Final
Figure 1 (Wikipedia)
Final Research Project - London's Heathrow Terminal 5
MET AD 646 Program Management
Professor: Virginia Greiman
Facilitator: Joan Frantino
1
Final Research Project - T5
Abstract
The main objective of this paper is to create final research program management based on
London’s Heathrow Terminal 5 project”. We will study and provide complete assessment of
project success from the initial program planning stage, projects schedule deliverables and to
budget.
This
paper
will
contain
the
program
scope,
deliverables
and
program
governance/strategic approach and will explain and provide explanations as to how this
megaproject was successful.
2
Final Research Project - T5
1
Table of Contents
2
Program Objective................................................................................................................................ 4
3
Heathrow T5 Governance Strategy and Procurement Management ................................................. 5
3.1
Project Management Phases and Processes .............................................................................. 7
3.2
Discontinuity Between Program Processes ............................................................................... 8
4
The Project Iron Triangle ...................................................................................................................... 9
5
Stakeholder Engagement Program .................................................................................................... 10
6
Comparison between T5 Heathrow airport projects and Big Dig project ........................................ 12
7
Recommendations ............................................................................................................................. 14
8
Conclusion .......................................................................................................................................... 17
9
References .......................................................................................................................................... 18
3
Final Research Project - T5
Introduction
The construction of Heathrow Airport Terminal 5 (T5) was the largest construction project in
Europe in the early 2000s. Prior to the beginning of T-5 Project, British Airport Authority
(BAA) carried out intensive research with respect to risk involved in such project. BAA studied
the various construction projects which were constructed over the previous 10 to15 years. BAA
decided that they need to change the “rules of the game” by instituting a new type of partnership
with its first-tier contractors. BAA was determined not to repeat the errors of past megaprojects
such as the Big Digs and as a result decided to consolidate management of all aspects of the
project. In doing so, and although they had mitigation in place, they accepted the fact that all
financial risk was on them.
By taking all the risk as the client, BAA looked to create an
environment where suppliers and contractors would be motivated to innovate and deliver without
having to worry about a protective paper trail (Davies et al, 2009). According to Fewings (2013),
BAA is the major airport company with many achievements in budget savings for over 50 airport
projects with its capability to reduce overall time and cost for 30%. The life cycle of the project
was between 1985 and 2008, and T5 was a new mega airport structure in British history which
was officially opened on the 27th of March 2008 (Davies, Gann, and Douglas, 2009; Doherty,
2008).
2
Program Objective
The objective of this final research is program is intended to review the project of Heathrow
international airport particularly on Heathrow’s terminal 5 and provide the following proposed
objective to make the project more successful
 To critically discuss the success on how BAA could meet the scope, schedule, cost and
quality standard as referred in the Generic Iron Triangle as the evaluation criterion for
project success.
4
Final Research Project - T5
 To evaluate the project’s procurement management during the operation, particularly on
how BAA handled suppliers, contractors and BA.
 To study the Governance Strategy and Procurement Management of Heathrow T5
 To study the Project Management Phases and Processes
 To assess the procedure and method of the BAA to counter with the potentials risk during
the construction.
 Study Stakeholders Communication Plan which is requited in mega projects
 Planned Budget and Quality Management and Control
 Comparison Report of T5 Heathrow airport project with other megaprojects such as Big
Dig project, why 5 Heathrow airport projects is successful.
 Recommendations about how the megaproject must be handled
 Conclusion
3
Heathrow T5 Governance Strategy and Procurement Management
The key team members in T5 procurement strategy was BAA, suppliers, contractors and
BA. In T5 project, the BAA’s procurement management approach was to have a relational
contract between BAA and all T5 first tier suppliers and junked the traditional principle of
construction contract. Heathrow T5 case uses the new governance method through which BAA
takes the role of system Integrator and accepted all the risks. This kind of structure makes the
client as accountability of suppliers and all the incentives for exceptional performance (OECD,
2015). There is no doubt the governance structure which was used in the case of T5 was
successful. BAA designed the contract such that, its main objective was to reduce the conflicts
that generally plagued major projects. They did not award the whole project to one contractor
instead they signed different agreement with numerous contractors as per their expertise. They
5
Final Research Project - T5
sign an agreement with the suppliers which created incentives for positive problem-solving
behaviors of suppliers. (Deakin and Koukiadaki, 2009). BAA removed the clause which says that
the lowest bidder will be awarded the project. BAA also removed the contractors risk
contingency which led to the lowering of overall tenders. The project risk was managed through
financial incentives for suppliers, rewarding successful performances. BAA altered cost-plus
incentive contract with suppliers and “assumed full accountability for the risk and worked
collaboratively in unified project teams with first-tier contractors to create innovative solutions”
(Davies, Gann & Douglas; 2009).
Figure 1: Source: (Major Project Association, 2007, pg.4)
This strategy has positive impact on the project governance. BAA was the one who
played a much bigger role in the management of each supplier’s scope since they would be held
responsible for the risks. This strategy helped the BAA to produce solution-based model; rather
than placing liability the teams were able to direct their energies into resolving the issues in a
pragmatic way.
6
Final Research Project - T5
3.1
Project Management Phases and Processes
In construction of the Heathrow T-5 case we can observe that there was discontinuity
between the processes required in delivering the ‘project’ and those involved in the ‘operations’
of the end result.
With respect to this statement, we can say that the megaprojects are assessed based on the
successful execution of six processes. These six processes are:
1. System integration
2.
Project and program management
3.
Digital design technologies
4. Off-site fabrication,
5. Just-in-time logistics
6.
Operational integration
(Brady and Davies, 2010).
All the processes given above must be given equal importance and consideration.
Coordination and control among the given processes is key to success of the project. All the
processes given above must be given equal importance and consideration. Coordination and
control among the given processes is key to success of the project.
. The T5 project also established a structure for project governance to manage risks,
coordinate with external suppliers, and cooperate with contractors and subcontractors (Schutter
and Lenoble, 2010). This gap generally occurs in each project, but it is the accountability of
project managers to make connectivity among all the six processes to deliver the projected
project to an end result.
7
Final Research Project - T5
In the case of Heathrow T-5 project, project managers also faced similar problems. He had to
make sure that there should not be any discontinuity in different phases like project design,
delivery and operation resolved. It is evaluated that this project has managed every phase with
system to the system approach as shown in figure (1) below.
Figure 2: T5 Project Life Cycle (Source: Davies, Gann and Douglas, 2009)
3.2
Discontinuity Between Program Processes
Discontinuity between project delivery and operations in Heathrow T-5 case was fully
resolved. The project was not properly tested by the BAA before making it operational. Terminal
5 Project is determined to be both successful and fail over the result their planning and heading
over stage. The main objective of constructing the new terminal was to streamline the different
processes through which each customer undergoes. Unfortunately, customers faced lots of
problems with respect to baggage handling, car parking and lack of trained staff. The terminal
was opened without the construction of whole project. Staff had not been trained properly, they
were unable to park when their car parks became too full on the day of opening, staff security
searches were delayed, and construction work on parts of the building was not finished when the
8
Final Research Project - T5
airport opened. There were errors in the transmission of BA flight data between BAA and
communications and IT contractor SITA. As a result, the system did not recognize a proportion
of the bags, which were held within the T5 baggage system for manual processing. Such issues
would have avoided if BA has tested the various functions of the airport properly.
It is assessed that along with the failures of the project, we should also look at the benefits which
this project provided to the people of England and foreigners. This megaproject was first of this
kind which was completed with the given time and budget. Most of the problems, which people
faced in the T5 were administrative in nature and these problems can be easily sorted out through
proper management. This project provides more free space to the travelers in the airport, freeing
up crowded buildings such as Terminal One. The extra departure gates made aircraft operations
easier, especially when things are expected to go wrong.
4
The Project Iron Triangle
The Project Management Triangle (called also the Triple Constraint, Iron Triangle and
"Project Triangle") is a model of the constraints of project management. While its origins are
unclear, it has been used since at least the 1950s. [1] It contends that:
 The quality of work is constrained by the project's budget, deadlines and scope (features).
 The project manager can trade between constraints.
 Changes in one constraint necessitate changes in others to compensate or quality will
suffer.
For example, a project can be completed faster by increasing budget or cutting scope.
Similarly, increasing scope may require equivalent increases in budget and schedule. Cutting
budget without adjusting schedule or scope will lead to lower quality.
9
Final Research Project - T5
In this regard, the cost management of the project that could meet the budget 4.3 billion pound
was done effectively, also, the time management, scheduling, of the project to meet the deadline
in six years including seven months reserved period was well-timed (Doherty, 2008). In addition,
the project was done with effective tools and framework to meet the deadline and budget. The
project started with the earned values management which was the core of the whole program.
The project was controlled and monitored by cost performance indicators and schedule
performance indicators which together they created a key milestone for the project and helped
creating a clear and unambiguous path for the project (Doherty, 2008). Meanwhile, there were
integrated baseline reviews which were held every six months aiming to find out the gap of the
project and discuss the problems among project teams (Doherty, 2008). After the integrated
baseline reviews, the mitigating a cost was created to take advantage of all opportunities and to
take looks at all potential risk. In this instance, total cost management team was created in the
project to look at ways to get better deals with suppliers and to look what could not be built and
designed (Doherty, 2008). After the mitigating a cost, the project team focused on the financial
risk. The focus and the approach £100 million from individual project budget (Doherty, 2008).
Finally, the last approach to achieve time and cost efficiency was the change-control process.
5
Stakeholder Engagement Program
Heathrow's Terminal 5 (T5) is a good example of how different stakeholders' perceptions of
success, failure and risks has varied enormously. T-5 Project PMO had upfront support from the
executive stakeholders, including the CIO and Senior Vice President. Under the unique T5
agreement, BAA absorbed total risk in all contracts for the project and developed the concept of
integrated teams with stakeholders from the designers, builders and suppliers collocates and
working together in a partnering relationship. This pioneering approach concentrated on early
10
Final Research Project - T5
risk mitigation to anticipate, manage and reduce risks associated with the project. The change in
BAA's culture was described as a 'watershed', creating an environment for early problemsolving, sharing of information and collaboration. In the T5 project the stakeholder engagement
and commitment process is supported by the project executives, to engage with project
leadership and suppliers to introduce a right first time quality concept and to get their buy-in and
commitment. On the downside, British Airways’ management failed to properly engage with its
important stakeholders prior to going operational—staff and paid the price of a tarnished
reputation. (OECD.org, 2916)
11
Final Research Project - T5
Figure 3 (Sustainability, 2013)
6
Comparison between T5 Heathrow airport projects and Big Dig project
When we study the Big Dig, we found that this project has not started and planning correctly
with respect to estimation of the budget. In this project, the budget was underestimated by the
government. True cost of the project was not made public. The stakeholders were not consulted
before the beginning of Big Dig project. According to Cilberti (2005), "a portfolio review is
essential for communicating portfolio status to all project stakeholders." This was missing in the
Big Dig project. The government fails to conduct proper survey about the various impacts of the
project on the lives of people prior to beginning the project. The original estimate was developed
12
Final Research Project - T5
in 1982 dollars, without allowance for inflation or mitigation, and was presented in the 1985.with
the Environmental Impact Statement (EIS) of detailed technical studies had been undertaken.
This was not the case with T5 Heathrow airport project. Prior to the beginning of T-5 Project,
British Airport Authority (BAA) carried out intensive research with respect to risk involved in
such project. BAA studied the various construction projects which were constructed over the
previous 10 to15 years. BAA looked to create an environment where suppliers and contractors
would be motivated to innovate and deliver without having to worry about a protective paper
trail (Davies et al, 2009)
T5 Heathrow
Perform Large Amount of Research based on
Big Dig Project
Lacks better research
Archives taken from 10 to 15 years
Rules were changed based on the First Tier
Rules or contracts were not communicated well
Contractors
Consolidated Management from Past Big
Resources wearer not properly appointed
projects to avoid risks.
Continued Collaboration and communication
Collaboration and Communication with
happen from Stakeholders to contractors
contractors, public and stakeholders did not
happen
Project Manager, Integration was successful
Lacked Project integration
13
Final Research Project - T5
7
Recommendations
Terminal 5 Project is determined to be both successful and fail over the result their planning
and heading over stage. Conversely, when analyzing the project as whole, Heathrow terminal 5
projects was a successful one which was completed on time with appropriate amount of budget.
Some of the recommendations about how the megaprojects must be handled in modern era are
given below:
 Program Integration:
To achieve success in any of the mega project, one needs to integrate the program
with operating organization. When benefits are not fully utilized we can say that the said
mega project failed to achieve its objective. When T5 was opened for public, customers
faced lots of problems with respect to baggage handling, car parking and lack of trained
staff. The terminal was opened without the construction of whole project. Staff had not
been trained properly. This shows that BAA failed to inveterate different processes. To
achieve efficiency in any project, it is very important for the management to integrate the
different processes of the project. This is possible only if the information is
communicated collaboratively between the different stakeholders.
 Effective program governance:
Effective program governance supports the success of a program by establishing
clear, well-understood agreements as to how the sponsoring organization will oversee the
program, and conversely, the degree of autonomy that the program will be given in the
pursuit of its goals. In case of mega projects, the steering committee along with the PMO
should create consistency among project and program governance. In case of
megaprojects, the management must establish a structure for project governance to
14
Final Research Project - T5
manage risks, coordinate with external suppliers, and cooperate with contractors and
subcontractors. This gap generally occurs in each project, but it is the accountability of
project managers to make connectivity among all the different processes to deliver the
projected project as an end result.
 Successful Implementation of Program Management Office (PMO):
A project management office (PMO) is an organizational unit used to centralized
and coordinate the management of projects. A PMO oversees the management of
projects, programs, or a combination of both. In era of competition, it is very important
for the companies to manage projects more efficiently and handle multiple projects at one
time. It is not possible unless companies do not adopt PMO. Program Management
Office (PMO) also provides standardization in managing the projects and gain
improvements in planning and performance of initiatives.
 Transparency and accountability:
Transparency and accountability are key components for any projects. It has been
observed that the contracts to build megaprojects are given to those individuals who bribe
under the table. In infrastructure sector, corruption is very common. This is a one reason
due to which megaprojects failed to achieve their objectives. Hence, in megaprojects, the
contracts must be performance based. In performance-based contracts, the buyer scores
the seller’s performance on the contract and deviation from the contract is penalized.
The benefits of this type of contract is that the cost is predictable and incentives
for lower costs. Each functional manager is responsible for defining work to be done
within their threshold. All that needs to be done is known and hence calculations are
15
Final Research Project - T5
made prior to project start and budget allocated accordingly. Hence there is no risk of
deficit funds.
 Mutual goals and incentive:
Goals and incentives must be mutual and built into contracts throughout the
project life cycle to ensure quality, safety, financial soundness, and a commitment to
meeting budget and schedule. It has been observed that in most of the mega projects,
goals of the stakeholder vary form one stakeholder to another. In Big Dig, the goal of the
contractors was to get maximum profit out of the project. Similarly, government agencies
wanted to reduce the cost of the project.
 Continuous improvement and change:
Continuous improvement and rigorous oversight are both essential. Generally,
megaprojects large projects take more than five years to complete. From planning to
execution of the projects, many things macro as well as micro environment factors gets
changed. Hence, the management should always remain open to the change. In big dig
project also, management faced variety of such problems which led to delay of the
project because management was not prepared for such changes.
 Environment Issues:
It has been observed that many mega projects get stuck into environment issues.
To authorize and maintain construction, thousands of other federal, state and local
environmental permits, licenses and approvals were required, as well as ongoing
environmental reviews of project changes and permit modifications by the agencies. The
environment compliance and mitigation cost increase the project cost by 2.7 billion.
16
Final Research Project - T5
 Communication between the stakeholders:
One of the biggest reasons behind the failure of the Big dig project was “lack of
communication between the stakeholders”. When the government announces the budget
of the big dig, it did not consult anyone. As a result, the work was not completed on time.
Addition to this, local people were never taken into confidence by the management prior
to the project.
8
Conclusion
Heathrow terminal 5 project provided project managers and researchers numerous of lessons.
One of the main lessons learnt is the adoption of Balanced Scored Card as a key performance
indicator within the Iron Triangle criteria. Second, the management took the risk of the client.
Heathrow terminal 5 project showed that one should not look for cheaper contractors rather the
focus must on the quality. T5 agreement with the stakeholders showed that innovation is the key
component in the agreement where was ‘‘no blame’’ culture of project which contributed as one
of the key success factors. Also, it is learnt that BAA had adopted many innovative and creative
approaches to facilitate the construction project, and especially, BAA had come up with
numerous of strategies to manage the potential risks in the project. Further, the success of the
megaproject also depends on Program Management Office (PMO). While implementing the
Program Management Office (PMO) should make sure that all the stakeholders should be taken
into confidence prior to implementing the PMO in the organization. PMO governance structure
needs to have clear objectives and goals which must be in line with the organization goals. There
is no doubt that competing the construction of T5 was a challenging task for the BBA and BBA
more or less completes this task successfully.
17
Final Research Project - T5
9
References
1. En.Wikipedia.org. "Heathrow Terminal 5" from
https://en.wikipedia.org/wiki/Heathrow_Terminal_5
2. David Hancock, Construction Director of infrastructure Projects Authority. 24th Nov
2009. " Heathrow Terminal 5 - Success or Failure ?" from
https://www.slideshare.net/Hank5559/heathrow-terminal-5-success-or-failure
3. Davies, A., Douglas, T., Gann, D. (2009). Innovation in Megaprojects: Systems
Integration at London Heathrow Terminal 5. California Review Management, 51(2). pp.
100-125.
4. Schutter, O. Lenoble, J. (2010) Reflexive Governance: Redefining the Public Interest in a
Pluralistic World. Bloomsbury Publishing.
5. Brady. T. and Davies, A. (2010) From hero to hubris – Reconsidering the project
management of Heathrow’s Terminal 5, International Journal of Project Management, 28,
pp. 151–157.
6. Davies, A., Gann, D. and Douglas, T. (2009) Innovation in Megaprojects: SYSTEMS
INTEGRATION AT LONDON HEATHROW TERMINAL 5, CALIFORNIA
MANAGEMENT REVIEW, 51 (2).
7. Major Project Association (2007) T5 Case Study. Available from:
http://www.majorprojects.org/pdf/seminarsummaries/136summaryT5.pdf
8. Deakin, S. and Koukiadaki, A. (2009) Governance Processes, Labor–Management
Partnership and Employee Voice in the Construction of Heathrow Terminal 5. Industrial
Law Journal [online]. 38 (4), pp.365-389.
18
Final Research Project - T5
9. Stan Mack."Seven Characteristics of Good Corporate Governance" from
http://smallbusiness.chron.com/seven-characteristics-good-corporate-governance57207.html
10. Fewings, P. (2013) Construction Project Management. 2nd ed. USA and Canada:
Routledge
11. Davies, A., Gann, D. and Douglas, T. (2009) Innovation in Megaprojects: SYSTEMS
INTEGRATION AT LONDON HEATHROW TERMINAL 5. California Management
Review [online]. 51 (2), pp.101-125.
12. Davies, A and Brady, T. (2007) From Hero to Hubris – Reconsidering the Project
Management of Heathrow’s Terminal 5. ELSEVIER [online]. 28, pp. 151-157. [Accessed
11 March 2013].
13. OCED.org.” Country Case: Stakeholder Engagement During the construction of
Heathrow Airport Terminal 5” from
https://www.oecd.org/governance/procurement/toolbox/search/stakeholder-engagementduring-construction-heathrow-airport-terminal-5.pdf
14. Sustainability, Article 2013. “Stakeholder Engagement: Achieving Sustainability in the
construction sector” from www.mdpi.com/2071-1050/5/2/695/pdf
19