Sharon Doherty, who worked for BAA during the Heathrow project, reveals the secrets that led to successful completion

When BAA set out to develop a fifth terminal (T5) at Heathrow, it was bound to be risky. With estimated construction costs of £4.3bn, a serious overrun on time or budget would almost certainly have broken the company. It was, explains Sir John Egan, CEO at BAA from 1991 to 1999, "an alarming prospect for any PLC board".

Recent history is littered with high-profile projects—from the Jubilee Line extension, to the British Library, the Millennium Dome and Holyrood House—that failed to meet planned targets.

Many of these projects were paid for by the public purse, while over-optimistic predictions were driven by political expediency. If the true cost of the 2012 London Olympics had been public at the outset, it is possible the bid would never have got off the ground.

Almost all very large construction projects in the UK, and indeed around the world, exceed their budgets, run over their deadlines, or both. 
So here we are, in March 2008, and BAA seems to have pulled it off. Construction has not only been completed on time and to budget, but with one of the best records for safety ever achieved on a project this size.
It has taken over 22 years to get here. This includes one of the longest planning inquiries in history, multiple designs and a construction site in the middle of an operational airport.

If the planning inquiry had followed the original timescale, T5 would have been in operation since 2000 and Heathrow East—the next planned terminal—would also have been complete. Instead, travellers face a creaking facility designed to process 45 million passengers a year, but which in 2007 coped with more than 68 million. When T5 opens this month, capacity rises to 90 million.

While meaningful checks and balances need to be in place, the T5 process highlighted deficiencies in the planning system and resulted in legislation to reform the process for future infrastructure projects.

Three different design schemes evolved as planning hurdles were overcome and new safety and security requirements were integrated in response to world events (such as the King's Cross fire and 9/11). The final design by Rogers Stirk Harbour & Partners may be perceived as costly. But the focus on quality and the user experience will, explains Mike Forster, BAA strategy director, "ensure it has the potential to stand the test of time as a facility that will continue to look great and work better over the years."

So, how do you manage a project of this scale? There were three key ingredients: an intelligent client, integrated teams and courageous and determined leaders. Companies such as BAA have been learning what a client needs to do to ensure success since the 1980s. Big retailers are getting there with new store-builds, but there are plenty of examples of inexperienced clients who may be "one-time buyers" or who pare everything down to "lowest-price contracting", without appreciating the implications on a large and complex project.

BAA found new ways of addressing the issues with the ground-breaking and legally binding T5 Agreement, through which it accepted most of the risk, with the supplier exposure limited to loss of profit or insurance excess payments. Risks resulting from acts of God, industrial action, legislative or government intervention or failure to deliver from another supplier in the chain were mostly covered by BAA. As an additional incentive, suppliers would receive a guaranteed margin that ranged from five to 15 per cent, depending on trade, for delivering at least industry best practice. A team incentive plan was put in place providing additional bonuses if exceptional performance was achieved across stakeholder teams. The aim was to try to keep money in play rather than "paying for risk" (where dead money is built into suppliers' prices to offset risk).

The contract was based on a few simple principles. It managed cause, not effect. It focused on managing risk and on rewarding opportunities, and it explicitly addressed organisational and cultural issues. Noel Gaffney from consultancy and construction firm Mace explains: "The T5 Agreement helped suppliers make the right choice and deliver the T5 programme without worrying about the commercial implications. Commercially it was an open book, so we all knew where we stood, and received incentives to perform at exceptional levels, which normally meant having to work with other teams in a more collaborative way, solving problems together and worrying about getting the job finished."

BAA then went about ensuring the overall organisational approach was effective. There was a clear and publicly declared strategy; the organisation moved through the phases with the right capability in place. Governance was clear and supported by good quality data, provided by a rigorous approach to programme management. And the people agenda was taken
seriously, with investment in quality site facilities, behavioural safety training, and communication to engage the workforce and deliver improved productivity.

Outside T5, clients, consultants and suppliers would typically form independent teams, each delivering its own work package. On a project the size, complexity and longevity of T5, traditional ways of working would have made it impossible to manage risk effectively.

In practical terms, integrating teams included co-location, and ensuring a "best man for the job" approach. It meant having people work in the spirit of collaborative problem-solving instead of protecting their company interests; and always working to deliver, at a minimum, industry best practice and striving to achieve exceptional performance. The commercial terms set out in the T5 Agreement, with BAA holding the risk and incentivising team performance, enabled this way of working to operate.

Every large project will have a unique environment and risks to manage. The first winter of construction was harsh and put the team on the late production curve. This meant that, from the beginning, time was in short supply, a situation exacerbated when the challenge of £350m of extra costs arose. But the management team offset these over the following years by finding savings in the areas of people costs and materials, while increasing site productivity and avoiding other risks. Projects didn't always go to plan, most notably in the case of the technical challenges on Heathrow Air Traffic Control Tower. Fraud was detected on projects, suppliers were asked to leave, and there was a strike to manage.

But T5's legacy to BAA is a risk well managed that unlocks the regeneration of Heathrow. The legacy for the construction industry is that 50,000 workers experienced the safety culture, ideas and frameworks of T5 and are starting to demand the same standards as they move onto other sites.

Sadly, though, the ground-breaking T5 Agreement, while critical to the success of the project, doesn't appear to have made the impact its creators would have hoped for on the industry as a whole. Clients and their approach to risk management remain on a slow journey.
As Ray O'Rourke, chairman and chief executive of Laing O'Rourke, comments: "The industry needs five T5s to make the transformation we are all looking to achieve." Unfortunately, that is unlikely. 

Sharon Doherty was T5 and Heathrow HR and change director between 2002 and 2007. You can read more about the project in her new book, Heathrow's Terminal 5: History in the making,out in April from Wiley-Blackwell

Leadership lessons from T5

Managing the development of the new terminal required some luck and a lot of ability. Elements that led to the successful outcome of the project include:

Think big picture
The political, economic and social context in which the T5 concept operated over more than 20 years meant leaders needed to understand and shape a constantly moving big picture, while working with a complex and changing set of stakeholders.

Engender and operate with vigilant trust
People had to enter into different relationships around trust, and this was tested as the T5 programme moved from an idea into a live construction site spending £3m-£4m a day.

Drive for success despite the odds
The opening date was set in 2001 and the final budget in 2003. Both were shared externally with all stakeholders. These became the targets towards which all leaders had to steer their teams—in addition to their individual targets.

Keep stakeholders on-side and aligned with objectives
Effort was put into building obligation and trust in relationships. It was key to know stakeholders personally, understand their drivers and have a strategy for dealing with each of them. Also vital was having credible leaders who were aware how different players would operate.

Get the best out of the integrated team
A one-team mentality was created through employee engagement. This was illustrated by on-site posters, newsletters and worker induction programmes which said: "History in the making—one day I'll be proud to say I built T5." Andrew Wolstenholme, T5 construction director, and Tony Douglas, T5 managing director, led meetings with their opposite numbers at contractors and suppliers, building an understanding of what working in an integrated team meant.