the channel tunnel (chunnel)

Background0 An underground tunnel connecting England andFrance.0 The largest privately funded project ever undertaken.0 Bankers underwriting the funding for the project.

Project Proposal0 A 32-mile (51.5 km) double-rail tunnel0 Will accommodate through-trains & special car-and-truck-carrying shuttle trains.0 Their bid was US$5.5 billion.0 The country with the highest standard would prevail.

New Technology0 New technology being used.0 State-of-the-art laser and computer tech.0 The Chunnel project was completed but it was lateand over budget.0 The new technology required significantmodifications during the project due to unexpectedconditions and changes required by various parties.

Phases for the Project0 1-Inception-Historical background, overall objectives,political climate, and pre-feasibility studies.0 2-Development-Overall planning, feasibility studies,financing, and conceptual design.0 3-Implementation-Detail design, construction, installation,testing, and commissioning.0 4-Closeout-Reflection on overall performance, settlement ofclaims, financial status, and post-project evaluation.

Inception Phase0 The ideas was to create a fixed transportation linkbetween England and France.0 This would create a spur of economic development.0 Improve trade using the new alternative high-speedtransportation.

Ground Rules & Time Line0 1974- Initial tunnel ideas gather but abandoned.0 1978-British & French discussions resumed.0 1983-Frensh & British banks & contractors proposetunnel scheme.0 1984 British and French agree to common safety,environmental, and security concerns.

Ground Rules & Time Line0 1985-French & British governments ask for fixed-linkproposals.0 1986 The project was awarded to Channel TunnelGroup/FranceManche a.k.a. Eurotunnel and declaredowner of 55-year concession for the link.

Ground Rules & Time Line0 1987 the “Concession Contract” was awarded toChannel Tunnel Group/FranceMache (CTG/FM) bidfor US$5.5 billion and ended on Dec. 15, 1994 with afully operational station.0 The project was 19 months late and had a costoverrun of some US$3 billion (total construction costof US$7.1 billion).0 On 1 December 1990, Englishman Graham Fagg andFrenchman Phillippe Cozette broke through theservice tunnel with the media watching.

The Implementation Phase0 Not agreeing in details resulted in eventual delays andcost overruns.0 Warning signs of rolling stock had not yet beendesigned (vehicle and freight cars).0 No contingency was set aside to cover “unknownunknonws” (Ventilation system).0 The specifications for British rolling stock and Frenchrolling stock were not the same.

The Implementation Phase0 With costs out of control, fixed-priced contract wereawarded to contractors in order to have any chance ofwinning the bid and not risk losing the bid to nextlowest bidder.0 Contractors assumed an optimistic case, and sinceunderground construction is rife with changedconditions.

Early Problems0 No air-conditioning was included costing US$200million more.0 The Intergovernmental Commission (IGC) approveddesigns that weren’t within the original concessionagreement.0 Thus indicating possible problems with initiation andplanning.

Early Problems0 The lack of defined scope makes resource planning,cost estimating, and budgeting difficult.0 Return on Investment (R.O.I.) assumptions made inthe planning stages may not prove accurate. Leaving atrail of unhappy investors and stakeholders.

Early Problems0 From US$5.5 Billion to US$7.1 Billion0 Ongoing safety requirements changes sought by ICGcontinued to create negative impact.0 Not enough was understood to limit the impact ofknown and unknown risks.0 Contractual errors were made in the estimates andrisk allocation method, costing additional US$2.25billion.

Early Problems0 Passenger doors be widened from 600mm to 700mm.Cost increase from US$9 million to US$7O million.0 Objectives of a project need to be identified andcommunicated clearly from the beginning. This wasthe largest and most damaging failure of bothgovernments.

Early Problems0 By not having the real goals, objectives, and scopedefined early, and by not implementation a contractmethod that directly linked the rewards to contractorsat all levels of the procurement chain to thoseobjectives.0 The project was essentially run by bankers.

Finances0 The Chunnel project had to be financed throughprivate sources without government aid or loanguarantees.0 The government was prohibited from regulatingprices except in monopolies.0 Financing was pursed via equity and loan capitalmarkets.

Finances0 Most shareholders seeking equity interest weremostly in France and eventually Britain.0 206 banks world wide participated with the loan.0 The refinancing had to be pursued, should negativevariances in time and cost estimates occur.

Success From a ProjectManagement Perspective0 Contracts are a critical part of the procurementmanagement process.0 Contracts define the scope of work, cost, timeline andrules of engagement.0 Risk planning and mitigation needs to be ongoing partof each project.0 The hope is that most material risk are identified,quantified, and prioritized early enough so that aneffective risk response strategy can be establish.

Success From aProject Management Perspective0 3 tunnels total North, South, and Service.0 46 contractors were hired.0 The tunneling itself was finished 3 months ahead ofschedule.0 Each team member has a responsibility for quality.0 Quality requirements were mostly defined up-front,quality planning, quality assurance, and qualitycontrol.

Success From aProject Management Perspective0 Team work was necessary to complete this project.0 It was estimated that 15,000 workers were employedon the project.0 From a P.O.V. quality management was a success.

The Development Phase0 Consisted of detailed planning, communication,agreements, and government approvals.0 A large part of the struggles were do to inflexibility ofsome characteristics of the project, and cross-culturalexchange between 2 countries.

The Development Phase0 A scope creep played a large part in the substantialincrease from its initial cost estimates, and itscompletion behind schedule.0 The scope was not fully assessed and the properprecautions to prevent scope creep weren’t put inplace.0 The project team were able to understand thecomplexity and were able to use previous research onthe soil, but in the end, the lack of continued focus onthe scope resulted in the frustrations of trying to dotoo much.

Closeout0 The completion of the project was rushed to allowoperations to begin before the entire effort wascompleted.0 The tunnel was actually completed.0 Teamwork and communication were broken downinto several key areas.

Financial Issues during Closing0 Focused on minimizing their losses, refused to acceptnegotiated arrangements for settling some of the keycontracts disputes.0 International Chamber of Commerce was involvedwith helping the various competing sides tobargaining table in an attempt to resolve key portions.

From a Management P.O.V.0 Even with a high-level design and respective rough-order-of-magnitude estimates were appropriate.0 In 1996 the American Society of Civil Engineersidentified the tunnel as one of the Seven Wonders ofthe Modern World.

Rating Scale:5-Excellent, 4-Very Good, 3-good, 2-poor, 1-VeryPoorProject Management Area Implementation PhaseScope Management 3Time Management 1Quality Management 3Human Resource Management 5Communication Management 2Risk Management 4Procurement Management 3Integration Management 2