Construction Procurement of Megaprojects

Construction Procurement Coursework Brief
Megaprojects are large-scale, complex ventures that typically cost billions of dollars, take many years to develop and build. They involve multiple public and private stakeholders, are transformational, and impact millions of people (Flyvbjerg, 2014). Hirschman (1967) calls such projects “privileged particles of the development process” and points out that often they are “trait making,” that is, that they are designed to ambitiously change the structure of society, as opposed to smaller and more conventional projects that are “trait taking,” i.e., they fit into pre-existing structures and do not attempt to modify these. Megaprojects, therefore, are not just magnified versions of smaller projects. Megaprojects are a completely different “animal” in terms of their level of aspiration, lead times, complexity, and stakeholder involvement. Consequently, they are also a very different type of project to manage. Megaprojects typically cost USD 1 billion or more from incubation to going live.
Across the world, megaprojects are increasingly used as the preferred delivery model for goods and services across a range of businesses and sectors such as infrastructure, water and energy, information technology, industrial processing plants, mining, supply chains, enterprise systems, strategic corporate initiatives and change programs, mergers and acquisitions, government administrative systems, banking, defence, intelligence, air and space exploration, big science, urban regeneration, and major events. Examples of megaprojects include amongst others high-speed rail lines; airports; seaports; motorways; hospitals; national health or pension ICT systems; national broadband; the Olympics; large-scale signature architecture; dams; wind farms; offshore oil and gas extraction; aluminium smelters; the development of new aircrafts; the largest container and cruise ships; high-energy particle accelerators; and the logistics systems used to run large supply-chain-based companies like Amazon and Maersk. Also, it should be noted that megaprojects can be found around the globe both in the largest economies and emerging markets, and are financed either by private or public sector players or as public-private partnerships.
Apart from their size and complexity, megaprojects have another unfortunate feature. Research suggests that 90% of megaprojects are significantly delayed, over budget, or fall short of their promised benefits. This is true for megaprojects from all sectors and across the globe. Rich countries do not seem to perform any better than poorer countries, and megaprojects in one sector are equally not managed better than in other sectors. Also, over the past few decades, megaproject performance in terms of on-time, on-budget, and on-quality delivery has not become significantly better. The shortcomings in megaprojects emanate from various factors which include amongst others an enormous degree of uncertainties; a large number of diversified stakeholders and actors; long project life cycle; complex procurement arrangements and high level of technological complexities. The actors in a megaproject must thus innovate to solve construction problems and achieve the basic goals set by the client.
At the heart of a successful implementation of megaprojects lies the implementation of a complex procurement arrangement. Procurement is one of the critical technical issues in megaproject management with regard to successful project development and operation in both the short and the long term. The UK National Audit Office (2004) defines procurement as:
“the whole-life process of the acquisition of goods, services and works…, beginning when a potential requirement is identified and ending with the conclusion of service contract or ultimate disposal of an asset”.
Thus, the procurement arrangements for the acquisition of megaprojects naturally ought to be efficient and effective. However, studies and practice report that procurement arrangements in mega projects acquisition have in most cases neither been effective nor efficient. They have largely been very limited and fragmented. Governments and practitioners across the globe acknowledge that there should be reforms to governance and institutional procurement arrangements to promote better decision-making in areas such as project selection, funding, financing and the delivery of services etc., for new and existing megaprojects.
It is in this regard that the UK’s Major Projects Authority (MPA), a part of the Efficiency and Reform Group in the Cabinet Office, working with HM Treasury and other government departments to provide independent assurance and improving the way management and delivery of major projects is conducted has requested you to write a report on procurement of megaprojects. This is to enable them create a central knowledge base that collects state-of-the-art research findings on the subject. The intentions are that new research findings in turn will assist in stimulating further research and discussion in the area and also provide some useful procurement guidance for practitioners. The MPA have stated that a diligent assessment of procurement alternatives is a prerequisite to assure Value for Money (VfM) in Mega projects.
Thus, in this report, you have been requested in your capacity as a Construction Procurement Consultant to critically discuss:

  • the key drivers of megaprojects commonly found worldwide;
  • the barriers in procurement of mega projects globally and particularly (& separately) in the UK;
  • the Critical Success Factors(CSFs) in the procurement process for megaprojects; and
  • your outline proposal of an innovative procurement ecosystem of megaprojects in the UK in pursuance of superior Value for Money (VfM)

Word Count: 3000

Marking Schedule

  1. Discussion of key drivers of mega projects commonly found worldwide. – [10 Marks]
  2. Analysis of barriers in procurement of mega projects worldwide and particularly in the UK – [30 Marks]
  3. An outline Critical Success Factors (CSFs) in the procurement process of mega projects – [30 Marks]
  4. An outline proposal of an innovative procurement ecosystem for mega projects in the UK in pursuance of superior Value for Money (VfM) – [20 Marks] (Asking what is the procurement process in mega projects?)
  5. Presentation, referencing, graphics – [10 Marks]

Tips:
• Report should be written in 3rd person
• Typical report contains an executive summary and/or introduction, issues outlined in marking schedule part 1, 2, 3, 4, conclusion and recommendation. Must have headings
• Issues should be worldwide; though report should be focused on the UK

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