project management

1.0 Introduction :

How a national iconic project turned into a hugely expensive and politically embarrassing fiasco?

This report intends to answer this question by analyzing the reasons that led to delay and cost over run in construction of new Scottish Parliament Building . This report has utilized he researches available on the internet, auditors report and other articles available from varied sources. As instructed, no direct contact has been made to any organization involved in the project This report will start by introduction to the background of Scottish Parliament project and will continue by discussing the reason for delays and cost increases, role of the project management, strategic issues and at the end concluding the lessons learned from this project. The reason for selection of this project is that the Scottish Parliament building was estimated to be completed in £ 40 m but finished at over £400 m which is an interesting parameter to study.

Fig1. Scottish Parliament Complex at Holyrood.

2.0 Background to the Scottish Parliament Project :

After the referendum in 1997, Scottish parliament was established by Scotland Act 1998 as a devolved legislature. Following this, Donald Dewar, Secretary of State of Scotland decided to have a purpose built facility to house the Parliament in the city of Edinburgh.

After having a turbulent journey to completion, Scottish parliament Complex was formally opened by Queen Elizabeth II on 9th October 2004. Striking features of the complex comprise of leaf-shaped buildings, turned over boat shaped roof, a grass-roofed branch merging into adjacent parkland and gabion walls formed from the stones of previous buildings. Throughout the building there are many repeated motifs

Scottish parliament is not one building but a complex comprising of new and old buildings such as Canon gate building, Debating chamber, Dewar room , Garden Lobby, Main Hall, Media tower, MSP building ,Queensberry House and Tower Building. All of these building were constructed or renovated according to Architect’s vision (Fraser 2004). High end materials like Granite, Cattiness Stone, Oak Timber , Sycamore Timber, Steel Glass and Marble was used in the construction. Detailed Environment and sustainability study was carried out which confirmed that propose built complex is environment friendly.

3.0 Project History: Road to Holyrood.

3.1 Site Selection:

To begin with, Edinburgh City Council provided a long list of 27 sites in Edinburgh. In September 1997 officials short listed three leading options: two new build

options, either at Leith or Haymarket, or adapting and developing the existing

St Andrews House building (old Royal high school). At this stage , on 23 September the Scottish Office appointed Jones Lang Wootton, Chartered Surveyors to assist in assessing the acquisition costs and potential difficulties of the candidate sites from a commercial perspective. Assessments of traffic and environmental issues were also undertaken at this time. Haymarket was never considered as preferred option and officials sensed real hostility in Edinburgh to the Parliament being located anywhere other than centrally thus reducing the chances of Leith.

The Holyrood site was not considered at this stage as it was occupied by Scottish and Newcastle brewery and was anticipated that it would not be ready within the required timescale. However, an accidental meeting of a civil servant on train with an official of Newcastle and subsequent negotiations resulted in the company indicating that they would be able to vacate the site in early 1999. As a consequence, on 8th December 1997 an announcement was made that Holyrood would be added to the short-list and design and cost feasibility studies undertaken.

DLE , Cost Consultants were commissioned to provide initial cost estimate for proposed sites and in January 1998 the Holyrood site was selected from the shortlist based on the following cost estimate.

Table 1.1 Holyrood Cost Estimate.

3.2Design Selection :

Once, the location was finalized the Scottish Office announced an international competition to find a designer for a new building to house the parliament through a competitive selection procedure . The competition itself was duly launched with a press release on 26 January 1998. giving the Project cost as being in the region of £50 million excluding VAT .

The final design teams named on 7th May 1998 ..

A design committee was appointed under the chairmanship of Dewar to choose from a shortlist of designer. Conceptual designs were costed and displayed for public to view and provide their opinion. Feedback from the public showed that the designs of Catalan architect Enric Miralles were amongst the most popular. The design team took account of public opinion on the designs, On 6 July 1998, it was declared that the design of Enric Miralles was chosen, with work being awarded to EMBT/RMJM (Scotland) Ltd, a Spanish Scottish joint venture design company, specifically created for the project. Construction management system of procurement was adopted and BLL was appointed as construction manager.

Construction commenced in June 1999, with the demolition of the Scottish and Newcastle brewery and the beginning of foundation work .

3.3 Journey of Estimate: The construction of the Scottish Parliament Complex generated controversy in several aspects. Spiraling costs and the use of public money to fund the project generated most controversy. By completion, in 2004, the estimated final cost of the project was set at £430m, some ten times higher. In my opinion it is not fair to compare final figure with initial figure of £10m as it was never an estimated price but an indicative one .

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Construction commenced in June 1999, with the demolition of the Scottish and Newcastle brewery and the beginning of foundation work .

Table 1.2 Adopted from Auditor general’s report & Holyrood inquiry.

4.0 Time delay and cost over run.

According to Auditor General of Scotland “ In the recent history of Scotland there has not been public building project as complex or as difficult to deliver as the Holyrood. Project”. From the beginning , the complex and its construction has been controversial. Almost all aspect such as location, design, architect, construction management company, project manager all have been criticized by different factions namely, politician, media and general public. Due to complexity of the project, it is very difficult to single out one reason for delay and cost over run but infect it was compound and interaction of many factors that resulted in delay and cost over run.

Location : Selection of Holyrood to be the seat of parliament has contributed to delay and cost over run. Holyrood was not an easy area to work due to the approach and being located in populated area. The selection of Holyrood added £4.5m to the project being the cost for site acquisition and clearing As the table1.1 shows, according to the costing done by DLE Hoyrood was not economically attractive.

Design &Design Development Factor.

The main cause of delay was the time taken for development of design. Construction started in June1999 but Stage D design was approved after an year in June 2000.

Everyone anticipated that this will put and end to uncertainly and provide some sort of anchorage for the project but it did not happen.

According to Auditor General’s report primary cause of delay from September 2000 can be attributed to delay in production of detailed Design The project was densely populated, unusual and complex and was pitted against very tight deadline. In some cases, trade contractor’s were responsible for part design but both the architects and some trade contractors failed to deliver some critical elements on time.

Design development process added another £80m (Black 2004) to the cost of project. Design development is a process of bringing approved design to detailed design. Design development process runs parallel to Tendering and award of work packages and subsequent work on site. From 2000 onward, client did not change it’s requirements significantly but the cost of bringing envisioned design to reality escalated. Main cause of the delay to the project since September 2000 was due to the production of detailed design variations and the late supply of information during the construction process. (Black, 2004)

Increase in area :

According to original plan, total area was envisaged to be around 16000.00 m2 but after several revisions and new requirement were incorporated, it reached to 31,000.00 m2 resulting in an increase of 47% and consequently effecting schedule and cost of the project. Building user’s brief prepared by the authorities substantially underestimated the requirements which resulted in various revisions and thus increase in area. Mr Stewart in his evidence to the Inquiry said that the original estimate was “Absolutely, too optimistic for a public building of this nature.”

Procurement vehicle :

In 1998, Civil servants opted for fast track method known as construction management form of procurement also known as pay as you go procurement vehicle to build the parliament complex. It works by fragmenting complete job into numerous small packages that are designed, awarded and monitored independently of one another. One of the advantages of using this sort of procurement vehicle is that overall design does not have to be complete at the start of building works. This type of contract is mainly used for the projects where speed is considered important than cost. In this form risk stays with the client, which is responsible for management of each individual work package-in this case around 60. However, in my opinion after keeping in mind importance and urgency of the project, construction management procurement was the only viable option available. Same thing echoes form the statement of Bovis Lend Lease’s managing director for Scotland, Harry Thorburn “ The reality is that construction management was the only contract option for a client wanting to make an early start on the project that was still at the design concept stage”.

Communication and coordination was another issue which added to the foes of already troubled project. Lord Fraser also pointed out in his report that there was a lack of communication, coordination and understanding between stakeholders, for example, resolution of many design issues was delayed due to misunderstanding and lack of communication between RMJM & EMBT. This is evident from the fact that RMJM & EMBT both submitted separate solutions to stage C difficulties.

Cultural differences and different working practices between EMBT & RMJM also played a part in delay of the project and is highlighted in Lard Fraser’s inquiry also.

Landscaping, although minor part of overall figure, still it reflects failure of system. Cost of landscaping amounting to ₤ 14 m came to the surface and was added when the project was well underway i.e. in Autumn 2001

Schedule: Time table for completion by project management was very demanding and idealistic rather than realistic. Construction manger consistently tried to achieve the set target but failed. According to Auditor General’s report , schedule set in Sept 2000 for completion by December 2002 was probably unachievable.
Proper EU guidelines and procedures were not followed for appointment of Bovis Lend and Lease as construction manager. BLL was not the lowest yet they were awarded. BLL’s contract was supposed to be converted to Lumpsum after finalization of cost plan but was not done. Conversion of fees would have provided a powerful incentive to Bovis to apply maximum rigor in relation to cost control. ()

No system was devised and implemented for performance measurement. No proper system was available for cost reporting , analysis & financial control.

Queensberry House proved to be the most costly item , in terms of cost per square meter. However, Queensberry’s cost, when viewed in context of the full cost of the Project at completion can be viewed as comparatively minor.

Golden triangle of quality time and cost was ignored and quality was preferred against time and cost, time was preferred against cost. The undue importance given to time and quality resulted in escalated cost.

The uncompetitive procurement of work package due to uncertainty of the works involved resulted in additional costs. Auditor general examined 20 construction contracts amounting to 56% of the estimated construction cost and found out that thirteen out of twenty examined had three or fewer bidders. Some of the contracts were awarded by negotiations with single contractor.

Disruption and delay added an amount of 86 M which comes up to 27% of the final project cost. ()

Security issue or 9/11 factor also played an important role in delay and spiraling cost of the project. Project director Sarah Davidson revealed that each of the one-off window designs on the building now had to be bomb-tested to destruction, which had led to delays and these in turn had added to the costs (bbc.co.uk). Lord Fraser in his inquiry agrees that security bill amounted to £29.11. A sum of £17.54 million was identified as the net additional cost of the consequences of the design of anti-blast measures. A second element is a sum of £11.57 million attributable to the cost of delay associated with blast.

Another major factor to be recognized was constructing a very complex, unusual building, visionary architecture was difficult to bring to reality. The Debating chamber roof, for example, was an extremely challenging task both for designers and builders.

There is another 4 million, which is project management’s estimate of the extra costs incurred because of the demise of Flour City in 2001 (Black, June 2004).

Another factor not be overlooked is that due to non availability of detailed design , contractors were not progressing as planned and worker were not being utilized and this resulted in increased cost to the project. Hundreds of workers sit around doing nothing at the new Scottish Parliament site while delays build up, an MSP claimed.

Proper risk analysis and cost management studies were nor done

At the early stage of decision making , no independent professional project management company was involved to advise the client .

5. Role of Project Management

Role of Project management is to deliver the project on time ,within budget and with acceptable quality. In this case , Project management provided an exceptional complex of high quality but failed miserable in context to cost and time.

Black (June, 2004) criticized performance of the project management or officials responsible for delivering the project. Holyrood progress group (HPG) was concerned about poor coordination, a misunderstanding of responsibilities with regard to cost control and other aspects of the project.

Auditor –General of Scotland severely criticized project management and control of the Holyrood Project. Leadership, decision making process and control of the project

were apparently not clearly established and there was no single point of leadership. Normally project director, who is key member of management team, is responsible for leadership and control, client delegate’s the authority to project director to make project happen. In this case Project director should have had clear responsibility for making decisions about balancing time, quality (performance) and cost. Auditor-General stated that the client (the Parliament) did not clearly establish leadership and control of project. Leading parties could not agree on cost plan which was a missing link in effective project management, a draft plan was prepared in late 2000, it was an indicator of the costs rather than available estimate of the cost.

The different forms of contracting are intended to transfer risk to those best able to manage it. Under construction management, design is incomplete and uncertain when construction starts, so the risks stay with the client (Fig1.1). In this case project management did not fully evaluate the risk and client was not aware of the repercussions of this system. The experience and expertise in construction management was not fully developed and was not present in the early stages of development. Project management selected a high risk route but failed to mange the risk properly. Risk accounting was insufficient in early stages and there was no quantified allowance for risk facing the project. At the later stage project management did introduce a process for quantifying risk and conducted some reviews but the general approach was to accept the cost increase and increase in the forecast as risk materialized. No system or forceful action was adopted to reduce the increase in cost

Fig 1.1 Risk in Construction Management.

Project management did not fully implement cost reporting and financial controls. Regular reporting of the total estimated costs of the project only started in July 2003(Black, June 2004).earlier financial reporting was neither comprehensive nor systematic.

Once, the overall budget constraint of £195m was removed by Parliament in June 2001, project management did not establish an alternative budget which gave them liberty to achieve high quality and tight deadlines without due considerations of cost implications.

Lord Fraser stated in his report that investing time at he beginning of the project to develop complete definitions reduce the chance of changes later. Defining the time allocated to each activity helps to complete the project on time , However, in this case project management would have planned and managed the project in better way. In the face of repeated slippage, project management should have developed and enforced an achievable and realistic plan.

Although project management raised some questions about performance of some of parties involved yet it failed to systematically assess their performance. Project management should have managed performance by measuring what was being achieved against contractual obligations and enforcing those obligations strictly (Black, June 2004)

Project management would have explored alternative fee arrangements for consultant and construction manager. With %age system, the more a project costs the more consultants are paid. Financial incentive system linked with delivering value for money would have been a better option.

6. Strategic issues

Different strategic and operational issues were involved with this project. The Auditor General’s report also identified some of the issues. For example whilst recognizing the unique and complex nature of the project the report identified some shortfalls. These included shortfall in the procurement strategy, project cost reporting, and in accounting for risk. (Scottish parliament, information centre, 2001.)

Client’s satisfaction is very important issue and shall be dealt seriously. Project management should involve client at every necessary step starting from the at the early stages of Project inception . Clear and accurate requirements of the clients must be taken into consideration while preparing the brief of the project .

Project management must ensure that all potential risks are identified and a thorough risk analysis is carried out . This analysis should take into account the main risks and identify the most likely outcomes as well as best and worst cases. After analyzing ,an action plan shall be prepared to manage the risk.

Project management should evaluate overall cost provision in the light of the risk analysis.

Project management should clearly convey the cost plan to the design team and the construction manager (if applicable) to provide an effective basis for development of design and subsequent execution of project.

A single point of leadership must be identified. Decision making process and authority should be established. Communication channels, control of project, contact between the client and project management and contractors must be confirmed.

Project management plays a pivotal role in monitoring and delivery of the project and represent the clients; Project management should identify and agree major milestones and a comprehensive performance measurement and benchmarking system should be put in place to monitor various aspects.

Project management should review and report project costs and pace monthly to the client on a comprehensive and systematic basis.

7.0 Conclusion & lessons learned

Project management plays an important role in the success of mega and prestigious projects .Construction of Scottish parliament has put a negative mark on the role of project management . Delay and cost over run of the project cannot be attributed to the failure of project management only , Lord Fraser in his inquiry stated that it was the result of systematic failure and it is difficult to single out one villain. There were many mistakes made with Holyrood but Lord Fraser points out that the biggest reason for failure of project was Procurement system. Once the problems started, they were interconnected , increased exponentially, and had a rippling effect which was visible all throughout the period of construction. Despite all the problems, Scotland has got an architectural gem, it’s an iconic building representing the land . In few years , the people of Scotland will be as proud of it as the people of Sydney are of Opera House, which was also an example of project failure when it was built

PM role in the complex project is very important and can affect the project in the positive or negative manners.

All the project should have agreed project budget and proper set of performance indicators. Proper benchmarking should be done to measure the performance.

If , competition is commissioned for selection of design, proper evaluation of pre qualification must be done and compatibility of working cultures should be considered. While selecting the design, attention should be paid to cost and execution problems that may arise due to complexity of design.

Procurement route must always be chosen with care coupled with comprehensive evaluation. It is always best to use the route with min risk but if conditions demand otherwise, all the risks entailed with procurement route shall be studied and weighed against the benefits of adopting this option.

Construction management procurement route should be used rarely for public projects.

Adequate time should be available for the planning stage, before construction starts. Good planning will involve (a)right sequence of construction to avoid delays and extra costs, (b) risk management (c) using value management to assess the contribution of each part of the construction processes. (Black,June2004) (d) selection of proper planning system

“There must always be sufficient time for procurement to allow the client’s requirements to be adequately defined so that it may obtain fixed and firm prices for the work in a competition.” (Black, June 2004). In all projects, it must be ensured that payment system does not provides incentives to contractors to perform against targets for quality, time and cost , on the other hand it is better to have be performance payment incentives for contractors

Clearly defined duties and single point of leadership with explicit authority and responsibility should be ensured. Strong system of reporting and transparent channels of communication must be devised. It is essential that full contracts, guarantees and bond should be secured to prevent the risk. Early involvement of contractors in design phase might help in solving the problems later on. Concurrent engineering should be carried out to avoid complications during execution. Safety measures needs to be an considered as an integral part. In this particular case, no one would have anticipated the impact of 9/11. So it is better to have some contingency plan in place to tackle unforeseen events. It is essential that the client management design development and has a project team that gives a key role to professional who are experienced in this construction method.

References:

Kaka, A and Brown,A W(2003). Project Management Strategic Issues. Edinburgh:Heriot Watt University. Module Notes (D29BM9), Heriot-Watt University, Edinburgh.
Project Management Institute (2004) A Guide to Project Management. Body of Knowledge(PMBOK Guides).3rded. USA.:Philadelpia.
The new Scottish Parliament building –and examination of the management of Holyrood project. [online] available from http://www.scottish.parliament.uk/vli/holyrood/inquiry/sp205-00.htm [last accessed on 22/3/2008]
Management of the Holyrood building project [online] available from [last accessed on 22/3/2008]
MSP says Holyrood builders are left idle [online] available from [last accessed on 22/3/2008]
Black R,W(2004) Audit Scotland [online] available from [last accessed on 22/3/2008]
The £431 million question. [online] available from [last accessed on 22/3/2008]
A Report by the Rt Hon Lord Fraser of Carmyllie QC on his Inquiry into the About Holyrood Project. [online] available from [last accessed on 9/3/2008].
Westland, Jason (2006) The Project Management Life Cycle. London: Kogan Page.