The number of construction megaprojects is increasing, most of which are focused on the Gulf region, and it is estimated that the first construction megaproject, with a cost estimate exceeding one trillion dollars, will be completed before the end of this decade. Currently, several projects exceeding 100 billion dollars are underway – despite the fact that just a few years ago, projects valued at 10 billion dollars were considered megaprojects.
According to McKinsey, an astonishing 98 percent of megaprojects will experience cost overruns of more than 30 percent. In fact, 77 percent of large construction projects are delayed by at least 40 percent, which reduces average construction profitability each year. A megaproject is generally defined as ‘complex large-scale endeavors that typically cost one billion dollars or more, require many years for development and construction, involve multiple public and private stakeholders, and transform and impact millions of people.’ However, the problem with megaprojects is that they typically always exceed the budget. An example is the English Channel Tunnel – Eurotunnel, between England and France, which is located under the English Channel and exceeded its budget by a significant 80 percent, while the Sydney Opera House was supposed to cost only seven million Australian dollars, but the final price was over 107 million Australian dollars.
Budget Overruns
Although there are undoubtedly several causes contributing to cost overruns, the single largest factor is inaccurate cost estimates that lead to changes in orders and schedules. Misestimation of costs is so ingrained in budget increases among these large projects that governments around the world are introducing new cost estimation procedures, such as cost estimate validation processes or reference class forecasting, to improve the accuracy of cost estimates for megaprojects and the ability of companies to deliver megaprojects within budget without changing specifications or altering schedules.
Since the budgets of some megaprojects exceed the national GDP of many countries, it is not only companies that suffer when megaprojects go awry, but also the national economies themselves.
With this in mind, we have compiled an overview of the most expensive construction projects currently under development and the most common issues contributing to their rising costs. Of all the megaprojects identified to cost 100 billion or more, four are being built in Gulf states.
This includes the ambitious project of Neom City. It is a collection of futuristic places and cities being built in northwestern Saudi Arabia, expected to house 450,000 people by 2026. Part of Neom City is The Line, a city that has received the most attention so far as it is planned as a fully enclosed city 170 km long, 200 meters wide, and 500 meters high.
More expensive than Neom City is the EU’s trans-European transport network. The large-scale infrastructure upgrade is estimated at 600 billion dollars and includes the construction of railway lines, roads, shipping routes, and related structures in EU member states to improve long-distance transport.
Other megaprojects in the region include the entertainment and tourism complex Dubailand, King Abdullah Economic City north of Jeddah in Saudi Arabia, and Silk City in northern Kuwait, which will be home to the future tallest building in the world.
TEN-T Core Network (Trans-European Transport Network Core Network): 600 billion dollars by 2050.
The TEN-T Core Network is a network of key transport infrastructures in the European Union that is supposed to connect EU member states. The trans-European transport network consists of railway lines, roads, inland waterways, maritime shipping routes, ports, airports, and railway terminals. This ambitious project currently includes nine core corridors that reflect major transport movements and routes over long distances across Europe. TEN-T is not only the largest but also the most expensive construction project in world history – the estimated total cost is 500 billion euros (600 billion dollars). According to experts, eliminating bottlenecks and filling gaps in the core transport infrastructure will cost an additional 250 billion euros.
—
—
It is not surprising that the project is experiencing serious schedule and cost overruns. It started in 2013 and is not expected to be operational until 2030. According to a recent project review conducted by the commission, changes in design and scope over time have ‘led to a cost increase of 17.3 billion euros (or 47%) compared to initial cost estimates.
International Space Station (ISS): 230+ billion dollars by 2030.
The International Space Station is the most expensive single object ever built. In 1998, the project was originally budgeted at 150 billion dollars, making it the largest megaproject in the world at the time construction began. It is a joint project developed in collaboration with 15 different nations. The length of the space station is longer than a football field and was constructed piece by piece while the station was already in orbit with the help of astronauts. As for the price, it has only increased as the lifespan of the project extended and new equipment was added to the station. By 2030, the project is expected to be completed, and the total cost will be at least 230 billion dollars.
Madinat al-Hareer (Silk City) in Kuwait: 132 billion dollars
Planned as a solution to the dual problem of overcrowding and overloaded infrastructure in Kuwait, the city of Madinat al-Hareer (Silk City) is a central part of the New Kuwait 2035 program, designed to free the country from dependence on oil and improve connectivity between the Gulf and Europe and Asia. The city will be built in phases over a period of 25 years, with the first phase starting in 2019. The current budget of 132 billion dollars makes Silk City one of the largest and most expensive constructions in the world, but it is only a small part of the 1 trillion dollars currently being invested in the Gulf region’s infrastructure. The new Kuwait will house the new tallest building in the world, Burj Mubarak al-Kabir, which will surpass the Burj Khalifa in Dubai and reach 1001 meters. Although Kuwait’s vision for Silk City is bold, many are already questioning the feasibility of the project given the sheer size and cost of the megaproject. While the project was originally estimated to cost 86 billion dollars, the latest estimates suggest it has already exceeded the budget by 53 percent.
