Megaprojects are on the rise, and delivering these multibillion-dollar builds is uniquely challenging, said panelists on April 29 at an event hosted by the Regional Plan Association, a development nonprofit focused on the New York, New Jersey and Connecticut region.
“It's the age of megaprojects. For sure,” said Jamie Torres-Springer, president of MTA Construction & Development, which manages the New York City transit agency’s capital program. “[We] recognize that we have to run billions and billions of dollars’ worth of work on a permanent basis, and we're building an organization in order to do that.”
Massive projects, from rail tunnels to computer chip factories, have myriad stakeholders and lengthy timelines that span political administrations. To gain and maintain public confidence, it’s important to manage projects wisely and reinvest in systems in order to demonstrate good stewardship of public dollars, Torres-Springer said.
Since megaprojects are long-term, they require long-term buy-in from counterpart agencies as well as community members to be successful, said Mike Shapiro, managing director of government relations at New York City-based investment management firm Blackstone.
“That means community benefits agreements with everything from environmental groups, to community groups, to housing groups, to make sure that the region and the location are sharing the benefits,” Shapiro said.
Managing risk
The magnitude and complexity of megaprojects can translate to mega-risk, but there are key ways to make these sprawling jobs a success.
First, the market can’t handle projects past a certain size, so it’s important to break them up into manageable contracts, said Kris Kolluri, CEO of the Gateway Development Commission, an agency representing Amtrak and the states of New York and New Jersey that manages the Gateway Program. Gateway is a $16.1 billion group of projects that will double capacity for the Northeast Corridor rail segment connecting New Jersey and New York City.
Communication with peers and awareness of each other’s projects so as to not cannibalize each other is critical, according to Kolluri. It’s also important to communicate with contracting partners effectively and respectfully.
“Every project is a public-private partnership,” Kolluri said. “It matters how we engage the contractor and the design community. We recognize that there's a lot of innovation available from the private sector.”
However, Torres-Springer pointed out it’s important not to have too many contracts, or things will slip through the cracks. He said the MTA is bolstering its project management capacity and is now sharing risk with contractors more effectively via design-build delivery methods.
“We love contractors, but if you put up any contracts that have too much work going on at once everybody points at each other and uses each other as an excuse,” Torres-Springer said.
Key considerations
Lack of sufficient labor and supply chain challenges continue to dog construction projects of all sizes, and megaprojects in particular soak up a large portion of an area’s labor pool. That’s why it’s critical to build relationships at the outset that will serve the project over the long term, said Shapiro.
“You need to partner proactively with a lot of the folks who are supplying and building the projects to ensure — whether that's through apprenticeship programs or other things — that you've got that pipeline of labor that can build the project,” Shapiro said.
Climate change is another growing challenge in planning and executing these projects, especially since much of the country’s patchwork of building codes aren’t up to date to handle current and future extreme weather.
The Hudson Tunnel project is, among other things, a resiliency effort to protect against future storms like Hurricane Sandy that could cut off Amtrak’s Northeast Corridor, said Kolluri. As the project progresses, the team is trying to make sure they minimize damage to sensitive environmental areas while ensuring the design will withstand future extreme weather.
“How do we make sure we try and build this project in time, so it is a solution rather than an afterthought? That is the challenge we have,” said Kolluri. “We’ve got to make sure we are aware of how do you prepare for eventual challenges that will arise with the rise of sea level, for example.”
Politics of megaprojects
Political changes at all levels of government have major implications for megaprojects. The $16 billion Gateway Program is a poster child for political risk: Backed by former President Barack Obama, former President Donald Trump killed an attempt to restart the project during his administration, while President Joe Biden revived it.
The Gateway Program is finally moving ahead with ample federal funding, thanks to a united political front — for now, Kolluri said. Still, he’s not resting easy until major pieces of the project are underway, making it difficult to cancel.
“What I've been focusing on for the last two years is to make sure that five out of the nine packages that make up the Hudson Tunnel project are getting to construction by the end of 2024. That is the ultimate insurance policy against a political bomb,” Kolluri said.
Sometimes that political risk comes from the community. Isela Bahena, managing director of infrastructure investments at Nuveen Infrastructure, a global investment management firm headquartered in Kansas City, Missouri, said that megaprojects need a short-, mid- and long-term communication strategy so that the public understands the benefits.
“One of the concerns that we have as investors is headline risk and making sure that the constituents are happy,” Bahena said. “I think a lot of these projects historically have suffered from, I hate to use the word, mismarketing, and there hasn't been enough engagement.”
