The Project Of The Channel Tunnel

The Channel Tunnel is considered to be the largest private sector infrastructure project of the twentieth century. It is a fixed link transportation system comprising twin rail tunnels with an additional service tunnel each 50.5 kilometres in length. These run below the English Channel connecting England and France. The terminals can be found in Folkstone in the UK and Coquelles, near Calais in France.

In 1986, a treaty of Canterbury was signed establishing the political framework for the project. This addressed issues such as jurisdiction, national boundaries and governmental involvement, consequently defining the role of the Intergovernmental Commission (IGC) and Safety Authority. In the same year, the Concession Agreement was awarded to Eurotunnel (ET), a bi-national company formed by the Channel Tunnel Group (UK) and France Manche S.A. (France) for 65 years. Eurotunnel subsequently became owner and operator of the project and awarded the construction contract to Transmanche Link (TML) for the tunnel’s design, construction, testing and commissioning. ET also became linked to the banks via a loan agreement and to national railways via a usage agreement.

The scope of the project entailed the development of a system to accommodate the transfer of regular traffic through airport-sized terminals onto an entirely new rail system with minimum transit time and shuttles travelling at high speeds with high capacity in a confined tunnel environment. This therefore defined the technology to be used, since a high integration was required between works and specific transport equipment, an unprecedented rolling stock which included the heaviest traffic on rails, and the largest real-time data system ever employed to manage shuttles travelling at high speeds.

Project Roles and Responsibilities

Project Sponsor

As the project was privately funded, the sponsor had to raise finance on an unprecedented scale through bank loans and equity while making shares available to the public. The loan was secured through a consortium of 203 banks worldwide. An increase in finance during the course of the project was necessary to accommodate for the previously unconsidered needs of the IGC and for safety and environmental concerns as well as the approval of changes made to the project plan by the manager to address the commission’s concerns and the degree of fast-tracking between the several phases of the projects. Contractual issues had to be resolved during the course of the project, with a revised agreement to that made with TML in 1987 being drawn up. As installation of equipment progressed, the concern shifted to the training of personnel for the operation of the transport system. Maintaining communication between both sides of the tunnel was also crucial in achieving project success.

Project Manager

The project manager’s principal responsibility was to plan and organise the project effectively to meet the sponsor’s design and construction specifications while adhering to cost and time constraints. During the construction phase, the project manager had to appoint sub-contractors for various stages of the project, with fixed-price contracts issued to reduce costs. Other duties included the modification of the project plan to accommodate for changes in the original design necessitated by pressures from the Intergovernmental Commission and accounting for safety and environmental concerns. The project manager also had to ensure that there was effective communication between the French and the English sides of the tunnel construction.

Project Timeline

Commissioning

Jan 1990 – total tunnel bored reached 50km

Dec 1986 – Geotechnical study of Shakespeare Cliff carried out. Cross channel surveys developed for the 1974-1975 tunnel project were refined using the latest satellite observations

Nov. 1987 – Funds arranged totalling £5 billion

Oct 1990 – Eurotunnel Signs agreement for £1.8 billion additional bank credit facilities

June 1992 – The installation of complex signalling, control and communication system begins.

Nov 1993 – Commissioning Program Begins

August 1987 – Construction work begins on both UK (Shakespeare Cliff) and French (Sangatte) sides of the channel

Figure 1: Fast-track programme for Channel Tunnel [Event dates obtained from Wilson & Spark (1994)]

Original Project Objectives

The fundamental objective of the tunnel was to offer a comfortable, fast, frequent and reliable transportation service that linked the United Kingdom to France via the English Channel. ET suggested that that two rail tunnels and a service tunnel be constructed. The service tunnel was to be fitted with safety and electronic equipment of the highest standard while the rail tunnels were to be designed to accommodate shuttle speeds between 100 to 160 km/h with an average journey time of three hours between London and Paris.

The project was initially scheduled for opening on the 15 May, 1993. This meant that the time taken between design consideration and completion of the project was set at seven years. Since Eurotunnel could not start earning revenues until the tunnel became operational, schedule overruns were linked directly to loss of revenue, and were considered a more damaging consequence than direct cost increases. Based on the conceptual design, the budget was estimated at £5 billion.

It can therefore be observed that the quality of the system was of greatest importance in this project. A compromise was necessary between the desired quality and the time taken to achieve this quality, since as the time increased, so did the costs (in the form of lost revenue). Figure 2 indicates the time-cost-quality relationship for the Channel Tunnel project. The red dot represents the relative importance of quality with respect to time.

Figure 2: Time-Cost-Quality Analysis

Project Strategy

The scale of design was massive and consequently broken into several smaller projects that ran simultaneously to achieve the overall objectives.

Realistic time estimates for the project were obtained from detailed schedule planning during the inception phase of the project. This included activity definition, activity sequencing, and activity duration to develop a baseline project schedule. During the course of the project, monitoring and re-evaluation of the time estimates were performed by the implementation of a hierarchical planning/control system. This allowed overall strategic planning, proper reporting to management and detailed logging of day-to-day activities using a computerized reporting system to monitor the progress on all aspects of the project.

According to the Channel Tunnel Treaty, Eurotunnel had to obtain funding for the project from private sources, without government aid or loan guarantees. Hence, financing was obtained through equity and loan capital markets.

The Intergovernmental Commission (IGC) was put into place to ensure the quality objectives were achieved. This included implementation of a Safety Authority which was responsible for monitoring and specifying design procedures, specifications, construction and issues related to the environment, operation and safety. Since the project was bi-national in nature, the IGC mandated that if there were differences in the standards of the two countries, the higher of the two should prevail. The Quality Management plan included quality planning, quality assurance and quality control.

Contracts played an essential role in defining the scope of work, cost, timeline and rules of engagement (or penalties).

Contract Strategy

During the conceptual design phase, Eurotunnel contracted TML for the construction of the tunnel. The contract agreements were based on estimated costs since at this stage of the project, detailed design was incomplete and hence, fixed prices were not available. Based on the estimated costs, the contract had three facets:

Lump sum works for the construction of terminals and installation of mechanical and electrical equipment in both tunnels and terminals.

Target works, for all tunnelling and related equipment such as the tunnel boring machines. The arrangement was that if the actual cost was less than the target cost at completion, the contractor will receive 50% of the savings, while if the actual cost exceeded the target cost, the contractor was required to pay 30% of the excess, up to a maximum of 6% of the target cost.

Procurement items for the rolling stock and its associated equipment on a cost reimbursement basis with a procurement fee.

Project Manager Type and Style

ET comprised mainly of banks and contractors. Throughout the project, ET was largely criticised for its approach to design and management. This resulted in failure to deliver the project according to the sponsors’ time, cost and quality objectives. Additionally, since ET’s organisation was bi-national, a sole project manager could not be identified.

Organisational Structure

Eurotunnel’s organisational structure can be described as functional, but its two board system made it unique. This is depicted in Figure 3 below.

Figure 3: Eurotunnel Management Structure: Joint-Board System (adapted from Stannard (1990))

Strategy Analysis

In retrospect with the original project objectives, the Tunnel was not opened until 6 May 1994 at a cost of approximately £12 billion. Additionally, original specifications for the rail system and tunnel quality were revised in order to keep costs down.

Many reports have analysed the Channel Tunnel project in an effort to determine what went wrong in such a massive construction venture. From its inception, it was plagued by financial and technical woes, blown schedules and highly public battles between the company managing the project, ET, and its contractors, TML.

One of the factors responsible for the cost overruns stem from the short time allocated for bidders to place their proposal for the project in the inception phase. Due to time constraints only a conceptual design was presented and priced. All detail design was to be completed during the construction phase after the bid was won (an example of fast-tracking in the program). Consequently, a number of design problems were not identified from the onset of the project and no provisions were made for them in ET’s initial cost estimates. A typical example of this was the need for air-conditioning in the tunnel, and therefore, an additional £200 million to accommodate this new design aspect. Later on, this lead to disputes between ET and TML about who was responsible for these cost overruns.

Another important factor to consider was the poor communication between the British and French teams, in addition to ET and TML. Project communications was an important aspect in project planning, especially for a project of this magnitude. The multi-national team of approximately 15,000 persons included the politicians, governmental workers, bankers, lawyers and analysts who were responsible for obtaining an approved proposal plan and financing, and the construction workers, machinists and engineers who were responsible for the actual implementation of the project. With a task force of this size, an executional communication plan was necessary to address horizontal and vertical communication channels.

An analysis of the Risk Management revealed that focus was on engineering risk as compared to process and approval risk, such as IGC safety decisions and approval, while the business risk was addressed via contractual agreements.

During the project life, several key members of the ET team resigned and TML’s management also underwent significant change. Strategies were adjusted given the depreciating status of the project. Organisations involved such as the banks, Safety Authority, environmental issues, local authority and public opinion interfered strongly and permanently in this project that was constantly under media scrutiny.

The Channel Tunnel was able to withstand all these delays and cost overruns principally because of its highly robust future income stream.