Megaprojects - KPMG

Enrique Fuentes (EF): Based on your
experience developing megaprojects
in different parts of the world, what are
some of the biggest challenges you face
as developers
Carlos Bosch (CB): Probably the biggest
challenge that all megaprojects face is in
dealing with the implications of a very long
timeline. Megaprojects sometimes take
a decade or more to move from design
to handover, which can create significant
challenges related to both the escalation
of costs and the potential for technology or
design elements to become obsolete before
the project is even completed. Hospital
technology, for example, seems to change
almost every year which makes designing,
building and delivering a turnkey mega-hospital
project rather difficult if those parameters and
the tools to solve them have not been taken
into account from the beginning.
Carlos Hermanny (CH): On top of this, many
megaproject developers face significant
social and environmental risks that can easily
cause projects to be delayed or stalled.
In effect, this has a direct impact on the
financing of the project because it is very
difficult to secure funding when some of
the risks are unknown. Aligning the vision
of multiple subcontractors can also create
unique challenges as each partner brings
a different culture and approach to their
part of the job. In our experience, a lack of
alignment between partners can often lead
to further time delays and potential overruns
as decisions are debated and consensus is
laboriously achieved on an issue by issue
basis.
I P Rao (IR): I would agree with everything
already said and add two more challenges.
The first is finding and securing experienced
professionals with the right capabilities
and skills to successfully deliver on such a
large and complex project. In almost every
country and region, the supply of experienced
professionals who understand the complexity
of megaproject development is tight. Another
challenge that I would mention relates to
stakeholder management. In India, there is no
‘single window’ for megaprojects and so each
government department must be managed
individually. For the Delhi International Airport,
this meant that we had to work through
53 different government departments. That
can make a project very complex and risky.
EF: In my experience, megaproject developers
often have hundreds of subcontractors
partnering on the same project. Do you
have an approach to contract structuring that
lets you better apportion construction risk
IR: Our airport project involved more than 250
subcontractors and three main contractors,
so apportioning the construction risk was
a very difficult and complex job. The reality
is that it is very difficult for many of our
subcontractors to take on the construction
risk. But it all depends on how the package of
work is tendered. If the risks are well known
and everything is stated up front, then the
costs will be lower because the risks are
defined and understood. In other cases, the
cost of construction risk is loaded into the
contract which can push up the price overall.
CH: I think it really all depends on how the
client or project owner wants to structure
the project. In some cases, the client wants
to split the project into multiple packages
which makes apportioning of risk much
easier because the size of that risk is more
easily understood and delegated. But if they
are looking for a single consortium that is
responsible for all aspects of the project, we
have often found that we need to split the
job into different inter-related consortiums
that take responsibility for their part of the
project, yet work together to deliver a single
final project to the client.
CB: I think the key that underlies both
of these views is the need to create a
joint collaborative environment amongst
40 | INSIGHT | Megaprojects