Project Management: Analysis of HeathrowTerminal 5

I. Introduction

London Heathrow Airport is one of the busiest airports in the

world (Burns, 2014). Heathrow airport was built to help improving thecountry economy and minimizing negative impacts on local communities

and environment (Heathrow Airport Limited, 2011). In September 2002,

Heathrow airport had a construction project to build another terminal

upon the existing four terminals, which was the terminal five. The

essential for a new terminal to enhance the ease of travel for

passengers all around the world and to reduce airport congestion

in the existing terminal 1, 2, 3, and 4. The project, particularly,took 19 years from inception to completion, and also, it took six

years to be constructed at a cost of 4.3 billion pounds (BBC, 2008).

The main player of the project was British Airport Authorities (BAA),

and the terminal was designed by Richard Rogers (BBC, 2008). According

to Fewings (2013), BBA is the major airport company with many

achievements in budget savings for over 50 airport projects with

its capability to reduce overall time and cost for 30%. The life

cycle of the project was between 1985 and 2008, and T5 was a new

mega airport structure in British history which was officially

opened on the 27th of March 2008 (Davies, Gann, and Douglas, 2009;

Doherty, 2008).

II. Literature Review

Heathrow terminal 5’s construction project was known as one of

the mega constructions, which involved more than 60 contractors,

and it was consisted of 16 major projects and 147 sub-projects

(sfuheathrowcase, 2010). The project covered a main terminal, two

satellite terminals, an air traffic control tower, and public

transport connection, with regard on environmental impact as well

as risk management. The facts and figures about the terminal arethat, first, there are 30,000 square meters of glass in wall; second,

there are 60 new aircraft stands; third, 13km of tunnels are bored for

baggage handling and rail links; fourth, most rainwater dropping on

the building will be recycled; finally, there are six new rail

platforms linked to the terminal (BBC, 2008). Heathrow’s terminal 5’s

project was an important project since it has immense impacts toward

economy and social benefits (Heathrow Airport Limited, 2011). Heathrow

terminal 5 was built to eradicate the passengers’ frustration due

to the Heathrow hassle (BBA Terminal 5 disaster, n.d). At first,

Heathrow terminal 5’s project was deemed to work well which was

on schedule and budget. On the other hand, two weeks after the

opening, Heathrow terminal 5 faced massive combination of

problems. With this combination of problems, Heathrow terminal

5’s project illustrates the gap of the project, which is very

fascinating. According to Toor and Ogunlana (2010), construction

project success criteria are based on Key Performance Indicators

(KPI) displaying the completion within time, within budget, and

within a set of objectives and stakeholders’ requirement.

Therefore, it is imperative to conduct a post review on some

important aspects of the project in order to fully comprehend the

success and failure of the project.

III. Research Objective

This report is intended to review the project of Heathrow

international airport particularly on Heathrow’s terminal 5.The

proposes of the review are:

-Frist, to critically discuss the success on how BAA could meet

the scope, schedule, cost and quality standard as referred in the

Generic Iron Triangle as the evaluation criterion for project

success.

-Second, to evaluate the project’s procurement management during

the operation, particularly on how BAA handled suppliers,

contractors and BA.

-Third, to assess the procedure and method of the BAA to counter

with the potentials risk during the construction.

-Fourth and finally, to offer justification and lessons learnt

from the success of the project.

IV. The Project Iron Triangle

First of all, the iron triangle was initially presented in the

1980s as a triangle of balanced requirement (Bruke, 2006). The

iron triangle is considered to help stakeholders to highlight and

specify the constrains-time, cost and quality-where stakeholders

can choose to emphasize one or more than one of that constrains

(Gardiner, 2005). The dimension of these criteria is definitely

vital for project accomplishment since it is a generic

measurement for most of the project. In this regard, the cost

management of the project that could meet the budget 4.3 billion

pound was done effectively, also, the time management,

scheduling, of the project to meet the deadline in six years

including seven months reserved period was well-timed (Doherty,

2008).

Yet, these Key Performance Indicators can be valued as basic

tangible factors within the T5 project as a whole, but this does

not include other contributing determinants behind this excellent

project outcome (Basu, Little, and Millard, 2009). Technically,

balanced scorecard purposes, capacity and application are

necessary to be recognized. For instance, the abilities to plan

and implement the project depict the success factors that help

T5’s project to be done on time and budge. Those abilities

consisted of system integration, support of integrated supply

chain, digital technology, productivity and safety, supplement of

material for speed and efficiency, and operational integration

and preparation (Davies, Gann, and Douglas, 2009). Furthermore,

JIT logistics were utilized to sustain an efficient schedule of

large volumes of construction materials, (Davies, Gann, and

Douglas, 2009). More importantly, to avoid more cost within the

project, BAA, initially, chose to run the program (Heathrow T5

whole project) itself (BAA: The T5 Project Agreement 2008).

In addition, the project was done with effective tools and

framework to meet the deadline and budget. The project started

with the earned values management which was the core of the whole

programme. The project was controlled and monitored by cost

performance indicators and schedule performance indicators which

together they created a key milestone for the project and helped

creating a clear and unambiguous path for the project (Doherty,

2008). Meanwhile, there were integrated baseline reviews which

were held every six months aiming to find out the gap of the

project and discuss the problems among project teams (Doherty,

2008). After the integrated baseline reviews, the mitigating a

cost was created to take advantage of all opportunities and to

take look at all potential risk. In this instance, total cost

management team was created in the project to look at ways to get

better deals with suppliers and to look what could not be built

and designed (Doherty, 2008). After the mitigating a cost, the

project team focused on the financial risk. The focus and the

approach £100 million from individual project budget (Doherty,

2008). Finally, the last approach to achieve time and cost

efficiency was the change-control process.

Besides, quality was another main aspect in judging the success

of the project. Basu (2014), exemplified that some projects were

delivered timely and on budget, but failed to meet the long term

benefit to end users or significant stakeholders; he added that

quality of project is what matches with customers’ expectation.

The quality of the project work was influenced by T5’s leadership

which urged individuals to understand what good quality looks

like (Doherty, 2008). Doherty (2008) suggested that there were

six golden rules to apply on the construction team in order to

manage quality work, particularly in T5 project. First of all,

terms and specification shall be agreed in the T5 project.

Second, create an examination plan and test plan to make sure

standardized works are done. Third, ensure that workforce have

the right skills to implement the plan. Fourth, check finished

works done by suppliers if they meet the standard requirement or

not. Fifth, quality audits need to be carried out. Particularly,

there were over 700 audits were carried out in T5 project to

address 2500 issues (Doherty, 2008). Finally, the handover of the

project.

V. Project Procurement Management

Since the T5 programme was a big construction programme, it is

imperative not to ignore the procurement strategy or management

styles adopted by BAA which to help enhancing the effective of

the works. Project procurement management concerns about

acquiring good and services from outside the performing project

team that are needed to operate the project’s scope of work

(Burke, 2006). The key players in T5 procurement strategy was

BAA, suppliers, contractors and BA. In T5 project, the BAA’s

procurement management approach was to have a relational contract

between BAA and all T5 first tier suppliers and junked the

traditional principle of construction contract (Caldwell,

Roehrich and Davies, 2009). In this regard, instead of pointing

out what could go wrong and spelling out the blame, the contract

was aimed to provide positive incentives in order to create

positive problem solving behavior among contractors (BAA: The T5

Project Agreement 2008). Moreover, the contracts’ strategy of T5

was that the contracts were incentivized based on a pooled fund

of the benefits gained which would be distributed after a

significant milestone was set (Caldwell, Roehrich and Davies,

2009). Specifically, Noel Gaffney from Mace stated in Doherty

(2008, pg.235) that ‘‘T5 agreement helps suppliers to make the right choice,

deliver for the T5 programme without worrying about the commercial implications.’’.

T5 agreement was claimed to be a ground breaking contract and it

was an effective approach for BAA since it tried to bring the

best out of client, suppliers and the teams to focuses on common

project’s objectives (Doherty, 2008). According to the case

study, BAA terminal 5 project, the structures of the T5 agreement

are, first, it is a delivery agreement that is legal actions and

condition of contract, second, identifying the skills and

capability and capacity that supplier can bring to T5 is

supplement agreement, lastly, the T5 agreement is supported by

document like commercial policy which describes commercial

environment and emphases on handling threat rather than evading

litigation. More importantly, in comparison with mainstream

construction contract, there are differences like in terms of

flexibility, the T5 agreement is flexible and it does not look

like conventional contract; integrated teams, the agreement helps

creating better relationship to ensure the desired outcome;

responsibility and liability, the contract differentiate clearly

between responsibility and liability; and the risk, BAA held the

risk and active risk management (Major Project Association, 2007)

(See figure1). Furthermore, the management issue by having the

flexible commercial contract between stakeholders in response to

the uncertainties is justified with a model of having insurance

policy and incentive scheme with business contractors that could

really alleviate the risk (Norris, 2007).

Figure 1

Source: (Major Project Association, 2007, pg.4)

Besides, to embrace the best procurement strategy, the BAA’s

procurement team designed the twelve procurement processes that

move away from the traditional contractor’s approach which

squeezes the supply chain on cost and which usually involves only

one or two preferred suppliers (BAA Heathrow, 2004). The twelve

procurement processes which were used in the T5 construction

project are to obtain technical information, pre-qualify

suppliers, acquisition plan, prepare tender enquiry, issue

tender, mid-bid interviews, evaluate bids, suppliers’

presentations, recommendation, place orders, feed backs and

operations (BAA Heathrow, 2004).

With regard to the project stakeholders, there are 43 different

stakeholders (Doherty, 2008) including British Airways (BA),

first tier suppliers, and first tier contractors, and BA was

unquestionably the main stakeholder. It is believed that it is

essential to see financial auditing review agreement between BAA

and the suppliers and its communication and trial testing with

BA. (Davies and Brady, 2007). This Auditing Review theory can be

perceived from a conflict management with regard of collaborating

style of Conflict Resolution theory. Hence, with all these

strategies deployed by BAA, they provide an important lesson that

comes from the contractual relationship among stakeholders; so

without this groundbreaking agreement, BAA could not have

productively completed the project on time and on budget.

VI. Risk Management

Risk management is one of the main aspect to be considered when

projects are carried out. According to Burke (2006), the key

component of the project is making decision, which associated

with the level of uncertainty that leads to risk. Specifically,

project risk management is “the systematic processes of identifying, analyzing

and responding to project risk” (Bruke, 2006, pg. 253). Therefore, since

Heathrow terminal 5 was a mega construction project that involved

plenty of decision-making processes, it is essential to assess

the project’s risk management model in order to understand how

effective and efficient when risks were handled in the project.

Constructing Heathrow terminal 5 required large amount of capital

and budget; therefore, there was a huge financial risk for BAA to

deal. In Davie, Gann, and Douglas (2009) article states that the

client, BAA, had learnt from its experiences and found that

fixed-price or Private Finance initiative (PFI) caused the poor

performance. Thus, to manage the failure, increase performance

and reduce risk, BAA introduced the T5 agreement which was

associated with procurement management (Deakin and Koukiadaki,

2009). Yet again, T5 agreement was an important legal document

which allowed BAA to manage its suppliers and contractors

effectively. More importantly, this agreement could give an equal

share of risk taking with its suppliers, contractors, and the

rest to BAA itself as a client. In relation to uncertainty

management theory, in response to risk and future uncertainty, T5

Agreement could be linked to risk mitigation and risk deflection

from the four main risk responses.

In terms of contracting, BAA’s T5 agreement is a cost plus

incentive contract which designed to deflect risk (Davies, Gann,

and Douglas, 2009). The cost plus contract is deemed to be the

most flexible type of contract in which the client pays the

constructor the costs incurred plus a pro t margin (Burke,fi

2006). On the other hand, unlike mainstream cost plus contract

where risks are shared between client and contractors, BAA took

full responsibility for this risk and operated collaboratively in

integrated project teams with rst-tier suppliers to generatefi

inventive solutions (Davies, Gann, and Douglas, 2009). In

terminal 5 project, BAA sought to find and expose risks, then

motivate and incentivize parties to perform their best to address

and evade risks with creative and inventive approaches and

solution. Also, BAA’s study concluded that ‘‘transferring the risk to the

contractor offered no real protection for the client’’, and ‘‘the only way to succeed on

T5 was to change the “rules of the game” by establishing a new governance structure

and commercial principles embodied in the T5 Agreement’’ (Davies, Gann, and

Douglas, 2009, pg. 115).

Specifically, to avoid technological risks, BAA used only mature

technology during the integration of system in order to ensure a

smooth run at the final stage of the project (Brady and Davies,

2010). Also, to circumvent big surprise and risk from unproven

technologies, BAA conducted a test to have those technologies

installed in different environment, smaller airport (Brady and

Davies, 2010). Moreover, to avoid the delay risk to the entire

project from the failure to complete one component, BAA used

‘‘pre-assembly and pre-fabrication’’ techniques to allow

suppliers to produce, bring together and examine components and

rehearse the installation process before taking to T5 project’s

site (Davies, Gann, and Douglas, 2009). To recap, with the T5

agreement and different approaches, the T5 project was seemed to

work well, BAA were able to manage the potential risks

effectively and efficiency.

VII. Conclusion

Heathrow terminal 5 project has shown and provided project

managers and researchers numerous of lessons. One of the main

lessons learnt is the adoption of Balanced Scored Card as a key

performance indicator within the Iron Triangle criteria (Basu,

Little, and Millard, 2009). Alternatively, understanding and

knowing the method of how BAA handled and adjust the procurement

systems, T5 agreement, and how they evaded risks with noble

approaches are an absolute benefit and such an important

information and experience to learn about. In this regard, from

the T5 agreement is learnt that the innovation was the key

component in the agreement where was ‘‘no blame’’ culture of

project which contributed as one of the key success factors

(Caldwell, Roehrich and Davies, 2009). Also, it is learnt that

BAA had adopted many innovative and creative approaches to

facilitate the construction project, and especially, BAA had come

up with numerous of strategies to manage the potential risks in

the project. By this means, those strategies and approaches

embraced by BAA had made this mega construction, Heathrow

Terminal 5, become a successful one.

In conclusion, Terminal 5 Project is determined to be both

successful and fail over the result their planning and heading

over stage. Conversely, when analyzing the project as whole,

Heathrow terminal 5 project was a successful one which was

completed on time with appropriate amount of budget. BAA executed

project effectively by having strong and innovative leadership;

moreover, BAA ran the project with experiences which allowed them

to create practical strategy to finish the project (Doherty,

2008).

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