Chunnel

The ChunnelfOLKESTONE, England to CALAIS, FranceTeam 11

1AgendaHistoryBackgroundProblem & PreventionRecoverySummary & Lessons Learned

2project failure OverviewEstimatedActualOverrunTime7 years8.5 years1.5 yearsCost$5.5 billion$14.9 billion$9.4 billionReasons for failure:Cost overrunTime OverrunInsufficient planningCommunicationsScope creepContract management

31802 - 1st Channel Tunnel proposed by French designer1803 - English proposal 1834 - 1st Channel Tunnel for railroad use proposed 1855 - Queen Victoria and Napoleon III approve undersea tunnel1973 - Construction begins on rail tunnel 1975 Construction halted due to Oil Crisis / Concorde development1985 British & French Governments invite (Apr 85) and receive (Oct 85) 4 design proposals

History41986 FranceManche-Channel Tunnel Group design selected (Euro Tunnel). Franco-British Treaty of Canterbury signed Established Intergovernmental Commission (IGC) Construction contract signed with TransManche Link (TML)

Project Timeline

5Design

Project Fact: 46 Contractors & 13,000 employees61987Treaty of Canterbury ratifiedUK begin Tunnel construction

1988 French begin Tunnel construction

1990French & English tunnels meet at 22.3 km from the UK and 15.6 km from France.

1994Channel Tunnel officially opens

Project timeline704/85Proposals requested10/85Proposals received01/8602/8608/8607/8712/8702/88Design selectedUK begins constructionCanterbury Treaty ratifiedConstruction contact signedFrench begins constructionTreaty signed12/90Service tunnels meet/connectChannel Tunnel officially opens05/94Project Timeline1802 French proposal199419851975Oil crisis halts constructionConstruction begins on railroad tunnel - 1973185518341803English proposalRailroad tunnel proposalQueen Victoria & Napoleon III approve undersea tunnel8Create a fixed transportation link between England and FranceProvide high speed alternative transportation options between UK and EuropeImprove tradeEconomic development

Project Objectives9Channel Tunnel Project RiskEngineeringGeology of Channel bedDrilling from both sides (lasers)TechnologyTBM (Tunnel-boring machines): two designsFinancing100% privately fundedBanking (investor) have oversightGovernment dictates health & safety requirements

10Channel Tunnel Project RiskSafetyTunnel collapseFloodingFiresCommunication/CoordinationProject ManagementMeeting milestonesPolitics France/England/Bankers/Private

11Communications ManagementCOMMUNICATION MGMTLevel:12345Communi-cations planningNo standardsInformal stakeholder analysisComm plan expected for all projectsUpdate and refine comm mgt planLessons learned analyzedInformation DistributionAd hoc distribution of informationStakeholder distribution of statusFormal info status system for stkholderAutomated database queriesImprove process measuresPerformance ReportingInformal reporting of statusSummarize status, progressGraphical performance reportingFormal variance & trend analysisEfficiency & effectiveness metricsIssues TrackingIssues handled on ad hoc basisIssues management not enforcedRegular issues meetingsImpacts of issues on other areasTracking process evaluated12

COMMUNICATION MGMTChannel Tunnel project organization13Transmanche Construction organizationCOMMUNICATION MGMT

14COMMUNICATION MGMTCommunicationsConflicting interestsDivergent interests15CommunicationsPrevention:Prepare & implement detailed stakeholder analysis & communications planDiversity/cultural awareness trainingConflict resolution training

Recovery:SWOT analysis & Raci chartStakeholder meetings for coordination/informationCOMMUNICATION MGMT

16Project IntegrationLevel:12345Project Plan DevelopmentAd hocDocumented processRisk, cost, schedule, quality, HRIntegrated w/ organizations strategic planImprovement process in placeProject Plan ExecutionInformal, verbal directionSummary level metricsDetail level metrics, templatesVariance & performance analysisLessons learnedChange ControlAd hoc, without PM awarenessScope only changes identifiedScope, cost, schedule identifiedIntegrated w/ control, risk managementChanges are in efficiency metricsProject Information SystemNoneSimple PM information systemStandardized system for all projectsAutomated systemContinuous improvement of data & sys.Project OfficeInformal, no standards or trainingEstablished, training availablePM methods, PM training mandatoryBest practice, PM training for all teamCost-tracking support, EV, PMP trainingPROJECT INTEGRATIONGreyed out portion were not able to find substantial information to confirm or deny type of methodology used for Chunnel project

Project Plan Development: Detailed design studies were not performed for entire project, only for actual digging portion of project.

Project Plan Execution: Design and construction began at the same time for the No collaboration between England and France to mitigate unforeseen issues, ultimately causing delays and cost overruns

Change Control: No formal process for change requestsNo coordination between IGC and Banks

Project Office: TML had a project management office; however, no standardized method of tracking progress of the project, allowing for huge oversight issues

17PlanningProblems:High-level planning completed for tunnel route & excavationInsufficient planning at detailed level to mitigate risksNot all requirements identifiedEngineering/technical issues arose as soon as excavation beganRail being designed while tunnel was being constructedDifferent train specifications discovered lateTraditional project approach for an agile/adaptive projectPROJECT INTEGRATION

TPMAPMxPMMPx5 Process Groups of Traditional Scoping, Planning, Launching, Monitoring and Controlling, & ClosingCharacteristics: Clear Defined Requirements (Goal)FEW expected scope changesRoutine and repetitive activitiesUse of established templatesAgile/Adaptive Iterative structure, Just-in-time planning, critical mission projects, thrives on change through learning and discovery

Must have high client involvement (cannot ID exactly what will be delivered until end of project)Leveraged by expecting and accommodating frequent change (as a result of learning and discovery), Expects and accommodates frequent changeRequires more client involvementScoping is at high level activity since little is known about the solutionPlanning is done based on each coming cycle Lunching includes established team operating rules, the decision making process, conflict management, team meetings and a problem solving approach

18Engineering/TechnicalPROBLEMS:Tunnel GeologyUnexpected Flooding on English sideEquipment failureWaste material disposalTunnel Boring Machine (TBM) outpacing supply chainAir conditioning/VentilationDifferent voltagesDifferent train sizes

PROJECT INTEGRATION

GeologyGoes back to English side not accounting for leakage through the chalk and when it did their equipment got wet, subsequently causing it to fail because it was not made to work in wet or damp conditions.Appropriate EquipmentTML used sophisticated machine when older machines would have been sufficient.

Air-conditioning needed- $200MRail tunnels in general do not require air-conditioning because air can usually circulate freely from one end of the passage to the other.Not so in the case of the 32-mile long Chunnel. The heat that the high-speed trains will generate as they pass through the long, narrow tunnels is expected to cause temperatures as high as 130 degrees Fahrenheit.

Incompatibility between the British and French railwaysDifference in train width, railcar width and voltagesTrains and rail cars had to be special ordered to ensure they were compatible with all platforms and bridges and run on three different voltages. Manufacturers delivered the equipment late adding to the schedule overrun. Trains-One year delayRailcars to carry vehicles- Six month delayEngines-Six month

19Planning/EngineeringPrevention:Allow Sufficient time for planning, research, and development before beginning projectrobust WBSrequirements identificationRisk assessmentCorrect project identification (APM)

Recovery:Pause construction, address lack of planning detailIncorporate all relevant stakeholders in regularly scheduled briefsImplement quality control checklist based on updated work breakdown schedule

PROJECT INTEGRATION

20Project Scope ManagementPROJECT SCOPE MGMTLevel:12345Requirements DefinitionStatement of purposeProcess to identify requirementsStakeholders involved in requirementsFunctions fully documentedIncorporates quality improvementDeliverable IdentificationNames of deliverablesCustomer & management identify deliv.Detailed description of deliverableConsistent template for all projectsImprovement in processScope DefinitionAd hoc, no standardsDefined scope statementAssumptions & constraints clearDocumented & monitoredProject experience data usedWBSBasic work componentsThird level templateJointly identify all tasksInter-project dependencies documentedRegularly monitoredScope Change ControlAd hoc communi-cationDocumented change processBaselines established & managedIntegrated with organs systemsLessons learned21The Intergovernmental Commission (IGC)Approved initial design based on outline of plan. Control project scope in relation to health & safety standards; no ability to provide funding.Forced design change to widen railcar doors from 600 mm to 700 mm ($9M to $70M and 9 month delay). Comparing English and French safety standards, the stricter of the two were used, causing additional delays.French and British Government approvalrequired approval from both governments.Approvals resulted in additional delays.Scope CreepPROJECT SCOPE MGMTThe Intergovernmental Commission (IGC)Responsible for reviewing plans for safety. Allowed portions of the project to be reviewed at various times during construction. Approved the initial design based on an outline of the plan. Had significant control of the project scope in relation to safety standards, but did not have the ability to approve fundingForced a design change to widen the railcar door. A delay in approval from IGC caused the manufacturing costs to increase from $9M to $70M for that portion of the project. This not only had cost increases, but caused a nine month delay. The commission ruled that when there were differences in safety standards between the two countries, the tunnel would use the more strict standard. This caused additional delays

22Scope CreepAdditional air conditioning/ventilation$200 million increasecompatibility problems between the British and continental railway systems Required Chunnel versions of French high speed train to operate between London, Paris, and Brussels.Trains run on three different voltages and are of differing sizesManufacturing the Chunnel versions of the high-speed train were a year late in deliverySpecial engines to carry cars and trucks through Tunnel six months behind in delivery

PROJECT SCOPE MGMTChange in passenger door width from 600-700 millimetersIGC Safety issue that was not submitted in a timely fashion causing delays and cost increases

Rail tunnels in general do not require air-conditioning because air can usually circulate freely from one end of the passage to the other. Not so in the case of the 32-mile long Chunnel. The heat that the high-speed trains will generate as they pass through the long, narrow tunnels is expected to cause temperatures as high as 130 degrees Fahrenheit.

Differences in construction and safety standards Highest of the two countries was supposed to prevail Caused significant time and cost delays23Scope CreepPrevention:Conduct detailed risk assessment prior to project implementationEnact deliberate scope change process including relevant stakeholdersIntegrate igc into initial planning & design phases

Recovery:Reevaluate & update risk assessmentDevelop & enact scope change process involving stakeholders from igc and banksIntegrate igc into ongoing planning & design phasesQuality checks with igc

PROJECT SCOPE MGMTRule #1: When a client asks to change the Scope of a ProjectChange in passenger door width from 600-700 millimetersIGC Safety issue that was not submitted in a timely fashion causing delays and cost increases

Rail tunnels in general do not require air-conditioning because air can usually circulate freely from one end of the passage to the other. Not so in the case of the 32-mile long Chunnel. The heat that the high-speed trains will generate as they pass through the long, narrow tunnels is expected to cause temperatures as high as 130 degrees Fahrenheit.

Differences in construction and safety standards Highest of the two countries was supposed to prevail Caused significant time and cost delays24Project Cost ManagementLevel:12345Resource PlanningIndividuals identify resource req.Resource listing definedProject office resource repositoryIntegrated w/ project office & HRImprove resource prioritiesCost EstimatingScope statement; ad hoc estimatesTop WBS, cost-estimate templateCost analysis of alternativesIntegrated w/ finance, acct, risk mgtImprove forecasting vs. estimatesCost BudgetingNo established practiceBaselining process not org standardTime phased estimates, baselinesIntegrated w/ finance, acct, risk mgtBaseline lessons learnedPerformance ManagementInformal, ad hocSummary level trackingEarned value, corporate financialsPerformance indicesMeasure efficiency & effectivenessCost ControlNon-standard trackingPeriodic cost reportsVariance analysis, est to completeCost reports integrated w/ tech reportsCost assessments, lessons learn25PROJECT COST MGMT25Cost & Schedule OverrunsUnique project never done beforePoor cost estimating & budgetingCosts tracked & reported but not controlledSchedule overruns more costly than cost overruns. Eurotunnel given exclusive control over Chunnel operations/profit for 55 years.No profit until Chunnel operational.

EstimatedActualOverrunTime7 years8.5 years1.5 yearsCost$5.5 billion$14.9 billion$9.4 billionPROJECT COST MGMTThe entire project is projected to be overrun by $9.4 billion (original bid of $5.5 billion and actual cost of $14.9 billion) and 19 monthsThis is mainly due to inappropriate planning. The short timeline of 7 years from design to completion was a contributing factor. As a result:Design and construction were executed at the same timeDetailed design studies were not performed to determine requirements The contract was inappropriately awarded as FFP resulting in $2.25 billion in additional claims due to changes in scopeThe contract was poorly written, and did not include key information about requirements and responsibilitiesSince design and construction were performed concurrently, required approvals were not obtained prior to the start of the projectThe project plan was reviewed for safety standard compliance during the project. The agency enforcing the changes did not have the authority to authorize the funding changes. Additionally, cost overruns were multiplied because the primary contractor was mostly concerned with making a profit, therefore cost overruns were less costly than schedule overruns.

Schedule overruns more costly than cost overruns. Eurotunnel maintained control over the tunnel for the next 55 years. Projected profits would be negatively impacted if revenues didnt begin on schedule. The company, composed of bankers and contractors, main objective was to make money. Not necessarily safety/operation The Chunnel couldnt begin to make money until it was operational. Therefore, operation began before the project was fully completed.

26Cost & Schedule OverrunsPrevention:Use of cost management maturity modelRobust and detailed business case analysis prior to project implementationRecovery:problems discovered during construction phase, limited influence over expendituresPrepare & Analyze alternative costing options (contracting, procurement, scope)PROJECT COST MGMT

27Project Procurement Management28PROCUREMENT MGMTLevel:12345Procurement PlanningNo process, ad hocMake/buy decisionOrganization capacity analysisCross organ. team decisionEnhancement continually incorporatedRequisitionProcess used is same as suppliesScope statement reviewedExpedited bidder processIntegrated with entire organizationEnhancement continually incorporatedSolicitation / Source ControlNo process for evaluating vendorsConducts price comparisonSuppliers provide WBS, sequencedIntegrated with entire organizationEnhancement continually incorporatedContracting ManagementMinimal reporting requirementsPeriodic status reportsProgress reported to WBSProgress against planEnhancement continually incorporated28VendorSolicitationVendorEvaluationVendorSelectionVendorManagementVendorContractingPM LIFE CYCLE28ContracTINGPROBLEMS:loan agreement required project to be funded until completionRequirements and responsibilities not clearly definedBlame game:Contractor believed there were problems with initial designEurotunnel believed there was contractor inefficiencyEurotunnel required to refinance and acquire additional equity

PROCUREMENT MGMTVendorSolicitationVendorEvaluationVendorSelectionVendorManagementVendorContractingClause in the 1987 loan agreement required the project to be funded until completionEurotunnel was required to refinance and acquire additional equityRequirements and responsibilities not clearly definedDisputes between Eurotunnel and TML on who should pay for cost over runs. Disputes on whether cost overruns were due to design deficiencies or contractor inefficienciesOne contract for design and construction. For a contract of this magnitude it could have been broken into multiple contracts

29ContractingContract TypeFixed price contract (design & construction) with competitive bidding to subcontractors Risk on contractorInappropriate because requirements not clearly definedDesign and implementation done concurrentlyUnderground construction most risky typeLongest tunnel of its kindrequirement to design freight cars identified, but not designed yet. Competitive bidding led to conservative construction estimates.Contractor had to create change orders to ensure they were paid. Large amount of work required a change order $2.25 billion in claims settled through arbitration and negotiationPROCUREMENT MGMTVendorSolicitationVendorEvaluationVendorSelectionVendorManagementVendorContractingTML Issued a Firm Fixed price contract with competitive bidding to their subcontractors Firm Fixed price contracts are appropriate when the contract requirements are known. This puts all of the risk on the contractor. The contractor is provided a lump sum with which to execute the project. They are only provided additional funding if they can prove that the scope of the contract changed. In that case, the contractor can receive actual costs plus overhead. This was in appropriate because requirements werent knownDesign and implementation were done concurrentlyUnderground construction is the most risky type of constructionLongest tunnel of its kind using this type of construction Although a requirement to design freight cars was identified, the cars werent designed yet. Competitive bidding led to conservative construction estimates. It incentivized the contractor to present the best case scenario to provide a lower cost estimate to win the bid. As a result, the contractor had to create change orders in all avenues to ensure they were paid. Undefined requirements made it so a large amount of work required a change order As a result, relationships between TML and the sub contractors were strained Gave rise to $2.25 billion in claims at the end that had to be settled through arbitration and negotiationAt the end of the construction, Eurotunnel had many claims against them, but no profits to pay out.Additional delays in profit to shareholders was caused by conservative cost estimates and the FFP model which didnt allow any extra money to pay out. Therefore, once profit came then they would have to settle claims.

30CONTRACTINGPREVENTION:Appropriate Type of Contractfixed price contract; should have been cost reimbursedIncreased Oversight from PMOMore time for contract preparation & biddingMore timely evaluations of project progress (vice only reviewing for financing)Recovery:Terminate contract, redefine requirements, rebid as a cost plus award fee contractPROCUREMENT MGMTIncreased Oversight (should have been a PM office overall in charge of project to ensure milestones were being met and not allowing for so many project change requests)Longer planning process for such a highly complex job that needed a lot of coordination (could have prevented so many oversight and coordination issues with vendors and GR/FR)More timely evaluations of project progress (vice only reviewing for financing)

31Summary (Lessons Learned)ContractingIdentify correct contract TypePre-project Planningearly & thorough stakeholder involvementcomplete requirement definitiondetailed risk assessmentCommunicationregular meetings & reportstransparency among stakeholdersScope changeRisk mitigation planEstablished scope change procedures32Questions

33Referenceshttp://www.eurotunnelgroup.com/uk/the-channel-tunnel/history/http://channeltunnel.org.uk/history.htm Project Management Maturity Model, Crawford, 2002The Channel tunnel a case study, ltc leslie veditz, 1993Channel tunnel project overview, pierre-jean pompeeCase study the channel tunnel, Josef Mittmann, Fachhochschule Dortmund, 2008PMI Case Study the Chunnel project, Frank Anbari, George Washington University, 2005Groupe Eurotunnel, history, http://www.Eurotunnel.com, 2013http://en.wikipedia.org/wiki/Channel_Tunnel34