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Southern Star Observation Wheel

Summary

There are several projects undertaken in Australia that have highlighted the problems of defective project execution and also misallocation of spending on projects that occurred due to the occurrence of unpredictable risks, resulting in further waste of resources due to their complex and large-scale nature. These factors often disrupt effective project management practices in their project scope and its implementation. Cases presented in this report clearly highlight the real problems of project management in relation to cost and time overruns. The cases described in this report are the Southern Star Observation Wheel, Federation Square, Hindmarsh Soccer Stadium Redevelopment Project, Sydney Opera House and The Millennium Train.

Introduction

Project management and effective project costing are the keys to success of every project. At its most basic level, project success is seen as finishing project deliverables on time, on budget and to a quality grade. It is a process that requires careful planning, organizing, and managing cost and time to meet project goals and objectives. Every project especially in the construction industry has its own unique challenges and the level of difficulty depends on the scope of work which is governed or constrained by time, quality and cost. Each of these criteria is related. The incapability to plan a project effectively and efficiently will somehow delay progress and jeopardize quality of work.

Southern Star Observation Wheel

Australia's Southern Star Observation Wheel was supposed to be one of the Melbourne's latest tourist attractions offering riders a breathtaking 360-degree view of Melbourne from atop of the 120-meter tall wheel. It was expected to draw more than 1.1 million tourists a year, boosting the surrounding Waterfront City.The wheel was scheduled to open to public from last November 2008 but the project was delayed due to setback of some construction parts. This effect is identified as abnormal internal or external events in a project execution. After a two-year delay with $20 million worth of undergoing warranty work, it was opened to the public before Christmas 2008 and the wheel gained positive reviews and worldwide media attention. However on January 2009, disaster occurred as the 150-ton structure which is the third largest observation wheel in the world after the London Eye (135m) and Singapore Flyer (165m) developed 14 cracks in its supports (Southern Star a $100m embarrassment 2009). On several nodes that join the wheel to the centre, cracks up to 60 centimetres were found.Due to the structural failure, Southern Star will not be operated for a year as of January 2009. Its 21 cabins and outer structure (rim and spoke sections) will be taken apart and disassembled. However, the main wheel building will be maintained (Mark Dunn 2009). After the incident, an agreement has been made between the wheel's management with its Japanese manufacturer Sanoyas Hishino Meisho Corporation to repair it off-site. Due to the buckling and cracks in support structures as well, Docklands tourist attraction was shut down a month later, hurting the business of Docklands retail and restaurant owners with the loss of expected flow-on business. From this example, it clearly shows that the project failure and overruns in cost and time is due to several factors such as insufficient project evaluation and defective project execution. Initially, the cracks were blamed on the effects of a heat wave (Melbourne's Southern Star wheel gets heat stroke 2009), but engineers soon discovered that the wheel's design has flaws. According to major news publication, management of the Southern Star Observation Wheel, ING Real Estates ignored a number of defects when the tourist attraction was opened last December, despite two cabins being reported damaged during testing. Secondary stress cracks were discovered as well throughout the 150-tonne structure before opening. However, the warning was not taken seriously. This may due to insignificant definition of project scope and insufficient initial site investigation by ING Real Estates. Besides that, the operation and construction team of Southern Star may be insufficiently trained as structural failures are not taken seriously.Cost and time overruns of the project could be resolved if the start up and commissioning problems are identified. It was obvious that there is insufficient planning of start-up of the project, causing two years delay. Besides, inadequate monitoring and control proved to be another primary factor that leads to the failure of the project. ING Real Estates failed to monitor closely the works of subcontractors. If extensive and detailed planning were undertaken in every stage of the project lifecycle, the project would have a higher chance to succeed. Strict Quality Assurance (QA) procedures should be performed by initiating trend reporting at the commencement of the project so that project could be improved at minimum cost.

Federation Square

Federation Square is the cultural precinct in the city of Melbourne, located at the corner of Flinders and Swanston Streets (Federation Square 2009). Being an iconic project, one of the goals was to redevelop the original site of the old Gas and Fuel Corporation building to offer a wild range of leisure, commercial, cultural and communication facilities for the public. However, the project performance was not satisfactory (Federation Square 2009) as the 'white elephant' project has resulted in cost blow-outs, delays, and political disputes - much of it at the taxpayer's wallet (The battles behind the Square 2003).The Square was opened to public in October 2002 after two years behind schedule, with work still required for completion (Victorian Auditor-General Office 2003). The estimated cost increased to approximately $395 million by June 2002 from an original approximation of $110 million when the Square was envisioned in 1996, and by May 2003 it had risen to $473 million. Any difficulties with the project execution were clear to become very public. Thus, the project sponsor, the Victorian State Government experienced negative reputation. Project execution was difficult as there are frequent changes in supervisory personnel with the withdrawal of the City of Melbourne (the other joint venture partner) from the project and a requirement was proposed to change the condition of a centre from privately to publicly-funded, resulting in client funding restriction (Victorian Auditor-General Office 2003). Changes in supervisory personnel lead to excessive changes to project scope, causing significant overruns in cost and time.Another factor of failure in the project execution is the inadequate and inefficient project management. Public Sector Agencies reported that in June 2002, the Victorian Auditor-General 2002 reported that the cause of cost increases included the implementation of a 'fast track' approach to construction before the detailed design work was completed. Besides that, the adoption of complex and unique architectural design (Victorian Auditor-General Office 2002) also caused failure in project execution. There was no proper risk management although major risk was apparent from the start of the Federation Square project. The allocation of risks is inequitable as reflected in its selection of Project Delivery Systems (PDS).From this example, it is clear that project definition and planning processes must be improved, especially for large-scale, complex 'icon' projects like the Federation Square. Defective project execution may lead to persistent major controversy and it may become sinkhole for taxpayers' wallet. The project could be a success without cost and time overruns if a number of major issues could be analysed. For example, the cost variations related with incomplete documentation, consultants' fees and management delivery expenses risks as these issues could impact on the estimated completion cost and time of the project.

Hindmarsh Soccer Stadium Redevelopment Project

The Hindmarsh Soccer Stadium Redevelopment Project (HSSR) is another important example of the dangers of inadequate project execution of a large public project. Today, Hindmarsh Stadium is a world-class multi-use facility located in Adelaide. Although the Hindmarsh Stadium has hosted a number of international tournaments, including the 2000 Olympic Games, the project failed to achieve the purpose for which it has been undertaken.In February 1004, there was a proposal made by The South Australian Soccer Federation to the South Australian Government to upgrade the Hindmarsh Soccer Stadium to a 22,000 seat facility at an estimated cost of $22.5 million. (Government of South Australia Auditor-General's Department 2001). However, from December 1995, the scope of the project was increased under the funding of the new Minister for Recreation, Sport and Racing, leading the total cost of the redevelopment of the stadium to blow up to $41 million as of June 2001. This is due to changes in supervisory personnel of the project and the excessive changes to the project scope.It was identified that the main reason of the redevelopment of the Hindmarsh Stadium was to secure the staging of preliminary matches in the 2000 Sydney Olympic Games. Although the soccer stadium with seating capacity of 15,000 spectators has hosted seven Olympic soccer matches in September 2000, Hindmarsh Stadium was only utilized for a limited number of National Soccer League (NSL) with poor attendance of less than 3,700 audiences (Government of South Australia Auditor-General's Department 2001). Attendance has never exceeded 5,500 and income generated is less than expected by unsatisfactory ticket sales. The project could be improved if there is a better initial definition of project scope of the redevelopment of the stadium in the first place. The specifications of the project are too loose. The redevelopment objectives were never clear and the decision to proceed was taken entirely by Cabinet on the suggestions of the relevant ministers. It was clear that from Government of South Australia Auditor-General's Department that cost overrun happened due to inaccurate estimation, causing political damages to the government. The evident misuse of taxpayers' funds was also significant and increasingly apparent to the general public.Better project management and project costing practices should have been followed to avoid basic mistakes. Undesirable risk was built into the project from the start with insufficient or deficient project evaluation, but the risks are not being identified and analysed. Selection of appropriate Project Delivery Systems (PDS) could improve the situation as well with suitable contact conditions.

Sydney Opera House

In 1955, international architectural competition to build a new performing art centre in Sydney was launched by the Sydney Symphony Orchestra. Jorn Utzon from Denmark has submitted an entry that did not meet the competition rules. However, despite the fact that judges had rejected Utzon's entry, Eero Saarinen, one of the judges from Michigan in the United States had persuaded others that the Utzon design should win. The winner was announced in January 1957, and construction started in March 1959. Originally, it was predicted that it would take up to four years to build and building will cost $7 million. However, it took 16 years to complete and cost over $100 million (Paul Bartizan 2003).The construction proceeded in slow stages as Utzon objected from the beginning, reason being he had not yet concluded the design for the structure, but the government insisted that construction get carry on. This shows that there is lack of start up and commissioning coordination as there is lack of planning in its preliminary state. When the government changed its requirement from two theatres after construction had started, it caused technical and structural problems with the original design. The lack of input materials also delayed the construction activities. Although Utzon altered the design of the roof vaults so that the roofs were able to be constructed in a pre-cast method to reduce both time and cost overrun, he was criticised for the cost overruns that occurred.A Liberal government led by Robin Askin replaced the Labour government in May 1965, and a new Minister for Public Works was appointed. Due to the changes in supervisory personnel, the Public Works Department would not allow funds for the building of plywood mock-ups of new ceiling construction for the main halls because Utzon was unable to develop his concepts for the interiors. Due to the client funding restrictions, the building works stagnated. A team of Australian architects then took over and after an extensive review of the proposed functions of the building after Utzon resigned on February 1966 as Stage II was nearing completion. It was finally completed in 1973 for over $100 million. The Sydney Opera House was officially opened by Her Majesty Queen Elizabeth II on 20 October 1973.It was clear that one of the factors leading to the cost and time overruns is the insufficient and deficient evaluation of the project scope. There is no proper definition of the scope in its initial state and there are excessive changes to the project scope during its later stage. Cost estimation and time schedules are not accurate as well. There should be an improvement in the procedures for identifying, assessing and managing risk in this big project. Sydney Opera House reflected all the problems of poor project management. Adequate project planning is crucial, particularly in projects where there is significant complexity or technical risk, or when there is a tight schedule for completion like the Sydney Opera House.

The Millennium Train Project

Issues related to the technically complex and innovative public projects are highlighted in The Millennium Train Project. On 8 October 1998, The Millennium Train project was initiated when the New South Wales State Rail Authority signed a contract for the design, construction and in-service management of 81 new suburban double-deck electric passenger trains known as the Millennium Train (Concept drawings for the 4th Generation 'Millennium' train n.d.).The Millennium trains experienced some technical problems and caused problems with the Sydney rail network (CityRail M set 2009). Insufficient power supply to cope with the power demands of such technologically advanced trains is one of the major problems. There were also various incidents relating to the train shutting down because of the power failure. Software bugs also affected to the train's poor reliability. Due to the problems, the Millennium trains services were deactivated from service temporarily in April 2003 while a full audit was carried out. They were then reintroduced into service in June 2003 and have since been operating (Millennium Train 2009).It was reported in NSW Auditor-General's Report: State Rail Authority: The Millennium Train Project that the train is way beyond schedule and considerably over budget. The capital costs had increased by $114 million or 24% to $588 million, and the total project costs had increased by $98.4 million or 17% to $658 million as of June 2003 (The Audit Office of New South Wales 2003).Selection of inappropriate PDS (Project Delivery Systems) such as improper allocation of risk is the major factor contributing to the cost and time overruns. The risks of completing the Millennium Train project were big but without a risk management plan for the Millennium Train, the risk was ignored unreasonably by the client with an engaging delivery schedule by New South Wales State Rail Authority and the Minister for TransportTo ensure a successful project delivery, government contracting authorities must be competent and experienced. Risk management plans must be satisfactory to protect the public interest. Governments should share expertise and experiences to counterbalance the disadvantage of public-sector policies and practices.

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