The dangers of inappropriately analysed, large infrastructure projects

Open Letter to Permanent Secretary, Ministry of Public infrastructure

The Association des Consommateurs de l’IIe Maurice (ACIM) has taken positions on some major infrastructural projects. We hold the view that some of these proposed projects such as the Metro Leger and the Harbour Bridge will have adverse impact on the country. We are not convinced in the face of evidences actually available in the public that Government is taking the right decision. That was, in passing, the reason why we had been asking for the report from the Singaporean company to be made public. We are still waiting.

However this should not be an issue based on opinion and views. Rather, it should be based on science, more appropriate analytical tools that are best practices, commonsense and hard facts. ACIM is, therefore, proposing a novel and advanced form of planning – Reference Class Forecasting – before we embark on major infrastructural projects, such as Metro Leger, Harbour Bridge, etc., under the Public Sector Investment programme (PSIP). This new forecast is already adopted by OECD countries, the American Planning Association and other economies that have at heart the real need of their country.

This novel forecasting approach is based on a concept developed by psychologist, Dr D. Kahnemann, the 2002 Nobel Prize Winner for economy. This concept is supported by research by Prof B Flyvberg, Professor at Oxford University and other researchers worldwide.

It is intended to avoid pitfalls in major infrastructural project forecasting. Major economies, bent on good governance and accountability have adopted this useful method.

The lack of visibility of the world economy is taking us in unknown grounds. The impact of the Euro zone crisis on the Mauritian economy is looming large and wide. This clearly indicates that we need to tread carefully regarding the financial situation of the country. By the very nature of the massive financial input required and the development mode adopted, what are portrayed as 21st century world models for public transport could turn out to have the opposite effect if not given the best major infrastructural forecasting analytical tool.

Unwelcome negative outcomes could affect the economic, social and environmental bearing of our country. A rich country could afford to make such a mistake, but not a poor or even middle-income country.

Already, we are seeing major cost overruns emerging in many projects either brought out by the Audit’s report or brought up in parliamentarians’ questions. Cost overruns in the Terre Rouge –Verdun Link Road, the Ring Road, Waste Water development in Baie du Tombeau, Caudan Fly over, MedPoint, etc indicate that the costs are higher than expected. This will clearly impact on availability of funds for other projects under the same Ministry.

But when the mistake will be in billions of rupees darker days would have been brought upon us not by international environment, but by our own making or lack of decision making.

Hence consumers, workers, unemployed, pensioners will have to pay or be directly affected, if not now then later on, by:

· Higher or new taxes such as the airport tax for the construction of the new arrival lounge and the resurfacing of the runway, potential raising of the VAT and other taxes, tax on petroleum products kept artificially high, Toll fees, Levy on Food such as water, Parking fees etc.

· Higher costs of utilities such as water, waste water, and electricity, etc

· Privatization proposals (for the CWA, the Fitness centre) and selling off of state assets (Air Mauritius), (Casino) and future ones.

· Freezing of new job creation in the public sector, even if necessary – Health, now and in the future.

· Laying off or redeployment of employees in other areas

· Squeezing of welfare benefits through paying for free services

This tool will help technicians and policy makers embark on the implementation of major infrastructural projects knowing at the very start of real expected costs and benefits.

We hope it will be a fitting contribution of ACIM for the benefit of the country.

Jayen Chellum
General Secretary

The dangers of inappropriately analysed, large infrastructure projects.

The strategy adopted by the western economies to deal with the current financial crisis has been to stimulate growth through large infrastructure development. There is an estimated 22 trillion US dollars projected for development in emerging economies. Mauritius is one of these economies subjected to such planning and investment. Public record and researches (Prof Bent Flyvberg & ors) show that the private sector, public and private sector partnership and the public sector have poor record on delivering within cost on large infrastructure projects like road building, tunnel, railways and transport system like light railway (Metro Leger), IT systems, airports, stadiums and power stations.

Examples of major project overruns and shortfalls

Shortfalls – Sydney Opera house

The Sydney Opera House which was meant to cost 10 million Australian dollars was completed and opened in 1973 at a cost of 102 million Australian Dollars i.e. 1400 percent overrun cost

The building of the Euro tunnel under the English Channel in 1987 (a Margaret Thatcher legacy) proved a catastrophic financial disaster which has nearly bankrupted the Eurotunnel, the company that was set up to manage the project and to operate the tunnel. They had budgeted for a 10% overrun cost but it proved that the real cost was twice over the estimated and projected cost which resulted in share prices value of the company to drop by two thirds. They had also overestimated the revenue estimation by two thirds which meant the Eurotunnel had to carry out many financial restructuring over many years from which it recovered in 2007. The actual net value of the project was minus 17.8 billion US dollars to the British Economy and the actual rate of return minus 14.45 %. It would have been better for the British economy if the Tunnel had not been built (Anguera, 2006:291).

Tolling System in Europe

In 2003 a consortium comprising of DaimlerChrysler, Deutsche Telekom and Cofiroute of France (a public private partnership venture) who had built a new tolling system for heavy goods vehicles on German motorways for the Federal Government was losing 156 million Euros per month due to delays and software failure to manage and run the system. It was estimated that 6.5 billion Euros was required to fix the problem.

Road and Metros

Boston Big Dig which is otherwise known as the Central Artery Tunnel Project was 275% over budget. Denver 5 billion US Dollars international airport was 200% higher than estimated cost. The Los Angeles, Calcutta and Copenhagen Metros and many urban rail projects worldwide had similar cost overrun. In 44 urban rail projects in North America, Mexico, Europe, London tubes and other developing nations’ cost overruns were in constant of 45%-60%. Passenger usage was 50% below the forecast. The projects proved to be over budget and overtime.

Table 1: Inaccuracy in cost estimation for transportation projects worldwide by type of projects in constant price

Type of projects

Number of cases (N)

Average cost overrun (%)

Standard deviation

Rails

Bridges and Tunnels

Road

58

33

167

44.7

33.8

20.4

38.4

62.4

29.9

Flyvberg, B. (2011)

Benefit shortfalls

Bangkok sky train

As for benefit shortfalls the Bangkok 2 billion US $ sky train, a two-track elevated urban rail system designed to service the most densely overpopulated area from the air is vastly oversized with too long platform for the sizes of train. Currently many trains and wagons sit in storage as there is no need for them as traffic turns out less than was expected.

Research shows that across the globe large infrastructure projects always have cost overrun of 50% and that it is not uncommon to have 100% cost overrun. The reasons for these were established following a study (by Prof B. Flyvbjerg from Oxford University) in major infrastructural projects (over 100m Us $= app. MRU 3 bn) in 20 countries spanning 70 years that showed that 9 out of 10 projects lead to cost overruns.

Estimated passenger usage/ actual observation of use

Additionally there are major discrepancies between project estimation of passenger usage against actual observation of use. It is not being suggested that this may be the case in Mauritius given the demographics, societal and cultural differences in public transport usage. However research results in large infrastructure planning cannot be ignored and need careful consideration by Mauritian planners. 84% of rail passenger forecast are wrong by more than + 20% and 50% of road traffic forecast are wrong by more than +20%. Inaccuracy in traffic forecasts is found in 14 nations and 5 continents.

Limitations of common forecasting tools

Planners have in the main relied on cost benefits analysis in their deliberations. Their main emphasis has been cost against the benefits that are to be expected. But these have limitations and have proven to constantly result in overspending and low usage or inadequate specification for what is needed.

There are three main explanations for cost overruns, project extension and overestimating benefits in major infrastructural projects. These are:

1. Technical bias: There is a lack of adequate data, honest mistakes and lack of experience by the planners;

2. Optimism bias (Psychological): Planners are self-deluded, spin scenarios of success, and overlook mistakes and miscalculations. In fact, their decisions are based on delusional optimism.

3. Political-economic bias: Political economic bias is based on self-advancement, political pressure leading to misrepresentation and lying in order to get the project started irrespective of the outcome.

Reasons for cost estimates differences compared to real cost and passenger usage

The main reasons found for differences between cost estimates and projected use with the final cost and passenger usage are

1) Project complexity

2) Technological uncertainty

3) Demand uncertainty

4) Lack of scope clarity

5) Unexpected geological features

6) Opposing stakeholders’ voices.

Major Infrastructure Projects in general have the following characteristics:

– Such projects are inherently risky owing to long planning horizons and complex interfaces.

–   Technology and design are often non-standard.

– Decision-making, planning and management are typically multi-actor processes with conflicting interests.

–  Often there is “lock in” or “capture” of a certain project concept at an early stage, leaving analysis of alternatives weak or absent.

The project scope or ambition level will typically change significantly over time.

Statistical evidence shows that such unplanned events are often unaccounted for, leaving budget and time contingencies sorely inadequate.

As a consequence, misinformation about costs, benefits and risks in the norm through out project development and decision-making, including in the business case.

The result is cost overruns and/or benefit shortfalls during project implementation.

Inside view thinking: Overestimation of Benefits and Underestimation of Costs

Costing of projects and timescale to completion are overoptimistic in the planning phase. Project managers make honest mistakes and have delusions through political pressure, deception and strategic manipulation of information. Delusion and deception leads to flawed decision making and delusional optimism rather than rational weighting of gains, losses, risks and probability. They overestimate benefits and underestimates cost and time. Additionally politicians, planners, consultants and project champions strategically overestimate benefits and underestimate costs to increase the likelihood that their projects go ahead against the competition. Consultants appear to justify projects rather than critically scrutinize costs and risks. The project looks good for these actors as it brings them kudos and prestige. It allows them to add their name to posterity and they therefore spin a positive scenario and fail to see the potential for failure, cost overruns and under-usage on completion. Delusion therefore accounts for cost underestimation and benefit overestimation. It is consistent with inside view thinking. Keep it in the family, as they say. It is very much a bottom up approach. It concentrates on the project and its details which is part of their planning fallacy. Adjustments are made to fit current insular thinking which leads to optimistic forecasts. There is always a plan that is used as an anchor and stuck to rigidly.

The dynamics of optimism bias

Hence Deception ensues because the system encourages those who make decisions to focus on benefits. Champions of projects, consultants have information that the project leaders do not possess due to their strong interest, incentives as well as personal benefits from the project. The project managers’ wish is to get the project to fruition, hence play down the risk issues which invariably lend to project managers to misrepresent, hide and manipulate the facts and information in order that the project goes ahead.

The dynamics of political economic bias

Strategic deception occurs when incentives are misaligned. There are differences in the preferences, incentives, time scale and information between the principal agents (the Government), the consultants, the project managers and the stakeholders. When strategic deception and optimistic delusions operate simultaneously this lend to the largest errors. In Mauritius the potential for these are great and could affect the Airport development, the link roads, the dream bridge, the metro léger project etc.

The time scale of projects bears significant cost overrun. Often projects are started in the mid-term of a particular government in situ hence other factors comes into play. Different values are evaluated, concerns with leaving a legacy by the government or being the first to suggest such a project or the first to implement such a project, issues to do what will the government be remembered for or wish for re-election. All bear impact on the decision of the project. Very often because there are many actors involved in the decision making like project managers, steering group, different committees, multiple people responsible for the success of the project which increases strategic deceptions and poor accountability for the success or failure of the project.

Reference Class Forecasting

The key to minimizing delusions and deception is to have a good learning environment and adopt reference class forecasting. This method was developed by Daniel Kahnemann who won the Nobel Prize for economics in 2002 based on his work on bias. Subsequently a study by Bent Flyvberg conducted with the concept of D. Kahnemann resulting in this approach. If clearly similar problems occurs and are frequently encountered in similar projects it provides feedback from which to learn and change.

These deception and delusions can therefore be overcome if project managers

1. Address financial incentives and non-financial incentives for the principal agent (the government), the consultants, proposing institutions, opposing institutions, planners, contractors

2. Discuss adoption of an outside view which focuses on understanding historical statistics and patterns of similar projects. Adopt Reference Class Forecasting where decision makers search for an unbiased representative population of similar and past projects/cases that will be useful in making unbiased prediction for the future. This is adopting an outside view of forecasting. This is not to suggest that planners and consultants should not take an inside view but that they should attempt to assess risks using statistics from similar type completed projects which would give a better view of overrun and outcome. Using reference class forecasting avoids bias, produce more accurate forecasting and remove strategic bias. Reference class forecasting has been used to great effect with major projects worldwide e.g. the Edinburgh proposed tram line.

3. Financial responsibilities should be shared by the proposing institution, private financiers with their own capital and risks which will therefore align incentives.

4. Adopt optimism bias uplift that is calculate project cost on the basis of similar project types for their history of cost overrun which will mean plan for a 50% risk of cost overrun on a road scheme plus 15% uplift cost. Similarly for railway projects a 50% cost overrun with a percentile uplift of 40%. This approach would discourage cost increases.

5. Create a comprehensive risk register on everything that could affect the project finishing on time, future maintenance risks, operation and delivery issues and revenue consequences. It must be made clear who owns the identified risk. Bidders should be made aware of all significant risks.

(Excerpts)

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Seafaring Culture for a Maritime Republic

A small island state has become a vast maritime republic (2.3 million sq km). What does this mean for our future development? A lot if we do not, out of sheer mental lethargy, smother our imaginative and creative powers. A change in outlook and mindset will open up new horizons and offer rewards unimagined before.

The development of a seafaring and maritime culture is the order of the day. As a first major step, the sea is not to be perceived as the dumping ground of human and industrial waste and all Mauritian citizens should learn to swim. Is it not incredible that a high percentage of islanders, including fishers, cannot swim although the sea is never far away? Yes, fishers have been known to drown.

Land will be used for residence and the production of staples (breadfruit, potatoes, rice) and different foodstuffs but general growth and development will be powered by the sea which has enormous potentials. Only fools can mock this idea. Policy makers and the people of the Republic will have to go back to the drawing board to chart a new course. Besides universal literacy in at least two main languages (Morisien and English) – in passing, recent research suggests that bilingualism and regular reading do help to slow down the slide into the horror of Alzheimer –, marine sciences and technology must become top priorities. Can we not imagine ships driven by wind and solar energy?

To successfully explore, judiciously exploit and effectively protect our maritime resources we will have to build and/or strengthen ties with friendly countries such as South Africa, India and China. Despite global warming, climate change and the collapse of western capitalism, there are great prospects for the Maritime Republic of Mauritius. All we need is fresh thinking.

DEV VIRAHSAWMY

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A propos du projet de loi légalisant l’avortement dans des cas spécifiques

L’Eglise respecte le résultat du processus démocratique même si celui-ci a abouti à la légalisation de l’avortement dans certaines circonstances.

Notre respect de la démocratie n’entame pas cependant notre responsabilité civique. Car même si la loi a donné aux femmes le droit d’éliminer une vie humaine déjà commencée en certaines circonstances, je souhaite de tout cœur que cela ne diminue pas notre devoir à tous (y compris aux femmes) de protéger la vie humaine en toute circonstance. Il y a aussi à renforcer la solidarité nécessaire pour que cette protection de la vie humaine soit efficace.

En ce qui nous concerne dans l’Eglise, nous continuerons à promouvoir la conscientisation sur le devoir civique de protéger la vie humaine en toute circonstance, à développer nos réseaux de solidarité pour soutenir les femmes en détresse et à poursuivre en amont le travail d’éducation des jeunes à une sexualité responsable.

Cela peut paraître bien dérisoire comparer à la « victoire » et au moment qualifié d’historique où des femmes ont obtenu du parlement le droit d’éliminer la vie humaine en certaines circonstances. Mais il reste que la petite pierre que représente l’engagement à protéger la vie humaine en toute circonstance, même si elle a été, sinon rejetée du moins écornée, demeurera toujours la pierre d’angle de la construction de toute société. Au-delà de l’écume médiatique du jour, c’est cela que l’histoire retiendra.

Maurice E. Piat
Evêque de Port-Louis

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Vasectomies for men

There’s been so much ballyhoo about termination of pregnancies, in specific cases and some men even started a protest outside parliament. What do men know about all this, unless one is a doctor? I don’t like it either but that doesn’t mean I have to put spokes in the wheels of others. The government is not forcing anyone to have it; the law is here that’s all. It’s the woman’s body and the decision at the end of the day is hers only. Who are we to object or judge? Are we that sin free?

Maybe, men who are against it should have vasectomies done. Simply, it’s the cutting of the spermatic duct from the testicle to the urethra, in other words male sterilization. Women then won’t get pregnant; no need for abortions and that will be the end of the story. It’s a minor operation, done under local anaesthesia, all plain sailing and in and out of hospital on the same day. It can be reversed even. What do you say?

Do you know in the sixties, women even had to have the approval of their mothers-in-law to follow birth control? My tenant had 4 young kids and they were quite poor. One day, she borrowed 25 cents from me to buy 4 slices of poisson salé or snoek at 5 cents each and a bunch of watercress. (Nowadays you can pick 20 cents coin on every street corner). The menu was going to be bouillon cresson and poisson frire. How nice. The mother left the articles on the table and once her back was turned, the children were so hungry that they started to eat the raw fish and scoffed the whole lot. Being an only child with only my mum, I could see the disadvantages of feeding several mouths. But yet Grand-mère remained adamant as she was a staunch Catholic and besides ‘zenfants nés avec so manger’ she used to say. All were living in one room and then Grand-mère went to live in the countryside followed by the rest eventually, in the hope of a better future.

This is 2012 and women have to decide for themselves. Men should not poke their long nose in women’s affairs and this should be as plain as the nose on one’s face. The Mauritian public is trying to wear blinkers like horses.  Dozens of abortions are being carried out in private clinics and surgeries. And you can’t stop that.

One more thing, our law and order is in a mess and crime is a daily occurrence. Suppose a government (I don’t mean this one) decides to bring back capital punishment, yet some members of the Legislative Assembly might vote against it and even members of the public will take to the streets saying the law is barbaric. So you see this is a catch-22 situation – head you lose and tail you don’t win either. Suffice to say you can never please everyone at the same time as it’s such a mammoth task.

Mona R. Babajee

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Rape & murder – shame on us all !

49-year-old Sateewantee Jangtoo, an onion field labourer, was attacked on her way to work on Friday 8th June 2012. One 19-year-old person allegedly confessed to the crime of raping and killing the woman. This brutal crime happened on the very day the Mauritian Parliament was debating the provisions to legalise abortion in specific cases, one of the case being to give the victim of rape the choice to have the foetus or unborn baby aborted, however innocent the baby may be, should the victim become pregnant. This law was « piloted » by none other than Me Yatin Varma, Attorney General and Minister of Justice in Mauritius. He even claimed to be « fier d’avoir piloté ce projet de loi » (l’Express 2 June 2012).

When Yatin Varma says he feels « proud » to introduce (amongst other specific cases) legislation for women, victims of rape, to have the choice to kill the innocent unborn baby, is he not making it easier for men to rape in the knowledge that it will be easier for the women to get rid of the unborn babies well before they are convicted of rape, if at all, many years later, or if they are ever caught? Should not the government, through appropriate laws, make it much more difficult for any man to even think about raping any woman or child rather than feeling « proud » of legalising abortion of the innocent after the rape has occured?

We cannot use the proposed legislation in favour of abortion in cases of rape and other specific cases to deviate attention from a very sick society. Those proposed badly drafted abortion laws will never cure such a sick society except make it more permissive, given that Mauritius has been turned into a Pleasure Island.

M Rafic Soormally 
London

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