Internal Control Disaster: Fiasco at
Heathrow
April 2008
In March 2008, London's Heathrow Airport's
new Terminal 5 building went live after a huge and exceptionally well-managed
building project. Sadly, thanks to problems with baggage handling, it has been
a disaster for BAA, who owns the airport, and British Airways, the sole airline
using Terminal 5. What can we learn from this experience?
by Matthew
Leitch
In a typical post-implementation meltdown, the high error rates and backlogs
that often happen when a process or system is new overwhelm the fledgling control
system in place, or nearly in place, to deal with them. This can happen even
when people are aware that the initial months can be very challenging. The sequence
of events usually goes in the stages described below.
Stage 1: Good Intentions
People on the project responsible for designing and implementing controls
around the process or system think widely about what they need to do and write
a long list of action items. It may be a good list. They make plans. They know
management reporting is needed.
Stage 2: First Cracks Appear
Once the project is underway, it may be that things start to fall behind
schedule and some strain is felt. Business analysts and process designers take
all the time they are allowed and then a little bit more, leaving the controls
team with very little time to respond to what is happening. At the same time,
they gradually become aware that they are not as skilled or as productive at
controls work as they had imagined.
Stage 3: Rising Panic
As project health continues to decline, stress rises, and people begin to
revisit their original intentions and make cuts. It is justified as "focusing"
but, in reality, this is a kind of tunnel vision that gets progressively narrower.
The controls team goes back to its original list of things to do and asks, "What
do we really, really need to do by go-live?"
Systems people begin to regard controls work, and management reporting in
particular, as "nice to haves" that they can leave until after going live. Some
people can't take the pressure and drop out of the project. Testing gets de-scoped
and compressed.
As project health declines, the likelihood of high error rates and backlogs
upon implementation increases, so controls development becomes more important
and should be boosted. Instead, what usually happens is that it declines with
everything else, or more so.
Stage 4: Champagne
It's taken long shifts, working through weekends, and the project is a few
weeks late, but it's over. Hooray! Champagne corks are popped, and everyone
celebrates. It was a success. We've done it.
Stage 5: Emerging Problems
Initially, there is little or no evidence of things going wrong, but after
a short while the first, feint indications of problems under the surface begin
to emerge. As they are investigated, more problems come to light, and this eventually
reveals a ghastly mess of faulty data, stuck transactions, or lost items. It's
too late to revert to backups. Thousands of incorrect cases already exist, and
the reason this wasn't visible immediately is that not enough checks were being
done. The controls weren't in place. Worse still, now there's a lot of
work to do, and the management information and supervisory control system needed
to oversee it is not in place. These could have been developed and tested before
going live as part of other testing, but that was de-scoped.
Stage 6: Long Recovery
There's nothing to do but to bring in temporary staff to cope with the extra
work. It may take months to work through all the mistakes and correct them.
What about Terminal 5?
At this stage, few details have emerged about what went wrong, and some of
these details are slightly different from a typical meltdown. So far, what has
been reported by journalists and the companies involved includes the following
points.
-
The construction of Terminal 5 and its associated transport links cost
£4.3bn and yet was completed on time and on budget. The number of deaths
and injuries during construction was exceptionally low. By all accounts,
this was a project where risk was well managed, in part because of an innovative
approach to contracting that encouraged companies to work together to solve
problems rather than waste time assigning blame.
-
The baggage handling system was assembled and tested in the Netherlands
before being delivered to Terminal 5 for more testing, many months before
the terminal was to open.
-
Extensive "live trials" of Terminal 5, including baggage handling, were
conducted in the months leading up to the terminal's opening, and these
involved some 15,000 people, many of them travellers.
-
At 4 a.m. on March 27, 2008, the terminal opened for business at a planned
70 percent of full capacity.
-
That morning, terminal staff struggled to find their parking area thanks
to poor signage and incorrect instructions. When they got there, they found
it was too small. They were delayed in getting into the building by security
checks and by not knowing their way around the terminal, and then many were
unable to log into the computer system. Consequently, when the terminal
opened to passengers, no desks were opened, and passengers just formed a
queue. (They had already struggled to find parking themselves, but this
was just the start of their bad day.)
-
Delays moving baggage to and from airplanes and passengers developed
immediately.
-
There were too few storage bins.
-
By early morning, there were baggage backlogs because staff could not
keep up with the flow of baggage coming off the belts. Union representatives
were quick to say that staff had received insufficient training, and that
the union had told BA in advance that the people would not be able to keep
up. A baggage handler spoke to the BBC and said that problems had been obvious
during the "inadequate" training and had not been sorted out.
-
That afternoon, a luggage belt in the departure lounge broke down.
-
By mid-day, BA had canceled 20 flights. Some flights took off without
baggage. BA offered passengers the option of flying without their baggage
or not flying at all. Roughly 20 percent of flights were canceled on the
first day.
-
At 4.30 p.m., passenger check-in was suspended completely.
-
Many passengers were forced to stay overnight in hotels while waiting
for the next flight that could take them. BA wrote to them saying it would
cover reasonable costs and giving a maximum limit for hotel room costs.
Unfortunately, actual room costs were higher, and it has been reported that
some hotels may have raised their prices to take advantage of the situation.
It rapidly emerged that BA's limit was illegal, and fines seemed likely
in addition to heavy expenses.
-
At least one passenger was quoted by newspapers as saying that he had
participated in the "live trials" and had seen so many problems during them
that he was not at all surprised at what had happened.
-
For over a week, BA canceled a portion of flights every day, and the
baggage mountain was not cleared. On one day, BA estimated it had 20,000
items of baggage to deal with while BAA estimated it was more like 28,000.
Not knowing exactly put BA in a particularly bad light.
-
BA decided to send baggage by lorry to a courier company in Milan, Italy,
to be sorted, a decision that seemed to the British public absurd and desperate,
even though BA said it was "standard practice."
-
Cruelly, on the weekend that BA announced there would be no more canceled
flights, snow fell, resulting in canceled flights.
-
The transfer of long-haul flights from Terminal 4 to Terminal 5 was postponed.
Overall, a terrible period for everyone affected.
What Lessons Might Be Learned?
The most obvious lesson from the Terminal 5 baggage fiasco is that a live
trial is still a trial. There's nothing quite like live operation. While conducting
a dry run can help a lot, it's not enough on its own.
BA seems to have decided that the results of trials were sufficient to justify
starting at 70 percent of capacity on day one, when starting at 10 percent or
less seems to have been a more reasonable approach. The background has not been
made public but, typically, if you deliver incrementally, it is possible to
start delivering earlier than if you try to deliver everything (or nearly everything)
on the first day—and much can be learned as a result.
After the live trial, there would still have been uncertainties about the
productivity of people involved in baggage handling and the reliability of the
systems. These uncertainties should have been recognized, measured, and resolved
through progressive increases in live operations.
As I have argued many times in previous IRMI articles, our human tendency
is to underestimate uncertainties and, consequently, to do too little about
them. Most likely, Terminal 5's baggage handling is another example of this
phenomenon.
BA seems to have been taken by surprise by events, as suggested by their
sending of an illegal letter to customers and the inability to put extra personnel
onto moving baggage as soon as a backlog began to develop on the first morning.
Unusually, there is no evidence at this stage of project health problems,
with the exception of reports that baggage handling staff were demoralized and
unimpressed by the training. It may be that the baggage system project had problems,
but the construction work had gone so well that senior people felt that the
magic of their risk management approach would work once again.
Conclusion
While Terminal 5 made headlines due to the large scale of the fiasco, post-implementation
meltdown is a common experience with causes that are easy to understand. It
is essential to comprehend the high risk involved, to implement incrementally
if at all possible, and to boost controls development if project health is ever
in doubt.
Further Reading
Intelligent Internal Control
and Risk Management, by Matthew Leitch, first published in 2008 by Gower
Publications (www.gowerpub.com).
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