Focusing on European Airport Capital Project Effectiveness

Global airport executives are finding that IPA can assist them at better understanding practices that drive capital project effectiveness and system improvements.

At the European Airports Project Benchmarking and Research Consortium held in September 2019 in London, representatives of large and mid-size airports in the U.K. and Ireland indicated that they recognize the benefits of collecting project data and conducting research specific to airport projects. Airport industry participants expressed particular interest in governance practices, construction labor productivity, and cost performance outcomes for projects both large and small, including runways, parking areas, and baggage handling systems. During the day, one of the attending airports shared their own capital improvement journey with the participants.

The European airports capital projects consortium builds on the success of the consortium that gathered in Northern Virginia a year earlier. Most of the airport executives at last year’s gathering represented airport authorities in North America. European airport leaders at the London meeting “agreed that enlarging the consortium to include a wider representation of European airports is important to establish a robust understanding of the sector,” IPA Airport Capital Project Improvement Leader Maria Pinilla said.

IPA delivered several presentations during the European airports project consortium. The following topics were discussed:

State of Capital Projects in the Airport Industry in Europe

More than 300 known projects above US$5 million are ongoing, with investment mostly focused on expanding existing airports. With all this capital at stake, airports should aim for more efficient planning and delivery.

Project Governance

IPA’s capital projects research finds the average expected net present value (NPV) of a project degrades by 22 percent. Many things are outside of executives’ control, but one thing they can control is the quality of the work behind key decisions through a stage-gated process.

Role of the Project Sponsor

The project sponsor is the primary proponent for the project and owns the business case. Ultimately, project sponsors are accountable for the value of the project while balancing risk and reward. Project sponsors must make sure that the capital project has value to begin with and that the value is maximized and maintained over the project delivery cycle.

Drivers of Revamp Projects

Owners perceive these projects to be more difficult to execute than their non-revamp counterparts because of constraints in design, as well as work being done in a congested, operating environment. Because many of the airports in Europe have existed for almost 80 years, much capital investment is required to address smaller maintenance projects to keep these airports running smoothly and to address the needs of growing passenger volumes.

Key Principles in Contracting

Hiring firms to execute major capital projects is possibly the most difficult single aspect of project management. As a result, few owner organizations are consistently effective in their contracting strategies.

Moving ahead, IPA will collect airport data from consortium members starting with a series of brief surveys targeting specific subject areas, including project sponsorship, construction labor productivity, and governance. IPA will facilitate the data gathering and summarize research findings for participating airports. In the long term, we will continue to collect data that will be used to further understand what drives effectiveness in airport projects as well as begin to establish a benchmarking methodology for projects in this sector.

Additionally, the consortium provided a platform for airports to share practices specific to projects that was very valuable. Therefore, we plan to continue with the consortium, and will be working to enlarge the group and regions represented.

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