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Learning to Manage Mega-projects – The Case of BAA andHeathrow Terminal 5

By Dr Tim Brady, Dr Andrew Davies, Professor David Gann and ProfessorHoward Rush

Abstract

This paper examines how BAA (the British Airports Authority) implemented a strategicprogramme of capability building to improve the management of projects at Heathrow Airport,ranging from routine capital projects to a one-off mega-project – Terminal 5 (T5). Itconcentrates on the learning gained from previous projects, individuals and organisations thatcontributed to the innovative approach used to manage T5 – Europe’s largest and mostcomplex project. The project is an example of a ‘mega-project’ because of its scale,

complexity and high cost, and its potential to transform the project management practices ofthe UK construction industry. The paper builds on and extends the scope of previousresearch based on studies of capital goods suppliers, which showed how firms could buildnew project capabilities over time as they learn from their previous project experiences.Specifically, it extends the earlier PCB (project capability building) model beyond the singlesupplier firm and its repeated execution of similar projects to include the actions of the majorclient and its interaction with the network of firms that come together to deliver repetitivecapital projects and unique mega-projects.






Introduction

This paper examines how, over the past decade, BAA (the British Airports Authority) – a

major client and project management organisation – implemented a strategic programme ofcapability building to improve the management of projects at Heathrow Airport. These rangefrom routine capital projects to a one-off ‘mega-project’ – Terminal 5 (T5). The paperconcentrates on the learning gained from previous projects, individuals and organisations thatcontributed to the innovative approach used to manage the T5 project. The T5 project uses‘integrated team working’ to ensure that safety, time, budget and quality constraints are met. Ithas already reached 50% completion (as of March, 2005), on time, within budget and with ahigh safety record. BAA has developed an innovative form of cost-reimbursable contract – the‘T5 Agreement’ – under which BAA holds all the risks associated with the project, rather thantransferring them to external suppliers, and guarantees a level of profit for suppliers.

The T5 project is Europe’s largest and most complex project to date. It is an example of amega-project (Flyvbjerg et al., 2003

i) because of its scale, complexity and high cost and its

potential to transform the project management practices of the UK construction industry. It isbroken down into 16 major projects and 147 sub-projects. At any one time the projectemploys up to 6000 workers, and as many as 60,000 people will have been involved in theproject over its lifetime. The goal of the project is to increase the airport’s current capacity of

67 million passengers a year to 95 million.

Conceptual Background

This paper builds on and extends the scope of previous research based on studies of capitalgoods suppliers, which showed how firms could build new project capabilities over time asthey learn from their previous project experiences (Davies and Brady, 2000

ii; Brady and

Davies, 2004iii).

Previous research has emphasised the difficulties that firms face when they attempt tocapture the learning gained through projects and transfer it to their wider organisations (e.g.Middleton, 1967

iv; DeFillippi, 2002; Keegan and Turner, 2001

v; Grabher, 2003

vi). There is a

risk that the knowledge and experience gained is lost when the project finishes, the teamdissolves, and its members move on to other projects or are reabsorbed into the organisation.Unless lessons learned are communicated to subsequent projects, there is also a risk that thesame mistakes are repeated. It has been suggested that, compared with the systematiclearning that takes place in high-volume functional or business process organisations, theone-off and non-recurring nature of project activities provides little scope for routinised learning (Winch, 1997

vii; Hobday, 2000

viii) or systematic repetition (Gann and Salter, 1998

ix

and 2000x). A further challenge is that in project-based firms there is often a disjuncture

between project-based learning and company-wide business processes (Gann and Salter,

1998xi).

The problem with this perspective on project-based learning is that it equates project-basedactivities with non-routine behaviour. Challenging this perspective on project-based learning,Davies and Brady (2000

xii) have argued that performance in project-based organisations can

be improved through exploitative learning because firms undertake ‘similar’ categories ofprojects which involve repeatable and predictable patterns of activity. Projects are similarwhen the same capabilities and routines are required for their repeated execution. Theperception that projects perform only unique and non-routine tasks often conceals manypotentially transferable lessons. Knowledge creation and learning can occur at severaldifferent levels (such as the individual, project, firm or industry levels) and often as anunintended by-product of the project activity (DeFillippi and Arthur, 2002

xiii).

Despite the difficulties of project-based learning, several studies have shown that firms doachieve organisational learning through projects (Prencipe and Tell, 2001

xiv). However, such






research has tended to focus on snapshots of learning practices within a single project orlearning between projects, with few examples of ‘enduring engagement in learning andprofound large-scale transformation’, as firms succeed over time in generating and diffusing

the knowledge gained throughout their organisations (Ayas and Zeniuk, 2001xv

).

Brady and Davies (2004xvi

) propose a model of project capability building (PCB) for project-based firms consisting of two interacting and co-evolving levels of learning:

• the first level involves a series of bottom-up ‘project-led’ phases of learning that occurwhen a firm moves into a new technology or market base and experimentation andexploration with new approaches takes place to develop routines and processesrequired to execute new, radically different, types of project

• the second level involves ‘business-led’ learning (within which the project-led learningis embedded) that occurs when top-down strategic decisions are made to create andexploit the company-wide resources and capabilities required to perform increasinglypredictable and routine project activities

On a spectrum of projects ranging from ‘unique’ to ‘repetitive’ (Lundin and Söderholm,1995

xvii; Davies and Hobday, 2005

xviii), the PCB model was applied to a category of projects

that evolved from a first project of its kind (starting out with unique characteristics) for a singlecustomer to a full line of repetitive (increasingly standardised) projects in a growing market.

This paper extends the PCB model beyond the single supplier firm by focusing on a clientorganisation which delivers both repetitive capital projects and unique mega-projects. Itexamines BAA’s deliberate strategic efforts to improve the delivery of routine capital projectsand a one-off mega-project – Heathrow’s T5 project. To achieve its objectives, BAAimplemented a far-reaching strategy to change not just its own capabilities but those of itsmain suppliers as well. Partly because the planning process for T5 was so protracted, BAAhad the opportunity to learn from ongoing projects both at Heathrow and elsewhere. This wasan important element in the creation of the T5 Agreement, which was developed to provide anenvironment in which it would be possible to deliver the T5 project.

The Research

This paper is based on research undertaken in two distinct phases. The first phase took placein 1998–1999, when a study of BAA was carried out, involving two capital projects beingundertaken at Heathrow Airport: a new baggage handling system at Terminal 4 and theInternational Arrivals Concourse at Terminal 1. The two case studies were based on around20 in-depth interviews (approximately 2 hours per interview) conducted with managers at multiple levels (project directors and project managers) in BAA and its main suppliers.

xix

These project case studies are used to provide an analysis and benchmark of BAA’s attempts

between 1998 and 1999 to improve the efficiency of its project processes for repetitive capitalprojects. This was a critical juncture in BAA’s efforts to use its previous project experiences tohelp shape its approach to the setup of the T5 project.

The second phase is based on a current and ongoing study of a one-off unique project – theT5 project (2005–2006).

xxThe research focuses on how BAA is capturing the learning gained

from previous projects and from other contexts (e.g. BAA, other projects, firms, consultantsand industries such as the car industry) that have been important to the creation of BAA’snew project management approach for T5. The research includes an analysis of importantprevious project experiences leading to the creation of the approach used to manage the T5project. A series of interviews has been carried out with past and current senior managersinvolved in the planning and execution of the T5 project. However, as this is still work inprogress, confidentiality agreements mean that for the purposes of this paper we will be using

secondary data in relation to the T5 project. BAA has used its previous project experiencesand processes to develop a new organisational approach to project management, which has






been developed specifically to deal with the unique challenges of T5 (Kimberley and Jordan,2005).

xxi

Learning to Deliver T5 – Empirical Findings

Background

BAA is the world’s largest commercial operator of airports, responsible for seven UK airportsand managing a range of activities in various other airports around the world. It undertakeshundreds of capital projects as part of its ongoing operations, as well one-off mega-projects,such as the design and construction of Stansted Airport and Heathrow’s T5. In 1994 BAA’scapital projects programme was running at £500 million but it was also planning a series ofmajor projects, including the development of T5 (the largest project BAA has undertaken).This ambitious capital projects programme had to be undertaken against a background ofsteadily rising costs of building, while the charges they could levy on their building occupants

were rising at a lower rate since they were subject to regulation.

The primary driver behind improving its project processes was for BAA to find a way ofreducing the costs of providing facilities in their airports. But there was another strategicobjective, spearheaded by BAA’s then chairman and CEO, Sir John Egan: to make BAA thebest client in the country for construction projects and to create a team and all the planningand preparation for T5. To achieve this objective, BAA set about implementing ways ofimproving the efficiency of its ongoing capital projects that would enable it to show continuousimprovement in performance and developing the project capabilities required to manage themassive T5 project. Senior management embarked on a strategy to turn BAA into the mostcapable and sophisticated project management client in the UK. They brought in experiencedpeople from outside BAA to spearhead this strategy – people who had worked on massiveprojects for demanding and sophisticated clients in other sectors.

Towards developing repeatability and predictability in construction

Sir John Egan was instrumental in transforming BAA’s project performance. Based on hisprevious experience in the car industry, Egan recognised that BAA could make radicalimprovements to the way it traditionally delivered projects. At this time there was a hugeincentive to achieve value for money from BAA’s projects by improving cost efficiency, drivingout waste and developing a more efficient process to cope with the long gestation time forprocuring projects. Egan wanted to emulate the continuous improvements in performanceachieved in car manufacturing, by creating an orderly, predictable and replicable approach toproject delivery.

In October 1994 a group technical director, with experience of implementing major projectsaround the world, was hired to oversee this process. He was tasked with examining bestpractice in construction around the world and bringing back the knowledge to BAA. SeniorBAA managers visited the Lean Construction Institute in Stanford, California, and spent timewith leading clients from other sectors such as Tesco and McDonalds from retailing, andNissan, Rover and Unipart from the car industry.

This new thinking was embodied in a government-sponsored report called Rethinking Construction (1998) written by Sir John Egan, which became a manifesto for thetransformation of the construction industry. The report argued that the client could play a rolein this transformation by abandoning competitive tendering and embracing long-termpartnerships with suppliers, based on clear measures of performance. Partnerships wouldprovide a continuous stream of work over an extended period and the stable environment that

contractors needed to achieve systematic improvements in the quality and efficiency of theirprocesses. The report recommended that firms focus more strongly on customer needs,integrating processes and teams, and on quality rather than cost. Under Egan’s guidance,






BAA’s senior managers began applying the principles laid out in the Egan Report to improveBAA’s project processes and relationships with suppliers, and by the late 1990s BAA hadmade significant improvements to its project execution capabilities, reflected in a greater

degree of predictability in terms of time, cost and quality.

BAA’s first phase of moving towards being able to deliver T5 centred around trying to getmore predictability in terms of time and cost in its projects. There were four key strands tothis:

• developing new and improved project processes• managing the supply chain

• standardisation and prefabrication

• integrated team working

Project process improvement

BAA’s desire to improve its project processes was led by its CIPP (continuous improvementof the project process) programme – to develop a new process for organising projects in itscapital investment programme – which was introduced in 1995. It aimed to establish aconsistent best practice process applied to all projects with a value of over £250,000. Theprocess was designed around a typical £15 million building project but it was expected that itcould be used regardless of the size of the project right across BAA’s business. A taskforcewas set up, with project representatives from all parts of the group, with the aim of capturingall the best parts of existing practice and creating a single system. More than 300 peoplewere consulted over a period of 18 months, both from within BAA and from other companiesand industries. The issuing of the CIPP handbook was accompanied by a long-term trainingprogramme to provide a firm basis of understanding for implementation.

The CIPP handbook laid down a set of key policies or principles – safe projects, a consistentprocess, design standards, standard components, framework agreements (see below),concurrent engineering and pre-planning – which all capital projects had to adhere to. Itprovided a template for the organisation of BAA projects and outlined a seven-stage processcovering the project life cycle, from inception through to operation and maintenance. Eachstage included a series of checkpoints which had to be completed and a series of evaluationgateways, where the project was assessed by an evaluation team before going to approvalgateways for sign-off from local and/or group capital project committees. To successfully passthrough a gateway, eight key sub-processes needed to be managed and the outputs fromeach co-ordinated: development management, evaluation and approval, design management,cost management, procurement management, health and safety, implementation and control,and commission and handover. BAA developed a process map showing each stage along thetop and the sub-processes within each stage, outputs and gateways.

The introduction of CIPP was not without teething problems. The Terminal 4 baggagehandling project examined by two of the authors in 1998 was among the first to apply theCIPP, and while the introduction of the process did not prove problematic in itself, a numberof interviewees commented on the procedures it laid down and considered them toomechanistic and rigid for a large capital project. CIPP was incompatible with the processes ofthe main contractors and the airlines who would be the end users of the baggage handlingsystems. For example, the CIPP manual stated that costs of the project should be calculatedto within 10% of their expected final costs by D-day. However, British Airways’ internalprocedures required that capital costs (when over a certain amount) had to be calculated towithin 5% before they could be approved by its board. Difficulties also arose in calculatingcosts, as a consequence of the procedures not making provision for a single reporting systemfor all contractors on the project. This loophole enabled contractors to exploit the differences

and inflate and hide costings to an extent.






While the CIPP may have been appropriate for standard construction projects, it was thoughtby several interviewees that a more flexible process was needed – for example the ‘fixed instone’ dates for the various gateways put undue pressure on the project team to deliver to a

particular date, whether they were ready or not. Risk management was not adequately dealtwith in CIPP, with the result that different processes for risk management were operated bythe three project managers associated with the project.

The project also faced a number of difficulties which hampered effective team building. First,there were three different project managers in the space of four years, each coming fromdifferent companies with different management styles and approaches. Second, there werespace constraints which prevented co-location of all the contractors at the beginning of theproject. Third, new project members (such as contractors with maintenance expertise) werebrought into the project late in the day and were not fully integrated into the team, as alsohappened when new project managers were brought in.

By the end of the case study in 1999 the authors of the research were informed by BAA that

several changes had been made to the process for large capital projects, which wouldintroduce a higher degree of flexibility during the early stages of design to prevent prematuredesign freezes in the light of uncertainty about requirements.

Managing the supply chain: the Framework Programme

At the same time as it was developing the CIPP process, BAA started the development ofwhat it called the Framework Programme to work with a number of preferred suppliers on anongoing basis. Up to that point, every time BAA embarked on a capital project it went totender and through a whole process of qualifying, with the result that everyone had to go upthe learning curve every time. The five-year framework agreement provided suppliers with anopportunity to learn and to make continuous improvements year by year that would benefit

both BAA and the supplier.

This was first attempted in 1993–1994 and subsequently became widely used. Frameworkagreements were not restricted to first-tier suppliers – they encompassed a wide range ofservices, including specialist services, consultancy services (design and engineering),construction services, etc. Each agreement was structured slightly differently, depending onthe nature of the service, but the concept was applied consistently. Standardisation ofcomponents helps to reduce unit costs, but the framework agreements also incentivise thesuppliers to improve the products and performance. For example, in the case of lifts andescalators, the installation contractors went to BAA and would analyse the process, sayingthat if they did it like this they could get the lift installed quicker and this would save time andmoney.

In 1998 BAA still had as many as 23,000 suppliers working throughout the company, andeach of its seven UK airports had developed its own unique approach to supply chainmanagement. BAA recruited Tony Douglas as Group Supply Chain Director and tasked himwith profiling and reducing BAA’s number of suppliers to a much more manageable level(Douglas, 2002

xxii). He was able to draw upon his own experience in the car industry and

many studies of electronics, aerospace and other industries that had already developedsophisticated approaches to supply chain management. Strong internal capability had to bedeveloped so that BAA could better manage its external suppliers.

By 2002 BAA had developed a second generation of framework agreements to achieve moreaccurate project costs, to implement best practice and to work with suppliers in longer-termpartnerships. The key difference between first- and second-generation frameworkagreements is that the latter were devised to source the best-in-class capability and were

valid for a period of 10 years rather than five. BAA developed strict criteria to select the bestpartner for each project. All aspects of its business are examined, including all its systems






and processes covering quality, people, its supply chain, finance, R&D, and businessdevelopment.

Under the second-generation agreements, suppliers now work with BAA in integrated projectteams to cultivate close co-operation, to leverage the right expertise needed for specificprojects and to reduce costs. BAA injected commercial rigour into its second-generationframework agreements by creating an annual review to measure the supplier’s performanceagainst projects that it delivers. If the supplier fails to perform, as measured against an agreedset of performance criteria, BAA sets an improvement plan. A supplier will remain in BAA’sfamily of framework suppliers if it achieves the targets set in the improvement plan. If it fails, itwill be deselected and replaced by another firm from the list of framework suppliers.

Standardisation and prefabrication

Several projects carried out at BAA prior to the T5 project were experiments in predictabilityand repeatability. CIPP was applied to four different clusters of BAA products: car parks,pavements, baggage handling and buildings. For example, an early attempt to createpredictability in BAA’s project delivery was the design of standardised BAA office products.Standardised design was first developed for three offices at BAA’s World Business Centres inHeathrow, which were built in succession. Previously each office would have been dealt withas a separate project, starting from scratch each time. Under the new approach BAAdesigned and built the first one and, rather than starting from scratch again with a new design,decided to replicate the first on a site next door but with a target of reducing the cost by 10%and the time by 15%. BAA then built a third to the same design with similar targets for timeand cost reduction over the second one.

The design was then used at Gatwick Airport and reused at lower cost for Stansted Airport’ssecond satellite office buildings. For the Stansted project 90% of the team from Gatwick was

retained. The frame that had been used for the Gatwick project had had some problemsrelated to component fit and watertightness, but these were overcome at Stansted, where theframe utilised pre-cast columns with cast-in slab/column connectors (patented by LaingO’Rourke plc). Prefabrication of the external stairs in entire floor height modules was anotherfeature. BAA reaped significant learning-curve cost advantages from this approach to productstandardisation. The above-ground construction time was reduced by five weeks, savingaround £250,000.

xxiii

Involvement in framework agreements on a long-term basis has enabled other suppliers todevelop repeatable processes and improvements in productivity over time, as lessons havebeen learned and shared. For example, AMEC – which has framework agreements coveringbuilding services, airfield pavements, aircraft stand services and general consultancy tosupport the development and upgrade of airport infrastructure across the UK – claims that in

excess of 100 projects have been delivered on time with savings of 30% achieved overall

xxiv

.

Integrated team working

One of the central features of the BAA approach is integrated team working. The HeathrowExpress tunnel collapse in 1994 played a key role in the development of this from ofpartnering. BAA had contracted Balfour Beatty as the main contractor for the construction ofa fast passenger link between Heathrow and London, the Heathrow Express. Balfour Beattyhad been chosen because they had just completed the Channel Tunnel and a crucialengineering concern was the tunnels needed within the airport.

The collapse of the Heathrow Express tunnel put the entire £440 million project in jeopardy.The normal construction industry response would have been to go down the litigation route

and place the blame on the main contractor, Balfour Beatty. Instead BAA chose to worktogether with Balfour Beatty and the other main parties as partners to resolve the situation. A






4.

new contract was drawn up between BAA and Balfour Beatty, which established whatbecame known as ‘the single team’, in which all the parties worked as one team instead of acollection of separate project groups. This integrated team, which also included Mott

MacDonald, succeeded in delivering the new project in June 1998 – only six months behindthe original schedule.

BAA appointed a new Construction Director for the recovery project, who demonstrated andpromoted a culture of co-operation instead of rivalry. He employed:

‘a team of specialist change facilitators and behavioural coaches to work with theteam on changing the tradition of adversarial working in order to make the singleteam “statement of intent” a reality. This was demonstrated in the everyday behaviourof the construction team.’

xxv

The success of the Heathrow Express recovery project showed how partnering and trust canbe made to work.

xxvi

At one point Heathrow Express was 24 months behind programme, but eventually becameoperational only nine months after the original projected date. It was a huge success storywithin BAA. Once finished, the Construction Director recruited to work for BAA on thatHeathrow Express recovery project was transferred to the central BAA capital projects teamas Group Construction Director. Much of the learning was channelled into developing theCIPP and applying the integrated team working concept to different clusters: the pavementteam (for runways, taxiways, links and resurfacing); the baggage handling team (clusters ofsuppliers); and a cluster of suppliers for buildings (shell and core, fit-out, etc.). Teamworkwas mentioned as a major success factor in the Terminal 1 International Arrivals concourserefurbishment project, which we studied in 1999. There it was claimed that teamwork hadbeen excellent, both at the Heathrow Airport Limited level and through to constructionactivities where the co-location of the team provided huge benefits. It was also noted that the

team members ‘left their companies at the door’ when they came to work on the project.

Preparing for T5: creating the T5 approach

The steps that BAA had taken up to this point – the development of the CIPP, the first- andsecond-generation framework agreements, and integrated team working – had improvedproject predictability and repeatability. However, a more radical approach was needed todeliver T5, where there was a much higher level of uncertainty involved. T5 had to beconstructed while causing minimal disruption to the operations of Heathrow Airport.

Between 2000 and 2002 BAA carried out an in-depth analysis of every major UKconstruction project in the last 10 years (valued at over £1 billion) and every internationalairport that had been opened over the last 15 years. This analysis showed that:

• no single UK construction project of that size had been delivered on time, onbudget, safely and to the quality standards that had originally been determined, and

• that not a single international airport had worked properly on day one.

Based on this analysis BAA predicted that T5 would be 18 to 24 months late, over budget bya £1 billion, and six people would be killed during its construction.

xxviiThe airport case

studies showed that it would take three years to build up to moving 30 million passengers ayear through the new terminal. BAA expects T5 to do that in its first year of operation, sincethe passengers are already there in Terminals 1 and Following the public inquiry, severe restrictions were placed on traffic volumes and routes

outside the site and there was only one viable entrance to the site. According to TonyDouglas, Managing Director of the T5 project:






‘… if we were to build it conventionally, not only would we require about 7000additional workers on site, but there would be a 40ft vehicle load passing through thegate every 40 seconds or so for the next four years. …. The only possible solution is

to develop standard solutions that include pre-assembled products, manufactured offsite, then assembling at the airport with the minimum of human intervention. Thisalso brings environmental benefits by reducing the impact of thousands ofconstruction workers on local infrastructures and, as everybody recognises, safetyperformance is infinitely better in factory conditions than on a construction site.’

xxviii

There was a recognition in BAA that the only way to deliver T5 was to change ‘the rules ofthe game’ by creating a set of behaviours that allow people to be constructive and come upwith innovative solutions to problems. The success of the Heathrow Express recovery projectdemonstrated that such an approach was viable. The T5 approach combines two mainprinciples: the client always bears the risk; and partners are worth more than suppliers.These principles are embodied in the T5 Agreement – a new form of contract developed byBAA which guarantees suppliers’ profits while the client retains the risk.

In practice, the T5 Agreement is a Delivery Team Handbook. It provides an appropriateenvironment for integrated team working. Rather than transfer risks to its suppliers, BAAassumes responsibility for all project risks all the time and works with its integrated teammembers to solve problems encountered during the project. The agreement includes anincentive payment if a supplier achieves exceptional performance. This is designed to enablesuppliers to work effectively as a part of an integrated team and focus on meeting theproject’s objectives not only in relation to the traditional time, budget and quality measures,but also in relation to safety and environmental targets.

BAA decided to adopt this approach since traditional liabilities – such as negligence,defective workmanship and the like – are extremely difficult to prove in an integrated teamenvironment. BAA recognised that if suppliers were made jointly responsible for running

significantly over budget then this would probably put them out of business. It decided toreimburse the costs of delivery and to reward exceptional performance and penalise inferiorperformance only in terms of profitability.

As Mike Riley, BAA Commercial Director, explained:

‘By doing that you take away negativity, allow space for innovation and create anyopportunity for people to perform at levels they haven’t been allowed to before.’

xxix

BAA’s approach to the delivery of T5 has resulted in a number of innovations and examplesof best practice in a number of areas (NAO, 2005).

xxx

• The contract form – the T5 Agreement is a cost-reimbursable contract, in contrastto the fixed-price contracts generally seen on large projects.

• Risk management – the client takes on the risk so that project managementbecomes a tool of risk management rather than vice versa.

• Sponsorship and leadership – the T5 project managing director is an executivemain board member and receives regular and overt support from other boardmembers.

• Logistics management – the constraints on access to the site have led to:o a focus on pre-assembly and off-site fabrication and testing wherever

possibleo the creation of two consolidation centres: the Colnbrook Logistics Centre –

consisting of a railhead for the supply of all bulk materials, a factory for theprefabrication and assembly of rebar, and a laydown area – and the

Heathrow South Logistics Centre for the preassembly of pile cages and lateras an area for assembly of materials into work packages ready to deliver onsite






o the use of ‘demand fulfilment software’ designed to pull materials on site ona just-in-time basis.

• Insurance – BAA took out insurance for the whole project, lowering costs and

avoiding unnecessary duplication.• The approval process – a five-stage approval process based on the changing level

of risk, which enables the project to move forward to the next stage withoutcompleting production design.

• Teamwork – the T5 Agreement incorporates integrated teams working to a commonset of objectives and based on a capability approach, so that the team for each sub-project is assembled with the best possible expertise within the partner firms.

Due to open on 30 March 2008, T5 has gone past its halfway stage on budget and withinschedule. If it is successfully delivered it will be a major breakthrough in project managementas it would avoid the trend of all similar mega-projects being delivered late, over budget andoften below quality expectations.

Discussion

This paper has shown how BAA realised over time that a whole new approach to projectmanagement and delivery had to be adopted in order to deliver T5 on time and withinbudget. Partly facilitated by the long and drawn-out public inquiry into T5, BAA were able toundergo a strategic programme of learning and development to build up the necessarycapability. BAA attempted to learn internally – from within the group and from previous andongoing capital projects – and externally – from other airport projects worldwide, projects inother sectors and leading-edge practices in supply chain management and projectmanagement. BAA built up internal capability through recruitment of world-leadingpractitioners and external capability by the development of framework agreements tied toregular benchmarking to try to ensure continuous improvements in delivery performance. It

recognised that a major source of failure in the past was related to trying to shift risk onto thesuppliers, and it adopted a new approach whereby it assumed responsibility for the risk.

The knowledge that BAA used to develop, implement and learn the T5 approach can bedivided into four types.

• Tacit knowledge – the experience and knowledge held by individuals or shared byteams of people.

• Codified knowledge – the explicit knowledge converted into project guides, tools,processes, supply chain management, technological innovations and standardisedcomponents.

• Individual learning – acquired when a person gains experience and knowledge byworking on a project.

• Organisational learning – the knowledge gained when groups of individuals workingin a team use their collective knowledge and experience to perform project activities.

Our research examined two different levels of learning within BAA: project-led and business-led (or strategic) learning. At the project level, we identified how the T5 approach wasdeveloped by drawing upon previous project experiences and implemented in practice duringthe T5 project. The analysis of business-led learning in BAA focuses on the strategic changesin organisational structures, capabilities and business processes that BAA put in place todevelop and support the successful execution of its routine capital projects and the T5 mega-project.

Several different periods of knowledge capture and transfer have contributed to BAA’s effortsto improve the performance of its project processes. Overlapping periods of learning, driven

by the efforts of either the BAA group or the specific interests of airport projects, include:






• BAA Group-led development of the CIPP process and framework agreements (1995– 2000)

• Heathrow Express project – the experience of the project fed into the CIPP process

and through tacit knowledge into the preparation for T5 (1994–1998)• BAA Group-led learning to prepare for the T5 project (1995–2002)

• T5 project implementation – learning within the T5 project phases (2002–2006).

Figure 1 shows a modified version of the PCB model to illustrate the levels of learning thatBAA has undertaken in the creation of its approach to project delivery in the lead-up to T5.

Phase 1: Vanguard project(s): Heathrow Express recovery project

Phase 3: Project to BAA corporate organisation

BAA corporate organisation

CIPP, framework agreements, T5 Agreement

Phase 2: Project-to-project (e.g. product offices)Project-led

learning

Business-ledlearning

Figure 1: BAA as a project capability builder. Building project capabilities

The research findings suggest that the PCB model put forward by Brady and Davies (2004xxxi

)can be usefully extended to the case of major clients who are involved in a continuous seriesof major capital projects. In particular, the findings confirm that capability building involves aninterplay between the two levels of learning – project-led learning and business-led learning.The emphasis of this study has been on the role of the business–led learning. As we haveseen, BAA made deliberate strategic efforts to create a standardised and predictableapproach to the delivery of all types of project – repetitive and unique. But this business-led

learning has been informed by the bottom-up learning BAA gained on key projects – inparticular the harnessing of the lessons from the Heathrow Express recovery project and theexperimentation and exploration that went on in relation to the development of standardproducts, prefabrication and off-site assembly.

This finding is consistent with the process of a ‘generative dance’ between the epistemologiesof possession and practice (Cook and Brown, 2000

xxxii), which suggests that new knowledge

is created by the interaction between the world of codified knowledge and the world ofpractice. This is a promising area of future research, which could improve our understandingof how knowledge is developed and implemented in a project-based environment.

BAA has used various projects to explore a variety of concepts along the way, which havecontributed to the overall T5 approach. Product standardisation and the use of off-sitefabrication and pre-assembly in relation to offices, car parks, etc. was used on successiveprojects at Heathrow, Gatwick and Stansted airports. The idea of a ‘no-blame culture’ and






integrated team working was implemented and refined during the Heathrow Express recoveryproject. This project-led learning has been complemented with the Central Projects Groupefforts to create a standardised approach to project delivery, which draws upon an

understanding of approaches used in other industries, and the benchmarking of other airportprojects and mega-projects. During the long lead-up to the implementation of the T5 project,the interaction of these two levels of learning contributed to creation of the key elements ofthe innovative T5 approach.

Conclusions

This paper extended the PCB model by applying it to a new context: a large clientorganisation (rather than a contractor) that is learning over time from various projectexperiences and developing the capability to deliver all types of project (unique andrepetitive). Furthermore, whereas past research has tended to focus on the project-ledlearning, this paper presented an example where business-led learning (i.e. strategic, top-down learning) is more prominent.

It is important to emphasise that this paper is based on work in progress. Our future work willbe focusing on how lessons learned from T5 will be used in the delivery of subsequent BAAprojects, ranging from the massive Heathrow East project (which plans to replace the agingTerminals 1 and 2) to more routine and repetitive projects to update and maintain existingairport infrastructure. Can the T5 approach work on all types of project or is it only suitable forlarge, risky and uncertain mega-projects? Indeed, is it necessary to adopt the T5 approach forsmaller, more predictable, projects? Beyond BAA and airport infrastructure, what can the UKconstruction industry learn from T5 about delivering projects? Can the T5 approach be usedto avoid major project failures such as the Wembley Stadium project, which, like many mega-projects, is very late, hugely over budget and has been subject to a series of problems duringits execution?

Dr Tim Brady and Professor Howard Rush are at the Centre for Research on Innovation Management, University of Brighton, Sussex. Dr Andrew Davies and Professor David Gann are at the Innovation Studies Centre, Tanaka Business School, Imperial College, London

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iv

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xviBrady, T. and Davies, A. (2004), ‘Building project capabilities: from exploratory toexploitative learning’, Organization Studies, 26(9), 1601–1621.

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xixThis research was carried out by two of the authors, Davies and Rush, in the Economicand Social Research Council’s CoPS (Complex Project Systems) Innovation Centreprogramme of research at Sussex and Brighton Universities.

xxThis part of the research was conducted by three of the authors, Davies and Gann(sponsored by the Economic and Social Research Council’s Built Environment InnovationCentre at Imperial College) and Brady (sponsored by the Economic and Social ResearchCouncil’s CoPS (Complex Project Systems) Innovation Centre at Sussex and BrightonUniversities).

xxiKimberley, A. and Jordan, C. (2005), ‘Terminal 5: history in the making’, Ingenia , 22, 28– 29.

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xxiiiSource: ‘BAA Lynton roll out Mark 3’, May 2000, www.m4i.org.uk.

xxivSource: ‘Upgrading airports in partnership with BAA’, www.amec.com.

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xxviiNational Audit Office (2005), ‘Case studies: improving public services through better

construction’, 15 March.xxviii

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xxixQuoted in Mylius, A. (2005), ‘A game of two halves’, Supply Management , 6 October.xxx

National Audit Office (2005), ‘Case studies: improving public services through betterconstruction’, 15 March.

xxxiBrady, T. and Davies, A. (2004), ‘Building project capabilities: from exploratory toexploitative learning’, Organization Studies, 26(9), 1601–1621.

xxxiiCook, S. D. N. and Brown, J. S. (1999), ‘Bridging epistemologies: the generative

dance between organizational knowledge and organizational knowing’, Organization Science , 10(4), 381–400.

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