The £16bn funding package for London’s new Crossrail project is in place, but for Cross London Rail Links executive chairman, Doug Oakervee, there is still plenty of detail to work out.
When Prime Minister Gordon Brown finally gave the green light for the Crossrail project two weeks ago, he brought to an end three decades of postulating.
For Doug Oakervee, executive chairman of scheme promoter Cross London Rail Links the go-ahead was the culmination of months of hard work and behind the scenes negotiation.
Despite 30 years or more of ideas, routes, planning and delivery strategy, it is only now that the cash is on the table that the stakeholders are fully engaged and this mammoth £16bn job can really get going.
Key to the process is the design, construction and project management strategy – how to turn a bunch of ideas into a functioning railway, on time and under budget.
The original Crossrail strategy was for the multidisciplinary design consultants (MDC) to do the scheme design. If the project actually kicked off then these outline designs were to have been tendered as design and build contracts.
But having brought the UK’s major contractors together to talk about the project, Oakervee opted to change tack early last year. “The industry has made it crystal clear to me that they have no desire to do design and build. They want an engineer’s design,” he explains.
“But the (MDC) contracts that exist right now don’t cater for that. Nor does the funding that we have.”
The MDC contracts were let in Spring 2006 to Arup/Atkins, Mott MacDonald, Halcrow and Scott Wilson on the basis that once design and build contractors were let, the MDCs would simply oversee the contractors’ designs.
But the switch from design and build means that Oakervee now has to work out a way to procure the detailed design, as this will now be the client’s responsibility rather than that of the contractor. As the detailed design is now a much bigger job than the MDCs were
originally contracted to do, the whole design process is now under review.
With the exception of Scott Wilson, which is contracted to work on the overground sections and will be novated to work directly to Network Rail after the Crossrail Bill gets Royal Assent next year, the MDCs are being encouraged to look at forming a single team to tackle the work across the project.
“I’d much prefer a single team and I’d love to have the same players – otherwise we’ll have to start afresh again,” says Oakervee.
“It’s the way I’m used to working,” Oakervee explains. “To me, the more contracts you have, the more interfaces that you introduce, and the more disputes you introduce. If you actually want to get the job done you need a properly integrated team with a really reasonable fee.”
Having said that, Oakervee will need to ensure that this team is established in accordance with European procurement rules before the detailed design work is awarded.
The same goes for the role of delivery partner. Bechtel has handled this work so far as development manager, but its role ends next year, and the continuation of this work will also need to be put out to tender again. The plan he says, is not to outsource delivery but to build a team around his in-house staff.
“The strategy was never really worked out,” says Oakervee, denying that this represents a significant change in direction. “There was talk that there would be a delivery manager and [that we would] outsource the lot. But, I want a delivery partner so that we can actually integrate the delivery team together.”
The aim, Oakervee says, is not to have a slimmer project delivery team but to create one with the right components – much the same, he adds, as he achieved on the Hong Kong Airport Core Programme project which heled in the 1990s.
“Obviously, it’s a complex structure of governance (see box) and with all the different people involved it is very important that we have an in-house part of the team that can work with the sponsors and translate their needs into the project,” he says.
“The delivery partner will have project management skills and resources that are not just picked up off the street – or not easily picked up off the street.
And he says he will need the best people on board, need the industry to perform and need to value engineer the job from the start until the end if the out turn is to be hit.
“Because it is such a large sum of money there will be a lot more rigours imposed upon us through to the start of construction,” he says. “I will have to demonstrate to our sponsors that the out turn cost is holding good.”
He adds: “There will be a number of key milestones. The first is when we have completed the design and re-verified the job based on the final design that goes into the tender packages for procurement.”Oakervee points out that having an affordable scheme is vital and adds that keeping this scheme affordable right through to the end is equally crucial.
“We have reduced the capital cost of this job by roughly 20% from what was envisaged and therefore demonstrated to the sponsors and Treasury that we do have an affordable project and they have accepted that,” he says.
“The £16bn that the prime minister announced is the out turn cost – not the construction cost – the total out turn cost in cash. Not £16bn today but £16bn when I’ve finished. Major public works in this country have not often been funded that way.”
The key to delivering this aspiration is, Oakervee says, managing the risks. First, clearly identifying them and then allocating them to those who can handle them best.
“It is not a question of putting all the risk on the contractor, nor is it a question of the client taking all the risk,” he says, pointing out that there will be some form of early contractor involvement.
“Before contractors price the job we need them to understand what they have to do,” he says.CLIENT SETUP
Crossrail is without question a hugely complex project, not so much technically but in its almost unique project setup.
“The reason for the complication is that it is such a huge project to fund,” says Cross Link Rail London (CLRL) executive chairman Doug Oakervee. “And the funding is coming from different sources.”
Clearly comparisons are being made with the UK’s last mega transport project, High Speed 1 (HS1), but Oakervee is clear that while they have studied and learned from this project there are significant differences.
“The difference with HS1 is that it was essentially a private company, whereas this is a public company,” he says. “This is quite different and unique and that is what has made it quite difficult to actually structure with all the parties involved.”
At the moment, the Crossrail project is run by CLRL and is jointly owned by Transport for London (TfL) and the Department for Transport (DfT) as the joint sponsors.
But after Royal Assent next summer the DfT will pass its shares to TfL so that Crossrail will become a wholly-owned subsidiary of TfL.
But given that the DfT is still there funding part of the project, the secretary of state for transport will continue alongside the mayor of London at the very top of the project. CLRL will have its own separate board of directors and be independent, and will operate under a hard contract with these sponsors.
“It looks like I am going to be the executive chairman with executive and non-executive directors who will be freshly appointed,” says Oakervee.
“We will run as an independent company but we will always have relationships with TfL.”
Oakervee explains that he will be looking to TfL transport commissioner Peter Hendy as the sole arbiter of any disputes along the way involving London Underground, one of the PPP (public private partnerships) infracos or anyone else and to make the decision in the interests of transport in the capital.
“The great thing is that Ken (Livingstone, mayor of London) has been the champion of Crossrail for some time - he says since 1974 Đ and is also the key stakeholder for London,” Oakervee says. “We have interfaces with LUL (London Underground Ltd) and the fact that we are in the same family will do much to ensure that these relationships are as seamless as possible.”
Meanwhile, on the above-ground sections Network Rail is in charge of upgrading the infrastructure on its network - working more as a partner on the project.
“Network Rail is the expert and so will do the upgrades and replacements that are necessary on the network.
“We will have an overall project management role to make sure that everything falls into place with the milestones and the programme.
“My particular interest is getting the project completed on time, so there will be a steering group but at day-to-day working level we will be working as an integrated group.”
“For those looking in it may seem like a very complicated arrangement and that it has taken a long time (to finalise),” accepts Oakervee.
“Well the length of time is, as Gordon Brown said, because nobody has ever put a package like this together before. But everybody involved has got an absolute will to make this work.
So although there are different political interests, everybody knows that London needs Crossrail.”
“Gordon Brown was impressed about the fact that we have got to the position that we can give the go ahead,” says Oakervee. “It’s a job that has been spoken about for decades, is desperately needed for London but has not been affordable.”
The £16bn project includes:
- design costs;
- operations costs for CLRL;
- construction costs;
- cost escalation;
- the purchase of some 7,000 plots of land;
- compensation to tenants; and contingency.
“We conducted an extensive quantitative risk analysis,” says Oakervee. “We were able to quantify the contingency sum needed for the project in all aspects - not just construction. There is no optimism bias but a genuine contingency figure… “