The Channel Tunnel Project: Initial Planning, Actual, Execution Recommendations - Essay Example

Prologue The Channel Tunnel was envisioned as the method to connect England to Europe in order to enhance trade and the movement of people. A number of schemes had been suggested before but they were either technically not feasible or they were too tenuous to construct. There was growing interest in creating a practical solution to the problem of connecting England to the rest of Europe especially in the seventies. This was furthered by the interest taken by the British and French governments to spark this project. It was agreed to by both governments that the initiative to build the Chanel Tunnel would be supported at the highest levels except for the financing. The involved governments felt that supporting and sustaining a large initiative such as the Channel Tunnel project would demand a lot of fiscal commitment that the governments did not have. The alternative means of financing the project were to be private equity and shareholders who would be provided the concession of operating the tunnel for a period of 55 years without governmental interference (except for monopolistic practices). The creation of the Channel Tunnel is a mixed story of success and failure all at the same time. The creation of a tunnel this size under the surface of the sea is a technical challenge that had never been undertaken on this size ever before. The accomplishment of such a task demanded a multifaceted team that drew on experience from all kinds of fields. However, while the technical challenge was undertaken and accomplished well, there were certain failures in terms of project management. The experience of those involved was brought down by the collective challenges posed by the project. Constant governmental interference coupled with unique challenges stemming from the unique nature of the project led to the negative variance of both cost and schedule. These variances in cost and schedule are expected of nearly every project because every project tends to be unique in one form or the other. However, the highly unique nature of the Channel Tunnel project meant that variances in cost and schedule were high as well. The project was delayed by about one year while the budget increased by nearly one and a half times the original estimate. The problems faced by this project were not restricted to one phase of project management alone. Instead, the emergence of problems can be attributed to various parts of the project that are explored in detail below. 2. Initial Planning The British and French governments agreed to common proposals for safety, security and environmental concerns before the project was opened up for bidding. Both governments in 1985 requested the first proposals for the Channel Project. A number of proposals were submitted for the Channel Project. After an evaluation from both the British and French sides, the proposal submitted by Channel Tunnel Group / FranceManche (later Eurotunnel) was accepted. The initial proposal delineated a 32-mile double rail tunnel that was to accommodate passenger trains as well as cargo trains and a special truck and car carrying shuttle service. The initial bid price was set at some $5.5 billion for the entire project. The limited amount of time provided during the initial planning phase meant that the initial scope had to be revised on a number of occasions to accommodate for base modalities. Naturally, as the scope of the project was revised, there were direct effects for the cost of the project that escalated in response to an enlarged scope. The shortage of time meant that neither high-level design estimates nor rough order of magnitude estimates were ever carried out to deal with project scope. Had these measures been carried out there are chances that the overall project scope and hence the costs would have been better estimated. The redefinition of project scope was a constant occurrence and source of friction as the project proceeded. For example, the initial project scope did not account for any air conditioning facilities because they were not deemed as required. However, as the project went on it became clear that without air conditioning the tunnels would not be able to operate. Consequently, air conditioning was added to the project’s scope entailing the addition of another $200 million in project costs (Veditz, 1993). In order to finance such a large project one would expect that the respective governments would provide some kind of fiscal support or cover to the involved parties but this was not the case at all. Instead, the respective governments made it clear from day one that the finance required to create such a gargantuan project would be derived from private equity as well as private shareholders. With both governments steering clear of the financing requirements, it became obvious that finance had to be derived from many smaller sources put together. The involved governments had steered clear of financing requirements in order to avoid financial contagion or other difficulties for themselves. In real terms, only the involved governments had the kind of financial backing required to take this project forward smoothly. However, given the involved government’s stance on the issue the finance was sought from a combination of some 206 banks along with over 700,000 shareholders. When the project proceeded, there was a large demand for increase in the base cost of the project that had to be met with some kind of new funding source. The newly included investors tried to rely on disputes in order to pay contractors less than originally deemed required. This in turn led to many contractors heading off to courtrooms in order to settle their fiscal disputes with the Eurotunnel business enterprise. The courts overturned various stances held by the investors of Eurotunnel and awarded the contractors large sums of money in dispute and claim settlements. One of the more enhanced claims came from TLM who were able to convince the court to pay them an additional $2.25 billion while the total cost of the project was estimated initially at $5.5 billion. This additional claim represents some 40% of the cost of the original project estimate indicating that claim and dispute settlement was a major losing point for the investing banks (Morris, 1994). The schedule demarcated for the project required that planning had to be carried out for all activities that were related to building three tunnels (north, south and service) at the same time. These planning requirements introduced unique complications because forty-six contractors had to be hired in order to deal with design requirements alone. When the project was taken into the execution phase, it became clear that the time estimates required to complete work on tunnelling was accurate as the total tunnelling activity ended three months before the schedule’s appointed time. In contrast, the changes that were required by the ICG for safety requirements had an entirely negative impact on the schedule. The imposition of new safety standards by the ICG as work commenced caused negative schedule variances that were not previously anticipated (Fairweather, 1998). The overwhelming focus of risk assessment and management was based on engineering risks while the areas of process and approval risks were not really accounted for. Greater focus on process and approval risk assessment and management were necessary and this became apparent as the project proceeded. The management of the project seemed to be more at ease with dealing engineering risks compared to dealing with IGC oversight as well as various kinds of change management controls. In terms of the highest levels available for the project, both nations involved were fully aware of the financial risk involved in the project as funding came entirely from private equity and shareholders. The amount of business risk involved in the overall project was contained using various forms of contractual agreements but in the longer run, this proved to be problematic as well. These contracts were designed to contain business risks and when new stakeholders were added these contracts were not able to spread the business risks appropriately between different stakeholders. Instead, the use of these contracts allowed the containment of these risks to a number of stakeholders only. 3. Actual Execution Another confusing aspect of the Channel Tunnel project was quality. The domain of quality was established by the IGC that was composed of civil servants from both France and the United Kingdom. It was agreed that the differences in standards between both countries would be worked out such that the higher (or better) standard should prevail (Fairweather, 1998). From a theoretical standpoint, it was a very good idea. However, in actual practice, it was often a problem on how to decide exactly which nation’s standard was better. For example, contractors often had problems in dealing with how to pour contract based on differing standards from both countries and their ensuing interpretations. The time required to approve these quality measures could have been looked into early on during the proposal stage or directly after it but no such efforts were carried out. Instead, these issues were raised during project execution which in turn led to more time being required for resolution of quality issues. The time required to solve these quality debacles only added to lengthen the overall timeline. In order to deal with the extension of time amicably, the contractors had to rush in materials and supplies which in turn led to massive increases in cost. A major example of such failures was the delay in communicating requirements related to the passenger doors on railway bogies. Quality concerns required that the width of passenger doors on trains be increased from 600 mm to 700 mm. The concern was raised by IGC when the project was being executed instead of when the proposal was initially made. Consequently, IGC took its time to approve of this change which led to unwanted delays in the manufacturing of these doors for railway bogies. The delays caused by IGC’s untimely approval led to an escalation in costs from $9 million to $70 million that the contractor TML had to face on its own. If this issue had been foreseen early on there would have been the possibility that timely change management would have occurred leading to reduced costs for the entire initiative. On the other hand, matters surrounding various kinds of financial and contractual obligations between different parties eclipsed the facet of teamwork. Material issues can be hard to agree to by all involved parties once all kinds of assumptions, commitments and assessments have been framed in writing. Negative schedule and cost variances can only be accounted for if any incomplete requirements, changes of scope and risk response strategies have been taken into account while drafting contractual obligations. If these matters are not considered during contracting, there is an increased likelihood for disputes and claims arising during the course of work. When a project is being executed, it is simpler to define the project team but it is far harder to bring them to one page. Often there are contentious issues between the team regarding ownership, timelines and activities assigned to different members. One major method to deal with this is to define roles and responsibilities up front in an effort to deal with activities directly in the work breakdown structure (WBS). However, the real test of team cooperation can only be gauged once all parties try to move in a unified direction and issues begin to arise. This is important, as the issues that arise tend to bend and break the previously held formal and informal agreements. In these terms, the Channel Tunnel project could be declared a success because there were no major breaches of working cooperation though a few minor road bumps did exist. A large number of parties were involved to make the Channel Tunnel a success story including some 700,000 shareholders, 15,000 workers, 220 international banks, governments of France and United Kingdom, suppliers and a host of construction companies (Genus, 1997). The interconnection between such a large list of factions mandated that communication requirements were tenuous. The overbearing dependency of various factions on each other meant that not all issues were addressed to everyone’s satisfaction levels. The various kinds of changes needed in the scope (either due to omissions or due to changes in requirements) were viewed as to how they influenced cost, quality, time and potential risks. A number of communication breakdowns were responsible for delays in solving problems listed above causing negative variances in cost and schedule. Contracting had to be carried out during the project’s execution phase as well because of the need for more finance to deal with the project. When these contracts were being carried out, it was agreed that the parties providing the equity namely banks would set down the rules. While it seemed logical then that “he who has the gold makes the rules” but this proved to be an obstacle later. The banks involved in this project were provided with far too much advantage to control the project. The involvement of banks meant that risk mitigation measures were given far too much focus than required. Although risk management is positive but taken to the extreme, it could mean failure as well. The contention behind risk management was to save money by trying to minimise the risk available but this was overturned because of claim settlement and award settlement issues. In trying to minimise risks, a number of disputes and claims arose which were settled against Eurotunnel that in turn led to further escalation of costs. 4. Recommendations The work done by the IGC added to greater confusion rather than helping the project’s execution phase out as such. It would have been better if the staffing and working of the IGC were decided in greater detail than what was displayed during the execution phase. The differences in standards should have been attended using solid comparisons instead of vague statements. One of the primary causes behind negative time schedule variance were quality issues so this aspect needs to be looked into detail during planning in order to avoid delays and cost overruns during execution. The raucous mess created over the train doors extension from 600mm to 700mm is an issue that could have been tracked down easily enough through thorough analysis during the design phase. This only serves to show that better scope definition would have helped to improve the overall status of the project. The amount of teamwork achieved during execution could have been improved as well if the interfaces in interaction could be convinced to work in greater collaboration. One of the chief methods to achieve this would have been to develop common stakes in all teams so that cooperation could be maximised. Furthermore, the role of banks and other financial lenders in delaying and adding costs to the overall project cannot be under stressed. When projects of the scale of the Channel Tunnel project are being executed it is pertinent to keep specialised jobs for specialised teams to deal with. The involvement of finance and similar interfaces in taking technical and legal decisions is a blunder in itself given their lack of expertise and experience in such affairs. 5. Conclusion The success of the Channel Tunnel project is an astounding feat in both technical terms as well as management terms. It cannot be denied that the project was held up because of a some problems that had to do with project management aspects. The Channel Tunnel project provides a host of different opportunities for learning and improving on existing project management knowledge so that the problems experienced in this project can be avoided elsewhere. The primary aspect of project management that needs to be considered in this case is the creation of a regulatory agency that had little stakes involved in the overall project planning and execution phases. IGC should have had a more positive role to play in the Channel Tunnel project through their use of judicious time allocation for planning and proposal submittal. Once this phase was over, the allocation of the contract should have been done on more than one criterion to choose a contractor. Apparently, the biggest concern of the IGC in choosing a contractor was cost concerns alone. The IGC should have also placed precedence on seeing where the contractor was actually going to derive finance and how much experience was available to the contractor in order to drive the project forward. The Eurotunnel team could not assess the situation feasibly enough and this in turn led to their losses throughout the project. This indicates that the people at the helm of affairs at Eurotunnel did not possess the requisite experience in dealing with such projects. The lack of experience at Eurotunnel as well as the IGC led to disastrous underestimations that threatened the overall health and feasibility of the project. The gravest concerns arose from the structural point of view because neither Eurotunnel nor IGC were prepared to interface with such a lot of organisations and working principles. The lack of a proper communication interface meant that Eurotunnel had to suffer in the longer run just to keep the project on track. The second problem with the Channel Tunnel project arises in relation to activity monitoring during planning such that it negatively affects both cost and schedule. The lack of a detailed WBS and the lack of detailed specifications in relation to many things meant that issues had to be tackled as they came along. The change in the width of doors for railway cars is one such example. This oversight may seem slight at first but its fiscal consequences are undeniable for a project this size. This problem could have been dealt in either of two different ways. The first approach could have been to request more time from the IGC in order to prepare a more detailed proposal. The second approach could have been to increase the total amount of resources available to creating a more detailed proposal. Even if IGC refused to extend the total available time for the proposal, it would still have been feasible to use more resources to developed detailed proposals. This critical underestimation led to the escalation of costs on an unprecedented scale later in the project so it should have been dealt with in a more mature fashion. 6. Bibliography Fairweather, V., 1998. The Channel Tunnel: Larger than life, and late. In R.P. Bursic & Y.A. Vlasak, eds. Project Management Casebook. Newtown Square, PA: Project Management Institute. pp.289-96. Genus, A., 1997. Managing large scale technology and inter-organisational relations: The case of the Channel Tunnel. Research Policy, 26, pp.169-89. Morris, P.W.G., 1994. The management of projects. London: Thomas Telford. Project Management Institute, 2004. A guide to project management body of knowledge. 3rd ed. Newton Square: Project Management Institute. Veditz, L.A., 1993. The Channel Tunnel: A case study. Executive Research Report. Washington, D. C.: The Industrial College of the Armed Forces The Industrial College of the Armed Forces. Read More