Large construction projects tend to be complicated — and the project to develop a high-speed rail transit system in the state of California is no exception. California’s high-speed rail system is a publicly funded project that is designed to run entirely on renewable energy — electricity supplied by renewable sources of energy such as solar (California, 2022). The hundred-billion-dollar-plus rail system will first stretch from San Francisco to Los Angeles, allowing for the distance to be traversed in less than three hours by eclipsing a travel speed of over 200 miles per hour (California, 2022).

 

Ultimately, the rail system will be extended to other parts of California such as Sacramento and San Diego — totaling approximately 800 miles. The rationale or desired outcome of this project is multifaceted: connect the largest regions of the state; reduce the amount of traffic and pollution to facilitate a cleaner environment; contribute to economic growth and job creation. Overall, the expansion and modernization of the rail system are intended to meet the transportation needs of California for the 21st century — however, a project of this size and complexity will undoubtedly face risks to its progress that must be confronted with best practices under project management. One of these best practices falls under the knowledge domain of risk management, as there are numerous risks — known and unknown — associated with the construction of a high-speed rail transit system. While recognizing the intersection of other knowledge domains, the management of risks facing high-speed rail construction explains some of the issues currently confronting this project in California — and why some experts argue the project has gone off the rails.

The reasons why a project fails are numerous. Challenges contributing to project failure — that must be overcome for the project to succeed — typically arise during the Ideation, Initiation, Preparation, Implementation, and Transition or Closure Phase (Wu, 2020, p. 87). Notably, effectively addressing project risks is one such challenge. When considering project risks, it is important to distinguish between risks and issues — as well as positive (opportunity) and negative (threat) risks. Risks refer to uncertain future events or conditions that can have either a “positive or negative effect on at least one objective” if they occur (Canvas, 2020). Often, a risk is a likelihood “that an objective will not be met” (Canvas, 2020). The realization of a risk transforms it into a problem or issue for the project (Canvas, 2020) — therein, project issues are certain realities that must be addressed in the present in order of impact. Risks that are characterized as positive provide opportunities for the project to be even more successful. Positive risks are meant to be taken advantage of to catapult the project forward, whereas negative risks threaten to undermine the project and should be mitigated or avoided.

Before the formation of risk response strategies, a risk assessment is performed to address the probability and impact of project risks. Relying on expert counsel, the risk assessment will objectively lay out project vulnerabilities — and tracking risks and issues will create space for contingency measures to effectively respond. Risks are to be organized via a risk register and a risk management plan for a structured “systematic decision-making process” to strategize, assess, monitor, control, and document risks (Canvas, 2021). The risk register describes the risk and provides a “quantitative or qualitative analysis of risk, the probability of occurrence” and the severity of impact (Wu, 2020, p. 85). The likelihood of a risk’s occurrence and the degree of its impact are weighed to determine “top-level risks” that most endanger — or potentially benefit — the project (Canvas, 2020). When identifying “top-level risks” (Canvas, 2020), a risk breakdown structure (RBS) is an effective tool for categorizing “risks at various levels” (Wu, 2020, p. 190) and an RBS aids the risk management plan. As the life cycle of large and complex projects progresses, various broad and generalized risks arise at the “environmental, industry, business, organizational, or product level” — whilst at the project and project management levels, risks become increasingly “specific and detailed” (Canvas, 2021). As such, the number of risks facing the development of a high-speed rail transit system is equally as large and complicated — making effective risk management all the more necessary.

Planning for risks on large and complex projects is challenging due to the difficulty of predicting the occurrence of risk events that are “beyond the view of the project team” (Wu, 2020, p. 187).

This is especially true for California’s endeavor to develop a high-speed rail system. Nonetheless, risks to the project must be planned for — known or otherwise. When it comes to risk management, this function must be more than mere “compliance with a bureaucratic exercise” (Azevedo et al., 2014, p. 368). Treating the assessment of risks as a rudimentary task, rather than an essential element of project success, is why so many organizations report ineffective risk management (Azevedo et al., 2014, p. 368) — and also why countless projects fail (Canvas, 2021). When it comes to construction, it is necessary to value the management of risk given the “uncertain” future awaiting the launch of any new project (Azevedo et al., 2014, p. 368). Whenever a new venture project is conceived, the initial phases of the project life cycle are always the riskiest because project goals are significantly impacted by “decisions made during this stage” (Azevedo et al., 2014, p. 368). Therein, the development of the sustainable California high-speed rail system — to connect the largest regions of the state, reduce the amount of traffic and pollution to facilitate a cleaner environment, and contribute to economic growth and job creation — faces many uncertainties.

            Generally, construction projects are defined by a lack of uniformity — they come in all shapes and sizes (Azevedo et al., 2014, p. 368).

Additionally, construction projects are typically “non-serial” in their production — resulting from how unique the “typically custom” products are (Azevedo et al., 2014, p. 368). For example, some construction projects — like the building of a high-speed rail system that stretches across a state — are a once-in-a-lifetime affair; the likelihood of the project repeating itself is low. Moreover, construction projects are implemented in “dynamic, uncertain, and complex” environments that often suffer from a climatic dependency due to fluctuations in the weather (Azevedo et al., 2014, p. 368). The various stakeholders invested in these projects often hold interests “that are not always convergent” — and project responsibilities are outsourced and divided “among various vendors” (Azevedo et al., 2014, p. 368). Finally, such projects usually endure a “long period of development” (Azevedo et al., 2014, p. 368) — and the totality of these standard elements reveals the “high degree of risk” associated with construction (Azevedo et al., 2014, p. 368). These elements also demonstrate the critical need to plan for risks — to rely on expert counsel for the construction of a risk register and risk management plan. In doing so, project vulnerabilities that are known and unknown to construction — the probability and impact of identified risks — can be anticipated and tracked to devise timely and flexible response strategies.

Making the project more “transparent, defensible, and demonstrably improved” by better decision-making (Azevedo et al., 2014, p. 368),

the knowledge domain of risk management has been used to hypothetically assess the development of the California high-speed rail system and the numerous risks confronting it. Examining the construction of the high-speed rail system from a project management perspective, several risks were documented across seven stages of this project’s life cycle. During Stage 1: Project Initiation, there was a good possibility that key stakeholders — such as congress and the public — might not approve of all elements of the project plan. Stage 2: Identify Preferred Alternative & Begin Preliminary Design, recognized that the size and complexity of the construction project might lead relevant federal agencies to find alternative drafting of the Environmental Impact Report/Statement (EIR/EIS) time-consuming — potentially causing delays to the original project schedule. Stage 3: Environmental Clearance, Prepare for Pre-Construction, the United States Environmental Protection Agency (EPA) might freeze or reject the construction project due to environmental concerns. Stage 4: Early Works & Right-of-Way Acquisition, land and environmental permits from federal agencies might be delayed or canceled in response to political protests from residents or environmental activists.

For Stage 5: Procurement for Construction, if the project is frozen by the EPA or suits in courts of law, there might be a delay in the awarding of construction contracts. During Stage 6: Final Design, Construction, Testing, and Commissioning, California is subject to natural disasters such as earthquakes and wildfires that might impede construction and cause delays to the project schedule; inflation might cause project funds (costs for material and labor) to dry up faster than expected — potentially forcing construction to stop temporarily until more funds are acquired; weather conditions might delay the start and/or completion of the project; the rail system might not pass quality or safety inspections, leading to a delay in the completion of the project as adjustments are made.

Finally, in Stage 7: Project Close Out, the Covid-induced supply chain crisis might slow down construction of the rail system due to a lack of resources — delaying project completion and transfer from the contractor to California High-Speed Rail Authority; the body directly overseeing development.

These aforementioned, hypothetical risk scenarios play out in the construction industry where the concept of risk management “is a less popular technique” (Bahamid, et al., 2017, p. 1).

Nonetheless, the construction business is characterized by a much higher level of risk than some other industries (Bahamid, et al., 2017, p. 1) — and operationally analyzing and managing construction-related risks poses an enormous challenge to risk management professionals in the construction field (Bahamid, et al., 2017, p. 1). When risks are not managed well, or when it is not possible to predict or plan for every risk that might afflict a project, the risks transform into issues — problems that must be addressed, or else the project will be severely hampered or outright fail. As such, issue management pursues the goal of successfully resolving problems, removing obstacles, and addressing real — not hypothetical — concerns (Wu, 2020, p. 85). As opposed to risks, issues have a probability of 100% because they either have already occurred or are still occurring (Wu, 2020, p. 85). Akin to a risk register, a log is made for issues affecting the project in order of “urgency and importance” (Wu, 2020, p. 85). Just as there are contingency measures and risk response strategies such as mitigation, avoidance, transference, acceptance, enhancement, exploitation, and sharing of the risk (Wu, 2020, p. 198), ways to address issues or challenges are planned for and documented too — and while project managers are originally responsible for issues affecting the project, primary ownership of issues should be assigned to “trusted team members” (Wu, 2020, p. 85).

Examining the construction of the California high-speed rail system from a project management perspective, several issues arose across this project’s life cycle. Many of these issues are challenges that the project has struggled repeatedly to overcome. As an issue or challenge, the project scope is suffering from unknown factors during construction due to the large size and complexity of the California High-Speed Rail System project — and this is increasing costs by extending project requirements and the timeline (Vartabedian, 2022). There are supply chain issues with ensuring that the appropriate resources arrive on time and inadequate numbers to avoid project delays (Vartabedian, 2022). Procurement issues have arisen as it has been difficult to acquire the necessary vendor resources and materials needed for development — and there are issues with ensuring the capabilities of the vendors match the needs of the project (Vartabedian, 2022). There are also governance issues related to the support of political bodies and other stakeholders with a say in project requirements (Vartabedian, 2022). Finally, issues stemming from a lack of funding have made it difficult to progress the project according to schedule (Vartabedian, 2022).

Some experts argue, because of the arisen issues, that the project has gone off the rails. For example, fundraising has become an issue for the project — and this exemplifies one of the many overlaps between risk management and other knowledge domains. When it comes to specific stakeholders that are contributing to fundraising issues, the governor and state legislators of California are playing a central role in the rail dispute. The high-speed rail project has suffered “a decade of troubled construction” stemming from mishandled risks and growing issues (Vartabedian, 2022). Many experts see the struggling, hundred-billion-dollar plus high-speed rail project as a symbol of “how not to build a railroad” (Vartabedian, 2022). The project plan does not appear to have been “robust” enough (Vartabedian, 2022) — likewise, risks were not managed effectively. In addition, the relationship of risk to stakeholder management — and aligning project requirements with the shifting expectations of stakeholders — was poorly factored in. From schedule management, there was always a possibility that various stakeholders might lose interest in the project as time wore on — or that the interests of various parties to the project would evolve in ways that provided additional complications. Thus, the project schedule should have been managed better to incorporate the realities of any risk assessment.

The dispute between the governor and state legislators — and consequently, the state, California High-Speed Rail Authority, and the project team — was brought about by mishandled risks. Now, there is a battle over who will control the future of the project, how project efficiency can improve, and how to optimize whatever benefits are to be extracted from “the remaining funds” (Vartabedian, 2022). The main issue facing the project is funding — and the disagreement over how to proceed with funding “could be difficult to resolve” (Vartabedian, 2022). This is where issues of governance — and so, both stakeholder and governance management — come into play. A contest over who should exert the most control over the project’s future direction, as well as a need to ensure the interests of various stakeholders are not conflicting, is creating new risks and issues to handle. Most directly, the team must develop strategies to address a growing lack of confidence in the project that has contributed to a “legislative standoff”, fundraising hurdles, insufficient federal support, “utility relocations” that have derailed the bullet train and brought about construction delays, contractual missteps that have pushed back land purchases, and “competing California high-speed rail plans” that will determine a new direction for the project (Vartabedian, 2022). Granted the failures and many issues facing the effort to develop a high-speed rail transit system in the state of California, several things could have been done — and still can be done — to improve the project’s direction.

As the “largest single investment in state history” (Vartabedian, 2022), it is necessary to recognize the risk of mismanagement that often accompanies projects of this scale. Every knowledge domain is associated with a series of risks that must be planned for — not just those risks that are typically known to construction projects, but unknown risks as well. As described by a “former Federal Railroad Administration executive and World Bank railroad expert”, failures to effectively address cost and schedule risks have diminished support for the project by reducing “optimism about future performance” (Vartabedian, 2022). Thus, a greater emphasis needs to be placed on cost and schedule management too. Moreover, resource management must take into account issues with the supply chain as the ability to acquire resources will suffer from “inadequate and unstable” project funding (Vartabedian, 2022). Improving stakeholder management, as it pertains to navigating relationships with sources of funding, is also imperative. Likewise, communication management will support this navigation along with addressing the lack of “clear guidance from the Legislature” over the next steps of the project (Vartabedian, 2022). Communication is key as effective management in any individual knowledge domain — including the governance issues surrounding disputes between elected representatives, California High-Speed Rail Authority, and the project team — cannot be had without the sufficient integration of all project processes.

Because “integration is the key to success”, throughout each phase of the California High-Speed Rail project, risk management needs to coordinate with the other knowledge domains “from initiation to completion” to ensure the success of the entire project (Canvas, 2020). However, it is necessary to recognize how project sponsors are interested in more than just the outcome — project sponsors care greatly about “important risks and obstacles” facing the project (Canvas, 2020). This is explained by the saying that nobody likes surprises (Canvas, 2021) — especially if they are detrimental to business objectives. To that end, risk management instructs for the minimization of surprises and negative risks — but also the maximization of “value and gains from positive risks or opportunities” (Canvas, 2021). There were opportunities early on to communicate more effectively and foster closer relationships with stakeholders in government — but these opportunities do not appear to have been stressed enough. In addition, fostering strong relationships with the general public is essential for maintaining public opinion that influences government stakeholder support for the project. From this, the overlap of communication and risk management becomes clearer. Communication ties into managing risks in the early stages of the project because communication is key to relaying every concern that is held to the appropriate stakeholders.

The constant dilemmas the high-speed rail project has faced demand renewed assessments of the project risks and improved responses when a risk event arises. Any new information should be added to the original risk register — spelling out exactly what issues are currently threatening the project’s well-being; what risks remain and what issues might still yet arise. These risks and issues should be shared with the relevant stakeholders because the project managers — and yes, the project itself — cannot be effective without the support of key stakeholders (Wu, 2020, p. 87). As such, regardless of good news or bad news, it is important to let key stakeholders know how the project is doing early on so that the best-informed decision can be made as to how to proceed — whilst recognizing there might be few upsides to any decision. Risk management aims “to reduce overall project risk to a level that is acceptable” (Wu, 2020, p. 85) to the stakeholders involved — this requires the missteps and failures to be objectively shared. When the project sponsors are presented with an updated set of risks and issues, the risk register will also contain a risk response plan full of mitigation and contingency measures if the project is to move forward. From the outset of the project, risk management will be a priority. A survey will be conducted of the terrain for all the potential risks that could harm total project success. Risk evaluations should be supported by “expert judgment” — along with the qualitative methods of risk breakdown structures and work sessions with the project team to further communicate and qualitatively evaluate additional risk characteristics (Canvas, 2021).

Conclusion

Furthermore, risk management can be described as a field that is concerned with understanding, assessing, and managing “the world (in relation to risk)” (Aven, 2016, p.1). In that vein, the world of project management is increasingly Agile — and in understanding this shift, there are “Agile approaches for controlling risk” (Wu, 2020, p. 199) that can also improve the high-speed rail project going forward. An Agile approach to project and risk management recognizes the impracticality of attempting to precisely determine project scope (Wu, 2020, p. 199). Moreover, project scope — as was the case with the construction of the high-speed rail system — is subject to “change as the project progresses” (Wu, 2020, p. 199). A more agile approach to risk management relies on “smaller than traditional project teams” (Wu, 2020, p. 200) to address the shifting circumstances of projects by instilling greater flexibility in project processes. Greater flexibility is more apt for tackling project uncertainties than more traditional methods that are less responsive to change. Adopting an Agile methodology for the high-speed rail system to better address the shifting requirements contributing to project risks will support faster delivery of results, fast recoveries after quick failures, and ultimately a faster realization of value (Wu, 2020, p. 200). Agile, then, acts as a tool that is “suitable for changing circumstances” and aligns with the organization’s “strategic objectives” (Azevedo et al., 2014, p. 368).

Additionally, given the expert criticism that has arisen over the size and complexity of the project, any future project must ensure the project manager recognizes their responsibility to present strong leadership to the team. While the final say rests with the organization’s executives, the project manager is responsible for guiding the project to a smooth and successful conclusion as much as possible — granted the present circumstances. The project manager cannot afford to be solely optimistic — both skepticism and the “occasional cynicism” must be balanced against the prevailing positive outlook (Wu, 2020, p. 88). To skeptically analyze the situation — detached from the subjectivity of assumptions — is to lessen the possibility of reacting recklessly to evaluated data as the project is monitored for risks and issues. The skepticism that is incumbent upon a project manager is combined with the responsibility “to set an example” and be accountable to the project team (Wu, 2020, p. 88). In doing so, the project manager must exhibit a willingness “to challenge their team” with professional expertise — all the while being “culturally sensitive, respectful, and open-minded” (Wu, 2020, p. 88). If this project management approach had been adopted from the outset of the California venture, risks to the “largest single investment in state history” (Vartabedian, 2022) could have been avoided and the project would not have succumbed to the many issues that caused it to derail.

About the Author:

John Izuchukwu is a graduate student at the Feliciano School of Business. He previously earned a bachelor’s in International Justice from Montclair State University. He has an avid interest in the technological and international business sectors. See the author’s linkedin profile here: https://www.linkedin.com/in/johniz-izuchukwu2010/

References

Aven, T. (2016). Risk assessment and risk management: Review of recent advances on their

foundation. European Journal of Operational Research, 253(1), 1-13. Retrieved from

https://doi.org/10.1016/j.ejor.2015.12.023

Azevedo, R.C., Ensslin, L., & Jungles, A.E. (2014). A review of risk management in

construction: Opportunities for improvement. Modern Economy. 5(4), 367-383.

doi: 10.4236/me.2014.54036

Bahamid, R.A., & Doh, S.I. (2017). A review of risk management process in construction

projects of developing countries. IOP Conf. Series: Materials Science and Engineering.

Retrieved from https://iopscience.iop.org/article/10.1088/1757-899X/271/1/012042

California High-Speed Rail Authority. (2022). High-speed rail in california. Retrieved from

https://hsr.ca.gov/high-speed-rail-in-california/

Canvas Learning Management System for MGMT565 Fall 2022. (2021). Feliciano School of

Business.

Canvas Learning Management System for MGMT565 Fall 2022. (2020). Feliciano School of

Business.

Vartabedian, R. (2022, May 6). Governor, legislators won’t budge in high-speed rail dispute. Cal

            Matters. Retrieved from https://calmatters.org/politics/2022/05/california-high-speed-

rail-standoff/

Wu, T. (2020). Optimizing project management. CRC Press, Taylor & Francis Group.