Free The Channel Tunnel Project Essay Sample
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The primary objective of the Channel Tunnel Project was creation of an underground tunnel connecting England and France. It is one of the major privately financed construction projects in history, and it required joint efforts from two national governments, various contractors and numerous regulatory authorities (Bursic & Vlasak, 1998). In addition, the project required considerable modifications and used new technology in the course of implementation because of unforeseen conditions and changes in user`s requirements from the involved parties. It is evident that managing a project of this scale needs a considerable effort (Cleland & Ireland, 2006). This paper highlights the various factors and their effects on the course of implementing the project. The Channel Tunnel was completed, but it exceeded the time scope and the budget (Chinyio, 2010). This paper discusses and analyses the causal factors that led to cost and budget schedules failure, and other factors associated with project management processes. Specifically, the paper provides a clear understanding of the project management process and its planning; a critical evaluation of initial project planning and its execution; and analysis of how it came together in the actual execution. In addition, the paper provides an insight on the role of risk management, time frames, planning, costing and evaluation of the project; a critical evaluation of what went wrong, and suggestions how to improve the process.
A Clear Understanding of the Project Management Process and Planning
The initial scope of the Channel Tunnel Project was to build a fixed transportation link, connecting England with France. It was anticipated that it would facilitate economic development, increase European trade, and offer an alternative means of high-speed transport. Initially, the high-level design and financial estimates were appropriate (Fewings, 2005). Nevertheless, there was no adequate time required for completing the detailed design studies, implying that the planning phase did not identify potential avenues for expanding the scope of the project. For example, there was no adequate time for project management process and planning to identify the need to incorporate tunnel air-conditioning, which resulted in $ 200 million scope increase, not incorporated in the original project plan. Furthermore, the process, established by Intergovernmental Commission for design approval, exerted additional pressure on the scope of the Channel Tunnel Project because it approved design drafts not adopted in the initial concession agreement. These points out potential problems in relation to project scope initiation and planning (Donavan, 2003).
During the inception of the Channel Tunnel Project, cost estimates totaled $5.5 billion. According to the Channel Tunnel Treaty, the sources of finance for the project were private sources devoid of government assistance and loan guarantees. Consequently, governments could not regulate prices with the exception of potential monopoly scenarios. This helped in costs estimation, in the wake of possible governmental economic pressures. Equity and loan capital markets financed the project, with shareholders who sought equity interest easily located in Britain and France. Loan financing came from a conglomerate of 206 banks globally. This would impose significant consequences later in the course of project implementation because of the need to pursue refinancing in the event that negative variances in time and cost happened. An additional cost consideration is that the Channel Tunnel project managed to secure a concession agreement lasting for 55 years, which granted Eurotunnel the sole right to operate the Channel Tunnel for that duration. Therefore, any time delay or cost increases in the course of the project would impose significant impacts on the planned cash flow for the designated period.
There is a straight correlation between definition of scope and project cost estimates. In the case of a project of this magnitude, there is likelihood of potential challenges with original estimates, contract type and scope management (Genus, 1997). The argument is that the absence of scope definition increases difficulties in cost estimation, budgeting and resource planning. Additionally, the Return on Investment (ROI) assumptions was not accurate, which had the potential of resulting in unhappy investors and stakeholders. Since the initial cost estimations in due course increased by $14.9 billion, opportunities for improving project process management and planning are evident in this area (Harvard Business School, 2005).
The Channel Tunnel Project Schedule needed the planning of all activities linked to constructing the three tunnels. The need to hire 46 contractors to complete the design specifications complicated the project schedule. In the end, time estimations for completions of the tunnels were accurate because tunnel completion was three months ahead of the time schedule (Donavan, 2003). Nevertheless, the continuing changes in safety requirements, demanded by ICG, imposed negative variances in time schedules. From a project management process and planning viewpoint it is apparent that the schedule-planning phase did take into consideration activities associated with activity sequencing, definition and duration estimations to establish a baseline project schedule. An example that illustrates it is the fact that planned activities encompassed 12 tunneling faces dug out by 11tunne-boring machines. Therefore, it is apparent that there are significant schedule complexities, which needed mature logistical planning and expertise in relation to the development of work breakdown structure (Harvard Business School, 2005).
Contracts are an integral part of procurement management phase during project process planning; this is because contracts define project scope, timeline, cost estimation and rules of engagement. In the case of Channel Tunnel Project, it is apparent that procurement planning process was complex and completed under time constraints. Therefore, assumption errors were evident in relation to the ability to acquire adequate resources needed for project completion. In relation to fixed-price contract, project management team did not have an insight to limit the impacts imposed by known and uncertain risks. This led to the occurrence of contractual errors in terms of project estimates and risk allocation method, resulting in further contractual claims of $2.25 billion (Harris, 2006).
Quality standards are also an integral part of project process management and planning. From this point of view, it is apparent that there were differences in quality standards between France and England; the IGC claimed that the higher standard should prevail. Theoretically, this was an effective approach, although the contractors faced immense difficulties in interpreting the variations associated with concrete pour. The project management process and planning did not take into consideration the incompatibility issues in the original quality requirements. Therefore, quality planning, assurance and control processes required an up-front definition of the specifications (Jones, 2008).
An Analysis of How It Came Together In the Actual Execution
The development of the Chunnel Project comprised of detailed project planning, government approvals and communication agreements. The development phase was a vital part of its execution due to its magnitude, breadth and complexity. Some of the difficulties witnessed during actual execution of the project included cross-cultural differences between the two countries, and inflexibilities of some elements of the Channel Tunnel project. Two different companies managed two different sides of the project (Kerzner, 2003). The outcomes of the Channel Tunnel project point out the cost management challenges when executing large construction projects. The project was successfully completed above budget, leading to significant contractual claims. The project scope was extremely enormous, and scope creep was ultimately responsible for causing a considerable increase in the original cost estimations and schedule overruns. During project development phase, the project management team failed to fully assess the scope and adopt adequate precaution to mitigate scope creep. Complexities during the development phase arose from IGC capacities to control the scope without approval of extra funding, this affected project management, increasing difficulties in its completion. It is arguable that schedule planning in the development phase was adequate. Despite schedule overruns by one year, the factors causing the time overruns were beyond the control of the project management team (Loch et al., 2011).
The project management of Channel Tunnel project had a clear understanding of the project’s immensity; however, adequate research and detailed planning to back up the immensity of the project was lacking. The project management team relented most of the control to the IGC, resulting in immense pressure from stakeholders, the need to emphasize on cost and reduce risks associate with different cultures, two project management teams and other numerous challenges.
Political problems were evident during the commencement of the project because there was simultaneous fast tracking of design and construction (Maude, 2011). This may not have been a potential constraint, with the difficulty arising from the fact that promoters had to seek government approvals from Britain and France. The deliberative nature of democratic governments played an integral role in causing delays and initiating false starts when the project commenced. In addition, CTG/FM was under immense pressure from the governments to control project costs irrespective of the fixed-price contracts to their respective subcontractors and vendors (Meredith & Mantel, 2011). Since the scope lacked a precise definition, the use of a fixed-price contract in such a competitive bidding scenario resulted in increased claims. There is likelihood that the deliberative governments imposed significant challenges in the project management.
The Channel Tunnel project embarked on fast tracking, which involved simultaneous design and construction, to reduce delivery time causing an execution strategy risk. In addition, this strategy implementation increases the risks especially when there is new and unproven technology used. The risk increased by the fact that underground constructions projects are the most risky of all construction projects. Other warning signs observed during the execution phase included lack of contingency plans to address uncertain changes, differences in British and France specifications of rolling stocks, and the fact that some of the rolling stocks were not yet designed. All these issues served as warning signs during the execution phase, indicating the need for advance agreement in details.
There was the need for precise identification of objectives since the beginning of the project. It is evident that this was one of the primary failures of British and France governments. The governments financial models were extremely optimistic for the risks specified, a problem compounded by the bankers having the mandate of running the project. The absence of feasible goals and objectives, lack of scope definition, and failure to adopt a contract type that directly related the contractors’ rewards to all procurement chain levels to the specified objectives were potential indicators of project failures. It is arguable that the governments played a significant role in setting up the financial challenges during the actual execution of the project. Significant issues, emerging from the actual execution of the project, include the significance of cultural factors, effective communications and contractual issues. There was the need to have a single contract, developed and written in a single language using one legal system (Nigel et al., 2006).
Appreciation of the Role of Risk Management, Time Frames, Staffing, Costing and Evaluation of the Project
In relation to risk management, the project management team reviewed the project scope for initial risks. Nonetheless, the focus of risk management was on engineering risks, instead of project process and approval risks. The project management team was contented with the technical nature of the Channel Tunnel project, and they were not adequately prepared to handle the degree of IGC supervision and change management controls. Both France and England had knowledge of the financial risks, which posed the need for non-governmental funding. Effective project management requires the risk planning, and mitigation is a continuing element of the project (Wolfgang & Finn, 2009). This viewpoint draws on the assumption that the early identification, quantification and prioritization of most material risks facilitate the effective establishment of risk response strategies. Addressing known and unknown risks need a careful evaluation and insight of the nature of each initiative. The project management process and planning of Chunnel failed to assess the risk impacts carefully in terms of change management oversight and contract type (Webb, 2003).
In relation to cost estimates and time frames, it is evident that schedule management highlighted considerable challenges in the course of the project. Cost estimations increased because of changes of the requirements in the course of project implementation. Even during project closeout, the need for tunnel air conditioning system was a considerable scope modification. In fact, after project completion, there were unresolved scope items, implying that a project scope creep after closeout (Harris, 2006).
In relation to staffing, teamwork was an integral element needed for the success of the project, since the project entailed people from two different countries of different cultures and languages. This served as a significant barrier to communication and agreements in terms of quality specifications. Politicians, government officials, analysts, bankers and lawyers were above the ground. They helped in leveraging the historical perspectives and the economic constraints to develop and approve a project plan. Numerous construction workers, engineers and mechanics were below the ground, working towards the three tunnels. The project lasted for 3.5 years, indicating the high level of cooperation and teamwork among the involved members. Effective project management requires the definition of a project team, and agreeing on ownership, timelines and activities (Project Management Institute, 1996). This poses the need for an upfront definition of roles and responsibilities to handle activities outlined within the work breakdown structure. Teamwork requires all the stakeholders to move forward together to achieve similar objectives. The basic argument is that projects of such magnitudes should not underestimate the significance and role of communications during all phases of project implementation. The numerous stakeholders in the Channel Tunnel project, including shareholders, global lending banks, construction companies, suppliers and British and French governments played a role in creating the logistical and communication challenges (Dinsimore & Cabanis-Brewin, 2010). Their interdependence further increased the difficulties in providing satisfaction to all stakeholders. In fact, scope changes due to omission of requirements indicate how they affected cost, time, potential risks and project quality. In this regard, effective communication was lacking, implying that time resolution of matters was missing, causing further variances in time and cost schedules (Flyvbjerg et al., 2003).
Project evaluation of Chunnel project illustrates the significance of efficient change management in the course of project execution because of the impacts imposed by the ability of a party to demand changes in user`s requirements without appropriate funding for implementing the changes (Nickson & Siddons, 2006). In this case, IGC had the authority to demand changes in project requirements, but they lacked the means of providing extra funds to implement the changes. In combination with slow decision-making, it played a significant role in the budget, and cost overruns were not because of bad cost estimation or control, but because of out-of-control change management processes (Nigel et al., 2006).
A Critical Evaluation of What Went Wrong
The core factors that led to time schedule overruns included changes in the requirement specifications in the course of project implementation; for instance, there was the need to incorporate tunnel air conditions to enhance safety (Nigel, 2002). Changes lacking in the initial design imposed significant delays. The second factor that affected effective project management was the lack of effective communication and teamwork between French and British teams in the project. This is because the project began working from two different sides with the objective of meeting in the middle. The third factor that affected effective project execution was the fact that contract bidding was based on competition, which encouraged the selection of winners, basing on low cost estimates (Shenhar & Dvir, 2007). Cost and contract management are some of the core issues that resulted to schedule and cost overruns. The negotiation of core elements of the contract did not create an opportunity for a timely delivery of project deliverables. This was because of the conflict of priorities, which had a significant effect on the final project delivery (Nokes, 2003).
Suggestions as To How the Process Could Have Been Improved
As discussed in the paper, it is apparent that key weakness areas in the Channel Tunnel project involved cost and contract management. The significant strengths, associated with this project, included quality and schedule management. It is apparent that there are many opportunities for improvement of cost management and contractual issues (Project Management Institute, 1996). The first suggestion is to use a standardized change-control management to eliminate cost considerations issues, imposed by out-of-control-change management control processes. Standardized change control offers an effective framework for evaluating the cost impacts of changing requirement specifications in the course of the project (Thomson, 2005). Overall, improving the project management process and planning required the specification and validation of functional and technical requirements, in order to strengthen time schedules and cost estimations. In addition, there is a need for an effective change management plan in the course of the project life, in order to offer an objective method of project approval and evaluation (Roberts, 2007).
Other suggestions for improvement include upfront validation and definition of roles, responsibilities of the project team members in order to ensure effective risk control and minimization, and use of appropriate contract methods in accordance to the scope. Another recommendation is the precise establishment of project objectives from the outset; besides, the project management team should have adequate project control without excessive influence from external entities that lack the capabilities of making appropriate decisions to facilitate the success of the project.