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Overcoming the ‘White Elephant’ Syndrome in Big and Iconic Projects in the
Public and Private Sectors

Chapter · February 2007

DOI: 10.22459/II.02.2007.05

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5. Overcoming the ‘White Elephant’
Syndrome in Big and Iconic Projects in
the Public and Private Sectors
Scott Prasser, Faculty of Business, University of Sunshine
Coast

Introduction
This chapter1 analyses ‘big,’ ‘iconic’ or ‘mega’ projects and their impact on
effective project management and also on the effective allocation of funds for
priority infrastructure. It is argued that part of the problem of Australia’s
perceived present infrastructure shortfall is not just the lack of spending on
infrastructure as many suggest. Rather, it is as much about the misallocation of
spending on ‘big’ and so called ‘iconic’ or prestige projects that too often become
expensive ‘white elephants’ requiring considerable post-completion maintenance
and support and further wasting valuable resources that could be used elsewhere.
Such projects, because of their status, size, and complexity too often disrupt
effective project management practices in their original scoping, assessment and
implementation and fail to have clear purposes or functions.
This is not a project management or even an infrastructure problem confined to
Australia. Concerns about misallocation of funding of big, mega or iconic
infrastructure type projects have been observed elsewhere. Flyvbjerg (2003: 3,
9) in his overview of ‘megaprojects’ around the world noted:
At the same time as many more and much larger infrastructure projects
are being proposed and built around the world, it is becoming clear that
many such projects have strikingly poor performance records in terms
of economy, environment and public support. Cost overruns and lower
than predicted revenues frequently place project viability at risk and
redefine projects that were initially promoted as effective vehicles to
economic growth as possible obstacles to such growth ... Megaprojects
are becoming highly public and intensely politicised ventures ...
Indeed, despite all the techniques now available in project management what is
striking, as the Economist (2005) recently lamented, was the large proportion of
major projects across both the public and private sectors that failed to deliver
on time and within budget. The problems that the Australian based firm,
Multiplex is having with the Wembley Stadium project in the United Kingdom

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 Improving Implementation

is a further recent example of poor project management (Australian Broadcasting

Corporation 2006a).

Australian Infrastructure Spending and Misallocation: So

What’s the Problem?
In Australia, many commentators and interest groups argue that there is an
infrastructure-spending shortfall. Declining infrastructure spending give some
credence to this view. In 1969, 8 per cent of Australian GDP went on
infrastructure. By 1975 this had fallen marginally to 7.2 per cent. In 1989 it was
5.5 per cent and down to only 3.6 per cent of GDP five years later (2004). While
some blame the Whitlam Labor Government’s (1972-75) changed expenditure
priorities from infrastructure to welfare services it has been a pattern that was
not reversed by subsequent federal governments (EPAC 1985; EPAC 1990).
Others contend that the problem has been exacerbated by the drive for
governments to run ‘balanced’ budgets, to accrue surpluses and meet the
demands of external credit rating agencies than the real needs of their respective
communities (Anderson 2006; Allen Consulting 2003).
A similar decline in infrastructure spending is evident across the states. In New
South Wales the public transport crisis has been blamed on low state
infrastructure spending. Queensland has seen infrastructure spending as a
proportion of Gross State Product fall from 5.4 per cent in 2000 to 4.2 pr cent
in 2003 (see also Allen Consulting 2003). Given that Queensland is responsible
for key Australian exports like coal that rely on the provision of extensive
infrastructure then any shortfall in this area has the potential to adversely affect
Australia’s overall economic growth. Reports recently commissioned by the
Queensland Government have also highlighted inadequate spending on
refurbishing energy infrastructure.
Concerns about infrastructure spending have prompted calls from the federal
Opposition (Australian Broadcasting Corporation 2005), the business sector and
other interest groups for an infrastructure summit (Taylor 2005), special
infrastructure councils between business and government and increased
spending. Partly in response to these demands the Howard Government in March
2005 appointed the Taskforce on Export Infrastructure, headed by Henry Ergas,
to assess the issue.
While much of the debate has been about the amount being spent on
infrastructure, some have suggested that the problem, especially for the public
sector, is more about the need for better targeting and priority setting. Reluctance
to accept this view is understandable. It is easier to increase spending than to
make choices. It is easier to satisfy everyone by spending more than to disappoint
some and set priorities. It is also easier to take broad strategies than to try to set
long term goals and stick to them. Such strategic activities are inimical to

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 Overcoming the ‘White Elephant’ Syndrome in Big and Iconic Projects in the Public and Private Sectors

government and interest groups. As commentator Alan Wood (2004) summed

up the issue thus:
The lack of cost-benefit analysis means a significant amount of the money
spent on infrastructure has been wasted … But establishing whether
there is in fact a critical shortage of national infrastructure is impossible
to achieve with any degree of accuracy.

Obsession with ‘Big’, ‘Iconic,’ and ‘White Elephant’ Projects

One of the underlying problems of why funds are misallocated is that
governments, and, sometimes even the private sector, have sought to develop,
‘big’, ‘iconic,’ ‘landmark’ or ‘signature’ projects. These projects are characterised
by their large physical size (buildings), extent (e.g. events like Olympic or
Commonwealth games), costs, and alleged ‘iconic,’ prestige and symbolic value.
Such projects are often linked to the use of technology in their construction,
appearance or operations, that too often becomes an end in itself (Scott 1992).
The issue, concluded Flyvbjerg (2003: 6) is that ‘more and more megaprojects
are built despite the poor performance record of many projects’. There is a long
record of these project management failures (see Hall 1968 for some earlier
examples).
The most notable example of an ‘iconic’ project is the $400 million Guggenheim
Art Gallery in Bilbao in northern Spain. Its aim was to help revive a depressed
area by being an ‘attraction’ in its own right because of its size and stunning
building design rather than because of the quality of the art gallery it was built
ostensibly to house. Form dominated function. Although its wider regional
economic benefits have been less than expected (tourists fly in and fly out rather
than stay), many have sought to emulate the ‘Bilbao’ effect with each new
construction more expensive than the one before, but often having only limited
success. In Australia the Geelong City Council tried vainly to attract the
Guggenheim to duplicate the Bilbao project, while in 2000 the Queensland
Government established a taskforce to examine the possibility of developing a
‘Landmark Building’ in Brisbane. One architect described this obsession with
‘big’ projects by governments as ‘monumental madness’ (Hall 2001).
Enthusiasm for ‘big’ iconic projects also pervades the event attraction industry
with nations, states and regions often competing for major events like the
Olympic or Commonwealth games, and Formula One car racing to surf life saving
carnivals. However, the stated economic benefits of events have often been
contested.
At a regional level this is most explicitly seen in tourism based projects that
ostensibly act as destination attractions to boost economic growth (e.g. South
Australian Wine Centre, Queensland’s Stockman’s Hall of Fame), have been
built.

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 Improving Implementation

The problem with many of these ‘big’ or ‘iconic’ projects is that they are
frequently undertaken more for reasons of prestige (personal, governmental,
organisational) than for reasons of function. Broad, ill defined ‘public’ benefits
are usually stressed in relation to these projects rather than any quantifiable
economic positives. Recent comments by the organisers of the 2006 Melbourne
Commonwealth Games in the light of its less than expected economic impacts
(Australian Broadcasting Corporation 2006b) highlights this sort of justification.
The emphasis was on the ‘profile’ the Commonwealth Games gave to Victoria
and, Australia, than its tangible economic benefits. Similar justifications have
been offered for numerous projects across Australia ranging from Queensland’s
Suncorp Football Stadium (a world class sporting facility), and the Adelaide-Alice
Springs train-link (a symbolic linking across Australia, see Brockman 2005).
Even scientific projects like the synchrotron project that Victoria snatched
(thankfully) from Queensland in 2000 (Baker 2003) have stressed the broader
scientific capacities of such a facility than its direct economic benefits.

‘White Elephant’ Projects

Many of these ‘big,’ ‘iconic’ projects too frequently degenerate into what has
been described as ‘white elephant’ projects (Scott 1992). ‘White elephant’ projects
are not only often large and expensive to build and take longer than originally
estimated, but also form and ‘prestige’ so dominate over function that the project
never performs satisfactorily either in terms of stated role, unclear as it is often
is, or financially. Moreover, what really make these projects ‘white elephants’
is that they become expensive to maintain because of poor design, confused role
and lack of what may be best described as a ‘business case’ for their very
initiation. These problems are most explicitly seen in those projects in the arts
such as art galleries and museums where even in the best of circumstances
purpose is often ill-defined and clear criteria for success, difficult to articulate.
Such buildings are characterised by a failure to meet anticipated attendance
levels and frequently need repeated and expensive refurbishments that often
cost more than their original construction. Scott (1992) reminds us of ‘white
elephant’ projects covering many other areas ranging from technology parks,
very fast train proposals, spaceports, to the famed multifunction polis.
Of course, ‘white elephant’ projects are not limited to the public sector. Examples
in the tourism industry include the construction by various entrepreneurs during
the late 1980s and early 1990s of numerous ‘prestige’ and ‘iconic’ resorts up and
down the Queensland coast. Most ran at a huge losses and were usually on-sold
several times at a fraction of their original development costs. Indeed, many of
these resorts today, although apparently viable, are only profitable in terms of
their operating, rather than full capital costs (Syvret and Syvret 1996) and have
become viable by considerable changes in their scope and range of activities.
Development of strata title units for on-selling has been one strategy used for

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 Overcoming the ‘White Elephant’ Syndrome in Big and Iconic Projects in the Public and Private Sectors

these tourism developments. So numerous are ‘white elephant’ projects that one
commentator suggested they were not limited to one off examples, but had
become a ‘herd’ that pervaded the Australian landscape too frequently (Scott
1992).

Problems of ‘Big,’ ‘White Elephant’ Projects and Project

Management
The important feature of these ‘big’ of ‘iconic’ projects is that many of the key
elements of good project management are downgraded, distorted or ignored.
These problems include:
• Goals both at the beginning, during and after the project remain unclear and
are dominated by post-project justification;
• Overt and covert political goals and political interference in setting the
project goals;
• Limited initial or independent evaluation of the project’s viability so that
expectations are exaggerated, over optimistic, or unspecified;
• Often supply rather than demand driven – the we can build it rather than
we need it, often expressed in the ‘build it and they will come syndrome,’;
• Poor risk analysis;
• Suffer from the ‘sunk costs’ mentality whereby even if project value is
correctly challenged, the project is continued because of previous investments
(financial, personal and political);
• Changing specifications during the project implementation phase;
• Budgets are poorly developed and expansive;
• Timeframes are compressed, uncertain, or established to meet election cycles,
with little accompanying consultation with relevant stakeholders;
• Poor project governance with little separation between project management
and project client resulting in excessive interference in both design, budgets,
and management;
• Long lead times so that their full impacts (and costs) are not appreciated till
project is nearly or fully completed and frequent changing goals;

Examples of Australian ‘White Elephants’

A number of projects undertaken in Australia have highlighted the problems
of ‘big’, ‘white elephant’, and ‘iconic’ projects.

The Port Adelaide (SA) Flower farm

The Port Adelaide Flower Farm (PAFF) project illustrates very clearly deficiencies
in project conception and definition.
On August 1988, the South Australian Minister of Local Government approved
the development by the Port Adelaide Council of a farm on the LeFevre Peninsula

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for the growing of native plants. The project became known as the ‘Port Adelaide
Flower Farm’. Work started in September 1988 but, after continual financial
losses in operation, the farm closed on 3 August 1995.
PAFF would have created much needed employment in the Port Adelaide area
at a time of significant economic recession. The aim was to successfully grow,
harvest and export Kangaroo Paw and Geraldton Wax flowers to Japan and
Europe with prospects of extending to the North American market (South
Australia 1997). The demise of the project after such a short time was a waste of
public money and resources.
PAFF provides important lessons, particularly for local government, including:
• PAFF was not only a new venture, but it was a new venture in a fledgling
industry. At the time, ‘no one had any long experience’ in the growing of
Australian native plants for the international cut flower trade (South Australia
1997). More importantly, this was not made clear in the project Business
Plan. The lesson is that government is not the appropriate vehicle for taking
such economic and technical risks, particularly with totally inadequate
research and planning;
• The Business Plan as presented to the Port Adelaide Council was deficient
in a number of areas. Financial projections were overly optimistic, significant
technical issues relating to the varieties of plants to be grown were not
addressed, the marketing plan was extremely ambitious and based on dubious
information and the risks associated with the flood-prone location for the
farm were not identified;
• The Business Plan set out a number of ‘wider social, economic and
environmental objectives for the project,’ but did not relate these to the
critical success factor – that the flower farm had to be commercially viable
for the project to achieve its objectives;
• Key project sponsors, that is councillors who were in office at the time, were
advised by consultants and council officers that the project would be
profitable and provide benefits to ratepayers and other key stakeholders.
They were not adequately briefed as to the significant risks associated with
the PAFF project. Failure to adequately assess project risks is a common
theme in the audit reports on public projects.
A key lesson from PAFF concerns the identification of a clear business need to
underpin public projects. In the mid to late-1980s councils were being encouraged
to be more entrepreneurial and to become less reliant on revenue from ratepayers
and government funding. While this may explain to some degree the willingness
of the Port Adelaide Council to embark on PAFF it does not justify undertaking
such a high-risk venture with totally inadequate research and planning.

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 Overcoming the ‘White Elephant’ Syndrome in Big and Iconic Projects in the Public and Private Sectors

Magnesium ‘Light Metals’ Project (Queensland)

For some time a light metals industry was mooted based in Rockhampton.2 It
was to produce magnesium for use in the car industry. However, no commercial
backer came forth. Nevertheless, the Queensland Department of State
Development pursued the project, despite advice from a major industry partner
of the project’s lack of long term viability, and even internal departmental
assessment that questioned many of the basis of many of the project’s underlying
assumptions. This critical view was echoed even more strongly by Treasury
assessment. In addition to these economic issues, there were technical concerns.
For instance, the technology for the production processes was not satisfactorily
resolved even as government funds started to be allocated to the project.
Nevertheless, both the Queensland and federal governments provided over
$300m worth of funding, though this was still not enough to attract major
commercial interest. The Queensland Government subsequently developed a
scheme to attract small investor support. Sadly, the project then collapsed with
reputed losses of $450m that has been borne by the two governments and small
investors (Cunningham 2006). Ultimately, it appears the project has cost taxpayers
alone $240m (Fraser 2004).
The magnesium project reflected all the aforementioned problems of poor project
management. It also highlighted what happens when projects are hijacked for
‘political’ purposes to meet electoral timeframes and how the lack of transparency
concerning advice, clothed as it was in the cloak of ‘commercial in confidence’
arrangements (de Maria 2002) in a public service, in this case the industry
department, lacking independence and too eager to please the government rather
than analyse.

National Wine Centre, Adelaide

The National Wine Centre in Adelaide was conceived and built for the purpose
of focusing national and international attention on the Australian wine industry
and South Australia as a principal wine-growing and wine-making state
(DiGirolamo and Plane, 2002). The business need as set out in the National Wine
Centre Act 1997 (SA), stated that the purpose of the centre was to conduct a
range of functions, ‘including the promotion and development of the Australian
wine industry and the management of a wine exhibition (South Australia 2002).
Under the Act a board of directors was established to control and direct the
centre with the board responsible to the appropriate Minister.
Construction of the National Wine Centre in Adelaide was problematical enough
with cost overruns and time delays, but those difficulties were overshadowed
by the crippling losses that the Centre made on operations subsequent to its
opening for business in early October 2001. Reports suggested that the centre
was costing South Australian taxpayers $50,000 per week, despite major cost

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cutting measures (The Australian, 2 October 2002). The South Australian

Treasurer, Kevin Foley described it as the ‘cash-burning’ National Wine Centre.
The original business need for the National Wine Centre could be questioned.
Less than two years after its opening under State government ownership,
operation of the debt-ridden facility was handed over to the Winemakers’
Federation of Australia. Eventually, on 1 July 2003, it was taken over by the
University of Adelaide for $1 million on a 40 year lease.
This project highlights the issue that public ‘icon’ projects are frequently
launched without an adequately identified business need. In fact, unlike
private-sector projects, taxpayer funded projects are frequently conceived and
defined to meet a political need or justification while the business need is cobbled
together to ‘legitimise’ the expenditure of significant public funds. This is not
to say that a political need is not legitimate, but the ‘what?’ and ‘why?’ questions
must be clearly stated and agreed by all stakeholders if large, complex projects
are to have any chance of proceeding successfully.

Hindmarsh Soccer Stadium Redevelopment Project (South

Australia)
The Hindmarsh Soccer Stadium Redevelopment Project (HSSR) provides another
important example of the dangers of inadequately defining the business need
of a large public project. In February 1994, the South Australian Soccer Federation
proposed to the South Australian Government that Hindmarsh Soccer Stadium
be upgraded to a 22,000 seat facility at an estimated cost of $22.5 million. The
redevelopment received bi-partisan support (SA Auditor-General 2001).
From December 1995, under the sponsorship of the new Minister for Recreation,
Sport and Racing, the scope of the project was increased. In the opinion of the
South Australian Auditor-General (SA Auditor-General 2001: 3) ‘that increase
was pursued without proper or adequate due diligence’. In June 2001, the total
cost of the redevelopment of the stadium was $41 million.
The business need identified for the redevelopment of the Hindmarsh Stadium
was to secure the staging of preliminary matches in the 2000 Sydney Olympic
Games. No alternative to the upgrading proposal ‘was given serious
consideration’.
The subsequent controversy over this project damaged the already embattled
Liberal government of South Australia. The difficulty for the government was
in providing sufficient justification for the escalation in the scope of the project.
True, South Australia acquired a soccer stadium of international standard (with
seating capacity for 15,000 spectators) and seven Olympic soccer matches were
played there in September 2000. From then on, however, Hindmarsh Stadium
was used for a limited number of National Soccer League (NSL) and other soccer
matches and trials with an average attendance of less than 3,700 spectators (SA
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 Overcoming the ‘White Elephant’ Syndrome in Big and Iconic Projects in the Public and Private Sectors

Auditor-General 2001: 10). Premier and State League finals attracted over 1,000
spectators with other events not achieving this level. Attendance has not
exceeded 5,500 and income generated by ticket sales has been far less than
required.
The South Australian Auditor-General (2001: 10) concluded that, ‘In economic
and financial terms, there is a very strong basis for concluding that the
Hindmarsh Soccer Stadium Redevelopment Project was not cost-effective’. The
political damage that was caused to the government and the relevant ministers
was severe. The apparent waste of taxpayers' funds was also significant and
increasingly apparent to the general public. So what went wrong?
First, the government committed to the expenditure of substantial sums of public
funds without adequate justification (business need). In fact, the Auditor-General
could not find that either the Sydney Olympics organisers (SOCOG), or South
Australian soccer officials had insisted on the redevelopment of the stadium in
the first place. The business need was never clear and the decision to proceed
was taken entirely by Cabinet on the recommendations of the relevant ministers.
Second, project management controls existed but were repeatedly ignored (SA
Auditor-General 2001: 11). The controls ignored included:
• inadequate feasibility study or cost/benefit analysis was undertaken;
• cabinet submissions recommending major contract and financial commitments
were ‘inaccurate and incomplete in material aspects’;
• an alternative to redeveloping Hindmarsh Stadium was not adequately
considered;
• Treasury instructions on project management were disregarded;
• FIFA and SOCOG requirements were inadequately defined. As a result, the
required minimum pitch size was compromised to provide for corporate
boxes and other non-essentials; and
• ownership and management issues were not resolved before the project
commenced.
The main lesson from this case was that proven project management practices
should have been followed to avoid fundamental mistakes. There was ample
evidence of previous bungled projects, but that experience was ignored. There
appears to have been a strong element of groupthink in the South Australian
government’s management of the Hindmarsh Stadium project. Once work started,
error piled on error, despite the then government being in considerable political
difficulty. Unacceptable risk was built into the project from the start, but the
government apparently failed to identify and analyse the risks and to manage
them effectively.

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 Improving Implementation

The Millennium Train Project (New South Wales)

The Millennium Train project was initiated on 8 October 1998 when the New
South Wales State Rail Authority signed a contract for the design, construction
and in-service management of 81 new suburban double-deck electric passenger
trains. These became known as the Millennium Train.
While the New South Wales Auditor-General (2003) found that the train
represented value for money, the project came in well beyond schedule and
considerably over budget. As at June 2003:
• capital costs had increased by $114 million or 24 per cent to $588 million;
and
• total project costs had increased by $98.4 million or 17per cent to $658
million.
The Millennium Train project highlights issues concerned with technically
complex and innovative public projects. Risk management is an essential element
of such projects, particularly where the number of suitable suppliers or
contractors is limited. This inevitably places the client (government) in a
relatively weaker bargaining position and the supplier in an almost monopolistic
position (New South Wales Auditor-General 2003).
The risks of achieving contract delivery requirements in the Millennium Train
project were significant but the New South Wales State Rail Authority and the
Minister for Transport were not provided with a risk management plan for the
Millennium Train. With an aggressive delivery schedule (prompted by
government election commitments to meet public transport service goals) the
risk was borne disproportionately by the client. As the New South Wales
Auditor-General (2003: 5) rightly pointed out:
… because governments cannot readily walk away from such projects,
even if difficulties arise, they necessarily carry significant risk for such
projects. Contract provisions designed to share risk with private sector
providers thus need to be robust and enforceable should the need arise.
An essential requirement in this type of project is that government contracting
authorities must be both competent and experienced. Private sector suppliers
in this type of project are commonly blessed with long-serving project managers
and contract administrators. Government managers and staff, on the other hand,
frequently occupy their positions for a relatively short period of time and may
lack the longevity and experience of their private-sector counterparts with
whom they must conduct complex project negotiations involving very significant
sums. The New South Wales Auditor-General (2003: 5) stated that:

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 Overcoming the ‘White Elephant’ Syndrome in Big and Iconic Projects in the Public and Private Sectors

… the restructure of the New South Wales rail authorities in 1996 and
a disruptive purchase environment at State Rail had some effect on the
Millennium Train project.
The lesson is that risk management plans must be adequate to protect the public
interest. Considerable information on public project management exists in a
variety of sources and governments should share expertise and experiences to
offset the disadvantage of public-sector employment policies and practices.

Melbourne’s Federation Square Project

Federation Square is situated at the corner of Flinders and Swanston Streets,
Melbourne. A major ‘icon’ project, the objective was to redevelop the site of the
old Gas and Fuel Corporation building to provide a range of recreational,
commercial, cultural and communication facilities. Project performance was
anything but satisfactory. The Square was opened in October 2002, two years
behind schedule but with all construction still not complete (Vic Auditor-General
2003). From an original estimate of $110 million when the Square was conceived
in 1996, the estimated cost rose to approximately $395 million by June 2002 and
by May 2003 had risen to $473 million, with work still required for completion.
The Federation Square project had major ’icon’ implications and was high profile,
located as it is at a major inner-city intersection. Accordingly, any difficulties
with the project were bound to become very public and reflect on the project
sponsors, the Victorian State Government. The project had its fair share of
difficulties including the other original joint venture partner, the City of
Melbourne, withdrawing and a requirement to change the status of a function
centre from privately to publicly-funded.
In his Report on Public Sector Agencies for June 2002, the Victorian
Auditor-General (2002: 4.21) reported that:
Two of the key drivers of cost increases included the adoption of a ‘fast
track’ approach to construction, whereby construction moved ahead of
the detailed design work, and the adoption of a complex and unique
architectural design.
These issues echo the experiences in the Sydney Opera House project almost 40
years before and yet they still bedevil public projects today. Significant risk
was obvious from the start of the Federation Square project, but risk management
still appears to have fallen far short of the standard required.
The Auditor-General reported in May 2003 (Vic 2003: 2.236) that the Federation
Square Management Pty Ltd’s ‘quantity surveyors’ have progressively identified
a number of major risks that could impact adversely on the latest estimated
completion cost of the Square. These risks, which represent ongoing project

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management challenges for the company, involve the potential for higher costs
arising from:
• cost variations associated with incomplete documentation;
• trade contract disruption and delay claims;
• managing contractor cost increases (due to further project delays);
• tenancy fit-out costs borne by the project;
• consultants’ fees and management delivery expenses;
• unplanned prolongation to completion of outstanding works leading to
additional costs for the project;
• latent design defects;
• operator initiated changes (post-completion);
• poor or uncoordinated workmanship; and
• failure to secure full reimbursement for costs of works undertaken on behalf
of major tenants.
The main lesson from Federation Square is that project definition and planning
processes must be improved, particularly for large-scale, complex ‘icon’ projects.
Prestige projects such as Federation Square have the capacity to create lingering
major controversy and to become a sinkhole for taxpayers' funds and maybe the
government of the day.

Parallels with Overseas Experience: The Holyrood Building

Project, Scotland
There are certain similarities between the Federation Square project and the
construction of the new Scottish Parliament House (the Holyrood Project).
Holyrood was an extremely difficult and complex project. The Auditor-General
of Scotland (2004: 8) commented that, ‘in the recent history of Scotland there
has not been a public building project as complex or as difficult to deliver as
the Holyrood project’.
In 1998, the client (the Scottish Parliament Corporate Body) required the new
parliament house to be built by mid-2001. In fact it was not completed until 20
months after that date while cost more than doubled from £195 million in
September 2000 to £431 million in February 2004. There is no doubt that the
resulting building is an outstanding facility and an ‘icon’ for the Scotland’s new
found independence, but the excessive cost could have been reduced by better
project management practices.
The Holyrood project was faced with a very tight and far too ambitious
construction program. The use of the ‘construction management’ method of
procurement and contracting was identified as the main reason for the significant
cost increases. In construction management the design is incomplete and
uncertain when construction starts, whereas in normal construction contracting
most of the costs are determined at the time when the contract is awarded. In
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 Overcoming the ‘White Elephant’ Syndrome in Big and Iconic Projects in the Public and Private Sectors

the Holyrood project, the Auditor-General (2004: 6) identified that, ‘design

development became a process of costing a developing design rather than
developing the design within a cost limit’. Given the high degree of uncertainty
and complexity associated with the various work packages, there was significant
risk. The method of contracting placed most of the burden for risk on the client
and not the contractors, and also left open the opportunity for contractors to
claim additional payment for time-related cost increases.
One of the main criticisms made by the Auditor-General of Scotland was in
regards to project management and control of the Holyrood Project. Leadership
and control of the project was apparently not clearly established (2004: 7). The
Project Manager (or project director) was the Chief Executive of Parliament who
should have been assigned clear responsibility for making decisions about
balancing time, quality (performance) and cost. The Auditor-General stated that
the client (in effect the Parliament) did not give the project director the
responsibility for managing the project. The report states, ‘in the Holyrood
project there was no single point of leadership and control’ (2004: 7). As a result,
the parties to the project could not agree on a cost plan and, when a draft plan
was prepared in late 2000, ‘it was an indicator of the costs rather than a reliable
estimate of the costs’.
The Scottish Auditor-General’s report identified a number of important lessons
for management of public-sector projects.
First, the form of contracting adopted should place the risk on those best able
to manage it. Using construction management methods the risks stay with the
client and not the contractors. In public ‘icon’ projects, the temptation exists to
err on the side of performance (including prestige and appearance) rather than
on cost and time. Consequently, public project sponsors should ensure that
appropriate measures including adequate safeguards are put in place to ensure
that construction costs do not ‘run away’ on technically complex projects.
Second, there is a need to ‘scrutinise the business need for a project at key stages
in its life-cycle, before key contracts are awarded, to provide assurance that it
can progress successfully to the next stage’ (2004: 8). In project management
this can be achieved by establishing key milestones or decision review points
where ‘go/no go’ decisions can be assessed and made.
Third, the Auditor-General of Scotland (2004: 9) recommended that, ‘In all
projects, care should be taken to put in place a payment regime that provides
incentives to contractors to perform against clear targets for quality, time and
cost’. In ‘icon’ projects this is especially relevant, as the practice has often been
to chase quality, prestige and performance, by committing funds well over initial
cost estimates.

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Fourth, there should be a clear distinction between the project sponsor and the
project director. This is particularly important where governments are concerned
as the political need is so inextricably linked with the business need. If big
projects are to be effectively and efficiently managed, there must be a clear
separation between project sponsorship and project direction or management.
There should be a single point of leadership and control for a project.
Fifth, to ensure that time, cost and performance targets are met, there should be
agreed project budgets, timetables and specifications. Key performance indicators
that can be used throughout the project to measure performance should support
these.
Last, the Auditor-General (2004: 9) emphasised the importance of adequate
project planning, particularly in projects where there is significant complexity
or technical risk, or when there is a tight schedule for completion. There may
be some political cost in establishing more realistic time frames for big projects,
but these costs are preferable to the death of a thousand cuts situation
experienced by governments as scandal-ridden projects struggle to completion.

The Project Performance Paradox

These cases highlight the very real problems of effective project management
in relation to particular types of projects. The paradox is that, despite long
experience in public projects, governments (and many private sector firms)
repeatedly make the same mistakes.
Why are the lessons of the past apparently not learned and applied in big
projects? One a New South Wales may be the ‘phenomenon of institutional
amnesia’ (Pollitt 2000: 5). Seeking to explain ‘the declining ability – and
willingness – of public sector institutions in many countries to access and make
use of possibly relevant past experiences,’ Pollitt offers the following causes:
• Constant restructuring of departments and institutions. As governments
and/or chief executives change, each one seeks to put their signature on the
administration (the ‘new broom’), frequently through the vehicle of
organisational change. One of the adverse effects of this is that organisations
and key people lose touch with experience and/or records that contain
important lessons.
• Changes in the form of record keeping, from one media to another, or to a
new and different operating system or software, may mean that important
information on lessons learned is lost or the location of the information is
forgotten;
• The decline of the concept of public service as a permanent career (to which
could be added the increasing politicisation of the public service). Thus
important project decisions may be made by managers with little or no
experience of past debacles and little interest in longer-term perspectives.

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• The embrace of ‘unceasing, radical change’, with its attendant dismissal of

the past and primary focus on the future.

Lessons for Project Management: Let’s Not Do it!

There are some important lessons in the history of big projects in Australia and
overseas.
First, in the conceptual phase of the project it is essential to establish and agree
the business need among all stakeholders. Failure to agree and accept the business
need is at the root of many poorly performed public projects. The business need
should be clearly distinguished from the political need (where appropriate) and
offered to stakeholders to obtain consensus before any planning is commenced.
Where a strong business need cannot be established and agreed, decision-makers
would be well advised to resist the temptation to proceed, but to seek
alternatives. A valid alternative is always to do nothing. If only the Queensland
Government had not persisted with the magnesium project despite the lack of
commercial partnerships, then the taxpayer would not have seen several hundred
million dollars wasted and small investors would not have lost considerable
funds they had so hopefully invested in a project seemingly guaranteed by
government.
Second, in setting up a project management structure, there should be a clear
separation between the project sponsor (often individual politicians or the
government of the day) and the project director/manager. The project sponsor’s
role is to provide political and other support to the project management
organisation, not to manage the project. The project sponsor should prepare a
project charter or directive and, in it, assign specific responsibility to the project
director for decisions on cost, time and performance. The Hindmarsh Soccer
Stadium Redevelopment Project provides clear evidence of the problems when
this distinction between project sponsorship and management is blurred.
Third, there should be increased emphasis on project definition and planning
to ensure that adequate consideration is given to how the project objectives can
best be achieved. The temptation to plan on the basis of ‘ready, fire, aim’ should
be avoided. Additional time spent in planning may not satisfy the need to appear
to be doing something, but it can provide an opportunity to consider how best
to award contracts, how to deal with complex, technically demanding projects
and how to identify, assess and manage risk. The Federation Square project
could have benefited from these basic guidelines.
Last, there should be an improvement in the procedures for identifying, assessing
and managing risk in big projects. A common thread of numerous adverse reports
by the respective auditors-general is inadequate risk management. Measures for
avoiding political embarrassment, an area where the public sector frequently
outperforms the private sector, are an inadequate replacement for disciplined

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project risk management techniques. There needs to be more realistic assessment

of the risks involved in big projects, not least because the costs of doing otherwise
are so great. The Adelaide Port Flower Farm highlights the need for this risk
analysis.

Some Reforms
All these issues highlights the need for some fresh thinking about the way new
major project proposals are assessed so that they do not turn into ‘white
elephants’. Flyvbjerg et al (2003: 7) concluded in their international survey of
poor megaproject management that:
… good decisions making is a question not only of better and more
rational information and communication, but also of institutional
arrangements that promote accountability … We see accountability as
being a question not just about periodic elections, but also about a
continuing dialogue between civil society and policy makers and about
institutions holding each other accountable through appropriate checks
and balances.
It seems that existing processes and institutions and now accepted norms in
public sector management are no longer adequate in ensuring effective project
management of major public infrastructure. Auditor general reports, as
highlighted in this chapter, do provide useful insights into what went wrong.
However, these evaluations are necessarily after the event. Nor can exhorting
elected officials to act in the public interest be effective. Such exhortations are
like asking children put in charge of a sweet shop not to eat the merchandise!
Treasuries certainly have the capacity to do the analysis, but treasuries are part
of the bureaucracy and face all the limitations that this imposes as has been
discussed above. As Ian Lowe (1992:142) suggested:
The crucial lesson to be learned (from white elephant projects) … is that
we ought to be able to do a better job of foreseeing problems. The need
is for improved foresight: an enhanced ability to analyse the future
impacts of our decisions and actions.
Others too, have stressed the need for improved long term policy development
processes in Australia, but these suggestions have focussed on the broader policy
framework (Marsh and Yencken 2004). The need, it seems, is to provide some
brake of the ‘Let’s do it’ approach in project initiation which while possibly
acceptable for entrepreneurs like Richard Branson of Virgin Airlines fame, are
so patently unsuitable for major long term public sector projects, and one suspects
most private sector ones.
While Lowe stresses the need to challenge some of the underlying rationale of
many projects such as the obsession with growth and faith in technology, what

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is also needed is some institutional renovation to better manage infrastructure

issues in general. This is especially needed at the state level where many
infrastructure decisions are made. Also, at the state level there are fewer and
less transparent processes of decision making, accountability and advice giving
than nationally.
Indeed, in many ways the problems in effective project management now so
evident in the public sector are similar to those that surrounded industry
assistance at the beginning of the 1970s. In those times there was a lack of any
real independent and public evaluation process of what industry assistance was
really costing the Australian public both directly in the form of subsidies and
indirectly in terms of extra costs to consume certain products. The solution was
the establishment in 1973 by the Whitlam Labor Government of the expert
based, independent Industries Assistance Commission (IAC), which has now
become the Productivity Commission Notwithstanding the potential narrowness
of IAC’s economic analysis, it gave the Australian public some insight into the
real costs of assistance across both the manufacturing and agricultural sectors
through a very public and consultative process (Rattigan 1986; Warhurst 1982).
John Howard (1976:12), when Minister for Business and Consumer Affairs in
the Fraser Government summed up the rationale for the IAC:
Most economic issues involve some kind of dilemma, some kind of
striking a balance and that is one of the reasons why it is important as
part of the process of arriving at decisions on industries, that you have
an independent advisory body such as the IAC to give government
advice.
While different state business groups have proposed an infrastructure council
composed of representatives of government and business, this smacks of decisions
behind closed doors between consenting interest groups. Such an infrastructure
council would lack any sense of independence or have any real research and
analytical capacities.
Another suggestion to tackle both the infrastructure selection issue, to improve
choice, ensure public involvement, enhance accountability and potentially
improve subsequent project management is for an expert, statutory base state
priorities commission.
Such a body would audit a state’s present infrastructure needs, identify gaps,
and make public recommendations for improvement. Done annually, this would
provide a report card on a state’s infrastructure needs and their overall
performance. In addition, such a commission could evaluate openly any new
proposals for new infrastructure or events and to provide a means for effective
consultation with both the business and wider community. It could provide
government with a convenient post box to which complex proposals could be

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despatched and so give everyone time to think, before acting. The government
could lay down priority areas and criteria that the commission would use to
determine priorities and make assessments.
Of course, a priorities commission could only provide advice to governments –
elected officials would have to make the final decisions. Nevertheless, such a
process would give governments a better means of making choices from a range
of projects that maximise benefits. It would also provide greater public
participation in decision-making, improve accountability and assist in more
efficient allocation of taxpayers’ funds on big projects.

Conclusion
‘Iconic’, or ‘big’ projects are an important component in infrastructure. They
can provide significant benefits and focus, but not if they are mismanaged and
do not meet clear performance criteria. Public cynicism towards politicians and
public organisations is reinforced when taxpayers see examples of where more
and more of their funds are seemingly squandered on projects that run seriously
over cost estimates and well exceed scheduled completion dates.
More importantly, the failure of ‘big’ projects to meet performance criteria
through poor project management can mean that an otherwise important ‘icon’
can present an ongoing reminder of the failure and inefficiency of public
administration. Successful projects on the other hand, while often not attracting
the same degree of spectacular media reporting as problematic projects, can
deliver the lasting economic and social benefits that were intended and build a
positive image for a government.
‘Good’ government is not just about having grand visions and building ‘big’
projects. These have their place, but ultimately, ‘good’ government is about
allocating funds in a timely manner to maximise benefits and meet real needs.
Project management is tools to assist governments achieve these goals, nothing
more and nothing less. Project management cannot make up for poor policy
choices and craven political behaviour. However, adherence to project
management principles and processes can help improve public policy outcomes
if it accompanied by the same features that improve all aspects of accountability
– transparency and integrity of process. Too often in the past the ‘Let’s do it’
approach, the obsession with project prestige and the electoral cycle driven
timeframe has so overwhelmed project management as to render it useless. The
result has been poor project conception, design and execution, resulting all too
often in ‘white elephant projects. This is bad policy and ultimately bad politics
when the money runs out, the roads become clogged and taxes have to be
increased to pay for urgent and overdue infrastructure repair.

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ENDNOTES
1 This chapter originally began with a focus on regional issues. Special thanks is given to John Wilson
who co-authored the original draft.
2 This case study is based on a report Mike Cunningham, a former Queensland State Treasury official,
in D. Moore, The Role of Government in Queensland: Report to Commerce Queensland, May 2006, Brisbane.

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