Socioeconomic Evaluation of Megaprojects

Dealing with uncertainties

Markku Lehtonen, Pierre-Benoît Joly, Luis Aparicio

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781317222064
• Edition: 1
• Topic: Economics
• Subtopic: Sustainable Development
• Index: Economics

The governance and evaluation of 'megaprojects' – that is, large-scale, complex, high-stakes infrastructure projects usually commissioned by governments and delivered through partnerships between public and private organisations – is receiving increased attention. However, megaproject evaluation has hitherto largely adopted a linear-rationalist perspective to explain the frequent failure of such projects to meet the 'iron triangle' of performance criteria: delivering on time, within budget, and according to specifications. This approach recommends greater control and accountability to remedy megaproject 'pathologies'.

Drawing on empirical examples mainly from the transport sector and radioactive waste disposal, this book offers new perspectives to megaproject evaluation. Comprising contributions from leading experts in project evaluation and appraisal, this collection opens up new avenues by suggesting two ways of improving megaproject evaluation: 1) approaches that go beyond the dominant linearrationalist notion of policy processes, and emphasise instead the objective of opening up appraisal processes in order to enhance learning and reflexivity; and 2) approaches that extend evaluative criteria beyond the 'iron triangle', to cover the various socioeconomic impacts and preconditions for project success.

This volume will be of great relevance to scholars and practitioners with an interest in megaprojects, energy and climate policy, radioactive waste management, urban design, and project planning and management.

1
Introduction

Markku Lehtonen, Pierre-Benoît Joly and Luis Aparicio

Broadening the scope of megaproject evaluation¹

Increasing attention has recently been paid to the governance and evaluation of what have become known as ‘megaprojects’ (e.g. Flyvbjerg et al., 2003; Flyvbjerg, 2007; 2011), i.e. ‘large-scale, complex infrastructure projects usually commissioned by governments and delivered through partnerships between public and private organisations, with multiple partners, high uncertainties, and considerable political stakes’ (van Marrewijk et al., 2008: 591).² Typical examples include infrastructure construction projects such as motorways, tunnels, bridges, railways or ports, which frequently “respond to global competition among cities for investments, knowledge workers, tourists and prestige” (Bornstein, 2007), and are expected to deliver multiple socioeconomic benefits to the society. A number of characteristics specific to megaprojects render their governance and evaluation particularly challenging. These include in particular: the exceptionally large budgets, and hence considerable economic and political interests involved; considerable temporal and spatial scales; continuous evolution and dynamism – also concerning project governance and the institutional framework; and sharp normative disagreements among parties involved, at different levels of governance. Further challenges arise from the lack of precedents, i.e. similar earlier projects, which would help provide a basis for evaluation; the complex causal relationships between governance measures and policy outcomes; and the high degree of scientific, political and institutional uncertainties involved (e.g. Altshuler and Luberoff, 2003; Flyvbjerg, 2007; 2011; Flyvbjerg et al., 2003; Flyvbjerg and Priemus, 2007; OMEGA, 2012).

The two dimensions of ‘the socioeconomic’

Literature and practice in the area of megaproject governance and evaluation have hitherto largely focused on a rather narrow set of approaches and evaluative criteria, neglecting a range of aspects that could conveniently be subsumed under the term ‘socioeconomic’. To put it simply, the emphasis has been on evaluating the performance of megaprojects in the light of the ‘iron triangle’ of success criteria (Dimitriou et al., in this volume) – that is, in terms of their capacity to deliver on time, within budget, and within predetermined project specifications (OMEGA, 2012; see also Giezen, 2012: 781; Shenhar et al., 2001). Current literature in the area often interprets megaproject “pathologies” (Priemus, 2010), i.e. their chronic difficulties in complying with these criteria, as an outcome of strategic and malevolent behaviour by the involved actors. As a result, solutions suggested have largely focused on the needs to increase control, transparency, and accountability, notably through more rigorous and independent ex ante evaluations. The contributions in this book explore avenues for extending megaproject evaluation from such narrow framings towards approaches that would truly integrate ‘the socioeconomic’ concerns.

Our concern for bringing to the fore ‘the socioeconomic’, and therefore calling for a more complex evaluative perspective, draws on two dimensions composing the term. The first refers to the socioeconomic aspects as performance criteria in project evaluation, including both socioeconomic impacts and the socioeconomic preconditions for successful project implementation. Arguably, the ‘iron triangle’ considerations constitute only a part of the multiple criteria against which the performance of megaprojects should be evaluated. In particular, the exclusive focus on the ‘iron triangle’ neglects the implementation processes. In these processes, project goals are constantly redefined through interaction and dialogue among the involved actors and stakeholders – which may or may not include public bodies or individuals beyond the project planners, managers and directly concerned parties. The second dimension relates to the evaluation approaches – the theories, methodologies and paradigms underpinning project governance and evaluation. In this perspective, the key weakness of the narrow framing of megaproject evaluation would lie in its exclusive reliance on a linear-rationalist notion of policy processes (e.g. Albaek, 1995; Adelle et al., 2012) as the interpretative frame. Seen from this angle, greater attention to ‘the socioeconomic’ would mean embracing the multiplicity of interpretations of policy processes and rationalities motivating human behaviour – an approach that would highlight and take seriously the various uncertainties. In a way, one could even say that this approach feeds uncertainty, by placing uncertainties at the heart of governance instead of seeking to suppress them.³

‘Opening up’ of megaproject evaluation

In practice, the neglect of ‘the socioeconomic’ has resulted in evaluation approaches that see evaluation as a means of fostering accountability – in a narrow meaning of the term – in order to help ‘close down’ policy options and perspectives (Stirling, 2008). However, alternative accounts exist in megaproject literature, and are making their way into governance practice. These approaches acknowledge the multiple dimensions and types of rationality, and stress learning, flexibility, reflexivity, and the potentially constructive nature of uncertainties.

A key starting point for the preparation of this book, and a reason why we decided to devote four chapters to nuclear waste disposal projects, was the observation that these projects drive certain megaproject characteristics to their extreme, while representing rather atypical megaprojects in other respects. The extreme length of the timescales involved represents an example of the former – most megaprojects entail long time frames, but seldom raise the kind of true intergenerational justice issues that are typical for nuclear waste disposal. The challenges for socioeconomic evaluation and intergenerational justice are similar to those associated with, for instance, climate change and biodiversity protection. Similarly, in particular because of the dominance of safety as the overriding concern, the state plays possibly an even greater role in nuclear waste disposal than in other megaprojects. Where nuclear waste disposal projects clearly differ from ‘conventional’ megaprojects – and do not just represent extreme examples of such projects – is in their ultimate raison d'être: nuclear waste disposal projects respond to the imperative of solving ‘a societal problem’, rather than simply seeking to bring added benefits to society in the form of economic development, job creation, etc. Delivering on time and within budget remains important, but secondary to safety as the dominant performance criterion. Partly in reaction to the need to manage the long term and the society, nuclear waste management has seen its own ‘participatory turn’ (e.g. Sundqvist and Elam, 2010) – an attempt to manage uncertainty by involving the public and the stakeholders. Efforts to ‘open up’ the socioeconomic evaluation of nuclear waste management face largely similar challenges as the participatory turn.

This introductory chapter first elaborates on the major themes and rationales underpinning the subsequent chapters of the book. The discussion is structured according to the distinction mentioned above: ‘the socioeconomic’ as an evaluation approach and as a set of evaluative criteria. We then conclude by introducing the remaining chapters of the book.

The socioeconomic as an evaluation approach

Megaproject pathologies and the ‘iron triangle’ of project performance criteria: strategic misrepresentation and optimism bias

A dominant, ‘rationalistic’ strand in megaproject governance and evaluation literature focuses on the ‘iron triangle’ of project performance criteria (OMEGA, 2012: 2). It explains the chronic failure of megaprojects to reach their objectives as a result of project selection dynamics, which would favour the “survival of the unfittest”, i.e. the selection and financing of the least viable projects (Flyvbjerg, 2009; 2011). Two main reasons are evoked. First, humans have a systematic tendency to estimate things more positively than objective analysis of empirical evidence would warrant ('optimism bias' or ‘planning fallacy’) (e.g. Flyvbjerg, 2011). Second, the hypothesis of ‘strategic misrepresentation’ (Flyvbjerg, 2009; 2011), or ‘malevolent design’ (van Marrewijk et al., 2008: 599), in line with the rational actor model of human behaviour, postulates that project approval decisions are guided by strategic, rent-seeking behaviour by planners and other key actors. Planners and project advocates would hence have an interest in lying and representing costs and benefits in a manner that would maximise the project's chances of winning public funding (Wachs, 1989; Bruzelius et al., 2002: 145; Flyvbjerg, 2009; 2011: 329; Flyvbjerg et al., 2002; Cantarelli et al., 2010). Strategic misrepresentation would explain failures in most megaproject contexts – i.e. when political pressures are strong – whereas the optimism bias might prevail in less politically contentious situations. The very long time frames would further accentuate the problems, because of the lack of proper accountability structures: project advocates – including politicians – may often no longer be in office when the project reaches a stage in which its actual viability could be assessed reliably (Sanderson, 2012: 437).

A logical consequence of this interpretation has been a repeated call for greater accountability, ex ante control, and more effective ex post monitoring and enforcement designed to minimise strategic, self-interested behaviour (e.g. Sanderson, 2012). To increase transparency and both public and private sector accountability, greater external scrutiny (e.g. benchmarking, peer review, media scrutiny, financial rewards and sanctions) would be needed. According to this line of argument, deliberative and participatory approaches would be inherently ineffective because of the overwhelmingly powerful economic and political interests at stake (Flyvbjerg et al., 2003: 7).

Alternative readings of megaproject governance and evaluation – which have received less attention in public debate and policy practice – interpret megaproject governance in the light of the multiple alternative rationalities governing the behaviour of policy actors. These interpretations emphasise that since project objectives constantly evolve, even a project that does not fulfil its original criteria may in fact constitute a success in the light of the new criteria. A ‘failed’ project may therefore over time be reclassified as a success (Dimitriou et al., in this volume). The alternative approaches to megaproject governance and evaluation share a number of common characteristics: they reject the idea that malevolence is the dominant explanation for megaproject ‘pathologies’; they emphasise the diverse rationalities underlying actor behaviour instead of adhering to the rational actor model; they stress learning, reflexivity, and the complexity and dynamism of megaprojects; and they advocate an ‘opening up’ of appraisal and decision-making to a broad variety of perspectives and stakeholders. Some of these approaches see the sources of risk, turbulence and uncertainties in megaproject governance as emanating from outside the project management organisation, while others stress internal factors, such as conflicts and confrontation between mutually conflicting rationalities and project cultures (Sanderson, 2012: 437). Regardless of these variations, the alternative accounts lead to very different suggestions for evaluating megaprojects than the rational-actor based model.

Network governance and ‘positive uncertainties’

From the point of view of a ‘rationalistic’ reading of megaproject pathologies, the multiple uncertainties and complexity in megaproject governance appear as exclusively problematic, insofar as they render the control of projects difficult and accentuate the risks of chronic budget overruns, failure to keep to timetables, and overestimation of the benefits of the project (e.g. Flyvbjerg, 2007: 12–13). Yet Sanderson (2012) argues that it would be unrealistic to expect that the complexity and irreducible uncertainties inherent in megaprojects could be simply controlled through careful ex ante planning of appropriate governance measures.⁴ Instead of strategic planning, megaproject governance should therefore focus more on the day-to-day practice of ‘real-life’ megaproject “governing”, the spontaneous processes of emergent work practices, “organising rather than organisation”, and project governing “here-and-now” (Sanderson, 2012: 441).

Furthermore, the notion that megaprojects would actually represent clearly definable projects has been called into question. Instead, megaprojects could more usefully be characterised as “programmes of projects” (OMEGA, 2012: 36) or “networks of people and organizations that work more or less coherently and purposefully to address complex public problems” (Benjamin and Greene, 2009: 297; see also e.g. Hertting and Vedung, 2012). Given their nature as ‘open systems’, these ‘projects’ would exhibit boundaries that are vague, fluid, and subject to constant change (Benjamin and Greene, 2009; OMEGA, 2012). In such a situation, the ‘evaluand’ – the entity to be evaluated – cannot be clearly defined, i.e. it is not “programmatically organised or institutionally situated”, as the conventional approach to policy and programme evaluation assumes (Benjamin and Greene, 2009: 297).

Megaproject governance can therefore be interpreted in terms of a broad range of alternative notions that could conveniently be classified under the umbrella of ‘network governance’. Such an approach is generally considered appropriate for solving complex, unstructured problems that require cooperation between a variety of actors from different institutional backgrounds (Benjamin and Greene, 2009; Regeer et al., 2009: 516, 518). From this perspective, uncertainties would appear not merely as problems, but also and above all as opportunities (Hertting and Vedung, 2012). The mutual interdependencies would encourage voluntary, horizontal governance and coordination (ibid., 31), and the conflicts involved in megaproject governance could help to harness the inevitable uncertainties to the benefit of reflexivity, adaptability and exploration of alternative pathways (e.g. Gelatt, 1989). Network governance strategies would emphasise more complex types of “double-loop” or even “triple-loop” learning (e.g. Argyris and Schön, 1978; Reed et al., 2010),⁵ adaptation, iteration, and flexible experimentation (Regeer et al., 2009: 518). Given the multiple interdependencies, vertical and horizontal accountability relationships and organisational heterogeneity, decision-making would entail not only rational choice among a set of known options, but also redefinition of the range of available options (Stark, 2000; 2001). Constant technological change and shifting societal preferences and power relations would highlight the challenges of dealing with irreversibility: no single option would be...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of figures
• List of tables
• List of acronyms
• List of contributors
• 1 Introduction
• PART I Socioeconomic evaluation of megaprojects
• PART II Novel approaches to evaluating the socioeconomic in megaprojects
• Index