Planning for the Future The Bottom Line

and manned and also land reform. `` domestic demand. Now it is time

for The Bottom Line. Most of us plan our lives a few days

ahead, Pabst at work we think a few months in advance, most of us

negotiate with a few people from time to time, an employer or a

customer, but today we will be talking about business life for

those who have to think decades ahead, and have masses of different

interest to handle. My guests or work in transport and infrastructure

and they will tell us how they get things done. Each week, influential

business leaders gather in London for the BBC Radio 4 programme, The

Bottom Line. You can see it as well as he read. `` as well as here at

it. I enjoyed around the table by three

guests or run organisations involved in planning the unpredictable. Let's

spend a few minutes meeting each of them. We will start with Tushar

Prabhu. URA boardmember at an engineering company. Tel is a bit

about Pell Frischmann. It is a consulting engineering firm. We get

involved in the design of large`scale projects. These are in

the infrastructure space, so we are talking about roads, some property

projects, buildings, highways, water supply. Anything that is in the

built environment. You are based in the UK. I am. But your company works

in India and all over. We worked out a three hubs. We have the UK where

the headquarters is located. Then we have a middle eastern group. And we

have an Indian hub. Also with us is Richard Deakin, who is the chief

executive of NATS. It used to be National Air Traffic Services, that

has long since dispensed with that name. Feel everybody in on the

structure of this company. It was partially privatised a decade ago.

It is a fully privatised company. The government owns 49% but we do

operate as fully privatised. We provide all the en route to air

traffic control sensors for UK airspace and the north Atlantic. We

also control air traffic services to 15 of the largest airports in the

UK, and contracts in over 30 countries outside of the UK. You are

a commercial enterprise. You sell your expertise to other nations. Are

there any rivals in a similar position? The Canadians have got a

similar model. But other than that, it is done by government owned

players. My third guest is Alison Munro, Chief Executive of High Speed

two. Did you know it was going to be such a controversial job when you

took it on? I have been doing it for nearly five years. I knew it was

going to be controversial but it has turned out to be really quite

controversial. You came from the Department for Transport. It is

owned by the UK government. It is a government entity. We are a

government owned company. The case has been refined and replaced, a new

version, and now we have a relatively new case that is being

made. Does that worry you that the case has not somehow grabbed the

ball yet? It should be the easiest thing on the planet to sell, fast

trains, connecting big cities, improved journey times, all of those

things, and yet somehow it is not captured the imagination. We have

recognised that we have to make the case more strongly. We have been

gathering more evidence to show what will happen in the future if we do

not make a good investment. Some of the parallels are similar to the

debate around airport capacity. Investing for the long`term growth

and capacity for the UK essential. You will never end up in a situation

where everyone is happy with the solution. I guess the debate to have

is whether one has to plan for the UK or plan for specialist

communities. You raise an interesting point, Richard, is the

balance between perfectly legitimate, sensible people

supporting their local community, saying they do not want it in their

community, whether it is Richmond, or people living in the Chilterns,

we disparagingly call them NIMBYs. It is a term of abuse, really, but

what is the balance? The communities which are going to be badly affected

and the national infrastructure. You have to strike a balance. Even on

the national economy you cannot decide on something that is

devastating to too many people. The Duke and do things about environment

improvement. There is a lot that you can do. There is compensation also.

The people who are affected, how they are compensated. We are quite

mean in this country overcompensation, head to some of

those? The French give a bonus. You get 10% bonus. On top of the kind of

market value. It is not that mean. The French may pay more. But at the

same time, the British system allows a lot of time and opportunity to

have your say. So there is an argument to say that more voices can

get hurt. It has been incessantly debated. We are talking about a

railway in 2032. How many miles of high`speed line will be Chinese

built in that time? We have been consulting non`stop. It is a very

intensive process. But that is the way that our democracy is founded.

One hopes that at the end of it you get more consensus. You have a very

long argument and then tread on the interest of half of the country that

did not want it. That is High Speed two. Our theme is complexity, the

complexity of the sorts of businesses that you are in. In

particular, trying to plan the unpredictable. There is a movie

called the fog of war, Robert McNamara described the complete

absence of information in which decisions were made. You could call

it the fog of business. You are involved in predicting a long way

ahead. Making full cars which can be so, so wrong. Nevertheless you have

to make them. There's talk about all the stuff that goes wrong and causes

you to lose sleep. It is an interesting business. Tell us about

the models that you use and the way that you go about. A lot of what we

do is driven by forecasts around a man to a mantle passenger travel,

which gives help is very much linked to the economy. `` around demand

for. A lot of the demand that we see in the UK is a reflection of global

demand. The key thing for us to try and get the long`term trends.

Whether you are one or two years out on your actual numbers is rather

immaterial. But the trick becomes, how do you take it out of the life

of the infrastructure. Say it is a hideaway you are widening, that will

itself has a life of 50 years. So you can only with confidence look at

the beginning of the infrastructure, and hope that that peace will be fit

for the purpose, the infrastructure also attracts traffic. Users like

it. So the thing that you are doing changes the environment in which you

are full casting. You have to take your best guess. We are at the other

end of the spectrum. We are looking a very long way ahead. The normal

period is 60 years. The second phase is 2033. We are looking at 2093. Do

you have a forecast for rail traffic in 2093? We try to do the cost and

benefits after 60 years after opening. It is so uncertain. We are

quite conservative. We think that once you get past a certain point in

time, it is so uncertain and that we cut off to mount at a certain point.

And just issued that it flatlines. That is because we do not know. What

we do not know, particularly for Railways, in terms of the total

traffic it is a share, a small share, when will the increase that

we have been seeking in rail traffic, when will it level off?

People already drive a lot. We anticipate road travel. That rail

travel, there is tremendous scope for people to increase their rail

journeys. I heard a report saying that we have reached peak car, we

are at the point where the amount of time we are spending in a car is as

long... Now forecast, in the year will be cut off to Mand, we issued

that every household makes 3.5 trips per year. That is long distance

trips. I'm sure there are plenty of people who already do more than

that. So that is the real difficulty, predicting how that will

happen over such a long period of time. Things like new technology

will come along. Technology will reduce the need to travel. But the

evidence does not support that at all. So a lot of unknown is when you

look into the future. You have to make the best judgement. It is the

issue, when will the jet pack come? That has been promised for so long.

One day we will be there and a lot of this will be obsolete. What is

the jet pack? Even the highways agencies wrote an article say we

will be able to have roads and highways which will be a bit like

railways, where cars will be right next to each other in a wagon. So

the capacity of the system will certainly increase. We will have a

different type of travel. You have an oil price shock which means

people will behave very differently. You will have a new

technology. Over a significant horizon, you cannot put it in. You

know that something will happen. Let's go on the cost side.

Predicting the cost of building a railway. A bridge or a road. How

easy is that? One of the lessons that we have learnt is that we have

been much too definite at an early stage. Projects up the

underdeveloped. We have said it will cost so much. There is a lot of

uncertainty. In the cost `` the case of High Speed two, the charge is

that the cost has risen and risen. It has not actually risen that much.

What we have done recently is provide more of a buffer. A

contingency. We will not face that problem because we have the allowed

for the risk of the cost going up in the future. I suspect that in

Britain, we think of ourselves as being particularly bad at that it

can cost, but whenever I look at what every other country does, it

seems the same everywhere. The burly and airport is the latest example of

an infrastructure project that has run over budget. It is true that

there is a general worldwide tendency for cost to creep up. It

does not have anything to do particularly with Britain. I think

British exports of these kind of services that we provide are quite

well`known around the world. So we must be doing something right, if

British technical services are being seen as more useful. But it is in

the nature of the beast. One of the reasons that it can do that, it can

become bigger than you thought, is that when you high your construction

companies, or whichever entity you get to build your piece of

infrastructure, the one that you will pick is the one who has the

most optimistic view about the piece of infrastructure that you wish to

deliver. Typically, varies very strong pressure to go with the

dollars cost, the lowest entity. That tends to push projects a bit

further than they would have otherwise gone.

I have the winners curse in front of me. Ten people bidding for the

contract, the one who wins is the one who didn't understand how much

work was involved and it too low. That is the winners curse because

you lose money on the things you win and you do not make money begins it

will actually make money on. Tushar Prabhu, you probably have the most

experience in this. How much more competent at does that make your

life? You are doing a lot of business in Iraq, for example. That

must be obligated in many different ways. It is. We have been building a

huge water supply system, which will serve about 5 million people. A very

substantial project. But what we are doing there and the areas where we

find ourselves having the issues is many close conflict countries are

coming out off centrist kind of political situations. Strong

dictators. Yes. The systems have been working under 40 years of

chaotic decision`making. What do they do? A narrow down in what they

do, people don't take risks, things have to be done by the book and a

lot of blame afterwards. Maybe even complete an interest, lack of

interest, in innovation. We want to try to plug of that stuff in. That's

the extra dimension. When you are doing that, I do demanding forecasts

from Iraq? Absolutely, because the populations grow. We did a large

project as an interesting crossroads between the Iraqis and the Kurds.

That was exactly what we were doing. We tried to work out for 20 years

what would happen. How will the city naturally grow, what will be the

blockers and how do we unblock them. Is that easy to do, in a country

might Iraq? Or is it harder to do than in a developed economy like the

US? One of the issues relating to maturity is the issue of keeping

data. In a country like Iraq, it's difficult to find back. There are

many oil traditions and things are written down but they aren't kept

properly or they are in files decaying. In this situation, you

tend to have to do things more from first principles, using judgement

and knowledge and interviewing people. The basic principles are

still the same. We have been talking about some of

the complexities of your business, in terms of predicting demand,

handling costs. The other area is very complex relationships. The

multiple stakeholders. Not a word I like. With whom you have to deal.

All infrastructure projects, government in particular, deal with

this. What are some of the difficulties you face? It's a

massive exercise and you have to try to take everyone along with you. At

the moment we have 26 forums along groups, where we meet local people.

We have numerous local authorities, whom we have to talk to. `` a great

three. We have the Mayor in London, transport operators and the city

councils, we have the National Trust, for example. The Woodland

trust, the wildlife trust, the Bucks back group. `` Buckinghamshire Bat

Group. We have been criticised for community relations but it's a big

part of the job. You won't get it through unless you talk to all of

these people and try to address their concerns as you go forward. If

you think of the consultation we do around London airspace, redesigning

that, several hundred consultation events going on to talk to local

communities, for each of those communities, the challenge really is

to share with them what we are trying to deliver to get them to

understand the challenges we have as well. Equally, you try to understand

what life looks like from their point of view. I agree, sharing

information is important. But because we are at an early stage,

people's expectations of the information we should have doesn't

match where we are. They want a lot of information that you would have

if you were about to build the project that's not where we are. It

can quite frustrating for our stakeholders when they feel that we

are holding back or we should have information. Ideally, you want to be

able to share all the information. If they don't like it, at least they

understand why do I doing what you are doing and what the impact will

be. Sometimes you can't. For example, when we were developing at

an early stage, if we brought all of the information out into the public

domain, we would have blighted half of the country. It would not be

responsible. Sometimes you have to wait until the information is

sufficiently certain that you can make it available and you aren't

causing unnecessary concern, where actually they shouldn't be any. ``

there shouldn't. We steered away from governments. Let's talk about

them and how you deal with them. They are your shareholder,

basically, you're only shareholder, Alison. 49% of your company. They

are not indifferent to what you are doing what you are designing. Tell

me about governments and how easy they are to deal with, in the UK and

abroad. I think government is fundamental to infrastructure. It's

the only entity that can really underwrite it. If we get it wrong,

we can't go bust. There is no we `` way we can recall infrastructure.

Government is the only one that can take that view. Unfortunately, what

we have in government is also attended the two want to keep

flexibility. Sometimes that fertility hurts us because it then

means that suddenly project has stopped. Other European countries

have much `` of a different view. We will positively view our

infrastructure as an enabler, a growth driver, and we build the rest

around it. In this country we have chosen to keep infrastructure or

flexible and we have kept other things more ring`fenced. What's the

difference between consulting government and consulting say,

another private business, for example? What's it like in Spain? We

have a contract for traffic control tower is out there and it's a

different environment to the UK, certainly from an industrial

relations point of view. We have had challenges. Ben hasn't been used to

the privatisation model we had in the UK. `` Spain. But with the

powers to have taken onboard, we deliver them for half the price and

at that equality. The customer is very happy. Who is the customer

their? The Spanish government. They have privatised some of the towers

but we hope they will do more. It's been interesting to see how it

evolves. Often the public sector still delivers a lot. One of the

tensions we find is that, when we are there, we sometimes have a less

productive competitor in the sector, who is also in addition with us. ``

in competition. We have looked at different characteristics of the

business you are in. When you look at your companies, maybe this is

unfair on new Alison, your company has not built anything yet, what are

you most proud of that you have achieved? What makes you stand up

and think, that's amazing and I'm glad I work for this organisation?

It's a family firm. Continuity is very important. One of the projects

that my father and his colleague worked on was centrepoint. A fairly

prominent building in the middle of London. It was a tall tower and had

its own share of notoriety for the reason. We were reappointed on this

project and the public square will be there. It's not the biggest

project we have worked on but, in a sense, it's actually, timewise, in

terms of the abolition of the firm, it's been something we have been

proud to work on before and we are still proud to work on the game.

That's an interesting one. We haven't built anything yet but, in

terms of what the have delivered, I am really proud of the fact that we

have done a lot in five years. We have been through far more

consultation than any other project. When we deposit the bill, it will be

the quickest any project of this scale has done it. You are proud of

the stuff you have done but it isn't job done yet? Of calls. What makes

you proud? `` of course. The safety record that we have delivered over

the past few years, in particular in an environment where we have the

world's busiest airports in the UK. And at a time when traffic has

picked up since privatisation quite significantly, handling 7500

aircraft a day and doing so safely, without anyone noticing. How many

horrific incidents have there been since NATS was formed in its current

structure? Zero. That's something we are particularly proud of. And

something overseas governments are attracted to. That's a good note on

which to close. Let me thank my three guests. Tushar Prabhu, Richard

Deacon of NATS, air traffic control services, and Alison Munro. I will

be back with more guests next week. Don't forget, the downloads of the

bottom`line Mac are available. The details are on our website and you

can listen to it on BBC Radio 4. `` the bottom`line Mac. We also like

getting your e`mails. Just drop us a line.

Good morning. Typhoon Haiyan is leaving the Philippines but will be

battering Vietnam on Sunday. Winds could still be gusting 150 mph. More

details on the website. Here at home, the weather is quieter. It

looks like Saturday will be the wetter day. Then a risk of frost on

Saturday night before we enter the weekend with dry and sunny weather.

Early sunshine on Saturday in east Scotland, but a touch of frost. The

showers are waiting in the west. Some snow, even over modest hills. A

few showers coming into the north`west of England. The chances

are it will be