Overcoming the ‘White Elephant’ Syndrome in Big and Iconic Projects in the Private and Public sectors: Overcoming the ‘White Elephant’ Syndrome in Big and Iconic Projects in the Private and Public sectors Dr Scott Prasser University of Sunshine Coast


Key Issues: Key Issues Concerns about lack of infrastructure funding Less concern about the misallocation of resources, poor priority setting Many projects - ‘white elephant’ involving: Unsustainability Failure to meet purpose


The Infrastructure Crisis?: The Infrastructure Crisis? Spending not keeping up with: Existing maintenance New demands (population growth new regions eg ‘seaside’ phenomenon) Core economy demands eg ports for exports 1975/2003: 7.2%- 3.6% GDP Qld 2000/2003 5.4%- 4.2% GSP Federal-State/local government disjunction and Obsession with mega/icon ‘white elephant ‘ projects Poor priority setting: nationally, states and regionally


Recent Problems: Australia and Queensland: Recent Problems: Australia and Queensland Power Ports: Dalrymple Bay Crisis Hospital crisis Roads/traffic/public transport Maintenance key infrastructure Big project failure Obsession with mega, ‘iconic’ projects Balanced budgets and lack of borrowing


Features of Big, ‘Iconic’ Projects: Features of Big, ‘Iconic’ Projects Projects that stress: Size (as a feature) Form (over function) Symbolic (over measurable benefits) Prestige (over function: obsessions with ‘icons’ (industrial, arts, tourism) – the ‘Bilboa complex’ All areas – arts, transport,industrial Linked to ‘technology’ = good project Benefits exaggerated (not quantified, poor scrutiny) Good project management practices lost


Examples of Big, ’Iconic’ Projects?: Examples of Big, ’Iconic’ Projects? Often large-scale ‘icon’ projects designed to boost economic activity ‘Infotainment’ projects, or attractions eg Stockman’s Hall of Fame, Longreach, Queensland Projects designed to lift regional profile or prestige eg Bilbao, Gold Coast Convention Centre Projects intended to symbolise government achievement eg Parliament House, Canberra Events eg Olympics, Expos New private developments eg residential, tourist resorts


‘White Elephant’ Projects: ‘White Elephant’ Projects Size matters Excessive cost High prestige and symbolism Stress on form rather than function Competitive – other corporations, govts, regions Infrastructure=high technology=good “Public” Benefits


White Elephant Projects (cont’d): White Elephant Projects (cont’d) Original terms of reference ignored ‘Political’ interference Purpose unclear/ill defined Over-optimistic expectations Inflated viability – little independent assessment/market analysis Supply rather than demand driven – “Build it and they will come” syndrome Changing specifications Poor project governance: lack of transparency/participation democratic deficit secrecy fudged estimates-budget/time minimal risk assessment Rushed to meet ‘political’ rather than project timeframes


Big Projects and Project Planning: Big Projects and Project Planning Terms of reference ignored ‘Political’ interference Purpose unclear/ill defined Over-optimistic/inflated viability Supply rather than demand driven – “We can build it - Build it and they will come” syndrome Changing specifications Poor project governance: lack of transparency/participation democratic deficit secrecy fudged estimates-budget/time minimal risk assessment Rushed to meet ‘political’ rather than project timeframes


Examples of big/iconic/white elephant projects: Examples of big/iconic/white elephant projects Sydney Opera House (1400% over budget) Alice-Springs railway-$1,000m Big Events: Olympics/Expos SA Wine Centre Magnesium Project – Qld ($250m) Technology parks Very fast train projects and other railway ideas (eg inland rail) Synchrotron (Victoria) Submarines UK: Millennium projects


Melbourne’s Federation Square: Melbourne’s Federation Square Redevelopment in Melbourne Major icon implications, high-profile, very visible project during construction Complex and unique architectural design Opened in October 2002, 2 years behind schedule-$363m over original budget with work still to be completed ‘Fast track’ construction approach where construction moved ahead of detailed design work Reflected similar risks to Sydney Opera House


Melbourne’s Federation Square: Melbourne’s Federation Square Major areas of risk identified: Cost variations - incomplete documentation Trade contract disruption and (construction) delay claims Managing contractor cost increases due to project delays Tenancy fill-out costs borne by the project Consultants’ fees and management delivery expenses Unplanned prolongation to completion of outstanding works - extra project costs Latent design defects Operator initiated changes (post completion) Poor or uncoordinated workmanship Failure to secure full reimbursement for costs of works undertaken on behalf of major tenants.


Queensland Magnesium Project: Queensland Magnesium Project C’mth/State support ($200m) Unable to be initiated without government guarantees Unproven new technology Export / prestige market/new technology Failed to: Market test Develop business case Consider overseas assessments/trends No independent assessment outside confines of bureaucracy


Common Problems of Big Projects: Common Problems of Big Projects Over budget and over schedule; Performance (quality) objectives not met; Inadequate risk management where taxpayer funds involved; Relative inability of public sector project managers compared to private sector (contractor); Examples of ‘groupthink’ leading to poor project choice, development, performance; Damage to government image and prestige. Hindmarsh Soccer Stadium, (SA)


Problems (cont’d): Problems (cont’d) Lack of business case prior to decision to proceed Little open dialogue among all stakeholders before any work commences; Limited separation between the sponsors of the project and the project director/manager; Poor project processes eg project directive should set out specific responsibilities for decisions on cost, schedule and performance; Increased emphasis needed on project definition and planning to avoid the ‘ready, fire, aim’ approach; Poor risk processes identifying, assessing managing risk in big projects.


Suggested Solutions: Suggested Solutions Greater transparency in total project process Clearer performance specifications Explicit formulation regime-institutional reform Use of risk capital – real money Governance: separation between project sponsors and project managers Priority setting issue


Governance problem : Governance problem Poor co-ordination across government and governments Lack of priority setting mechanisms Politicisation of public service Loss of expertise / capacity-hollowing out / organisational amnesia Short termism Loss of key institutions eg Qld COG


Governance Solutions?: Governance Solutions? Infrastructure Advisory Committee (business, govt, stakeholders) – deals? State Priorities Commission: Statutory based: Govt set priority areas Expert Evaluate projects Public process Identify gaps Develop long term knowledge Annual progress reports Advisory only Separation from direct government interference


References: References Allen Consulting, 2003, Financing Public Infrastructure in Queensland, Melbourne Baker, R., 2003, ‘Labor lying over synchrotron plan,’ The Age, 26 August Flyvbjerg, B., et al, (ed), 2003, Megaprojects and Risk, Cambridge University Press, Cambridge Hall, P., 1968, Great Planning Disasters Prasser, S., ‘Enough White Elephants,’ Courier-Mail, 8 April Scott, P., (ed) 1992, Herd of White Elephants, Hale & Iremonger, Sydney Wilson, J., and Prasser, S., 2004,‘Big Projects and Regional Economic Development: Hopes, Dreams and Tombstones,’ SEGRA Conference, Alice Springs