Crossrail: on time and on budget, is this how to get a major infrastructure project right?

Written by Colin Marrs on 8 February 2016 in Feature
Feature

Crossrail, the capital’s new east-west rail link, is on track to open on time and on budget. As well as being a boon for commuters, it could also improve the UK’s reputation for delivering major infrastructure projects. Colin Marrs digs around for some lessons

In less than three years, passengers will pour through ticket barriers onto the platforms of a major new London rail line. The Crossrail project is one of the most ambitious transport construction projects ever undertaken in the UK, creating 21km of twin tunnels beneath the capital’s streets. When fully operational in 2019, the line will connect Reading and Heathrow in the west to Shenfield and Abbey Wood in the east.

Despite spending decades in gestation, delivery of the project has been remarkably smooth, with the government claiming the project will be delivered on time and on budget. Experts seem to agree that the governance structures put in place for the Crossrail project have helped put the UK back on track when it comes to delivering major transport infrastructure. So what’s the secret?

It can be argued that the Crossrail concept is more than a century old. During the 1880s, parliament gave permission for the Regents Canal & Railway Company to create a surface line between Paddington and east London’s busy docks. The scheme was aborted, but a similar idea resurfaced in 1944 as one of the less well remembered – and unfulfilled – parts of the famous Abercrombie Plan for the capital.


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The Crossrail name itself was coined in a 1974 rail study by the Greater London Council and the Department for Environment, but it wasn’t until 1991 that a private bill allowing for the creation of the line finally came before parliament. A global recession and the tightening of public finances that ensued put paid to those plans, with MPs finally rejecting the bill in 1994.

Steven Norris, who served as a Conservative junior transport minister from 1992 to 1996, was a big proponent of Crossrail and played a key part in a fresh drive to revive the project via a hybrid bill in 1996. This attempt was scuppered “due to the Treasury playing its usual duplicitous games,” he says ruefully. Indeed, even the Department for Transport’s own permanent secretary at the time, Sir David Rowlands, was none too keen on the project. “He told me later: ‘You kept the thing alive when we all wanted to kill it’,” Norris says.

The aborted 1990s attempts had, however, pushed the project forward in one critical regard: the safeguarding from development of sites above proposed Crossrail stations. With this protection locked in, further momentum was provided in the run-up to the first election for London mayor in 2000. Norris, by now the Conservative candidate, and his victorious rival Ken Livingstone both backed Crossrail. “I was a strong advocate in the technical press, but Ken also deserves credit for pushing for it,” Norris says.


"Not dictated by traditional budget cycles”

The project as we know it today was first instigated as part of Labour’s 10-year transport plan, published in 2000. By 2005, a business case, a DfT review and an economic appraisal had all provided the then-transport secretary Alistair Darling with evidence that the scheme was deliverable, if costly. The latest version of the business case, updated in 2011, concludes that for every £1 invested in Crossrail, £3.09 benefit will accrue.

However, only £1.97 of this gain relates to the transport case, covering narrow issues such as crowding relief and reduced journey times. The rest comes from a wider project aim – supporting London’s growth, particularly in the Thames Gateway.

“The original business case for Crossrail considered housing growth in these communities and included this information in the standard departmental economic appraisal methodology used at the time,” says the DfT’s current acting project director for Crossrail, Sarah Perring. Work was also undertaken assessing the wider economic benefits of the scheme in line with departmental transport analysis guidance, she says.

As a new hybrid bill crawled through parliament, the government worked on detailed costings. In 2007, a legal agreement between the DfT and Transport for London put the capital cost, including contingencies, at £15.9bn in 2015 prices. Professor Nuno Gil, academic director at the Centre for Infrastructure Development at Manchester Business School, says: “The decision to announce the cost in final prices deserves a lot of respect. It put lot of pressure on the department because there is less room for manoeuvre and for hiding increases the budget.”

According to Perring, this clarity on the amount of cash available protected the ability of those running the project to pursue long term value. “Providing this level of certainty of overall funding, along with flexibility on when the delivery body can time its spending, enables the delivery body to spend when it is best in value terms, rather than being dictated by traditional budget cycles,” she says.

However, it was only when an agreement was reached with the London business community over the introduction of a 2p business rates levy on larger commercial premises that the Treasury was finally convinced that the sums added up. The levy will contribute £4.1bn to the project funding. Former TfL deputy chairman Dave Wetzel says: “I met up with Darling’s then special adviser Sam White recently. He told me that the levy was the game changer – without that, Darling thought it was too expensive.”

The hybrid bill granting the planning and land acquisition powers to create the new line was finally given royal assent in 2008. At this point, a new governance model was established to guide the delivery phase. Delivery would become the responsibility of Crossrail Ltd, an independent company with all of its shares owned by TfL. It would report to a new sponsor group comprising representatives from the DfT and TfL.
James Stewart, chairman of global infrastructure at consultancy KPMG, was intimately involved with creating the new governance structure in his role as chief executive at Infrastructure UK, a former branch of the Treasury. The approach adopted was inspired by lessons learnt from the successful model which was at that time delivering the 2012 London Olympics. He says: “In the past there had been a muddle between client and deliverer – the money kept for contingency was always spent because they are the same person.”

In simple terms, the sponsor group was responsible for defining the scope of the project while holding the purse strings. “It said: ‘We want stations here there and everywhere’,” says Stewart. “It told Crossrail Ltd how much its budget was, leaving Crossrail to pull in the skills it needed to build the line.”

The separation meant that the “day-to-day delivery was deliberately kept away from politics”, Stewart says. Initial worries about having two joint sponsors (the DfT and TfL) on the client body – rather than just one on the equivalent Olympics body – proved unfounded, he adds. “Everyone thought it could create disagreements and problems but it actually helped to bring a certain neutrality – both the DfT and TfL scrutinise each other which ensures there is more independence from each of the partners’ parent bodies,” he says.

Although they had no control over its operations, the sponsors gave themselves additional oversight of Crossrail Ltd by appointing an independent project representative. This representative acted as their eyes and ears on the project, giving them further assurance over the progress of Crossrail’s delivery.

Gordon Masterton, now chair of future infrastructure at the University of Edinburgh, was the first to hold the post, leading a team which had been appointed through a competitive tendering process. “Our responsibilities included schedule control programming, cost control, and making sure the reporting regime was solid and transparent and robust, in order to ensure the reports and figures you are seeing are a true reflection of what is happening on the ground,” he says.

“Independent reporting means that, if you get two views that might not align, that issue can be worked on and teased out so there is no room for massaging figures,” Masterton says. Despite some limitations, the model worked well, he adds. “You can’t man mark every single thing that is carried out – at its peak Crossrail was employing up to 14,000 people, with a big proportion in management,” he says. “However, an oversight team of six that expanded to 20 on a deep dive made a big difference on managing some of the strategic risks.”

The method has been successful “in providing a check and balance approach to delivery, ensuring that the sponsors have the right level of information on cost and schedule performance to be able to challenge Crossrail Ltd on their delivery,” according to Perring. Contractual documents setting out the assurance framework provided a good balance between “the need from sponsors to receive assurance and oversight over delivery with the need for the delivery body to be left alone to deliver,” she says.

The independent project representative also oversaw a series of “gateways” – set deadlines by which Crossrail Ltd was required to meet increasingly demanding sets of criteria. As each gateway was passed, more and more delegated authority was passed to the delivery body. “During the early stages, Crossrail didn’t have a huge power to award large contracts, but has now gained that ability as trust built up,” Masterton says.


“The spending of contingencies becomes a self-fulfilling prophecy”

Of course, another advantage of creating a delivery body independent of government means that executive pay has not been constrained by government caps. “The company is public sector owned but with very highly paid professionals running these delivery bodies. If this was a DfT employee it would be very difficult to pay them so much,” Stewart says.

The value of paying for such experience is demonstrated by the actions taken by Andy Mitchell when he assumed his role as Crossrail Ltd’s programme director in 2009, according to Professor Andrew Davies. “Crossrail has two delivery partners – one to deliver the complex central section and one to do the rest of the programme,” says Davies, who is professor of the management of projects at UCL’s Bartlett Faculty of the Built Environment. “When Andy arrived, he discovered they weren’t talking to each other and made sure they were quickly co-located.”

To some, the moral behind such anecdotes is that paying top dollar for executive skills saves money in the long run. Further efficiencies of more than £1bn were made within the programme budget in the 2010 Spending Review through the lengthening of the delivery programme for the central tunnel works by around a year. The project is now on track to be delivered to this new, lower, budget.

Perring is clear that governance structures as well as individual executive decisions are responsible for the success of the project. “In the early years, [the sponsors] took effective action to stop costs escalating and to obtain more competitive rates from suppliers during the recession,” she says. “During the construction phase, the governance arrangements and oversight of the project have ensured tight management of the programme so that delivery to both cost and schedule are well managed.”

Others are less sure the government deserves so much credit. The Manchester Business School’s Professor Gil points out that the governance structure has failed to prevent the spending of a £5bn (reduced in 2010 to £4bn) contingency included in the overall funding envelope. “The spending of contingencies becomes a self-fulfilling prophecy that politicians and managers can’t prevent. If there was less money for a project available at the beginning, it might focus the stakeholders’ minds better,” he says.


“Strong and informed sponsorship within government is important”

Overall, though, most consider the project to have been an example of good project management, with Amyas Morse, head of the National Audit Office, concluding in 2014: “The sponsors and Crossrail Ltd have so far done well to protect taxpayers’ interests, by taking early action to stop costs escalating and, during construction, tightly managing the programme.” The Major Projects Authority 2015 annual report gave the project an amber/green rating, which is about as good as it gets for a project on which delivery is not yet complete.

So could the lesson be that delivering a successful project requires keeping civil servants well away from delivery? Not quite, says Stewart. “The competencies required within Whitehall are not to run the day-to-day commercial procurements and project management, it is true. But there is a lot of skill in being a good client. You are monitoring the performance of the delivery body and not relying on their assurances that everything is fine. You are also managing the politics and policy environment.”

Departmental officials are a key part of a team in which each partner has played its appropriate role, says Perring. “Strong and informed sponsorship within government is important, as is the ability to let the delivery company get on with delivery while keeping a close eye on what is going on. This requires expertise and experience on the part of the key players on the team and enables an appropriate level of challenge, and mutual respect between the parties,” she says.

She also emphasises the importance of “having a well-developed and well-defined project in advance of approval being given to proceed with the project”. It is a view that Crossrail’s early supporter Steven Norris shares. “Rule one of good project management is to resist variations. You have to do a lot of work to make sure it is properly defined from the start. On that basis you would have to say they have done well.”

The evolution of governance structures which have developed through the Olympics and Crossrail projects mean that the UK is no longer a laughing stock when it comes to delivering major construction projects, says Stewart. “I think this new approach we have developed in professionalising delivery and separating it from the politicians is improving the impact of these projects,” he says. “The UK now compares pretty favourably with its international competitors. You couldn’t have said that 10 or 15 years ago.”

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Colin Marrs
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Gavin Curry (not verified)

Submitted on 8 February, 2016 - 15:38
Among the Civil Service's contributions to the progress of Crossrail has been the efficient registration of the land acquired for the project, both above surface and below. A dedicated team at Land Registry worked with Crossrail and its lawyers to meet the deadline set by the legislation and continue to be involved. You can read more here: http://blog.landregistry.gov.uk/registering-crossrail-job-well-done/

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