion of the Aral Sea to 10% of its original size due to canal diversions by the Soviet Union for irrigation purposes.

With proper project management, such accidents or catastrophes in most cases could have been avoided, as we will discuss in this article. By using one of these real cases, you will understand how most of the problems that arise and that we may think are inevitable, can be anticipated, managed and avoided in a more effective way, thereby reducing impacts and their consequences on our environment.

Water pollution in Flint, Michigan Downtown Flint MI, on Tuesday, October 4, 2016 U.S. Department of Agriculture (USDA) Food and Nutrition Service (FNS) Disaster Household Distribution Program (DHHDP) activities by Genesee County Community Action Resource Department (GCCARD), are helping those in need. USDA Foods are being packaged and delivered to 17,000 households eligible for The Emergency Food Assistance Program (TEFAP) in the Flint area to help address the ongoing water crisis. DHHDP packages are prepositioned in shopping carts in the onsite distribution area that includes receptionists, commodity shelves, assistants, and checkout counters. The DHHDP consists of an additional 14-pound nutrient-targeted food package, containing foods rich in calcium, iron, and Vitamin C – which are believed to help limit the absorption of lead in the body. This number of boxes will be distributed each month for four months. The food is in addition to the regular allotment that TEFAP recipients currently receive. The packing line team included Michigan government employees volunteering their personal time produced hundreds of Commodity Supplemental Food Program (CSFP) and TEFAP packages. CSFP works to improve the health of low- income elderly persons at least 60 years of age by supplementing their diets with nutritious USDA Foods. USDA photo by Lance Cheung. For more information about USDA -- www.usda.gov For more information about FNS -- www.fns.usda.gov For more information about Disaster Nutrition Assistance Programs, including DHHDP -- http://www.fns.usda.gov/sites/default/files/disaster/Disaster-Brochure.pdf For more information about CSFP -- http://www.fns.usda.gov/csfp/commodity-supplemental-food-program-csfp For more information about TEFAP -- http://www.fns.usda.gov/tefap/emergency-food-assistance-program-tefap @USDA

A particular case that may sound familiar recently affected the residents of Flint, Michigan. The economic crisis that has hit much of the planet during the past decade was also felt in Flint, which faced a huge financial debt. To try to reduce its debt, it was decided that a new source of drinking water was to be used. Instead of bringing it from Detroit, it was sourced from Lake Huron, enabling the city to save about $2 million a year, which, considering the situation at that time, would mean some relief. However, to bring it to the city from this new source took time - about two years -, therefore a new source had to be selected so that the residents could continue to have fresh drinking water. It was then decided that the Flint River, which practically crossed the city, would be the solution, which was then implemented in 2014.

However, this was not the solution, but rather the source of their problems. After its first introduction, residents complained of its salty smell and taste. Moreover, the bacterium E. coli was detected and the water analysis determined very high levels of carcinogenic substances and trihalomethanes. As if all this wasn’t problematic already, there was an additional fear that the General Motors factory would have to stop using the water because it was corroding parts of its facility. The water from the river Flint was transferred through pipes that contained lead, which dissolved into the water. This can generate problems, specifically with the nervous and cognitive systems, known as lead poisoning, one of the causes that historians argue to explain the fall of the Roman Empire.

A management possibility for avoidance

Could all of these problems been avoided? It seems that the obvious answer is yes. It is true that the causes were external, with the crisis and the financial situation of the city council. However, a necessary step that was neglected was taking into account the characteristics of the pipes that were carrying the water from the river to the city: these pipes were about a hundred years old and heavily corroded. All of these elements should have been considered and taken into account during the first phase of the risk management process: identification. Focusing only on one element, such as the need to save money, and ignoring the rest was the likely cause of the disaster.

Once this identification process was concluded, both the pipes’ age and lead content should have been observed in the next phase of analysis. In the third phase (evaluation) the magnitude of the risks should have been prioritized.

In Flint, a greater importance was attached to the economic issue rather than to human health, when it should have been otherwise.

Once this process is done, next should be the treatment phase: what can be done to avoid impacts that can be considered catastrophic? And here the process and control of corrosion would have cost between $80 and $100 per day. With that cost and planning they would have saved all the difficulties in the aftermath. If it had been done, it would only be the last phase, the monitoring phase, a simple verification that the systems worked during the time that the works took place.

Due to the consequences of the disaster, for two years Flint’s inhabitants have had to endure non-potable water and between 6,000 and 12,000 of the residents have developed excessive levels of lead in their blood. All this to end up reconnecting the city to the Detroit water network, the same initial situation. This is a great example of extremely serious problems that should be avoided using risk management techniques and tools.

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Keyboard key, fail, Thumb turned down

"The fastest way to succeed is to double your failure rate."

Thomas J. Watson Sr., Founder of IBM

While this quote is by no means dogma, nor a desirable way to obtain success, a plethora of companies have had to experience, and learn from, great failures. Finding and scrutinizing reasons for failure is a crucial part of the project management cycle. Here are three examples of the most disastrous project failures in history:

 

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Fail 1- Denver International Airport's Automated Baggage System

Who failed?

Denver International Airport (DIA), the largest airport in the United States by total land area, and the 6th busiest by passenger traffic.

What were they trying to achieve?

In 1991, DIA attempted to remodel and upgrade the arduous, time-consuming luggage check-in and transfer system. The idea involved bar-coded tags being fixed to each piece of luggage that went through 'Destination Coded Vehicles'. This would fully automate all baggage transfers, integrate all three terminals, and reduce aircraft turn-around time significantly.

Why did they fail?

We know that the five key variables all project managers have to deal with are scope, time, cost, quality, and risk. If each of these had a check box next to them, DIA would have a big, fat, red cross in every single one.

When DIA contracted BAE Systems to develop the automated baggage handling system, they completely ignored BAE's projected timelines, instead stubbornly sticking to their unrealistic 2-year schedule. The project was underscoped, and management took on unnecessary amounts of risk. Perhaps the most detrimental decision was to not include the airlines in the planning discussions. By omitting these key stakeholders, features catering to oversized luggage, sport/ski equipment racks, and separate maintenance tracks were not designed appropriately or at all.

Large portions of 'completed' works had to be redone, the airport opening was delayed by 16 months, and losses of approximately $2 billion were incurred. The entire project was scrapped in 2005.

Fail 2- The NHS' Civilian IT Project

Who Failed?
The National Health Service (NHS), England's publicly funded healthcare system, the largest and oldest in the world.

What were they trying to achieve?
The project aimed to revolutionise the way technology is used in the health sector by paving the way for electronic records, digital scanning and integrated IT systems across hospitals and community care. It would have been the largest civilian computer system in the world.

Why did they fail?

If you were to pinpoint the project's major downfall, you would need a lot of pins. Contractual wrangling plagued the NHS from the outset, with changing specifications, supplier disputes and technical problems pervasive throughout the project's doomed existence.

Unrealistic expectations of both timelines and costs were not helped by inadequate preliminary research, failure to conduct progress reviews, and a clear lack of leadership. The project has been referred to as the 'biggest IT failure ever seen' and 'a scandalous waste of taxpayers money'. Estimates of the damage inflicted upon British citizens fluctuate, currently hovering precariously around the £10billion mark.

While the benefit of hindsight elucidates how the politically motivated nature of the top-down project was never going to suit the localized needs of the NHS divisions, it is yet to be seen whether the ambitious project will ever be re-attempted.

Fail 3- IBM's Stretch Project

Who Failed?
International Business Machines Corporation (IBM), the multinational technology and consulting corporation that consistently lies in the upper echelons of global brand ranking lists.

What were they trying to achieve?

In the late 1950s IBM set out to design and build the world's fastest and most technically advanced computer, the IBM 7030 Stretch supercomputer. The computer would be 100 to 200 times the speed and performance level of its nearest competitor, thus 'stretching' the existing limits of computer design. This ambitious and impressive target resulted in its price being set at $13.5 million.

Why did they fail?

The project leader, Stephen W. Dunwell, later recalled that what made the project so complicated was that "many more things than ever before had to go on simultaneously in one computer." Engineers faced a conglomerate of challenges in designing and manufacturing many elements of the ground-breaking system; a load-sharing switch which would allow the use of transistors to drive the ferrite-core memory was amongst these problems.

The overly optimistic forecasts meant that project timelines and costs were severely overrun. Additionally, when the first working version of the Stretch was tested in the early 1960s, it was only 30 times faster than its predecessor. This was seen as a dismal failure, and the price of the systems that had already been ordered were cut to $7.78 million, below cost price.

There was a silver lining, however. The manufacturing, packaging, and architectural innovations Stretch had fostered were the cornerstone to many of IBM's future developments, and helped catapult them to the forefront of the industry. If such lofty expectations had not been set at the time, perhaps the project could have been a success. Alas, Stretch is resigned to the history books as being part of 'project management failure' lists such as this.

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phone, dollar, manifying glass, balance, credit card, calculatorOne of the main functions of the CIO is to estimate and plan projects that will take place in the near future. And this, for some management positions requires pure reflection and strategic vision, from the CIO. Which represents an extra capacity of creating consensus and balance among the C level.

Let’s suppose that the organization where you work is proactive and start budgeting for the following year a few months before it begins. Say that the CIO has the task of drawing up a list of projects that will be implemented next year. In addition, of course, to value that list economically, plan the resources available, align it with the overall company strategy, etc.

"For the CIO it becomes a test of ability to search for consensus and balances"

The demand will have to be considered, which shall consist of the ideas and needs of all other organizational units.

Many of you will agree with me that the demand for business units do not usually come in an orderly manner.

This scenario, repeated year after year, can be relieved or hindered depending on organizational culture factors: the more mature ones will have orderly processes tabulated that will make this process, in theory, a path of roses. But this is not always the case, right?

The proposal we are making in this article to survive the planning and budgeting processes, which is to link the rest of the management team with the criteria for project evaluation and selection in order to find consensus in the early stages of the process.

Basically, it is articulated through a weighting system in stages, trying to isolate each one of them until it reaches a stage of selection. Let's look at it in more detail.

Phase 1. Assess business objectives in the planning and budgeting

Nothing to do with the projects. Simply extract the objectives and criteria of the strategic plan and assign values.

There are several methods to do this. In this case we have chosen the "pairwise comparison". Although we might have used the "ask the boss" or any other more orthodox methods.

planning and budgeting

With this method (either executed in an application or in a spreadsheet) we will obtain an assessment of the objectives, putting one over another, which is what we want at the end.

This is an example resulting from the previous comparison between pairs.

planning and budgeting

The key to this process is not so much the correction from the point of view of content, but rather the composition of the people who made this assessment: for a CIO concerned about the alignment of IT with the business and the subsequent support of the organization projects, it would be essential that this step is performed by the steering committee. This will be allow him to be personally detached of the foundation of future decisions.

In large organizations, this process can be repeated by business units which will not necessarily prioritize objectives in the same way.

Phase 2. Assess projects against these targets

The next step is to make comparisons of the value contribution of each project to each of the business goals.

In this case, we decided to use a qualitative method with Harvey Balls, where projects are rows and columns objectives. Here we say if the project adds value to the goal or not so much.

planning and budgeting

As in the previous case, these evaluations provide a "base 100" scoring for projects. But the key here is that the projects are not valued in relation to themselves, but are weighted by the prior evaluation of the objectives.

The result would be something like this:

planning and budgeting

Phase 3. Selected projects

Now it will be easier to select projects that may or may not be undertaken, with budget constraints according to value creation criteria.

planning and budgeting

In conclusion:

The work life of the CIO could be greatly simplified:

  • Because it has implied other directors in valuations, especially the one related with objectives and criteria.
  • Because it provides a scientific and professional decision-making support system.
  • Because it encourages the rest of the organization to have a cross-company and objective view of the initiatives

This short article aims to offer a proposal to focus strategic planning of projects in a solid form and strengthen the role of the CIO in organizations. We encourage you to leave any thoughts in the comment box below.

 

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