channel tunnel project management case study

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The Constructor

Channel tunnel: construction of the world’s longest underwater tunnel.

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The Channel Tunnel, also known as Eurotunnel or Chunnel, is the world's longest underwater railway tunnel built to connect the United Kingdom with Europe via France. Traveling through the tunnel is possible either by ordinary rail coach or the passengers' own vehicles, which are loaded onto special railcars.

The Chunnel project consists of two main transportation tunnels of 7.6 m diameter spaced at a distance of 30 m, and one service tunnel of 4.8 m diameter. The main running tunnels and service tunnel are connected with 3.3 m diameter passages for functional and safety reasons in the transverse direction at an interval of 375 m throughout the tunnel.

Besides, ducts with a diameter of 2 m were constructed between the main tunnels at every 250 m span. These ducts act as air pressure relief ducts to dissipate the air pressure in front of the train, thereby diminishing the aerodynamic drag on the moving train. The total length of the Channel Tunnel is 50 km, out of which 38 km is located under the seabed.

In addition, two large underground crossover chambers were constructed at a distance of 27 km and 45 km along the tunnel length. These chambers allow the trains to easily switch between the tracks running in the tunnels, for example, during maintenance works being carried out in a particular tunnel section.

1. Geology of the Channel Tunnel

The following points describe the geology of the site of the Channel Tunnel:

• The Channel Tunnel was constructed on Dover strait, which includes the anticline folds.
• The seabed of 38 km comprises the chalk rock and clay. The thickness of the chalk bed and clay is given as: (a) Upper Chalk: 90 m, soft white chalk with flints. (b) Middle chalk: 70 m, hard white chalk with little or no flints. (c) Lower chalk: 68 m, combination of white, grey, and yellow chalk was present. (d) Clayey layer: 15 m, calcareous clay, and mudstone were present.
• The compressive strength of chalk was around 50 MPa, whereas, in clays, it was only around 5 MPa. Therefore, the chalk marl was considered an ideal medium for tunneling.
• The Channel Tunnel was excavated in the lower region of chalk, which had sufficient compressive strength to act as a supporting medium.
• Before the construction, around 120 marine and 70 land boreholes were drilled along the tunnel alignment level. Around 4000 line-km of marine geophysical survey was conducted.
• Chalk marl was mostly classified as blocky. Rock-quality designation (RQD) values of chalk marl were reported around 90%, which was deemed to be fit for construction. The Quality-index for chalk marl was in the fair to good category.

2. Tunnel Construction

To construct a 50 km long tunnel at a depth of 50 m below the sea was a challenging task. It tested the imagination and skills of the top minds in the British and French construction industry. The construction works for the Channel Tunnel started in 1987 and most of the tunneling work was finished by 1991. The various machinery and advanced technologies used in the tunneling of the Channel Tunnel are discussed below:

• The construction of terminal stations at either ends of the Channel Tunnel was a gigantic construction project on its own.
• To construct two main tunnels and one service tunnel of 50 km length between the terminals, 11 massive Tunnel Boring Machines (TBM) were used on 12 separate working faces of the tunnel.
• Out of which, six numbers of open-mode full-face TBMs were used. Cast-iron and concrete segments were used as a lining material during tunnel construction using TBM.
• The New Austrian Tunneling Method (NATM) was used for making castle hill tunnels, portals, shafts, and pumping stations.
• Road-headers were used as an excavation tool for large chambers.
• Hand excavation tools, the cast-iron segmental lining of cross passages, piston relief ducts, pumping stations, and ancillary structures were used to construct the tunnel.
• The two main tunnels and one service tunnel ran into two vast undersea chambers that were 160 m long, 11 m high, and 18 m wide. The construction of these crossover chambers tested the nerves and skills of the finest engineers in the world.

2.1 Probing

The service tunnels act as pilot tunnels for the main running tunnel drives. Extensive probing was carried out ahead of the tunnel face to locate areas of potential high-water ingress.

Additional downward vertical probing was regularly carried out in the invert, at the rear of the TBM. Probing on the UK side accounted for 7% of the TBM’s downtime, with almost the full width of the Channel Tunnel being probed. Sideways probing was also carried out from the service tunnels to the crown area of both the running tunnels before starting the drive of running tunnels.

The frequency of such side probes depended on the potential problems. Probing was conducted at closer spacing if found that the ground conditions are deteriorating or when there was a possibility of increased water ingress adjacent to the service tunnels. During probing, normal cored and packer permeability tests were conducted to gather information on rock quality and likely water ingress.

2.2 Underground Technologies Used in the Construction of the Channel Tunnel

For just 1 km stretch of land, the project demanded four different methods of tunneling. It was just a reflection of the challenges that the engineers had to face while construction. The following underground technologies were used in the construction of the channel tunnel:

• The New Austrian Tunneling Method : This method was used for the construction of crossovers chambers.  
• Tunnel Boring Machines: A total of 11 TBMs were used to construct the Channel Tunnel.
• Cut and Cover Construction Method: This method was used for excavating the area and building the tunnel out of reinforced concrete boxes for making the route through the geologically challenging castle hill.
• Top-Down Construction Method: This method was used where space was limited. It was used to construct the tunnel and terminal's roof at the end of the Channel Tunnel.

2.3 Tunnel Boring Machines Specifications

The following points describe the specifications of TBMs used in the tunneling of the Channel Tunnel:

• The TBMs were about 250 m long and had a circular boring face.
• TBM was backed up by an ingenious collection of rams, lining erectors, conveyors, and handling cranes.
• The TBM machines were working on a relatively simple principle, i.e., the soil was excavated by the rotating circular cutting head, and the four hydraulic rams provided the pressure to move forward.
• Further, the excavated soils were sent to a conveyor belt connected to the TBM. The conveyor belt carried the spoil along the constructed part of the tunnel and dumped it into the articulated vehicles waiting to take it to the terminal for disposal.
• The length of the circular cutting head was about 12 m. A control center with closed-circuit television and laser guidance system was used to track the cutting head movement. 
• The back of the TBM had four main rams. By pushing the rams against the completed concrete lining, the cutting head was forced forward to apply pressure, allowing the head's circular action to excavate spoil.

2.4 Concrete Lining Segments 

Most of the parts comprised 380 mm thick concrete lining , but this varied according to the ground conditions of the site. The following points describe the specifications of concrete lining segments used in the Channel Tunnel:

• In the tunnels running in the UK side, 1.5 m long lining ring was formed of eight lining segments plus a key lining segment. Whereas on the French side, six 1.4 to 1.6 m wide lining segments plus a key lining segment were used.
• Concrete lining segments were cast outside the tunnel and delivered to the machine on wagons. More than 700,000 segments were cast and different linings were used for varying ground conditions. Due to this, the segments could weigh anything from 0.75 to 9 tons.
• On the French side, 250,000 segments were cast at a hill situated directly above the entrance portal.
• On the UK side, things were not that easy. There was barely enough room to hold a concrete mixer at the base of the Shakespeare cliff. Therefore, engineers had to search for a suitable location for casting the remaining 450,000 segments on the UK side. The correct spot was found eventually at the Isle of Grain in Kent, between the River Medway and the Thames Estuary.
• A very efficient concrete segment casting production line was set up. These concrete segments were taken up to a distance of 100 km by rail, from the Isle of Grain to Shakespeare Cliff and stockpiled on the site. 

3. UK Side Tunnel Drive 

In the UK, the main site was at the Shakespeare Cliff, from where, the six British tunneling machines started their journeys. Three were sent seaward to meet their French equivalents in the tunnel and three landward to break through 8 km away from the terminal site. The following points describe the various technologies and methods used for tunnel drive in the UK side:

• At the cliff location, two existing tunnels were used for lowering TBMs.
• A 110 m vertical shaft was constructed from the top of the cliff down to these existing tunnels to provide access to the machines and the workforce.
• A large space was created for the first TBM by widening the old stretch of the existing tunnel towards the sea end.
• This started the journey for the first TBM towards France in November 1987, backed up by the site rail transportation system and the tunnel linings.
• High-speed gantry cranes were used to transport the concrete lining segments onto the delivery train wagons for shipping to the working face of TBM.
• While supporting the roof with rock bolts and shotcrete, significant space was created under the cliff site using a road header. This gave enough room to assemble the other five tunneling machines.
• In addition, one of the world's longest sheet piling wall was constructed in the sea around the lower site of the cliff. This was done to create a platform for the storage of millions of cubic meters of soil arising from the excavation of the tunnel.
• Later on, this platform was also used by batching plants and workshops. Although many objections were raised at the formation of the platform by certain environmental groups, but it did allow an easy way of getting rid of the excavated soil.

4. French Side Tunnel Drive

Six open-mode face TBMs were used from the French side to construct the tunnel. The following points describe the various technologies and methods used for tunnel drive from the French side:

• On the French side, no convenient working site was available to aid the construction activities.
• Therefore, a 75 m deep shaft with a 55 m diameter was formed to lower the tunnel boring machines into the position to start their excavation journeys towards the UK side.
• On the UK side, the 12 m long cutting heads of each machine had to be dismantled to allow installation inside the tunnels. Whereas the French shaft was large enough to accommodate them as a whole, lowered into place by cranes with a carrying capacity of 400 tons.
• The engineers on the French side developed a method for disposing of the excavated soil. At the shaft base, the excavated soil was mixed with water so that the mixture could easily be pumped away from the construction site to a dam for storage.
• The cutting head of the TBMs was versatile. In poor and fractured ground conditions, the closed mode of cutting head was used to avoid the water ingress into the tunnel. Whereas in good ground conditions, the open-mode was used to enhance the speed of construction.  
• The linings segments used in the French side were either cast-iron or bolted concrete segments. The cast-iron segments were used where the ground was particularly poor and where a good seal was required. The bolted concrete segments were used in good ground conditions. 

5. Construction of Crossover Chambers

Two mammoth crossover chambers were constructed out of the chalk rock with the help of service tunnel. The main purpose of these chambers was to allow the trains to change their direction.

The chambers were constructed in such a way that they formed three separate tunnel sections making it easy to conduct maintenance works without shutting the complete tunnel. The various approaches used to construct the UK and French side of the crossover chamber is discussed below.

5.1 UK Side Crossover Chamber

The following points describe the UK side crossover chamber used for constructing the Channel Tunnel:

• The UK side crossover chamber was 7 km away from the coast.
• The crossover chamber work involved the construction of the largest undersea cavern in soft rock anywhere in the world.
• The construction of the crossover chamber began first in June 1989.
• The crossover chamber is of immense size with a length, width, and height of 160 m, 18 m, and 11 m, respectively.
• The first sequence in the construction of the chamber was the diversion of the middle service tunnel from its path so that the horizontal and transverse boring could be allowed from it. 
• Therefore, the service tunnel was constructed way before the two main running tunnels. Once the service tunnel reached the site of the chamber, the chamber was excavated by making adits from the service tunnel. 
• The NATM was used to construct the gigantic chamber. Generally, the NATM is used to construct the underground structures in hard rock. However, the first application of NATM in soft rock was accomplished by constructing the crossover chamber in the UK.

5.2 French Side Crossover Chamber

The following points describe the French side of the crossover chamber used for making Channel Tunnel:

• The French side crossover chamber was 12 km away from the coast.
• In the planning phase, it was decided to construct the biggest open arch of 35 m below the sea bed. Later on, this task was considered very risky.
• More fractured and fissured rocks were encountered on the French side than on the British side. Therefore, the threat of collapse or excessive settlement of the open roof was too great.
• After that, the engineers decided to construct the chamber in smaller sections. Firstly, the main tunnels were constructed up to the chamber location, as opposed to the UK side method. Further, a series of small tunnels were constructed from the main tunnel to form a roof for the arch of the chamber.
• The arch was formed by filling the sections of these small tunnels with concrete. Thus, enough area was created beneath the arch roof to allow the excavation of the chamber.
• Although this technique was very effective, it increased the overall construction time because the chamber was constructed once both the main running tunnels had reached the chamber site, which was 12 km away from the French sea coast.

An average of 350 trains per day run inside the Channel tunnel. Approximately, one train for every 3 minutes in peak time.

The Channel is located at 50 m below the sea's surface water level.

The Channel Tunnel is 50 km long.

It takes only 35 minutes to reach London from Paris via the Channel Tunnel.

The construction of the Channel Tunnel was completed in six years.

The Channel Tunnel, also known as Euro Tunnel, is the world's longest underwater tunnel.

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The Chunnel Project

Developed by Siri Lassen-Urdahl

The project, The Channel Tunnel, is one of the largest privately financed engineering project in history. The tunnel is thirty-two miles in length and stretches beneath the English Channel from Cheriton, Kent in England to the town of Sangatte in the Nord Pas-de-Calais region of France. Each terminal of the tunnel is linked in both national highway and rail systems. The Chunnel consists of three tunnels: Two main rail tunnels; Northbound and Southbound, and the service tunnel which is smaller in diameter, and located between the two main units. The service tunnel allowing access for maintenance, evacuation in case emergency and supply for air. Compared to the 12 hours trip between London and Paris by rail and ferry, the tunnel takes 3 1/2 hours for rail passengers. This high-speed rail system is providing Europe with one of the finest transport network in the world. [1]

During the project phases, the project came across some unexpected problems, resulting in cost and schedule delays. The completed project had an overrun of US$9.9 billion. [2] Some of these problems will be further discussed later on. Overall, the whole construction project was generally accomplished successfully. In addition, The Chunnel can be viewed as modern-day engineering.

The purpose of The Chunnel project was to create a fixed transportation link between the two countries to improve European trade environment and provide an alternative high speed transportation method. This required a cooperation between the two national governments, bankers underwriting the funding for the project, numerous of contractors, and several regulatory agencies from both countries. In 1985, a request for proposals (RFP) from the British and French governments resulted in the project, The Chunnel being awarded to the winning bidder, Channel Tunnel Group/FranceManche (CTG/FM), which later became Eurotunnel. The group were established among construction companies and bankers from both countries, which was led by to co-chairmen; Lord Pennock on the British side and André Bénard on the French. Their winning bid price was established at US$5.5 billion, all privately funded. [2] The Eurotunnel required a proper client-contractor relationship to build the tunnel to perform a proper execution of the project. Therefore, in order to improve management and planning, a new management group was established, Transmanche Link (TML). TML was an Anglo-French joint venture between Translink in Britain, and GIE Transmanche Construction in France, these two groups in turn joint ventures of the construction companies originally brought together in CTG/FM. [1]

The case study covers Project Management Knowledge Areas, within four project phases: inception, development, implementation and closeout. The inception phase includes defining at a high level what the system will do and estimate the cost and schedule. It defines the risks to the project and determine the overall project feasibility. During the development phase starts the overall planning, feasibility studies, financing and the conceptual design. This phase is transforming the information to a machine-executable form. The implementation phase refers to the final process of moving the solutions from development status to production accomplishment. This includes detailed designing, construction, installation, testing and commissioning. The last phase, the closeout phase involves all of the actions and activities that have been accomplished through all project management processes up to the officially complete product.

The project took 8 years to complete, with a cost of nearly US$15 billion, and involved 700,000 shareholders, 220 international lending banks, the British and French governments, many construction companies, and numerous sub-suppliers involved. The Chunnel represents one of the largest privately funded projects ever undertaken. Although the Chunnel project was well completed, it was late and far over the budget. [2]

Large construction projects, such as the Chunnel project, are well-known for cost and schedule overruns. Managing of a project of this magnitude is very complex and includes a significant amount of efforts. The complexity of this project would cause significant planning, logistical and communication challenges. However, the project become a success, despite all the changes and challenges.

In fact, the many changes in scope due to requirement omissions or changes of methodology can be viewed in many ways depending on how it impacts cost, time, quality, and potential risk. It is here where the overall communication and planning seemed to have a breakdown, as issues were not resolved in a timely manner, resulting in significant cost and time impact variances.

One of the challenges was to deal with two international governments, the differences in political aspects, their different attitude and underlying goals from locals. The communication was limited between the French and British. The two teams were put on each end of the tunnel and work towards the middle, which resulted in insufficient and delayed communication until the end of the project. Given that the two teams had a common goal, it was considered not necessary to communicate and interchange information on a detailed level because the plan was to work and meet the other team in the middle. Insufficient communication during the development and design process in the early stages caused different opinions later on. Although the status reports were helpful and consistent every three months, it did not highlight or accentuate improved communication within the team. It was a report for the financial world just to appease them and allow the project to continue. [2]

The Channel tunnel Treaty refused the project to be financed by government funds and the teams agreed to establish a health and safety commission, the Intergovernmental Commision (IGC), which had scope control and authority to demand changes, but no ability to implement the changes due to lack of funding. [2] The agreement to create IGC, and give both the IGC and the banks excessive control contributed challenges in the finances area.

There was another lack of control in the Chunnel project as there was no direct contract between the banks and contractors of the project. This project involved 220 international banks, which caused a significant communication challenge. To deal with different banks, the challenges for example was the question about who will be the superior to one another in ranks for guarantees and the differences in payment terms. The numerous of contractors who were involved in the Chunnel project and the coordination of these contractors reached out to be difficult. Their internal interfaces, their differences in plans, progress and cooperation between them would be a challenge. [2] Another major reason why the project had so many problems was the large amount of investors and the fact that most of the banks and construction companies were more interested in making money on the construction itself, and not on the operation. [2]

During the Chunnel Project, several regulatory agencies were involved. Regulatory bodies with different requirements, doubling of set of bodies from England and France, overlapping and interfacing rules caused complications during the development and engineering phases. Some of the challenges were to try to satisfy the regulatory bodies from the two countries, design challenges from different contractors, as well as numerous technical and planning interfaces.

In general, the complicated underground construction was a challenge by itself, with specific requirements related to geotechnical issues, precautions against potential leakages, ventilation and internal transport. The general safety (HSE) had to be given special attention as well. [1]

Overlapping of the design and construction was another challenge during the project. Trying fast tracking, overlapping the design and construction to expect a shortening in delivery time it is risky even under the best circumstances. The risk was even greater when using techniques containing new and unproven technology. The construction and engineering faced requirements for a new use of technology and significant modifications along the development phase. [2]

The construction and engineering faced requirements for a new use of technology and significant modifications along the development phase. Added to this is the fact that underground construction is arguably the most risky of all construction, as changes of conditions such as design and technology, if proven, stand as first class evidence entitling a contractor, subcontractor, or vendor to require compensation both in terms of actual costs plus extended overhead. [2]

The Inception Phase

The overall project, including the Chunnel Project, Eurotunnel and Transmanche Link was covered by three construction segments, a Cost Plus Fix Fee (CPFF), lump sum, and Cost Plus Percentage of Cost (CPPC) contract. The construction contract based on lump sum payments (cost-plus fixed fee contract), included construction of the tunnel itself, including electrical and mechanical work completed (Mechanical Completion Level). The cost-plus fixed fee contract gave benefits to the Chunnel project. The contract only allowed payments of the costs that were established in this phase. The firm-fixed price contract made sure that the money that was selected for electrical, mechanical or construction did not exceed the chosen dollar amount. [3]

In addition purchasing work for acquiring major equipment and rolling stock were covered by a cost-plus-percentage-fee (reimbursable-cost-plus) contract. The problems with cash-flow were mainly due to the impacts from the large delays in the schedule. The fixed-price model settled in the contract should give a continuous funding throughout the project, but as the payment milestones were not reached according the schedule funding did not occur on time to cover for the costs. If the project had remained on schedule, the payment terms in the fixed-price model would have both covered for the costs when they occurred, and provide a good return on the investment, in accordance what was expected by the stakeholders. [3]

The Development phase

The development phase of the Chunnel project was an important phase because of its scope and complexity. It contained detailed planning, communication agreements and government approvals. Unfortunately, many of the difficulties the project went through were due to failures in the development phase. Two different companies, on two different sides of the project, speaking two different languages, led by two different managing directors, did the planning. [2] Perhaps the main struggle during this phase was the banks and their early involvement in the project. They were excessively involved in the renegotiation of contracts. The banks were also given too much control resulting in immediate improvement, but created complications in the Chunnel Project later. The banks assisted with keeping the risks to a minimum, which worked strongly. The project management was hopeful, for planning of the technical equipment and the understanding of the projects complexity; the team did a reasonable job. However, the research and detailed planning was insufficient. The development phase of the project had been made so problematic; the resulting cost and schedule overruns were unavoidable. [3]

The Implementation phase

The implementation phase, of the Chunnel project, started in the fourth quarter of 1887, by awarding of a Concession Contract of US$5.5 billion in response to the bid from the Channel Tunnel Group/FranceManche (CTG/FM). It was terminated in December 15, 1994, with project being handed over to the stakeholders in fully operational condition. [2] During the implementation phase, the Chunnel Project faced several major setbacks. The Transmanche Link requested the use of fixed-price contract of the CTG/FM in order to try to control the costs. Request of the fixed-priced contract resulted to be one of the best moves by the TML, which benefited for the total project. This type of contract gave the power to the buyers, and gave the seller the unknown costs and the possible risks. For the subcontractors work, the fixed-price contracts helped to keep the costs overruns under control within the budget for the project. The contract assisted the CTG/FM to not require spending extra money, as the burden would lie with the subcontracting companies. [3]

The Closeout phase

The Chunnel Project during the closeout phase showed no significant improvements with regard to management, even with the best attempt at managing the critical complications during the project did not have any impact on the overall outcome. [2] The return of the investment at the end did not materialize based on the fixed-price contracts that were used at the beginning of the Chunnel Project. The reasons were mostly the effects from the delays in the schedule. The problems with cash-flow were mainly due to impacts from the large delays in the schedule. The fixed-price model settled in the contract should give a continuous funding throughout the project, but as the payment milestones were not reached according the schedule the funding did not occur on time to cover for the costs. If the project had remained on schedule, the payment terms in the fixed-price model would have both covered for the costs when they occurred, and provided a good return on the investment, in accordance what was expected by the stakeholders. However, the overall quality of the delivered project during the closeout phase, was impressive. The completion of the final tunnel was an engineering feat that was extremely complex and there were difficulties to succeed. Even with these obstacles, the tunnel was carried out as designed. The project operated successfully through an effective quality and safety program. [3]

Implication

The report consist of analysis and evaluation four project management concepts: Project Selection, Project Delivery System, Project Planning, and Project Control. These various key factors in project lifecycle will help breakdown the project into criticized subjects.

Project Selection

The project faced many problems during the process. The financial model that estimated a cost of US$5.5 billion dollar was a flawed model, whereas the total cost was US$14.9 billion dollars. [2] A correct financial model is essential in the project selection phase, and it is important that enough time and research has been used to make sure that all circumstances have been considered. Time was also miscalculated in the initial model, where the process took one year longer than estimated. [2] The model used considering project selection had many errors and miscalculations, but in a functional sense it represented a successful project selection. The Chunnel was successfully built and serves its intended purpose. [2]

Project Planning

The best way to view The Chunnel Project is as “either one of the greatest engineering and political feats of the twentieth century, or a project that never should have happened.”. [2] This is because the tunnel will be seen as a success in terms of functionality and convenience by the public, but when we look at how the project was managed, it will be seen as a total failure, mostly due to poor planning in the inception phase. Detailed plans were incomplete and key details such as air conditioning were left out. During the inception phase it is essential to take the time needed to provide a thorough plan with schedules and budgets so that there will be as few flaws during the development phase as possible. [2]

Project Delivery System

Initially, The Chunnel Project was an economic disaster, having a badly defined scope which resulted in a huge cost overrun. [2] The governments involved, France and England, were not prepared for this project and the management personnel involved did not have sufficient knowledge or experience required to construct the tunnel. At project closeout there were still gaps in the project scope. Many situations were rushed, trying to finish the project earlier rather than analyzing the situations and choose a better solution. [2] The lack of communication between the governments, both having different priorities eventually resulted in a breakdown of the management structure. It was not known before project completion, which was a year late, that 15 000 workers were employed in the project, which also highlight the poor control from management. [2] Regardless of project management, it can be argued that quality management was a success. When focusing on the constructional engineering, safety program and efficient use of new technology materials, using IGC ensuring quality of the tunnel, few would argue with an impressive connection between England and France, which remains the longest underwater tunnel in the world. [2]

Project Control

The underdeveloped project scope and lack of control impacted the projects’ budget, time schedule and total project life cycle. Having a multiple contract and not a detailed one, made it hard to respond to and implement changes. The status report delivered to the financial investors was a good way to keep stakeholders informed and to keep track of the project, however it could have contributed more if it were completed more frequently than every third month, this is far too long time intervals for controlling a such complicated project. They should have completed the definition and scope of the project before starting to build The Chunnel to achieve more control and easier reach its financial goals, and to give a better chance to complete at the scheduled time. [2]

‘The Chunnel Project’ was constructed to create a connection between England and France by using an underground tunnel. This is one of the largest engineering projects completed, and required the contribution of two national governments. [2] The Chunnel Project started with the expectations of a huge success, the quality of the design was incredible, cost expectation and delivery time was clearly stated. However, as the project developed, one problem led to another problem, which resulted in delays and cost overruns lastly resulting in an economic disaster. The scope of the Chunnel project should have been better defined because of time of preparations was not an issue. During the inception phase of the project, there were opportunities to define a better project scope. Almost every challenges that occurred during the project was due to lack of project communications. The main factors in this case, there were two different nations and a multi-cultural approach to the project. For future projects, proper scope of the project and an establishment of communications should be established. Despite of these factors, the tunnel was successful built and today serves in intended services. As it is written earlier, The Chunnel can be viewed as "either one of the greatest engineering and political feats of the twentieth cenfury, or, a project that never should have happened. However, irrespective of the opinion taken, it is clear that the Europeans are proud of their Chunnel". [2]

Annotated bibliography

Leslie A. Veditz, (1993). The Channel Tunnel - A Case Study: This case study focuses on the history of the Channel Tunnel project. The article starts with the beginning of the Chunnel, with the earliest suggestion of a fixed link between the two nations in the early 1800s, until the beginning of the current project. The case also describes the ongoing political pressure in France and Britain, and the how the pressure had an impact on the project. The paper also includes the competition between the proposals for the fixed link, the selection of the winning bidder who would build and operate the project, the project financial planning and engineering design, as well as the challenges due to technology and finance.

Mr. Ισαάκ Δ Arnold (2015). Harvard Business Review Case Analysis: Euro Chunnel Project: Euro Chunnel Project: This case study will present an analysis of the defined phases, this related to the use of project procurement procedures. These defined management areas are inception, development, implementation and close-out phases where the paper is presenting how the procurement procedures were implemented and applied. Furthermore, the possibilities for improvements

Anbari, F., Giammalvo, P., Jaffe, P., Letavec, C. & Merchant, R. (2005). The Chunnel Project, Project Management Institute: This article is a case study which examine the Project Management Knowledge Areas (Project Management Institute’ 2004) within four project phases: inception, development, implementation, and closeout. In each of the phases describes and discusses the paper the activities, achievement and the challenges in performance within the processes of Initiating, Planning, Executing, Monitoring, Controlling, and Closing. The case study evaluates the process within the selected Project Management Knowledge Areas at the end of each phase. Then the results are shown and evaluated, resulting a valuation of the management of the project, which includes the project’s strengths, opportunities for improvements and lessons learned.

• ↑ 1.0 1.1 1.2 Leslie A. Veditz. (1993), “The Channel Tunnel – A Case Study”
• ↑ 2.00 2.01 2.02 2.03 2.04 2.05 2.06 2.07 2.08 2.09 2.10 2.11 2.12 2.13 2.14 2.15 2.16 2.17 2.18 2.19 2.20 2.21 2.22 2.23 Anbari, F., Giammalvo, P., Jaffe, P., Letavec, C. & Merchant, R. (2005), The Chunnel Project, Project Management Institute
• ↑ 3.0 3.1 3.2 3.3 3.4 Mr. Ισαάκ Δ Arnold. (2015), Harvard Business Review Case Analysis: Euro Chunnel Project

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The Channel Tunnel

Project highlights.

The Channel Tunnel is a roughly 50 km rail tunnel linking Folkestone, Kent, in England with Coquelles, Pas-de-Calais, near Calais in northern France. The tunnel extends beneath the English Channel at the Strait of Dover. It is the only fixed link between the island of Great Britain and the European mainland. It allows the city of London to be directly connected by train to Paris, Lille, Brussels, Amsterdam and Cologne – thanks to the Eurostar and Thalys train lines.

The Channel Tunnel was officially opened in 1994. Train operation consists of shuttle trains conveying cars and coaches and other trains conveying heavy goods vehicles between the two terminals. Other trains using Getlink infrastructure are operated by the respective owners.

Getlink, previously Groupe Eurotunnel (until 2017), is a public company that manages and operates the Channel Tunnel, including the Eurotunnel Shuttlevehicle services, and earns revenue on other trains through the tunnel (DB Schenker freight and Eurostar passenger trains). The company was formed in 1986, with the objective of financing, building and operating a tunnel between the two countries initially for a period of 55 years, then extended to 99 years until 2086. Getlink’s head office is located in Paris.

Originally estimated at GBP4.8 billion in 1985 (about USD6.2 billion, 1985 prices), the Channel Tunnel’s total cost was much higher than expected, reaching GBP9.5 billion by the end of its construction (about USD14.5 billion in 1994). Project costs were vastly underestimated and an overrun of 80% was incurred. This was due to delays related to “construction cost, equipment delivery and testing problems”,    and to changes to the design of the project during construction to increase safety. The project was financed entirely by private sector capital, including five banks who were part of the TransManche Link consortium. Financing originated partly from investment by shareholders and partly from GBP8 billion of debt (about USD12.2 billion, 1994 prices).

This draft report was written on the basis of a review of literature sources, as well as an interview with a representative from Getlink Group.

Project timeline

Development

History of the project .

The idea of a tunnel under the English Channel has a long history, with the first proposal dating back to 1802, and several others following over subsequent years. The idea was discussed several times during the 20th century but only in the 1960s did dialogue between France and the UK result in a call for proposals, leading to the drafting of a convention in 1972, which gave the Channel Tunnel Group the mandate to start the technical and financial feasibility studies and the preparation of the construction works. Government-funded tunnel boring works started in 1974 but were cancelled in 1975 by the newly elected UK Government for financial reasons, including the oil crisis. The project resumed in 1981 with the formation of a joint working group to study technical and economic aspects of a fixed link. After four years of studies and discussions, the procurement procedure was initiated in 1985 under British Prime Minister Margaret Thatcher and French President François Mitterrand for the construction of the link as we know it today.

Policy and planning setting

The Channel Tunnel was approved with the signature of the Treaty of Canterbury (signed by the French and UK Governments on 12 February 1986), which authorised the construction of the Fixed Link as a concession without any public financing or guarantees. The Treaty of Canterbury also established the creation of the Channel Tunnel Intergovernmental Commission (IGC) as the body in charge of supervising the construction and operation of the Fixed Link on behalf of the French and UK Governments, as well as the general application of the Treaty. The IGC is the body in charge of adopting and implementing rules for the Channel Tunnel. Safety aspects of the project are managed under the remit of the Channel Tunnel Safety Authority (CTSA).

Another key document to the Channel Tunnel’s inception is the Concession Agreement (signed 14 March 1986), which establishes the rights and roles ofthe concessionaires, the two governments and the IGC. It stipulates that concessionaires of the Channel Tunnel “have the right and the obligation to carry out the development, financing, construction and operation during the Concession Period” (i.e. for 55 years from 1986 – extended by 10 years in 1994, and extended again in 1997 to 99 years until 2086).

This is done “at their own risk, without recourse to government funds or to government guarantees of a financial or commercial nature and regardless of whatever hazards may be encountered.” Furthermore, “the Concessionaires [are] free to determine their tariffs and commercial policy and the type of service to be offered. In particular, laws relating to control of prices and tariffs shall not apply to the prices and tariffs of the Fixed Link.”

The third key document is the Railways Usage Contract, which determines Eurotunnel’s source of income. According to Michael Grant, at the time Eurotunnel’s Corporate Finance Manager, “Under this Contract, Eurotunnel is required to make half of the tunnel capacity available to the British, French and Belgian railways for their Eurostar and freight trains.

In return, the railways pay a fixed charge and tolls based on the volume of traffic passing through the tunnel together with a contribution to Eurotunnel’s operating costs. There is a minimum charge level, a mechanism to ensure a guaranteed level of cash flow to Eurotunnel over the first 12 years of operation.” The Railways Usage Contract is of fundamental importance to the Channel Tunnel, together with the Treaty of Canterbury and the Concession Agreement, in giving confidence to investors that the Channel Tunnel will remain operational.

The project contractual structure and associated governance structure are illustrated in Figure 1.

Figure 1: Overview of the Channel Tunnel contractual scheme (Source: authors own figure, based ondata from Michael Grant 11 )

Challenges and opportunities addressed by the project

The project aimed to provide a fixed (rail) link for the transport of freight and passengers (including by high-speed train, ‘Train à Grande Vitesse’ or TGV), complementing ferry and air travel between the UK and France, and by extension the rest of the EU. One of the objectives of the project was to provide a transport option that was faster than the ferry and more affordable than air travel. The project had strong economic and political implications with regard to trade and tourism, in particular the strengthening of ties between the UK and France, and by extension between the UK and the rest of the EU.

Alternative options considered

In 1985, a call for proposals received several submissions of varying designs. Four were shortlisted:

• Euroroute, a hybrid solution of a bridge-tunnel- bridge (GBP4.8 billion – about USD6.2 billion, 1985 prices)
• Europont, a suspended bridge (GBP5 billion – about USD6.5 billion)
• Transmanche Express, four bored tunnels allowing both railway and road traffic (GBP2.5 billion – about USD3.3 billion)
• Eurotunnel, a rail shuttle service for road vehicles with provision for through trains, using three tunnels (GBP2.6 billion – about USD3.4 billion).

The Eurotunnel consortium, consisting of the Channel Tunnel Group (CTG) and France-Manche (FM), was awarded the project in January 1986. Of all project options, Eurotunnel was selected in part because it offered the highest level of safety thanks to the three-tunnel design that includes two tunnels for train transit and a tunnel in the middle for maintenance and safety evacuation (see Figure 2).

In 1994, the first Eurostar train link service was created between Paris, Lille and London, then Brussels was added in 1997 and Amsterdam in 2018, via the high-speed Eurostar train. In 2015, the Eurostar line was extended from London to Avignon, Lyon and Marseille. The Eurostar also connects London and the Savoie region of France during winter.

Figure 2: Cross section of the Channel Tunnel, showing the three-tunnel design. Source: Getlink Group.

Long-term benefits 

The Channel Tunnel project has driven transport infrastructure improvements of the road and rail networks in France and the UK that connect to, and are associated with, the tunnel. Of all designs proposed, Eurotunnel also offered: the least environmental disruption, due to the tunnel being dug 40 m under the seabed; less health risks from pollution (compared to an automobile ‘drive-through’ tunnel, initially preferred by the UK Government); lower vulnerability to environmental disasters; and better protection against the risk of terrorism.

In terms of trade, the trade value of the Channel Tunnel has been estimated as equivalent to 26% of total UK–EU trade as of 2016. The speed and efficiency of transport offered by the Channel Tunnel has significantly increased trade interconnectivity between the UK and the EU, with the benefit of consumers able to access products cheaply.

Procuring and financing

Procurement process.

The project was procured using an open form of tendering. The tendering procedure formally took place after discussions between governments and with private sector actors following the release of the joint statement of the two governments in October 1984, up until the final decision a year later. The concession was awarded to the Eurotunnel consortium, which owns, financed and manages the Channel Tunnel and which makes revenue with access charges levied on railway undertakings. The Eurotunnel consortium consists of CTG and FM.

The Channel Tunnel proposal from Eurotunnel was conceived as a combination of financing and construction functions. The design-and-build contract was awarded by Eurotunnel to the bi-national organisation TransManche Link (TML), a consortium made up of five banks – arranging Eurotunnel Credit – and 10 construction companies: five French companies (TRANSMANCHE) and five UK companies (TRANSLINK).

The passenger trains are run by Eurostar, which is owned by public companies:

• London and Continental Railways (LCR) – 40%

LCR’s holding was transferred to the Treasury in June 2014, and the UK Government’s shares – equalling 40% – were sold in 2015 to a consortium comprising the Caisse des Depot et Placement du Quebec (CDPQ) and Hermes Infrastructure.

Financial structure 

The Treaty of Canterbury and the Concession Agreement established that the project would be entirely financed, delivered and operated by the private sector. This approach was particularly advocated for by the UK Government at the time to spare public expenditure on the project. To enable total private financing of the project, the Channel Tunnel was procured as a concessional public-private partnership (PPP). The concessionaire would design, build, own, operate and transfer the project over an initial duration of 55 years, extended to 99 years throughout the many renegotiations over the debt restructuring. The initial structure was a project finance structure (equity/debt) with equity provided by five banks and 10 construction companies.

Eurotunnel had forecast that the Channel Tunnel would lead to construction costs of GBP2.8 billion (about USD3.6 billion in 1985) and total costs of GBP4.8 billion (about USD6.2 billion) between 1986 and the last year of construction, 1993. Eurotunnel planned to raise GBP6 billion (about USD7.8 billion) in order to cover the costs and possible overruns. This amount included GBP1 billion (about USD1.3 billion) in equity and GBP5 billion (about USD6.5 billion) in debt. However, construction costs were more than double their initial predictions. This was partly due to unforeseen technical complications related to the complexity of the three-tunnel design, but also modifications to the design as a result of safety concerns expressed by the IGC during construction.

Moreover, the expected revenue from passenger and freight transport through the Channel Tunnel was vastly overestimated from the outset. Fierce competition from existing ferry operations resulted in a lower market share for the tunnel and Eurotunnel needing to reduce tariffs.

In its first year of operation (1994–95), the company reported a loss of GBP925 million (about USD1.4 billion) because of disappointing revenue from passengers and freight, together with heavy interest charges on its GBP8 billion (about USD12.2 billion in 1994) of debt. In light of its financial difficulties, Eurotunnel was at serious risk and sought to refinance the project with a scheme based on debt-for-equity restructuring legally enforced using French legal protection with a ‘procédure de sauvegarde’ (safeguard procedure), effectively pausing all debt repayment processes for six months and enabling Eurotunnel to bank in some of its operating revenue to finance the restructuring effort. The refinancing plan was completed in 2007 with Eurotunnel turning a net profit of EUR1 million (about USD1.4 million) for the first time in that year.

When asked the question of what made the Channel Tunnel model withstand economic difficulties, a representative from the Getlink Group interviewed for the purpose of this case study replied that the Treaty of Canterbury and Concession Agreement, but especially the Railways Usage Contract, were fundamentally important in giving confidence to investors that a minimum volume of traffic would continue to run despite financial difficulties.

Currency risk and credit ratings

Due to the cross-border nature of the project between two countries with different currencies (the French franc and, since 2002, the Euro in France, and the pound sterling in the UK), Eurotunnel has structured its debt and established its operations in both currencies to mitigate currency fluctuations. For instance, passenger traffic tends to be more UK-led whereas freight traffic is more EU-led, such that the corresponding currencies are used. This has been an advantage to Getlink: if a change in currency value occurs (such as the drop in the pound during Brexit), Getlink can, for instance, change its focus when tendering for contracting by preferring one currency or the other.

In order to guard against customer credit risk, Getlink Group applies UK and Eurozone credit policy “requiring that every new customer undergo a credit check before being able to benefit from the Group’s standard credit terms”. Furthermore, “The Group’s credit risk exposure to account customers is managed by the continuous monitoring of their financial position and of their outstanding debt in relation to the credit limits and payment terms granted to them.”

Political and operational coordination 

The IGC is made up of an even split of French and UK Government representatives who regularly meet and oversee the Channel Tunnel’s operation. Regulatory discrepancy is minimised in the case of the Channel Tunnel due to the application by both countries of relevant EU legislation (even after Brexit). For instance, the IGC is responsible for the implementation of safety provisions from EU legislation (Directive 2004/49/EC on rail safety).

Rules and procedures are harmonised as part of implementing common EU legislation and under the regulatory role of the IGC. Border procedures are, for instance, set by EU standards for border controls for EU Member States and third countries to the EU. After Brexit, the UK will introduce import controls on EU goods at the border after the transition period ends on 31 December 2020. Immigration control will continue to be performed on the way from France to the UK due to the UK not being in the Schengen area.

Being composed of key government officials, the IGC is directly involved in the process of coordinating the transition following Brexit. In the case of a no-deal Brexit at the end of the transition period, Getlink Group remarks that Eurotunnel and Eurostar “will

be dependent on the decisions of the governments and regulatory authorities regarding the licences, and operating agreements and procedures needed to ensure the smooth running of the rail service” including “border control measures, cross-border employment contracts for Eurostar personnel, operating and safety licences that are valid in the EU, as well as the regulatory and operational framework of the European Union.” France has now formally asked the European Commission if it may negotiate with the UK a new agreement supplementing the Treaty   of Canterbury fixing rules governing the tunnel. At the time of this writing, an agreement between the UK and the EU has not yet been found to resolve the situation.

Harmonisation of rules, procedures, and technical standards 

Technical standards for the Channel Tunnel relate mostly to safety and interoperability. In the EU, interoperability is ensured by the Safety in Railway Tunnels Technical Specifications for Interoperability (TSI), however the safety standards applied to the Channel Tunnel by the IGC do not comply with the EU TSIs. According to the Getlink Group, the reason for this is that the Channel Tunnel should obey the specific standards approved by the CTSA in accord with the tunnel’s particular design, such as its length (being one of the longest tunnels in the world). For example, shorter tunnels may more easily prescribe that trains which have an incident must run out of the tunnel and be repaired outside the tunnel. Due to the length of the Channel Tunnel, an internal firefighting system was built in four places in the tunnel, going beyond standard TSIs.

Arbitration issues

Arbitration has occurred twice in the history of the Channel Tunnel. The first arbitration case occurred during project development and related to the rising costs of construction, which led TML to launch a claim to the International Chamber of Commerce (ICC) in Brussels, as foreseen by the construction contract, for additional construction costs of GBP1.5 billion (about USD2.0 billion, 1985 prices). As TML was threatening to suspend work unless its claim was met, Eurotunnel applied to the English court for an interim injunction to restrain TML from carrying its threat. However, this injunction was rejected, as all the parties had agreed to go to arbitration abroad in their contract.

The second time was in 2003, when Eurotunnel launched an arbitration request related to “the Governments’ failure to protect the Fixed Link from multiple incursions” of migrants leading to delays, damage and expenses. A second issue of the same arbitration relates to the “Governments’ granting (or failing to prevent the grant) of large subsidies to SeaFrance, thereby allowing it to remain in business, to renew its fleet and to compete with the Fixed Link on an unfair basis.” Arbitration between Eurotunnel, the UK and French Governments was handled by the Permanent Court of Arbitration (PCA). The PCA eventually ruled in favour of Eurotunnel, judging that the UK and French Governments should be held liable.

Accountability

The management of the Channel Tunnel is held accountable by means of transparent reporting of related activities. According to Eurotunnel’s Network Statement, the fixed link is also subjected to a performance monitoring and improvement regime which involves measurement of delays and reporting of causes, as well as reporting of incidents to Eurotunnel and to the European Railway Agency, all in accordance with relevant EU legislation.

This monitoring is conducted by railway undertakings and in collaboration with Eurotunnel.

• Political will – The Channel Tunnel could be realised thanks to strong political will from both the French and UK Governments wishing to build a fixed link between the UK and the rest of Europe.
• Financial issues – The project has faced several financial difficulties during construction and operation that resulted in several restructures and significant losses for the private However, the financial situation was able to be resolved thanks to several restructuring and refinancing plans, the participation of many individual shareholders, and the Channel Tunnel’s operating model based on the terms of the Railways Usage Contract. In hindsight it is possible that, had design been completed and agreed upon with the IGC before construction started, the project may have avoided some of its financial difficulties. This demonstrates the importance of proper planning and design to the successful delivery of infrastructure.
• Policy, planning setting and governance – The project benefits from a solid legal basis enshrined in the Treaty of Canterbury and the Concession Agreement, as well as the binational steer of the IGC overseeing the good implementation of the Treaty and maintenance of the project’s operations in spite of Brexit. This policy and planning setting, involving both countries on an equal footing, has provided certainty to the development and management of the project and is exemplary in terms of project governance.
• Long-term benefits – The Channel Tunnel is one of the longest tunnels in the world for freight and passenger transport. Channel Tunnel passenger trains allow for fast travel between the city centres of several EU capitals and cities at a low environmental footprint compared to private cars, airplanes and ferries. The choice of a rail tunnel is also safer in terms of the lower risk of accident, but also faster than the ferry, and more frequent than flights. Accounting for an estimated 26% of France–UK trade, the Channel Tunnel is a significant contributor to both French and UK consumer markets.

Revue d’histoire des chemins de fer

Accueil Numéros 52 Articles The Channel Tunnel: A case study ...

The Channel Tunnel: A case study of financing and governance after 25 and 125 years

This paper juxtaposes the Channel Tunnel project of the 1880s with the Eurotunnel project 100 years later to reveal issues affecting the financing and governance of large, complex infrastructure projects. The paper concludes by attempting to derive lessons affecting the operation of public-private partnerships and to measure the Tunnel’s success.

Cet article juxtapose le projet du tunnel sous la Manche des années 1880 avec le projet d’Eurotunnel 100 ans plus tard pour mettre en lumière les problèmes qui affectent le financement et la gouvernance des grands projets d’infrastructure complexes. Le document conclut en tentant de tirer des leçons sur le fonctionnement des partenariats public-privé et de mesurer le succès du tunnel.

Entrées d’index

Mots-clés : , keywords: , texte intégral.

• 1 There are many accounts of this project. From the British side see the bibliography in Terry Gourvi (...)
• 2 On Watkin see David Hodgkins, (2002), The Second Railway King. The Life and Times of Sir Edward Wat (...)

1 In Britain and France, 125 years ago, a number of promoters were still touting their ‘grand projet’, a tunnel under the sea between Britain and France. The story is as follows. In the third quarter of the nineteenth century a spirit of free trade had emerged, and in 1868 Napoleon III had lent his support to an Anglo-French consortium led by Michel Chevalier and Lord Richard Grosvenor. In 1872 the British and French governments confirmed that they had no objection in principle to the building of a tunnel, and by 1876 a joint commission had set out the basic ground-rules for a treaty. On the French side a tunnel company, the Société du chemin de fer sous-marin entre la France et l’Angleterre, was established in 1875. Supported by the Rothschilds in France and the Nord railway, it was granted a concession for construction and began work on a pilot tunnel which extended to about 1,840 metres by 1883. 1 Not for the last time, the British were more cautious, however. Further progress depended on the French company reaching an agreement with a British counterpart, and although a Channel Tunnel Co had been created in 1872, this failed to attract support from either the British railway companies or the Rothschilds in England. Consequently, there was an impasse. It was at this stage that the Liberal politician Sir Edward Watkin, Chairman of the South Eastern Railway and other companies, entered the fray. In 1880 the South Eastern obtained powers to bore pilot tunnels at a site favourable to the railway, and construction work began in the following year. The works were then handed over to a separate concern, the Submarine Continental Railway Company. By 1883 it had driven three tunnels through the chalk, including a 7-foot tunnel some 2,026 yards (1,852 metres) in length. 2 All this effort, came to nothing however, and it is clear that financing and governance difficulties lay at the heart of the matter. These problems were also present a century later when the successful Tunnel, which will soon celebrate 25 years of operation, was promoted. There was a further connection between the two projects, because a small portion of Watkin’s tunnel was incorporated into the service tunnel that exists today.

3 Ibid., Gourvish, The Official History , p. 5-6, 388.

2 The opportunity thus presents itself to look at the financing and governance of major infrastructure projects through the experience of these two tunnels, a hundred years apart. In both cases financing was affected by the reluctance of the private sector to commit to a large project with a long gestation period and uncertain outcomes. Like many buccaneering capitalists, Sir Edward Watkin was no philanthropist when it came to bearing financial risk. With his dreams for a Manchester-Paris Railroad, had he been born in the Brexit era he would certainly have been a Remainer. But, anticipating discussions which were repeated in relation to the 1960s tunnel promotion and then Eurotunnel 20 years later, he asserted that the tunnel could not be built by the private sector unless the governments provided some kind of financial guarantee. By the time tunnelling was under way in the early 1880s his view had hardened, and in 1881 he tried to persuade Joseph Chamberlain, the President of the Board of Trade, that the tunnel should be a public investment. However, the British government revealed that it was unwilling either to take the project on or to underwrite it financially. 3 Personal and political considerations worked against the tunnel. Watkin’s entrepreneurial style embraced corner-cutting, which irritated both government ministers and civil servants.

• 4 Wolseley, 10 December 1881, in Correspondence with reference to the Proposed Construction of a Chan (...)

5 Correspondence , p. xiv-xvi.

3 In 1882 the Board of Trade discovered that the South Eastern had exceeded its powers in tunnelling beyond the low-water mark without permission, and work was halted pending a decision by the High Court. Watkin’s abrasive approach also alienated the other promoters and the merchant bankers, and prevented an agreement with other parties, notably the other interested railway company, the London Chatham & Dover Railway. Then the window of opportunity closed when military opposition surfaced. The threat to Britain from a continental invasion was an old anxiety, but its resurgence lay behind the Government’s decision to halt the tunnelling work. In 1881‑2 an inter-departmental committee (Board of Trade, War Office, Admiralty) examined the threat to Britain’s security, but also heard evidence emphasising the commercial advantages that a tunnel would bring. But the most impassioned evidence was provided by Lt.-General Sir Garnet Wolseley, the Adjutant-General, who contended that a tunnel would destroy all the strategic advantages that the channel provided for Britain as a naval power. ‘Surely’, he wrote, ‘John Bull will not endanger his birth-right, his liberty, his property… simply in order that men and women may cross to and fro between Britain and France without running the risk of sea-sickness’. 4 With the inter-departmental committee unable to make a firm decision one way or the other, the matter passed to a special ‘scientific’ committee appointed by the War Office. Led by Major-General Sir Archibald Alison, it was asked to report on the military safeguards that would be needed to render the tunnel useless to an enemy power. Unsurprisingly, this committee found in May 1882 that neither Watkin’s project, nor its rival scheme, complied with the suggested requirements. 5 In the process, it became clear that the number of influential tunnel opponents exceeded the number of supporters, the former including the Chancellor of the Exchequer and the Governor of the Bank of England. The public debate culminated in the appointment of a joint parliamentary select committee in 1883, chaired by Lord Lansdowne. Lansdowne was in fact a tunnel supporter, but he was unable to carry his committee with him, and it eventually voted 6‑4 to withhold parliamentary approval of the scheme. The intensification of Anglo-German rivalry then made success less likely.

• 6 Sartiaux A. (1907). Le Tunnel sous-marin entre La France et l’Angleterre , Lille, Imp. L. Danel; Wil (...)

4 In the period to 1895 several more tunnel bills were introduced in parliament, but all failed to surmount military objections. By the early twentieth century the development of electric traction offered a more satisfactory solution to the problem of transit in a long tunnel. Despite British equivocation the French remained enthusiastic about the prospects, none more so than Albert Sartiaux, General Manager of the Nord Railway, who drew up a tunnel scheme in 1904‑6. This attempted to counter military objections by incorporating a viaduct close to the tunnel mouth, which could be disabled in the event of a war. However, attempts to progress the scheme on the British side, in 1907 and 1914, proved unsuccessful. Military and naval objections, together with insular sentiment, remained paramount. 6

• 7 On the French side, we should note the equally important contributions of Pierre Mauroy, Jean Aurou (...)

8 Ibid., Gourvish, The Official History , p. 224ff.

5 The successful tunnel in the 1980s was mercifully free of such barriers to progress, and indeed, the role of individuals such as the British Transport Minister, Nicholas Ridley, the Eurotunnel Co-chairman, Alastair Morton and others was instrumental in driving the project forward to success in spite of numerous financial and political obstacles. 7 The only time politico-military considerations intruded in the passage of the 1980s scheme came during the Falklands War, when the sinking of HMS Sheffield in May 1982 provided Thatcher’s Cabinet with a reason for calling a halt to the consideration of a positive report from an Anglo-French study group, which had argued for a twin-bore tunnel. In fact, the circumstances were rather more complicated. The British welcomed French support during the Falklands War, and were keen to maintain a co-operative stance during the tunnel negotiations. But consideration of the project was shelved at this stage because British ministers were attracted by a road/rail alternative called EuroRoute and championed by a Thatcher favourite, Ian MacGregor. There were other complications, too. The French had surprised the British by changing their minds on the funding issue. Having assured their co-partners in September 1981 that their share of the capital investment would come from the public sector, they were now stating that the French promoters would have to obtain capital from the market. There were many parallels with the situation in the 1880s, but fortunately, the impasse of 1982 proved temporary. 8

• 9 Department of the Environment, ‘Channel Tunnel: Experience of Project Abandoned January 1975. Notes (...)

6 The engagement of the public and private sectors was a theme which ran through the promotion of the eventually successful project. This inevitably brought financing and governance issues to the fore, and they remained as important as the challenge of construction and new technology for the promoters. The first point I wish to make here is the need to place the Tunnel securely within its historical context. Eurotunnel was an amazing ‘mega-project’, but its structure clearly owed much to what had gone before, not only in Watkin’s time, but subsequently in the 1960s, when a feasible tunnel was developed and costed, and during the more turbulent conditions of 1970‑5, when the first serious attempt to build the tunnel was abandoned. It was during this period that the complexities of public-private partnership were first rehearsed properly; and it was instructive that civil servants called up the files on the period to inform them when progressing the project a decade later. 9

7 Second, we should take into account the nature of social overhead capital investment from the 19 th  century. The large sums required, the long gestation period before revenue streams, and often uncertain returns, have historically deterred the private sector from participating in many major transport investments without some form of public sector support. Of course, paradoxically, the UK was one of the few countries where the relative abundance of private capital in the 19 th century enabled the private sector to bear the risk of railway promotion and construction. In most countries, the government was heavily involved as promoter, constructor, or guarantor. After the world wars, of course, the UK private sector found it harder to fund social infrastructure, and the government played a correspondingly greater role. More recently, constraints on the public purse have led to private sector involvement, not just in railways, but in the entire arena of social capital. In relation to the several tunnel projects, we should note that all of them required some kind of government support.

10 Peter Kemp, interviewed in 2002.

• 11 Ibid. Notes 2 and 4; Gourvish, The Official History , p. 170; Bonnaud L. (1994). Le Tunnel sous la M (...)
• 12 The 1960s tunnel project has been described in many places. For my analysis see ibid., Gourvish, Th (...)

8 The negotiations stretching over decades provided something of a learning curve for the eventual scheme in the 1980s. In the 1930s, after Watkin’s time, the Channel Tunnel Company advocated private construction, presumably for public operation, but the scheme was ruled out by the government. Only two schemes, the initial 1960s scheme orchestrated by the Americans, Alfred and Frank Davidson, and Thatcher’s tunnel, if we may call it that, proposed private involvement for both the construction and operating phases. But the 1960s scheme was affected by problems in raising equity finance, and some kind of government involvement became inevitable, with the French exhibiting a preference for ‘économie mixte’ institutions. This scheme was essentially a government-dominated PPP, with the public contribution to funding amounting to a substantial 90 per cent, and private project management for what was to become a public facility. Indeed, the civil servants reviewing its failure concluded that private capital should have been excluded altogether. As it was, the project was unusually complex, with the involvement of three countries (including Belgium), and for the project management, two sets of public and private institutions. One British civil servant called this the ‘tartan quilt of quadripartite negotiations’, 10 which required considerable patience and skill on all sides. Undoubtedly, the experience helped when shaping the 1980s/90s arrangements, when a major weakness, the lack of a project champion, was rectified. As for the abandonment, this came when there was a conflict of interest between the two sides, and the cost of the British public sector rail link escalated substantially. ‘In the end’, the officials concluded, ‘we came unstuck because the shared interest of most of those concerned with an adequate review of the rail link in the UK, and in a complete assessment of the changes in the world economic situation, conflicted with the interest of some of the shareholders… we came unstuck because we had inadvertently built in a major financial incentive to two parties to withdraw in circumstances which arose accidentally’. 11 Throughout the tunnel’s long gestation period, then, there was a lively debate about the pros and cons of public and private participation. In the early 1970s the British government’s difficulties in reaching an accommodation with the private sector project managers, and especially Rio Tinto, in relation to the sharing of risk and rewards undoubtedly created negative attitudes towards PPPs for some time. For its part the private sector found dealing with Whitehall equally frustrating. |The difficulty in getting the two governments to pledge unequivocal support for the project tried the patience of business executives used to a more straightforward environment. 12

• 13 On these issues see Allen Sykes (Willis Faber), ‘Reducing Neglected Risks on Giant Projects’, Arthu (...)

14 Ibid., Gourvish, The Official History , p. 247-363.

9 The Channel Tunnel of 1986‑94 is often quoted in textbooks about project management, and the financing and governance of large infrastructure projects. Developing such projects brings numerous frustrations. The long gestation period, asset specificity and high risk involved encourages public sector investment. However, when Governments find it impossible to raise the money out of their own resources, they inevitably turn to the private sector for a solution. The common reaction of private interests, whether banks or contractors, is to seek to maximise their advantage in risk-reward bargaining, particularly since profit forecasts are frequently uncertain (despite the protestations of consultants). Thus, demands are made to guarantee the companies against the risks of cancellation, to severely limit the extent of equity financing, and to secure government guarantee of the loan capital. But if governments provide guarantees, whether financial or political (i.e. compensation against cancellation), they clearly take a share in the project’s risks, and therefore make it difficult for them to escape from the constraints of public sector funding. 13 It was a testimony to the determination of the parties in the mid-1980s that this circularity was broken, although the decision to insist on private sector funding for the Tunnel, and the project’s continuing and deep-seated financial difficulties, drew the two governments into the arena, inviting further questions about the efficacy of public-private ventures. To describe the progress of the Tunnel after 1984 is to provide a litany of bankers’ doubts, central bank interventions, concerns about contracting consortia, shareholder worries, and brinksmanship which surfaced when Eurotunnel was faced with security and environmental issues. 14

• 15 Here defined as arrangements between the government or a public body and the private sector whereby (...)
• 16 See, for example, Rob Ball et al., (2001). ‘Private Finance initiative – a good deal for the public (...)

10 The current research project has contributed some very useful studies of PPP-type solutions, notably from Roger Vickerman and Julien Dehornoy, in the London conference. The literature on PPPs 15 is growing, and among the contributors there are both advocates and critics. 16 I am certainly not an expert in this field, but should like to offer some comments on this popular phenomenon from the early 1990s, drawing on the experience of the Channel Tunnel project in detail. First, it is clear that the results of such transactions have been mixed, though there is some evidence that in recent years some of the more problematic areas in the public-private interface have been addressed more satisfactorily. In seeking to improve on the inadequate contracts of the past, we might ask the following questions: Have risks and returns been shared equitably? Can costs be constrained (are transaction costs higher in a PPP)? Can the final cost be predicted with more certainty? Can complexity and transaction costs be minimised? Finally, in the context of Brexit, how important are European institutions, including the European Investment Bank, in driving through ambitious projects?

• 17 Merrow E W. (2011). Industrial Megaprojects: Concepts, Strategies and Practices for Success , John W (...)
• 18 A recent study of railway PPPs suggested the use of surety bonds to deter withdrawal, or linking pr (...)

19 Details in ibid., Gourvish, The Official History , p. 289.

11 I would argue, first of all, that the contracting process should be improved, in order to optimise beneficial outcomes for all parties. In this context, the American commentator, Ed Merrow, has some illuminating things to offer in his recent book. He refers to seven ‘danger signs’ which indicate when things may be going wrong in contracting relationships, including impatience in concluding a deal, such that a contract is signed before all the details have actually been addressed. With the Channel Tunnel, the negotiation with the contractors took several months, but the promoters were keen to get everything signed up before the 1987 election, in case Margaret Thatcher lost that election, and a Labour government had second thoughts about the project. In fact, of course, Thatcher won. 17 Second, an obvious point, perhaps, but there should be a fairer division of risks and rewards between the public and private sectors, for example, with higher exit costs for private sector partners. The role of the various stakeholders should also be made unambiguous. Behaviour described by the terms ‘hostage-taking’ and ‘lock-in’ should be avoided. 18 We should note that the Tunnel contracts were incentive-based only for the tunnelling, with most of the riskier elements, such as electrical systems, rolling stock, etc., arranged on a cost-plus basis. This clearly favoured the contractors. 19 Three final points. The number of parties to a contract should be limited as far as possible, to improve operational aspects; when the private sector requires incentives, such as subsidies, these should be calculated with more sophistication; and ‘additionality’ should be encouraged by governments, so that PPPs are additional to the ‘normal’ public sector rate of transport investment, rather than being a substitute for public sector investment.

• 20 Merrow’s data for 52 infrastructure projects found an average cost over-run of 88% and time over-ru (...)
• 21 For gloomy verdicts on the Tunnel see the criticisms of Ricard Anguera, ‘The Channel Tunnel – an ex (...)

12 Notwithstanding all this, we should note that despite the numerous disputes between promoters and contractors, and despite the several engineering and financing challenges the project presented, the Tunnel project of 1986‑94 was a success. The facility was built, and it also performed quite well in relation to cost and time over-runs. The private sector, whether banks, contractors or concession-holders, were prepared to take on risks, the French were happy with private sector financing, which was the key to British involvement, and although the British emphasised private financing, they were happy to commit some £7 billion in public money to support the tunnel and the HS1 rail link. The project was also, I would argue, a relatively successful example of project management, if not, of course, commercially sensible. Like many such projects, it was late and the budget was exceeded. But the cost over-run of 64 per cent above the 1987 forecast and the time over-run of 17 per cent compared well with many of the large projects analysed by Merrow, and referred to by Bent Flyvbjerg et al. in their study of megaprojects. 20 More disappointing was the financial over-run of some 122 per cent, compared with the forecast of 1987. The Tunnel’s cost-benefit analyses make for sorry reading in the light of actual results, and the profits anticipated by consultants such as Warburgs failed to materialise. However, the financial health of the project would have been much better had it not been constructed during a time of comparatively high inflation, and then operated when inflation was much more modest. In this situation, revenues failed to rise relative to the large burden of debt, prompting Eurotunnel’s series of painful financial reorganisations. 21 However, even here, as with the 2008 financial crash, there were winners and losers, and those institutions that organised the debt were not necessarily the ones who had to pick up the bill. The project remains an exciting piece of transport infrastructure which will continue to produce economic and social benefits for years to come, whatever the political complexion of Europe.

1 There are many accounts of this project. From the British side see the bibliography in Terry Gourvish, (1986), The Official History of Britain and the Channel Tunnel , London, Routledge, p.386 n1, and especially Donald Hunt, (1994), The Tunnel: The Story of the Channel Tunnel 1802-1994 , Images Pub., and Keith Wilson, (1994), Channel Tunnel Visions, 1850-1945: Dreams and Nightmares, Hambledon Continuum.

2 On Watkin see David Hodgkins, (2002), The Second Railway King. The Life and Times of Sir Edward Watkin (1819-1901) , Merton Priory Press.

4 Wolseley, 10 December 1881, in Correspondence with reference to the Proposed Construction of a Channel Tunnel , British Parl. Papers, 1882, liii, C.3358.

6 Sartiaux A. (1907). Le Tunnel sous-marin entre La France et l’Angleterre , Lille, Imp. L. Danel; Wilson K. (1994). Channel Tunnel Visions , Rio Grande, Ohio, Hambledon Press, p.73-88.

7 On the French side, we should note the equally important contributions of Pierre Mauroy, Jean Auroux, Guy Braibant, André Bénard, and Patrick Ponsolle.

9 Department of the Environment, ‘Channel Tunnel: Experience of Project Abandoned January 1975. Notes for our Successors’, August 1975, The (British) National Archives, Kew, MT144/534.

11 Ibid. Notes 2 and 4; Gourvish, The Official History , p. 170; Bonnaud L. (1994). Le Tunnel sous la Manche : deux siècles de passions , Paris, Hachette, p.182.

12 The 1960s tunnel project has been described in many places. For my analysis see ibid., Gourvish, The Official History , p. 26-170. For Rio Tinto, see ibid., p. 98-102, 133, and 141.

13 On these issues see Allen Sykes (Willis Faber), ‘Reducing Neglected Risks on Giant Projects’, Arthur D. Little Symposium on ‘New Dimensions of Project Management’, Boston, April 1981.

15 Here defined as arrangements between the government or a public body and the private sector whereby a public service is delivered in co-operation. There are several forms, but they usually involve risk-sharing and finance.

16 See, for example, Rob Ball et al., (2001). ‘Private Finance initiative – a good deal for the public purse or a drain on future generations?’, Policy & Politics , no 29:1, p. 95-108; Jay H. Walder and Thomas L. Amenta, (2003). ‘Financing New Infrastructures: Public/Private Partnerships and Private Finance Initiatives’, in Richard E. Hanley, Moving People, Goods and Information in the 21 st Century , Routledge, p.79-98; Darrin Grimsey and Mervyn K. Lewis, (2007), Public Private Partnerships: The Worldwide Revolution in Infrastructure Provision and Project Finance , Edward Elgar ; Stephen Perl, Public Private Partnerships: Costs, Benefits and Efficiencies , Nova Science Publishers Inc; Jean Shaoul et al., (2012), ‘The fantasy world of private finance for transport via public private partnerships’, OECD ITF discussion paper 2012-06.

17 Merrow E W. (2011). Industrial Megaprojects: Concepts, Strategies and Practices for Success , John Wiley & Sons, and note Merrow EW et al. (1988). Understanding the Outcomes of Megaprojects: a Quantitative Analysis of Very Large Civil Projects , Rand Corp.; Ibid., Gourvish, The Official History , p. 289ff.

18 A recent study of railway PPPs suggested the use of surety bonds to deter withdrawal, or linking projects together so that if a company wants to withdraw from one contract, it has to give up others. See Gunnar A, Hulten S. (2009). ‘Prospects and pitfalls of Public-Private Partnerships in Railway Transportation. Theoretical Issues and Empirical Evidence’, International Journal of Transport Economics , no 36(1), p. 98-117.

20 Merrow’s data for 52 infrastructure projects found an average cost over-run of 88% and time over-run of 17%. Merrow et al., Understanding the Outcomes of Megaprojects , ibid.; and see also Flyvbjerg B, Bruzelius N, Rothengatter W. (2003). Megaprojects and Risk: An Anatomy of Ambition , ibid.; and see also Mott McDonald study for the UK Treasury, on 'Review of Large Public Procurement in the UK', 2002, July, [Online], available at : https://www.parliament.vic.gov.au/images/stories/committees/paec/2010-11_Budget_Estimates/Extra_bits/Mott_McDonald_Flyvberg_Blake_Dawson_Waldron_studies.pdf ; and Flyvbjerg’s B. (2005). 'Policy and Planning for Large Infrastructure Projects: Problems, Causes, Cures', World Bank Policy Research Working Paper, no 3781, December 2005.

21 For gloomy verdicts on the Tunnel see the criticisms of Ricard Anguera, ‘The Channel Tunnel – an ex post economic evaluation’, Transportation Research , Part A (2006), p. 291-315; Myddelton D. (2007). They Meant Well: Government Project Disasters , IEA; and Millward R. (2007). Review of Gourvish, The Official History , in Enterprise and Society , no 8(4), p. 970-2.

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Project Finance pp 163–170 Cite as

Case 13: Channel Tunnel UK

• B Rajesh Kumar 2  
• First Online: 04 May 2022

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Part of the book series: Management for Professionals ((MANAGPROF))

Channel tunnel is also known as the Eurotunnel. The 50 km long channel tunnel link Folkestone Kent in England with Coquelles Pas de Calais in northern France. The tunnel extends beneath the English Channel at the Strait of Dover. The tunnel is the only fixed link which connect the island of Britain with the European mainland. The tunnel connects the city of London by train to Paris, Lille, Brussels, Amsterdam and Cologne through Eurostar and Thalys train lines. The Channel tunnel is composed of three tunnels: two for rail traffic and a central tunnel for services and security. Passengers can travel either by ordinary rail coach or by their own motor vehicles which are loaded on special railcars. The project was financed by a consortium of British and French corporations along with banks. The operating company of the tunnel is called Eurotunnel. Approximately 2.5 million Eurostar passengers travelled through the channel tunnel in year 2020. The project was considered the most expensive construction project ever proposed in UK. By the completion time, the cost for the project reached GBP 9.5 billion. The channel tunnel project was designed as a concessional public private partnership. The project was structured as Design, build, finance, maintain, operate and transfer (DBFMOT) model. The problems for the project was manifold. The project couldn’t attract business on account of high access charges. The interest payment burden on the debt of £6 billion was very high. Low volume of passenger and rail traffic than estimated added to the problem.

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Further Reading

https://www.britannica.com/topic/Channel-Tunnel

http://www.ferryto.co.uk/ports/Folkestone.html

https://www.eurotunnel.com/uk/build/

https://www.getlinkgroup.com/content/uploads/2019/09/110118Eurotunnel-traffic-and-revenue.pdf

https://cdn.gihub.org/umbraco/media/3754/the-channel-tunnel.pdf

Flyvbjerg, B. (2014). What You Should Know About Megaprojects, and Why: An Overview.

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Finnerty, J.D. (2012). Chapter 18 Case Study: The Eurotunnel Project (in: Project Financing – Asset-Based Financial Engineering). John Wiley & Sons, Inc., Hoboken, New Jersey.

Grant, M. (1997). Features: Big Project Financing – Financing Eurotunnel. Japan Railway & Transport Review No. 11, pp. 46–52. East Japan Railway Culture Foundation (EJRCF). Tokyo. Retrieved from https://www.ejrcf.or.jp/jrtr/jrtr11/pdf/f46_gra.pdf

TRANSMANCHE: Bouygues, Dumez, Spie-Batignolles, La Société Auxiliaire d’Entreprises (SAE), La Société Générale d’Entreprises (SGE)

TRANSLINK: Balfour Beatty Construction, Costain UK, Tarmac Construction, Taylor Woodrow Construction, George Wimpey International.

Eurostar.com , Behind the scenes. Available at: https://www.eurostar.com/uk-en/about-eurostar/our-company/behind-the-scenes

Anguera, R. (2006). The Channel Tunnel – An ex post economic evaluation. Retrieved from: https://ideas.repec.org/a/eee/transa/v40y2006i4p291-315.html

Connectivity across borders: Global practices for cross border infrastructure projects, Case study: The Channel Tunnel, Global Infrastructure Hub, https://cdn.gihub.org/umbraco/media/3750/full_report.pdf

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