Major engineering projects: governance, risk and scope

Major engineering projects: governance,

risk and scope
Identifying stakeholders: public and industrial
stakeholders
Who are major project stakeholders?

When managing a major project it is important to consider the people involved in, or attached
to the project. In the next few sections you will explore how to identify and manage these
people in order to ensure the project is successful.

You can break down major project stakeholders into four key categories:

• public stakeholders
• industrial stakeholders
• financial stakeholders
• other stakeholders.

Government: Executive power

Government operates at a number of levels, including the government of nations (eg the government
of the UK), states (eg federal states), and cities (eg the municipal council). Governments are often
active stakeholders in major projects. In some countries, public infrastructure projects are funded and
governed by public institutions. In this scenario, the government can assume the role of sponsor
and/or client. The government undertakes specific responsibilities for the major engineering project
either directly or indirectly through institutions such as ministers and other administrations. In other
countries, governments have limited direct involvement in major projects: this is often the case in
liberalised countries. In this case, a government might only facilitate the development of the major
project.
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In general, governments pursue the following objectives in relation to major engineering projects
(adapted from Vinter et al 2006, p.3-4):

• to satisfy the national interest and have the project completed (to the government's
specification) as soon as possible
• to bring the project back into public ownership once the private sector has received an
acceptable return on its investment
• to have adequate safeguards and assurances that the project will be operated properly and in
the public interest
• to reduce or eliminate the need to use the government's own funds  to limit the undertakings
given by the state
• to be able to offer ownership and/or operation of the project to other private sector entities
should the original private sector participants fail to provide the required level of service or run
into financial difficulties
• to be able to regain control of the project itself or to bring it back into public ownership as a
matter of last resort should the private sector fail to provide the required level of service or if
the project runs into otherwise insurmountable difficulties
• generally to transfer risk from the public sector to the private sector.

Public agency
Some public major engineering projects involves public agencies providing specific services. For
example, public roads are managed by a devoted agency acting as operators. Similarly, hospitals and
prisons are infrastructures which public agencies tend to operate. Since these public agencies are
dependent on specific ministries (for example hospitals are linked to a ministry responsible for
health), they are considered to be an extension of the government.

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Assembly: Legislative power

Legislative power operates at a number of different territorial levels including: national parliament,
state-federal assembly, and municipal assembly. Major engineering project infrastructures are subject
to a variety of legal provisions including: public concessions, financing and banking provisions,
corporate law, taxes, construction law, environmental protection provisions and employment law.
These are just a few of a number of legal regulations governing a project. These laws are usually
issued by the legislative powers who operate at different territorial levels. Some major projects, or
infrastructure programmes, are so broad that ad-hoc legislation is issued by the legislative power.

Regulatory Body: Authority

Major engineering projects usually need independent regulatory bodies or authorities for their
successful delivery. A regulatory body is an independent administration specialising in different
technical issues which affect a project. They regulate aspects such as environmental protection or
health and safety. Regulatory bodies are technical-administrative institutions rather than political
institutions: they provide technical and administrative expertise. It is important that the regulatory
body is kept independent from the project to avoid a conflict of interest. In a nuclear programme,
there are a number of parties who have interest in the deployment of a nuclear power plant: there
may be a national strategic interest, and political powers (ie the government) may be interested in
promoting the new plant. Therefore, regulatory authorities must be kept entirely separate and not be
influenced by matters of strategic and economic interest. For example, it is vital to have an
independent authority focussing exclusively on the safety of the nuclear power plant.

Industrial stakeholders
Now you have considered the public stakeholders you can move on to consider the stakeholders
involved in the industrial aspects of the major project. These include different types of suppliers,
construction firms and contractors.
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Construction Firms
Major engineering projects usually involve several construction firms assuming different roles. Often,
the construction firm takes the role of prime contractor and assumes a project management role.
Sometimes a contractor also takes on the role of the sponsor or investor. Subcontractors are also
construction firms, but these are often smaller in scale in comparison with prime contractors.

Technology provider
Some major engineering projects involve a technology provider. These might be engineering
companies who own the intellectual property rights associated with a specific type of technology. For
example, in the nuclear sector, the vendor of a reactor (which is the technology provider) is a critical
stakeholder. In the oil and gas industry, international oil companies own patents for technologies
specialising in extraction and processing. You can see, therefore, the technology provider is a critical
stakeholder of the project delivery chain.

Process and manufacturing corporations

Usually, these corporations are involved in supplying a major project. Some of these corporations are
primarily involved in construction and they might supply materials such as concrete, steel, cabling,
pipes. Other corporations are involved in operations and might provide fuel, electricity, lubricants and
other input materials. Depending on the type of infrastructure created by the project, these companies
might also act as a client and operator: for example, in the oil and gas industry, a large refinery is
owned and operated by a process corporation.

Service provider
Major projects involve a variety of service providers. These services include some critical to the
delivery and operation of the infrastructure such as software support, telecommunications, logistic,
legal and financial intermediaries.
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SPE and Consortiums

Often, major projects involve the creation of ad-hoc organisations that are used to help manage
specific aspects of the project. These often relate to tax, accounting, risk management and financing.
A special purpose entity (SPE) or special purpose vehicle is defined as “a fenced organization having
limited predefined purposes and a legal personality (Sainati et al. 2017, p.58).”

A special purpose entity often represents multiple institutions and it assumes many roles which are
critical to a major project including: client, owner, prime contractor and operator. Typically, SPEs
represent multiple firms such as a group of sponsors and financiers or critical organisations in the
project delivery chain: these might be construction companies, technology providers, and critical
suppliers .Consortiums are similar to special purpose entities and are widely employed to bring
together a variety of industrial stakeholders who share specific risks and responsibilities. The
difference between SPEs and consortiums is a legal technicality. Special purpose entities are
incorporated organisations while consortiums are not: this difference has implications in terms of
taxes, financing, accounting and risk management.

Please refer to the glossary to check any terminology you are unfamiliar with: Glossary of Project
Management Terms

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