Having successfully let the first £1.25bn worth of tunnelling contracts in December, Crossrail chairman Terry Morgan now faces the challenge of finding a new chief executive following Rob Holden’s surprise resignation last week.
Rob Holden’s decision to quit as chief executive of the £14.5bn Crossrail project in six months time has presented chairman Terry Morgan with an unexpected new recruitment task.
And without question, it is a task that he would rather not have been handed to deal with right now.
Having got through the monumental task of securing a funding package in October’s Comprehensive Spending Review (CSR), Holden and Morgan together steered the project towards the successful letting of the first four major tunnelling contracts to effectively make the project unstoppable.
“I had no wish for Rob to leave,” says Morgan, stressing that the decision was not something he either had expected or desired. He is also quick to quash recent speculation that Holden’s departure was prompted by any problems or frustrations with the project’s governance structure.
“Rob has made his decision to leave because he has decided in his own career to do something else,” he insists.
“He has never said to me that his decision to leave was based on anything else.”
That said, Holden is clearly aware that the project has reached a major milestone as it moves rapidly from a planning phase towards all out construction. The result is that, according to Morgan, the whole organisational structure of the Crossrail project is now about to change - from the chief executive down - to reflect this change in priorities and activities.
“[The project structure] will change in recognition of the fact that the programme itself is changing,” he says.
“We have let some very big contracts and we need the organisation to reflect the fact. We are looking at that right now and it is not yet concluded.”
The changes, Morgan insists, will affect the whole of the Crossrail project, its activities and use of external programme managers and delivery partners.
“Rob has made his decision to leave because he has decided in his own career to do something else. He has never said to me that his decision to leave was based on anything else”
The key, he says, is to make the Crossrail programme as lean as possible. He points out that many of the roles on the job to date are by their very nature short term.
“The question for me is how does Crossrail get itself able to support the contractors; what is the best way of ensuring delivery is absolutely on time and to the cost structure. So we are taking the opportunity to take what we have learnt and decide how best to organise ourselves,” he explains.
“But I don’t want this to feel like a revolution,” he adds. “This is just us saying that this is a point in time to reflect on how best to organise going forward. The whole of Crossrail will change. We have to be very cohesive - moving from being an organisation focused around planning to getting out there and getting construction underway.”
Morgan says that the successful letting of the first major tunnelling packages in December was critical to the project making the vital transition into a full project implementation and Crossrail Ltd operating as a fully fledged construction client.
“It was really important for us to get those contracts let because we know that we tested the market in terms of its capacity,” he explains.
“These are big contracts with risk and they have to be bid for effectively. We were consciously aware that we were placing a lot of demand on the bidders and that it required an awful lot of detailed work.”
And given that many of the bidding firms will be competing across a range of future contracts, he points out that asking them to start bidding for more work before letting these could have risked putting too much demand on the market.
With two major tunnelling contracts worth £500M each and four major station construction contracts worth a total of £950M currently out to tender plus another two worth a total of £500M due to be tendered shortly, there will be plenty more major procurement activity around the project.
And having already taken £1.5bn out of the project’s expected outturn cost, Morgan anticipates that there will continue to be more opportunities for the market to introduce innovation and reduce costs further.
“We learnt a lot from the work we did last year both from the procurement and from the value engineering process.But we used the tunnelling contracts to give us an indication of where the market was against our expectations,” explains Morgan. “When we placed the contracts they were very much in line with the funding conclusion after CSR.
He explains that with four contracts to let and five consortiums bidding, the key was agreeing among the five bidders the process for allowing innovative ideas to be proposed and fairly judged.
Mitigated risk profile
“We have taken innovative ideas and we now have a mitigated risk profile,” he says pointing to the decision to combine the western running tunnels and platform tunnel contracts as an example of the market being innovative.
“The procurement process was very thorough and tested the fact that there was a clear understanding of the scope of work and that the price they were offering made sense,” he says. “There is no point in us placing contracts where we don’t think the contract can make a good deal on it.
“We wanted keen prices but we didn’t take the lowest bid. We assessed 60% technical and 40% cost.”
The challenge for the project is to continue to allow the market to bring forward its innovative ideas and enable further costs to be saved and risks to be mitigated.
“The whole of Crossrail will change. We have to be very cohesive - moving from being an organisation focused around planning to getting out there and getting construction underway”
Although the accepted outturn cost of the project now stands at £14.5bn, Morgan insists that the notion of “outturn cost” is not something he ever refers to. Instead he says he prefers the concept of “funding capacity” - how much money the sponsors have.
“Within that funding capacity there are hard costs like the contracts we have just let and there is risk contingency to deal with things some of which we don’t know about,” he says “[The challenge is] how do we create a gap between our funding capacity and our actual costs.”
Morgan’s grip on this challenge will be tested by the project sponsors Transport for London and the Department for Transport and the Treasury Major Projects Review Group in March during the so-called Review Point 4 audit of the project programme.
Point of no return
This will officially take the project beyond the point of no return and effectively will see full responsibility for delivering this programme pass to the Crossrail team.
And while Morgan is clear that stopping the project would already be considered “unthinkable”, he is aware that the pressure on the public purse means that constant attention muts be paid to project cost management to help the sponsors continue to protect investment.
“I just want to be sure that we keep sufficient funding capacity to enable us to cope with things we don’t know about and in that respect we are working in the right direction,” says Morgan.
“There were a number of rumours circulating that we were going to be asked to reduce the scope [of the project] but we are still, with revised funding and programming, intending to deliver the full scope. So I think that both our sponsors have done a fantastic job.”
Search for new CEO
Over the next few weeks Morgan’s search for new chief executive will begin in earnest and he is in no doubt that he will not be short of quality candidates ready to lead the project to its opening date in 2018.
“This is the biggest infrastructure project in Europe and a fantastic opportunity for someone to come in and do a great job,” he exudes. “But it is going to be hugely challenging. We start tunnelling in the first quarter of 2012 and there will be things that happen that we don’t yet know about.
“It will be someone with the skills and leadership to know-how to deal with those challenges,” he adds. “It’s an opportunity for someone to make their mark.”