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CASE STUDY

THE CHUNNEL PROJECT

Adapted from “The Chunnel Project” case study published by the Project Management Institute

The original case study was prepared by:

Frank T. Anbari, PhD, PMP, Paul Giammalvo, MSPM, CCE, PMP, Paul Jaffe, MSPM, PMP, Craig Letavec, MSPM, PMP and Rizwan Merchant, MSPM

And edited by:

Frank T. Anbari, PhD, PMP The George Washington University

Case Study

The Chunnel Project

Introduction

The Channel Tunnel (Chunnel) project, undertaken to create a connection between England

and France via an underground tunnel, represents one of the largest privately funded construction

projects ever undertaken. It required the cooperation of two national governments, bankers

underwriting the funding for the project, numerous contractors, and several regulatory agencies.

Further, the construction and engineering of the tunnel required the use of new technology and

required significant modifications during the project due to unexpected conditions and changes

required by various interested parties.

The management of a project of this magnitude is a significant effort even if everything

related to the project ran extremely smoothly. As this case study will demonstrate, numerous factors

came into play during the course of the project that had significant effects on the overall course of

the project. In the end, the Chunnel project was completed, but it was late and over budget. The

causes for missing the key cost and schedule deadlines, along with other factors related to Project

Management Knowledge Areas and processes, are discussed and analysed throughout the case

study.

The case study covers various Project Management Knowledge Areas (Project Management

Institute, 2004) within four project phases: inception, development, implementation, and closeout.

Within each project phase, the activities, accomplishments, and shortcomings of performance in the

processes of Initiating, Planning, Executing, Monitoring and Controlling, and Closing are discussed. In

the inception phase, the discussion focuses on the historical background of the project, its overall

objectives, political climate, and pre‐feasibility studies. In the development phase, the discussion

addresses the overall planning, feasibility studies, financing, and conceptual design. In the

implementation phase, the discussion addresses detailed design, construction, installation, testing,

and commissioning. Finally, in the closeout phase, the discussion reflects on overall performance,

settlement of claims, financial status, and post‐project evaluation.

The Inception Phase

During the inception phase, the initial scope of the Chunnel was to create a fixed

transportation link between England and France. The expectation was that this would spur economic

development, improve European trade, and provide an alternative high‐speed transportation

method to the existing modes (planes and ferry boats).

In 1984, the British and French governments agreed to some common safety,

environmental, and security concerns prior to opening up the project to bidders. In 1985, the French

and British governments asked for proposals. Various proposals were submitted, and in 1986 the

project was awarded to the Channel Tunnel Group/FranceManche (later to become Eurotunnel).

Their proposal included a 32‐mile (51.5 km) double‐rail tunnel to accommodate both through‐trains

and special car‐and‐truck‐carrying shuttle trains. Their bid price was US$S.5 billion.

From a project management perspective, it could be said that the high‐level design and

respective rough‐order‐of‐magnitude estimates may have been appropriate. However, not enough

time was provided to complete detailed design studies that would have identified the need for

tunnel air‐conditioning, a US$200 million scope increase that was not included within the initial

scope (Veditz, 1993, p. 20). In addition, the process created by the Intergovernmental Commission

(IGC) for approving designs put additional pressure on project scope, as it approved design drafts

that were not considered within the original concession agreement. This may indicate possible

problems with scope initiation and planning. According to Colin J. Kirkland, Technical Director of the

Eurotunnel from 1985 through 1991: “When governments announce an intention to have such a

huge public utility built, leaving all the details to be determined in the course of the competition, it is

rather like releasing a mouse at a Christmas party‐the reactions of all those affected are

unpredictable and uncoordinated, and everybody believes that he knows what the end result should

be” (Kirkland, 1995).

During the inception phase, cost estimates were established at US$5.5 billion. As per the

Channel Tunnel Treaty, the Chunnel project would have to be financed from private sources without

government aid or loan guarantees. In return, the governments were prohibited from regulating

prices except in potential monopoly situations. This would help in terms of estimating costs amid

potential governmental economic pressures. Financing was pursued via equity and loan capital

markets. Shareholders seeking equity interest were more readily found in France and eventually in

Britain as well. Loan financing was raised through a consortium of 206 banks worldwide. This would

have great ramifications later in the project, as refinancing would have to be pursued, should

negative variances in time and cost estimates occur. Another cost consideration is that the

Eurotunnel had secured a concession agreement for a period of 55 years. This gave them the sole

right to operate the Chunnel for that time. Thus, any delay or cost increases throughout the project

life would impact the planned cash flow for that period.

From a project management perspective, there is a direct correlation between scope

definition and cost estimates. For a project this large, there are usually challenges with initial

estimates, scope management, and (as will be discussed) the contract type. Thus, lack of defined

scope makes resource planning, cost estimating, and budgeting difficult. In addition, return‐on‐

investment (ROI) assumptions made in the planning stages may not prove accurate, which could

leave a trail of unhappy investors and stakeholders. Given that the original cost estimate eventually

increased to US$14.9 billion, opportunities for improvement appear to exist in this area.

During the inception phase, various milestones were completed. Some may be considered

false starts in the conceptual period, which included the following (Fairweather, 1998):

 1974 – Initial tunnel ideas gathered, but efforts abandoned;  1978 – British and French discussions resumed;  1983 – French and British banks and contractors propose tunnel scheme;  1985 – French and British governments ask for fixed‐link proposals;  1985 – Anglo‐French Treaty signed, Transmanche Link (TML) awarded contract, and

Eurotunnel declared owner of 55‐year concession for the link. The schedule required planning all activities related to building three tunnels (north, south,

and service). This was somewhat complicated due to the need to hire 46 contractors to complete

the design requirements. As it turned out, the time estimate to complete the tunnelling itself was

materially accurate, finishing three months ahead of schedule. However, ongoing safety

requirement changes sought by IGC continued to create negative schedule variances.

From a project management perspective, schedule planning did include activities related to

activity definition, activity sequencing, and activity duration estimates to develop the baseline

project schedule. This can be further illustrated by the fact that scheduled activities included 12

tunnelling faces (six landward and six seaward) that were excavated by 11 tunnel‐boring machines in

both directions (Williams, 1993, p. 6). Thus, it can be suggested that the schedule complexity was

significant and required maturity in logistical planning and experience in work breakdown structure

(WBS) development.

During the inception phase, Eurotunnel entered into a construction contract with TML in

1987 having three cost categories:

1. Target cost for tunnelling, done on a cost‐plus fixed‐fee basis, with a target cost above or below which there would be a sharing of the difference.

2. Lump sum for the terminals and the mechanical and electrical works for the tunnel. 3. The procurement contract for rolling stock and associated major equipment was procured

on a cost‐plus‐percentage‐fee basis.

Eurotunnel was responsible for roughly 70% of cost overruns on the original contract and

TML was responsible for the remaining 30%, capped at a maximum 6% of the total cost. A revised

agreement in 1990 provided a more equitable distribution of risks with Eurotunnel responsible for

about £1.58 billion and TML responsible for 30% of everything above that figure. As will be discussed

later, the types of contracts would prove to be challenging (i.e., ground consistency, fixed equipment

claims).

From a project management perspective, contracts are a critical part of the procurement

management process. They define the scope of work, cost, timeline, and rules of engagement (i.e.,

penalties). As it relates to this case, it appears that the procurement planning process was quite

complex and being completed under vigorous time constraints. Thus, certain assumption errors may

have been made regarding the ability to have enough resources to complete the contract and, in the

case of a fixed‐price contract, not enough was understood to limit the impact of known and

unknown risks. In this case, contractual errors were made in the estimates and risk allocation

method, leading to additional contract claims of US$2.25 billion.

Relative to risk management, the management team appears to have reviewed the scope of

the Eurotunnel for initial risks. However, it seems that the focus was on engineering risk as opposed

to process and approval risks. Those involved appear to have been comfortable with the technical

nature of this project, but less prepared to deal with the level of IGC oversight and change

management controls. At the highest level, both countries were aware of the financial risk, requiring

that funding be provided by non‐governmental sources. Business risk appears to have been

addressed to varying degrees via contractual agreements. However, these same contracts were the

focus of subsequent scrutiny based on their inability to spread the risk among various stakeholders.

From a project management perspective, risk planning and mitigation needs to be an

ongoing part of each project. The hope is that most material risks are identified, quantified, and

prioritised early enough so that an effective risk response strategy can be established. The ability to

address known and unknown risks requires careful assessment and understanding of the nature of

each initiative. For this case, decisions made in the inception phase (contract choice and change‐

control methods) could have been more carefully assessed for risk impact.

From a quality perspective, the IGC (made up of civil servants from France and the U.K.)

mandated that where there were differences in the standards of the two countries, the higher of the

two should prevail (Fairweather, 1998). This was a good idea in theory, but contractors had difficulty

interpreting differences related to a concrete pour.

In addition, quality and specification issues could be seen early on as they relate to railway

width, voltages, and signalling systems. These incompatibility issues needed to be included within

the initial quality requirements during the inception phase. Another example of quality impacts

relates to the delay in communicating the requirement that passenger doors be widened from 600

mm to 700 mm. This was a safety concern with IGC. When IGC did not provide timely approval for

this change, TML’s manufacturing costs increased from US$9 million to US$70 million. However, the

extent of quality planning for this initiative cannot be understated, given the scope of this initiative.

State‐of‐the‐art laser and computer technology was used to bore the tunnel and to test every part of

the rail system. In fact, the most amazing feat is that the three tunnels could be excavated so close

together and still meet in the right spot in both countries.

From a project management perspective, each team member has a responsibility for quality.

Specific quality requirements must be defined up‐front as part of an overall quality management

plan. This should include quality planning, quality assurance, and quality control. Given the technical

challenges related to this project, it can be suggested that quality management was successful.

During the inception phase, it was understood that the teamwork necessary to complete this

project would be significant. The ability to plan and execute as a multinational team required

cooperation and efforts at the highest level. Although the general complexity was known, it was not

realised until this project was completed that 15,000 workers were employed on the project

(Fairweather, 1998).

Teamwork can be looked at as it relates to those above and below the ground. Above the

ground, there were politicians, governmental workers, bankers, lawyers, and analysts, all of whom

leveraged the historical perspectives and economic challenges into an approved project plan and

act. Below the ground, thousands of construction workers, machinists, and engineers worked very

well boring three tunnels for 32 miles (51.5 km) from both borders across the Channel. The fact that

it took 3.5 years to complete this activity, on time, speaks volumes to the level of cooperation and

teamwork for this activity alone.

However, this feat was somewhat overshadowed by issues surrounding the contractual and

financial obligations between various parties. Once all assumptions, assessments, and commitments

are in writing, it can be very difficult to come to a mutually agreeable solution to material issues.

Incomplete requirements, scope changes, and risk response strategies should have been considered

within these efforts to reduce the likelihood of negative schedule and cost variances.

From a project management perspective, defining a project team is one thing, but getting

agreement on ownership, activities, and timelines is another. Roles and responsibilities can be

defined up‐front to address activities within the WBS. However, the true test of teamwork is how

well stakeholders move forward with the same objectives, given the inevitable issues that will seek

to bend or break formal and/or informal agreements.

From a communications perspective, there was the usual give and take related to project

planning, negotiations, and communication flow during the inception phase. This was amplified for

the Eurotunnel project, given the need for communications and agreements at the highest levels of

governments. This case offers extensive evidence of the importance of communications in

preplanning, contract negotiations, financing, and technical issues. However, it appears that

technical problems were solved rather smoothly, whereas those related to organisational structures,

contracts, and finance were wrought with conflict.

This project involved 700,000 shareholders, 220 international lending banks (Genus, 1997, p.

181), British and French governments, many construction companies, and many suppliers. This

complexity caused significant logistical and communication challenges. The interdependency of

these stakeholders made it difficult to address issues to everyone’s satisfaction. In fact, changes in

scope due to requirement omissions or changes can be viewed in many ways depending on how it

impacts cost, time, quality, and potential risk. It is here where the communication seemed to

breakdown, as issues were not resolved in a timely manner, resulting in significant cost and time

variances.

Project communications management is often one of the most important aspects to project

planning and execution. A communications plan needs to be put in place that will address horizontal

and vertical communication channel needs. This communications plan could include information

distribution, as well as issue tracking and performance reporting. It appears that issues in the

Chunnel project may not have been given enough visibility and/or managed or escalated to a

sufficient extent to mitigate their impact on the overall project plan.

During the inception phase, very little was mentioned in the way of formal project office

activities, although it can be assumed that a project of this size had considerable back‐office efforts

to support it. Clearly, overall project activities and progress were being monitored, given the

dependency on funding and accountability to the shareholders. The construction industry is known

for its use of advanced project management tools and techniques. Thus, the project should be

managed to industry‐specific practices and agreed‐upon international standards.

One of the challenges is that decision‐making was somewhat fragmented, sub‐optimising

the project for the sake of specific issues. This eventually pitted project champions against each

other, as contractual obligations made mediation difficult. Thus, although project management

techniques may have been in play, the ability of the project management team to address critical

issues from a centralised position seemed insufficient.

It can be questioned if enough effort was spent on agreeing to the value of a project

management office prior to the project gaining momentum. Given the international ramifications, it

can be assumed that general protocols were deemed sufficient. However, given the nature of the

conflicts and need for effective management, this may be considered a challenge to this initiative.

From a project management perspective, there is significant value of an effective project

management office as it relates to supporting and promoting project management “best practices”.

The larger the project, the greater the impact of proven methods and processes will be on the

bottom line. It is assumed that during the inception phase, the roles and responsibilities of a project

management office should be validated. This can be difficult to do unless agreed to early with key

stakeholders.

The Development Phase

The development phase of the Chunnel project consisted of detailed planning,

communication agreements, and governmental approvals. This was an important phase for the

project because of its sheer size, complexity, and breadth. There were many things that made this

phase difficult, including the inflexibility of some of the characteristics of the projects, and the cross‐

cultural exchange between two countries that had to take place. Two different companies, on two

different sides of the project, speaking two different languages, led by two different managing

directors, did the planning. The company on the British side was Translink and the company on the

French side was Transmanche. A large part of the struggles that the project incurred were due to

failures in the development phase of this project.

The scope of this project was enormous. The decision to link France and England has been

considered before, but never completed. The project had no hope of being profitable in the 20 th

century. This was the world’s largest privatised project, and scope creep played a large part in the

substantial increase from its initial cost estimates, and its completion behind schedule. During the

development phase, the scope was not fully assessed and the proper precautions to prevent scope

creep were not put in place. The Treaty of Canterbury and setting up of the IGC to coordinate the

approach, construction, operation, and safety of the tunnel resulted in total loss of control when it

came to scope (and huge cost increases).

The project team did a reasonable job when it came to planning the technical equipment

that would be needed and understanding the complexity involved. They were able to use previous

research on the soil, but, in the end, the lack of continued focus on scope resulted in the frustrations

of trying to do too much. The mistake of allowing IGC to have scope control without the ability of

IGC to approve additional funding for scope creep affected the management of this project so that

success became extremely difficult.

The results of the Chunnel project point clearly to challenges when it comes to cost

management in the development phase. The project finished substantially above budget and led to

an additional significant claim. Although cost is one of the most difficult aspects to plan for when a

project has such a huge magnitude, the project management team had serious challenges in

planning and detailing. The chief project executive at Eurotunnel from 1990 to 1993 stated, “...

perhaps the central problem was the banks’ early involvement in the renegotiation of the contract,

and the multiple methods of compensation for different parts of the works .... The banks insisted on

the least defined portions ...” (Fairweather, 1998, pp. 290‐291).

The difficulties in cost planning during the development phase could be partly blamed for

the US$2.25 billion claim that was brought against Eurotunnel by the contracting company.

The schedule planning during the development phase seemed to be adequate. The project

finished a year late but it was often due to things beyond the project management team’s control.

The IGC mandated that whenever a difference occurred in standards between the two countries, the

higher of the two standards be kept. Theoretically this made sense, but when it came to the fine

details of the project, it helped create schedule delays. There was much interpretation open for

agencies like IGC that might have been better off detailed during the planning sessions for schedule

analysis. The IGC’s decision to force Eurotunnel to change its design from 600 mm doors to 700 mm

doors by itself cost the project a nine‐month delay. Every three months, a hefty status report was

prepared for all the investors involved in this project, which contributed to keeping the project

somewhat on track.

Contracts during the development phase of the project included agreements for the

financial aspects of the project, as well as the logical aspects. The golden rule was followed: “He who

has the gold makes the rules”. The banks were given way too much leeway and control in this

project. When banks are involved, they often focus on minimising risk, which can be a good thing.

However, when that is taken to the extreme, as in the Chunnel project, all the efforts to save money

and minimise risk to the bank are thrown out the window because of things like the claim and award

settlement that went against Eurotunnel. The agreement to create the IGC and give it so much

control also contributed to the challenges in this area of the project. Risk was thought to be on the

banks’ side during the development phase of the project, but, in hindsight, the banks’ plans

backfired badly. The courts ruled in favour of the contractors’ claims, and cost the project a lot of

money.

Risk could have also been better researched and evaluated when it came to the technical

side of the project. Due to French fears about being unable to grout on their side, much more

sophisticated and advanced equipment was used. Later on, it was found that equipment as old as

1974 could have been used just as effectively. This is another example of over‐managing risk.

Because of the free reign given to the IGC, quality aspects of this project were handled well.

Using the “better of the two methods”, the most advanced technological equipment and very little

margin for error allowed for quality to be an extremely important attribute while planning during

the development phase of this project.

Teamwork during the development phase was helped by the focus on fairness that was

followed by the two governments involved. For every British team member, the French had a

matching counterpart. However, there was no method of encouraging teamwork during the later

phases of this project. The team could have designed methods by which teamwork across all the

phases, teams, and team members of this project was emphasised. Although the momentum,

elation, and pride created during the signing of the treaty approving this project gave it starting

strength, proper provisions were not put into place to allow that momentum to continue through

the life of the project. The two governments moved further away from the teamwork concept when

they refused to guarantee the project financially. That put an additional burden on the privatised

sector and forced its back to the wall. This caused some level of mistrust because the governments

created the demands for safety and so forth, but the government guaranteed nothing financially.

Communication between the French and English sides of this project was limited. Putting the

two teams on opposite ends and working toward the middle delayed communication until near the

end of the project. Each side worked toward a common goal, and did not feel the need to

communicate because the assumption was that they were both working toward meeting in the

middle. Lack of communication during the development and design of this project in its early stages

led to differences of opinion in its later stages. Although the status reports were helpful and

consistent every three months, it was akin to a yearly prospectus that did not foster or accentuate

communication within the team. It was a report for the financial world just to appease them and

allow the project to continue.

The project office did an adequate job during the development phase. It followed some of

the planning, designing, and detailing phases required in the development phase of a project, but its

work was far from superior. It did take data from past projects, but perhaps not the lessons learned

when planning the Chunnel project. Project results point to the fact that there is room for

improvement in this phase.

Project management in the development phase of the Chunnel project was generally

hopeful. There was a clear understanding of the immensity of this project, but not enough research

and detailed planning to back it up. The project management team, in hindsight, could have done a

better job of detailing, planning, and designing this project. Once the project team gave up the

majority of its control to the IGC – and had financial people breathing down its neck and

emphasising cost cutting and minimal risk, two different cultures, two different management teams,

and various other challenges – the development phase of this project had already been made so

difficult that the resulting cost and schedule overruns were just foregone conclusions.

The Implementation Phase

The implementation phase of the Chunnel project started in the fourth quarter of 1987, with

the awarding of a “Concession Contract” in response to the Channel Tunnel Group/FranceManche

(CTG/FM) bid for US$5.5 billion, and ended on December 15, 1994, with the project being handed

over fully operational (Genus, 1997, p. 173; Veditz, 1993).

The winning proposal was made under a “build‐own‐transfer” (BOT) arrangement, granting

CTG/FM the concession to run the project for a period of 55 years (Morris, 1994), after which

ownership would revert back to the French and British governments. Having won the request for

proposal (RFP), CTG/FM awarded a “design/build/commission” construction contract to TML. The

actual contractor was a consortium of construction companies, some of which were investors

(through joint ventures) with the original CTG/FM winner. Thus, although a normal client‐contractor

relationship was created, there were instances of real conflicts of interest as the contractors were, in

many cases, direct or indirect investors. These conflicts of interest would cause problems as the

project was implemented. When the construction contract was awarded, the cost estimate was

US$4.3 billion and the original completion date was May 15, 1993. When the implementation phase

was completed, the project was 19 months late and had cost overruns of some US$3 billion (total

construction costs of US$7.1 billion). The closeout phase explores the total cost impact not only of

the construction cost overruns but also, more importantly, the lost revenue and carrying costs of the

project during the 19‐month period.

It is generally agreed that the Chunnel project presents excellent opportunities for lessons

learned in project management, especially for capital‐intensive projects, using new or proven

technology, under unusual or new high‐risk conditions.

Problems with politics started almost immediately, as the project was being fast‐tracked

with design and construction happening simultaneously. This in itself may not have been a problem,

except that the promoters CTG/FM had to obtain approvals from the governments of both Britain

and France. The very nature of democratic governments is to be deliberative, thereby causing delays

and false starts from the beginning. Furthermore, CTG/FM, under pressure from the French and

British governments to control costs, insisted that TML issue fixed‐price contracts to their

subcontractors and vendors. As the scope was not well defined, using a fixed‐price contract in a

competitive bidding situation inevitably gave rise to claims, as the contractors, in order to have any

chance of winning the bid in a competitive environment, assumed an optimistic case, and relied on

“changed conditions” to justify claims as they arose. Since underground construction is rife with

changed conditions, the use of fixed‐price contracts (rather than some sort of cost‐plus incentive

fee) set the stage for a contentious relationship between the subcontractors and TML, and in turn,

between TML and CTG/FM. These change orders, although many were resolved in favour of

CTG/FM, nonetheless caused cost escalation. More importantly, as will be shown in the closeout

phase, the impact of cost overruns was nowhere near as serious as the impact of delays to the

functional completion of the project. It may be that governments, particularly those requiring

deliberation in order to make decisions, have added challenges in managing projects, especially

those that are time constrained.

Fast tracking, the process of overlapping design and construction in the hope of shortening

delivery time is a risky approach under the best of circumstances. However, using this technique

when the technology is new or unproven makes the risk exponentially greater. Added to this is the

fact that underground construction is arguably the most risky of all construction, as changed

conditions, if proven, stand as prima facie evidence entitling a contractor, subcontractor, or vendor

to compensation both in terms of actual costs plus extended overhead. This is in addition to an

extension of time to complete. As the longest tunnel of its type in the world, the fact that tunnelling

is the most risky of all construction (and such a project had never been attempted previously with

available technology), should have alerted the governments not to use the approach they did.

Several other issues stood out as warning signs:

1. Some of the rolling stock had not yet been designed (vehicle and freight cars). 2. No contingency was set aside to cover “unknown unknowns”. (In this case, the need for a

ventilation system in the tunnels.) 3. The specifications for British rolling stock and French rolling stock were not the same.

All these issues should have been early warning signs that the details needed to be agreed to in

advance, and that proceeding without resolution would only result in eventual delays and cost

overruns.

Using contract methods inappropriate for the scope definition was another issue (Kerzner,

2003, p. 826). As previously outlined, TML was attempting to use fixed‐price contracting methods

when scope was not sufficiently defined. Contractors who bid on fixed‐price contracts under

competitive bid (low price) “winner takes all” terms have only one choice if they are to win the bid –

they must assume the “best case” scenario for that amount of scope, which remains vaguely

defined, or risk losing the bid to the next lowest bidder.

Under these circumstances, there was no room for contingencies and margins were cut to

the barest minimum. The contractor had no choice but to be aggressive in pursuing any and all

change orders. Thus, anything that differed from the original scope (or that a reasonable person

might infer was missing from the scope) had to be pursued. To do otherwise would risk forcing the

contractor into bankruptcy. In setting up the RFP, the British and French governments set the stage

for a contentious and adversarial relationship. The sponsoring governments may have avoided many

of the problems by realising the risks involved and setting up the original RFP with the objective of

rewarding the “promoters” – and, in turn, the contractors at all levels – for achieving the goals

determined by the governments to be important.

Another example was the fact that the original consortium (CTG/FM) consisted of

construction companies and bankers whose primary objective was to make money on the

construction and not on the operation. Remembering that this was a 55‐year BOT, it may have been

better to structure the consortium so that the construction was done at cost, and the only profit

would come from completing the project at the lowest possible cost, within the framework of the

quality and safety constraints established by the governments of France and Britain. This model may

have stood a better chance of being successful.

Reflecting on the project, Jack K. Lemley, Chief Executive Officer of Transmanche Link from

1989 to 1993, highlights the importance of cultural matters, communications, and contract issues.

He states: “There must be one contract, it must be developed and written in one language, and it

must be based on one legal system. It must all contain clearly defined dispute resolution procedures,

procedures with which all parties are familiar and with which all parties have agreed to abide.” He

concludes by stating: “The key element is communication” (Lemley, 1995).

The objectives of a project need to be identified and communicated clearly from the

beginning. This was perhaps the largest and most damaging failure of the governments of France

and Britain. The financial model they created was far too optimistic given the risks involved, and the

fact that the project was essentially run by bankers compounded the problem. By not having the real

goals, objectives, and scope defined early, and by not implementing a contracting method that

directly linked the rewards to contractors at all levels of the procurement chain to those objectives,

the governments set the stage for the financial challenges of the Chunnel.

The Closeout Phase

In the closeout phase, the project would not be expected to gain significant ground in key

areas of project management. Most notably, the immense amount of litigation and the size of the

claim against the project showed that even the best attempts at managing critical issues during the

project did not have a significant effect on the overall outcome.

In terms of scope, the overall scope of the project was increased due to significant change

requests throughout the life of the project. Even near the end of the project, the requirement for an

air conditioning system to cool the tunnel during normal operation represented a significant scope

modification. In fact, even when the tunnel was deemed to be complete, there were still outstanding

scope items to be resolved. This meant that the overall scope of the project was still not fixed, even

at the proposed completion. It should be noted that the completion of the project (which was

delayed) was even rushed to allow operation to begin before the entire effort was completed.

Clearly, cost and schedule management represented significant challenges during the

project. By closeout, the majority of the effort was focused on analysing the sources of cost overruns

and attempting to assign blame to one or more of the participating organisations. The focus during

closeout was on attempting to minimise the amount of claims awarded rather than on truly

analysing the causes of cost overruns. Although certain portions of the project were completed early

(the tunnelling, for example), other areas such as the delivery of key mechanical systems (including

key components of the rail car system) were delivered late and caused the project implementation

to slip past its intended completion date and into the time allotted for closeout.

By the closeout phase of the project, teamwork and communication had broken down in

several key areas. The financial backers of the project were keenly focused on minimising their

losses and, as such, refused to accept negotiated arrangements for settling some of the key contract

disputes. Several arbitration bodies, including the International Chamber of Commerce, were

involved to help bring the various competing sides to the bargaining table in an attempt to resolve

key portions of the very complex claims existing at the end of the project. The concept of “win‐win”

negotiations was clearly far from the minds of the interested parties by the time the project came to

a close. Overall, teamwork during closeout was focused on each party meeting its own priorities and

interests rather than working toward an acceptable solution for all parties involved. However, the

parties involved in the project seemed to be quite willing to share in the project “success” – even as

multibillion‐dollar claims were being made against them. From a public relations perspective, it was

clearly in the best interest of the owning parties and the contracting parties to show that success

had been achieved and to provide as much positive information as possible to the public. The

Chunnel project was something totally new, and a tainted view in the eyes of the public due to

management issues would do nothing to help sales of crossings in the Chunnel.

The overall quality of the delivered project, as measured during closeout, was impressive.

The final tunnel was an engineering feat that was extremely complex and there were immense

hurdles to success. Despite these factors, the tunnel operated essentially as designed. Through an

effective quality and safety program, even the workplace accident rates during the project were well

below the industry average.

One of the greatest impacts on the project that did not materialise until closeout was the

impact of the late delivery of the project on the project’s overall ROI. The initial cost models detailed

an expected return based on use of the tunnel assuming that the tunnel was completed on time. The

delivery delay and corresponding impact on the beginning of operations meant that the parties

“owning” the tunnel were faced with numerous litigation items and no source of income from the

operation of the tunnel. The “bare minimum” approach to cost estimating and contract awarding in

the fixed‐price model meant that there were no significant operational reserves available to provide

additional funding in the interim. Thus, project shareholders could not expect to see a return on

their investments until significantly longer than had been initially expected. From a project

management point of view, there were numerous factors beyond the control of the project team

that led to this situation. In a sense, bankers and other parties that demanded deviations from the

proven methods of managing the project “shot themselves in the foot”, and set up a situation that

was detrimental not only to the project itself, but also to the public perception of the project.

From a project management perspective, the closeout phase is an excellent example of why

effective change management must be in place for projects. The ability of a party to make demands

for changes in the design of the deliverable without corresponding funding for making those changes

provides a perfect setup for challenged results. In the case of the Chunnel, the “health and safety”

commission (known as the IGC) had broad authority to demand changes, but had no means to

provide additional funding to implement the changes. This, combined with very slow decision‐

making, led to situations where significant budget overruns occurred not due to bad estimating or

controlling, but rather due to out‐of‐control change management processes.

Summarising his thoughts on the project, Kirkland (1995) states: “We should seek to advise

future generations contemplating the creation of very large infrastructure developments not to get

carried away by the excitement of the design and construction process before they have clearly

established the rationale, the relationships among the key players, and the means by which the

totality of the process is to be managed.”

The Chunnel can be viewed as “either one of the greatest engineering and political feats of

the twentieth century, or, a project that never should have happened. However, irrespective of the

opinion taken, it is clear that the Europeans are proud of their Chunnel” (Serich, Bale, Kwasny,

Patneaude, & Stack, 2001).

References

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Genus, A. (1997). Managing large scale technology and inter‐organizational relations: The case of the

Channel Tunnel. Research Policy, 26, 169‐189. Kerzner, H. (2003). Project management: A systems approach to planning, scheduling and controlling

(8th ed.). New York: John Wiley & Sons. Kirkland, C. J. (1995). The Channel Tunnel – Lessons learned. International Tunnelling Association

(ITA). Originally published in the journal Tunneling and Underground Space Technology, 10(1), 5‐ 6. Retrieved October 16, 2005 from http://www.ita‐aites.org/applications/30th/PDF/TUST_95_v10_n1_5‐29.pdf

Lemley, J. K. (1995). Managing the Channel Tunnel‐Lessons learned. International Tunnelling

Association (ITA). Originally published in the journal Tunneling and Underground Space Technology, 10(1), 9‐11. Retrieved October 16, 2005 from http://www.ita‐aites.org/applications/30th/PDF/TUST_95_v10_n1_5‐29.pdf

Morris, P. W. G. (1994). The management of projects. London: Thomas Telford.

Project Management Institute. (2004). A guide to the project management body of knowledge (3rd ed.). Newtown Square, PA: Author.

Serich, S., Bale, G., Kwasny, M. K., Patneaude, S., & Stack, J. (2001). The Chunnel: The channel tunnel

project. Unpublished manuscript, Washington, DC: The George Washington University. Veditz, L. A. (1993). The Channel Tunnel: A case study. Executive Research Report (pp. 1‐22).

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