Channel Tunnel Case

Case Study The Channel Tunnel
Mingyi Su Elvin Bayramov Christoph J. Szczecina Henrique A. Lima de Faria

Fachhochschule Dortmund
University of Applied Sciences and Arts
Managing Change - Prof. Dr. Josef Mittmann
May 26th, 2008
Content
1. Historical Context 2. Engineering 3. Organizational Transitions 4. Financial Developments
Historical Context Engineering Organizational Transitions Financial Developments Case Study: Answers
Christoph, Elvin, Henrique, Mingyi
5. Case Study Answers
Managing Change - Channel Tunnel Case Study
Historical Context
1802
Albert Mathieu put forward a cross-Channel tunnel proposal.
1880
A railway tunnel by Watkin, the chairman of the South Eastern Railway
1883
The work stopped after an injunction had been served against Watkin
1887
Watkin became `Channel Tunnel` Company
Historical Context
1914 -18 WW I January 1974
During World War I the 1800 m. tunnel was used for military purposes A UKFrance government backed scheme that started in 1974 was cancelled.
February 1986
The Treaty of Canterbury was signed allowing the project to proceed.
June 1988 December 1988
First tunnelling commenced in France. UK TBM commenced operation.
Historical Context
December 1990 May 1994
The service tunnel broke through under the Channel. The tunnel was formally opened by the Queen and President Mitterrand.
Mid 1994
Freight and passenger services commenced operation. A fire in a lorry shuttle severely damaged the tunnel High Speed 1, linking London to the tunnel, was opened.
November 1996 November 2007
Attempts and Proposals

In the 1830s Frenchman Aim Thom de Gamond In 1865, a deputation led by George Ward Hunt, In 1881, British railway entrepreneur Sir William Watkin and French Suez Canal contractor Alexandre Lavalley . Work started at both sides. On the English side a 2.13-metre (6.99 ft) diameter Beumont-English boring machine dug a 1,893-metre (6,211 ft), on the French side a similar machine dug 1,669 metres (5,476 ft) from Sangatte
The Beumont English boring machine
Attempts and Proposals

As a result of meeting between the leaders of two countries FOUR submissions were proposed by promoters, in 1985:
1. A rail proposal based on the 1975 scheme presented by Channel Tunnel Group/FranceManche (CTG/FM), 2. Eurobridge a 4.5 km span suspension bridge with roadway in an enclosed tube 3. Euroroute a 21 km tunnel between artificial islands approached by bridges, and 4. Channel Expressway large diameter road tunnels with mid-channel ventilation towers
Geology
Strait of Dover The closest distance 33 KM One of most important Straits in all over the world
Geology
Geology
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Tunneling
The second undersea Tunnel in the world (Seikan Tunnel in Japan) The major risk for underwater tunnels major water inflow Folkestone, Kent in England and Coquelles France Long 50.5 Kilometers
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Tunneling
Channel Tunnel/France-Manche: Double rail tunnel , Cost: $5.5 Billion
EuroRoute: a bridge/ Tunnel scheme. Road tunnel and Rail tunnel. Cost: $11 -14 Billion
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Tunneling
Channel Expressway: twin very large bored tunnel, two-line express way and train track. Cost: $2.9 Billion
Eurobridge: a bridge for motorway and a Railtunnel. Cost $11.5 Billion
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Tunneling
7.6-metre (25ft) diameter rail tunnels
4.8-metre (16ft) diameter service tunnel
A tunnels: Passenger Trains, and Freight and shuttle Trains B tunnel: service tunnel
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Engineering
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Railway design and rolling stock

Locomotives ( Brush British company and ABB - Swiss/Swedish Company The passenger railcars (Bombardier Canadian company)
Railcars for carrying freight vehicles (Breda and Fiat Italian company)
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Engineering
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Problems in Engineer Sector

Problem of machine, increased 7% cost (1988) Machines shut down on British side (1988) Enhanced safety features (1989) Problem on the passenger railcar (1991) Air cooling system (1991) Delay delivery of the systems acceptance certificates and rolling stock
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Problems in Engineer Sector

The project was not properly designed in
advance by Eurotunnel, and they developed a habit in the early days of asking for the best of everything, whether or not it was needed".
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Project Start
TML Consortium (Transmanche-Link)
October 1985
Transmanche -Link
October 1985: Highly centralized
Translink JV Balfour Beatty Construction Costain Tarmac Construction Taylor Woodrow Wimpey
Transmanche Construction GIE
Bouygues Lyonnaise des Eaux-Dumes Societe Auxiliare dentreprises Spie Batignolles
Nationally based twin structure Each general director keeps control of almost all activities on his channel side
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Project Start
1. Historical Context 2. Engineering 3. Organizational Transitions 4. Financial Developments Translink JV 5. Case Study Answers Balfour Beatty Construction Costain Tarmac Construction Taylor Woodrow Wimpey Bouygues Lyonnaise des Eaux-Dumes Societe Auxiliare dentreprises Spie Batignolles

October 1985
Transmanche -Link
Transmanche Construction GIE
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Tunneling Phase
February 1988:
Evolutionary decentralization Five Directorates: Construction France Construction UK Common Services Engineering Transportation Systems
Chairman

February 1988
Chief Executive
General Director UK
Construction Director Project Common Services
General Director France

Engineering Director Transportation Systems Director Construction Director
Tunnel Terminal Isle of Grain
Administrati on/Finance Director Commercial Director Project Services Director Quality Assurance Director Human Relations & External Relations Director
Engineering Group
Transportati on Systems Group
Tunnel Terminal
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Tunneling Phase
General Director UK
Construction Director Project Common Services
Chairman

February 1988
Chief Executive
General Director France

Engineering Director Transportation Systems Director Construction Director
Tunnel
Terminal Isle of Grain
Administrati on/Finance Director Commercial Director Project Services Director Quality Assurance Director Human Relations & External Relations Director
Engineering Group
Transportati on Systems Group
Tunnel Terminal
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Fitting Out Phase

December 1989
Internal Audit Director Quality Assurance Director Chairman Chief Executive
December 1989:
Unified management structure
Commecial Director
Technical Advisor to TML Board
Finance Director
Construction Managing Director
Legal Director
Administration Director
Transportation & Engineering Man Director Transportation Systems & Engineering Group Transport System Design Rolling Stock Design Rolling Stock Procurement Transport Systems Contracts Commisioning Transport System Procurement
UK Director Construction
France Director Construction
Construction Group UK Building / Civil Design Tunnels Precast Factory M&E Supervision
Construction Group France Building / Civil Design Tunnels Precast Factory M&E Supervision
Devolving civil responsibilities to Construction Groups Operations grouped under Construction Managing Director
Disbanding Engineering Directorate
Introduction of Technical Advisor to Board

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Fitting Out Phase

Finance Director Internal Audit Director Quality Assurance Director Commecial Director Technical Advisor to TML Board

December 1989
Chairman
Chief Executive
Legal Director
UK Director Construction
France Director Construction
Early 1991:
Coordination problems between Transportation System & Engineering Group and Construction Group Devolvement of all M&E responsibilities to Construction Groups
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Fitting Out Phase

Finance Director Internal Audit Director Quality Assurance Director Commecial Director Technical Advisor to TML Board

December 1989
Chairman
Chief Executive
Legal Director

UK Director Construction France Director Construction
26
Commissioning Phase
Chairman

March 1993
Chief Executive
Executive Director
March 1993:
Internal Audit Director
Quality Assurance Director
Commecial Director
Finance Director
Managing Director Operations
Head of Legal Affairs
Corporate & External Affairs Director
Commercial Director: Dispute Resolution
Commercial Director: Transport Systems
Commissioning Director
Fixed Equipment Central Director
Rolling Stock Director
UK Operations Director
French Operations Director
All operational aspects subordinated to Managing Director Operations Abolishing of Construction, Transportation and Engineering Groups Introduction of Tests On Completion Director and Commercial Directors: Dispute Resolution and Transport Systems
Tests on Completion Director UK Operations UK Operations
French Operations French Operations
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Commissioning Phase
Internal Audit Director Quality Assurance Director Chairman

March 1993
Chief Executive
Executive Director
Commecial Director
Finance Director
Managing Director Operations
Head of Legal Affairs
Corporate & External Affairs Director
Commercial Director: Dispute Resolution
Commercial Director: Transport Systems
Commissioning Director
Fixed Equipment Central Director
Rolling Stock Director
UK Operations Director
French Operations Director
Tests on Completion Director UK Operations UK Operations
French Operations French Operations
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Financial Arrangements
Two different projects

Chunnel the railway connecting France to England Eurostar the only high speed rail for the area
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Financial Arrangements Chunnel

Costs about $80 to drive from London to Paris ($35 gas and $45 tolls) Eurostar is not cheaper, but much faster Flight tickets are more expensive, but faster then the Eurostar
TransManche Link (Cross Channel Link) - TML
5 banks and the 10 construction companies

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10,153 billion 2007 cost of construction Cost overrun around 80%
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Financial Arrangements Eurostar
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Projected budget - 3,5 billion 1996 TML raised only 250 million 1987 extra 800 million (US stock crash) 1989 - 1,2 billion lawsuit by TML against Eurotunnel 1989 change on door cost 35 million Until 1994 Eurotunnel raised 6,8 billion and planned extra 800 million Full project cost around 10,153 billion
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34

1995 Suspend interest payments (1,5 million a day) 1996 fire causes more loss 1997 debt restructure, 8,7 billion generates loss of equity of Eurotunnel 1999 feasibility study proved that the project was still not profitable
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Eurostar investment - 15,6 million Loss in 2003 - 1,33 billion Loss in 2004 - 570 million
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Any Questions left?

Serdecznie dzikujemy M Muchas Gracias Muito Obrigado
Thank you very much for your attention

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References
1. 2. 3. 4.
``THE CHANNEL FIXED LINK : LE PROJET DU SICLE`` - Graham M. Winch, November 1998 http://www.wikipedia.org http://www.itc.nl/~ingeokri/newsletter/summer98/newpage1.html The channel tunnel Lieutenant Coloned, Leslie Allen Veditz, USA Air forece
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Case Study - Questions

1. In what ways did factors from the external environments influence the client, and shape the establishment and behavior of the project coalition?
France and Britain have been in need of affordable means of transportation since the 18th century, but politics have always been on the way of the Eurotunnel. It is not possible to talk about his case and not talk about change management. The entire project was full of surprises like the US stock market crash in 87 got the company $1,5 billion over the night; investor pressure for a fixed price in order to reduce their risk; ICG interferences (the safety issue regarding the door and the reduction of the maximum speed of the freight trains to 130km/h); hitting bad ground during excavation generated difficulties between the managers (external help was used to conciliate the parts).
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2. Describe governance of the project coalition. In your opinion, how appropriate was the choice of the three different incentive structures in motivating TML and its supply chain?
55 years of concession, no regulation of the fares charged and a commitment not to support any other link with public funds or guarantees for the life of the concession were the way that the Franco-English government found to promote the channel tunnel project. They had to draw the attention from independent investors, and it worked, TML decided to undertake the project even though the project had to be entirely financed with private funds without any government guarantees.
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3. Conduct a stakeholder analysis of who benefited from the fixed links construction.
Governments UK & France: The Channel Tunnel promotes the trading
connection between the countries and improves living conditions by cheaper and faster transport for both sides. The construction as well the tunnel operation improves employment in the respective regions. regional economy
Citizens of Europe: Better living conditions, Employment, Improved

Logistic Companies: Promoted trading connection Channel Operators: Business interest TML & Contractors: Business interest
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4. How and why did the organization design of TML change over the life cycle of the project.
1988: The initial nationally based twin structure of TML evolutionary decentralized into five Directorates as soon as the project went on site. 1989: After completion of the tunneling phase a unified management structure appeared. Operations responsibilities were grouped under Construction Managing Director. Disbanding Engineering Directorate and devolving civil responsibilities to Construction Groups. Due to difficulties within UK senior management a technical advisor to TML board was introduced. 1991: Cultural problems between office and site arose. Transportation System & Engineering Group was responsible for design of mechanical and electrical installations while M&E departments within Construction Groups were responsible for supervision. This led to coordination problems and devolvement of all M&E responsibilities to Construction Groups. 1992: With beginning of the commissioning stage Construction and Transportation Systems & Engineering Groups were abolished and operational aspects were subordinate to a single Director of Operations.
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1. Historical Context 2. Engineering 3. Organizational Transitions 4. Financial Developments 5. Case Study Answers
5. What lessons can be learned from this account for the management of future large infrastructure projects?
Try to avoid the large international construction project, if the involved countries are
without a common state interest. In this kind project, politic elements will be the most important critical reason, which will prevent or terminate the project, even in one country. Must have sufficient government support, if it is possible, government should be involved in the project as one of shareholders. Furthermore, must keep a close communication with
government.
Before starting the project, all shareholders should have a common interest and detailed
understanding about the project.

Must have a long term plan (long term project), aborative R & D, advance design and an
effective organization structure, in order to avoid changes and reduce loss during implementing
project.
Coordinate the partners, subcontractors and investors. And build up a effective communication system Risk, change management Eliminate unnecessary changes
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6. On what basis can the project be considered a success? As we know, the Eurotunnel was constructed in order to have a cheaper and faster transport connection between UK and France and finally improve the living standards of European people. For such a great advantage of it, the project can be considered as a success.
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7. On what basis can the project be considered a failure? The project can be considered a failure if we take into consideration the following aspects: it lost 6 months revenues due to delay in opening; its service were disrupted by technical problems; this had an impact on the market and damaged customers confidence; it encouraged the ferries to compete vigorously and prices fell well below expectations.
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Case Study The Channel Tunnel

Mingyi Su Elvin Bayramov Christoph J. Szczecina Henrique A. Lima de Faria

Managing Change - Prof. Dr. Josef Mittmann

May 26th, 2008

5. Case Study Answers

Managing Change - Channel Tunnel Case Study

Albert Mathieu put forward a cross-Channel tunnel proposal.

A railway tunnel by Watkin, the chairman of the South Eastern Railway

5. Case Study Answers

Watkin became `Channel Tunnel` Company

Christoph, Elvin, Henrique, Mingyi

Managing Change - Channel Tunnel Case Study

1914 -18 WW I January 1974

5. Case Study Answers

The Treaty of Canterbury was signed allowing the project to proceed.

June 1988 December 1988

First tunnelling commenced in France. UK TBM commenced operation.

Christoph, Elvin, Henrique, Mingyi

Managing Change - Channel Tunnel Case Study

December 1990 May 1994

November 1996 November 2007

Christoph, Elvin, Henrique, Mingyi

Managing Change - Channel Tunnel Case Study

Attempts and Proposals

5. Case Study Answers

The Beumont English boring machine

Christoph, Elvin, Henrique, Mingyi

Managing Change - Channel Tunnel Case Study

Attempts and Proposals

5. Case Study Answers

Christoph, Elvin, Henrique, Mingyi

Managing Change - Channel Tunnel Case Study

5. Case Study Answers

Christoph, Elvin, Henrique, Mingyi

Managing Change - Channel Tunnel Case Study

5. Case Study Answers

Christoph, Elvin, Henrique, Mingyi

Managing Change - Channel Tunnel Case Study

5. Case Study Answers

Christoph, Elvin, Henrique, Mingyi

Managing Change - Channel Tunnel Case Study

5. Case Study Answers

Christoph, Elvin, Henrique, Mingyi

Managing Change - Channel Tunnel Case Study

Channel Tunnel/France-Manche: Double rail tunnel , Cost: $5.5 Billion

5. Case Study Answers

Christoph, Elvin, Henrique, Mingyi

Managing Change - Channel Tunnel Case Study

5. Case Study Answers

Eurobridge: a bridge for motorway and a Railtunnel. Cost $11.5 Billion

Christoph, Elvin, Henrique, Mingyi

Managing Change - Channel Tunnel Case Study

5. Case Study Answers

7.6-metre (25ft) diameter rail tunnels

4.8-metre (16ft) diameter service tunnel

Managing Change - Channel Tunnel Case Study

5. Case Study Answers

Christoph, Elvin, Henrique, Mingyi

Managing Change - Channel Tunnel Case Study

Railway design and rolling stock

5. Case Study Answers

Christoph, Elvin, Henrique, Mingyi

Managing Change - Channel Tunnel Case Study

5. Case Study Answers