1.0 Introduction and Scope
The New Wembley National Stadium was envisioned to be one of the largest and extraordinary stadiums in the world. It was designed to be constructed with a seating capacity of 90,000 and now stands as the most expensive stadiums ever built. The aim of the project was to build a state-of-the-art national stadium and sought to be the “home of English Football” and to host other large music concerts, Athletic games and Cup finals. Designed to be state-of-the-art with the longest single-span roof structure stretching to 315 meters covering every seat in the stadium and is also the tallest in the world touching 133 meters. Like most construction projects which want to established itself in the history books, the Wembley stadium (owned by the Football Association) also a victim of accusations, rumours and controversies. The Football Association(FA) had dreamt of the 2006 FA CUP finals, the most prestigious and largest UK soccer championship to be hosted at Wales due to the delay in construction.2 Though the Wembley Stadium today stands as the largest football stadium with a colossal arc standing 133 meters tall which can be seen from miles across London, the overly ambitious redevelopment project, was delivered £70 million over budget and delayed for almost one year.
2.0 Brief Overview of the Problems Faced
The client (owner) of the project for the construction of Wembley Stadium was Football Association which enlisted Wembley National Stadium Limited (WNSL) to manage the stadium. Multiplex Constructions was hired as the main contractor to provide the infrastructure and the Chief Designer was MacDonald. The primary scope of the Wembley stadium was to facilitate hosting of several events such as football, athletics and rugby. These sports have different requirements demanding unique field layouts and goal structures, especially athletics which needs a synthetic track around the entire stadium pitch along with other requirements. Accommodating three different sporting events in one stadium demands stupendous planning and not to mention extreme commercial and technical challenges. Due to such difficulties athletics was removed from the scope in 1999, and later in December 2001 several other changes took place, focused on expanding the hospitality suites and redesign of the north side of the stadium. This took about 8 months to redesign and increased the cost dramatically.There were several procurement issues which were found in the management of the project. A project management should set out procurement processes which dictates to treat all bidders alike and equal in order to avoid and opportunistic behaviour. Best procurement practices as what a high profile project is required to follow were not followed,(eighth report of session) and there were serious flaws in the procurement policies. In March 2006, a temporary roof support collapsed which caused further delays in work, following this another incident in January 2004 resulting in death of a worker and injuring few others causing further delays. Hasty decisions and last minute amendments to the planning procedures proved to be the major problems, especially when Multiplex rushed in order to meet unrealistic deadlines. Disagreements between Cleveland Bridge, the steel contractor firm and Multiplex further added to the delays.
3.0 Stakeholder Management
This section describes in detail the funding provided by different stakeholders for the Wembley project and analysis of the stakeholder management by the Wembley Project management. As of today The Football Association(FA), Department of Cultural Media and Sport, Sport England and The London Development Agency are the four key stakeholders. The following describes the funds provided by each of the organisations. Sport England paid £120 million via National Lottery funding. oThe Football Association (FA) provided £148 million Government funding included The London Development Agency which provided £ 21 million and Department for Culture, Media and Sport which provided an additional £20 million. o£426 million over Half the cost for the project was to borrowed as a loan from Westdeutsche Landesbank. oOther sources were Credit Sulsse First Boston providing £7 million and WNSL itself with £15 million.
3.1 Sport England
In November 1998 the Sport England provided £120 million lottery funds to the WNSL. This fund was subject to an agreement, which stipulated the conditions under which the money awarded and the public benefits expected to be
delivered by the project, Such as: to allot a certain minimum number of seats to the general public and no naming rights were to be sold to the stadium, to be able to host international athletic events by installing temporary platforms over which tracks could be laid. However in December 1999 it was decided that athletics were to be withdrawn from the plan, also until December 2000 the WNSL were unable to secure funds to proceed with the project.3 Two of the main clauses of the lottery grant were violated and Sport England had the right to withdraw their funding. This required legal actions to be taken and through several investigations and trials it was decided that £20 million was to be repaid to Sport England due to removal of athletics infrastructure from the plan. The repayment was to be done in instalments. In addition to the £ 120 million funding that WNSL received from the Sport England, they also received £20 million of taxpayers’ money by the London Development Agency. This amounted to £161 million of public sector funding. WNSL showed extremely poor dedication and management towards its primary stakeholder.
3.2 Public Sector Involvement
The Wembley project was definitely a private sector undertaking (The Football Association), however now the key stakeholders also involved public organisations. It gets complicated when public sectors get involved, and WNSL seemed to be completely unaware of the repercussions of the decisions they were taking. It was clear to Sport England that there would be no scope for them in the profits made by the project and the public sector interests would be subordinated because the banks would have an upper hand due to the enormous funding they provided.3 However it can be noted that effective stakeholder management lies in facilitating interests of all the bodies involved in the project, including the contractors and development authorities and the people who actually use the stadium. According to Newcombe the project should be managed for the benefit of all its stakeholders which include its clients, suppliers, owners, employees and local community. The rights of each of these groups must be ensured and these groups must be included in the decisions. The project managers must always act in the interests of the project and its stakeholders together in order to ensure smooth flow of knowledge and participation. The decisions made by the Wembley project management team failed to ensure equal rights to be given to all stakeholders and lack of mapping added to the problems.
3.2.1 Stakeholder Mapping
A clear model of the stakeholders and their involvement, along with a mapping model could have been adhered to effectively manage all the stake holders involved. The figure below clearly identifies the key stakeholders involved and the manner in which they are interlinked. This model only depicts the key players and does not include the subcontractors and underlying heads.
a) Private Sector Bodies
Football Association is the private sector non-profit organisation and the governing body of football in England. It was the ultimate owner of the new Wembley Stadium and also a beneficiary of any form of profit generated by stadium through its shareholding in the WNSL. oWembley National Stadium Limited(WNSL) is a private sector company solely owned by the Football Association, which was in charge of orchestrating the Wembley project. oMultiplex is a private construction company, which was responsible to provide the infrastructure and deliver the stadium.
Figure 1. Key Stake Holders in the Wembley Redevelopment Project. (Adapted from the model by Newcombe)6
b) Public Sector Bodies
Department for Culture, Media and Sport sets the policies for distribution of financial assets directed by Secretary of the State. It provided funding of £20 million towards non-stadium infrastructure of the project. oSport England was responsible for distribution of National Lottery Funds to sports in England. It funded £120 million and commanded certain rights within the policy. oLondon Development Agency is responsible for promoting economic development in England. It provided a funding of £21 million. oUsers are the general public, players and the event management firms which use the stadium for variety of purposes.
3.2.2 Interest/power matrix as a tool for effective mapping. Further Stakeholder mapping can be done using the interest/power matrix adapted from Low and Cowton as seen in Figure 2. This type of mapping would give the Wembley project management team a methodology which they could follow while including the stakeholders while making decisions. The grouping will enable the project manager to establish and maintain relationships with each type of stakeholder. Zone A defines those with little activities and little power to influence decisions and requires minimum effort. Zone B defines higher level of interest in the project but little power to influence decisions and need to be kept well informed. Zone C are those stakeholders whose level of interest in decision matters remains rather low but if their interests are threatened they can move to Zone D where the interest in project and the power they command are high.
Figure 2. Interest and Power matrix Low and Cowton8
4.0 Analysis of Procurement Management
On July 1999 WNSL opened the bids for the contractors for the Wembley National stadium. Several firms responded to the invitation, however owing to the budget constraints Multiplex was given the contract as it provided the best value for money. Multiplex was hired on contract for an agreed guaranteed maximum price of £326 million. The estimated time for construction which was agreed on contract, was to deliver the stadium in 39 months (starting in 2002).
In order to design the stadium, Foster and Partners and HOK Sport were hired. Sir Norman Foster was responsible for designing the arch and the complex retractable roof structure. In early 2000 the joint venture of the firms, Bovis and Mutliplex were the opted contractors, but Bovis backed out from the alliance when they realised that the budget offered for construction was not justified and realistic. The choice of procurement process rests on several factors relating to a priorities of the project and characteristics of the client . The procurement path will have a huge impact on the total cost of the project, the relationship and involvement of the project partners and the potential for disputes which would rise due to lack of communication. A good company will clearly understand and comprehend the complexities and costs associated with procuring resources. Multiplex was the agreed to be sole contractor for delivering the stadium. The lack of understanding and unclear design objectives led to the agreement with the erroneous bid of £326 million. It was but obvious that such a partnership based on wrong forecasts was bound to have problems and several controversies and disputes rolled out. The choice of procurement process rests on several factors relating to a project’s and characteristics of the client. The procurement path will have a huge impact on the total cost of the project, the relationship and involvement of the project partners and the potential for disputes which would rise due to lack of communication.
4.1 Major Flaws in Wembley Procurement process
The most important flaw lies in the procedures followed while formally recruiting Multiplex as the contractor. Due to the delays especially due to financial setbacks, an investigation was carried out to determine whether the bid was carried out in accordance with the formal procurement process. It was proven that a clear and comprehensive formal procurement process was not followed by the WNSL. The WNSL ran two separate tendering processes and also were involved in dialogue with Multiplex before the initiation of the bid for the formal procurement process. Such behaviours are against best practices to build a good relationship between two partners. Instead, the WNSL could have followed best practices and followed formal procedures by ensuring fair play and equal opportunity for all companies to bid on the project. In order to do so the company must be able to submit the bid documents consisting of subcontractors, their fees and tasks. Another issue which significantly altered the course of the process during the construction was the differences which exploded between Cleveland Bridge and Multiplex. Multiplex hired Cleveland as their subcontractor to provide steel fabricated equipments, used for the construction of the arch.
Effective project management would lie in building relationships during the partnership period. Cleveland did not trust Multiplex to pay them duly for the material they provided , and hence Cleveland had to withdraw from the project. Such atrocities could have been avoided by forecasting for a larger budget, in which case Bovis could have also been included in the construction. As its reputation precedes it Bovis and Multiplex joint venture would be stronger together providing successful supply chain management. Also unlike the Australian company, Multiplex who were a start up in the UK, Bovis had its roots strongly embedded in the UK industry with a sound knowledge of the construction in the UK .
Wembley Stadium project was a high value project which involved enormous amounts of money and also the fact that public money is used for funding makes it a delicate project over all. Wembley used the traditional procurement process/route (figure 3) which was absolutely unsuitable for the type of value it held. Traditional procurement process kept the project management under a short leash providing the procurement process little freedom to adapt to the variety of changes that arose especially in the design period. This led to the project being heavily over-budget and caused severe delays .
Figure 3. General procurement path.14
The following adaptations are proposed that could have been applied to the Wembley Stadium. oDeeper understanding of procurement process in the construction industry by the bidders. oTransparency and need for formal communication.
oFair play in bidding process and following best practices in the process. oComprehensive description of the necessary infrastructure needed and clearly strategise the plan using modern and advanced methods such as Balanced Scorecard. oMake sustainability and ethical based purchased the key principles. 5.0 Time and Budget.
The Wembley project was scheduled to commence on 2000 and complete by 2003. But due to several financial issues and disagreements among the stakeholders the project construction started in September, 2002. The opening of the stadium was rescheduled to be on 2006, and also promised to host the FA Cup Finals. Several tools such as Critical path method, MSProj etc can be used to handle project breakdown better. However small or large the project may be, the occurrence of time overruns is not unusual. Financial issue, disputes etc. resulted in the project being delivered about a year late, but could have been prevented by effectively managing time, and designing a realistic project duration. Lack of decisive reactions to managing costs would cause problems within project and increase the associated risks. Cost management involves estimating cost of all the resources required for building the infrastructure, procuring material and labour, travel and other supporting requirements. These costs are then budgeted and effectively tracked and managed to keep the project within the stipulated budget.7 The Wembley Stadium project management team while creating the cost budget for the project, created a forecast which was greatly off target. This can be attributed to the negligence and erroneous calculations by the Wembley National Stadium Limited’s project management team as they estimated the project to be £332 million.
The National Lottery provided £120 million and the bulk of this was used to purchase the Old Wembley Stadium.3 One of the core project criteria is cost, which mostly is a major consideration for the management. This should be an aspect which comes in the early stages of the project cycle. Cost management goes through certain distinctive stages: planning of resources, estimating costs, budgeting and budget control. This should be based on a comprehensive and skilfully created estimates. All these processes must coordinate and communicate with each other to ensure effective work progress. However even until December, 2000 the Wembley National Stadium Limited was unable to raise the required funds to proceed with the construction. The project was on the verge of falling apart and all the funds borrowed had to be returned. The Football Association decided that the project could not be supported by the limited funding they had, hence it needed other stakeholders to invest and be involved.
In response to this, the Secretary Of State for Culture, Media and Sport was contacted to request the Government to aid and support the project financially. After thorough review by project management consultants hired by the government, in September 2002 it was decided that the project would proceed with an additional funding of £41 million from Public funds. Such problems in the project led to its delay and the project expected to cost £757 million, more than twice as the initial estimate in 1998. In order to meet the large surge of financial needs to provide for the infrastructure According to National Audit Office analysis of the report generated by Patrick Carter. oA lump sum of the funds amounting to about £445 million were to be used for stadium construction. o £106 million was already used to initially purchase the Old Wembley Stadium. oInfrastructure costs summed up to £ 21 million.
oManagement and development costs roughly was 11% of the total costs summing
up to £ 86 million oThe financial costs and Contingency costs were about £ 100 million.
Figure 4. Budget Split
6.0 Wembley Stadium risk management.
The Wembley project management team did a fairly good job at assessing the risks and its effects. Their approach was however incomprehensive and lacked decisive and effective measures. Risk Management being one of the most important project management parameter must have been more thoroughly dealt with. Wembley project management team assessed risks broadly under two categories; Construction risk and Operational risk.
6.1 Risk and Its Assessment
Construction risk building the stadium takes longer or costs more than expected, potentially leading to a funding gap. oIf the stadium is delivered late, Multiplex will be liable to pay damages to Wembley National Stadium Limited up to a maximum which represents nine months delay, unless the delay is on grounds that entitle Multiplex to an extension of time. oWork to review the contract sought to minimise the risk of design changes and concluded that most of the circumstances in which Multiplex would be entitled to claim extra costs or time lay within. oWembley National Stadium Limited’s control. Examples include Wembley National Stadium Limited providing instructions late or making design changes. oIn the event that it fails to deliver as planned, whether through insolvency or another reason, Multiplex has a performance bond of £60 million in place to fund completion of the stadium. oThe bond is underwritten by an insurance company. Wembley National Stadium Limited will also retain £40 million of the fee due to Multiplex until completion has been certified. o The retention combined with the bond gives Wembley National Stadium Limited up to £100 million of cover in the event of contractor failure or insolvency.
There is a contingency provision of £30 million (£20 million with Wembley National Stadium oLimited and £10 million with Multiplex) to cover unanticipated costs. o In the event of the project getting into financial difficulty, Wembley National Stadium Limited could apply to Sport England for some of the funding conditions, such as those relating to naming rights and anchor tenancy to be relaxed.
Operating risk –
The stadium’s running costs are more than expected or revenue falls short of projections, undermining the project’s viability and Wembley National Stadium Limited’s ability to meet its obligations to the senior bank. oThe business case as a whole was tested by the banks as part of their due diligence process and reviewed by Mr Carter’s team, and found to be satisfactory. oThe financial success of the project relies predominantly on the sales of premium seats (which are expected to generate around 70 per cent of income). Responsibility for selling the premium seats has been contracted to IMG (a sports marketing agency), which will have incentives to maximise returns. oIn respect of the revenue to be generated by advance sales of premium seats prior to the completion of the stadium, Credit Suisse First Boston has provided the senior bank with a letter of credit guaranteeing up to £25 million in the event that there is a significant shortfall in the income generated. oThe Football Association has provided Wembley National Stadium Limited with an annual income guarantee. As part of this, the staging agreement guarantees that certain events will be held at the stadium. Under the agreement, the Football Association will forego all premium seat income and pay 32 per cent of general admission receipts to Wembley National Stadium Limited.
(Source National Audit Office)
6.2 Methods which could be adopted While such measure to secure the funds invested and promises made are nice and seem unbreakable, the risks associated with accidents during construction were not given much importance to. During the construction period of the Wembley stadium, several incidents occurred which highlight the failure in effective risk management. The main incidents can be summarised as follows oFirstly when the arch collapsed and caused further delay and huge repair costs. oDefective pipe work in a 12km long drainage system in 25 separate locations and threatened to flood the stadium with sewage water. oA 50 tonne steel raft fell from its temporary position, nobody was hurt but all workers about 300 workers were sent back with full pay. oThe death of a worker killed due a tower crane feeding a concrete pour collapsed. Risk avoidance in construction is impractical as accidents are bound to happen, accidents during construction is not uncommon, however risk identification and reduction techniques could have be effectively implemented by the management team. Apart from the traditional approach of “identifying, analyzing, controlling and reporting risk” in order to minimize the risk of failure of the project, a model for the causation of accidents (as in figure 5) during construction could have been implemented. Analysing previous projects in UK and the accidents associated with it, could have been researched and analysed in this design thereby coming up with contingency plans if any of any such incidents occurred. According to model in figure 5
Figure 5. Pattern of accident causation.
Describing the model bottom to top can be best explained using the crane incident. The undesired outcomes of an accident event could even result in the death of an individual, as seen in the mishap during the Wembley stadium construction, these events can be analysed and 5 types of proximal factors are identified, for example the crane incident (surely hundreds of such incidents could have occurred) could have occurred due to failure to properly position the crane and can be classified as inappropriate operative action. Lack of supervision could have also been a cause and can be classified as inappropriate construction control. What if the crane was fit for the purpose , this can be classified as inappropriate construction operation. Incident could have also occurred due to ground conditions, classified as inappropriate site conditions and finally it could have also occurred due to incomprehensive site detailing and classified under inappropriate construction planning. Distal factors represent the response upstream of the event that actually creates the situations in which the proximal factors are bound to be generated. By using such a model to investigate the causes and stipulate possible solutions to the risks which may have occurred, the Wembley project could have further narrowed down the risks and prevented huge losses and unwanted delays.
With every badly managed project comes experience. experience which can prove to be an asset to best practices within organisations. Key learning’s can be taken from the badly managed Wembley Stadium Project. Dysfunctional relationships can prove to be very fatal turning a smooth functioning project in utter chaos. Procurement processes need to be based on fair and just means, and also must develop processes which rely on partnering and performance as key criteria’s. Stakeholders must be kept well informed and constantly updated with regard to the proceedings. Time and budget estimates must be more realistic.
The scope of the project must be comprehensive and fixed. To sum up it can dictated that a project may fail for several reasons, not always due lack of professional project management skills. Every stage provides a variety of potential risks ranging from poor estimation, communication gaps and lack of management techniques. It can be seen for the Wembley Project that the project management team’s bad decision to adopt traditional approaches to contract the cheapest resources turned the project into a complete nightmare. Multiplex displayed very poor judgemental and professional skills in their management of the Wembley project, their managerial professionalism is to blame, besides bad forecasting of budget, crossing deadlines and poor communication abilities. Evidently is also led to degradation of their reputation in the market and this resulted in drop in share prices and almost tethered to bankruptcy. If only Multiplex had shown superior managerial and project management abilities in the construction of the Wembley Stadium by delivering it on time, they would have been the most apt and wanted contractors for the London Olympics who’s planning processes were in place at the time.