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NCHRP LRD 86 3 MANAGING ENHANCED RISK IN THE MEGA PROJECT ERA Ghada M. Gad, Hajer Dawoody, and Omar Shabana, California State Polytechnic University, Pomona; Christine Ryan, Patricia M. de la Peña, and Edmund Caplicki, Nossaman LLP; and Edward Minchin, Celia Planeta, and Wren Weber, University of Florida I. INTRODUCTION Managing risks is central to ensuring the success of high- way construction projects. is has become even more evident as projects that drastically increased in size and complexity have become more common. Known generally to the trans- portation industry as âmega projects,â the number of such highway projects is on the rise. Merriam-Webster denes âmega projectâ as âa major project or undertaking (as in business or construction).â1 e U.S. Department of Transportation Federal Highway Administration (FHWA) explains that Prior to the enactment of the Safe, Accountable, Flexible, Ecient Transportation Equity Act: A Legacy for Users (SAFETEA-LU),2 projects with over 1 billion in construction costs were designated as âmega projects.â SAFETEA-LU lowered the monetary threshold to $500 million or greater, and the term âmega projectâ has since been eliminated and replaced with the term âmajor project.â3 âMajor projects are typically large, complex projects designed to address major highway needs and require the investment of signicant nancial resources.â4 Projects that are high prole, of signicant importance to the region, and require a signicant investment by the owner may be included in this category even if the cost estimates are under $500 million. ese projects are oen complex, engendering higher levels of risk and uncertain- ties, and requiring higher management skills, while involving a large number of stakeholders from public and private sectors.5 In addition, such projects may have signicant impacts on soci- ety and the economy.6 As of May 2020, the FHWA had recorded 1 Merriam-Websterâs Collegiate Dictionary, (11th edition, 2020). 2 Pub. L. 109-59, 119 Stat. 1144 (2005) and extensions. 3 Federal Highway Administration, Major Projects, https://www. wa.dot.gov/majorprojects (last visited Nov. 2021); see also, 23 U.S.C. § 106(h) (2021). is digest continues the use of the term âmega projectâ due to its familiarity in the industry. 4 Federal Highway Administration, Project Management Plan Guidance, 82 Fed. Reg. 23,485 (May 22, 2017). 5 Richard J. Capka, Federal Highway Administration, Mega projects - ey are a Dierent Breed, Public Roads, July /Aug 2004, available at https://www. wa.dot.gov/publications/publicroads/04jul/01.cfm (last visited Nov. 2021). 6 Serghei Floricel & Roger Miller, Strategizing for anticipated risks and turbulence in large-scale engineering projects, 19 Intâl J. Proj. Mgmt. 445 (2001); Mendel Giezen, William Salet & Luca Bertolini, Adding value to the decision- making process of mega projects: Fostering strategic ambiguity, redundancy, and resilience, 44 Transport. Pol. 169 (2015); Hanyang Ma, Saixing Zeng, Han Lin, Honyquan Chen & Jonathan J. Shi, e societal governance of mega project social responsibility, 35 Intâl J. Proj. Mgmt. 1365 (2017). 93 active major projects on its list compared to only 17 projects in 2004.7 Risk allocation becomes increasingly crucial and dicult for mega projects, as the potential time and cost implications of risks on such projects may be astronomical. us, proper risk allocation is key to preventing excessive damages, litigation, and project failures. ere is a wealth of research and literature on risk management and allocation on transportation projects generally.8 However, there is an evident gap of practical advice on how to best manage risks and allocate them in contractual documents, specically pertaining to the variation in project size, complexity, and alternative project delivery methods. is digest is intended to (i) identify changes in the risk proles of transportation projects attendant to the increase in size and complexity, as well as the evolving project delivery methods, and (ii) recommend specic risk allocation strategies for mega project contract development that consider statutory require- ments governing these projects. e research team for this digest followed a methodology that included a comprehensive literature review, and case studies of 35 representative mega highway projects of varying size, scope, complexity, and delivery methods from across the United States.9 e projects studied were diverse enough to cap- ture variations in (1) project sizes in dollars (from $100 million to $3.8 billion dollars), (2) project delivery methods design-bid- build (DBB), design-build (DB), construction manager/general contractor (CM/GC), and public-private partnerships (P3s) and, (3) geographic locations (16 states). e project scopes of work included, among other things, new construction, bridge replacement, and freeway lighting. e case studies encom- passed (1) content analysis of bid and contract documents and risk registers, and (2) follow-up interviews with project 7 See, Federal Highway Administration, Active Major Project Status Report, https:// waapps. wa.dot.gov/foisp/publicActive.do. (last visited Nov. 2021). 8 See, e.g., Gary Fick, Ells T. Cockler, Steve Trost & Lee Vanzler, NCHRP Report 652: Time-Related Incentive and Disincentive Provisions in Highway Construction Contracts, Transportation Research Board of the National Academies of Sciences, Engineering, and Medicine, Washington, D.C., 2010, [hereinaer NCHRP Report 652]; Larry omas, NCHRP LRD 74: Liability of State Departments of Transporta- tion for Design Errors, Transportation Research Board of the National Academies of Sciences, Engineering, and Medicine, Washington, D.C., 2017, [hereinaer NCHRP LRD 74]; Eric M. Kerness, NCHRP LRD 67: Permissible Changes in Scope of Work for Construction Contracts, Transportation Research Board of the National Academies of Sciences, Engineering, and Medicine, Washington, D.C., 2015. 9 See Appendix A for the list of projects studied.