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TheChunnelEvaluationReport-ProjectManagement

By Anita Wallace,2014-05-15 05:20
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TheChunnelEvaluationReport-ProjectManagement

Chunnel’s Evaluation Report

Executive summary

    In 1996, American Society of Civil Engineers ranked the Chunnel as one of the Seven Wonders in the world (Reynolds & Christopher, 1996). From the initial idea to the final construction success, it took nearly 200 hundreds years. This paper mainly presents the detailed condition of Chunnel project in the first part, from the project design to the construction process and the finally performance. From the news and some documents or reference, we found this mega project always faced with varied problems from the start, such as financial crisis, technical difficulties, plan lag and so on. The author analyses these issues or problems with the perspectives of project management and give a critically evaluation on the project. Though we cannot provide any effective recommendation for this finished project anymore because the most important characteristic of project is disposable and unrepeatable, we still can learn some lessons or get inspirations through learning and analyzing this great project.

    content

    Executive summary ........................................................................................... 2 1 Introduction .................................................................................................... 4

    1.1Project Background ................................................................................ 4

    1.2 Project Profile ....................................................................................... 5

    1.3 Operation Condition .............................................................................. 5 2 Project Management Structure ........................................................................ 6

    2.1 Project Initiation.................................................................................... 6

    2.2 Project Construction .............................................................................. 7

    2.3 Project Financing .................................................................................. 8

    2.4 Project Actual Progress ......................................................................... 8 3. Evaluation of the Chunnel with the perspective of Project Management ......... 9

    3.1 Chunnel’s Evaluation ............................................................................ 9

    3.2 Problems and Suggestions during the Processes of Project Management

     ......................................................................................................................... 10

    3.2.1 Project Incubation ...................................................................... 10

    3.2.2 Feasibility Evaluation ................................................................ 10

    3.2.3 Project Financing ....................................................................... 11

    3.2.4. Implementation of the Project ................................................... 11

    4. Conclusions ................................................................................................. 12 References ....................................................................................................... 13

1 Introduction

    1.1Project Background

    The Channel Tunnel, also called Chunnel, is a 50.45 kilometer undersea rail tunnel linking Folkston, Kent in England with Calais in France, its lowest point reaching 75 meters (Janet, 2009). The tunnel’s undersea part is about 37.9 kilometer, which is the longest in the world. It is the second large channel tunnel, only after the Seikan Tunnel in Japan which is both longer overall at 53.85 kilometers, and deeper at 240 meters below sea level (Institution of Civil Engineers, 1989).

    The history of the Chunnel can date back to 1802 when a French engineer Albert Mathieu proposed to Napoleon I to build an undersea tunnel connecting England with French directly (Whiteside & Thomas, 1962). For security reasons, British government and press rejected the proposal to build the tunnel (Wilson et al., 1994). With the link between the England with the Europe continent become increasing tight, people felt the urgent to solve the transportation issue. In the November of 1973, Britain and France governments signed up the treaty to construct the channel tunnel and put forward specific solutions. In November 1984, British Prime Minister Margaret Thatcher and French President François Mitterrand achieved basic agreement that the project should construct and operated by private sector. In May 1985, the two governments invited main engineering companies and Banks all over the world putting forward draft of project planning. Finally, governments announced CTG-GM (Channel Tunnel Group-France Manche S.A.) win the bid (Flyvbjerg et al., 2003).

    This magnificent constructional engineering began in February 1987, took seven years to complete. In 1993, after the completion of the channel tunnel, high-speed just need 26 minutes got through the tunnel. The tunnel operate 24-hours, carrying Eurostar passenger trains, Eurotunnel Shuttle roll-on/roll-off vehicle transport and international rail freight trains and connecting the LGV Nord and High Speed 1 railway lines. Every three minutes two trains come out from both sides. This tunnel

could send 4000 cars to the other side every time.

    1.2 Project Profile

    In fact, the Chunnel is not just one tunnel, but consists of three parallel tunnels and the total length reach to 153 km. Two larger tunnels, diameter getting to 7.6 meters, both contain a monorail railway line. Between the two main tunnels is a service tunnel, having a diameter of 4.5 meters, which was used for ventilation, maintenance and safe passage. Three tunnels were separated from one another 30 meters and connect together every 375 meters via a crossway (Kirwan , 1995).

    This project can be roughly divided into 3 parts: The first is English access, it was provided at Shakespeare Cliff; the second is French access, it was located in Sangatte. The core part is undersea excavating, English took charge 22 km and France constructed 15.2km. French side used five tunnel boring machines (TBMs), the English need six. The middle service tunnel used Service Tunnel Transport System (STTS) and Light Service Tunnel Vehicles (LADOGS) (Dodge, 1993). Between France and England, the geology of the terrain where the Chunnel passed by vary enormously, on the English side, ran along with chalk marl which with impermeability ease to excavation and strength, on the French side has a length of 5 kilometers variable and difficult geology. Thus, the solutions to proof water pressure were different, on the French side, neoprene and grout sealed bolted linings produced by cast iron or high-strength reinforced concrete were used, on the English side, this kind of segments was only used in some poor geology areas.

    The construction of tunneling commenced in 1988, and the Chunnel began operating in 1994. The total construction budget cost was 4.650 billion pounds in1985, equivalent to 11 billion pounds today. At the peak of construction 15,000 people were employed by the Eurotunnel, needing a daily cost over 3 million pounds (Anderson et al., 1994).

    1.3 Operation Condition

    There are two kinds of services offered by the tunnel: Eurotunnel Shuttle service for

    road vehicles; Eurostar service for passenger trains. From 1994 the official starting operation to 2010, nearly 9,528,558 passengers took the shuttle train, equivalent to Britain's entire population. However, the economic performance of the Chunnel was far overestimated and the project result with 80% over initial budget (James, 1994), these unpredictable problems leading to in November 1995 Eurotunnel suspended payment on its debt in to avoid bankruptcy. Many financial expertise indicated this project proved to be a great failure and with few development in the future. They even said that the British economy would have become better if the tunnel had not been constructed. As for the impact of the Chunnel, scatter and small positive impacts on the two countries’ economy really have been seen, but it is hard to owe apparent

    economic soars directly to the tunnel. Since the very first of the Chunnel, the tunnel occupied with several problems. Accidents such as fire denied the construction schedule. Illegal immigrants and asylum seekers issues and continuously delay and overspend all disturbed the Eurotunnel.

    2 Project Management Structure

    2.1 Project Initiation

    After making the decision to build the tunnel, the financial problems became the key point of the project. On September 11, 1981, British Prime Minister Thatcher and

    French President François Mitterrand held a summit meeting in London and reach an agreement that the channel must utilized the private sectors’ strength. On March 2,

    1985, French and British governments issued the channel’s engineering, construction and management bidding invitation and received four different project bidding. In January 1986 the two governments selected CTG-FM prominent scheme. In March 1986, the British and the French government and the Eurotunnel signed an agreement, authorizing the company with a 55 years’ construction and management rights (including planned seven years for construction stage). Then it was extending to 65 years, starting from 1987, which is the longest project concession period in the history (Chisholm & Michael, 1995). The government also promised, unless Eurotunnel agree, none could build another competitive strait channel before 2020. After the

    concession period, the Eurotunnel returned the ownership of the Chunnel to the two governments. These two governments must provided necessary infrastructure and the company shall have the right to the performance its business policy, including charges pricing. Therefore, the Channel is a standard and the largest

    Build-Own-Operate-Transfer (BOT) project at that time (Bedelian, 1995).

    Eurotunnel is a giant transnational business group comprised by the two countries’ construction companies, financial institutions, transport companies, engineering companies and other professional institutes. In 1985, this group was divided into two parts: TML (Transmanche link) functioned as a general contractor, serving for construction, installment, and testing; Eurotunnel took charge of Operation and management as an owner. In fact, there is a company employed by Euro tunnel naming Maître d'Oeuvre to monitoring project activities and reporting to governments and banks (Kirkland et al, 1995).

    2.2 Project Construction

    The Eurotunnel was responsible for all possible risk during the construction of the channel tunnel, and prepared a $1.7 billion’s standby facility for the process. It

    provided profitable contract agreement for their contractors because that these contractors were shareholders at the same time. Half of the road construction engineering, worth $4.9 billion, was contracted at constant price, while tunnel construction at target cost. So Eurotunnel pay the actual cost plus fixed fee (12.36% of the target cost) to the contractors (Fetherston, 1997). If the actual cost was below the target cost, contractor would get half of the extra part. On the contrary, if the actual cost beyond the scheduled target, the contractor must pay the liquidated damages. In addition, due to the unforeseen submarine status, changes on the design or technical’s specifications, and inflation, the contract price allowed adjustment.

    The construction period: 1988-1995.

    Because this is a multinational design and construction engineering contract, the company had to deal with a large number of internal and external relations. In order to coordinate internal departments, the senior managers on both sides agreed to

    communicate on the corresponding level. To some external relations, Eurotunnel established some experts group to deal with.

    The project is divided into the following areas: tunnel, precast concrete, the terminal station, machinery and electricity, operation. Except operation, each area’s project management and construction was divided into independent sub items and its manager reported directly to engineering commander.

    2.3 Project Financing

    Eurotunnel raised fund through issuing shares in stock market and attracting private investors and they believed it is feasible to refinancing on a low rate because that the risk would reduce with the completion of the project.

    In fact, this unprecedented mega project faced with great economic risk on varied aspects. Therefore, the Eurotunnel conducted careful feasibility study. The main risk in construction period lied in that construction period lengthen would make operation period relatively shorten, directly affecting the project’s income and the repayment of the debt. This is probably going to placed Eurotunnel on risk for if the company cannot pay back line of credit with the bank’ regulations, the bank may exercised their power to clean company assets and sell it. However, after complicate market researches and economic analysis, the company believed it was feasible. 2.4 Project Actual Progress

    Compared with the blueprint depicted by the Eurotunnel, the reality was full with many huge unforeseen events. In the final years of the project, cost overrun emerged, and European tunnel company and construction contractor appear some serious controversies. At the same time, Europe tunnel company also claim 5 to 10 billion pounds from England and French governments because the additional cost caused by government required for enhance safety management and environmental measures. Finally, the government extended the concession period to 2052.

    The original operation date was in May 1993. However, due to several key points’ delay, the operation time had to put off. There were several reasons for the plan lag:

first, geological conditions were worse than expected (Kirwan, 1995).

    Undoubtedly, the cost overrun is one of the biggest problems. The planned cost at very beginning was $4.8 billion, and finally actual cost was 10.5 billion pounds. Since the opening of the tunnel, it revenue has been disappointed, at least in the first few years, even the situation get better in the later, the Eurotunnel still couldn’t get rid of the fate of the bankruptcy. Other accidents include several fire hazards.

    3. Evaluation of the Chunnel with the perspective of Project Management

    3.1 Chunnel’s Evaluation

    The Chunnel adopted mature and advance technology during the construction period. Engineers always sought high quality and reliability so that the tunnel could be regard as a successful and great engineering. In the construction process, terminal construction station tried their best to avoid polluting the local environment. In order to protect people life, the barriers was built up along the place where the railway passed by.

    On May 6, 1994 Britain and France’s heads took part in the official opening

    ceremony of the Chunnel. Prime Minister Thatcher saw it as a symbol that means private sector has the ability to build large-scale engineering and thought it set up a sample to guide the private enterprise to invest on infrastructure construction. The Chunnel also was rated as one of the ten major projects of human engineering history in the 20th century. This is not only because it is the second longest undersea tunnel in the world, for it was poured into a huge amount of money, and the grand ideas and energy of the engineers and workers. The soil and rock dug by the workers added to more than 750 cubic metro, equivalently to 3 great pyramid of Egypt’s volume. The steel used in tunnel lining, is equivalent to 3 Eiffel Tower only on the French side. More important is that it succeeded in solving many engineering technical difficult problem. It in the technical guideline is reliable and advanced requirements. Therefore, we should give highly praise to the project on its technical and engineering aspects. For a long time, British opposed to the construction of the tunnel owing to the military worry. The open of the Chunnel pushed the integration of

the European and strengthened the friendship of two peoples.

    3.2 Problems and Suggestions during the Processes of Project Management 3.2.1 Project Incubation

    Project incubation is a process from putting forward project ideas to project approval and forming the organizer. The reason of the crisis which Eurotunnel faced could data back to its project incubation period.

    At the demonstrate stages of the project, the company hired many independent consulting experts to make forecast. They generally believe in 15 to 20 years after 1992, the traffic demand across the channel would be doubled. In 1991, the number of passengers across between Britain, France and Belgium has reached 31.3 million people (including the plane, waterway and train ferry). Experts forecast 2003 it will up to 58.3 million in 2003, including 39.3 million travelers using the tunnel. Actual situation shows that their forecast tended to overly optimistic (Kirkland, 1995). Eurotunnel had obvious flaw on the organization structure. It is unreasonable to allow the project sponsor (CTG-FM) to make contract with his own cooperative partner (TML and lead banks) (Francis, 1993).In fact, it must exist a tough, independent owner to negotiate on the construction and loan issues.

    Capture the appropriate time to approving the project is the core content of the project. The project approval of the channel tunnel has been abandoned or paused at least 26 times. But this attempt tells us the demonstration of the project cannot be carried out just one time and need to build a team to conduct long-time feasible precast and tracking in order to grasp the best time.

    3.2.2 Feasibility Evaluation

    For maintaining sustainable competitive advantage of this kind of project in the market, support from government should be evaluated objectively. Generally speaking, this kind of mega project should own monopoly position to get stable income. In this case, although the governments guaranteed none could build the

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