The Chunnel Project

Revision as of 23:13, 19 September 2016

The project, The Channel Tunnel, is the largest privately financed engineering project in history. The tunnel is thirty-two miles in length and stretches beneath the English Channel from Cheriton, Kent in England to the town of Sangatte in the Nord Pas-de-Calais region of France. Each terminal of the tunnel is linked in both national highway and rail systems. The Chunnel consists of three tunnels: Two main rail tunnels; Northbound and Southbound, and the service tunnel which is smaller in diameter, and located between the two main units. The service tunnel allowing access for maintenance, evacuation in case emergency and supply for air. Compared to the 12 hours trip between London and Paris by rail and ferry, the tunnel takes 3 1/2 hours for rail passengers. This high-speed rail system is providing Europe with one of the finest transport network in the world.

During the project phases, the project came across some unexpected problems, resulting in cost and schedule delays. The completed project had an overrun of US$9.9 billion (Anbari et al., 2005). Some of these problems will be further discussed later on. Overall, the whole construction project was generally accomplished successfully. In addition, The Chunnel can be viewed as modern-day engineering.

Context

The purpose of The Chunnel project was to create a fixed transportation link between the two countries to improve European trade environment and provide an alternative high speed transportation method. This required a cooperation between the two national governments, bankers underwriting the funding for the project, numerous of contractors, and several regulatory agencies. In 1985, a request for proposals (RFP) from the British and French governments resulted in the project, The Chunnel, being awarded to the winning bidder, Channel Tunnel Group/FranceManche (CTG/FM), which later became Eurotunnel. The group were established among construction companies and bankers from both countries, which was led by to co-chairmen; Lord Pennock on the British side and André Bénard on the French. Their winning bid price was established at US$5.5 billion, all privately funded (Anbari et al., 2005). The Eurotunnel required a proper client-contractor relationship to build the tunnel, in order to improve management and planning, a new management group was established, Transmanche Link (TML). TML is an Anglo-French joint venture between Translink in Britain, and GIE Transmanche Construction in France, these two groups in turn joint ventures of the construction companies originally brought together in CTG/FM. The case study covers Project Management Knowledge Areas, within four project phases: inception, development, implementation and closeout.

The inception phase includes defining, at a high level what the system will do and estimate the cost and schedule. It defines the risks to the project and determine the overall project feasibility. During the development phase starts the overall planning, feasibility studies, financing and the conceptual design as well as detail engineering. This phase is transforming the information to a machine-executable form. The implementation phase refers to the final process of moving the solutions from development status to production accomplishment. This includes detailed designing, construction, installation, testing and commissioning. The last phase, the closeout phase involves all of the actions and activities that have been accomplished through all project management processes up to the officially complete product.

During the project, various involved parties required mandatory changes and unexpected variation of contractual and financial conditions. The construction and engineering faced requirements for a new use of technology and significant modifications along the development phase. The project took 8 years to complete, with a cost of nearly US$15 billion, and involved 700,000 shareholders, 220 international lending banks, the British and French governments, many construction companies, and numerous sub-suppliers involved (Anbari et al., 2005). The Chunnel represents one of the largest privately funded projects ever undertaken. Although the Chunnel project was well completed, it was late and far over the budget.

Challenge

Large construction projects, such as the Chunnel project, are well-known for cost and schedule overruns. Managing of a project of this magnitude is very complex and includes a significant amount of efforts. The Chunnel project involved 700,000 shareholders, 220 international lending banks, two different governments, several construction companies and many suppliers. The complexity of this project would cause significant planning, logistical and communication challenges. However, the project become a success, despite all the changes and challenges. In fact, the many changes in scope due to requirement omissions or changes of methodology can be viewed in many ways depending on how it impacts cost, time, quality, and potential risk. It is here where the overall communication and planning seemed to breakdown, as issues were not resolved in a timely manner, resulting in significant cost and time variances.

Challenges to deal with two international governments, the differences in political aspects, their different attitude and underlying goals from locals. The communication was limited between the French and British. The two team were put on each end of the tunnel and work towards the middle, which resulted a delayed communication until the end of the project. Given that the two teams had a common goal, was it not necessary to communicate because the plan was to work and meet the other team in the middle. Insufficient communication during the development and design process in the early stages caused different opinions later on. Although the status reports were helpful and consistent every three months, it did not highlight or accentuate improved communication within the team. It was a report for the financial world just to appease them and allow the project to continue.

The Channel tunnel Treaty refused the project to be financed by government funds and the team agreed to establish a health and safety commission, the Intergovernmental Commision (IGC), which had scope control and authority to demand changes but no ability to implement the changes due to lack of funding (Anbari et al., 2005). The agreement to create IGC, and give both the IGC and the banks excessive control contributed challenges in the finances area. There was a lack of control in the Chunnel project as there was no direct contract between the banks and contractors of the project (Anbari et al., 2005). This project involved 220 international banks, which caused a significant communication challenge. To deal with different banks, the challenges for example was the question about who will be the superior to one another in ranks for guarantees and the differences in payment terms. The numerous of contractors who were involved in the Chunnel project and the coordination of these contractors reached out to be difficult. Their internal interfaces, their differences in plans, progress and cooperation between them would be a challenge.

One of the reasons why the project had so many problems was the large amount of investors and the fact that most of the banks and construction companies were more interested in making money on the construction itself, and not on the operation (Anbari et al., 2005).

During the Chunnel Project, several regulatory agencies were involved. Regulatory bodies with different requirements, doubling of set of bodies from England and France, overlapping and interfacing rules caused complications during the development and engineering phases. One of the challenges was to try to satisfy the regulatory bodies from the two countries. Design challenges from different contractors, numerous technical and planning interfaces. In general, the complicated underground construction was a challenge by itself, with specific requirements related to geotechnical issues, precautions against potential leakages, ventilation and internal transport. The general safety (HSE) had to be given special attention as well.

Overlapping of the design and construction was one of the challenges during the project. Trying fast tracking, overlapping the design and construction to expect a shortening in delivery time it is risky even under the best circumstances. The risk was even greater when using the technique containing a new and unproven technology.

Added to this is the fact that underground construction is arguably the most risky of all construction, as changes of conditions such as design and technology, if proven, stand as first class evidence entitling a contractor, subcontractor, or vendor to require compensation both in terms of actual costs plus extended overhead.

Solution

The Inception Phase

The overall project, including the Chunnel Project, Eurotunnel and Transmanche Link was covered by three construction segments, a Cost Plus Fix Fee (CPFF), lump sum, and Cost Plus Percentage of Cost (CPPC) contract. The construction contract based on lump sum payments (cost-plus fixed fee contract), included construction of the tunnel itself, including electrical and mechanical work completed (Mechanical Completion Level). The cost-plus fixed fee contract gave benefits to the Chunnel project. The contract only allowed payments of the costs that was established in this phase. The firm-fixed price contract made sure that the money that was selected for electrical, mechanical or construction did not exceed the chosen dollar amount. In addition purchasing work for acquiring major equipment and rolling stock were covered by a cost-plus-percentage-fee (reimbursable-cost-plus) contract. The problem with cash-flow were mainly due to the impacts from the large delays in the schedule. The fixed-price model settled in the contract should give a continuous funding throughout the project, but as the payment milestones were not reached according the schedule funding did not occur on time to cover for the costs. If the project had remained on schedule, the payment terms in the fixed-price model would have both covered for the costs when the occurred, and provided a good return on the investment, in accordance what was expected by the stakeholders.

The Development phase

The development phase of the Chunnel project was an important phase because of its scope and complexity. It contained detailed planning, communication agreements and government approvals. Unfortunately, many of the difficulties the project went through were due to failures in the development phase. Two different companies, on two different sides of the project, speaking two different languages, led by two different managing directors, did the planning. Perhaps the main struggle during this phase was the banks and their early involvement in the project. They were excessively involved in the renegotiation of contracts. The banks were also given too much control resulting in immediate improvement, but created complications in the Chunnel Project later. The banks assisted with keeping the risks to a minimum, which worked strongly. The project management during this phase was hopeful, for planning of the technical equipment and the understanding of the projects complexity; the team did a reasonable job. However, the research and detailed planning was insufficient. The development phase of the project had been made so problematic; the resulting cost and schedule overruns were unavoidable.

The Implementation phase

The implementation phase of the Chunnel project, started in the fourth quarter of 1087, by awarding of a Concession Contract of US$5.5 billion in response to the bid from the Channel Tunnel Group/FranceManche (CTG/FM). It was terminated in December 15, 1994, with project being handed over to the stakeholders in fully operational condition. During the implementation phase, the Chunnel Project faced several major setbacks. The Transmanche Link requested the use of fixed-price contract of the CTG/FM in order to try to control the costs. Request of the fixed-priced contract resulted to be one of the best moves by the TML, which benefited for the total project. This type of contract gave the power to the buyers, and gave the seller the unknown costs and the possible risks. For the subcontractors work, the fixed-price contracts helped to keep the costs overruns under control within the budget for the project. The contract assisted the CTG/FM to not require to spend extra money, as the burden would lie with the subcontracting companies.

The Closeout phase

The Chunnel Project during the closeout phase showed no significant improvements with regard to management, even with the best attempt at managing the critical complications during the project did not have any impact on the overall outcome. The return of the investment at the end did not materialize based on the fixed-price contracts that were used at the beginning of the Chunnel Project. The reasons were mostly the effects from the delays in the schedule. The problems with cash-flow were mainly due to impacts from the large delays in the schedule. The fixed-price model settled in the contract should give a continuous funding throughout the project, but as the payment milestones were not reached according the schedule the funding did not occur on time to cover for the costs. If the project had remained on schedule, the payment terms in the fixed-price model would have both covered for the costs when they occurred, and provided a good return on the investment, in accordance what was expected by the stakeholders. However, the overall quality of the delivered project during the closeout phase, was impressive. The completion of the final tunnel was an engineering feat that was extremely complex and there were difficulties to succeed. Even with these obstacles, the tunnel were carried out as designed. The project operated successfully through an effective quality and safety program.

Implication

The report consist of analysis and evaluation four project management concepts: Project Selection, Project Delivery System, Project Planning, and Project Control. These various key factors in project lifecycle will help breakdown the project into criticized subjects.

Project Selection

The project faced many problems during the process. The financial model that estimated a cost of US$5.5 billion dollar was a flawed model, whereas the total cost was US$14.9 billion dollars (Anbari et al., 2005). A correct financial model is essential in the project selection phase, and it is important that enough time and research has been used to make sure that all circumstances have been considered. Time was also miscalculated in the initial model, where the process took one year longer than estimated (Anabari et al., 2005). The model used considering project selection had many errors and miscalculations, but in a functional sense it represented a successful project selection. The Chunnel was successfully built and serves its intended purpose (Anabari et al., 2005).

Project Planning

The best way to view The Chunnel Project is as “either one of the greatest engineering and political feats of the twentieth century, or a project that never should have happened.” (Anbari et al., 2005). This is because the tunnel will be seen as a success in terms of functionality and convenience by the public, but when we look at how the project was managed, it will be seen as a total failure, mostly due to poor planning in the inception phase. During the inception phase it is essential to take the time needed to provide a thorough plan with schedules and budgets so that there will be as few flaws during the development phase as possible (Anbari et al., 2005).

Project Delivery System

The first project, The Chunnel Project was an economic disaster, having a badly defined scope which resulted in a huge cost overrun (Anbari en al., 2005). The governments involved, France and England, were not prepared for this project and the personnel involved did not have sufficient knowledge or experience required to construct the tunnel. At project closeout there were still gaps in the project scope. Many situations were rushed, trying to finish the project earlier rather than analyzing the situations and choose a better solution (Anbari en al., 2005). The lack of communication between the governments, both having different priorities eventually resulted in a breakdown of the management structure. It was not known before project completion, which was a year late, that 15 000 workers were employed in the project, which also highlight the poor control from management (Andbari en al., 2005). Regardless of project management, it can be argued that quality management was a success. When focusing on the constructional engineering, safety program and efficient use of new technology materials, using IGC ensuring quality of the tunnel, few would argue with an impressive connection between England and France, which remains the longest underwater tunnel in the world. (Anbari en al., 2005).

Project Control

The underdeveloped project scope and lack of control impacted the projects’ budget, time schedule and total project life cycle. Having a multiple contract and not a detailed one, made it hard to respond to and implement changes. The status report delivered to the financial investors was a good way to keep stakeholders informed and to keep track of the project, however it could have contributed more if it were completed more frequently than every third month, this is far too long time intervals for controlling a such complicated project. They should have completed the definition and scope of the project before starting to build The Chunnel to achieve more control and easier reach its financial goals, and to give a better chance to complete at the scheduled time.

Conclusion

‘The Chunnel Project’ was constructed to create a connection between England and France by using an underground tunnel. This is one of the largest engineering projects completed, and required the contribution of two national governments (Anbari et al., 2005).The Chunnel Project started with the expectations of a huge success, the quality of the design was incredible, cost expectation and delivery time was clearly stated. However, as the project developed, one problem led to another problem, which resulted in delays and cost overruns lastly resulting in an economic disaster. The scope of the Chunnel project should have been better defined because of time of preparations was not an issue. During the inception phase of the project there were opportunities to define a better project scope. Almost every challenges that occurred during the project was due to lack of project communications. The main factors in this case, there were two different nations and a multi-cultural approach to the project. For future projects, proper scope of the project and an establishment of communications should be established. Despite of these factors, the tunnel was successful built and today serves in intended services. As it is written earlier, The Chunnel can be viewed as "either one of the greatest engineering and political feats of the twentieth cenfury, or, a project that never should have happened. However, irrespective of the opinion taken, it is clear that the Europeans are proud of their Chunnel" (Anbari et al., 2005).