by

Anders Adrem
adrem_anders@bah.com

Dieter Schneiderbauer
schneiderbauer_dieter@bah.com

Evert Meyer
meyer_evert@bah.com

Fadi Majdalani
majdalani_fadi@bah.com

Managing airports construction

projects
Providing an efficient managment framework for operators
 1

Managing airports construction projects

Introduction Exhibit 1
Number of on site employees at major European airports ( billion)

An airport is a very large, complex organization that 80 000

71 900
68 000
can mirror the size of a small community when on- 70 000

site employees are counted. An impressive and varied 60 000

53 881

number of activities are performed at an airport, ranging 50 000

from ground handling, to passenger handling, to com- 40 000

31 300
mercial activities, to transports, etc. As part of airport 30 000 26 000 25 000

operations, most of the activities are quite obvious to 20 000 18 000

the average person; however, one aspect of an airport is 10 000

usually overlooked that is that airports not only need 0

to manage air transport operations but also real estate Charles de

Gaulles
Heathrow Schiphol Barajas Fiumicino Gatwick Copenhagen

investments and construction projects.

Source: ATRS, company reports

Exhibit 2
Aircraft and passenger ows

Airside related activities

Lighting
Snow clearing

Approach Departure
Aircraft moving
Maintenance Fuelling
Runway/ ... Catering Runway/
taxiway Ground power taxiway
Deicing
...
Apron Apron
Terminal related activities
Airside
Gate Terminal Gate
Landside Landside related activities
Airport Airport
Baggage handling
transport transport
Retail

Parking Duty free Parking

Buses
Check in Trains
Airport info
Ground Ground
Car parks
transport transport
Cashiers

Source: Booz Allen Hamilton, annual accounts

2

Large operator of real estate

For all operations related to aircraft and passengers This holds also true in other regions with strong
to function efciently (see Exhibit 2), extensive infra- growth in air transportation, such as the Middle East,
structure must be in place and maintained. Airports where airports have committed to invest almost US
cast a huge footprint in terms of land and buildings, $30 billion in airport capacity over the next 10 years.
and this infrastructure demands daily attention. For For example, Dubai airport has undertaken an exten-
example, the new Terminal 5 at Londons Heathrow sive facilities expansion program, including a new
airport has a site area alone of 260 hectares (2,6 terminal and concourses worth US $2,5 billion; and
million square meters). An indication of the value of Doha is expanding its airport with a new terminal and
the real estate assets of an airport can be derived by runway worth about US $1 billion (see examples in
looking at the book value of the land and buildings of Exhibit 4).
airport operators (see Exhibit 3), which easily accedes
the one billion Euro mark for large operators. The space an airport commands is a function of its
products and offerings. For example, a growing airport
Exhibit 3 needs to adjust terminal areas and number of gates
Book value Land & Buildings, major European airport operators (and occasionally the runway capacity), and perhaps
( billions)
increase security levels (such as those seen after
12
11,0 9/11); and those changes entail changes to pas-
10 senger ow patterns as well as the purchase of new
9,0
equipment. Additionally, strategies to increase com-
8
mercial revenue involve reconguring terminal areas
6 to improve passenger ow and retail space.
4
The buildings and land areas of a major airport thus
3,1
continually change, not only as a result of upgrades
1,7
2 1,6
and restoration, but also as an effect of industry
0,5 0,3
0
changes and new strategic imperatives.
BAA AENA ADP Fraport Schiphol CPH TBI

Source: Annual accounts

Exhibit 4
Infrastructure expansion projects at selected Middle East airports

Strategy Total Invest Past CAGR Planned CAGR

Final decision on long-term expansion plan still under USD 5.5 % 5.4 %1)
Abu Dhabi consideration 330 million

Stated goal is to be the dominant hub in the regions USD 10.4 % 9%

Dubai Has begun an extensive facilities expansion program including 2.5 billion
a new terminal and concourses

Pursuing plans to expand its hub activities and capitalise on its USD 3.7 % 10 %
Bahrain geographic proximity to Saudi Arabia 158 million
Expansion covers new satellite, control tower and cargo facilities

Planning to expand as a hub for the growing Qatar Airways USD 4% N/A
Doha Expansion program includes a new terminal and a new runway 1 billion

Planning steady expansion based on the network and trafc of USD 1.4 % 19 %
Muscat Oman Air 200 million
Expansion covers extending terminal and parking

(1) ADP forecast

Source: Booz Allen research
 3

Why does construction at an airport differ from that

anywhere else?

Over the past years, Booz Allen Hamilton has seen When looking at current airport construction projects,
some very large investments planned and carried out specically on airside (i.e., after the security check),
by airport operators. These investments have not only Booz Allen found that construction costs can range
been an outcome of growth and increased focus on from 15 to 25 percent higher than what was esti-
commercial income, but also a result of the entrance mated as normal2 in the same region. So what is
of different airline carrier business models, which different when building at an airport, and what factors
the airports must adapt to in order to better serve affect costs?
their different needs. To be able to provide additional
space and products tailored to the different business Booz Allen has identied several airport-specic
models and to better serve the presence of a domi- drivers that increase costs, ranging from the dif-
nant carrier, some airport administrators believe that culties inherent to working in an airport environment
extensive infrastructure changes are necessary. to the challenges associated with managing different
stakeholder wish-lists.
Airports where very large investments have taken
place are, for example, in Munich, where an entirely Airside safety rules and regulations
new terminal is dedicated to Star Alliance1; and at
Charles de Gaulle, where a terminal is dedicated to An entrepreneur who is entering airside for the rst
OneWorld; as well as at Heathrow, where the new time will nd a number of obstacles that would not be
T5 terminal will be customized for British Airways. present if working elsewhere.
Although such large investments are not observed
on an ongoing basis, airports have a constant high First of all, the entrepreneur must factor the security
level of investment compared to their revenues (see element into the construction equation. All personnel
Exhibit 5). must display the appropriate badge to enter airside.
To obtain this badge, workers must be educated
Given that airports have extensive numbers of build- and undergo a security check to be cleared by the
ings and expansive areas that constantly need to be specic countrys security agency, which takes time.
maintained, refurbished, and / or expanded to meet Also, if the entrepreneur wants to drive a vehicle in on
the changing needs of the industry, construction airside, the transportation must rst be equipped with
projects are an integral part of airport operations. a special license; and the driver will have had to be
certied through an approved process.
Exhibit 5
Capital investment vs. turnover of major European airport operators
But once having gained access to the area, the entre-
CPH did during 1996 1998 invest in a new pier, a new
preneur faces other complicating factors. Before
1,0
0,9
baggage terminal, new cargo centre and a new Terminal 3
workers can get to the construction site in the
0,8

0,7 CPH
morning, they must factor in extra lead time because
BAA
0,6 they must undergo security checks at stations that
AENA
0,5
0,4
are often distant from the construction site.
Schiphol
0,3 ADP
0,2
0,1
Fraport
TBI
At airside, construction crews will also be in proxi-
0,0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
mity to enormously expensive airplanes (and entre-
preneurs seldom have insurance policies that would
Source: Annual accounts
cover potential damage) and a lot of extremely am-
mable fuel. This means that the entrepreneur has to
1 The construction of the new terminal was a joint venture between the airport take into account varied safety regulations that are
and Lufthansa.
2 By normal means constructing the same building in the same region, although
not encountered when working on landside, such as
outside the airport. regulations associated with foreign object debris /
4

damage or work with hot materials. The entrepreneur
must be fully conversant with these rules and regula-
tions and follow the direction that is often stipulated
in a hefty document called Airport Regulations.
In addition to the security and safety aspects of work-
ing at an airport, the entrepreneur must also take into
account commercial factors. An airport is often open
24/7, thus construction projects on airside cannot
interfere with the airports ongoing daily business.
Hence, any major operations must be carried out
when trafc in the airport is lower, which is usually at
inconvenient working hours (e.g., during night curfew).
An additional complication is that construction on air-
side seldom takes place in a secluded area. Its more
common for airports to expand or reduce existing
buildings / areas than build completely new ones (e.g.,
the new terminal building at Frankfurt airport).
The process of adding new space to existing build-
ings poses many difculties arising from establishing
the terms of the contract (i.e., which responsibilities
fall to the entrepreneur), ensuring new materials and
products conform with existing ones, identifying con-
nection points for installations, ensuring that the new
installations will work with the existing ones (opera-
ting systems / facility systems), etc. If construction is
planned to add to an existing building, stricter limits
for how the new area can be designed will come into
play the new construction must be faithful to and
coherent with the design of the older area.
All in all, working in an airport entails adherence to
rules and regulations that increase the lead times
and the costs.
stakeholders in the organization, all of whom want to
optimize the design based on different aspects that
are sometimes conicting (see Exhibit 6).
Although many agents have specic duties on the
project, they are not necessarily responsible for the
costs associated with those, which means that the
individual in charge of the project often has a hard
time ghting off the increased cost associated with
differing demands. Furthermore, given the size of an
airport organization and the high number of stake-
holders, it often takes a long time to reach an agree-
ment. Not uncommonly, changes to the design are
made well into the production stage, which is a large
cost driver.
High level of detail
Due to the complexity of designing new facilities at
airports, many airport administrators are tempted to
establish the exact design and specication before
engaging an entrepreneur. This means that when the
contractors become involved, they have very limited
freedom; almost all design elements are already xed.
Exhibit 6
Examples of how different functions drive general construction
requirements
Example implications for
Function Focus area
construction project
Area design that lets the pas-
Terminal Optimize the expected
senger go from point A to B in
coordination passenger ows
the shortest amount of time

Area design that forces the

Maximize commercial
Many stakeholders Commercial passenger to pass as many
sales
stores going from point A to B

Because of the large number of different activities Maximize exibility to

that are carried out at an airport, there are many dif- Trafc allow for different Complex exible solutions
coordination aircraft sizes and types driving costs
ferent stakeholders in a construction project. When, of travelers
for example, rebuilding terminals, several key func-
Separate ows from Extra areas and separation
tions need to be considered in the process. Usually Customs/
Schengen/non-Schengen needed for different type of
the specic project is owned by some type of facili- security
and arriving third country passengers driving costs
ties department within the airport that is responsible
Complex technical solutions in
for managing and developing all the airports build- Design Maximize passenger order to achieve the
ings and land. But for department to execute the experience extraordinary experience,
driving costs
construction project, it needs input from several key
 5

Because the airport operator has already predeter-
mined the exact specications, they seldom engage a
turnkey provider; instead, they engage a contractor for
each construction specialty with the view to keep costs
low. By planning for new development in this way, the
airport retains absolute control of the specication and
design, but it creates some problems:
The contractor does not assume responsibility for the
design and/or function because the buyer (the airport)
has pre-xed the specications, hence the airport
assumes the project risk
The airport does not take advantage of the contractors
technical know-how and experience on similar projects
Effective construction project management
On the basis of Booz Allens experience with airport
operators around the globe, there are efcient and
effective ways to mitigate the specic problems associ-
ated with airport construction project. The key factors
can be organized in four areas (see Exhibit 7).
1. Establish a stringent project requirements process
Booz Allen research has shown that more than 50
percent of the cost escalation in construction projects
results from changes that the buyers make to the
design / specications. Because construction project
costs are most effectively established in the early
project phases, it is vital that the buyer decide on the
specications in the early phases and adhere to the
plan. However, the large number of stakeholders in-
volved in the typical airport construction project makes
it more difcult to coordinate and agree on solutions.
Therefore, a stringent project requirements process is
crucial for keeping the costs contained.
The process must clearly dene who has nancial
responsibility and the nal decision rights, as well
as which individuals have a right to dene project
requirements. Furthermore, the different requirements
should not be considered rigid, rather they should serve
as input for dening the optimal solution, keeping in
mind the trade-offs of cost and function that differen-
tiate the nice to have from the must have (see
Exhibit 8).

2. Leverage the contractor in all project phases

Through our analysis of airport construction projects,

Booz Allen found that in several projects, the contractor
Exhibit 7
Framework for efcient management of construction projects at was engaged late in the process and was not appropria-
airports tely involved in the development of the specications.
This situation led to increased costs and heightened
1. Establish a strin- risk for the airport. In some extreme cases, newly built
gent project structures failed to serve their primary functions: the
requirement process
airport had developed the specications with limited
input from the contractor; and as a result, the contrac-
tor had disassociated itself from underwriting the func-
4. Facilitate the working Efcient 2. Leverage the tionality of the construction. Hence, xing the problems
conditions with respect management contractor in all project with the new construction fell solely on the buyer, i.e.,
to the rules and regula- of construction phases
tions of the airport projects the airport. These types of adjustments sometimes
involve very high costs.

3. Focus in-house
If an airport denes the projects technical specica-
competencies on
complementing tions without involving the contractor, the airport is
contractor assuming that it knows the solution better than any
contractor, which is rarely the case. An airport has
specic needs, but by excluding the contractor from the
planning phase, the airport is missing out on a vast
pool of experience. The experienced contractor has
6
wide-ranging expertise in similar construction projects
conducted for a variety of industries, and the airport
needs to leverage this expertise.
The key to a successful project outcome is to integrate
the airport-specic knowledge resident in its staff with
the experience held by the contractor. This can be done
either by involving the contractor early in the process
(during the planning phase) where the specications
still can be changed, or by applying functional specica-
tions at a higher level to detail the desired functions
instead of the exact technical dimensions.
Booz Allen found that when contractors were involved at
the stage where functional specications were dened,
the risk and cost to the airport were signicantly re-
duced (sometimes by as much as 25 percent). By leve-
raging the contractors expertise, alternative solutions
that require lower investment but maintain the required
functionality can be identied. Additionally, the time
necessary for project planning and construction can be
reduced, and greater risk will be borne by the contractor
because it signed off on the technical specications.
Exhibit 8
Examples of how different functions drive general construction
requirements
Work steps project requirements process
1 Appoint project responsible with scal authority and the right to
decide the level of requirement
2 Dene which stakeholders have the right to give input on require-
ments for the project (individuals representing the key functions)
3 Clearly map and detail the different user requirements
4 Dene level of requirement based on total cost of ownership for
the different alternatives (optimal solution)
5 Verify decided level with respective stakeholder in order to se-
cure that changes will not occur afterwards (signing process)
6 Identify and map posibility to develop standard products that
can be used in other projects
3. Focus in-house competencies on complementing
the contractor
An important aspect of managing construction projects
at airports is the ability to complement the contractors
skills so that the construction project can be run as
efciently as possible. Although the entrepreneur
should be in charge of driving the construction and
coordinating the efforts, the airport needs to behave
like a professional buyer when it comes to construction
projects. The airport needs to have resident knowledge
about the industry and how construction projects are
executed to be able to follow up and assess the con-
tractor as well as evaluate offers.
Furthermore, to evaluate different technical solutions
and effectively support contractors by understanding
existing solutions, the airport needs to have staff
with the relevant technical competencies. These staff
should be very familiar with the existing technical solu-
tions, help track all current drawings / solutions, and be
conversant with the specic rules and regulations that
govern the airports conduct of business.
For example, when adding to existing structures, it is
imperative that the contractor receive the exact and cor-
rect information about the existing buildings and land,
such as location of installation points, dimensions of
the various structures, location of the current pipelines,
etc. If the airport cannot readily produce this kind of
Work steps dening optimal solution
1 Divide construction project into clearly separated components
2 Prioritize components based on expected cost
Clearly dened user
requirements 3 Map different potential requirement levels (low to high) for
prioritized components
4 Estimate total cost of ownership for each requirement level
5 Identify optimal solution with regards to function/quality in
relation to total cost of ownership
6 Base specications on optimal solution, additional user
Optimal solution requirements separated in order to clearly specify the costs
dened associated with them

information, the entrepreneur must spend many hours
in mapping the existing area, and this will be very costly.
An extreme situation was found where the contractor
was forced to dig in a ramp almost by hand because
the airport could not produce accurate drawings of the
existing extension of the pipelines in the ground.
4. Facilitate the working conditions with respect to
the rules and regulation of the airport
As discussed previously, working in an airport entails
awareness of numerous security and safety rules / regu-
lations. Booz Allen experience shows that the increase
in costs associated with such difcult working condi-
tions can be as much as 15 percent. It is therefore
crucial that airport management guide the contractor
through the myriad of security and safety regulations
and processes.
This facilitation can be as simple as providing rest-
rooms, dressing rooms, and lunch facilities close to the
construction site so that workers do not have to pass
through security checks every time they have a break.
Coordination with airport security could be limited by
sealing off areas temporarily instead of compelling
workers to work during inconvenient hours. By focusing
on reducing lead time and by enabling the contractor to
work during normal hours, production costs can be d
substantially reduce.
Easing the work environment of the construction work-
ers also serves another purpose it encourages com-
petition. The restrictions and special demands related
to working at an airport effectively serve as a barrier
to entry for new players lacking experience in airport
construction.
7
Conclusion
Construction projects are an integral part of airport
operations, but the special circumstances inherent
to working at an airport (especially airside) result in
production costs that are much higher than those of
construction projects outside airports. Consideration
of how airports can improve management of construc-
tion projects puts the spotlight on what role the airport
administration should have on the project. Booz Allens
direct experience with airport projects has demon-
strated that success in managing construction projects
results from focus on four areas:
Establish the requirements. An airport has many
stakeholders, all of whom want to optimize different
aspects of the construction. To keep costs con-
tained, the airport operator needs to be very efcient
in pooling demands and transforming them into
realistic requirements
Leverage the contractor. In several projects studied,
the contractors were engaged late in the process, so
their experience was not fully utilized. Airports must
focus on working with the contractor and leveraging
its expertise in all phases of the project
Complement the contractor. For the airport to be able
to effectively support contractors with the technical
aspects of airport work and evaluate different solu-
tions, the airport needs staff who are fully know-
ledgeable of the existing design. Also, to be able to
dene project requirements, airport staff must have
some knowledge about the construction industry and
how construction projects are executed
Facilitating the working conditions. Working in an
airport entails adherence to numerous security and
safety rules / regulations. To make the construction
work more effective, the airport needs to assist the
entrepreneur in understanding and meeting these
demands while it regularly tries to make them as
uncomplicated as possible
Considering these implications with a strong focus on
internal resources and capabilities enables airports to
decrease production costs by as much as 25 percent.
Booz Allen has direct experience with numerous global
airport construction projects, during which we support-
ed our clients through every step of the construction
phases ensuring that opportunities for cost reduc-
tion and sustainable performance improvements could
be realized on a long-term basis.
8
What Booz Allen Brings
Booz Allen Hamilton has been at the forefront of
management consulting for businesses and governments
for more than 90 years. Providing consulting services
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With 18,000 employees on six continents, the firm
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Allen is recognized as a consultant and an employer of
Dr. Anders Adrem, is a Principal in Booz Allen
Hamiltons Stockholm office. He is part of the Global
Airline and Aviation Infrastructure practice and has led
assignments at major airports, airlines, and air naviga-
tion service providers in the Nordic region.
Dieter Schneiderbauer, is a Vice President in Booz
Allen Hamiltons Munich office. He leads the Global
Aviation Infrastructure practice and has led major
assignments at the worlds leading airports and air traf-
fic control agencies.
Downloadable digital versions of this article and other Booz Allen Hamilton publications are available from www.boozallen.com.
choice. In 2005 and in 2006, Fortune magazine named
Booz Allen one of The 100 Best Companies to Work
For, and for the past eight years, Working Mother has
ranked the firm among its 100 Best Companies for
Working Mothers.
To learn more about the firm, visit the Booz Allen Web
site at www.boozallen.com. To learn more about the
best ideas in business, visit www.strategy-business.com,
the Web site for strategy+business, a quarterly journal
sponsored by Booz Allen.
Fadi Majdalani, is a Vice President in Booz Allen
Hamiltons Beirut office. He leads the Middle East
Transportation and Aviation practice. He consults with
civil aviation authorities, air traffic management, and
airport operators in the Middle East region.
Evert Meyer, is a Principal in Booz Allen Hamiltons
San Francisco office. He is part of the U.S. Aviation
Infrastructure practice, working extensively with airport
operators and aviation infrastructure investors in the
North American region.
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