The Failure and Success of the Heathrow Terminal Program - Case Study Example

PROJECT SUCCESS AND FAILURE By Student’s Name Code + Course Name Professor’s Name University/College Name City, State Date Introduction Project management in the contemporary society is driven by business that associates benefit with proper organization of work around projects and critical co-ordination and communication of work between different professions and departments. It involves the application of various tools in measuring the progress of the project and tracking the tasks of the project. Unlike businesses that have full-time dedicated positions, projects require ad-hoc resources. In the traditional approaches to project management, a project is assumed to be a discrete entity with its set of resources such as the project team and the budget, and that it produces its deliverables, ensuring organizational benefit. Nevertheless, one is less likely to find certain programs such as the Heathrow Terminal 5 program, the London Ambulance System, and the Sydney Opera House Project to be fully self-contained. Poor coordination of the various departments within the program or project would lead to failure. This paper involves a review of the failure in part and success in part of the Heathrow Terminal 5 program, the London Ambulance System, and the Sydney Opera House Project with reference to the project management iron triangle, the procurement process, and the risk management of these projects. The Project Iron Triangle The Iron Triangle was established in the 1980s to define the importance of balancing the requirements of a project in order to facilitate success. It is considered a valuable tool for stakeholders in addressing constraints of time, quality, and cost, allowing the stakeholders to create emphasis on one constraint over the other in order to achieve project success (Toor & Ogunlana, 2010 p. 229). These criteria’s dimension, thus, remains an important part of accomplishing a project as an overall generic measurement. Considering the Heathrow Terminal 5 Program, the cost management was effective with the budget projected at 4.3 billion pound (Basu, Little, & and Millard 2009, p. 23). In addition, a realistic time frame was set for the project, which allowed for timely completion within a six-year period that included a seven months reserve period. Proper planning and implementation can be termed as the causative factors that led to the success of the program in terms of staying within the stipulated budget and time. The proper planning and implementation of the project was based on various abilities including appropriate system integration, digital technology, backing up of an integrated supply chain, safety and productivity, material supplement for efficiency and speed, and operational preparation and integration (Brady & Davies 2010, p. 152). On the contrary, the Sydney Opera House project was a failure with regard to the project management iron triangle. The second stage of the project was faced with changes in design including the addition of two theatres to the original two design, as requested by the client, who was the government in this case. This resulted in a delay of the project past the projected time, and a subsequent increase in the estimated cost. The initial time estimate of four years and AUS $7 million cost estimate were rendered highly uncertain as a result of the changes in design. The total cost of the project had escalated to AUS $17.4 million by the end of the second stage (Ochieng, Price, & Moore 2013, p. 68). The London Ambulance System of 1992 was also considered a failed project due to the over-ambitious timetable (Greenwood, Hosseini, & Sommerville 2010). Despite the high political pressure from the government on the project to move quickly in 1996, the project managers resisted the pressure and approached with caution towards the consideration of a new computer system. The new sytem developers were informed of the problem, who proceeded to adopt a timetable that was relatively relaxed, a move that further delayed the project at one stage. As such, the project failed in reference to the project management iron triangle. Procurement Management Given the size of the T5 terminal program, the London Ambulance System project of 1992, and the Sydney Opera House construction project, it is important to consider the management styles and the procurement strategies utilized by the project managers in ensuring effectiveness of all the program operations. Project procurement management involves acquisition of various goods and services from beyond the project, required for operation within the work scope of the project (Norris, 2007). The major players T5 project procurement strategy were BAA, contractors, suppliers, and BA. The procurement management employed by BAA was mainly aimed at building a relational contract between the first T5 tier suppliers and BAA, a connection that scrapped the principle used in the traditional construction contract. As such, the contractors were expected to go beyond simple identification of problems and placing blame on other parties, and instead the contract was established to offer positive incentives that would promote positive behaviour for solving problems among the contractors. In addition, the contracts strategy was aimed at incentivizing the contractors based on the pooled fund of gained benefits that would be distributed after setting a significant milestone (BAA Heathrow, 2004). This led to successful procurement within the project, with the only problem being with the poor estimation of cost and time. On the other hand, in the Sydney Opera House project procurement, it was ascertained that the Facilities Portfolio required a generational change in order to ensure that the needs of the customer were met (Shenhar & Dvir 2007, p. 21). The procurement team thus needed external input executive guidance to challenge the status quo in order to achieve this. The then newly-appointed Facilities Operations and Maintenance Manager and the Facilities Director for Sydney Opera House provided the required executive guidance. Meanwhile, consultants Currie and Brown provided the external input. The procurement team visited the sites of other comparable organizations and conducted interviews with key internal stakeholders and existing service providers, an aspect that allowed them to supplement their knowledge. The interviews with the stakeholders were critical in engaging the customers with the process of procurement, Service Providers selection, and defining the requirements of performance (Shenhar & Dvir 2007, p. 22). The RHA Standing financial instructions were employed in the London Ambulance System project procurement to provide a regulatory framework. This system however offered little guidance to the procurement process, one of the factors that contributed to the project failure. The primary rule of this framework was placing the contract as an open tender, a rule that was complied with. Another requirement of the standing financial instructions is for the lowest bidder to be offered the contract, an aspect that was also fulfilled (Finkelstein, 1993). It is important to note that the guidance provided by these standing instructions is less qualitative as the emphasis lies on obtaining the lowest price. This is a strategy that could be highly useful in the case of procuring tangible products that have similar specifications, but it is certainly less appropriate in making large IT procurements that make it difficult to establish qualitative judgements. Risk Management Risk management is one of the major determinants of the success or failure of projects and should be highly considered in project planning. According to Burke (2006, p. 103), decision-making is the major component of a project as it directly deals with any level of uncertainty in the project that could lead to risk. In specific, the process of risk management involves systematic identification, analysis, and responding to any risk that may arise during a project process (Gardiner 2005, p. 116; Fewings 2013, p. 63). Considering the size of the Heathrow Terminal 5, the Sydney Opera House, and the London Ambulance System projects, and the involved series of major decision making requirements, it is important to review the risk management of the projects so as to develop a clear understanding of the efficiency and effectiveness of the adopted risk management approaches. Poor risk management clearly leads to project failure as it fails to pull a project from a derailing situation. In the Heathrow Terminal 5 project, BAA’s contracting agreement involved a cost plus incentive that allowed for deflection of risk (Davies, Gann, & Douglas 2009, p. 105). This type of contract is highly flexible as it allows for the constructor to receive payment from the client in terms of incurred costs with profit (Burke 2006, p. 99). In addition, BAA assumed full responsibility for the associated project risk and instead collaborated with first-tier project suppliers through integrated project teams to develop inventive solutions (Davies, Gann, & Douglas 2009, p. 107). Poor risk planning and management could be highly attributed to the failure of the Sydney Opera House project. The project involved high risks and uncertainties right from the designing of the structure drawings to the delivery of the project, which contributed to cost escalation. The aesthetic design presented by the project architect was highly unrealisable as it only relied on maps and photographs without physical visits to the project site (Lester 2014, p. 38). The project was commenced without proper assessment of the design and carrying out of any suite surveys. Lack of designated project manager led to weak channels of risk management as the architect, Utzon, was left with the responsibility of making all design decisions without any procedures of project evaluation. This caused constant changes in the design of the structures and related demolitions and rebuilding (Murray 2004, p. 76). At a point, the Architect withdrew from the project and left with all the structural designs, thus causing further risks in cost. The case is similar to the London Ambulance System project, where poor risk management led to the failure of the project in 1992. The initiatives put in place by the project’s management between 1990 and 1992 failed to revitalize the staff and the management themselves and instead worsened the already existing environment of obstructiveness and mistrust (Finkelstein 1993). As much as the management may have set their agenda right at a point, they underestimated the risk involved in changing the LAS culture that was already deeply ingrained. The management also poorly judged the industrial relations that existed and failed to bring the staff on board and instead alienated them to the changes. The project further applied the Prince 2 project management methodology that was less familiar with the management, leading to further risk of poor project coordination and failure (Greenwood, Hosseini, & Sommerville 2010). This poor assessment of risk and failure to involve all the stakeholders in the project approaches led to heightened risks in the project that further resulted in delays and failure of the project. Conclusion The failures and successes of the reference projects in this paper provide researchers and project managers with different lessons that could be applied in ensuring efficiency of their projects. One of the learnt lessons is ensuring that a Balanced Score Card is used as a major performance indicator in the Project Management Iron Triangle. The sole purpose of a project is to produce quality results in a timely and cost efficient manner. Therefore, it is salient to ensure that all the constraints are balanced against each other. In addition, proper handling and adjustment of the systems of procurement within a project is necessary in eradicating any cost related risks. Innovation has a vital part to play in a project as it promotes agreement among the involved stakeholders in a project and eradicates any chances of blame, thus creating an efficient environment for proper decision making. Proper risk management is also an important part of the project right from its initiation as it prevents time or cost constraints that would lead to project failure. References BAA Heathrow, 2004, T5 Buy Club: How M&E Contractors Pool Purchasing at Heathrow Terminal 5, viewed 21 February 2015, Basu, R, Little, C & Millard, C 2009, A Fresh Approach of the Balanced Scorecard in the Heathrow Terminal 5 Project, Measuring Business Excellence, vol. 13, no. 4, pp. 22-33. Brady, T & Davies, A 2010,. From Hero to Hubris - Reconsidering the Project Management of Heathrow’s Terminal 5, International Journal of Project Management, vol. 28, pp. 151-157. Burke, R 2006, Project Management: Planning and Control Techniques, 5th edn, Burke Publishing, Hong Kong. Davies, A, Gann, D & Douglas, T 2009, Innovation in Megaprojects: Systems Integration at London Heathrow Terminal 5, California Management Review, vol. 51, no. 2, pp. 101-125. 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