Crossrail was supposed to be the example of how to deliver big infrastructure projects. As recently as late spring, we were being told the £15bn railway – in tunnel beneath central London from Paddington to Stratford and Woolwich – would be delivered on time and within budget.
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But in July, the Department for Transport said an additional £590m would be needed to complete the project. Then came the bombshell at the end of August: that the main opening of Crossrail would be delayed from December 2018 to autumn next year.
So why has it gone so wrong so late in the day? And what does that say for the delivery of major infrastructure projects to come – for HS2, Heathrow’s third runway and Crossrail 2? Is a new approach to procurement required?
One thing is clear: another major infrastructure scheme will finish late, threatening confidence in those that are following.
This reinforces a view that existing models of contract procurement are outdated and delivery of future projects requires a fresh approach.
Crossrail Ltd has given its explanations for the delay, in formal statements and in front of a specially convened session of the London Assembly. Chief executive Simon Wright and chairman Sir Terry Morgan blamed the train testing starting with a transformer explosion and exacerbated by delayed electrical fit-out problems. In its defence, the delays are about the norm for major rail schemes.
“The majority of rail infrastructure projects are late and over budget. Nine or 10 months isn’t earth-shattering for the biggest one going – if that’s the true extent for Crossrail,” says Penningtons Manches partner and chair of CIOB’s procurement group, Francis Ho.
OLE work takes place on Crossrail. An electrical transformer explosion at Pudding Mill Lane caused a key delay to the project
Crossrail was procured in a way that ought to have brought better results. Essentially it’s been built through a collection of NEC3 ECC Option C target-cost contracts – a type recommended for major infrastructure schemes, with all of the risk and benefit sharing meant to incentivise efficiencies and good behaviours.
“Crossrail’s contract procurement was heavily influenced from HS1 and refined substantially via the 2012 Olympics. NEC3 Option C is a well-worn procurement model and it can be understood why a refinement from London 2012 was considered a safe approach,” says Ho.
Nonetheless, something went wrong towards the end of the fit-out stages. “Likely it’s an accumulation of multiple delays of all sizes,” Ho says.
The government will not want to see HS2 going the same way. The £57bn project has also been procured through a series of NEC3 Option C contracts. Meanwhile, Transport for London is working with the DfT on a funding package for the £33bn Crossrail 2 scheme, including contributions from business levies and private sector.
Is it time to consider an entirely different model of procurement? In the background, the Infrastructure Client Group of ICE has launched its Project 13 initiative. This is aiming to develop a new approach, based on the principle of moving from one-off “transactions” to long-term integrated relationships.
One of its leading advocates, and the author of the Project 13 report From Transactions to Enterprises, is Miles Ashley, a former construction programme manager at London Underground.
He says: “Better procurement will not solve everything, but if we look at what works in other industries, their characteristics of integrated and long-established relationships contrast with the way we create infrastructure: buying an asset without a focus on outcomes; going shopping for packages of things.”
Infrastructure clients which are “early adopters” of the Project 13 approach include Heathrow, National Grid, the Environment Agency and Anglian Water. “All have started following Project 13 principles,” Ashley says.
He describes Anglian Water’s One Alliance for delivering capital investment as the leading example. “They have a clear sense of construction outcomes, the relationships are long term and the investment programmes are data driven. The results are a significant difference: certainty of delivery, better productivity, carbon reduction and cost efficiency,” Ashley says.
“The majority of rail infrastructure projects are late and over budget. Nine or 10 months isn’t earth-shattering for the biggest one going.”
Francis Ho, Penningtons Manches
Embedding Project 13 principles will not happen overnight, he says. HS2 ought to have long enough timescales to reach the necessary “maturity”, but publicly funded infrastructure has too many conventional hierarchies of horizontal and vertical relationships. He adds: “It will take time to get beyond current governance arrangements to make significant differences to project delivery and optimise outcomes. We’re trying to get a shift in attitude and approach to bring about real change.”
There are signs government is listening. In parallel to Project 13, the Construction Sector Deal has brought pledges including a commitment to procuring all public projects on the basis of value rather than lowest price in future. In exchange, the Construction Leadership Council has promised to play its part to improve industry performance.
The author of the CLC’s Procuring for Value report is Ann Bentley. She says: “My knowledge of Crossrail is slim, but I do think many of the philosophies of Procuring for Value were being followed, yet still the project has come up against difficulties.
“One problem could be political expediency. When people sat down to consider the project’s opening date, it could be that they fell victim of having to commit to a date that was not always likely, but necessary to make sure the project went ahead.
“Also, there are constraints made by certain public sector procurement rules. How much was it possible to get true integration across the supply chain? Perhaps they couldn’t know about problems soon enough to anticipate them. With these constraints associated with spending public money, we may see Heathrow’s third runway as the next innovative project.”
