19The Chunnel Months Delay One of the world’s Largest Privately Funded construction project involving 2 Governments – French and British 220 banks Numerous contractors Regulatory Agencies (IGC) The project was bid at $5.5 b but completed at $14.9 b $8.4b Scope creep
The Chunnel - ContractsFrench + British BOT-Contract CTG/FM Govt CTG/FM Contract TML
Next 15 MinutesInceptionDevelopmentExecutionCloseout
What is expected?• Proper risk management • Engineering risks • Process risks • Approval risks • Financial risks • Business risks
Inception Development Execution Closeout • Inception • Historical background of the project • Objective • Political climate • Pre-feasibility study
Inception Development Execution Closeout • Scope: • Fixed transportation (51.5kms) • Economic development • Pressures causing mishaps: • Lack of scope causes resource planning, cost estimating & budgeting difficult. • Air-conditioning costs • Formation of intergovernmental commission
Inception Development Execution Closeout • Finance aspects: • Treaty says to no government aid • Pursued via equity &loan capital markets. • Scheduling: • Activities related to activity definition, activity sequencing, activity duration estimates. • Planning 3 tunnels which required 46 contractors to complete the design requirements. • Changing safety rules created negative variances.
Inception Development Execution Closeout • Incompatibility issues could have been avoided by stating Initial quality requirement in more detail. • Areas of improvement There was much interpretation for the agency like IGC .The IGC decision to change 600mm doors to 700mm doors itself delay the project to 9 months. • Teamwork & cooperation considering the scope of the project was very important. • Contractual agreements made teamwork a complex activity. • It was very difficult to come to a mutually agreeable solution to material issues due to incomplete requirements, scope changes and thus , risk response strategies should have been considered.
Inception Development Execution Closeout • Efficient communication is very important in preplanning, contract negotiations, financing and technical issues during the inception stage. • Communication seemed to breakdown in case of issues regarding organizational structure , finance and contracts as the issues were not timely solved.
Inception Development Execution Closeout • Communication plan addressing horizontal and vertical communication channels should be in place. • Plan should also include information sharing, issue tracking and performance reporting. • Although , advanced project management tools and techniques were used, the decision-making ability to address critical issues from centralized position seemed insufficient
Inception Development Execution Closeout Some critical aspects in development phase: • Massive communication barriers. • Problems due to huge scope of the project. • IGC played critical and detrimental role. • Cost planning. • Banks played an important role from start. • Scheduling was well done but project still faltered on deliver date. • IGC’s highest standard norm.
Inception Development Execution Closeout • Better risk management could have been done. • Lack of investment in team building. • Two Governments denial to provide financial guarantee. • Project office’s work lacked detail. • All in all, given the facts, the project delay and cost overrun were almost foregone conclusions
Inception Development Execution Closeout Too Early A Start New Approval Issues TechnologyDesign Underground Construction Enggineering Construction Risks
Inception Development Execution Closeout Bureaucratic Pressures French + British Fixed Price Control Costs Implications for Govt. Pressures TML Squeezing Low Bid Prices “Winner Takes Revenue via with Best Case All” Issue Change orders Scenario Project cost Rise TO $7 billion from $4.3 billion
Inception Development Execution CloseoutControls in Wrong Hands Controls Construction Financing Banks Companies Profit Maximization Risk Minimization NO IMPORTANCE TO OPERATIONS
Inception Development Execution CloseoutCommunication Issues Different Cultures Different Different Countries Specification Internal Communication Limited
Inception Development Execution Closeout The immense amount of Litigation and Claim against project. • Scope: Scope of the project increases due to overall changes request through out the life of project. • Cost & Schedule Management: Max. Efforts to analyzing the source of overrun cost and blaming participating organization. • Team work and Communication: Team work and communication had broken down in several key area. Like Financial banker focus on minimizing their losses ,so they refused to negotiate any settlement. Clearly win-win negotiation far from mind between the parties.
Inception Development Execution Closeout • Time Over shoot: the greatest impact of ROI. • Quality of project: Quality of a project is up to the mark as per engineering design and expectation. Even no. of accident was less as per industrial avg. during project running time. • Effective Change Management: They ready to make changes as per demand without additional funding during close out.
Learnings• Equal importance should be give to the technical as well as functional aspects of project management.• Project contracts and financing agreements should not be rushed and should provide for contingency.• External Stakeholders should only play monitoring role and should not take part in day-to-day operations.• Large projects like Chunnel Construction requires leveraging of new technology and lessons learned from existing project.
Thank You!!!! No Questions Please. We Know You Cant Control, So Go Ahead And Shoot Your Questions!If learned from, Mistakes can be converted into Experiences.