Th e C h a n n

el Tunnel
(Chunnel)
Project Ca
se Study
By Juan R
ios

Background
0 An underground tunnel connecting England

and France.
0 The largest privately funded project ever
undertaken.
0 Bankers underwriting the funding for the
project.

Project Proposal
0 A 32-mile (51.5 km) double-rail tunnel
0 Will accommodate through-trains & special

car-and-truck-carrying shuttle trains.

0 Their bid was US$5.5 billion.
0 The country with the highest standard would
prevail.

New Technology
0 New technology being used.
0 State-of-the-art laser and computer tech.
0 The Chunnel project was completed but it

was late and over budget.

0 The new technology required significant
modifications during the project due to
unexpected conditions and changes required
by various parties.

Phases for the Project

0 1-Inception-Historical background, overall

objectives, political climate, and pre-feasibility

studies.
0 2-Development-Overall planning, feasibility
studies, financing, and conceptual design.
0 3-Implementation-Detail design, construction,
installation, testing, and commissioning.
0 4-Closeout-Reflection on overall performance,
settlement of claims, financial status, and postproject evaluation.

Inception Phase
0 The ideas was to create a fixed transportation

link between England and France.

0 This would create a spur of economic
development.
0 Improve trade using the new alternative highspeed transportation.

Ground Rules & Time

Line
0 1974- Initial tunnel ideas gather but

abandoned.
0 1978-British & French discussions resumed.
0 1983-Frensh & British banks & contractors
propose tunnel scheme.
0 1984 British and French agree to common
safety, environmental, and security concerns.

Ground Rules & Time

Line
0 1985-French & British governments ask for

fixed-link proposals.
0 1986 The project was awarded to Channel
Tunnel Group/FranceManche a.k.a. Eurotunnel
and declared owner of 55-year concession for
the link.

Ground Rules & Time

Line
0 1987 the Concession Contract was awarded

to Channel Tunnel Group/FranceMache

(CTG/FM) bid for US$5.5 billion and ended on
Dec. 15, 1994 with a fully operational station.
0 The project was 19 months late and had a
cost overrun of some US$3 billion (total
construction cost of US$7.1 billion).
0 On 1 December 1990, Englishman Graham
Fagg and Frenchman Phillippe Cozette broke
through the service tunnel with the media
watching.

The Implementation
Phase
0 Not agreeing in details resulted in eventual

delays and cost overruns.

0 Warning signs of rolling stock had not yet
been designed (vehicle and freight cars).
0 No contingency was set aside to cover
unknown unknonws (Ventilation system).
0 The specifications for British rolling stock and
French rolling stock were not the same.

The Implementation
Phase
0 With costs out of control, fixed-priced

contract were awarded to contractors in order

to have any chance of winning the bid and
not risk losing the bid to next lowest bidder.
0 Contractors assumed an optimistic case, and
since underground construction is rife with
changed conditions.

Early Problems
0 No air-conditioning was included costing

US$200 million more.

0 The Intergovernmental Commission (IGC)
approved designs that werent within the
original concession agreement.
0 Thus indicating possible problems with
initiation and planning.

Early Problems
0 The lack of defined scope makes resource

planning, cost estimating, and budgeting

difficult.
0 Return on Investment (R.O.I.) assumptions
made in the planning stages may not prove
accurate. Leaving a trail of unhappy investors
and stakeholders.

Early Problems
0 From US$5.5 Billion to US$7.1 Billion
0 Ongoing safety requirements changes sought

by ICG continued to create negative impact.

0 Not enough was understood to limit the
impact of known and unknown risks.
0 Contractual errors were made in the
estimates and risk allocation method, costing
additional US$2.25 billion.

Early Problems
0 Passenger doors be widened from 600mm to

700mm. Cost increase from US$9 million to

US$7O million.
0 Objectives of a project need to be identified
and communicated clearly from the
beginning. This was the largest and most
damaging failure of both governments.

Early Problems
0 By not having the real goals, objectives, and

scope defined early, and by not

implementation a contract method that
directly linked the rewards to contractors at
all levels of the procurement chain to those
objectives.
0 The project was essentially run by bankers.

Finances
0 The Chunnel project had to be financed

through private sources without government

aid or loan guarantees.
0 The government was prohibited from
regulating prices except in monopolies.
0 Financing was pursed via equity and loan
capital markets.

Finances
0 Most shareholders seeking equity interest

were mostly in France and eventually Britain.

0 206 banks world wide participated with the
loan.
0 The refinancing had to be pursued, should
negative variances in time and cost
estimates occur.

Success From a Project

Management Perspective
0 Contracts are a critical part of the

procurement management process.

0 Contracts define the scope of work, cost,
timeline and rules of engagement.
0 Risk planning and mitigation needs to be
ongoing part of each project.
0 The hope is that most material risk are
identified, quantified, and prioritized early
enough so that an effective risk response
strategy can be establish.

Success From a
Project Management Perspective
0 3 tunnels total North, South, and Service.
0 46 contractors were hired.
0 The tunneling itself was finished 3 months

ahead of schedule.
0 Each team member has a responsibility for
quality.
0 Quality requirements were mostly defined upfront, quality planning, quality assurance, and
quality control.

Success From a
Project Management Perspective
0 Team work was necessary to complete this

project.
0 It was estimated that 15,000 workers were
employed on the project.
0 From a P.O.V. quality management was a
success.

The Development Phase

0 Consisted of detailed planning,

communication, agreements, and

government approvals.
0 A large part of the struggles were do to
inflexibility of some characteristics of the
project, and cross-cultural exchange between
2 countries.

The Development Phase

0 A scope creep played a large part in the

substantial increase from its initial cost

estimates, and its completion behind schedule.
0 The scope was not fully assessed and the proper
precautions to prevent scope creep werent put in
place.
0 The project team were able to understand the
complexity and were able to use previous
research on the soil, but in the end, the lack of
continued focus on the scope resulted in the
frustrations of trying to do too much.

Closeout
0 The completion of the project was rushed to

allow operations to begin before the entire

effort was completed.
0 The tunnel was actually completed.
0 Teamwork and communication were broken
down into several key areas.

Financial Issues during

Closing
0 Focused on minimizing their losses, refused

to accept negotiated arrangements for

settling some of the key contracts disputes.
0 International Chamber of Commerce was
involved with helping the various competing
sides to bargaining table in an attempt to
resolve key portions.

From a Management
P.O.V.
0 Even with a high-level design and respective

rough-order-of-magnitude estimates were

appropriate.
0 In 1996 the American Society of Civil
Engineers identified the tunnel as one of the
Seven Wonders of the Modern World.

Rating Scale:
5-Excellent, 4-Very Good, 3-good, 2-poor,
1-Very Poor
Project Management Area
Scope Management
Time Management
Quality Management
Human Resource Management
Communication Management
Risk Management
Procurement Management
Integration Management

Implementation Phase

3
1
3
5
2
4
3
2