1165 København K
Tlf: 35 32 28 98 (mon-thurs)
Natural History Museum of Denmark — After budget overruns on the scale of billions of kroner for the Niels Bohr Building and the Maersk Tower, a new major construction task towers up on the horizon. Now the University of Copenhagen's new Natural History Museum of Denmark is to be excavated in the middle of the capital city. Is this at all possible on budget? Yes, says the government’s new building contractor. Perhaps, says a construction researcher.
The money has been raised for the new Natural History Museum of Denmark;
But before daddy or mummy can give their child’s sweaty palm a squeeze and step through the doors to the nation’s interwoven history of nature and Man in the University of Copenhagen’s (UCPH) magnificent setting, we need just one small thing.
The Danish government is to build it, and this is a terrifying thought for anyone who has followed the recent rounds of constructions on campus. The Niels Bohr building is particularly scary. It cost one billion too much and, if all goes well from here, opens in 2019 with several years of delays and a huge load on the future budgets of UCPH.
But the many problems that have been identified can also turn out to be an advantage for the new museum. The government has critically reviewed its construction methods and retraced its steps. When the scandal at the Niels Bohr Building was revealed in the autumn of 2017, the Danish government fired the responsible authority, the Danish Building and Property Agency. Instead it gave the construction to the Danish Road Directorate together with the government’s new Natural history Museum and two other projects (for the University of southern Denmark and Aalborg University.) At the same time, an auditor’s report was released about the debacle. It concluded that there was not one single factor which pushed the project over the cliff. It was a hodgepodge of mistakes in construction management and in risk management. A failed operation with multiple causes that they in the military call a clusterfuck.
At the Danish Road Directorate the task of picking up the pieces has been given to project director Erik S Larsen, an engineer and PhD with a number of years of experience from the engineering company COWI before he seven years ago got the job at the Danish Road Directorate.
With the transfer of the four difficult or troubled construction projects came 12 employees from the Property Agency and a more or less complete agreement with the main contractor for the new museum, the company Per Aarsleff A/S. The Danish road Directorate has thereby for good reason not been able to influence the museum project from the beginning.
There is good reason to be a cautious watchdog in this process.
Kim Haugbølle, Aalborg University
“This is one of the pre-conditions, and there may be some things I would have done differently, but the project seems sensible,” says Erik S Larsen.
But who are they in the Danish Road Directorate? And can they take care of the money?
“We have completed 30 major projects within the last 10 years, and with the exception of one, they have all been on budget. These are projects worth a total of DKK 17 billion,” says Erik Stoklund Larsen.
The Danish Road Directorate does not exceed budgets, he says.
“We just don’t do it. If you ask a member of staff in the Danish Road Directorate, they all say the same. This is not in their DNA. ”
They are paying for it
The DKK 950 million for the construction of the museum is comprised of:
• DKK 250 million from the Villum Foundation
• DKK 100 million from the Obel Family Foundation
• DKK 100 million from the Novo Nordisk Foundation
• DKK 100 million from the Aage and Johanne Louis-Hansen Foundation
• DKK 300 million from the University of Copenhagen
• DKK 100 million from the Danish Government, via the legal instrument 148
It is unusual that the university had found a large portion of the money itself.
In the Niels Bohr auditors report, the property agency was criticised for having too small an organisation to manage their complex construction assignments. Sources from the Niels Bohr project reported to the University Post that the agency was absent from the construction site for long periods of time. Erik Stoklund Larsen says that he will not fail through lack of manpower. The staff taken on from the property agency will be supplemented, he says, and the directorate limits the number of tasks they assign to consultants. The Danish Road Directorate will also maintain a permanent presence on the building sites:
“This is crucial, because there are so many decisions that need to be taken on a daily basis,” says Erik Stoklund Larsen and emphasises the words on a daily basis.
What does it mean for this project, that the University of Copenhagen pays a large part and has found the rest from foundations?
“Someone has gone through the trouble of finding the money for this. But it will not change how we approach this project. We take great pride in what we do, no matter who it is that is paying. We will continue to optimise the project financing right up until the day the museum opens its doors. We take just as much pride in being able to send money back, so they can generate new projects,” says Erik Stoklund Larsen. “We do not embellish projects. The customer gets exactly what they’ve ordered. ”
Kim Haugbølle, who is senior researcher at the Danish Building Research Institute at Aalborg University, reckons that it is a good question whether the museum will be built on time and on budget. But he says that several parts of the process are moving in the right direction.
“The building has already been postponed several times, and new difficulties are bound to occur along the way. But I also understand that they have now entered into an agreement with a contractor. This has happened in what is known as the negotiated procedure, where you have three contractors in who each makes proposals on how they would like to solve the problem. Afterwards, there has been a managed dialogue on their respective offers with clarifying questions, so that you can have projects estimated.”
So you get better and more realistic offers by doing it this way, but probably also at a slightly higher price?
“Yes, you get a more thoroughly prepared tender. I also notice, that they have found one, main contractor. This means that the main contractor – unlike at the Niels Bohr Building – will have the assigment of managing the subcontractors.”
Kim Haugbølle says that in the public sector the idea is prevalent that you can reduce some of your construction costs by offering up projects in separate subcontracts. But it is doubtful whether the benefits of this approach outweigh the risks to government, which then has to coordinate everything: “This was one of the things that went wrong at the Niels Bohr building.”
Another good thing, according to Kim Haugbølle, is that the project has been put through the Danish Road Directorate’s construction budgeting principle.
Danish Road Directorate also appears to be satisfied with this principle.
“Financial management is a matter of making reliable estimates of what the building will cost,” says project director Erik Stoklund Larsen. “Risk management is the second major part of it, where you identify the risks in the construction works, and put a price on them. This is the key point in relation to how we manage construction projects here, and other developers. Our risks are always accounted for.”
The price of the building and the price of the expected risks are summed up, and this is what the building will cost with a reasonable probability, says Stoklund Larsen.
“We need to go 10 metres into the ground in the museum construction, and this corresponds to two stories with high ceilings. We do research beforehand and find out where the water table is and this sort of thing. But there are some unknowns there. Remember that Copenhagen with created with moats and stuff, that has been refilled, and so it is a a bit of a mess. The most simple form of risk is that there is be a huge rock. But it can also be the water table shifting. You can’t identify these things 100 per cent.”
The Danish Road Directorate has gone through the risk scenarios in a number of workshops with experts on this type of calculation. “We really challenged each other on this. Afterwards, the task is to quantify things, to calculate what the different items will cost,” says Erik Stoklund Larsen.
What will they cost?
“It is a fairly large two-digit million kroner amount. When we make these kinds of estimates, we operate with a reserve fund, because we know that these things can happen.”
On the Road Directorate’s own projects a buffer for problems of either 50 or 30 per cent of the construction project (depending on how far in the process they are) is added to the budget. But here, the reserves have to be found within the DKK 950 million that has been put aside already. A two digit million kroner buffer is no more than about 10 per cent at the most.
If there is a shortage, there is only one place to go, and that is the end user
Project Director Erik Stoklund Larsen, The Danish Road Directorate
“In the natural history museum’s case, the prices coming in from contractors were relatively high. We are now therefore adjusting the project, so that it can absorb the financial risks that we see. You can either remove elements of the building, or change the elements you have,” says Erik Stoklund Larsen.
“In general, the functionality of the museum is in line with the plans that we work with, and in the way the museum originally required. But we are reviewing the details to see if we can optimize them at the moment. In this process, some things may be taken off the project, which hurt the project makers. But this is not something that you will be able to see.”
Erik Stoklund Larsen says that the reserve corresponds to the risk profile which the directorate sees in this project, and that the budget certainty is at a suitable level.
“A larger reserve would not have changed our approach, it would only increase the certainty of the budget. Whether we maybe would have wanted a larger reserve if we had been responsible for the entire project, is hypothetical. And it makes no sense to discuss it,” he says.
If the budget is overrun, does UCPH then have to pay for it?
“If there is a shortfall, there is only one place to go, and that is the end user. This is how it is for all the UCPH buildings. But this is, as I said, not something what we are going for,” says Erik Stoklund Larsen.
Unlike the Road Directorate, senior researcher Kim Haugbølle would like to discuss whether the reserve in the construction budget is big enough.
“If you ask me whether you can keep the budget on track for the new natural history museum, I would say, well, they have certainly made a number of initiatives. The primary contractor, the included reserves and the negotiated procedure – these all lead to a greater budget certainty. But there are issues which I do not know anything about. And these issues I do not know how the Danish Road Directorate has handled. They are about the high complexity of the project. They are building under existing properties in a garden, where there are all kinds of considerations, and then there is the question: Is this reserve, that you have included in the project, large enough in this specific case?”
The senior researcher acknowledges that the Danish Road Directorate has been given a fixed assignment.
“This has to be the way to deal with something like this. Imagine a triangle, where one corner is time, the second is quality and the third is finances. This is your management framework. In this case the financing is locked, so you can do no more. So you can work on the time, and depending on the economy situation it can sometimes pay off to postpone the time of construction, if the building market is overheated. The third option is to reduce the quality of the project, for example, by building a smaller museum, or by replacing the architect’s desire for some beautiful concrete with some boards of plaster. It is a classic situation in which the fundamental concept that you win a project for is too expensive to realise. So instead of a nice dome you end up with a rectangular box of standardised elements instead. This is what is called optimizing.”
There needs to be lots of love in the expression that the museum will take on.
Kim Haugbølle, Aalborg University
Does Kim Haugbølle believe it was actually the Building and Property Agency’s problem, that they let themselves be impressed by the architects’ wild dreams?
“This would probably be too hard on the property agency. But there is no doubt that they often requested a high architectural quality in the buildings they built. And there may well have been situations where they went too far in this direction. But if we did not have this type of client, that took the lead on high architectural quality, then we would live in a poorer country,” says Kim Haugbølle.
“The classic example is Utzon’s Opera House in Sydney. One of the world’s largest budget overruns, but also with hindsight, a building, that has not only put Sydney, but even Australia on the world map, and which is visited by millions of tourists every year. It’s an icon of a different world. ”
The Danish Road Directorate’s products are often more prosaic, says Kim Haugbølle.
“It’s all about roads and bridges, things that need to be there so we can use them, and that are typically not as sexy as building a museum of cultural history. But I know that the Danish Road Directorate has architects that design elegant lines with good visual experiences along the roads. Their typical assignments are more advanced than just pouring out asphalt, but at the same time more simple than building houses in special locations like the Botanical Gardens. This is a place that many people visit every year, and that many people have strong feelings about. There needs to be lots of love in the expression that the museum will take on.
As the problems in recent years have piled up at the Niels Bohr Building, the Maersk Tower, etc., the relationship between the UCPH and the Building and Property agency has turned sour. At the university, management had unsuccessfully lobbied different governments for years before the construction of the new complexes to acquire freehold ownership of their buildings. This would have let their own organization Campus Service be responsible for the renewal of the university.
The ill-feeling between UCPH and the Agency got so bad that it in the end hindered the Building and Property Agency’s decision making. Ernst & Young wrote in their report on the Niels Bohr Building that resources were being used on discussions about the process, and on individual cases, rather than on management of the project’s overall progress and finances.
Today, a small group of people from the Building and Property Agency have moved over to the Danish Road Directorate – people who have a detailed knowledge of the UCPH buildings. This can, according to senior researcher Kim Haugbølle play a role in the success of the museum.
“They’ve moved a good deal of people over from the property agency, who have been schooled there and who now are subject to a different logic in the Danish Road Directorate. This is a classic problem. If you look at this as a merger between two companies. Two groups, each with thier own tradition, culture and practice, now have to work together on a new common assignment. They will be able to learn from each other, but there will also be disputes. To the extent that you are able to get the ‘merger’ to work in a good way, there is reason to be optimistic. However, we also know from experience that mergers takes a long time. I have therefore a few reservations about the model. There is good reason to be a cautious watchdog in this process.
Needs to have tickets sold
The University of Copenhagen guarantees the operation of the Natural History Museum of Denmark with DKK 150 million a year based on an expectation that there will be 400,000 visitors. This is three times more than at the museum’s current premises -the Geological Museum, the Botanical Gardens and the Zoological Museum.
335,000 guests visited the nearby National Gallery of Denmark in 2017. And the Carlsberg Glyptotek and Christiansborg Palace both had around 400,000 visitors. For all sites a standard ticket costs more than 100 Danish kroner. According to a current statement from Statistics Denmark visitor numbers to Danish state museums have grown significantly over the last nine years.
“The operation is not something I have discussed with the university. […] However, we have had a discussion about how we can make the building as attractive as possible, so that you do get many visitors,” says Erik Stoklund Larsen from the Danish Road Directorate.
How can there be such a big difference between how things are done in the Building and Property agency and the Danish Road Directorate, which are both government agencies?
“In the Building and Property Agency, there has been a logic of finding the cheapest offer, and running things through contracts. And this is a logic you will find in the Ministry of Finance, where the property agency used to have its address. This is fine if you also have a good risk analysis and risk management. But if you don’t, you expose yourself to the risks that the property agency did for an extended period of time and in several projects,” says Kim Haugbølle.
If you ask in the Danish Road Directorate, whether it is good to work with the University of Copenhagen, the answer is unconditionally affirmative.
“Both at the Niels Bohr Building and at the Museum, we have had a very good cooperation with the University of Copenhagen. It is respectful and professional. We don’t always agree, but we always find a solution,” says Erik Stoklund Larsen.
“At the Niels Bohr Building, everyone who has been involved has been under pressure from how things went in recent years. But here we have a very good cooperation with UCPH, also on the site. I have only praise for the cooperation with UCPH,” he says but points out that things can go wrong even for talented people who have no other intention than to build well and on time. In the Niels Bohr Building’s case, the Danish government has reported the subcontractor Inabensa to the police, and has demanded more than a half a billion kroner in compensation.
We will be finished on time and on budget
Erik Stoklund Larsen, Danish Road Directorate
“The important lesson from the Niels Bohr Building is that you have to respect the money, and the time that passes. Decisions must be made quickly and efficiently. If you are unable to execute, a building project will run to a standstill. This is also why we have employees on site.”
And there is more to learn from recent years’ building projects,” says Stoklund Larsen.
“The message with the Natural History Museum of Denmark is that we will build to order. This will not be changed. If UCPH then comes along with things that need to be changed – and the world does chang – then we will sit down and work out what it will cost. Then we can say: Is this within what we can take care of? If we don’t agree, we don’t do it. ”
There are some people reading this, and they think, okay, we are building a museum. It is to be completed in 2022 and is to cost just under DKK 1 billion. Is this realistic? What impression do you want to leave them with?
“We will be finished on time and on budget,” says Erik Stoklund Larsen. “We do not set out on a construction project before we are certain of the budget and the time framework.”
UCPH management did not wish to participate in this article.