Short summary - Megaprojects and Risk: An Anatomy of Ambition
In the book Megaprojects and Risks. The Anatomy of Ambition” Bent Flivbjorg, Niels Bruzelius and Werner Rotengatter look into the causes of one of the most costly paradoxes of our time — the paradox of megaprojects.
Giant projects worth many billions of dollars that can affect the economies of entire countries (including the largest ones, such as the United States or China), often not only do not bring the expected benefits, but also plunge into huge losses.
Why, despite regular failures, more and more mega-projects are being started around the world? How to increase the likelihood that a megaproject will work for the benefit of society, and not to its detriment?
The authors show in detail the underside of megaprojects: where exactly mistakes are most often made and why, if precautions are not taken, ambitious plans are almost doomed to failure. What is especially important: we can talk not only about financial mistakes (for which taxpayers most often pay), but also about the deterioration of the environmental situation in the whole region, and about a direct threat to people's safety!
However, “Megaprojects and Risks” is by no means about a dead end into which humanity has unknowingly entered. On the contrary: the further we develop as a single global society, the more we need megaprojects. They will inevitably affect our lives, and it is better to prepare for this future in advance.
So the ability to calculate, analyze and, most importantly, control megaprojects is becoming more useful and relevant every day! And this can be learned by reading a book or a summary.
1. Paradox of megaprojects
1.1. Infrastructure projects worth billions of dollars are now not uncommon: they are in Europe and Asia, in North and South America. The need for megaprojects follows from the general logic of the development of modern society. We strive for independence from space, to move ourselves and move money, energy, goods, information as quickly and easily as possible. To accomplish this, it is necessary to improve and expand the transport infrastructure; and infrastructure megaprojects receive support from governments and banks.
1.2. However, most megaprojects are poorly documented and calculated.
This applies to:
economic indicators: how much money will be needed to implement the project, how much money it will bring after launch and why. Underestimation of expenditures and overestimation of income is a serious danger. The scale of the current mega-projects is such that failure could negatively affect entire countries - including giant countries like China.
impact on nature: often it is not evaluated at all or is categorically underestimated (and the advertised positive impact turns out to be insignificant). Environmental problems can arise both during construction and during further operation - which harms both the environment and the people living in it, and, of course, the megaprojects themselves;
how megaprojects are treated by people whose interests are directly affected. Civil society is not allowed to discuss or is limited in its ability to influence megaprojects.
1.3. It cannot be said that the analysis of economic indicators or the impact on nature is not carried out at all. The problem is different. Various groups of "analysts" are actually trying to win the opinion of governments, banks, firms, etc. (those on whom funding depends) to their side and discredit other similar groups. As a result, unbiased analysis is not carried out in the development of megaprojects.
1.4. The paradox of megaprojects is that, although they regularly fail or hardly pay for themselves, there are more and more of them.
1.5. The failure of megaprojects is connected, in particular, with the fact that risks are not taken into account in their development. We are now at the stage of a "risk society" where long-term planning is needed in the face of uncertainty. It is necessary to recognize the inevitability of risks and manage them. This is impossible without involving in the work on megaprojects - at all stages - a larger circle of people (taking into account their experience and competence) than now. We also need institutional mechanisms to ensure accountability in general and for risk in particular.
2. Don't trust estimates!
2.1. The risk of serious cost overruns (by 50—100% or more) in megaprojects is always significant, and it is impossible to completely eliminate this risk. Excess costs are due to underestimation of:
delays - their time and cost;
unforeseen expenses (and they will always be);
changes in design solutions, technical requirements and safety requirements (not everything is obvious at the beginning of the project);
changes in exchange rates and prices;
cost of alienation;
In addition, a number of mega-projects use previously untested innovations - which also increases the risks.
2.2. Here is the data on several megaprojects.
Channel Tunnel - 140% over budget. Transport communication "Great Belt" - by 54%.
—resund bridge-tunnel between Sweden and Denmark - first by 68%, then by another 26%.
This is a pretty typical picture. Studies of megaprojects show that severe cost overruns are far more common than accurate estimates. According to the most comprehensive study done by Aalborg University (Denmark):
cost overruns occur in 90% of transport megaprojects (irrespective of the location of the megaproject, but in developing countries overruns are usually higher);
the actual cost exceeds the planned one by an average of 28% (if we are talking about railways - by an average of 45%, tunnels and bridges - by 34%, roads - by 20%);
overspending is not due to “honest mistakes”, but due to deliberate distortion of data in the desired direction (so that the launch of the megaproject is approved);
overspending has not changed in the last 70 years - no lessons have been learned.
Things are no better with non-transport megaprojects, and often worse. So, the real cost of the Sydney Opera House turned out to be 15 times higher than planned!
2.3. It doesn’t matter who finances the megaproject, whether it is publicly owned or privately owned, the risks of overspending are about the same.
2.4. When presenting the estimated cost of a megaproject, it must be taken into account that it is almost certainly underestimated. To adjust the assessment, special systemic checks are needed - which, in particular, will include penalties (up to criminal ones) for deliberate distortions of expected costs and benefits.
3. Demand for megaprojects
3.1. The second main source of risk, along with underestimation of costs, is the overestimation of demand for megaprojects.
3.2. Let's return to the data on the previously mentioned megaprojects.
Channel Tunnel: in its first year of operation, only 18% of passengers used it and 18% of cargo was transported compared to the forecasted number, after 6 years the number of passengers increased to 43%, and the volume of cargo transported to 33%. Demand is greatly overestimated.
Great Belt connectivity: in the first year, the actual number of passengers using the railway was about the same as planned, in the next two years it decreased by about 10%, but then again increased to about the planned. As for motor transport, its quantity in the same year exceeded 73% of the planned one, and after 3 years the excess amounted to 216%. Demand exceeded expectations.
—resund Bridge-Tunnel: in the first year, the number of road and rail passengers was approximately 80% of what was expected. Demand is overrated.
3.3. Such variations in the assessment of demand for megaprojects are in line with global trends. Thus, according to a study by the UK Department of Transport, in 19 projects, the difference between planned and actual road traffic fluctuated within 50-105% (deviation in the demand estimate, not exceeding 20% (in any direction) is considered a good estimate). According to a study by the US Department of Transportation (10 railway megaprojects), the deviation from forecasts in the estimation of passenger traffic ranged from 38% to 578% (on average, it was 65% lower than predicted).
in railway megaprojects the forecast is on average overestimated by 65%;
in automotive megaprojects, the forecast is on average underestimated by 9%.
3.4. The main causes of errors in demand forecasting are:
inappropriate methodology: models do not correspond to reality;
Insufficient amount of data: no continuous collection of primary information;
changing behavior of people and the influence of additional factors: consumer safety, availability of shops and parking lots, etc.;
sudden changes in external factors - political, natural, etc. (like the collapse of the USSR);
unfulfilled political promises (in this regard, for example, high risks for environmentally oriented projects);
bias of the consultant (not necessarily intentional - but each consultant draws on his own experience and the experience of his country);
the bias of the authors of the project - the most interested in it, and therefore the least critical.
4. Reality and fiction in the economy of megaprojects
4.1. The viability of a project primarily depends on costs and revenues. A more accurate viability assessment makes it possible, if necessary, to abandon the project, replace it with another one, or change the form of project implementation.
4.1. Regarding the three Nordic projects:
Channel Tunnel: Eurotunnel shares were originally worth £3.50 in 1987, rising to £11 a year and a half later. However, in the future, confidence in the project was lost, and in 2001 (6 years after the opening) the shares were sold for 65 pence. After all the attempts to survive (suspension of interest payments on the debt, extension of the concession by governments, restructuring), at the time of this writing, the project has not even broken even.
"Great Belt": as a state-owned enterprise, it had no shares, but the viability can also be assessed indirectly. The cost overrun caused the railroads to increase the premium to an unreasonably high level - so that they did not become the owners of the railway service as planned. Instead, the rail section was taken over by Great Belt Ltd, which was forced to pay the cost of the money-losing rail sector at the expense of the more lucrative road sector. Due to this, the expected payback period has been reduced from 35-40 years to 26-29.
The sources of risk for the Great Belt were, first, the decision to value some of the debt in yen (and the yen unexpectedly rose by more than 25% - along with the debt), and second, use variable rate loans to store most of the debt (This decision at the time of writing the book paid for itself). But the Great Belt was benefited by the general rise in the Danish economy - without this factor, the megaproject would have become unprofitable.
—resund: calculated (on the basis of which it was ratified by the Danish Parliament in 1991) to generate 50 million DKK in net income each year. However, already in 1991, according to four parameters, it was an unviable project (this data was hidden). Despite criticism from the Auditor General of Denmark in 1994, the project continued to be built. After commissioning in 2001, revenues for the year amounted to only 40% of the planned ones, the estimated payback in 30 years seems unrealistic, and the project as a whole is not viable, if you do not put it on the shoulders of the Danish taxpayers.
4.2. Railroads tend to be more costly and less profitable than expected (i.e. they carry double the risk). This rule is confirmed by studies conducted in Denmark, Germany, Sweden, and the USA.
4.3. The assessment of the viability of transport megaprojects is often much more optimistic than reality. And it's not that there is not enough technical qualifications or data. This happens because too many people (project authors, contractors, politicians, etc.) are interested in appreciating the viability of the project. As a result, obstacles with this attitude are invisible or look insignificant, because:
engineers are too eager to implement their own projects;
As a rule, it is more profitable for politicians of various levels and city authorities to start a megaproject than not to start it (accordingly, more optimistic estimates are moving forward);
contractors, trying to win the tender, paint overly rosy prospects;
planners and forecasters may have a financial interest in getting the project off the ground;
and most importantly, those who promote the megaproject are either not responsible for the failure at all, or their risks are disproportionately small.
4.4. Inaccurate assessments of the viability of megaprojects have become so frequent that the belief arose that “the project will not be launched without overestimated forecasts.” The authors strongly disagree with this. In the end, deceived taxpayers have to pay for all the mistakes - despite the fact that it would always be possible without exorbitant costs, having calculated everything better and more honestly, to launch a more adequate project.
5. Environmental impact and risks
5.1. Analysis of environmental risks is at an extremely low level. Predictions about how a project will impact the environment are not accurate. If studies are carried out, then only in a narrow range of influences and for a short time. Feedback from organizations that would have to professionally assess risks does not work well.
5.2. Environmental risk assessment in megaprojects is most often given only at the final stage. This provokes conflicts between people directly interested in the project and the public. To avoid conflicts, it is necessary to launch an environmental review at the initial stage and immediately involve the public in the discussion. A late-discovered environmental risk becomes a financial risk.
5.3. Once a project is launched, the real impacts are rarely verified, and there is therefore little information about the actual impact of projects on the environment. If there is no environmental audit, there is no opportunity to learn from the mistakes of predecessors.
5.4. Main disadvantages of environmental assessments:
vague descriptive forecasts without specifics;
lack of data for analysis in general;
inability to carry out the necessary studies and lack of information about those carried out;
inability to assess the impact in detail - for certain species of animals and plants (including protected ones);
it is not clear what area of land (including wildlife habitats) will eventually be affected by the project;
lack of detailed recommendations on harm reduction from the project;
recommendations that should help reduce the harm from the project are misdirected - not aimed at the described impact;
no obligation to monitor the actual impact of the project.
5.5. At the time of this writing, environmental auditing has been used only in the most advanced projects, such as the repeatedly mentioned Great Belt and —resund. They did not take the path of preliminary calculation of the impacts from projects, but determined goals that allow maintaining the ecological balance in the Baltic Sea (the so-called "Zero decision" - that is, ideally, the projects should not have a serious impact on the ecology of the Baltic), and then created an organization which supervised projects at all stages, from the very beginning to commissioning. Environmental risks were analyzed as the most important for the projects and financed as a priority. An international group of independent experts was also involved in the work.
The “Zero Solution” was finally completed, although the cost overrun for it was 110%. Protecting nature is expensive - this must be included in the estimate. However, experts have not yet reached a consensus on whether the Great Belt reduced the overall human pressure on the environment (as was supposed) or not.
5.6. To improve the assessment of environmental risks, you need to:
conduct environmental studies from the very beginning of the project to its commissioning inclusive (and develop an organizational structure for these tasks);
accurately define the overall scope of the study and the specific study;
Precisely define uniform criteria for assessing the impact of the project - they must be controlled and verified, both by experts (both internal and independent) and the public (which must also be involved from the very beginning); in addition, the criteria should be transparent and understandable to the general public;
include, if necessary, tasks of another level (regional, long-term, systemic) - so that the megaproject works in conjunction with other projects.
5.7. Local authorities and the public may not require an environmental audit, but this is no reason to ignore it.
6. Implications for regional and economic development
6.1. One of the most common arguments in favor of megaprojects is: "This project will contribute to regional development and will cause economic growth." However, the reality is not always like this.
6.2. The logic of supporters (talking, for example, about transport megaprojects) is as follows: the development of the transport structure reduces the cost of expenses for consumers by reducing the cost of travel and reducing the time for them. This, in turn, stimulates demand for the service and increases profits in the business.
The above is true for short-term calculations. Long-term, however, is more difficult to do. For example, demand depends on the competitiveness of the transport structure. With uneven prices (say, land plots or labor) and new paths being laid, the very structure of the local market changes - it is not at all certain that this will lead to economic growth as such, or that a small increase will justify the investment.
Although, let's say, the rise in land prices can be perceived as a sign of economic growth, but without an increase in employment and new investment, this will not be growth.
Thus, the M62 motorway Liverpool - Manchester - Leeds - Hull reduced the production costs of the respective firms by 0.33% and added 2.9 thousand jobs per year in an area of 3.4 million people. Not convincing for a megaproject.
6.3. Conventional cost-benefit analysis does not always work correctly. In particular, it will fail if some regions benefit from the megaproject, while others lose. It does not take into account the operation of feedback mechanisms.
6.4. Data for the three northern megaprojects:
Channel Tunnel: there is no significant benefit from the project, additional investments are needed for regional development.
The Great Belt: the impact on the port cities is negative due to the closure of the ferry service, the area from Copenhagen to Jutland is positive, and the overall economy of the region is insignificant.
"—resund": at the time of writing the book remained in the stage of an experiment in interethnic and intercultural integration (of Danes and Swedes). The financial aspect was not obvious.
6.5. At the same time, of course, a transport megaproject can contribute to a serious economic growth of the region. But this requires prerequisites:
the region lacks the capacity of existing transport networks;
The project is deployed in large urban areas and leads to significant savings in transport;
investments are made not only in transport infrastructure, but also in social capital (for example, in the construction of an airport, new types of business are attracted and leisure activities are arranged).
7. Dealing with risk
7.1. We live in a stochastic, probabilistic world, not a strictly causal world. This makes forecasting difficult.
7.2. As a rule, investors, governments, the media and the public receive overly optimistic information about the risks in megaprojects.
7.3. How we worked with risk in northern megaprojects:
Channel Tunnel: The project was declared simple and investors were given data that showed a 10% risk. However, such a risk was possible only under the condition of work without any problems at all (from delays to conflicts). Naturally, it didn’t work out that way - in reality, the risks were several times higher.
"Great Belt": the risk was stated as "standard" for projects of this type. As risk factors, neither the size of the project, nor innovation, nor geological risks, nor technological ones were taken into account. The result is a 110% cost overrun.
—resund: a partial risk analysis was carried out, the project was declared unviable... and the information was withheld from Parliament.
In general, the work with risks was done unsatisfactorily; although the organization of the Great Belt and —resund as SOEs with loans and consumer finance added viability to the projects. However, it did not reduce the risks as such, it simply transferred them to the taxpayers.
7.4. On average, risk management in megaprojects is poorly managed. The World Bank studied 92 mega-projects, and in only a small part of them the risks looked realistic at the forecasting stage.
An example of successful planning is the Apollo space program, where the cost overrun was only 5% (total project cost - 21 billion US dollars, of which 8 billion were included in contingencies).
7.5. The main sources of risks in megaprojects:
increase in construction costs (for any reason - there are many of them);
the need for additional financing (for example, due to changes in the interest rate);
real incomes are lower than planned.
7.6. Risk types:
risks associated with the specifics of a particular project;
risks of the securities market.
7.7. The higher the riskiness of the project, the higher the cost of risk - the amount that people are willing to pay to avoid possible negative consequences. Different levels of riskiness are associated with minimum rates of return (government bonds - 3-4%, debt in the private sector - 5-6%, etc.). Investments in infrastructure are high-risk: investments cannot be returned if things go badly, and whether they go badly or well depends on the overall economic growth.
7.8. One of the most common mistakes in risk analysis is using the principle of EGAP (Everything Goes According to Plan - “Everything goes according to plan”): when it is assumed that there will be no problems during the implementation of the project. Instead, you need:
use the MLD (Most Likely Development) principle. According to it, the most probable risks are clarified and the most risky areas are identified (most likely, they should be avoided, replaced, abandoned, etc.). Threshold values of the viability of the project are also determined: if they are exceeded, it is necessary to radically rebuild the project or abandon it altogether;
analyze the worst possible scenario (eg floods, fires, etc.) - this increases the sustainability of the project.
7.9. It is necessary to find out from the very beginning who manages the risks. Possible options:
full elimination of the risk (for example, under an agreement with the government);
purchase of services to eliminate the risk (for example, in the case of the risk of the securities market);
risk sharing (eg when transferring geological risks to contractors).
Traditional development of megaprojects and private financing of megaprojects
8.1. In the case of traditional development, megaprojects are usually funded or guaranteed by the government. Wherein:
no preliminary feasibility study is carried out before a project decision is made;
technical aspects dominate over the rest (eg political or financial - like whether such a project is needed at all). There is no understanding of the project as something global and unified, there is a withdrawal into purely technical details;
talk about the external impact of the project comes only closer to the end of the project;
The public is limitedly allowed to discuss, provided with insufficient information and only towards the end of the project. This leads to discontent in society and the possibility of various manipulations;
no risk analysis;
issues of internal organization and responsibility are in the background. There is neither a regulatory framework that would provide this, nor a general expertise of the project.
Traditionally, most of the roles are taken by the government - while it is obvious that one cannot simultaneously be a promoter of the project and a guarantor of the protection of public interests (at least taxpayers, at least the environment).
8.2. In the 19th century, as a rule, megaprojects were financed privately. In the 20th century, most of the funding passed to states and international institutions. In recent decades, private financing of projects and the involvement of private capital and mixed (public-private) companies in projects have become more popular again.
8.3. In the case of attracting private financing, the BOOT (build-own-operate-transfer) scheme is usually used. Entrepreneurs create a consortium to invest in a project company that builds the facility, owns it for a certain time and operates it, after which it transfers it in full to the government. Risks are usually contracted out to construction companies. If the project is well calculated, developed and designed, this is a very effective scheme.
Ownership in this scheme is an optional element, and the BOT cycle (build - operate - transfer - "build - operate - transfer") is also possible.
8.4. The analysis of privately financed megaprojects differs from the traditional analysis because:
investments in infrastructure projects are unrecoverable if there is no opportunity to receive income from the use of infrastructure (the nominal value of the assets is low or it does not exist at all);
a project company is often created for a specific task, therefore, it is impossible to determine whether the project will be successful through its analysis;
there is no market for selling the company;
Risks also differ from “traditional” ones.
8.5. As a rule, transactions under the BOOT\BOT system are very complex, associated with long-term relationships between different participants. Short-term (construction) and long-term (operational) interests may conflict with each other.
8.6. In the case of privately financed megaprojects, it is not so easy to attract investors - this requires a high expected level of profit. It can be provided (among other things) by full indexation of inflation.
8.7. It is extremely important to calculate not only the risks themselves, but also to distribute the risks among the responsible parties. Thus, private investors, in principle, should not be responsible for political risks, etc.
8.8. One way to avoid problems with private finance is for the government to reward private sector services. The DBFO (design-build-finance-operate) scheme is based on this approach: a contract for all of the above is awarded to a specialized concessionaire company, and it receives compensation from the client state for the duration of the concession. This approach allows you to focus on economic efficiency and innovation.
8.9. Private financing of megaprojects is generally more beneficial for society, although it is not a panacea. However, it is possible only if a number of conditions are met:
the customer must be sufficiently qualified, focused on the implementation of the megaproject and not try to solve private, narrowly focused interests with its help;
need properly structured private companies, designed for long-term projects;
due to high risks, the megaproject will work only in conditions of general economic growth (in a stagnant economy, the project is doomed);
each additional fee regulation mechanism increases the risks — there should not be too many such mechanisms;
Make the best use of the private sector by stimulating new technologies and controlling construction and operating costs. We need contracts that put efficiency at the forefront (rather than absolute numbers of investments).
9. Four Instruments of Responsibility for Decision Making in Megaprojects
9.1. It is essential that both the private sector and governments cooperate in any mega-projects. Fully private funding for megaprojects is now impossible, and fully public funding is suboptimal.
Transparency is needed to ensure accountability on the part of the public sector, and competition on the part of the private sector.
9.2. The role of the state should be strong in terms of:
— determining the interests of the society and requirements for the project;
— normative regulation and drawing boundaries between the responsibility of the state and the private sector;
- involving the public in the project from the very beginning.
The role of the state should be weakened due to the fact that:
- the state does not provide full guarantees to investors;
- the state is not a project promoter - on the contrary, it critically evaluates all stages of the project.
9.3. The role of the private sector must be strong through:
— attraction of risk capital;
- attracting potential contractors and competition between them in terms of efficiency.
The role of the private sector should be weakened by reducing the possibility of lobbying based on narrow private interests.
9.4. Main instruments of responsibility:
The public (interest groups, media, etc.) should always be able to check both the project itself and its documentation from the beginning to the period of operation. Feedback from society should influence the project. Independent professional reviews are also needed with extended groups of experts to assess all aspects: viability, safety, environmental impact, etc.
The approach should not be technically oriented, but goal oriented. Goals flow from the public interest in all areas. The formulation of functional requirements should precede design analyzes and be applied through a competitive tendering process.
defining a regulatory framework and, where possible, addressing political risks;
A regulatory system is needed both as a system of rules for the construction and operation of a megaproject, and as a regulation of additional investments. It must be determined in advance - this allows you to determine the costs in advance. The choice of system also affects the risks - which allows you to attract risk capital.
attraction of risk capital.
The government lacks efficiency in determining responsibility, which means that for megaprojects it is necessary to attract a share of risk capital. This helps protect taxpayers - and ultimately reduces uncertainty somewhat. In addition, it allows better control of costs and delays at all stages due to the active participation of creditors. At the same time, the government does not give up control over the project - on the contrary, its control is necessary.
9.5. The two main options for making decisions regarding megaprojects are:
concession approach - private companies try to obtain a concession;
the approach of state-owned enterprises, including the presence of a share of risk capital.
9.6. A state enterprise can raise part of the capital without guarantees - either through borrowing in the long-term loan capital market, or through shares without a fixed dividend. Selling shares has the following advantages:
it arouses interest in the company, which stimulates its effective work;
the arrival of private owners on the board of directors increases the likelihood of interests being skewed into a purely political plane;
public trading on the stock exchange requires stricter rules on information;
the sale of shares can lead to profitable alliances with important partners;
Shareholders will influence management and thus increase the likelihood of project completion.
9.7. Key documents to be presented to the public and experts:
main policy document - in which the government outlines the main issues related to the project, including strategic ones;
draft report on functional requirements - it contains information on services and infrastructure (including additional) that must be subjected to examination, technical, financial, economic and environmental requirements, safety requirements, etc.;
preliminary feasibility study - a comprehensive analysis with the identification of alternatives to the project (including estimated costs and viability), assessment of the market and risks;
Functional Requirements Consultation Document - If, upon review, the functional requirements are not feasible, the project should be abandoned;
risk management consultation document (including analysis of operation, expected additional funding, etc.);
final document on functional requirements;
Guidance document with recommendations on basic conditions. May include a bill. Must not conflict with advisory documents;
final information paper.
9.8. Home - and global! - The meta-task associated with megaprojects is to reduce and manage the level and quantity of risks associated with the implementation and operation of the project. It is to its solution that we must strive.
Every year more and more megaprojects appear in the world. Unfortunately, many of them look quite unsightly. There are many reasons for this:
huge cost overruns (often many times);
misestimation of the demand for the services provided (almost certainly overestimated);
harmful impact on the environment (although the authors of the project promised that it would not happen);
lack of economic development for the region (although the authors of the project promised that it would be);
non-viability of many projects.
All this does not inspire optimism. Moreover, it seems that megaprojects are by nature programmed to fail. Too many people benefit from starting an expensive and prestigious project: politicians and engineers, contractors and consultants.
However, most problems with megaprojects can be avoided if the lessons learned from the failures of the past are finally learned. The main lesson: the biggest trouble is that the people who promote megaprojects are usually not responsible for failure in any way. You can't let them get away with it! This means that there is a need for constant careful control of society, all those people whose interests are affected by the megaproject, from the very beginning of the project to the period of operation inclusive. Promises cannot be trusted. You can not trust the estimated estimates. You can not trust the experts who are interested in the project. Only to check and double-check, both by ourselves and by turning to independent international expert groups. Any megaproject is too important a matter to let it take its course!
In addition, in order for megaprojects not to hang on taxpayers and shareholders as a dead weight, but, on the contrary, to contribute to economic development, the authors of megaprojects need to:
correctly analyze risks and determine from the very beginning who manages them;
correctly allocate responsibilities between the state and the private sector (both components must be presented in a megaproject);
use all four main instruments of responsibility: transparency, performance requirements, regulation and attraction of risk capital;
Use either the concession approach or the SOE approach with a share of venture capital: all other approaches have proven to be much worse.
In such a large and complex business as megaprojects, the risk cannot be reduced to zero. But it is possible - and necessary! - seriously reduce. After all, the well-being of each of us directly depends on it.