Managing large projects and measuring sustainability

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Keith Clarke, Former chief executive and director of sustainability at Atkins explains why MOD projects don't really run over budget and why it can be hard to measure environmental impacts.

By: Professor Janette Rutterford (Department for Accounting and Finance) , Keith Clarke (Guest)

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Janette: Well, Keith, building projects are very complex activities, and they’re often delayed and expensive with cost overruns. How best is it to manage that and to manage expectations when it does go wrong?

Keith: The intrinsic part of getting any public project done is just like Robert Moses did in America, was you ground stake, and that is actually you actually get it going because you get people convinced it will cost less. And then once you’re in the ground and it costs more, actually you only end up spending usually what you should have said at the beginning, but you would have never got anyone to agree to it at that point.

So there is a long tradition of ground staking. In fact MOD have a study out recently that somebody did, that said most MOD projects don’t overrun, they only cost what other people normally pay, it’s the expectation and the politics of getting projects started. I think that’s one major issue you have to strip out. And then usually it’s definition, what do you want the project to do? And we’re not very good at deciding that before we start.

Janette: Do people make things too complicated to start or too simple to start?

Keith: Usually sort of neither, not having a comprehensive view of what it is they’re doing it for. Eurofighter is a classic; it’s changed its function three or four times. The new light tank programme has changed its function eight times. Even Cross Rail didn’t know where it was going for 15 of its 20 years gestation. And having that sort of clear vision of what the animal is you’re doing, what you’re trying to achieve, does a lot to sort of ground things to an anchor. And that is politically quite difficult at times.

And often there isn’t the skill set between the private sector and the public sector to really nail down why you’re doing it, and then affect the design. And the more you change your mind during our process, and it’s true whether you’re doing a building or product, changing your mind during the design process, not to do it better but to do a different outcome is incredibly destructive to the quality of the product. And if you look at where Apple come from, they know exactly the product they want to give you, their interface with you, and Jobs drove that in extremism, if it didn’t do what it, it met your expectations of you as the customer he didn’t let it happen, it didn’t drift off, it became more and more pure.

You don’t see that with many projects. Canary Wharf did it, Reichman had a view. Some of our transportation projects haven’t had that clarity. French railway system has had that clarity. Our NG policy is beginning to get that clarity, so it various enormously. Complex stuff though.

Janette: Moving onto environment issues, I mean how can you actually measure the environmental benefits of a project?

Keith: I can give you any number you like and show it works, and some of the biodiversity numbers, which is a real issue, have no real good benchmark. Even energy profiles for the next 50 years, you can make up virtually any number you want to. And how are you going to decarbonise society has really no very good metrics at the moment, other than using energy as a proxy, and even that’s complex. So very very immature science of how one decarbonises society let alone look at broader ranges of sustainability.

Having said that, it doesn’t mean it’s not the right question. The fact that you haven’t got a good measure for it doesn’t mean it isn’t a primary question, and that’s quite often a fundamental flaw in the way people approach businesses or projects. If I can’t measure it it can’t be the right question. Actually the best questions, the right questions to be asking in projects or businesses aren’t always ones, and usually aren’t the ones which are easy to measure or easy to deal with.

So if you deal with your spreadsheets, the ones which can be measured, you’re going to be measuring the wrong thing, you’re going to be looking as a historian. And the fact it is difficult doesn’t mean it’s not the biggest business threat you’ve got. And to lock in a project to a highly energy intensive, needlessly intensive future, is actually putting a risk on your project that will bite at some point. You want to future proof, start looking at the stuff that’s hard to measure, not easy to measure.

Janette: Is there a problem with time horizons, so for example most projects are 10/20 years and this is longer term?

Keith: Massive issues about time horizons, though if you look at energy threats right now with Iran threatening to close the Strait of Hormuz, and a refinery going bankrupt in southern England, your energy spikes are getting quite violent. Albeit we’ve also had [Shell Gas?] coming in, it makes it very cheap. So the driver may not be spot prices and oil and gas and energy generally, the driver may be energy scarcity generally and the commitment of the world through COP15 and then through Durban to decarbonise the way we run our world anyway. And that’s a fundamental driver, and I think most businesses are just waking up to that as a business threat and wondering how to do it.

Janette: So how do you, I mean going onto my third question then how do you persuade your clients that carbon neutral is good?

Keith: You start to talk to them. It’s a good old fashioned idea, very sophisticated this year, you go and talk to your client. And you introduce them to something as an ancillary part of the question they’ve asked you. So they’ve asked you to design a railway and you say actually long term operating costs are going to kill you, it could be done a bit differently, we could air condition it a bit differently, we could look at energy savings. We did it on Dubai Metro, we did a bunch of stations and then we said actually we can change these stations and take 20% of the energy costs out. And environmentally that’s quite sensible, as an energy cost that’s quite sensible, as a piece of being a world class nation it’s quite sensible. And don’t underestimate the peer pressure.

Society is changing, to be profligate with energy is no longer clever, and don’t underestimate peer pressure for businesses, nations, groups of people to be embarrassed by behaviour. And that does affect financial decisions because the financial decisions are at best good guesses of the future. And to start to introduce some values, which won’t radically change it, they won’t change the question in totality, they won’t change the, but it will condition it. And that’s happening. Why does Land Rover sell its cars with an ad that says we’ll make it carbon neutral for you or something like that.

Janette: Eurostar does as well.

Keith: Because it’s not a market, sorry Eurostar market themselves as carbon neutral. Airlines are beginning to say we are environmentally responsible. Why are the ads for new airliners, for the actual product, no longer about how quickly I can get you there, how quiet my cabin is, we are an efficient plane.

Janette: Is it a good idea to have some kind of international standard where I can say I’m carbon neutral, is there?

Keith: We’ll get there; I think there will be dozens of standards. There’s sort of standards now for carbon trading which I think are fairly specious, because you’re measuring in by and large the carbon that you didn’t use, so it’s a negative concept. Since we don’t seem to have a financial market that can work on lending money to houses, which generally do exist and don’t move, or lending money on people who have not created carbon, is an interesting concept.

That doesn’t mean it’s not the right question, it just means it’s very very difficult to do. And the great thing about society’s clever people, engineers, business people, if they focus on the question you get extraordinary answers. If you knew the answer now it wouldn’t be fun. And it is about struggling with things which are not convenient, that you can’t put in your spreadsheet tomorrow. If you’re running off your spreadsheets, if you’re running off your ERP system and you’re looking at all your data, you’re not dealing with the right question. You’re only dealing with history.

Janette: Has it made engineers more important in society?

Keith: Oh much more important. I mean we’ve got to move engineering from people answer questions, take a question, go away and love to answer it, to people that help to find the question. And that’s a real challenge for people like the Institute of Civil Engineers who are trying to embrace that, doing some good work there. It’s a real challenge for Engineering UK where we’re trying to bring youngsters into engineering to show that this is a whole world that you can have a phenomenal career in really changing the world, because you’re changing the question.

Now whether you end up in government or in the private sector as a designer, as a builder, as a manufacturer, in all sorts of things, in food technology, there is an engineering science background that is beyond doing calculations. It’s about creating a future that doesn’t exist today. And that’s why it’s a revolution, I mean it’s a new industrial revolution, which means it’s really scary.

Janette: Thanks very much.

Keith: Thank you.

Keith was talking to Janette Rutterford after a recording of The Bottom Line.

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