OP-ED: Benefits overestimated in megaprojects

There are lessons to be learned from research on large spectacular megaprojects such as Northwolt, Stegra and North Bothnia line. This is according to Associate Professor Ossi Pesämaa, Luleå University of Technology, who in this Opinion gives examples of these lessons.

The majority of major megaprojects involve significant time- and cost overruns. It is also very common for megaprojects to contain large deviations in quality, as a direct result of optimistic management. A megaproject is considerably larger than an ordinary social project and therefore places completely different demands on governance and management. As projects take a long time and consume a lot of resources, both inputs and technical performance will change during project implementation. Many models for permitting processes are rigid and create technical lock-in effects that disadvantage future expected societal values. For example, more so-called “box permit” models would increase flexibility and provide greater scope to adapt quality and performance to the evolution of products over the life of the long megaproject.

Megaprojects like Norhtwolt and Stegra in northern Sweden represent a green transformation with bold financial, technological, logistical and societal elements.

Megaprojects are not only time-consuming and costly, but differ from “big” projects in that there should always be a societal value. Such a value is developed by a private, public or a combination of private and public actors. These societal values are expected to be lasting for society. At the same time, the megaproject is a temporary agent that transforms different innovative values for society. Such a transformation requires a large cooperation involving many different actors. Some societal values in infrastructure are expected to contribute to society over a very long period of time and thus also have major consequences for other alternative solutions. A train connection is expensive and can possibly knock out other solutions but also enable heavier transport. Similarly, we currently have bottlenecks on certain stretches of rail infrastructure, such as the ore line, where passenger traffic must be diverted to roads. These issues govern both mega-projects in infrastructure, but also other investments that are directly dependent on a functioning infrastructure.

Great importance for the site

A megaproject is often spectacular, and in a study of up to 35 Swedish megaprojects we have identified how they aspire to various “sublime” characteristics. A sublime characteristic means that a project stands out in length, height, technically, in design, financially or otherwise. These sublime features often contain several different innovative elements. Sublime projects stand out and can be the region’s longest bridge, tallest building, longest tunnel, fastest-built nuclear power plant or something else. Some sublimes are local while others are regional or global. The North Bothnia line is a typical local project that has great significance for northern Sweden.

Regional sublimes include the Öresund Bridge, which is well known to the Öresund region. Global megaprojects are known to the whole world, such as the Channel Tunnel. The megaproject is thus an agent for this type of bold attempt to aspire to a major innovative solution that will have a major impact on the place where the project is created.

Lack of scrutiny

It is now well known that megaprojects such as Norhtwolt and Stegra (formerly H2 Steel) in northern Sweden represent a green transformation with bold financial, technical, logistical and societal elements. In our research, where we have followed the megaprojects in various ways, it is clear that there has been a large degree of so-called optimistic bias. Optimistic bias is the most common type of bias. Optimistic bias means that managers and financiers in this type of project overestimate benefits and underestimate potential risks. Optimistic bias may explain why managers and financiers avoid critical questions and try to see everything in a positive light.

Projects do not always receive the transparency and scrutiny necessary for the most innovative or productive proposal to win.

The latter is of course a necessity to move the project forward, but it can also prevent projects from gaining the transparency and scrutiny necessary for the most innovative or productive proposal to win. Testing is an important part of successful innovation. In the early media portrayal of these green projects, the picture was very bright and the leaders were portrayed as sustainability heroes. Today, those same heroes are toned down and often portrayed as anti-heroes. What we forget is that these representatives were also allowed to emerge in the absence of scrutiny and where we, as silent owners and members of society, let loose with funding without questioning the innovative products’ right to exist in a competitive market.

Lessons from the mega-projects in the North

The outcome of the megaprojects in northern Sweden was expected to be innovative products and associated services that in many cases were not completed, fully tested and ready for a full-scale launch. The megaprojects have also in some cases been developed in isolation without full transparency, but with public or indirectly owned pension money as financiers. We sometimes forget that even large companies are largely owned by pension savers as indirect institutional owners.

It can also be about time aspects. One such example is the permitting process for wind turbines, which takes a very long time. The permit at the beginning of the project means that we are seeking permission for wind turbines of 80 meters, while the standard at construction 10 years later is 240 meters and corresponds to a completely different productivity and economic efficiency. This type of problem is known from current research in megaprojects.

My hope is that in future megaprojects, we will also be more careful and thorough in selecting megaproject managers. In our interviews, some people pointed out that the management and control of megaprojects is something completely different from ordinary projects. The fact that a project is scaled up to such an extent means that completely new problems arise and also requires completely different skills. From several successful projects, we also see that project managers in megaprojects have been more active in involving the surrounding community and have had a clear policy on transparency.

Ossi Pesamaa,

Associate Professor at Luleå University of Technology