Part 2: From Big Vision to Early Construction
Welcome to Part Two of a three-part series “A Trail of New Cities: A Simple Story About Planning Complex Things Better” an insider view of new city mega-projects too big to fail, but too expansive, too expensive, and too dependent on outside factors to succeed. Practices, pitfalls, and how to do it better.
Part One of this three-part series provides the thumbnail sketch of urbanization and why people build cities, how they do it, and a few of the more obvious big-picture challenges facing such an effort. Part Two is for urban planning and/or project management aficionados, and speaks to the “master plan” itself, the set up for early implementation, and several specific issues impacting these undertakings. Part Three provides a handful of constructive ideas that have broad applicability for project management in general, and urban development in particular.
PART TWO: From Big Vision to Early Construction
Building an entire city off a single blueprint is a dubious undertaking, but one nonetheless undertaken. As such, it will be beneficial to run through an account of how a master planning project for a new city comes together. This account focuses on project management issues surrounding the building of the physical city, deferring to the extent possible all existential, sociological, political, economic, aesthetic, and other considerations for another time. This is not a description of a specific project; it is an amalgam of real project examples assembled for dramatic effect for a theoretical new city, a “greatest hits” package of key issues and common troubles that may be encountered along the way.
The genesis of our new city project lies in the ambitious national housing and economic diversification policies pursued by the national government of this locale. The policies are socially progressive and heavy on intent but, until now, lighter on success. After a range of different efforts over the years, the new city mega-project is a hoped for “silver bullet” cure that will kick-start progress by providing housing and economic development in a highly visible manner. Fortunately, this government has considerable economic resources, so money itself is not the principal limiting factor that it would be elsewhere. In addition to the government policy rationale, certain other common characteristics of leadership come into play. These include soaring ambition, a strong desire for affirmation, impatience, a penchant for one-upmanship, and terrible FOMO [fear of missing out]. Typical stuff really.
The new city is a hoped for ‘silver bullet” to kick-start progress in housing and employment
With this background in place, imagine a massive program of city development being proclaimed with pomp and ceremony, couched in the language of a gift of government to the people in completion of a pledge. A grateful nation duly names this future city after the current head of government. A name is important on many levels, and the project benefits significantly from the halo-effect its name brings, at least for as long as that ruler remains in power; but it also comes with a responsibility to succeed, and just as importantly, to be seen to be succeeding.
The project starts like many others, with a pair of initial tenders for plans and studies being sent to a who’s who of international and large domestic consultants. The project will be managed by a lead government ministry acting as “project owner” but the tenders are required because the ministry will rely considerably on outside specialists to execute the work.
Instructions to interested parties in the tenders are clear enough: the government has provided the vision and the consultants are to support this vision by undertaking a project feasibility analysis [market study and business case], and a master plan with concept engineering. The “between the lines” sub-text is also clear enough for those in the know: first, make the feasibility analysis “work” no matter what because we are not asking you if this is a good idea, we are asking you to tell us why it is a good idea; second, ensure that the master plan comes with plenty of “eye candy” and superlatives because these are what is needed to ignite the imagination; and third, ensure the engineering is sufficiently advanced to catapult the project rapidly into construction because we are in a big hurry. Simple really.
It is worth spending a moment discussing the people and companies that will work on this project. The lead ministry, recognizing the unique nature of the work, has created a special unit to manage the project and put their best and most progressive people on it. This special unit in turn issues the tenders and assembles the team of high-profile consultants. The two main studies, the business plan and master plan, are separate awards and the two teams will have limited, if any, contact with each other. The feasibility analysis comes first and is usually taken on by one of the large management consulting firms, possibly with local partners, strong on financials but less so on urban development principles. The master plan is taken on by a team of urban planners/designers and engineers, usually a group of firms with one firm as the lead, strong on urban development principles but less so on financials. The project’s high profile ensures that a healthy representation of top global and local talent ends up at the table. Citizens from many nations work together, mostly from their offices remotely, meeting up at key points for workshops and presentations, each bringing their professional standards and work styles with them. There is great reliance on emails, video calls, and minutes of meeting painstakingly assembled and [hopefully] agreed. Language is an issue. Clear communication among the participants is a major problem with English being the lingua franca used by the speakers of many languages with varying degrees of expertise. Adding to the problem of communication and clarity, the official contract language and the language used by authorities, is not English and is rarely mastered by non-native speakers.
In such an environment, subtleties are easily lost. There is so much cultural and linguistic cross-traffic that the working environment allows for, and at times even rewards, aggressive behavior just to cut through the noise. Overall, though, most people simply keep their head down and their feet moving and do their professional best under complicated circumstances. It takes managerial dexterity, and no little luck with “chemistry” to maintain a smooth flow of information through a sprawling undertaking like this. Keeping everyone on the correct page with an oft changing script is no mean feat, nor is trying to avoid long meetings with lots of people where nothing really happens.
With the team assembling, a quick word about “fast tracking” projects. Part of the burden of being a ‘silver bullet” is that expectations for quick results are intense, thus time is always short. The most popular way to compress a project schedule is to simply pile activities one atop the other with as much overlap as possible. Simple, crude, and ultimately unwise, this approach ignores the fact that many activities must happen in sequence in order to be effective. There is no point diving into an urban plan, with all the attendant infrastructure design work, if you are still puzzling out the fundamentals of the business case, although it happens all the time.
From here we will zoom in on the master plan, leaving it in similar isolation from the business planning, as happens in real life. With the master plan kicking off, there are common pitfalls to look out for. Because the project targets the intractable hot-button social issues of housing and employment, a number of “quick win” projects have been identified and tacked on to the master planning project. One highly visible and symbolic housing project and one sizable employment project are to be planned and designed by the master planning team immediately and in parallel with their other work. As important as they are politically, each is a major task, and together they become a distraction that diverts attention and resources away from the overall master plan itself. Due to time and resource constraints, and generally being an afterthought, they often end up as mediocre products that may or may not complement the eventual master plan or serve as the desired catalyst.
Other issues to look out for at the macro-level include: insufficient coordination between various arms of government with differing levels of commitment to the project; insufficient coordination between the master planning team and the business planning team; insufficient coordination between the master planning team and key stakeholders providing infrastructure and social services; and insufficient congruity between the project owner’s specific mandate and the government’s broader economic and social development policies. Within the project itself, there is conflict between the owner’s expectations, market realities, and the physical plans. Within the physical plans themselves, there is conflict between the urban design and the engineering. As with any highly technical process, success lies in the detail and the synchronization, and having large pieces lurching in and out of phase with each other does nothing to make matters easier.
As the process unfolds, a dense network of links necessarily form among the major actors, the project owner, other government ministries, external institutional stakeholders, and the wide array of technical consultants. The project owner is acutely aware that they directly control little of the actual work being done yet retain ultimate responsibility for the project. Reflexively, they try very hard to control communication and referee contacts among stakeholders as a way of staying on top of things and controlling decision making. The result can be a heavy-handedness in project management that does succeed in controlling communication but at the expense of clear and timely exchanges of information and ideas. If this role has been outsourced to a consultant “client representative,” another common occurrence, the outcome is most often similar, if stylistically different. The fundamental problem is an emphasis on controlling information rather than promoting the timely and orderly flow thereof. Since Many international participants will struggle to follow burdensome communication and reporting protocols, this will become a distressingly major distraction that will negatively impact the project.
The project emphasizes engineering at a very early stage-- for all the wrong reasons
The scope of the master planning project emphasizes engineering design early in the process, even before project fundamentals have settled enough for such work. This is a common characteristic. Time constraints, a misplaced desire for “hard costs” early-on, and the reality that many of the people involved are, or originally were, engineers and feel comfortable in the language of engineering, all contribute to this situation. Oddly enough, front-loading too much engineering into a master planning project creates a harmful “tail” on the project. Urban design concepts and development strategies that determine how the city will be laid out and function are relatively easily modified and they will be many times during the planning process. High-level engineering approaches that show generally how the networks of roads, water, power, sewer, etc. will respond to the urban design can match these changes. In fact, the interplay between these two elements, urban design concepts and engineering approaches, is the very stuff of master planning itself. But engineering is methodical and intensive by nature and marches stepwise like a centipede. It takes real effort not to dive too far into the detail at too early a stage. Pushing “real” engineering too far upstream into the master planning stage, and then having to revise the work time and again as the planning evolves is a recipe for trouble. Repeated changes to concept engineering designs done under intense time pressure lead to errors and can leave the engineering out of sync with the urban plan. This situation will become a double jeopardy if, again because of time constraints, the full detailed design – the heavy lifting – begins before the master plan is even officially approved.
While time is money and everyone wants to get a move on, it is a false economy to procure work-off designs that are incomplete and/or strewn with change errors. As a worst case, out-of-date engineering can become embedded in construction contracts and drive up the cost by forcing realignment during construction. If realignment isn’t possible, it can force costly changes elsewhere in the project and lock key stakeholders into disadvantageous positions. As a best case, conflicts of this type will contribute to a cascading series of “interface issues,” individually manageable but collectively damaging as they sap energy from the project, negatively impacting time, cost, and quality, while adding complexity.
Contracts: a simple mismatch between contract type and project type
Contracts are another common pitfall. A typical local market characteristic is the use of highly punitive deliverables-based, fixed-fee contracts for all the technical engineering and design consultants. Fixed fee and variation averse. [For those unfamiliar with the jargon, this contract type has a fixed total value that is paid out incrementally against a list of pre-defined deliverables with a schedule of monetary penalties for non-performance. A variation is a contractual change to these terms.]
For the project owner, cost certainty for the small but visible project planning work signals fiscal responsibility, all the more important for optics as so many other cost variables remain in flux or are unknown. It also offers protection to the project owner from changes in direction during the master planning. This approach would work if the scope of work is clearly defined with deliverables and expectations explicitly limited, but this is not possible given all the uncertainties surrounding the project. It is a simple mismatch between contract type and project type. Fixed-fee, deliverable-based contracts without adequate definition become open-ended deliverables traps for consultants, riddled with terms such as “including but not limited to… .” This approach is referred to [by me at least] as the “fixed-fee-variable scope” contracting model that holds obvious risks to the consultant but equally significant, if rarely acknowledged, risks for the project owner.
If the project encounters delays or significant changes in direction due to outside influences, a high probability in our theoretical case, the consultants will be obliged to keep working with no additional financial reward. The situation from the consultant perspective is that, as the project falls behind schedule due to unrealistic initial expectations or unanticipated “scope creep,” payments against deliverables are also slowed, putting the project in a negative cash position as well as a negative profit position. Contrary to traditional business school thoughts around abandoning sunk costs, once a consultant gets too far behind in payments, the chances of them stopping work actually decreases as they have ‘too much to lose,” both in terms of money and reputation. Instead of stopping work, consultants will protect themselves as best they can from further loss by seeking time extensions to avoid further monetary penalties, something marginally easier to get than additional compensation. Consultants regularly buy time in this way to minimize future loss, but at the expense of extending the timeline and spending even more cash that they have not yet received. While this is happening, the consultants will also be cutting every corner possible to conserve effort. This leads to a decline in cooperation and coordination, to patching over but not resolving known faults, and to investing much less thought into the overall master plan. In other words, for the sake of saving a relatively few dollars up-front to show fiscal responsibility, the project owner introduces obvious but incalculable risks of disruption to the timely and orderly investment of billions of dollars over the coming 5-15 years.
Likewise, the terms and conditions within a contract will have a telling impact on the outcome, whatever the payment terms. Government procurement rules generally require the project owner to use one of a small set of standard-form government contracts allowing only limited discretion in the contracts Particular Conditions. This is not a problem per se as standardized contracts are among the most effective tools for normalizing markets. The problem lies in the relevance of the contract being used compared to the job being done, as a specific master planning agreement is rarely if ever among those available. The closest substitutes are usually architectural design or infrastructure construction contracts. As discussed earlier, master planning is neither architecture nor infrastructure. And it matters. The general terms of a contract originally crafted around a large infrastructure project in the late 1980s is simply not an appropriate contract model for a master planning project thirty years later. A good analogy is trying to build a modern automobile by following the detailed instructions and check list for an railway engine. Yes, they are both modes of transport, and yes, they both have wheels, but using one to build the other still does not make sense.
If our project had a private sector owner, there would be more flexibility in the form and terms of the contract, but the results would be largely similar. The culprit here is the commonly held belief that the best way to derive maximum value out of a contract is to nail the contracted party down as tightly as possible on all fronts, then relax and tighten just enough to keep them breathing. And this may possibly be the way to go – if you are procuring twelve million identical widgets, where all variables can be controlled, and the execution of repetitive tasks allows for brutal efficiency. But the master plan of a new city is the opposite of a widget. A master plan is a unique and bespoke product requiring a high degree of thought, flexibility, and responsiveness to changing circumstances. It is the type of project where locking down your consultants too tightly will have a inverse negative impact on the quality and internal logic of the product, and through this a similar negative impact on the overall investment.
Fast paced work undertaken in near secrecy
After a very public announcement to kick-off the project, work proceeds furiously but little is visible from the outside. The project owner is constrained from formally presenting the master plan to others prior to top government leadership approving the final product. Unfortunately, the jigsaw puzzle is too complex to put together without engaging many different stakeholders, but the pseudo-secrecy does serve to limit conversations to a narrow “need-to-know” basis only. Caring is not sharing in these circumstances. Definitions, of necessity, can be tight as interagency competition is fierce, with ministries wrestling for dominance or independence, not to mention the government and private sectors beginning their awkward dance together. Our project owner prefers to minimize outside communication until the master plan is fully approved. They believe that presenting the master plan as a fait accompli approved at the highest levels of government will provide them an advantage during subsequent negotiations with powerful stakeholders. And this may be the right approach given the local political environment. However, the price of this guarded approach is that the master planners themselves will need to embed many assumptions into the master plan in lieu of receiving direct information from these stakeholders, with resulting conflict later as some of the assumptions prove faulty.
A critical ingredient to the success of the master plan is the degree of certainty that emerges around the financing, ownership, control, and operations for the municipal services to be provided by the new city. Strange as it may sound, “Who owns the local government?” is an ongoing existential question for the project. This is particularly critical for private sector project owners, but remains relevant for our government project as well.
Municipal governance has been historically weak in this locale, and while local government exists, national ministries and their affiliates provide most of the services. Current national laws offer cities narrow authority and almost no fiscal independence. The regulatory and administrative situation is equally challenging, with decades of underinvestment in personnel taking its toll. In a rare instance of total agreement, no party wants to extend current local governance practices. But these governance issues have proven intractable to-date, so part of the “silver bullet” strategy here is to use the project to leapfrog these governance issues by providing the city planning team with the “freedom to innovate” and to introduce a new governance model along with the new city.
This sounds great on the surface as one rarely gets the opportunity to truly innovate in consulting. Upon closer inspection, however, this freedom is more burden than benefit. One of the reasons municipal governance problems often prove intractable is that they are massively complicated. Almost all potential solutions take the treacherous and complicated path of delegating authority, adjusting budgets, and decentralizing services to the local level, thus explicitly changing the way people interact with their government. To task the master planning team with addressing governance creatively while still being primarily engaged in a high-speed spatial planning exercise is not realistic. The two most common results are both shortcuts; either outside models are imported and recommended with little thought or adjustment to local reality, or there is a reversion to the default current practices dressed up in new jargon, neither of which responds to the mandate. While there will always be a limit in the level of detail embedded in a master plan itself, getting the fundamentals right, such as how municipal services will be delivered, is critical.
Key decisions are made on the fly, or plugged in as assumptions
As the project moves along, a series of determinations are made about who will bear the cost and responsibility for the infrastructure and major service activities, each of which has an incumbent provider in the market. The general arc of events is that, at the outset of the project, the project owner tries to minimize involvement of, or bypass entirely, other authorities and incumbent utility providers. This is due partly to the secretive nature of the project, but more so to the belief that sidestepping the usual suspects will provide greater freedom to cut red-tape and pursue new solutions falling “outside the standard framework.” This makes a degree of sense for a project expected to be at the leading edge of the smart city movement in a market where technical standards and administrative processes tend to be conservative and inflexible.
As time progresses, however, several things begin to happen to force a reversion to the norm. Powerful forces start to intervene from outside as they wake up to what is happening and see how much the project threatens to bind them, with or without their consent. The project owner, for its part, begins to reflect on the huge capital and operating costs and overall complexity of taking over responsibility for even a part of municipal operations, particularly as there is a dearth of recurring revenue streams in their business plan to support such activities. At this point, bringing in the incumbent providers begins to look decidedly more attractive. The project owner first tries to get the incumbents to build, pay for, and operate the installations according to the project owner’s schedule. Failing that, they seek to enter into some type of build and transfer agreement to keep to the schedule. Whatever the final solution, entering into agreement with the incumbents means that you must play largely by their rules, which may well run counter to certain innovations or assumptions in the plan. Such a forcible injection of external realities into the planning process will be another “wrench in the works,” particularly if it comes too late to be an intrinsic part of the planning process, but instead must be stitched in later. Complications around the ownership, governance, and operations of services will impact the project throughout its life.
For reasons previously discussed in Part One, the project will not possess a global business plan. Comprehensive budgets with sources and allocations of funds, matrices of ownership and responsibility, or any other consolidated set of information needed to get one’s head around the entire project will be largely absent. Partial estimates and calculations will exist in many locations including the project owner’s offices, utilities providers and other governmental agencies, the finance ministry, etc., and these will satisfy many needs. However, they will be neither consolidated nor presented in a way to materially assist the master planners in optimizing the city plan or, conversely, all others to use the city plan to help optimize the budgets.
Despite all the challenges, version one of the master plan will be completed, likely not according to the initial accelerated timeline, but still very quickly for such a complex undertaking. And it will be as good as dedicated professionals can make it within the peculiar conditions of the project. After completion, the master plan will percolate through an opaque [to us] evaluation process within the higher levels of government, eventually landing on the desks of the ultimate decision makers for final approval.
This is a fraught time for the project team because plans are often rejected the first time. This can happen for any number of reasons, from an eye watering price tag, unrelated external factors, or simply for failing to ignite the imagination. We will never really know. Regardless of cause, having a plan rejected causes consternation amongst project owners and occasions delay while fingers are pointed, heads rolled, consultants fired, and new ones hired. After a multi-month reboot, survivors are introduced to new players and the whole machine starts to move again. The new process builds selectively on the bones of previous work but is even more rushed for the delay. Rinse and repeat once, possibly twice, and there you have it: an approved comprehensive master plan for a brand-new city.
Even without having the plan rejected, the master planning process with all its distractions and delays will have lasted at least 24-30 months for a project unrealistically scheduled for 9 months. The delay on the master plan is just the start of a series of timing issues. The delivery dates for the early “quick wins” projects will be extended only in the direst circumstances, but could well slide in the end, while the highly optimistic build-out schedule embedded in the master plan conforms more to political exigencies than to technical, market, or economic conditions.
“Once completed, victory is declared, and it becomes imperative to show progress on the ground”
After the master plan is completed and approved by leadership, victory is declared with great fanfare, the project is officially launched by high government representatives, and it now becomes imperative to show progress on the ground. In the parlance of the trade, the task now becomes one of execution and of program management. As the name implies, program management is the coordination and management of portfolio of interconnected projects. Sequencing is critical. One hiccup in the delivery of an infrastructure project costing millions can risk delaying the completion of residential neighborhood valued at many tens of millions or more. Given the extended durations of activities, it may well be an accident in slow motion and resolvable technically, although almost inevitably at great cost. From a financial standpoint, the costs of these solutions are part of what make the city-as-project-as-business so perilous. Too many of these hiccups, or any “automatic fails,” and the project can lose momentum completely, potentially grinding to a near halt for years until eventually resuscitated and restructured.
The Program Manager heads the implementation team and becomes the caretaker of the vision and conductor of the development orchestra. The role can take on one of many forms: a specially created development company; a private developer operating under a concession; a specialized project management consulting firm working for the ministry; or other. Irrespective of the form, the substance and responsibilities remain similar. Program management requires a substantially different skill set from master planning and there is an almost total turnover of companies and personnel engaged on the project. This turnover and lack of “institutional memory” will be felt all the more so as the master plan contains many placeholders where understanding the original intent is particularly valuable when it comes time to resolve the issue.
The conductor of any orchestra does not blow the loudest horn, and nor does the Program Manager. Others will control the presence or absence of money, key regulatory and permitting functions, and have the last word over individual facilities or services. Yet the position of Program Manager remains very influential. They are the custodian of the master plan, responsible for keeping events from diverging too far from the score and getting the melody right. The program manager strongly influences the timing and flow of investments via the master schedule, manages key contracts and agreements, conducts program-wide oversite, and ensures coordination among the major participants.
The master development schedule merits a word. All major project activities related to on-site construction are [or should be] mapped and tracked via a large, intricate, schedule with sub-projects nested like co-dependent Russian dolls one inside the other. The level of detail needed for managing the overall program is different from individual projects. The master program schedule must demonstrate all the principal interrelationships among elements but should be undertaken with a “less is more” ethos to maximize clarity and eliminate noise. While comprehensiveness in the business plan proves illusive, a high level of completeness on the schedule is both possible and entirely necessary, driven by many factors, large among them technical site management requirements. The schedule is a key tool for the program manager as it is a common document among all parties that governs the running order of activities on site. Its importance cannot be underestimated, as during construction the number of activities and participants balloons, and control over large pieces of the puzzle transfer from the master planning team to their natural owners or delegates. Most importantly, they all need to work together.
When implementation starts, people will accept certainty over perfection
It is only at this point, where the master plan is approved and stakeholders are called upon to begin investing considerable amounts of time and money, that the project gets its first real dose of sunlight. Hitherto, the plans have been crafted largely in the shadows by a comparatively small group of players. But now, an enormous amount of outreach, coordination, and detailed agreement is required. If the plans encounter any serious resistance at this point, the cost of change and associated delays can be substantial, while certain things cannot be rolled back at all. At this stage, people will generally accept certainty over perfection.
Establishing the construction sequencing is an arduous task. On the public side, the project owner must reach a series of agreements with a half dozen powerful fellow ministries, particularly for the big-ticket, long-lead items that these ministries will provide (power, water, roads, etc.). Funding must be secured for each project element, ideally through the budget of the natural owner, but otherwise through the project’s budget. These sub-projects must be synchronized with the master project schedule and within the capital and operating budgets of the various ministries. There is also an acute need for our project to attract private investment capital to demonstrate momentum toward the ambitious targets for private participation that made getting earlier government approvals so much easier. Special purpose development companies may need to be established to take over all or some of the activities. Investment capital will be required through sub-development packages, operating licenses, and the like. This is the end of the “paper planning” and the start of the “real work.”
This is the end of Part Two discussing the master plan itself, the set up for early implementation, and several of the large issues overhanging these projects. Part One provided the setup, while Part Three offers a handful of constructive ideas should you find yourself in the improbable position of having to plan and build a new city.