Collective Action at the Front-end of Complex Systems Projects:
The Case of Planning Large Infrastructure Projects in the UK
This study uses an organizational design perspective to illuminate the front-end of
capital projects to develop complex socio-technical systems. The research is grounded
on planning activity for four large infrastructure projects in the UK. By modelling the
front-end with Design Structure Matrices, the analysis uncovers polycentric structures
formed to govern large arenas of collective action. In these structures, the promoter
formulates the grand problem but shares the authority to make interdependent strategic
choices with independent actors. The findings trace regular slippages in the
performance targets to the need to safeguard compromise solutions for emerging
disputes rooted in differing interests and visioning. However, context determines the
extent the accountability for the front-end outcomes is shared. The main contribution is
a contingency model of performance that contains a relationship between the umpiring
structure used to resolve internal disputes and the slack resources used to preserve
project legitimacy in the public eye. Implications to practice and policy are drawn.
Introduction
The project front-end is a central concept to the literatures in the management of
capital-intensive projects (Morris and Hough 1987, Morris 1994, Flyvbjerg et al. 2003,
Dvir and Lechler 2004, Gil and Tether 2011) and in developing complex products and
systems more generally (Hughes 1987, Miller et al. 1995, Hobday 1998, 2000, Gann
and Salter 2000, Davies and Brady 2000).1 Both research strands cover the projectbased production of one-off, complex socio-technical systems including large
infrastructure (e.g., transport, energy systems), defence systems, and IT infrastructure.
The project front-end aims to resolve strategic choices and produce a performance
baseline. This baseline sets the budget, timescale, and scope; the scope is embodied in
drawings and design requirements (Cleland and King 1968). Crucially, the baseline
informs the decision to sanction the project, and thus creates normative expectations in
the eyes of third parties (Morris 1994). Enterprises that fail to conform to established
practices and norms in the environment lose legitimacy to operate and acquire
Other terms used to address the phenomena include ‘major projects’ (Morris and Hough 1987),
‘megaprojects’ (Szyliowicz and Goetz 1995), and ‘large engineering projects’ (Miller and Lessard 2000)
1
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resources (Scott 1987, Suchman 1995). Hence, projects that struggle to meet the initial
performance expectations are perceived to be ‘failing’ (Dvir and Lechler 2004).
Numerous accounts of complex systems projects where performance baselines
were way off the mark have fuelled two views in management and policy studies. One
claims that the agent who promotes the scheme and finances it frequently
underestimates the cost and schedule targets during the front-end. The reasons offered
are: strategic misrepresentation and optimism bias (Wachs 1989, Flyvbjerg et al.
2003), underinvestment in front-end planning (Morris 1994, Merrow et al. 1988,
Merrow 2011), and use of rigid buyer-supplier contracts that preclude know-how of
implementation to feed into the front-end (Stinchcombe and Heimer 1985).
The second view is common too—that complex systems projects cannot be
planned reliably because the promoters are hostage to scope creep (Hall 1982, Shapiro
and Lorenz 2000), escalation of commitment (Ross and Staw 1986), and ‘shaping’ of
the scope by events and institutional interests that are outside the promoter’s control
(Altshuler and Luberoff 2003, Szyliowicz and Goetz 1995, Miller and Lessard 2000).
Whilst long-standing, this debate has struggled to move forward due to difficulties
in acquiring data about the inner workings of the front-end. Most empirical studies
have adopted an ‘outside’ view (Flyvbjerg et al. 2003, Miller and Lessard 2000, Dvir
and Lechler 2004). Thus, while there is consensus that the front-end is crucial, Pinto
and Winch (2015) note recently that “over the last 20 years…the actual processes of
shaping remain somewhat mysterious—project shaping remains a black box”.
This study expands on the ideas of these researchers, but shifts the focus to a view
that illuminates the project front-end from an organizational design perspective—a
cognitive lens useful to explore how governance structures allocate decision-making
authority and resource control, and resolve disputes (Galbraith 1973, Lawrence and
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Lorsch 1967, Simon 1969). Importantly, the front-end occurs before the promoter has
let major supplier contracts because the promoter is yet to enter into formal agreements
with actors that have key stakes on the project and control critical resources. Thus, the
front-end occurs before the promoter has simulated an authority hierarchy through
principal-principal and buyer-supplier contracts (Stinchcombe and Heimer 1985).
This study argues that the project front-end for one-off complex systems is carried
on by a consensus-oriented community of production. Consensus refers to the degree
to which the collective goals and plans are agreed upon by all involved (Van de Ven
1976). For example, a large infrastructure project cannot forge ahead without land,
capital, planning consent, political support, and knowledge of needs-in-use. The
control over these resources is distributed across autonomous stakeholders and many
resources are not up for sale. Hence at the front-end the promoter has to let many
actors participate in strategic choices in exchange for their cooperation; as Miller and
Lessard (2000) state, the front-end is about ‘building momentum and commitment’.
Put differently, the project front-end is carried on by a community of production
where the promoter formulates the problem but problem-solving requires creating a
‘negotiated environment’ (Cyert and March 1963). To this purpose, the promoter
decomposes a complex problem into more manageable sub-problems; it then needs to
interact with other stakeholders to produce mutually consensual solutions, and move
from an individual strategy to a ‘collective strategy’ (Astley and Fombrun 1983).
In distributed communities of production, the managers cannot rely on authority
hierarchies (March and Simon 1958), markets (Ouchi 1980), or system integrators
(Brusoni et al. 2001) to get things done. If governance is ‘flat’, the managers must
attend to the concerns of the community members to avoid defections (Rothschild and
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Russell 1986, O'Mahony and Ferraro 2007). This is, management has agency but
cannot exercise it fully and must engage in negotiations (Pfeffer and Salancik 1978).
However, the focal problem is markedly different from phenomena that has
informed management studies on production communities such as open source
software (O'Mahony and Ferraro 2007), private-collective innovation (von Hippel and
von Krogh 2003), new business models (Baldwin and von Hippel 2011), standardsetting (King and Lenox 2000), and science communities (Lakahni et al. 2007).
Unlike the settings above, the project front-end for complex systems is heavily
regulated, and frequently unfolds under externally-imposed deadlines. Strategic
choices are also often contentious given the high-stakes riding on the outcomes—if the
front-end succeeds, substantial capital gets committed to long-lived assets through
decisions that difficult to reverse. As such, the front-end struggles to meet known
antecedents of cooperation including a positive history of working relationships,
unifying goals, and the presence of a legitimate convener to draw together autonomous
actors (Gray 1989a, Ring and Van de Ven 1992, Thomson and Perry 2006); as Rittel
and Webber (1973) famously put it, “planning problems are wicked problems”.
At the front-end of complex systems projects, Jessop (1997) argues that
governance must steer multiple firms, agencies, and organizations that are both
operationally
autonomous
and
structurally
coupled
through
reciprocal
interdependencies. But we still lack in-depth empirical studies of how governance
actually works. This leads to the three questions motivating this study: i) which
structure governs the project front-end for a complex system? ii) how are disputes
resolved? and iii) what is the impact of front-end governance to project performance?
This research adopts a multiple-case study approach with embedded units of
analysis (Eisenhardt 1989, Yin 1984). Case studies allow researchers to incorporate
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contextual and temporal dimensions, and thus are suitable to explore novel ideas
(Eisenhardt and Graebner 2007). Embedded multiple-case studies in particular are
useful to investigate a holistic question without overlooking operational details (Yin
1984 p.45). This research design was thus suitable to address the holistic issue of
project performance by exploring the inner workings of the front-end stage.
The sample consists of four large infrastructure projects in the UK. The units of
analysis are incidences of front-end disputes that emerged between the promoter and
resource-rich stakeholders. Disputes are situations in which people disagree and thus
illuminate the “scene of the battle” (Latour 1986) and how people resolve conflicts
(Coleman and Ferguson 2014). The analysis reveals that the source of the disputes is a
conflation of three factors: i) rilvary over strategic choices; ii) scarcity of resources
(time, money) to bridge differences; and iii) the promoter’s reluctance to let prior
performance targets slip to preserve the legitimacy of the project in the public eye.
The study leads to three main contributions: first, it reveals that the front-end of a
complex systems project creates a large arena of ‘collective action’ (Astley and
Fombrun 1983, Ostrom 1990). In this structure, the authority to make strategic choices
is distributed across nested centres of decision-making power with capacity for mutual
adjustment—hence governance is polycentric (Ostrom 1972). Second, the study
reveals how disputes over strategic choices are resolved through the intertwinement of
deliberative and tough bargaining. It also traces major slippages in the performance
targets, during and after the front-end, to the costs of safeguarding compromise
solutions and to the extent context creates shared accountability for the outcomes. And
third, the study proposes a contingency model of project performance that contains a
relationship between: i) the umpiring structure used to resolve internal disputes; and ii)
the promoter’s use of slack resources to sustain external legitimacy for the project.
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The rest of this paper is structured as follows. First, it reviews literature on
consensus and governance in complex systems projects. Then it introduces the
methods and analysis, and discusses the relationship between front-end governance and
project performance. It concludes by highlighting implications to practice and policy.
Background: Front-end Governance in Complex Systems Projects
Interorganizational collaborations are central to management and policy studies
because they are critical to find solutions to complex problems—situations where a
single actor does not have all the information-processing capacity and resources to
solve the problem (Gray 1989, Fjeldstad et al. 2012, Hargrave and Van de Ven 2006).
One stream of this large body of literature looks at distributed communities of
production which are not governed by firms, buyer-supplier contracts, or central
administrative structures. In settings as diverse as the production of open source
software, industry standards, and science, well known structures to govern include
robust relational contracts and meritocracy-based authorities (Gibbons and Henderson
2011, O'Mahony and Ferraro 2007, King and Lenox 2000, Tuertscher et al. 2014).
The front-end of a one-off complex systems project differs, however, from the
aforementioned settings in important ways. First, relational contracts are fragile since
regulation forces the promoter to attend to the interests of opponents and work with
resource-rich stakeholders who may demand a high price for their cooperation (Cleland
1986, Divr and Lechler 2004, Morris 1994, Winch et al. 1997, Floricel and Miller
2001). Stakeholders are also drawn from different epistemic, institutional, and
ideological communities (Hughes 1987, Miller et al. 1995, Hobday 2000). This leads
to heterogeneity of ‘legitimating logics’ (Creed et al. 2002) where politics and power
can stymie the emergence of a meritocracy-based authority (Miller and Olleros 2000).
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A second factor complicating the front-end governance are deadlines that are
associated with electoral and regulatory cycles—as Engwall (2002) puts it, no project
is an island. Context puts pressure to hammer out deals. But building consensus over
strategic choices is hard to rush as holding lengthy talks is needed to allow actors to
make sense of complex problems and coordinate collective action (Susskind and
Cruikshank 1987, Gersick 1994, Thomson and Perry 2006, Weick and Roberts 1993).
Time pressure thus amplifies perceptions of risks, which leads to tough bargaining and
politics (Ring and Van de Ven 1992)—two mechanisms that create difficulties in
fostering cooperation but arise when the resources available are insufficient to develop
a common construction of the problem (Lawrence et al. 2002, Gray and Clyman 2003).
And third, the participants in the project front-end for a complex system cannot
bank on modular designs to circumvent difficulties in striking a consensus. Modularity
breaks apart interdependency between tasks, thereby enabling actors to do their work
with limited need to interact with one another (Baldwin and Clark 2000). Modular
choices thus dampen conflict caused by rivalrous preferences, encourage unpaid
contributions, and limit the impact of uncooperative behaviour. In contrast, when
autonomous actors must agree one-off design choices, and thus problem-solving is
‘non-decomposable’, the design choices qualify as an Ostrom’s (1990) shared
resource—this is, many autonomous actors with rivalrous preferences share the right to
participate in the design decision-making process (Gil and Baldwin 2013). Hence the
front-end for a complex system project involves ‘indivisible’ or shared strategic
choices, and can unravel if the participants refuse to cooperate and compromise.
The governance of shared resources is invariably a struggle (Dietz et al. 2003). But
even large arenas of collective action are sustainable if governance is: i) polycentric,
this is, it is decentralised across nested centres of decision-making and power with
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capability for mutual adaptation (Ostrom 1972); and ii) robust, this is, there is mutual
respect between the high-level authorities and the local claimants. This is the core
claim in Ostrom (1990)’s theory of governing large resources that are shared by many
autonomous and non-excludable claimants with rivalrous interests.
From this perspective, it is thus unsurprising that the governance of the project
front-end for a one-off complex system is a struggle. For example, a government
committed to build a new railway is expected to formulate a preliminary performance
baseline. During the front-end, the promoter and other stakeholders will share difficult
strategic choices for key components such as stations, train cars, and route. But
bounded rationality makes it hard for the promoter to delineate ex-ante solution spaces
that are robust enough to cope with all the emerging preferences (Simon 1981). Hence
the initial baseline potentially leads to sub-problems that are intractable. Changes to the
baseline are tricky because they can impair the external legitimacy of the front-end and
thus internal disputes arise. The next section explains how this study set off to explore
how the disputes get resolved, and how a contingent model of performance emerged.
RESEARCH DESIGN, SAMPLE, AND METHODS
This research uses an embedded multiple-case design (Yin 1984, Eisenhardt
1989). The larger unit of analysis is the project, and the holistic question asks how
front-end governance influences project performance. Hence the four cases are treated
as independent experiments that confirm or disconfirm emerging theoretical insights in
replication logic. In multiple-case designs, embedded units of analysis are useful for
focusing the case study inquiry (Yin 1984). This study focuses the inquiry on front-end
disputes because dispute resolution is a central task of governance.
To advance theory and yield more generalizable and robust insights a diverse and
polarised sample was built as recommended for inductive studies (Siggelkow 2007).
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The sample includes four large infrastructure projects for which I gained exceptional
access to the inner workings of the front-end: London Crossrail, a high-capacity
underground railway; London Olympic park; Heathrow airport terminal two (T2); and
UK’s second high-speed railway (HS2). Table 1 summarises the system-level goal for
each case, the organizational structure of the promoter, the front-end outcome, and data
sources. Appendix I summarises for each case prior history, context, timescale, and
the evolution of the performance baseline during the front-end.
--Insert here Table 1 -We built the sample to vary three key attributes of projects to develop complex
systems and increase the generalizability of our findings. First, the cases differ in the
potential to decompose the grand problem. Figure 1 illustrates this in a stylised way.
Modular infrastructure
design structure
(e.g., Olympic park)
Integral infrastructure
design structure
(e.g., railway system)
Hybrid infrastructure
design structure
(e.g., airport terminal)
Figure 1 – Stylised representation of different infrastructure design structures
An Olympic park is suggestive of a decomposable system. It comprises a set of
discrete assets such as sport venues that are connected by underground utilities. But the
utilities are ‘slaves’ designed not to constrain the strategic choices for the high-value
assets. In contrast, railway systems are far less decomposable. All stations connect to
the same functional components (tracks, control and signalling systems) and must
accommodate the same train cars. Hence many strategic choices for different
components are interdependent. In turn, an airport is suggestive of a hybrid system.
Some components are physically linked, for example, the tunnels and passages that
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connect the concourses, but other components such as the car park and hotel are not.
Decomposability was expected to attenuate the complexity of the project front-end.
The sample also varies in the organizational structure of the promoter. The HS2
and the T2 schemes were promoted by single organizations, respectively the UK
government and the private owner of the airport, BAA2. In contrast, in the other two
cases, coalitions were at the helm of the front-end. Crossrail was promoted by the UK
and London governments (although the stations located on private land were privately
financed); and four organizations were at the helm of the Olympic park. More
governance complications were expected the more fragmented the promoter was.
Finally, the sample varies in the time pressure on the project front-end. The
London 2012 immovable deadline put massive pressure to make planning decisions.
The other schemes did not face immovable deadlines. But pressure was still high due
to either the politicians’ will to complete the front-end before elections (the cases of
Crossrail and HS2 first phase) or the regulatory cycles in the case of BAA3. Time
pressure could be a cause for conflict, but also offer a stimulus to resolve disputes.
Units of Analysis
To probe deeper into the governance of the project front-end, a unit of analysis
was embedded: disputes over strategic choices. These disputes trigger difficult
questions: should the project proceed if the participants cannot converge? Should the
initial performance targets slip to facilitate convergence? And which actors should
directly influence strategic choices? Seeking answers for these questions was essential
to illuminate the relationship between front-end governance and project performance.
2
In 2012 BAA changed its name to Heathrow Ltd; I keep to the BAA name for the sake of simplicity
In the UK, the gap between general elections cannot exceed five years; and regulated private
monopolies operate under obligation to produce a new capital investment plan every five years.
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Data Collection
Data collection started in 2011 when, as part of a broad research program to
advance understanding of megaproject governance, we got access to the top managers
of the Olympic Delivery Authority (ODA), the public agency established in 2005 to
develop the Olympic park. This agent reported to a governing body formed by the four
promoters; the ODA attended the Olympic board meetings but had no power of veto.
Between 2011 and 2014, we leveraged the access to the ODA to, first, access top
managers of other stakeholders for the Olympic park; and second, to acquire similar
levels of access to the other schemes. In a snowball fashion (Biernacki and Waldorf
1981), for all cases, directors of major project suppliers were also interviewed.
In total, 121 formal interviews up to 2-hours long were conducted and tape
recorded by myself and doctoral students. Follow-up interviews were conducted to
probe deeper into particular issues, double check a verbal account, and bridge gaps in
the empirical database. We were not asked to sign non-disclosure agreements
regarding interview data, but always asked permission to use verbatim quotes and
whether to keep the source anonymous; some respondents gave free rein to use the
transcripts, whereas others disallowed the use of particular quotes; we formally
committed not to share any project reports which were not in the public domain.
To gather extra data and allow for member checks (Lincoln and Guba 1985) the
emerging findings were shared with respondents and some were invited to give
presentations and stay for lunch. We welcomed a total of 13 guests and for each visit
produced detailed hand-recorded notes of the talks and lunch conversations.
To improve data accuracy and the robustness of the insights (Jick 1979) the verbal
accounts were triangulated against archival sources (Miles and Huberman 1994). The
front-end of a large infrastructure project is heavily regulated by UK laws and thus
many documents are available online or become available through the Freedom of
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Information act. Key documents included minutes of board meetings, formal
communications, and reports announcing performance targets and corresponding plans.
In the case of BAA, we studied capital programs, master plans, and consultation
documents. The disputes between BAA and STAR were documented in reports
produced by the regulator and formal letters between BAA, STAR, and the regulator.
Information in the internal project documents was analysed against reports
produced by third-parties. Hence we combed through reports produced by the National
Audits Office, Parliamentary committees, government watchdogs, and other thirdparties. Other sources of data were articles and interviews with top managers in
professional outlets, e.g., New Civil Engineering, Construction News, and articles in
the national press, particularly for disputes that had fallen in the public domain.
Methods
Following recommendations for inductive reasoning (Langley 1999, Ketokivi and
Mantere 2010), we produced detailed accounts for each case. Each account provides a
contextualised and chronologic understanding and guards against account bias (Miles
and Huberman 1994) and risk of self-aggrandizement in recollections (March and
Sutton 1997).
Design Structure Matrices’ (DSMs) were used to illuminate the governance
structure. DSMs are a tool from design theory that allows representing a complex
system into a square matrix by capturing interdependencies between its constituent
elements (Steward 1981). The cells along the diagonal of the DSMs represent strategic
choices (the decisions are listed to the left of the rows) whereas the off-diagonal entries
indicate interdependency between these decisions. If the DSM has an entry in row i,
column j, the decision concerning element i has an impact on the decision concerning
element j. Hence the decisions represented in the diagonal cells have inputs entering
from the top and bottom decisions, and outputs leaving from the left and right sides.
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DSMs have been used to model the decision structure for producing a detailed
design (Sosa et al. 2004, Baldwin et al. 2010). But DSMs have not been used to model
the project front-end, and thus an original protocol was developed. The aim of this
exercise was not, however, to exhaustively model planning but illuminate governance.
Hence, for each case, a DSM was developed to qualitatively capture the
interdependencies between strategic choices. The empirical database consisted of 35
front-end disputes which were cognitively filtered out by the respondents. The
construction of the DSMs was restricted to the components that lodged these disputes.
The codes to interrogate the database were derived from the headlines of a
standard project performance baseline. Hence, the codes included goal, cost forecast,
and scope. The coding for scope was restricted to three salient design requirements:
capacity (which affects viability in use), footprint (which affects land acquisition), and
sub-elements at the centre of a dispute. In addition, for each DSM, a companion
organizational matrix was produced. This matrix reveals which stakeholders participate
in the front-end and the decision-making forums where the disputes are resolved.
The DSM analyses revealed a first regularity across the four projects: the front-end
is governed by a polycentric structure. However, the DSM analyses cannot reveal how
disputes are actually resolved. To address this question, a theoretical sample of nine
disputes was then built, and the empirical data was analysed using coding and tabular
displays (Strauss and Corbin 1990). The sample varied in terms of: i) the locus of
dispute resolution; ii) the extent dispute resolution involved relaxing the solution space
and thus the performance targets; and iii) whether the outcome was or not consensual.
The data analysis iterated between: i) reviewing transcripts and extracting quotes
of dispute-resolution mechanisms; ii) using secondary data to verify interview data;
and iii) developing the argument. As we iterated between data and theory (Miles and
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Huberman 1994), and listened to feedback received from previous drafts, a
contingency model of project performance started to emerge. We stopped iterating
when theoretical saturation was reached. The next sections present the analysis and
then discuss the insights, and the implications to management practice and policy.
Analysis
The analysis first examines the structure governing the project front-end. We then
examine empirical regularities and variance in the capabilities of this structure to: i)
resolve disputes; and ii) sustain legitimacy for the project in the eyes of third parties.
The Polycentric Governance of the Project Front-end
Polycentric governance is an intuitive approach to structure large arenas of
collective action such as networks of public agencies that perform similar functions but
operate in different local contexts (Ostrom 1972). The basic idea is to give local groups
decision-making autonomy insofar they keep to the higher-level rules; and when local
disputes surface, problem-solving gets deferred to high-level authorities who commit
to work back with the local actors to resolve the local problems.
In agreement with collective action literature, and across all cases, the analysis
reveals the creation of a nested structure of decision-making forums at the project
front-end. Figure 2 illustrates the analysis by showing the design and organizational
structure matrices for the four cases. Table 2 exemplifies the protocol that we used to
interrogate the empirical database of the disputes in order to construct the matrices.
<Insert Figure 2 and Table 2 here>
A first point to note is a regularity revealed by the four DSM matrices: invariably,
the matrices show densely populated clusters of off-diagonals ‘x’. Each cluster reflects
the interdependency between the strategic choices necessary to define key functional
components such as a railway station, a sports venue, or an airport concourse. The
result is intuitive. For example, in the Olympic park case, a key component was the
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Aquatics Centre. The choice to set the goal as a ‘massive iconic venue’ is an input for
deciding on the cost, footprint, and capacity—these interdependences are captured in
Figure 2 and Table 2. But, the latter decisions are inputs to refine the goal. For
example: the goal needs to be readjusted if: i) there is not enough land available; ii) the
cost is unaffordable; or iii) a massive venue is not viable. As the goal gets readjusted,
changes ensue to the other decisions. A level down, the decision to add a controversial
‘stylistic’ diving board is interdependent with the decisions to set the goal and budget.
In contrast to the regularity of off-diagonals ‘x’ clusters, the four DSM matrices
differ substantially in the degree of interdependency between the component clusters.
The Olympic park DSM is sparsely populated off the component clusters because the
strategic choices for each venue are technologically independent. The notable
exception is the interdependency between the cost decisions: increasing the cost for
one sport venue potentially leaves less money to invest in developing the other venues.
In contrast, the DSMs for the Crossrail and HS2 cases show high interdependency
between the component clusters. For example, in the case of the HS2 DSM in Figure 2,
the goals for each station along the route are interdependent—the goals need to be
similar to respect equitability. Furthermore, system-wide technical constraints create
interdependency between the requirements for the stations. Hence the railway DSMs
are densely populated off the component clusters; the DSM for T2 is a hybrid: the
cluster of strategic choices for the car park is, apart from the cost decision, independent
from the decisions for the concourses and baggage system. But the latter components
are connected, and thus the strategic choices are technologically interdependent.
In marked contrast, the organizational matrices (represented at the right of the
DSMs in Figure 2) are remarkably similar across the four cases. At the highest level,
the four matrices show a top governing body whose membership is restricted to the
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organizational actors that constitute the promoter. The promoter and its agent are
omnipresent in all strategic choices since they are accountable for project performance.
For example, in the HS2 case, the UK government and its agent, HS2 Ltd., directly
influence all strategic choices. Likewise, in the Olympic park case, the four promoting
organizations and their agent, the ODA, share control over all the strategic choices.
A level down, the four organizational matrices show a fragmented structure of
local working groups so-called project boards. Each project board is open both to the
local resource-rich stakeholders and to the promoter’s agent, but closed to opponents to
the project and resource-poor actors (although consultation reaches all actors). The task
of each board is to agree the strategic choices for the component of interest.
Table 2 shows evidence of direct influence of resource-rich stakeholders on local
strategic choices. For example, in the HS2 case, the London government and Transport
for London (who together control the transport strategy for London), and Camden
Council (who controls local planning consent) directly influence strategic choices for
the Euston station; in turn, the Manchester government, Transport for Greater
Manchester, and other local actors participate in the front-end for the Manchester
station. Likewise, in the Olympic park case, for each sport venue, different sport bodies
and other local actors directly influence the strategic choices. The authority of the local
stakeholders is thus delineated to the component that requires their critical resources.
In sum, the DSM analysis systematically reveals a degree of decomposability in
the front-end for a large infrastructure project. This regularity reflects how different
components create different sub-problems; solving each sub-problem requires a
different bundle of resources. Yet, not one of the four cases is fully decomposable into
a set of strictly modular sub-problems. First, some sub-problems are technologically
16
interdependent; and second, early announcements of performance targets for the
project create financial interdependence between the sub-problems.
Crucially, we uncover regularity across the four cases from a governance
perspective. Irrespectively of the observed variance in system decomposability and in
the structure of the promoter, front-end governance is systematically polycentric. At
the highest level, the promoter has overarching decision-making authority over all
strategic choices. But for each component/sub-problem, the promoter shares the
authority over the local strategic choices with a distinct group of local stakeholders.
The Resolution of the Front-end Disputes over Strategic Choices
We turn now to probe deeper into the resolution of disputes. We ask: is polycentric
governance not just masquerading a process of consultation? Were there key
differences across the four cases? Table 3 provides a sample of disputes that shows the
diversity of the high-level dispute-resolution mechanisms encountered.
<Insert Table 3 >
As aforementioned, at the onset of the project front-end, the promoter selfformulates a preliminary performance baseline that delineates the local solution spaces.
It is the mandate of the promoter’s agent to figure out consensual solutions within
those constraints. As shown in Table 3 a major source of disputes is lack of local goal
congruence. For example, the Olympic stadium dispute (#1) was rooted in differing
visions for the venue in legacy: football versus an athletics venue. Other disputes are
rooted in rivalrous preferences for lower-order choices but where the stakes are high.
This is the case, for example, of the dispute about adding toilettes to the Farringdon
station (#9): the local actors felt strongly about it, but the promoter was adamantly
against the idea because in his view toilets were costly to operate and keep safe. These
disputes are contained, but problem-solving can still be complicated.
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Goal disputes are particularly challenging. The disputes about the HS2 stations are
telling (#4,5). The local claimants argue that grandiose, well integrated stations are
needed to catalyse urban regeneration, whereas the promoter prefers utilitarian and
modular designs. To persuade the government to increase the local budgets, the cities
commissioned their own designs. But under pressure to keep to prior targets, HS2 Ltd
recommended plans to the UK government that the cities had not fully endorsed. It was
then up for Cabinet4, a level above, to decide what to do; one official explained:
HS2 Ltd, if you like, are the infantry out there; actually doing what they’re told by
[central] government. So HS2 Ltd get all the fights, appear to have all the fights, are
the bad boys, but they’re really only doing what they’re instructed to do
Crucially, our findings show that the promoter has less decision-making power
than could be assumed prima facie. De jure the promoter may have power to impose
reasonable solutions. And if the promoter believes it has strong evidence to support its
case, it may try to force its hand—sometimes it loses, sometimes it wins. For example,
the Olympic park promoter successfully proved the user wrong when the latter claimed
the diving boards of the Aquatics centre were unsafe (#3). But the Crossrail promoter
lost the ‘fight’ for not adding toilettes (#9). In the goal disputes, where evidence is
easily contestable, our findings suggest that the promoter prefers to negotiate. This was
true both for T2 (‘if something gets talked it gets changed’, said a STAR person) and
for government schemes (‘You could…make HS2 its own planning authority [but] that
would flout democratic processes’, said a HS2 official).
Hence the local working groups play two functions. As shown in Table 3, they
create opportunity for the front-end participants to engage in cycles of analytical
deliberation and design rework. Each participant will mobilize their own technical
teams to produce new evidence for backing up the preferred strategic choices. Teams
4
The UK Government Cabinet includes the Prime Minister and the most senior ministers
18
of technocrats from all parties will also meet regularly to get their points across, find
ways to bridge gaps in finance, and search for mutually consensual solutions.
Seldom is the case, however, that technocratic discussions suffice to bridge
differences in interests—‘this is all the art of possible, isn’t it?’, said one respondent.
Hence, high-stakes meetings occur concurrently. They are open to elected leaders and
top managers, and are crucial to cut deals. We did not uncover an instance where a
dispute was resolved by diktat. But the intertwinement of deliberative and bargaining
structures makes front-end governance a struggle. Hence, we turn now to discuss
regularities and variance in the mechanisms that keep the front-end stage afloat.
Empirical regularities: design safeguards and slippages in performance targets
The analysis reveals that investments in design safeguards such as redundant parts
and spare capacity were instrumental to resolve goal-related disputes. These
allowances enable one vision to rule strategic choices without prohibiting the shift to
implement the competing vision at a reasonable cost later on (Gil 2007). As a capitalintensive way to build limited flexibility, investments in safeguards are controversial
(Gil and Tether 2011). Still, they systematically enabled to resolve goal disputes.
The case of the Olympics aquatics centre [#2] is telling. The Olympics bid pledged
a massive, sophisticated venue. But the costs spiralled in planning; local claimants also
argued that a massive venue would be unviable in use. Yet, to back down from the bid
pledge was tricky—one official said, ‘if you challenge them [internationally-renowned
architect] directly they will just walk away’. Complicating matters was a hard
constraint on the minimum capacity of the venue for the games. In the end, the dispute
was resolved by keeping the aesthetics, shrinking the venue size, and designing
safeguards to increase the capacity just for the games. In the process, the cost forecast
duplicated, which caused an outcry—‘the games' organisers seem to be willing to
spend money like water," said a Parliamentary report.
19
Design safeguards were also handy to resolve disputes between BAA and Star.
The airlines craved a modern campus, whereas BAA planned to replace old facilities
[#6]. Some airlines also preferred ‘closed’ gates which they deemed more efficient,
whereas BAA preferred ‘open’ gates so passengers could move around up to boarding
[#7]. Consistent with its preferences, BAA announced a less than £700m new
concourse (‘Heathrow East’) to open in 2012. Disputes then ensued; in the end, BAA
safeguarded the airlines’ vision by adding basements and tunnels; it also designed in
flexible gates. In the front-end, the performance targets slipped three times until BAA,
Star, and the regulator settled on a £1bn concourse to open in 2013.
In the Olympic stadium dispute [#1], in turn, we trace cost and time overruns to a
failure to strike a front-end consensus on a safeguarded design. Facing a rift between
front-end participants due to differing visions, the promoter’s agent suggested
increasing the budget in 20% (~£100m) to build retractable seating and thus safeguard
both visions. But the football aficionados refused to compromise on what they called a
‘jack-of-all-trades’. With time running out, the Olympic board chose to go ahead with
a rigid design for the 2012 games. But the dispute was only resolved in 2013; the final
cost of the conversion to a dual-use venue then reached £190m in 2015.
Consistently, resolving goal disputes required throwing more resources (money
and/or time) into the pot until a compromise surfaced. This confirms Flyvberg et al.’s
(2003) claim that project promoters suffer from optimism bias; one respondent said:
‘early on, people’s eyes are much bigger than their stomachs…our guidance is ‘no
matter what your press people say…don’t be drawn towards providing a spot figure;
it’s foolish, you’ve just created a hostage to fortune to yourself’.
The promoter dislikes slippages to the local performance targets because, first,
they compromise equity; and second, they can compromise the targets for the project
as a whole that it announced at the onset of the front-end. Slippages in targets then
20
create a risk of losing public legitimacy. We turn now to examine variance in the use of
umpires to overcome what otherwise could become intractable sub-problems. Table 4
summarises the evidence at project level for the four cases.
Table 4 –Summary of Mechanisms to Resolve Disputes whilst Sustaining Legitimacy
Case
Olympic
park
Project
front-end:
2002-07
Umpiring Structure
Internal
External
Yes
design
sponsors;
planning
board
Yes
HS2
Project
front-end:
since 2009
project
sponsors
No
Yes
Slippages in the Performance Targets
Completion Date
Cost Forecast (*)
Immovable
Yes
But some disputes only
temporarily resolved for
2012
Yes
2002, ~ £1.1bn
2007, ~£2.0bn
2004, ~ £4.9bn
(~29% of cost
2007, ~ £6.9bn
forecast)
Final (2013): ~£8.1bn
Yes
2010, planning (1st phase)
(10/11 prices)
3 years in done by 03/2015
st
Parliament 2015, planning (1 phase) 2010, ~ £22.7bn
end
expected
by
2017
st
2012, ~ £26.5bn
for 1
Project completion:
2014, ~ £28.2bn
phase (as unchanged so far
of 2015)
Heathrow
airport T2
Project
front-end:
2005-08
Crossrail
Project
front-end:
2000-2008
Yes
design
arbitrator;
regulator
Yes
project
sponsors
Yes
Slack resources
(contingency)
Substantial
Yes
Substantial
2010, ~£7bn (30%
of cost forecast)
2013, ~ £14.4bn
(51% of cost
forecast)
Limited
2005, ~ £1.3-1.8bn
2008, ~£200m
2006, ~ £2.0bn
(8% of cost
2008, ~ £2.4bn
forecast)
Actual Completion: 2014 Final (2015): ~£2.8bn
Yes
Yes
Yes
Substantial
2000, open in 2012
2000, ~£4.7bn
2003, ~ £9.8bn
2006/7, ~£5.0bn
3 years in 2003, open in 2016
2007/8, ~ £10.9bn
(46% of cost
Parliament 2008, open in 2017
Actual Completion (as of Final (as of 2015)
forecast)
(2005-08) 2015): 2019
~£14bn
No
2005, open in 2012
2008, open in 2013
(*) final (cash) prices unless indicated otherwise; public budget envelope= cost forecast +contingency
Variance in Implementing an Umpiring Structure
In sports an umpire acts as a referee and settles disputes between competing
players. At the front-end of a complex systems project, promoter and autonomous
stakeholders strive to win arguments over strategic choices. It turns out that the
presence of an umpire is a pragmatic mechanism to put an end to disputes that could
otherwise drag forever. However, the findings suggest variance in implementing this
structure: the T2 and the Olympics projects relied only on internal umpires, whereas
many disputes were deferred to an outside referee in the Crossrail and HS2 cases.
In the T2 case, the regulator was both a front-end participant and the umpire of last
resort. The presence of the regulator was reassuring for both parties; as one BAA
respondent said, ‘we’re battling all the time ...if the airlines don't like it, then they can
21
bring in a formal dispute’. And indeed, in the dispute about the main concourse (#6),
Star wrote several letters to the regulator complaining that BAA was ignoring their
needs, a claim BAA found unfair—‘I can never get consensus on almost anything’,
said a BAA director. A level below, BAA and Star recruited a retired director to
arbitrate less substantial disputes such as the dispute over the type of gates [#7].
Likewise, the Olympic park promoter created an internal umpiring structure in the
face of self-imposed deadlines to make decisions—‘it’s continuous negotiation, a
tough, tough environment’, one manager said. Hence, at the lowest level, each project
board had a ‘design sponsor’ that owned a limited contingency to self-resolve small
disputes. A level above, the Olympic board was expected to resolve major disputes.
The lack of an external umpire was not an issue in the T2 case since the regulator
held both deep project knowledge and authority to resolve disputes. However, the lack
of external umpiring had disadvantages and advantages in the Olympics case.
On the one hand, it increased the risk of chaos; one official said—‘you’ve got
powerful figures all over the place…you can’t govern’ (Norris et al. 2013). To avoid
the risk of impasse, the Olympics promoter ditched the prior cost targets set in the bid;
it also engaged in a democratic decision-making process but bounded it to rigid
deadlines—time became a de facto dispute-resolution mechanism; but even then, the
stadium dispute [#1] shows, some issues could only be temporarily settled.
On the other hand, the lack of external umpiring enabled the promoter to overlap
front-end planning with project delivery works to gain time. And by 2009, as more
front-end disputes got finally out of the way, the Olympics promoter published an
updated performance baseline so-called ‘blue book’.
In marked contrast, the Crossrail and HS2 cases show umpires internal and
external to the project. Project sponsors worked as internal umpires in a role similar to
22
the aforementioned design sponsors. In turn, the laws in the environment elected the
UK Parliament as the referee of last resort—any organization who was ‘materially
affected’ by the promoter’s plans could petition against them. One official explained
the reason to petition against the plans for the HS2 London Euston St. (#4):
HS2 Ltd. didn’t persuade us that our points were wrong nor did they persuade us that
their points were right.…[Petitioning] gives us the ability to correct what we feel is a
mistake.…that’s ultimately about making your case that your vision is superior.
The presence of an external umpire had multiple effects. The case of the Crossrail
Woolwich station (#8) is telling. Despite years of talks the promoter refused to add this
station in part to avoid creating precedence as there were more claims for stations.
Petitioning gave local actors a last chance to overturn what in their perspective was a
flawed decision. After 40 months of deliberations, Parliament ruled that the promoter
should safeguard the station in the design, and that the petitioners (a house builder and
local government) should incur the construction costs. This ruling seems sensible and
no major issues ensued, which suggests that the presence of Parliament stymied mutual
cooperation. And indeed, aware of how inefficient it was to rely on Parliament to
resolve the disputes, the Crossrail promoter managed to privately cut late deals with
two thirds of the petitioners who then withdrew their public petitions.
We turn now to analyse variance in the slack resources used to sustain public
legitimacy for the project as internal disputes put pressure on performance targets.
Variance in the Use of Slack resources
Compiling registers of front-end disputes that can potentially cause late cost and or
time overruns is an established practice (Cleland and King 1983). Once the risks are
quantified in probabilistic terms, the project promoter faces a judgement call: either it
sets optimistic performance targets that increase the scheme attractiveness but also the
risk of overruns, or it sets more conservative targets; one civil servant said:
23
There’s a bandwidth there…if we push it [project budget] too far we won’t get the
project...so there’s that game that goes on to try and find what the [UK] Treasury’s real
limits are, and how far can we really push it. …it’s a political decision.
In the T2 case, the use of large buffers was ruled out. First, BAA was confident on
its ability to parry any public backlash caused by slippages in targets. Second,
regulation prohibited to start delivery without resolving first all major disputes; if need
be, the front-end could be prolonged. And third, the more capital spending, the higher
the levies that BAA would be allowed to charge the airlines to recover the investment;
hence both the airlines and regulator were also against the use of slack resources
In marked contrast, in the other three cases, elected leaders had no appetite to let
the public budget (cost forecast plus contingency) slip multiple times; there was also
no confidence that major disputes could be resolved in the front-end, let alone a much
larger number of minor disputes. The Olympic park case is a good example. The bid
cost forecast (~£4.9bn5) turned out insufficient to meet the bid pledges plus all the
emergent local claims—‘it’s like the Olympics will solve all the world’s problems’,
said one officer. To get a grip on a chaotic situation, in 2005, the promoter set a 2-4-1
rule: two years to plan, four to build, and one to test. But when 2007 arrived, many
disputes remained unresolved. This spurred the promoter to agree a large buffer (£2bn)
on top of what was by then a much higher cost forecast (~£6.9bn); one officer said:
Treasury were really, really clear...big envelope and never knock on our door for
money…actually they were right…we were then able to make decisions…rather than
being petrified because we didn’t have enough money to do what we needed to do
Table 4 shows a similar pattern for HS2 and Crossrail. In both cases, the
promoters faced an outcry at the onset of the project front-end due to slippages of the
cost targets. To mitigate the risks of further slippages derailing the project, the
promoters ditched the original budgets for way more conservative budget envelopes.
5
Includes £971m (venues); £89m (conversion costs); £640m (Olympic infrastructure); £1040m (nonOlympic infrastructure); £700m (local transport schemes); £766m (land) plus VAT (NAO 2007)
24
The cross-case analysis thus suggests a major difference between the privatelyand the publicly-financed cases. Front-end disputes were in all cases traced to flat
governance. But in the latter cases, context puts way more pressure both to rush the
project front-end and show to third parties that the project is ‘on target’. Complicating
matters, in the government projects, stakeholders operate under the expectation that the
promoter will incur the costs of resolving all disputes. The promoter’s use of slack
resources is thus a high-order device to address this conundrum: slack resources
decouple the internal evolution in scope and cost forecast from the figure (so-called
‘budget envelope’) that the public ‘sees’ and government can announce early on.
Slack resources do not automatically resolve disputes—Table 3 shows many
disputes that could not be self-resolved. Worth noting, the use of slack resources is
scrutinised by watchdogs to reduce moral hazard—‘[contingencies] are there for
known risks, not for somebody’s betterment’, said one official. But in the long run
slack resources appear to create a self-fulfilling prophecy—London 2012 depleted its
contingency and Crossrail and HS2 face similar fates (NAO 2014, Butcher 2015).
In sum, the analysis reveals two regularities. First, project front-end governance is
polycentric since problem-solving authority for developing a one-off complex system
is decentralised. And second, slippages in performance targets are necessary to
safeguard compromise solutions. Within this pattern, we observe variance in the
mechanisms to get things done. One source of variance is the use of external
umpires—an effective but inefficient way to resolve longstanding disputes. There is
also variance in the use of slack resources. Substantive slack is advantageous to sustain
a public narrative that the project is on target but leads to a self-fulling prophecy.
DISCUSSION
25
We return now to our central questions: what is the structure governing the frontend for a complex systems project and how does this structure affect performance? At
the front-end, the promoter cannot use contracts to simulate an authority hierarchy; it
also lacks authority to empower a ‘heavyweight manager’ (Clark and Fujimoto 1991).
And setting up a meritocracy-based authority is difficult when a robust relational
contract is yet to emerge. But since the promoter is accountable for performance, it
cannot also work as a mere ‘rubberstamping hierarchy’ (Rivkin and Siggelkow 2003).
To attenuate managerial complexity, our analysis suggests that promoters
decentralise governance by creating a polycentric structure. First, they exploit the
decomposability inherent in any complex system (Simon 1962) to formulate a set of
more manageable sub-problems. And then, they assemble distinct groups of resourcerich stakeholders committed to find compromise solutions for the shared sub-problems.
However, the project front-end is not fully decomposable: some sub-problems are
technologically interdependent; other interdependences are driven by preliminary cost
and schedule targets. These interdependences do not preclude the local claimants to
make claims on strategic choices—local actors invariably try to optimize locally due to
self-interest (Knudsen and Levinthal 2007). But decentralized searches of solutions for
interdependent problems can bog down (Mihm et al. 2010). This leaves the promoter
with a catch-22: if it governs by diktat, it alienates the local actors; if it lets the local
performance targets slip, the project front-end can lose legitimacy in the public eye.
Complicating matters, the front-end is time-bounded by context—no project is an
island, Engwall (2002) observes. Expecting government not to heed to the political
calendar as in the case of Crossrail and HS2 is unrealistic. In the other two cases, frontend activity was equally time bounded by context. Under time pressure, it becomes
tempting to complement deliberations with a bargaining structure to settle disputes.
26
Our findings corroborate literature on the challenges of integrating knowledge and
coordinating work across organizational boundaries to produce complex systems
(Hughes 1987, Miller et al. 1995, Hobday 1998, 2000, Gann and Salter 2000, Davies
and Brady 2000). They also agree with Morris’ (1994) claim that rushing the front-end
in complex systems projects makes it hard to produce reliable performance baselines.
Our analysis also qualifies Flyvbjerg et al.’s (2003) claim that promoters are
optimistically biased. Hence we trace regular slippages of the performance targets to
underestimation of the resources necessary to safeguard compromise solutions, i.e.,
risk-neutral solutions with higher expected benefits for everyone. However, we did not
encounter evidence of deceitful scheming (Wachs 1989, Flyvberg et al. 2003). Rather,
across all the cases, the analysis shows that promoters go to great lengths to produce
reliable baselines. But resolving disputes requires changes to the promoter’s preferred
plans—changes that inevitably compromise the targets (Dvir and Lechler 2004).
Still, it is fair to ask why promoters announce targets when strategic choices are
still up in the air. The thing is, Stone and Brush (1996) argue, organizations that
develop plans for endeavours with ambiguous value have to do it—commitments
dampen the ambiguity, and are thus a prerequisite to develop the legitimacy needed to
acquire critical resources. Once resource-rich stakeholders show predisposition to
volunteer resources to the enterprise, local searches ensue for compromise solutions.
BAA, for example, announced targets for the T2 project way before nailing down
the plans with Star Alliance, and disputes ensued. But BAA had started the
construction of another terminal for a rival alliance and was thus under pressure to
announce its plans to guarantee parity. Optimistic announcements were also the norm
in the government projects. For example, the first budget for Crossrail was released
when the plan was to build a central London train. The news helped to gain momentum
27
for a third attempt to promote the scheme. But the promoter had not yet seen that only
a much more costly commuters’ train could garner sufficient political support.
Notwithstanding regular evolution in the performance targets, the cases differ both
in the mechanisms to resolve disputes and sustain public legitimacy for the front-end.
Figure 3 summarises the logic in a contingency model of project performance.
Slack Resources for
Sustaining Project
Legitimacy in the
eyes of third parties
Limited
Substantial
Umpiring Structure for Resolving Internal Front-end Disputes
Internal
Internal and External
i)High pressure to resolve all major
front-end disputes before starting
delivery
ii)Opportunity for shared
accountability for outcomes
iii)Potential for moderate slippages
in the internal and external
performance targets
i) High risk of major slippages of
the internal performance targets
ii) High risk of major slippages of
the targets in the public eye
iii) Unavoidable inefficiencies
iv) High risk of the project frontend not being sustainable
No example: UK public policy
Example: Heathrow T2
discourages this scenario
i)High risk of a self-fulling prophecyi) High risk of a self-fulling
ii)Potential for efficient overlap of prophecy
front-end planning and delivery
ii) All major front-end disputes
iii) Slippages in the internal
resolved before delivery starts
performance targets hidden from
iii)Unavoidable inefficiencies
third parties
iv) Slippages in the internal
performance targets hidden from
Example: Olympic Park
third parties
Example: HS2, Crossrail
Figure 3- A Contingency Model of Performance of a Complex System Project
Umpiring Front-end Disputes
The structures that govern strategic choices in complex systems projects are
underexplored—as Pinto and Winch (2015) note, ‘the black box of project shaping
needs to be opened up’. In so doing, our empirical study uncovers a large arena of
collective action, a structure rife in disputes. An intuitive principle of governing
collective action arenas is to create affordable and independent conflict-resolution
bodies (Ostrom 1990, Ostrom 2005). If conflicts are resolved through democratic
decision-making processes, local claimants are less likely to defect; keeping the
participants enfranchised also matters to mitigate the risks of decisions becoming
embroiled in inefficient power battles and politics (Gray 1989, Tuertscher et al. 2014).
28
In agreement with this literature, across all cases, we found efforts to build internal
umpiring structures to resolve disputes, and thus avoid a front-end stalemate. In the T2
case, for example, it is hard to conceive how BAA and the airlines could have bridged
their differences without the arbitrator and the regulator. Facilitating the search for
compromises was also the role of the design and project sponsors in the other cases.
However, the cases differ in the umpiring structure external to the project. Outside
referees bring benefits and costs to collective action. The main benefit is the provision
of a forum of last resort to overcome impasse. But external umpires potentially create a
negative precondition for parties to cooperate (Reilly 2001); they are also inefficient
because they need time to assimilate knowledge before intervening. Hence Ostrom
(1990) argues that on balance their presence makes collective action more fragile.
The lack of an external umpire was not an issue in the T2 case. The regulator was
a knowledgeable referee that both parties respected; the regulator also had the power to
prolong the front-end talks if need be. However, the consequences were more nuanced
in the Olympics case. On the one hand, the absence of a regulator created opportunity
to make efficiencies. Hence, as independent elements of scope got gradually resolved,
their implementation could start without being hold back by front-end talks for other
elements. But the lack of regulation left no structure to fall back on if the front-end
participants struggled to converge. In a project that faced an immovable deadline,
letting the cost targets slip then became inevitable irrespectively if the local claims
were, in the promoter’s view, reasonable or disproportional to what was at stake.
In marked contrast, the HS2 and Crossrail projects could only move into delivery
after Parliament resolved all disputes that the front-end participants had failed to selfresolve. This situation also requires a nuanced evaluation of performance. It suggests
that context presupposes that, in the absence of a rigid deadline, the front-end is not
29
self-governable. An external referee thus mitigates the risk of chaos ensuing where
either nothing ever gets done because the promoter and key stakeholders cannot agree
on what to do, or excessive compromises lead to ‘white elephants’ that serve no one.
However, the use of external umpires has major costs. As the Crossrail and HS2
cases show, their presence leaves strategic choices in limbo for years. This dismal
prospect gives the promoter an incentive to self-resolve disputes. But if the
stakeholders are not accountable for the outcomes, the incentive is not mutual. Indeed,
if local stakeholders defer dispute resolution to the outside referee, they can increase
their gains with limited costs; to avoid external umpiring, the promoter would then
have to make concessions. But local slippages of targets can create precedence and
impair third parties’ perceptions of project performance. Hence, if the context allows
for external umpiring, it gets difficult to avoid this structure notwithstanding how
inefficient it is. We turn now to discuss variance in the use of slack resources.
The Strategic Use of Slack Resources
Built-in contingencies are buffers that create slack, this is spare resources that
allow an organization to adapt to internal pressures for adjustment or external pressures
for change (Bourgeois 1981). The effects of slack resources to how organizations
perform are contingent on the environment and the performance variable of interest
(Voss et al. 2008). For example, Cyert and March (1963) argue that slack resources
reduce politics and bargaining because more resources neutralise conflict. However,
Bourgeois (1981) notes that slack resources also create opportunity for managers to
engage in self-aggrandizing activity and thus for self-fulfilling prophecies.
The variance in slack resources in our sample has important implications to
performance debates. In the government projects, slippages of the performance targets
potentially turn projects into political footballs; stakeholders, in turn, act as if
government should pick up the tab for scope creep. This puts the promoter between a
30
rock and a hard place. Understandably, it is tempting to use slack to decouple what
happens inside the project from what the public eye sees. Hence the promoter built
substantial slack midway in the front-end for Crossrail and HS2; and even more
prudently, it did the same at the ‘end’ of the front-end in the Olympics case. But slack
resources cannot eliminate collective action problems, and thus the findings suggest a
self-fulfilling prophecy ensues irrespectively if the external umpires are or not in post.
In contrast, BAA management denounced the government’s use of, in their view,
‘over-egged budgets’. The context surrounding the T2 project was, however, very
different. Here, major disputes were only expected with the airlines, and by regulation
BAA had a guaranteed return on investment. Hence the airlines would indirectly pick
up the tab for the extra costs of resolving disputes. Shared accountability thus made it
in the interest of all front-end participants to contain cost escalation; it also reduced the
need to build in slack resources to sustain a public perception of project ‘success’.
The Performance of Complex Systems Projects
Legitimate perceptions of project ‘success’ by third parties are rooted in
comparisons of the outcomes against the baseline (Morris and Hough 1987, Pinto and
Slevin 1987). Legitimacy is about perceived consonance of an entity with established
norms, beliefs, value, and practices (Scott 2008, Suchman 1995); and in the world of
projects, evaluating performance against initial pledges is well established (Dvir and
Lechler 2004). Knowing this, promoters of a complex system go to great lengths to
construct a narrative that a project is ‘on target’. But doing so is no more challenging
than at the front-end where optimism bias and time pressure lead to regular
underestimation of the costs of striking compromises.
Setting the boundaries that delineate if a resource-rich stakeholder is external to
the project or a front-end participant in its own right is, however, a choice of the
researcher. Hence, in studies where resource-rich stakeholders are part of the context,
31
i.e., ‘external’ actors, resolving strategic choices becomes part of a process of
‘shaping’ the scope by the larger environment (Miller and Lessard 2000). This process
then lays in part outside the control of the project promoter which informs the claim
that complex system projects cannot be planned (Szyliowicz and Goetz 1995).
In this study, resource-rich stakeholders such as local authorities and user groups
are legitimate participants in the project front-end. These actors contribute resources
under their direct control to produce a complex system which they will share in use
with the promoter during a long service life. As such, the promoter and other
stakeholders constitute a de facto distributed community of production at the front-end.
This production community is rife in conflict because rilvary in preferences cannot
be damped by homogeneity of logics and/or modularity. Using bargaining can speed
up things, but also creates winners and losers and thus ambiguity in the effectiveness of
the outcomes (Lundrigan et al. 2015). External umpires guarantee that something gets
done in the absence of rigid deadlines, but exacerbate difficulties in producing reliable
forecasts. Slack resources, in turn, also amplify slippages in the performance targets.
However, this picture of regular slippages in performance targets is less dispiriting
from a collective action perspective. The governance of shared resources is a struggle
(Dietz et al. 2003). Hence a dose of optimism is needed to believe that shared resources
are governable (Ostrom 1990). In the project front-end for complex systems, strategic
choices are the shared resource. Hence, if we strike a parallel, front-end participants
need optimism to believe that the goal is achievable—‘weren’t we optimistic and we
wouldn’t get in this sort of job’, one seasoned manager said. Optimism does not excuse
the promoters from the obligation to formulate an initial baseline that is true to what
they know at the time. But slippages in the targets that are commensurate with the
outcome of open searches for compromise solutions are legitimate self-adjustments.
32
This suggests another angle to add on to the established norms and practices to
evaluate the front-end performance for complex systems projects. In collective action
literature, positive performance passes by sustaining a shared resource, and as a
corollary, sustaining the community that uses the shared resource (Ostrom 1990). In a
complex systems project, if the front-end is successful, the shared resource evolves
from strategic choices (or a ‘design-in-the-making’) into a physical asset that the frontend participants are happy to share in use; in turn, the community of production
evolves into a community in use. Positive performance then requires keeping the frontend participants enfranchised. This suggests that the capability to avoid defections and
thus to sustain the community of production is also a measure of performance.
CONCLUSION AND RESEARCH OUTLOOK
The motivation for this study is a question that has long eluded researchers: are
slippages in the performance targets for complex systems projects a consequence of
neglecting the front-end or are these projects too complex that they cannot be planned?
To shed light on this question, we use an organizational design perspective. Here,
we argue that the front-end structure of a one-off complex system project is that of a
community of production facing a large collective action problem. Polycentric
governance attenuates management complexity by delineating the spaces of shared
strategic choice, but cannot eliminate collective action. Hence the promoter’s optimism
bias is both a blessing and a curse. It is necessary to believe that the goal is achievable,
but fuels underestimation of the corresponding costs and thus exacerbates collective
action problems. The trick then becomes to let the targets slip to safeguard compromise
solutions whilst sustaining legitimacy for front-end activity in the public eye.
Our contingent model of project performance shows different ways to tackle this
difficult balancing act that comparative studies want to factor in. Projects where
33
context gives the last word over disputes to an external referee differ from those where
front-end participants have skin in the game and incentives to self-resolve the issues;
the amount of slack resources also changes third parties’ perception of performance.
There are, however, limitations to the generalizability of the insights that suggest
opportunity for future research. We derive our insights from using Design Structure
Matrices and the headlines of a standard performance baseline to model the structure of
the front-end problem for a diverse sample of complex systems projects. The analysis
shows that polycentric governance over shared strategic choices occurs irrespectively
of: i) technical system decomposability (integral versus modular); ii) promoter
structure (coalition vs. solo); and iii) deadline rigidity (immovable vs. flexible).
However, our four cases are large infrastructure projects occurring in the UK.
Three qualities suggest that these enterprises are arguably more prone to collective
action problems than other complex systems projects. First, infrastructure projects are
not that technologically complex that strategic choice cannot be comprehended by a
large array of autonomous stakeholders; this instils in the stakeholders a sense of
legitimacy to claim a right to directly influence strategic choices.
Second, the root causes of the disputes over strategic choices for long-lived
infrastructure are conflicting interests and needs. Long planning horizons allow for
ambiguous interpretations of supporting evidence, and open up the strategic choices for
contestation and negotiation if the time to bridge the differences is limited.
Hence
strategic choices are not about selecting optimal options in a ‘substantive rationality’
fashion but rather the outcome of what Simon (1976) calls ‘procedural rational’ to
account for possible agreements under ambiguity about future states of the world.
And third, large infrastructure projects are unique in the way they directly impair
property rights; many projects require land take and all almost invariably blight
34
property. Hence the project front-end is highly regulated in western-style legal systems
where external umpires such as Parliaments, public inquiries, and court systems are
default structures to fall back on if front-end disputes cannot be self-resolved.
Taken together, these qualities make large infrastructure projects quite different
from more technologically complex projects in general, and even from large
infrastructure projects undertaken by authoritarian states. It remains therefore
indeterminate the extent collective action problems surface in these settings
Limitations notwithstanding, our insights have important implications to practice
and policy. Normative expectations of performance have long dogged the reputation of
large infrastructure projects. This is troubling at a time when infrastructure gaps are
augmenting dramatically both in developing and developed countries due to
deterioration of existing assets, population growth, urban migration, and climate
change (WEF 2015). It is hard to conceive how matters can improve without a deeper
understanding of front-end governance and the impact to perceptions of performance.
The insights are also relevant to countries such as the UK where policy dodged
the reputation problem by building massive slack resources at the project front-end.
Slack masks slippages in targets, but the trick seems unsustainable when the country
faces some of the highest infrastructure production costs in the world (Treasury 2013).
A deeper understanding of front-end governance can allow for more shared
accountability for slippages in the performance targets. This, in turn, can create
opportunity to shrink slack and mitigate the risk of a self-fulfilling prophecy.
In sum, this study advances our understanding of the development of complex
systems by illuminating the collective action problem at the front-end. We trace
slippages in the performance targets to polycentric governance. We also offer a
contingency model of performance that contains a relationship between external
35
regulation and internal use of slack resources. Getting the right balance is tricky, and
thus the sustainability of the front-end stage is per se a measure of performance.
APPENDIX – Brief Summary of the Sampled Projects, History, and Context
Crossrail Project front-end: occurs between 2001 and 2008. Prior History: The idea of
building a cross-London railway first gained momentum in the seventies but the UK
government dropped the plan after a few years because of cost concerns; the idea was
reignited in the nineties but the project front-end again unravelled after five years. The start of
the third attempt happened in 2001 when the UK and London governments formed a coalition
to promote the scheme. Performance baseline: during the front-end, the goal evolved from a
9km London train to open by 2012 into a 118km high-capacity commuters’ train to open by
2017; the cost target evolved commensurately. Context: Project delivery could not start before
the promoter acquired from Parliament the power to force land sales. The front-end unfolded
under pressure to submit a proposal to Parliament before the 2005 elections; the Parliament
took 3 years to deliberate, and in 2008 the project promoter got authorization to proceed.
London Olympic park. Project front-end: occurs between 2001 and 2007. Prior history: The
idea of hosting the 2012 Olympics in London emerged in 1995 after the UK lost three
contests with different cities. In 2001 the UK government formed a coalition to promote the
scheme with the London government and the British Olympic Association (the only entity
that could bid for the Olympic games). Performance baseline: In 2002, the International
Olympic Committee (IOC) opened the competition; it gave the promoter two years to develop
an intermediate bid and six additional months to submit the final bid; the scope and cost
forecast kept evolving during the bidding process and afterwards. Facing an immovable
deadline, the promoter chose to spend the first two years after winning the contest to plan
properly and produce a performance baseline (‘Yellow book’). Context: after London gained
the contest in 2005, Parliament rushed to give government the power necessary to force land
sales; and LOCOG, a IOC’s watchdog, formally joined the promoter organization.
Heathrow Airport T2. Project front-end: occurs between 2005 and 2009. Prior History: The
goal of consolidating all operations by Star Alliance, a network of airlines, in a new terminal
was announced in 2005; this was the year when BAA, the private airport owner, started the
construction of Terminal 5, a facility to consolidate the operations of a rival alliance and
scheduled to open in 2008. Performance baseline: The initial goal was to replace the old T2
building with a new building so-called ‘Heathrow East’ to open by 2012. The front-end was
initially planned to end by 2008 to coincide with a new regulatory cycle, but was later
extended into another year. During the front-end, the goal evolved into a modern campus to
be developed in two stages; the first stage would open by 2013 and the second by 2017/8. The
first phase opened in 2014; as of 2015, no plan exists to start the second phase. Context:
Delivery could not start before the performance baseline was approved by the regulator
High-speed 2. Project front-end: occurs between 2009 and 2017 (first phase) and 2009-2020
(second phase) (expected dates as of 2015). Prior history: The idea to develop a new national
railway gained momentum in 2008 after the global financial meltdown. In 2009, the UK
government created HS2 Ltd, a public agency tasked to carry on the project front-end.
Performance baseline: It consists of opening the first phase connecting London and
Birmingham (225km) by 2026, and a second phase connecting Birmingham to various
Northern cities (306km) by 2032/3. Context: Delivery cannot start before the government
acquires from Parliament the power to force land sales. The project front-end unfolded under
36
pressure to submit a proposal to Parliament by 2013 as government hoped to see the proposal
approved before the 2015 elections; the proposal was submitted in 2013, but Parliamentary
work is not expected to be completed before 2017. The opening targets are yet to change.
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40
Table 1 - Description of the Sample of Cases, Interviewees, and Archival Database
Cases
System-level
goal
London 2012
Heathrow T2
London Crossrail
UK High-speed 2
Build an Olympic
Build a new terminal
Connect the East and
Build a cross-country
park to host Games
campus to create a
West outer London
railway to increase
and catalyse urban
dual-hub airport
with a new highnational transport
regeneration
capacity train system
capacity
Organizational Coalition: UK and
Solo:
Coalition: UK and
Solo:
structure of the London governments; BAA (regulated airport London Governments; UK Government
promoter
BOA(§); LOCOG(§) owner)
City of London
Outcome of the Formal agreement
Legal contract
Legal contract
Legal contract
project frontend
Yellow book (2007)
5-year capital
Parliamentary bill
Parliamentary bill
Blue book (2009)
investment plan
Interviews
36 (11 controversies) 19 (5 controversies)
33 (9 controversies)
35 (12 controversies)
Number and
8:
5:
8:
11:
description of
London2012 (bid
STAR Alliance, Air
CLRL (promoters’
HS2 Ltd (promoter’s
organizations
company) ODA
Canada, BAA,
planning
agent); Manchester City
interviewed
(promoters’ agent);
HETCo and Balfour
agent);Crossrail,
Council (MCC); Greater
LOCOG (games
Beatty (private design (promoters’ delivery
London Authority
operator); OPLC
and build companies)
agent); Network Rail; (GLA);Transport for
(park operator);
UK Treasury;
London (TfL); Borough
Transport for London
Transport for London
of Camden; Transport for
(TfL); CLM
(TfL);Canary Wharf
Greater Manchester
(programme
(private funder);
(TfGM); Network Rail;
manager); Land
Bechtel, Transcend
UK Treasury;
Lease (private
(consultants)
Manchester Airport;
developer); Network
CH2MHill, AECOM
Rail (owner of UK
(consultants)
rail infrastructure)
Archival data: Total Number of
Total Number of
Total Number of
Total Number of
Total number
Documents: 469
Documents: 114
Documents: 122
Documents: 66
of documents
(except news
Strategy and
Strategy and planning Strategy and planning Strategy and planning
articles)
planning documents: documents: 74
documents: 74
documents:22
organised by
260
Financial reports: 6
Financial reports: 2
Financial reports: 2
categories
Financial reports: 6 Formal
Formal
Formal communication:
Formal
communication: 19
communication: 6
20
communication: 5
Newsletters and PR
Newsletters and PR
Newsletters and PR
Newsletters and PR documents: 8
documents: 23
documents:12
documents: 111
Design documents: 4
Design documents: 9
Design documents: 8
Design documents:
Meeting minutes: 3
Meeting minutes: 8
Meeting minutes: 2
16
Meeting minutes: 71
(§) LOCOG, London Organising Committee of the Olympic and Paralympic Games and International Olympic Committee
(IOC)’s watchdog; BOA - British Olympic Association
(*) Inflation in construction prices was nil between 2008-2013
(¥) £15.9.bn (final prices for a completion date around 2016) is about £11.1bn at 02 prices (assuming 3.5% discount factor)
41
Figure 2- Representative excerpts of the Design Structure and Companion Organizational Matrices for the four Projects
42
Table 2- Excerpt of Protocol to Uncover Interdependences between Strategic Choices and Distributed Ownership of Strategic Choices
43
44
Table 3- Excerpt of Evidence for Source of Front-end Dispute, Outcome, and Mechanisms to Resolve Dispute
45
46
47