Making it happen: Central North-South Infrastructure Corridor
" The result is that 90% of megaprojects exceed their budgets and their timeline. "
Finding one or two recent megaprojects that came in on-time and – even more elusive – on budget, is like finding a needle in a haystack.
There is nothing random or cynical about this: our global study of 1,000 megaprojects found that 9 out of 10 had suffered delays and cost overruns.
But how did it get to the point where the only thing we can confidently expect from such giant projects – say for example a big infrastructure project such as a transcontinental pipeline, or hosting an Olympic event – is that they will not meet their targets? Leading academics, such as David Kahneman whose theory of the 'Planning Fallacy' and Albert Hirschman with his principle of the 'Hiding Hand', rightly highlight inherent issues common to a number of supersized projects. Typically, a rational decision is made to take a project on without considering potential obstacles in the future, which in turn need to be overcome "creatively" as it is then too late to abandon the project.
So far, so theoretical. But now that the ink has dried on technically complex blueprints and multi-billion, multi-year and multi-stakeholder contracts, what is there – specifically – in the megaproject executive's arsenal to help combat these issues? What can be done to improve the odds?
Speaking from our long standing experience in complex national and cross-border megaprojects, technical challenges, shifting commercial demands, diverse stakeholders and political pressures usually constitute the bundle of factors that make giant projects so very different to handle. Front-end loading, common in standard projects, does simply not work here. Decisions cannot be taken in bulk at the start never to be revisited, nor can all complexities and uncertainties be anticipated over such a long period of time, or expertise stretched into oblivion: you will simply not have all the information to bring about perfect decisions right from the off. You need to find/make room to adapt – or risk failure.
We advise setting up an Executive Intelligence Office which acts as a RADAR, i.e. enabling Rapid and Appropriate Decisions with Accurate Response. It bridges the gaps among experts and between experts, project directors, management and stakeholders, and synthesized experts' insights and communicates these in a clear and actionable way. Above all, it is dynamic and forward looking, underpinning and reflecting the long term, complex character of megaproject executive decision making. Find how it's done here:
Megaprojects are not becoming extinct any time soon – in fact any number of them has usually been deliberated for decades. However, many of these ambitious plans have little chance of ever becoming reality.
Our in-depth analysis of a long standing transcontinental, multi-sector, multi-stakeholder super-project, the Central European Infrastructure Corridor, takes a different view: at a time when energy security is at the top of the political agenda and infrastructure investments are widely acknowledged as a powerful driver of growth and competitiveness as well as a fundamental pillar of European integration, various grand political plans are discussed in Europe's policymaking circles. The North-South Corridor must not become another such project, for it is too important to Central and Eastern Europe and the EU.
To facilitate an understanding of how critical parts of the Corridor can be financed and eventually implemented, our report reviews technical and financial project characteristics as well as the merits of their underlying business cases. Our approach goes beyond reaffirming the sound political rationale of the Corridor and sets out to answer the fundamental question: How can we make it happen?
There are many important large scale infrastructure projects in Europe currently awaiting finance. The European Commission and EU Member States have already defined 2,000 projects that could be of interest to investors.
The European Fund for Strategic Investments (EFSI) proposed by the European Commission aims to mobilize at least EUR 240 billion in private infrastructure investments. Structural obstacles like differing national regulations and the lack of investment project standardization remain, limiting the outlook for actual private investment.
In a bid to help European infrastructure projects and private investors come together, the Roland Berger experts worked with United Europe to develop feasible building blocks for a European investment model.
In particular, our recent study, Squaring the circle: Improving European infrastructure financing, which aims to support the successful realization of the EFSI, proposes hands-on recommendations for a comprehensive European investment model.
Emerging and developing nations need modern, efficient infrastructure to keep growing. Whether for water or electricity supply, telecommunications or transportation: there are 145 countries with low to moderate gross national incomes that need to invest over USD 850 billion annually to bring their infrastructure up to date. That's the only way their local economies can keep growing.
Private international investors in particular could help, and boost their own businesses into the bargain, but they're holding back because of the risks. This fear is often unfounded, though, and is based on a misperception of local risks that is putting the brakes on their economic expansion.
Private investors need to assess the risks involved realistically to profit more from these countries' growth. We have been making the case for "profit through progress".