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Operations and Project Management Case Study
Eurotunnel: In Troubled Waters
Publication Year : 2004
Authors: Sandeep Chaurasia & T Phani Madhav
Case Code: OPM0003
Teaching Note: Not Available
Structured Assignment: Not Available
The Channel tunnel is a 50.4 km long tunnel rail link under the English Channel between UK and France. The Channel tunnel is considered to be one of the greatest civil engineering projects of Europe. Both British and French governments decided against using public money and the contract was awarded to Eurotunnel Group, a major player in the European railroad industry. The project took eight years to complete and became operational on May 6 th 1994. However, with most projections about the traffic to utilise the Channel tunnel not materialising, Eurotunnel ran into losses and by 2003, and was submerged in a debt of �6.4 billion. With the situation deteriorating, a group of shareholders approached the court for a change in the management of Eurotunnel.
- To understand the financial and operational problems faced by Eurotunnel and how it is restructuring its operations and financials to tide over the crisis
- To discuss whether the change in the management would solve the problem for Eurotunnel by increasing the traffic through the Channel tunnel or will the tunnel end up being an engineering wonder that people would like to admire but not use.
Government and Business Environment Case Study, Eurotunnel, Channel tunnel, Construction, Raising finance, UK, France, Financial problems, Losses, Debt restructuring, Passenger services, Freight services,Business Environment Case Study, Channel tunnel railway link, Traffic volumes, Toll tariffs, Shoring up the balance sheet
- Channel Tunnel: A Journey through the Past
- The Financial Crunch
- The Operational Front
- The Path Ahead
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It required the collaboration of two very different government entities, with very different policies. The tunnel was designed and built by Trans Menace Link a private group and financed by Routinely a combination of French and British investors. The project required the teamwork of variety of stakeholders from two different government entitles, many contractors and Investors, international lending banks, and various regulatory commissions.
Furthermore the project itself required engineers to approach the task that up to that point was unprecedented In Its feat As this case study will reveal, Numerous factors with stakeholder communication, underestimated financial budgets, government intervention and many others played role In extending Ana along to ten Tie cycle AT ten project, Day ten time ten project was completed, it was a year late and $10 billion over budgeted. The reasons for losing vital cost and schedule targets, along with other aspects related to Channel Tunnel PM and processes are examined all through the case study.
Stakeholder involvement is crucial throughout the life of the project. They are essential in the stages of conception, development, and implementation. The importance of stakeholders is made evident in the Channel project because of its unprecedented size, difficulty, and uniqueness. Cost and scheduling in the project represented many challenges for the project. The entire project was extended and inflated due to the numerous changes to the scope throughout the life cycle. The scale of the Channel project had intrinsic risks and uncertainties.
Perhaps the biggest uncertainty was the undertaking itself, the immensity of the project both in size and sheer act would prove to be at the very least a risky endeavourer. As stated in the case study, new technology was used to bore the tunnel; the fact that nothing of that magnitude was ever attempted illustrates the risks involved. The case study discusses various PM areas within the structure of the project to permit an assessment of the proper processes of different PM tools and techniques.
Finally the key areas of strengthens, weaknesses and as well as the lessons learned of the case study will be addressed 2. Project Appraisal Project initiation Was the Channel project well conceived? Is the decision to start the project a strategically sound decision? Give reasons for your opinion. The Channel Tunnel is among the largest infrastructure projects to have ever been carried out in Europe. The magnitude of the undertaking was unprecedented, a 50 km tunnel under the English Channel linking France and England.
When it was completed the tunnel allowed commuters to travel between the two countries within a fraction of the time it would have taken via cars or ferries. The project has taken its share of criticism for various issues in its planning and development stage. Numerous factors with stakeholder communication, underestimated financial budgets, government intervention and many others played a role in extending and adding to the life cycle of the project. It could be argued that the project was not adequately conceived and the decision to start was premature.
Describe the roles and performance of project management office as used by the Channel project. In terms of project management, it is fairly important to have an efficient/effective project management office (PM) as it promotes and sustains project management “best practices”. The bigger the undertaking, the more effective it becomes on the techniques and methods used to produce the end result. Throughout the planning stage, the responsibilities and roles of a PM should be confirmed. It can be a difficult task if the key stakeholders have not been informed earlier in the life cycle.
It is clear to see that throughout the project the tasks and progress were monitored very closely. The project is heavily dependent on the resources provided by its shareholders and in turn they rely on regular updates to reassure them on their investment. In the construction and building industry the methods and application of project management tools are very reliable and well tested. Therefore, it could benefit the project if the it was managed Witt telltale Ana talent practices Ana also Tallow standards set Ana agree upon on a international level.
Was the project scope defined clearly at early stage? Identify one major scope change throughout the project life and discuss the effects of scope changes on project performance? Since the early stages, the project was inundated with concerns and issues with the project scope. From the perspective of project management, the initial scope was not defined well enough. Details of the design were over looked and aspects such as the details of the air conditioning ended up increasing the original scope by $200 million.
This supposedly led a prosperous project to an uncertain economic ordeal. Initial estimates of the project had been $5. Billion and by the time of its actual completion it been delayed by a year and increased to $1 5 billion. It should me mentioned that the regulations that were imposed by the Intergovernmental Commission made it more difficult and added extra pressure on getting approvals for the scope. Stakeholder and communication management Why is stakeholder involvement so critical in project?
Stakeholder involvement is crucial throughout the life of the project. They are essential in the stages of conception, development, and implementation. The importance of stakeholders is made evident in the Channel project because of its unprecedented size, difficulty, and uniqueness. The magnitude of this project requires constant input and resources of all of its stakeholders which include the French and British governments, international lending banks, construction companies, and the individual shareholders.
The Channel Tunnel Stakeholder Mapping Matrix Level of Interest Level of Power Low High Shareholders wanting Equity, Government workers, Engineers, Construction Workers International Funding Banks, Intergovernmental Commission Regulatory Agencies French & British Government, Euro Tunnel, Channel Tunnel Group Limited, Transmittance Link Who are the key stakeholders (use stakeholder mapping matrix) and briefly identify two major stakeholders’ interests in the Channel project The number of stakeholders on this project was understandable large and of a wide variety.
As a privately funded project, one could assume that the involvement of any government entity would play a small role of advisor rather than controlling body. However, in the Channel Tunnel project the involvement of the French and British governments was quite extensive. Horticulture, ten Territories Detente ten two countries Ana Nell separate Interests caused issues added to the concerns of the overall project scope. The most significant distinction was the dissimilarity in investing and financing culture with public projects that involved infrastructure.
In France publicly funded projects are quite common, wherein England the government very rarely gets involved in public projects. Predictability this had a huge influence on how the tunnel was financed. England argued for private investors and France rallied for the involvement of the public. To settle the disagreement between the two countries a treaty was formed, he Channel Tunnel Treaty stipulated that the project would be privately funded by an assortment of investors and without government funding. Evaluate the Channel project stakeholder communications system.
The vast assortment of stakeholders involved in the project means that each one has a key contribution to the end result. The interdependency nature of these stakeholders can cause problems in important areas such as communication. An example of how quality was compromised due to a case communication breakdown was the safety concern brought up by the internal government commission (GIG). The pedestrian doors needed to widen to a standard that met with regulations, GIG were unable to get timely approval of the changes and failed to inform HTML of the new requirements.
Subsequently this increased the manufacturing costs from $9 million to $70 million and also extended the task by 9 months. This illustrates the issues in the communication system; a breakdown in communication between key stakeholders can lead to amplified or extended affects the on the project. Change/Control Management Identify the main causes of cost and schedule variations in the Channel project. Cost and scheduling in the project represented many challenges for the project.
The entire project was extended and inflated due to the numerous changes to the scope throughout the life cycle. For example, the addition of the air conditioning system and the widening of the pedestrian doors caused by a communication breakdown resulted in both the cost and time of the project to be extended. The key financial shareholders were fully determined to reducing their net losses and, in turn, declined to approve negotiation arrangements for disputes in their contracts. What loud you have done when you saw that the project would not meet its schedule?
During the development stage, project management team could have improved on planning and detailing the project. The magnitude of the project was understood by the team however not enough planning and research went into it. By the implementation stage the PM team had given most of their control over to GIG and along with that, financial shareholders were demanding cost cuts; two diverse counties battling for their own unique policies and interests. The overrun of cost and schedule became an eventuality by the end of the project.
Discuss- Quality should be considered whenever there is a change to any component of the “triple constraint” (time, cost and scope) Nevertheless the tunnel was constructed and delivered with a comparatively high level of quality. Even though the project ran past the deadline, dealt with a massive amount of extra labor and cost, and came across issues within the organization. They factors overall did not have a large impact on the quality of the deliverable. The two most important factors of the triple constraint in this particular project would be quality and time.
They represent the key components Nat snaps ten general Impression Tanat Is glen Day ten s taskmasters Ana ten general public. A project that is considerably late and has ongoing problems can conjure negative feeling and refer to the project as a failure which is not the case for the Channel Tunnel project. Risk management What are the risk and uncertainties in the Channel project? The scale of the Channel ever attempted illustrates the risks involved. Also two different countries with two different interests having to unite in order to design, fund, and construct the tunnel has risks and uncertainties in itself.
Other key stakeholders can also be problematic, such as lending banks have very set priorities and they want the most from their investment. A risk in that case could be that in the process of cutting cost to satisfy the financiers the overall quality of the project could be tarnished. How did the Channel project handle risks? What more might they have done? In terms of risk management, risk mitigation and advanced planning should be an ongoing aspect of every project. It is the intention that the risks are identified, measured and accordingly priorities; by doing this in an early stage the appropriate response tragedy can be administered.
The capacity to address familiar and unfamiliar risks involves understanding and assessing the life of each initiative in the project. The individuals involved in the technical side of things appear to have had a good understanding of the possible risks and how to mitigate them. However, this changed slight when GIG took control of managing and heighten the level of oversight and supervision. As for the business end, any risk involved with negotiations, consent approvals etc were addressed by stipulating a contractual agreement Rationalize he use of fast tracking in the Channel project.
Fast tracking is usually an efficient means to cut down the delivery time of a project. The technique of overlapping aspects of the project such as planning and construction can help to get the project back on schedule. However, this method can prove to be risky especially this case. Fast tracking is used on projects that it has been proven to be effective in the past. The Channel Tunnel, in contrast is a project that has never been attempted before with new technology that carries a certain amount of risk to it, they should have not seed this approach of fast tracking.
Contract What contractors (and sub-contractors) were involved in the Channel project? Discuss- why are the project contracts and financing agreements should not be rushed? The project was a build/own/operate/transfer (BOOT) enterprise. Financing was done through Routinely, a legal entity that took control of France Menace (FM) and Channel Tunnel Group (ACT), groups that represented each of the two countries. Routinely contracted HTML to design and construct the tunnel. Nevertheless, the safety assessments and final engineering were controlled by the French and British overspent.
Using contracting methods should be appropriate to the project scope. Rationalist the choice of different contracts (example: fixed-price, cost-plus fixed-fee) in the Channel project. Contracts are a very important in the process of project procurement management. They are able to identify and define the scope of cost, time, Ana ladder AT ten project. As It Is stated In ten case study, ten procurement process was multifaceted and restrict to a limited schedule. It can be assumed that errors could have occurred that were regarding funds and resources needed to fulfill that agreed upon contract.
The intricate planning procedure and schedule restraint of this oversized privately funded project lead to faults in risk allocation and resources. In a fixed price contract there was a lack of knowledge as to the impact of the risks and how to limit them. These contractual errors in risk allocation and resource estimates lead to further contract claims that surpassed $2 billion. Describe what specific things you must watch out for during contract administration for each of the following contracts: fixed-price, cost-plus fixed-fee.
Furthermore, the British and French government began pressuring Routinely to limit spending, insisting Trans Menace Ltd to issue out fixed price contracts to the vendors and sub- contractors. As mentioned before the project scope lacked definition and was subject to change. Since they use fixed price contracts rather than a cost plus fixed fee contract this inevitably led to claims being filed by contractors. The relationship between the contractors and HTML and subsequently Routinely became turbulent. Others Highlight the major areas of strength in the management of this project.
In terms of management, the overall quality of the end result was of a high standard. This reject was a unique in every way and was unprecedented in size and engineering feat. It proved to be exceedingly complex and consisted of many unforeseen obstacles. In spite of these issues, the tunnel and the project carried out the objectives as designed and produced a high quality deliverable that pleased the public and eventually the shareholders Highlight the major opportunities for improvement in the management of this project?
After analyzing the many features that relay the complexity and intricacy of the tunnel project, certain areas of weakness in the project management can be exposed. As stated above, the main areas of weakness can be separated into key stages throughout the life of the project, factors such as governmental interference, scheduling, progress and financial agreements, contract management, and safety regulations.
Areas of opportunities and improvement in the project Projects which are outsized and carry so much uncertainty such as the Channel Tunnel project need to be planned with concern and should not be rushed. They should be carried out using proven PM tools and methods Transparency is an important factor to consider with such a public project. It is important to disclose the full intentions of the project to all that are concerned. Such a project which is all encompassing involves practically everyone, from the main share holders, to the two leading government entities, and to the general public.
Disclosure allows these individuals to voice their opinions and validates their involvement Technical requirement and functional specifications need to be addressed and defined as soon as possible to assure the final cost and deadline are met Strict and rigid agreements should be established concerning the accountability to the overall costs of the reject, as the initial figures were highly underestimated and led to many problems later in the life of the project The French and British government should have accuses Ana talent tenet roles In ten project Witt more clarity Ana snow more cooperation between themselves and the investors.
Financing and contractual agreements should have been more methodically planned out and should not have been rushed in the manner that they were. There should have been more than one design for the project as to not be obliged and restraint to one idea. What project management lessons have you learnt from this project?
The key project management lessons from this case study Well before the project is initiated, the stakeholders need define a common goal or interest that they can all agree upon to achieving It is important to have ample support from the government, more so to help stabilize and control the many stakeholders that have their own priorities and expectations. If not direct involvement, a steady flow of communication throughout the life of the project International infrastructure projects such as this one prove to be problematic and should be avoided all together.