CIB World Building Congress 2007 11

CIB2007-396

Managing mega construction projects

- learning from two case studies:
London Underground’s Jubilee Line
Extension and BAA’s Heathrow
Terminal 5
Keith Potts

School of Engineering and the Built Environment, University of

Wolverhampton, Wulfruna Street, Wolverhampton WV1 1 SB, UK
Tel: 01902 322257; email: [email protected]

ABSTRACT

The successful management of mega construction projects is immensely

challenging with huge potential risks. These projects often have a
significant impact on national economies or the financial stability of private
companies.
The aim of this research is to seek to identify project management
best practice through the examination of London Underground’s Jubilee
Line Extension and BAA’s Heathrow Terminal 5, using the 22 hypotheses
identified in Morris & Hough’s book The Anatomy of Major Projects as a
template.
The research has established that the JLE was beset by problems
not helped by the traditional adversarial contracts. In contrast the
enlightened project management philosophy adopted by BAA on the
Heathrow T5 in which BAA took all the risk and significantly harnessed the
“intellectual horsepower” through the use of integrated teams has proved
highly significant. Morris & Hough’s 22 hypotheses have been found to
provide a relevant framework and 4 additional hypotheses have been
identified.

KEYWORDS: Project management, mega projects

12 CIB World Building Congress 2007

1. INTRODUCTION

The management of major projects poses special challenges. They are

larger, more complex and offer greater risks and rewards, both to society
as a whole and to those directly associated with them. Furthermore, major
projects are particularly challenging to the participants because they
combine complexity with time pressures and often touch on sensitive
political and environmental concerns.
It was estimated in 1999 that there were more than 1,500 large
engineering projects worldwide (each worth over US$1 billion) at different
stages of financing or construction, in sectors such as oil, power,
transportation and manufacturing. Furthermore, the number, complexity
and scope of the projects have been increasing rapidly over the last few
decades (Miller & Lessard, 2000).
Over the years several guides have been produced in order to help
participants better understand the project management process on major
projects. The National Economic Development Office’s Guidelines for the
Management of Major Construction Projects (NEDC, 1991) identified the
importance of the strength, calibre and leadership of the project manager,
the requirement for co-operation of all working on the project and the need
to freeze designs before proceeding with construction.
The U.K. H.M. Treasury Guidance No 36: Contract Strategy for
Major Projects noted that the contract strategy has a major impact on the
timescale and ultimate cost of major projects (H.M. Treasury, 1992).
The Major Project Association’s Beyond 2000: A Source Book for
Major Projects (MPA, 1994) identified the reduction in the role of the public
sector and the move towards new and inventive forms of funding and
ownership together with technology advances in IT and growing
sophistication in project management techniques. Since publishing the
Source Book the MPA have continued to press ahead with an active
programme of seminars, investigations and case studies and made
summaries of this knowledge available to all via their website
(http://www.majorprojects.org/).
In the late 1990s an international team led by research director
Roger Miller examined sixty major projects in different industries and parts
of the world in order to identify best practices (Miller & Lessard, 2002). The
authors emphasised the importance of solid front-end work as a critical
success factor identifying that as much as 25% of the total project cost
might be spent on exploration of issues pertaining to coalition building,
governance, adequacy of institutional framework, the role of the state,
population support, and the ecological, social and economic aspects of the
project.
CIB World Building Congress 2007 13

2. RESEARCH METHODOLOGY

The aim of this research is to compare and contrast two different large
engineering projects: London Underground’s public sector £3.5 bn. Jubilee
Line Extension which was completed in December 1999 and BAA’s private
sector £4.3 bn. Heathrow Terminal 5 due for completion in March 2008.
The projects are compared using the 22 hypotheses identified in
Morris & Hough’s Anatomy of Major Projects: A Study of the Reality of
Project Management (1987) as a template. In this book Morris and Hough
examined in detail nine case studies in a variety of sectors including civil
engineering, aerospace, railway, nuclear power, oil, IT and space
exploration. The identified hypotheses will be tested based on a thorough
review of the relevant published material, in order that lessons can be
learned and best practice identified.

3. CASE STUDY 1 – LONDON UNDERGROUND’S JUBILEE LINE

EXTENSION

In 1989 London Underground’s Jubilee Line Extension, which linked

Westminster to the Docklands and beyond to Stratford was reborn after
previously being abandoned. This project was initially estimated to cost
£1bn with £400m. being provided by Canary Wharf Property developer
O&Y. This mega civil engineering project comprised more than 30 major
projects embracing 22 km of new running tunnels, four under-river
crossings, 11 new stations and complex E&M installations.
The contracts were let based on the JLE Conditions of Contract - a
th
hybrid of the ICE 5 edition and the international FIDIC form, modified by
the Hong Kong MTRC and Singapore MRT. The civils contracts including
the stations were let on the basis of remeasurement contracts with Interim
Payment Schedules (IPS) based on defined milestones within four cost
centres. In contrast the E&M contracts, which represented 30% of the total
cost, were let on the basis of design and construct contracts based on
conceptual designs and performance specifications with schedules of
prices.
Construction work commenced in December 1993 with an intended
completion date of June 1997, in the event the line was opened in
December 1999. The project was delayed throughout its life cycle by four
major events: an 18 month moratorium while private sector funding was
secured; the collapse of the Heathrow Express tunnels using the NATM
system which impacted on three of the most complex JLE contracts, failure
of the Moving Block Signalling system and the decision to site the
Millennium Dome at Greenwich.
14 CIB World Building Congress 2007

The projects were tendered in a period of industry recession and

the bids were relatively low (“bid low – claim high”); critically the working
drawings at tender award were incomplete. The project was plague with
changes to the programme, which caused delay and disruption, with
extensions of time and acceleration resulting in substantial claims.
Additionally there were considerable co-ordination problems at contract
interfaces. In the event the IPS payment system, which had worked well in
Hong Kong, became difficult to operate and discouraged collaborative
working.
The project was opened in time to provide an underground
transport link to the Millennium Dome and despite facing considerable
space constraints the architects rose to the challenge to provide
memorable station architecture, viz. Foster Associates’ Canary Wharf
Station.
The project cost nearly 70% more than the approved budget (£2.1
bn. to £3.5 bn.) and overran by 20 months (53 months to 73 months)
(Mitchell, 2003).

4. CASE STUDY 2 - BAA’s HEATHROW TERMINAL 5

The BAA Heathrow Terminal 5 is currently one of Europe’s largest and

most complex construction projects. The Secretary of State approved
terminal 5 on 20 November 2001 after the longest public inquiry in British
history (46 months) and when completed in March 2008 it will add 50% to
the capacity of Heathrow and provide a spectacular gateway into London.
The £4.3bn project includes not only a vast new terminal and
satellite building but nine new tunnels, two river diversions and a spur road
connecting to the M25; it is a multi-disciplinary project embracing civil,
mechanical, electrical systems, communications and technology
contractors with a peak monthly spend over £80 million employing up to
8,000 workers on site. The construction of T5 consists of 16 main projects
divided into 140 sub-projects and 1,500 “work packages” on a 260 ha site.
The project management approach on Terminal 5 was developed
based on the principles specified in the Constructing the Team (Latham,
1994) and Rethinking Construction (Egan, 1998) but went further than any
other major project. The history of the UK construction industry on large
scale projects suggested that had BAA followed a traditional approach T5
would end up opening 2 years late, cost 40% over budget with 6 fatalities;
this was not an option for BAA.
Significantly BAA expected a high degree of design evolution
throughout the project in order to embrace new technological solutions and
changes in security, space requirements or facilities functionality. On such
a complex project early freezing of the design solution was not realistic.
BAA realised that they had to rethink the client’s role and therefore
decided to take the total risk of all contracts on the project. BAA introduced
a system under which they actively managed the cause (the activities)
CIB World Building Congress 2007 15

through the use of integrated teams who display the behaviours and values
akin to partnering.
This strategy was implemented through the use of the T5
agreement under which the client takes on legal responsibility for the
project’s risk. In effect, BAA envisaged that all suppliers working on the
project should operate as a virtual company. Executives were asked to lose
their company allegiances and share their information and knowledge with
colleagues in other professions. BAA’s aim was to create one team,
comprising BAA personnel and different partner businesses, working to a
common set of objectives.
The T5 agreement is a unique legal contract in the construction
industry – in essence it is a cost reimbursable form of contract in which
suppliers’ profits are ring-fenced and the client retains the risk. It focuses in
non-adversarial style on the causes of risk and on risk management
through integrated team approaches. The reimbursable form of contract
means that there have been no claims for additional payments and no
payment disputes so far on the project (NAO, 2005a).
This approach created an environment in which all team members
are equal and problem solving and innovation are encouraged in order to
drive out all unnecessary costs, including claims and litigation, and drive up
productivity levels (Douglas, 2005).
BAA uses cost information from other projects, validated
independently, to set cost targets. If the out-turn cost is lower than the
target, the savings are shared with the relevant partners. This incentivises
the teams to work together and innovate. It is the only way to improve
profitability; all other costs, including the profit margin, are on a transparent
open-book basis (NAO, 2005b). BAA takes precautions against risk of the
target being too high through a detailed “bottom up” analysis by
independent consultants.
The T5 Agreement creates a considerable incentive for
performance. If the work is done on time, a third goes to the contractor, a
third goes back to BAA and a third goes into the project-wide pot that will
only be paid at the end (Douglas, 2005). Suppliers also benefit from ring-
fenced profit and an incentive scheme that rewards both early problem
solving and exceptional performance.
The final strand to the T5 Agreement is the insurance policy. BAA
has paid a single premium for the multi-billion project for the benefit of all
suppliers, providing one insurance plan for the main risk. The project-wide
policy covers construction all risk and professional Indemnity.
The T5 agreement allows the project to adopt a more radical
approach to the management of risk including early risk mitigation. Key
messages include: “working on T5 means everyone anticipating, managing
and reducing the risks associated with what we’re doing”.
16 CIB World Building Congress 2007

5. SUMMARY OF FINDINGS BASED ON MORRIS & HOUGH’S

HYPOTHESES

Hypotheses Jubilee Line Heathrow T5

Extension

1. Evaluation of the DoT study (1988) BAA identified its

project viability should showed that the project requirement for more
be objective and was viable in cost- space in world class
realistic from the benefit terms. facility.
participants view.

2. Unclear objectives Clear broad objectives Clear objectives; early

mean an unsatisfactory to provide a modern change made to roof
project. mass transit railway to shape and column
Docklands and configuration.
beyond; however
design modifications
throughout.

3. Changes in the Lack of fit on day one Changes controlled

specification can lead on construction and managed.
to management or between tender
performance problems. drawings and working
drawings.

4. Technical Suspension of NATM Template for future

uncertainty/innovation (sprayed concrete U.K. construction;
increases chances of tunnel lining) following off-site trials for roof
difficulties. Heathrow tunnel erection; use of
collapse. common 3D computer
model.
CIB World Building Congress 2007 17

Hypotheses JLE Heathrow T5

5. Interface co- Significant co- Use of 3D computer

ordination can create ordination problems generated prototype of
difficulties. civil/E&M led to the whole project –
substantial re-work. eliminated errors and
omissions before work
starts on site.

6. Design management Large number of civil & RRP had to obtain

difficulties can cause architectural designers design approval from
problems. used; civil & 43 stakeholders; RRP
architecture designers works closely with
looking to freeze other design practices
design, E&M elements and specialist
still at conceptual contractors.
definition stage.

7. Amount of finance Increase in finance Fixed budget £4.3bn.

required may cause from initial £1.2bn to
difficulties. £3.5 bn.; £1.3 bn.
diverted from LUL’s
investment
programme.

8. Mixed public/private Canary Wharf

funding can create developer O&Y caused N/A
difficulties. 18 months delay. Private funding.

9. Financial Generally low civils BAA holds all the risk

risk/difficulty of tenders led to high on time, cost and
forecasting final costs, level of claims; tenders quality.
etc indicative of kept alive during 18
problems. months moratorium.

10. Geophysical £6m. site investigation Intensive design and

challenges increase minimised problems. planning throughout on
chance of overruns. existing contaminated
site.
18 CIB World Building Congress 2007

Hypotheses JLE Heathrow T5

11. Political, social, Huge political and Longest public inquiry

community and other environmental in UK; close liaison
“external factors” affect pressure on project; with local community;
success chances. completion of JLE. terrorist effect
linked to Millennium uncertain.
Dome.

12. Schedule phasing Four major Controlled planning

chosen so as to interventions: 18 month throughout with five
minimise risks of moratorium; Heathrow overlapping key
political, financial, etc., NATM failure; failure to stages.
changes. implement MBS
(signalling system);
transport link to
Millennium Dome.

13. Urgent schedules Hugely ambitious initial Controlled high level

can create problems. schedule; 53 months expenditure with
planned became 73 realistic fixed
months actual. completion date.

14. Inadequate Rigorous programming Single virtual project

planning increases the throughout; model; smart logistics;
likelihood of failure. little float; parallel 2 logistic centres; off-
critical paths on many site manufacture.
major projects.

15. Legal agreements 30 major civil contracts Bespoke T5

and contract strategy based on BofQ with Agreement manages
and conditions payment liked to cause not effect –
influence structure and milestones: E&M based on commitment,
roles. based on D&C with trust and teamwork;
performance spec; applies to all key
contracts perceived as suppliers; long-term
adversarial. relationships.

16. Organization Structure of project Matrix management

structure should fit team subject to organisation; ten core
project needs and be considerable processes; sixteen
dynamic. metamorphosis. integrated design and
construction teams.
CIB World Building Congress 2007 19

Hypotheses JLE Heathrow T5

17. Absence of Milestone system Effective use of team

effective project became ineffective due targets; 70 key
controls increases to substantial changes milestones; high level
chances of overruns and revised of transparency; use of
and poor performance. programmes; many ARTEMIS PM software
changes approved (Schedule and Cost
retrospectively. Performance Indices
generated at all levels
and for each package).

18. Leadership has a Three different client Professional expert

strong influence on Project Managers client; BAA chose
chances of success. (Russell Black/Hugh industry experts to
Docherty/Bechtel) all head integrated teams
provided significant and key roles (forty
leadership. total).

19. Team work is Teams not created Use of integrated

important to success. early; team charters teams; contractors
only implemented late work in partnerships;
in project; creation of collaboration centres.
“family” environment.

20. Labour relations Generally good on T5 pay agreement;

can disrupt project civils: later industrial unprecedented
implementation. dispute with standards for pay,
electricians caused welfare, safety and
some delay. training (80 modern
apprenticeships per
year); local labour
strategy; occupational
health centre.

21. Poor Monthly progress Regular meetings with

communications review meetings; 42 stakeholders.
reduce the chances of regular meetings with
success. the Government.
20 CIB World Building Congress 2007

Hypotheses JLE Heathrow T5

22. Error Failure to deliver state High performance

incompetence, of the art signalling levels and
incapacity or system (untried benchmarking
incapability can technology). standards.
jeopardize the project.
success

6. SUGGESTED NEW HYPOTHESES

Hypotheses JLE Heathrow Terminal 5

23. Requirement for Contracts based on Clear identification of

identification of the ICE/FIDIC – some roles within an
roles and problems with role of integrated team.
responsibilities of the the Engineer
parties. (impartiality v
representing client).

24. Correct use of PM Traditional approach Use of Artemis PM

tools and techniques: on civils contracts; little software - produces
RM/VM/WLC/KPIs etc contractor involvement Schedule Performance
should improve in design or Index and Cost
efficiency of process. constructability though Performance Index for
contractors could offer all levels for each
alternative designs; package; significant
risk analysis used use of VE particularly
throughout project. on roof/columns
design/erection; use of
“Project Flow” web-
based based on Pull
logistics (J.I.T.
delivery); productivity
raised from typical 55-
60% to 80-85%.
CIB World Building Congress 2007 21

Hypotheses JLE Heathrow T5

25. Project culture Projects managed BAA created positive

team-based through Project culture and commercial
partnership approach Director/Project environment through
improves likelihood of Managers and large use of T5 Agreement;
project success. project team; became BAA provided one
inflexible and insurance plan for
adversarial. construction all risk
and professional
indemnity.

26. Claims represent Two years after No claims or litigation

inefficiency; completion significant to date.
adjudication represents commercial claims still
failure. to be settled; lawyers
involved in claims
evaluation and
settlement; legal action
taken against some
contractors.

A review of the fundamental project management issues cost/time/quality

shows that the JLE failed on both cost and time whilst achieving a
resounding success with quality. In contrast the enlightened approach
taken by BAA on Heathrow T5 indicates that the project will be completed
within budget, opened on time with a world-class quality.

7. CONCLUSIONS

The hypotheses identified in the Morris and Hough book Anatomy of Major
Projects has proved a sound framework for comparing London
Underground’s Jubilee Line Extension with BAA’s Heathrow Terminal 5.
Four new hypotheses have been identified; firstly, requirement for
clear identification of the roles and responsibilities of the parties; secondly,
correct use of PM tools and techniques (RM/VM/WLC/KPIs etc) should
improve the efficiency of the process; thirdly, the issue of project culture – a
team based partnership approach improves the likelihood of project
success and lastly, claims represent inefficiency, adjudication/litigation
represent failure.
22 CIB World Building Congress 2007

London Underground’s Jubilee Line Extension was tendered in a

period of recession based on a modified traditional civil engineering form of
contract, which had worked well in Hong Kong and Singapore. However the
design was not complete at tender and following four major delaying events
the project quickly became adversarial. It was completed late and
massively over budget.
In contrast, BAA on their Heathrow Terminal 5 project has taken an
enlightened approach creating a virtual company in which all team
members are equal. Under this approach BAA have taken all the risk and
harnessed the “intellectual horsepower” through the use of a partnering
approach with integrated teams. Innovation and problem solving is
encouraged in order to drive out unnecessary cost and improve productivity
levels. Heathrow Terminal 5 has proved to a watershed in embracing the
principles of lean construction allowing the implementation of industry best
practices and the achievement of world-class performance.
This paper has contributed to the general subject of development
by critically examining the management of two mega construction projects
in the U.K. and identifying a significant improved procurement strategy for
experienced and knowledgeable clients like BAA.

8. REFERENCES

Broughton T (2004) Terminal 5 Supplement, A Template for the Future

How Heathrow Terminal 5 has rebuilt the building industry, In
Building, 27 May.
Douglas T (2005) Interview: Terminal 5 approaches take-off, In The Times,
Public Agenda Supplement, 6 September.
Egan (1998), Rethinking Construction, DETR, London.
Major Projects Association (2000) The Jubilee Line Extension, Seminar at
the ICE, London, 17 November,
http://www.majorprojects.org/pubdoc/654.pdf accessed September 2006.
Miller R & Lessard D.R. (2002) The Strategic Management of Large
Engineering Projects: Shaping Institutions, Risks and Governance,
Massachusetts Institute of Technology.
Mitchell B (2003) Jubilee Line Extension: from concept to completion,
Thomas Telford Limited
Morris P.W.G & Hough G.H. (1987) The Anatomy of Major Projects: A
Study of Reality of Project Management, John Wiley & Sons.
National Audit Office (2005a) Improving Public Services through better
construction, The Stationery Office.
National Audit Office (2005b) Improving Public Services through better
construction: Case Studies, Report by the Comptroller and Auditor
General | HC 364-II Session 2004-2005 | 15 March