BAE Analysis1.docx

MGMT 660 BAE – Denver International Airport Project Analysis Evaluate the implementation of the Denver International Airport Baggage-Handling System. What do you believe were the top 3 factors that contributed to the project's failure? Who do you feel is most at fault (Peña, Webb, DiFonso, others)? Identify "top 3" and the person most at fault. The three top factors that led to the demise of the DIA project in my opinion are – (i) strategic decisions changes, (ii) Local City rules to attract local talents – that resulted in over 400 independent contractors that were not properly supervised, and (iii) unrealistic project completion timeline that should have been revised to allow for a more robust planning due to the scope and magnitude of the project. Thus, at the start of the project, strategic decision changes made from allowing airlines to handle their own baggage handling to bringing in BAE to build an automated baggage handling system for the entire airport was problematic. Communications and project coordination through the city was done poorly – as by summer 1991 United Airlines had started construction of their own baggage handling system prior to BAE. Even when BAE came in, the Chief airport engineer – Slinger who as a result of his expertise had autonomy concerning the project from the City to make whatever decisions necessary without consulting the City. Additionally, through Singler’s assurance and former City Mayor Pena, BAE would have unlimited access to the airport to conduct its work. However, Slinger’s death, and takeover from Webb – new Mayor did not affirm the original stipulations under which BAE had accepted the project. This obviously resulted in problems – BAE having access to complete its work. For instance, once a United construction truck blocked BAE’s access to an area it needed to work, and attempts to work out so BAE have access to certain area was unsuccessful. Other instances such as harsh chemical including sealants were used in an area in the airport that BAE construction workers were working that forced the construction crew to abandon their work due to the harsh chemicals that were used at the time. Local City council rules to retain local talent forced BAE to award contracts to nearly 400 independent businesses that was impossible to monitor, and coordinated very well resulting in delays with the project. Lastly, failure to yield the advice of several experts concerning the project completion time line, which experts including BAE and others such as Patrone Associates, and Munich airport experts warned was too short a period to complete the project. And cited that at least, a couple more years be added to the project’s completion time line.

What problems occurred during the timeframe when Federico Peña was mayor? Given the constraints he faced when he succeeded Peña in November 1989, what should Mayor Wellington Webb have done differently? At the time of Pena’s reign in office as Mayor prior to November 1989, problems that existed with the DIA project was the (i) unrealistic timeline to complete the project; (ii) Rules to award contracts to local businesses – local talents that foreseeably were familiar with local city building codes and also to boost economic development of local businesses. However, the reality with the problem of awarding contracts to local talents resulted in about 400 firms being contracted that were poorly supervised and coordinated in their functions. Thus, resulting in delays with the project. Wellington – new Mayor that took over from Pena should have yielded to the advice of experts warning concerning unrealistic project completion timeline to iron out critical logistics issues and break-down in

communication with many stakeholders that was detriment to the project from the onset. In essence, Wellington should have reviewed the project’s plans for necessary changes – commitments from major airlines concerning the projects; fundamental construction plan changes (changes to the physical building design structure) that were made – which was not properly documented or widely “in sync” with various stakeholders.

As Gene DiFonso, what would you have done differently to avoid the problems faced at the end of the case? The contractual conditions for the agreement and the scope of work for the project were hammered out in just three “intense” sessions. Despite BAE having some level of understanding because of their contract with United Airlines, clearly the three sessions would not have provided sufficient time all parties to develop an in-depth understanding of what was involved, and what BAE was getting into for them to fully understand the risks BAE was taking. Thus, the schedule, budget and scope of commitments critical to the success of the project was lacking. And BAE’s decision to give a firm commitment to scope, schedule and budget transferred considerable risk onto BAE’s shoulders. This move indicates strongly that those in the highest level of BAE’s management structure had completely failed to recognize the level of risk they were entering into. Had they been more aware, they almost certainly would have taken steps to limit the risk and to find ways to limit the scope to something that was more achievable in the time available. Especially, knowing, and having advised the City administrators and leadership in the capacity as consultants prior to accepting the project contract that the project timeline to completion was “unrealistic” due to the magnitude of the project. How should DiFonso respond to Mayor Webb's decision to impose a $12,000 per day penalty and the requirement that BAE assume the $50 million cost of building a conventional tug-an-cart baggage system? While, I sincerely believe Di Fonso is partially at blame for accepting the project in the first place owing to BAE’s full knowledge that the set project completion date was unrealistic among other major issues. However, BAE is not at blame, and Webb’s decision to impose a $12,000 per day penalty in addition to BAE assuming a $50-Million cost of construction penalty was unjust. Under the original terms – made with former Mayor Pena and then Chief airport engineer – Slinger. BAE was to have “full and unlimited access” to completing whatever work that is required of BAE – to enable the company achieve the completion date of the project, which was not realistic anyway. But BAE wanted to try as a result of the persuasion from the Denver City and then Mayor Pena. Needless, to say that when Webb took over – BAE did not receive such access – and in many occasions was limited to completing required work. For instance, BAE workers were forced to abandon an area in the airport they were working due to work that was being done by another entity using harsh chemicals and sealants. Also, BAE construction employees encountered issues with United airline construction crews regarding blockade of access to areas where BAE crew needed to complete work. However, the United crew were uncooperative resulting in delays. In light of this fact, issues that BAE brought to the attention of City leaders. But little or nothing was done resulting in significant delays. Therefore, BAE should not be liable for any penalties as was threatened by Webb – then Mayor of the City.