Mega-projects and Risk by Bent Flyvbjerg, Nils Buzelius and Werner Rothengatter (Cambridge 2003)

Mega-projects (The changing politics of Urban Public Investment, by Alan Altshuler and David Luberoff (Brookings Institution 2003)

These books were published around the same time and have a shared focus on mega-projects. They respond to growing concerns about the viability of mega- projects in an increasingly complex and litigious world and to increasing suspicion about the motivation behind many such projects. Public works and defence contracts have long been vehicles for corruption in many countries and the aura of secrecy which surrounds most of them does not inspire confidence.

"Mega-projects and Risk" is a scholarly work which analyses a small number of key projects in unusual depth. These projects are the Great Belt Bridge in Denmark, the Øresund link between Denmark and Sweden and the Channel Tunnel. All were pioneering in nature and scope, and were driven by political ambition and technical hubris. The Danish projects were carried out by state owned enterprises; the Channel Tunnel was totally funded by risk capital. Among the issues explored in depth are:-

• The political conflicts in inter-country projects (most could have been foreseen)

• Exaggerated traffic growth forecasts (not properly tested for unexpected factors)

• Failure to explore downside possibilities and impact (risk seen as neutral or upside)

• Failure to do comprehensive risk assessment at the feasibility stage(reacting to risk later)

• Failure to develop and explore worst case scenarios (extreme impact of disasters)

• Failure to manage public involvement (confusing special interest groups with public interest)

• The relative merits of "build, operate, transfer" (BOT) and "build, own, operate, transfer" (BOOT) schemes

(Euro tunnel started as a construction consortium and evolved into a BOOT plus concessionaire in order to recover costs which were twice those originally planned. The Danish projects were managed by a state owned enterprise (SOE) and were close to budget).

The authors identify four instruments for accountability:-

• Greater transparency and public scrutiny

• Performance specifications which can be monitored and audited

• An explicitly formulated regulatory regime

• Involving risk capital (at least one third) to sharpen the process

"Mega projects and Risk" moves the platform for mega-projects away from national or personal ambition towards one which involves society in a holistic and open process. It does, however, miss a trick in not exploring the use of scenario planning in the scoping of projects and the analysis of risk. Where a process is holistic and open the need for consultants and other middlemen is sharply reduced and the ability to control costs and specifications is enhanced. This book offers a better process for mega-projects in the interests of society as a whole.

"Mega-projects" is a strangely narrow book focussed solely on US experience and on urban public investment. Compared with "Mega-projects and Risk" it seems old fashioned and its main concern seems to be the politics of mega-projects rather than the design management and costs/risk control which are the focus of the European book. "Mega projects" traces the post war history of transport investment in the USA, beginning with the heavy expenditure after World War II to upgrade a system that was tired and misdirected (following population and activity movements). In the mid 1960s expenditure fell due to funding and lobbying problems before a slow recovery from 1985 onwards. After the war development had high priority and considerable damage was done to historic infrastructure. Conservation only became an issue in the 1970s (a period of protests and greater social conscience). The planning motto became "do no harm" - in the Bush era this has changed to "let it rip".

The political difficulties of securing planning permission from the 1980s onwards has led to the practice of expanding projects beyond the obvious need in order to make them "essential" (and difficult to oppose). The Boston Central Artery Project was expanded to include a tunnel to Logan Airport to overcome business objections. It is now essential that projects appear costless to local voters, hence underpricing and adding costs as "extras", together with ultra long term private finance. Post 1945 high tax revenues had made government sympathetic to mega-projects. Decades of tax cuts have forced funding into the future through borrowing. Federal aid for projects is now a rarity and local government needs to build local coalitions to implement the projects it needs. With activists becoming more aggressive and adept at using the courts, the future of mega-projects is clouded. The authors support the idea of local referenda to force planning permission but funding remains controversial. It seems likely that the era of politicians exploiting "pork barrel" projects may have ended - only projects with public support seem to have a future if they can be privately funded. The authors seem to have boxed themselves in, and have failed to see the US situation in a global context. Will the future of funding US mega-projects be in the hands of foreign lenders? After all who built their original railroads?

Adrian Davies - June 2004