Sample Management Case Study Paper on Chunnel Project

1.     Introduction

The Channel Tunnel is currently deliberated as one of the largest and most important private sector infrastructure projects in European history. It is a 50km fixed link transportation system comprising of twin rail tunnels that go under the English Channel linking England (Folkstone) and continental Europe through France (Coquelles, near Calais). The project remains one of the largest and most significant infrastructure projects to have ever been carried out in Europe. After its completion, the Channel Tunnel allowed travelers from both countries to go back and forth within a fraction of the time taken by the ferries or vehicles. Despite the clear benefits of developing the channel, the project faced significant criticism from the planning to the development phases. As indicated by Stannard, various factors such as undervalued financial budget, poor stakeholders’ communications, unwanted government intervention, and other issues have played a primary role in raising questions of the efficiencies as well as the benefits of the project (42). It could be argued that the project was not well thought through thus the resolution to start it was untimely.

2.     The Channel Tunnel Project Integration Management

Project Management aids in the scheduling, organizing, and running of tasks that aid in the accomplishment of defined objectives despite constraints of time or costs. As indicated by Williams, most projects regardless of their size or complexities can be broken into smaller and easier to manage tasks as work progresses; however, for years, this has not been the case for the Channel Tunnel project (269). The prospect of a tunnel linking the UK and continental Europe was first brought to light over two centuries ago. As narrated by Locatelli et al., Albert Mathieu, a renowned French mining engineer, was the first to propose the existence of a tunnel running under the English Channel to France (108). Since then, there have been several suggestions presented on actualizing Mathieu’s engineering visions; however, because of issues such as lack of technology or the perilous relationship between the French and the English, it took 183 years before work began on what came to be called the Channel Tunnel. As indicated by Zhang, the proposal presented by the Channel Tunnel Group/France-Manche (CTG/F-M) in 1985 was accepted particularly because it presented an optional private funding and technological simplicity (694). As straightforward as the project seemed, it stands as an example of a poorly managed project due to unexpected outcomes; for instance, time delays, poor workforce management, and an increase in costs by the time of completion.  

3.     The Scope of the Project

All projects need guidelines that help stakeholders have a clear comprehension of the final objectives. As narrated by Rothengatte, the benefit of a convenient (cost-effective and faster) trade route linking the UK and continental Europe was identified during the dawn of the industrial age, as more commodities needed shipping through the English Channel (215). However, the logistics issues made it hard for both the English and French governments particularly because each entity had its governance policy that conflicted for years. Eventually, the project took off in 1988 and was completed in 1994 under the management of Eurotunnel. Initially, the project was expected to involve 5,000 workers at the peak of construction and had an estimated budget of £5.5 billion (1985 prices). The Preliminary plans showed that the Channel Tunnel would constitute shuttle terminals at Folkestone and Coquelles near Calais and the main aim of constructing such a massive tunnel of 32 (50km) miles length, of which 23.6 (30km) miles are underwater, was to allow people to travel between those countries in an unprecedented travel time of only 35 minutes. Currently, the crossing time is much lesser and cheaper as technological advances such as the use of electric trains have become part of the infrastructure project.  

 Despite the need and the clear benefits underlying the development of the Channel Tunnel, the project was never defined well in the initiation phase. As narrated by Chang and Graham, the project lacked a clear scope particularly because it was one of its kind and seemed long overdue (269). During the drafting of the Channel Tunnel Treaty, it was agreed that both the English and French governments were prohibited from regulating prices apart from potential monopoly situations. The reason behind this clause was that the terms would keep costs low amid possible government economic pressures; however, this was not the case. As narrated by Söderlun, as a privately financed project, the involvement of the governments went beyond their assigned role of an advisory entity as compared to a controlling body (159). For instance, during the development phase, the two nations’ economic interest constituted to additional concerns of the overall design project scope. Additionally, the project ended up costing £9 billion ($21 billion), well over its proposed £5 billion budget. From a Project Management standpoint, the initial scope was not properly defined as the project’s designs were ignored; for instance, issues regarding the air conditioning increased the initial scope cost by an estimated $200 million.

4.     Risk Management Analysis

Risks are part of any project, and over time, the prevailing premise has been that the larger a project is the higher the chances of challenges. The risks involved in its development went beyond the usual technological challenges, credit risks, as well as environmental and social risks. As narrated by Stannard, in 1985, the technology needed to construct a tunnel with the specifications required for the Channel Tunnel untested (51). The Eurotunnel group was faced with the challenge of developing a tunnel that went lower than the soft floor of the English Channel without any incidence of collapsing. The project needed state-of-the-art equipment, which was costly and in the later stage of the product proved unnecessary. Credit risk was the second issue that was in hand as it measures the return on investment for the stockholders. As indicated by Williams, projects with the magnitude of the Channel Tunnel are traditionally funded by governments. Subsequently, this changes the return on investment profile; the private funding on this project presented increased risk on the contractors as well as investors because more of these stakeholders were footing a fraction of their total estimated costs due to delayed funding (270). As presented by Stannard, some of the niggling issues that led to the delay of the Channel Tunnel were a consequence of the credit challenges faced from the initiation phase of the project (54). This inevitably led to many claims and litigations towards the end of the project.

5.     Time Management

As mentioned in the introduction part of the paper, the Channel Tunnel took seven years to complete. As indicated by Chang and Graham, the first locomotive to carry both passengers and trains from England to France on the tunnel did so on 22 December 1994 (396). The initial plans presented indicated that the project would be ready by 15 May 1993. This means that it was completed more than one and a half years after schedule. There are various reasons why the project did not meet its scheduled completion time, the most apparent being the delay in procuring financing. As indicated by Söderlund, the Eurotunnel group did not have as many resources as earlier indicated in time; one month before tunneling the group had only underwritten a portion of what was needed to purchase needed equipment (160). The amount raised by Eurotunnel was set to assure consortium banks in investing their shares. Therefore, the delay led to a subsequent interruption to other purchases and procurement as stakeholders did not have much investment insurance.

6.     Cost Management

As earlier presented, in the initiation phase, the proposal presented by Channel Tunnel Group/France-Manche (CTG/F-M) stated that the Channel Tunnel would be privately funded, a factor that drew the French and English governments into discussions. As narrated by Chang and Graham, it was clear that both governments would not be involved in the financing of the projects, an aspect that was specific to Margaret Thatcher’s, the then British Prime Minister, acceptance to the approval of the Channel Tunnel development (399). The funds were expected to be raised through loans from consortium banks as well as the sale of shares in capital markets. As explained by Locatelli et al., 226 banks were expected to provide loans that would be used in the project (111). However, the Natwest and Midlands banks in the UK, as well as the French banks Credit Lyonnais, Banque Nationale de Paris, Banque Indosuez, were the main banking institutes that raised £4bn in various equity issues. During the development and implementation phases, the poor project scope projections led to over expenditure. By the end of the project in 1994, the initial cost had overrun the initial budget by 80%, as compared to the estimate of £5 billion. As explained by Chang and Graham, the underestimation of rolling stocks, changes in the fixed equipment work and terminals, and the initially poor tunneling process all contributed to the cost overrun (402). The British and French governments continuously interfered with spending to the point of instating the Trans Menace Ltd issue as a third party brought in to offer vendors and subcontractors with fixed-price contracts. As mentioned before, the project scope lacked proper definition thus was subject to significant change in the development phase. For instance, the initial plans used fixed-price contracts and not the accurate a cost plus fixed fee contract, this subsequently led to extra expenditure. The relationship between the contractors and TML became turbulent.

7.     Quality Management

From the information that has been presented, it is clear that the scope of the Channel Tunnel had been poorly managed, thus affecting the cost and timing on the entire project. However, these issues did not affect the quality of the final product. As indicated by Stannard, the Intergovernmental Commission (IGC) and Maître d’Oeuvre (Md’O) were obligated to supervise the work done by the Eurotunnel (50). Their main task was to monitor all activities on the report and present reports on a quarterly, indicating if the projects were being executed per the requirements of the concession and the quality assurance standards established by TML. Additionally, both the French and English governments, as well as the banks, used the reports as updates on progress. According to Williams, to attain the required quality of standards, a grouping scheme was used on the management plane to make the whole process more flexible by assessing and prioritizing the tasks (270). The use of better equipment resulted in a higher quality of work, providing an unexpected benefit.  

8.     Procurement Management

The Channel Tunnel faced a lack of proper funding in its inception phase, a factor that led to rigorous hasty procurement plan and costly contracts. As indicated by Chang and Graham, the borrowing machines bought in 1988 were estimated to be 15% more expensive than the retail price (404). Additionally, the acquisition of rolling stock, as well as much needed equipment, made was not presented as an additional percentage; thus, the initial budget was understated. Development of the cascading effect of poor implementation created 17 months delay.

9.     Human Resources Management

Different workforces significantly contributed to the completion of the project throught its various phase. The magnitude in size, difficulty, and uniqueness of the Channel Tunnel project meant that workers had to be sourced from different parts of the world; 1,500 individuals. However, as explained by Williams, the workforce was demotivated for a majority of the construction process due to the delay and the non-settlement of claims (271).

10.  Communications Management

As mentioned earlier the Channel Tunnel project sourced specialized workforce from different locations globally. Therefore, the managers had the challenge of communication. Additionally, the various stakeholders on and outside the worksite caused significant confusion and delays. As indicated by Williams, the project managers in the tunnel project were forced to hire translators and invest in wireless communication devices to maintain flowing communication processes through all sectors involved in the construction of the project (272).  

11. Conclusion

 The Channel Tunnel is a significant infrastructural product that to this date servers a purpose that was envisioned in the early 19th century. However, from the information presented, it can be argued the project was not well managed. Firstly, the costs of the project almost doubled from the projected budget. Secondly, the project ended over a year and a half behind schedule. The Channel Tunnel caused significant project management challenges leading to unhappy investors and stakeholders throughout the project’s life cycle. The Channel Tunnel is a modern engineering marvel and has undoubted public benefit; however, it is an example of a poorly managed project.

Works Cited

Chang, Chen-Yu, and Graham Ive. “The Hold-Up Problem in the Management of Construction Projects: A Case Study of the Channel Tunnel.” International Journal of Project Management25.4 (2007): 394-404.

Locatelli, Giorgio, Diletta Colette Invernizzi, and Naomi J. Brookes. “Project Characteristics and Performance in Europe: An Empirical Analysis for Large Transport Infrastructure Projects.” Transportation Research Part A: Policy and Practice98 (2017): 108-122.

Rothengatter, Werner. “11. Innovations in the Planning of Mega-Projects.” Decision-Making on Mega-Projects (2008): 215.

Söderlund, Jonas. “Pluralism in Project Management: Navigating the Crossroads of Specialization and Fragmentation.” International Journal of Management Reviews13.2 (2011): 153-176.

Stannard, Colin J. “Managing a Mega-Project—the Channel Tunnel.” Long Range Planning 23.5 (1990): 49-62.

Williams, Terry M. “The Need for New Paradigms for Complex Projects.” International Journal of Project Management 17.5 (1999): 269-273.

Zhang, Hongliang. “A Redefinition of the Project Risk Process: Using Vulnerability to Open Up the Event-Consequence Link.” International Journal of Project Management 25.7 (2007): 694-701.