1. Improving decision-making for major urban rail projects
Context
Research purpose and approach
Key issues
A change agenda
Conclusions
Presentation to ICEA 7th July 2009
R.J. Allport BSc MA PhD DIC FICE

2. Allport ICEA Presentation
Context - metros
‘Metros’ - carry a mass ridership rapidly
When segregated – 30/40kph, capacity 35/60,000 pphd
Part-seg’d LRT
20kph and 10,000pphd.
Impacts
City efficiency
City structure + footprint
Environment
Social
Finances
High cost – for 15km line:
Elevated US$ bn
Underground US$ bn
Revenue surplus over opcosts small/negative
Capital cost requires large public funding
7th July 2009
Allport ICEA Presentation

3. Allport ICEA Presentation
Opportunity cost
Singapore’s NEL: US$3bn buys:
The budget for education + health per year…….Or
New Changi terminal +
2 Hospitals +
1 polytechnic +
5 ‘LRT’ lines +
Interim upgrading for 10% of HDB flats
7th July 2009
Allport ICEA Presentation

4. Success - before research
Parameter
Outturn compared with Forecasts
Capital cost X
Implement’n time X
Operating cost
probably X 1 – 3
Ridership
X 1/3 - 2/3
7th July 2009
Allport ICEA Presentation

5. Allport ICEA Presentation
Poor success - explanations
Flyvbjerg et al (2003):
A central tension between power and rationality
Two causes: ‘optimism bias’ (innocent) + ‘strategic misrepresentation (‘lying’)
To counter OB – benchmark forecasts [apply OB factors]
To counter ‘lying’ – increase accountability:
Public sector – proactive stakeholder part’n, inf’n made available, peer review, spec’s focused on ends not means, clear regulatory system
Private sector – competition, risk capital with no sovereign guarantees
7th July 2009
Allport ICEA Presentation

6. Allport ICEA Presentation
2. The research
Cities
0.3mn to 10mn
Income
Developing and developed
Technology
LRT to automated metro
Procurement
Public and private [7 concessions]
Purpose
Establish evidence of success
Understand causes of problems
> How to do better – practically
Method
Innovative
Interview based
9 widely differing case studies Singapore, Phil's, Thailand, UK
Focused on understanding the 10-20yr project dev’t history
Cost
US$ 0.15 to 2.15bn
Year 1 ridership
10 to170,000 pax/day
Revenues/ opcosts
0.5 to 2.1
7th July 2009
Allport ICEA Presentation

7. Research- success updated
Parameter
Outturn compared with Forecasts
Capital cost
As expected (+50 to 100%)
Implement’n time
Small overrun (0 to +50%)
Operating cost
+0 to +200% (no change)
Ridership
-33 to 67% (no change)
Research identifies recent improved delivery…… but no change in poor operational success
7th July 2009
Allport ICEA Presentation

8. 3. Key Issues – Context matters
Politics vs. technical rationality
Public finances - affordability
Sponsor authority
autonomy (powers, ability to raise funds)
capacity
culture/ ethos / transparency
Central government’s influence
7th July 2009
Allport ICEA Presentation

9. Turbulence changes everything
This should change: > planning objective > way projects dev’d > type of project The core challenge – the management of dynamic complexity
2001
2009 ?
Climate change
Energy security
Terrorism
Credit crunch
7th July 2009
Allport ICEA Presentation

10. Allport ICEA Presentation
Metros are very risky
Megaprojects > mega-important
Challenging finances – widely misunderstood
Sponsors – public sector + often inexperienced
Central gov’t guidance – help or hindrance?
Many stakeholders > mixed objectives, imp’n thwarted
Long-lived assets – inflexible in a fast-changing world
Each project unique – no template for success
Technical complexity – huge …… increasing
Many critical decisions – all need to be good
Imp’n - through city centre of largest dynamic cities
Demand - No captive passengers
Operations - Little interest by anyone……
7th July 2009
Allport ICEA Presentation

11. Sponsors matter Public Private Objectives unclear, undeliverable?
clear, deliverable
Strategic planning
poor
strong focus
Autonomy
constrained
strong
Approach to risk
transfer it
central concern
Short-termism?
dominant
lowest initial cost
much less focus
Asset m’gt
little interest
central focus
7th July 2009
Allport ICEA Presentation

12. A dysfunctional project dev’t process
Development 1
Planning 2
Implement’n 3
Operations
Led by
Planners
Engineers
Operators
Role
Identify project
Implement
to time + cost
Operate commercially
Approach to Risk
Largely ignored
Focus
imp’n only
Inherited > large
Influence on
op’l success’
Large
Modest
7th July 2009
Allport ICEA Presentation

13. Central gov’t - part of the problem?
CG usually defines the ‘enabling environment’
National policies – dev’t, transport, PSP
City plans – req’ts and content
A funding system – who pays/ carries risk?
Statutory system - for consultation, powers
Process for project identification…. and appraisal
Procurement method
UK guidance > complex, inconsistent, detailed, ever-changing? Contributes to unpredictability.
7th July 2009
Allport ICEA Presentation

14. Allport ICEA Presentation
Planning failure?
Evidence
Ineffective plans - misleading/ aspirational
Incredible forecasts – for a certain world
Inappropriate projects - not implementable, bankable, adaptable
Why? Planners are too often
Uninvolved, ‘techie’ + inward-looking
Without real-world sector experience
‘hired hands’
7th July 2009
Allport ICEA Presentation

15. 4. A Change Agenda Start on the right path…
Mindset
Strategic/ holistic…. Creative/ imaginative…
Entrepreneurial - engaged
Approach
Holistic PFS to identify feasible concepts – small experienced team, ‘back-of-envelope’ technical work
Strategic technical work + stakeholder consultation
Opportunities and downside risks
‘What next’ > efficient project dev’t process
7th July 2009
Allport ICEA Presentation

16. Infrastructure planning > that stands the test of time
Strategise before detail – experience req’d
Engaged approach, negotiating a consensus
A creative endeavour (bankers much later)
Project to be ‘ready and adaptable’
Operator influence early
Focus on stakeholders, robust technical viability, implementability (land), bankability
Formal risk management
(How to) involve the private sector?
7th July 2009
Allport ICEA Presentation

17. Forecasts that are not incredible
Role > probable outcome + risks
Risks formally analysed – opp’s & downside
Forecasters to understand project dev’t ….
Data/ models alone cannot provide ‘the answer’
> All forecasts ‘reality-checked’
Provide advice with interpretation.
Requires experience and deep sector knowledge
7th July 2009
Allport ICEA Presentation

18. Operations that are sustainable
Operations (the purpose) receive little attention
Operators have huge potential + rarely used
Operators face severe challenges, many in crisis.
Early, continuous operator influence
Concessions focused on op’l performance
Operator established contractually, regulated to provide predictable finances
7th July 2009
Allport ICEA Presentation

19. Involve the private sector?
Role Create, validate, finance, deliver, operate
Modalities
High-level Peer Review > project dev’t
Project Development Group > validate implementability/bankability/ concession structuring
Financing - £1.9bn from 5 concessions
Implement/ operate > concessions focus on whole-life
And even - plan/ develop the whole project (risky)
7th July 2009
Allport ICEA Presentation

20. 5. Conclusions – why poor success?
Metros are different – public sector interest/ sponsorship
Implications of turbulence are not recognised
Flyvbjerg’s analysis
Good analysis of accountability
Nature and cause of problems considerably more complex
Behaviour often a rational response in a difficult situation - not ‘lying’
Optimism bias not an adequate solution, indeed reduces accountability
7th July 2009
Allport ICEA Presentation

21. Conclusions - project dev’t process > requires profound change
Focus on op’l success > delivers projects ‘ready and adaptable’
Requires:
Continuity in thinking, personnel, processes
Staged decisions, delayed commitment
Risk management and the business plan central process
‘Project m’gt’ req’d to move upstream + downstream [not just imp’n]
Planner’s role to create consensus behind a good project
Critical at front-end to start on the right path
Identifying projects/ forecasts that stand the test of time.
Operator influence + focus on sustainable operations
7th July 2009
Allport ICEA Presentation

22. Allport ICEA Presentation
Policy conclusions
Metros and city sustainability are inextricably linked.
But when high opportunity cost projects ‘unsuccessful’ - decision-making fundamentally undermined.
Debate about ‘whether MRT?’ or which ‘which MRT?’ moot…..
Strong focus req’d on comparable cities/ projects + ‘what works’
Requires in-depth sector experience. Models + analysis necessary but no substitute
Metro dev’t can create huge value.
Research reveals huge endeavour and success as well as problems.
It identifies an Agenda for Change that suggests progress can be made by informed people of good will.
7th July 2009
Allport ICEA Presentation