The London Orbital Motorway –M25 – is a 117-mile-long highway that encircles most of greater London, England, making it the second largest orbital road in Europe. Skanska, the global construction group, was awarded the $1.6 billion contract to widen sections of the M25 to increase the number of lanes and to refurbish the three-quarter-mile-long Hatfield Road Tunnel ahead of the London Olympics in 2012.
The project had to be completed in time for the games with potential costs and liquidated damages of more than $100 million if deadlines were not met. The contract was fixed cost, lump sum with an immovable end date. If the end date was missed, then the entire project had to demobilize completely for the duration of the Olympics and then remobilize afterwards.
Risk management played a major role in the success of the project, which was completed eight weeks ahead of schedule and has received numerous awards.
High-profile, high-risk project
This was an extremely high-profile project, with numerous stakeholders including U.K. government ministers and agencies, several local authorities, utilities providers, emergency services, and the public. The M25 is a vitally important part of London and the U.K.'s transport infrastructure; any delays or failures would have attracted negative publicity and had major reputational and economic impacts.
The inherently risky nature of the project was compounded by the fact that the contract was signed five weeks later than expected, making an incredibly tight deadline even tighter. The lump sum nature of the contract also transferred considerable risk to Skanska. Traditional methods of generating additional value were not an option, and at the point of tender a significant number of assumptions made were likely to be inaccurate because of the lack of detail available.
Project work took place in three sections simultaneously – two sections of highway widening and one road tunnel overhaul. The road-widening sections were extremely demanding projects, requiring more work to be done simultaneously than had ever been done before on U.K. roads. The sections were to be widened from three lanes to four, with hard shoulders in both directions. This section of the M25 also included a number of road and railway bridges, signage gantries, and communication and traffic monitoring upgrades. The two road sections were 22.5 miles and 16.15 miles in length, and some of the busiest routes in the United Kingdom.
One section also included installation of 81 new signage gantries across the road – one of which was the largest in Europe – installation of more than 230 miles of cable, and removal of 13 existing gantries.
The Hatfield Road Tunnel refurbishment was to bring it in line with current European safety standards. The refurbishment included stripping out redundant equipment, concrete repairs, and structural modifications. The project also included design and installation of new mechanical and electrical equipment, control systems, and lighting. A large shopping mall and entertainment complex built over the top of the tunnel added a further dimension to construction complexity, stakeholder interfaces, and health and safety issues.
Unlike many capital projects that use standard contract elements, the M25 project contract was written from scratch. In a contract of many thousands of pages that included unique additions, this alone produced a whole gamut of potential risks.
Risk management process
Two broad approaches were adopted to help mitigate the high level of risk inherent in the project. The first was to gain an in-depth understanding of obligations to minimize the potential of being in breach of contract. The second was to treat partnering seriously.
To support this strategy it was decided from the outset to utilize Active Risk Manager (ARM) enterprise risk management software across the project, rather than to hold a large number of risk registers in multiple spreadsheets. This approach provided the benefits of better visibility, increased security and auditability, and custom reporting capabilities.
Risks were split into several registers within the one ARM system to enable the different teams to take ownership of their own parts of the process. A core register also was produced for macro risks that affected the whole project such as overall design risks. Risks within the top 10 per section, and any items selected for in-depth monitoring, were substantiated with a current breakdown of impact cost from the commercial department.
Construction in the United Kingdom often has an inherent culture of "fire fighting" to fix problems. In contrast, the M25 project utilized Monte Carlo simulations provided by the ARM software to analyze single risks with super-high impacts and very low probabilities; it enabled the teams to keep sight of the big picture and helped prompt early investment in mitigation.
The level of reporting provided for the stakeholders using ARM was substantial, enabling all parties to have considerable confidence in the current state of play at all times. This in turn led to simple resolutions rather than contentious disputes.
Building a risk management culture
For consistent and effective risk management to take place, it must be embedded in the culture. Oftentimes, even on major projects, the role of Risk Champion is given to a person in the earliest phase of their career, and this person rarely has the ability, experience, or enthusiasm to be fully effective.
In contrast, on the M25 project, the Risk Champion role was allocated to senior managers within each of the sections. Each Risk Champion had considerable experience and respect within Skanska. This sent the strong cultural message that risk management was important and vital to success.
To gain and share knowledge, the project team was encouraged to network through the Institute of Risk Management and via LinkedIn. Networking enabled team members to share questions and experiences with others. The transfer of knowledge was vital not only to this project, but also to the future of U.K. construction itself.
Using the ARM enterprise risk management software and incorporating risk management throughout the culture at Skanska, the team achieved success by planning predictable schedules, collecting accurate progress information, acting on that information, and achieving all key milestones. The overall project was delivered eight weeks ahead of schedule and won numerous awards including the Major Capital Projects Award and the Outstanding Contribution to the Risk Industry at the CIR Global Risk Awards in November 2012.
In addition to completing the planned 38 miles of road widening, the project chalked up the following records and milestones:
- 11 million man hours were worked with numerous safety records set;
- 125 signage gantries were erected, including the largest single-span gantry in Europe, using pioneering methods of offsite manufacturing and deployment;
- 130,000 new shrubs, plants, and trees were planted and 2,800 animals were moved to new habitats;
- new records were set for minimizing waste – the project was a net importer of waste with more than 300,000 tons of construction waste from the Southeast of England being processed into aggregates;
- the project set industry standards for certification and handover timing; and
- the project surpassed all financial targets.
All sections of the M25 project were completed before the agreed-upon deadlines. With this level of all-around success, the M25 project completed by Skanska is full of valuable risk management lessons for project teams on both sides of the pond.
Chris Bell is the chief marketing officer at enterprise risk management (ERM) software provider Active Risk (www.activerisk.com). He provides expertise on technology and business topics such as ERM, project portfolio management, and governance risk and compliance. Bell is a published author of many articles, white papers, and books, including EVM (earned value management) for Dummies, and contributed to Active Risk's ERM Readiness Guide.