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Implementing Risk Management at Crossrail

Contents

Introduction.

Sources of Finance.

Consideration of Wider Economic Factors.

Issues Associated with Projects with Long-term Deadlines.

Risk Management Process and Procedure.

Conclusion.

References.

Introduction to Cross Rail Project Analysis

Crossrail Limited is a wholly-owned subsidiary of Transport for London (TfL) that was set up just as a special purpose organization mainly to make and deliver the Crossrail project whose goal is to deliver an outstanding railway that fast-tracks the progress of London. The values of this organization are safety; integrity; respect; inspiration; and collaboration. Crossrail is the largest construction project of Europe to deliver the Elizabeth Line that is a 100 km rail line passing through forty stations vi 42 km of new tunnels under central London. It is a novel superlative and inexpensive railway in London that offers a higher frequency; accessible link; and higher capacity between the west end, Heathrow airport, canary wharf, and the city of London (Milillo et al. 2018). This project is jointly sponsored by TfL (Transport for London), and DfT (Department for Transport). This project has consistently been innovative as a strategic solution to the UK's transport needs. Moreover, it has been classified as a megaproject due to its cost; complexity; and size. It delivered sustained outcomes by adding 10% additional rail capacity for London; by relieving congestion in present train and underground amenities; and by declining trip times across the nation. The structure will expand services for rail users by releasing crowding, confirming faster trips, and offering a wider set of novel direct journey choices, and also enabling exchange between diverse public transportation modes. Moreover, it may have wider social and economic benefits for London, allowing the sustained growth of important economic sectors and places. It plays an important role in fulfilling the present as well as forthcoming transport needs in London and hence securing the forthcoming economic development of the UK and encouraging sustainable development (Worsnop, Miraglia and Davies 2016). This report is going to critically analyze the Cross Rail project in London, UK. Further, it discusses the sources of finance to aid the project; and consideration of wider economic factors. Additionally, it entails the issues associated with long deadline projects. Besides, it explains the risk management procedures and processes.

Sources of Finance

Project finance refers to the procedure of financing a particular economic enterprise that is created by sponsors wherein creditors share their business’ risk and funding is attained mainly for the project. There are numerous methods to secure project finance like loans, investors, funds, private finance, grants, and more (Pinto 2017). The short term finance can be obtained from loans and overdrafts. Contrarily, long-term finance can be procured from the sources like business angels; debentures; venture capital; share capital; issuing shares; retained profits; and so on. It is noteworthy that project finance is a means to fund projects that are usually capital-intensive; large; and complex. It may stem from numerous sources like debt, equity, government grants, and so on. There exists a difference between the terms "funding and "finance". The finance is the term utilized when funds have to be borrowed and finally paid back via a certain form of the debt instrument. Contrarily, the term funding is utilized when the money is accessible to use during the project and it is usually the government funds that do not have to be paid back or examined afterwards (Buck 2017).

There is no doubt that the cross rail project is part private and pat public-funded. It is jointly sponsored by the government via DfT (department for transport), and the Mayor via TfL (Transport for London). The Mayor of the nation; government, and TfL have unitedly established a financing platform to convey the closing stages of this project and open the Elizabeth line to commuters. The funding of this project was amounted to £14.8 bn and was mainly reliant on central government funding that covers approximately one-third of the costs. It is evident that a business rate increment was settled to finance 28 % of the costs, but just 4% of the finance was upraised from utilizing section 106 of CIL (community infrastructure levy) that is the tactic adopted to capture the monetary gains from planning in the United Kingdom (Aubrey 2016). The DfT had recognized grant funds of nearly £ 5 bn for this project, and the GLS (Greater London Authority), and TfL had recognized nearly £ 2 bn that might be made accessible via borrowing against fares (forthcoming revenue income) and by reprioritizing other facets of its capital speculation program (Buck 2017).

The capital cost of the Crossrail project was financed via three means via forthcoming farebox incomes generated by services; national taxpayers via grant offered by DfT; and businesses in the nation via direct contribution to capital costs, a BRS (Business Rate Supplement); and developer contributions. The debt requirement for the Crossrail project may take numerous forms entailing loans from the developmental banks like European Investment Bank; bank debt; and bonds. The current sources of finance for the Crossrail project are tabulated as follows (Crossrail 2020).

Sources of Finance

Amount of finance/ funding (in £)

DfT direct funding

4960 m

BRS (Business Rate Supplement) borrowing and direct contribution

4100 m

NR financing for work on existing network

2300 m

TfL direct funding

1900 m

A loan from DfT to GLA

1300 m

A loan from DfT to TfL

750 m

Sale of surplus land and property

550 m

Developer contributions

300 m

Community infrastructure levy

300 m

DfT additional funding for NR

290 m

City of London corporation committed funding

250 m

NR funding

220 m

TfL additional funding

150 m

DfT additional funding

150 m

Contribution from GLA

100 m

HAL

70 m

Voluntary funding from London businesses

100 m

Consideration of Wider Economic Factors

The economic factors that are common to all projects entail the provision of fuel; financing; generation of revenue; and so on. There is no doubt that the forthcoming economic success of the South East and London is reliant on the strong transport infrastructure. Investment in the public transport infrastructure has a significant influence on the GDP (gross domestic product) of the UK that entails increased tax receipts to the government (Vickerman 2018). The Crossrail project is the major part of the package of investments required to certify London has a transport network satisfactorily strong to fulfil its existing and forthcoming needs. Enhanced public transport is one of the leading requirements for appealing for job prospects and inhabitants, providing and enabling the growth that is forecasted in the London plan. Moreover, this project can also facilitate the renewal of fields around the stations along its route via refining accessibility with smaller journey times, and offering workforce placed near route better access to a superior, more practised labour market with more choice of skilful staff. This ultimately is probable to entice novel private sector expansion and the augmented employment densities neat the stations of Crossrail (Davies et al. 2014). It can be said that the enhanced efficiency caused by collecting economic events with refined commuting and working-time business tourism across London is important to support the United Kingdom’s international relative economic advantage and facilitating the nation's forthcoming expansion as a main global commercial centre. Injunction London, the Elizabeth line develops the influences of a range of previously peripheral and consequently lower value housing places with Central London for the major time. It has a positive effect on the distribution of extensive residential expansion in more reasonable places for house purchasers. Crossrail is also having a momentous influence and role in assisting London to fulfil its housing needs by assisting a noteworthy number of allowed housing units in areas along the Elizabeth line route (Batty 2012).

The Crossrail project plays an essential role in reinforcing and shaping the position of London as a world city economy. It is because it is generating the capability and situations for numerous novel corporate headquarters for the liked of Deutsche bank; Societe Generale; and Facebook. Additionally, the original construction of this project that has been recognized as Europe’s biggest civil engineering project will also be economically momentous in its own right mainly in 2010 economic situations (Dodgson et al. 2015). It is because nearly 14000 individuals were worked on the construction of this project with nearly 1000 net additional jobs being generated to preserve and operate the railway after its completion. Subsequent jobs will be protected in supplying the project during construction and offering facilities to those directly engaged by this company.

The conservative cost-benefit assessment of the transport projects has been an evaluation of transport user welfares mainly travel time and vehicle working cost reserves, misfortune savings, and pollution linked visibly assistances with project costs. The UK's Crossrail project, in early 2000, illustrated the increase in the net worth of projects from adding WEBs (Wider Economic Benefits) that are based on agglomeration. There are mainly four categories of WEBs demonstrated in the nation’s DfT (Department of Transport) guidelines and that entails static agglomeration benefits; move to more productive jobs; labour supply tax impacts; and productivity change in imperfectly competitive markets. Static agglomeration is the approach that mainly is used to measure the result of transport development on the economic scale and density via access to effective density measures for each place (Douglas and O’Keeffe 2016).

The influence of this project on the broader economy is noteworthy. The upsurge in the GDP of the nation resulting from the execution of Crossrail is concentrated on facilitating the expansion of central London employment. It produces greater profits and revenues for the businesses in the UK that convert into greater taxes to the government of the nation.

Issues Associated with Projects with Long-term Deadlines

It is noteworthy the complex projects that last for 10 years or more require changes due to its length. It can be said that the suppositions made at the start of the project are likely to change during the entire life. The variations might take place in the technological aspects; a measure of success; and the scale of the project that ultimately leads to changes linked with confirmation of the project (Eriksson, Larsson and Pesämaa 2017).

The Crossrail Limited organization, a long-deadline project, has had to adjust to changes in the external micro and macro-political and economic environment. This project has been sought by three prime ministers and three mayors of London between the royal assent in 2008 and delivery to the workers in 2018. There is no doubt that large scale projects or programs certainly must have to adjust as they go through the several stages of work. Likewise, for Crossrail, this procedure is regulated using a yearly business planning cycle wherein the shape and size of the business are assessed, confronted, and reorganized for the forthcoming years (Wright, Palczynski, and, ten Have 2017). In the long deadline projects, delays are the biggest issue in construction projects or assignments. Moreover, it can be said that cost overruns and time delays are the main issues linked with long-term complex projects. The delays in the project further can increase the timetable, enhance the costs of the project, and threaten security and quality (Venkatesh and Venkatesan 2019).

There have been numerous delays in the Crossrail project since its initiation that increased the costs also. Recently, it has been delayed until 2020, and the costs £450 million over the estimated budget. It is noteworthy to say that this project of constructing Elizabeth's line will get complete more than three years late and cost overrun by nearly £4 billion more than the original budget. Recent delay is due to the three major reasons named as the ‘impact of COVID-19 on schedules of construction activities; a reviewed supposition regarding the speed of the massive task that complex large central stations can be offered over to TfL; and lower than scheduled efficiency in the final achievement and delivery of the shafts and doorways on the routeway (O’connor 2020). Furthermore, the technology is advancing from time to time, and due to which the contractors have to develop the novel railway systems software using contemporary technology. This is the fact that the suppliers have missed the deadlines to fit out the pathways and other infrastructure in the channels (Topham 2018).

Risk Management Process and Procedure

Project risk management refers to the process of recognizing, evaluating, and then reacting to any risk that occurs during the entire life of a project (Marcelino-Sádaba et al. 2014). For the Crossrail project, the risk management process was made efficient by assuming the essential steps in risk management entailing risk recognition; risk evaluation; risk ordering; risk treatment; and risk monitoring. Numerous strategies of risk management were considered for procuring Crossrail and that has enhanced the chance of success of the project. Furthermore, there was an RSC (Risk Sub-Committee) formed in 2010 that assisted the Crossrail project in the assessment of risk management employment and performance. Besides, it was useful in the performance review in respect of definite risks. It also introduced the concept of key risk that was aimed to attain a noteworthy level of decline to risk exposure. There are three main goals of implementation of risk management by Crossrail project that are as follows:

  • To assist the Crossrail project delivery by declining the probability and probable consequences of activities that may have an undesirable impact on the project and augmenting the probability of actions that may have a positive impact on it.
  • To refine decision-making, prioritizing, and scheduling by enhancing the understanding of risk and ambiguity.
  • To offer assurance to all stakeholders that each project comprehends its noteworthy threats and is vigorously managing them (Crossrail learning legacy 2020).

The Crossrail involved the entire company in the procedure of risk management and assure that strategic planning was directed by the greater authority at management. Cross rail has taken the strategy of combing the health and safety risk into its entire risk management process that is different from other models of railway wherein such risk is separate from the corporate risk model. Therefore, the risk management model at Crossrail comprises all forms of risks during the construction & design phase; and the operational stages. The categories of risk considered are environmental; health & safety; quality' engineering & design; security; business continuity; and interface & logistics risks. The process of risk adopted at Crossrail was reliant on four-week reviews and recording of risks on a qualitative basis. In the early development, this project was innovative in its denial of optimism partiality in favour of QRA (Quantitative Risk Assessment) techniques. It positioned an early emphasis on risk management and ambiguity and led to a useful acknowledgment that outturn costs must be informed as a collection. The main motive of this was that risks must be handled by the party best capable of eliminating them. Further, people were provided responsibility for managing the risk in their fields and certifying that where required, this accountability was passed onto their contractors and groups. The risk was described in terms of program, strategic, contract levels, project, and area sector. The aim was to involve diverse sections of the company in the risk process at a suitable level to engage them in the actions of recognizing, evaluating, and handling the threats that there were best positioned to manage (Morgan 2011). This organization avoided the usage of the Monte Carlo technique in its active risk manager (ARM) due to the higher flexibility linked with a spreadsheet-based cost assessment tool.

Innovation is significant in addressing the fluctuating units of uncertainty that can be established within diverse portions of a huge, complex assignment. Certain great, difficult projects indeed contain both expected and random elements; equilibrium has to be creating between acting arranged routines when circumstances are constant, and alteration, managing, and inventive action when circumstances change unpredictably. In 2013, Crossrail recognized an innovation program promising contractors, suppliers, and other stakeholders to improve, employ, and exchange novel concepts, skills, and practices. An in-house team managed the innovation program and established a database called Innovate18 to capture all the innovative ideas, proposals, and solutions submitted by members of the Crossrail project (DeBarro et al. 2015).

Conclusion on Cross Rail Project Analysis

From the above evaluation of the Cross rail project, the UK, it can be concluded that the Crossrail project in the UK has been jointly sponsored by TfL (Transport for London), and DfT (department for transport). The funding of this project was amounted to £14.8 bn and was mainly reliant on central government funding that covers approximately one-third of the cost. The debt requirement for the Crossrail project may take numerous forms entailing loans from the developmental banks like European Investment Bank; bank debt; and bonds. The Crossrail project plays an essential role in reinforcing and shaping the position of London as a world city economy. The upsurge in the GDP of the nation resulting from the execution of Crossrail is concentrated on facilitating the expansion of central London employment. It produces greater profits and revenues for the businesses in the UK that convert into greater taxes to the government of the nation. Moreover, it can be inferred that large scale projects or programs certainly must have to adjust as they go through the several stages of work. It can be said that cost overruns and time delays are the main issues linked with long-term complex projects. This project of constructing the Elizabeth line will get complete more than three years late and cost overrun by nearly £4 billion more than the original budget. Furthermore, it can be concluded that the risk management model at Crossrail comprises all forms of risks during the construction & design phase; and the operational stages. The categories of risk considered are environmental; health & safety; quality' engineering & design; security; business continuity; and interface & logistics risks. Furthermore, there was an RSC (Risk Sub-Committee) formed in 2010 that assisted the Crossrail project in the assessment of risk management employment and performance. Besides, it was useful in the performance review in respect of definite risks.

References for Cross Rail Project Analysis

Aubrey, T. 2016. Bridging the infrastructure gap. [online]. Available at http://centreforprogressivecapitalism-archive.net/wp-content/uploads/2016/06/Bridging-the-infrastructure-gap-June-2016.pdf [Accessed on 26th October 2020]

Batty, M. 2012. Urban regeneration is self-organization. Architectural Design82(1), pp. 54-59.

Buck, M. 2017. Crossrail project: finance, funding, and value capture for London's Elizabeth line. In Proceedings of the Institution of Civil Engineers-Civil Engineering, 170 (6), pp. 15-22. Thomas Telford Ltd.

Crossrail learning legacy. 2020. Implementing risk management at Crossrail. [Online]. Available at https://learninglegacy.crossrail.co.uk/documents/implementing-risk-management-crossrail/ [Accessed on 28th October 2020]

Crossrail learning legacy. 2020. Risk management. [Online]. Available at https://learninglegacy.crossrail.co.uk/learning-legacy-themes/project-and-programme-management/programme-and-control-reporting/risk-management/ [Accessed on 28th October 2020]

Crossrail. 2020. Funding. [Online] Available at https://www.crossrail.co.uk/about-us/funding [Accessed on 26th October 2020]

Davies, A. 2019. Project management for large, complex projects. [Online] Available at https://www.apm.org.uk/media/32612/digital_edinburgh-tram-report.pdf [Accessed on 28 Oct 2020]

Davies, A., MacAulay, S., DeBarro, T., and Thurston, M. 2014. Making innovation happen in a megaproject: London's Crossrail suburban railway system. Project Management Journal45(6), pp.25-37.

DeBarro, T., MacAulay, S., Davies, A., Wolstenholme, A., Gann, D. and Pelton, J. 2015, November. Mantra to the method: lessons from managing innovation on Crossrail, UK. In Proceedings of the Institution of Civil Engineers-Civil Engineering, 168 (4), pp. 171-178. Thomas Telford Ltd.

Dodgson, M., Gann, D., MacAulay, S., and Davies, A. 2015. Innovation strategy in new transportation systems: The case of Crossrail. Transportation Research Part A: Policy and Practice77, pp. 261-275.

Douglas, N. and O’Keeffe, B. 2016. Wider Economic Benefits–When and if they should be used in the evaluation of transport projects. In Proceedings of the Australasian Transport Research Forum.

Eriksson, P. E., Larsson, J., and Pesämaa, O. 2017. Managing complex projects in the infrastructure sector—A structural equation model for flexibility-focused project management. International Journal of Project Management35(8), pp. 1512-1523.

Marcelino-Sádaba, S., Pérez-Ezcurdia, A., Lazcano, A.M.E. and Villanueva, P. 2014. Project risk management methodology for small firms. International journal of project management32(2), pp. 327-340.

Milillo, P., Giardina, G., DeJong, M. J., Permission, D. and Milillo, G. 2018. Multi-temporal in SAR structural damage assessment: The London Crossrail case study. Remote Sensing10(2), p. 287.

Morgan, T. 2011. Briefing: Risk management critical to Crossrail’s success. Proceedings of the Institution of Civil Engineers-Management, Procurement, and Law164(2), pp. 57-58.

O'Connor, R. 2020. Crossrail delayed until 2022 and needs an extra £1.1 bn to complete. [Online]. Available at http://www.infrastructure-intelligence.com/article/aug-2020/crossrail-delayed-until-2022-and-needs-extra-%C2%A311bn-complete [Accessed on 28th October 2020]

Pinto, J.M. 2017. What is project finance?. Investment Management and Financial Innovations14(1), pp. 200-210.

Topham, G. 2018. What is happening with Crossrail? [Online].Available at https://www.theguardian.com/uk-news/2018/aug/31/what-is-happening-with-crossrail [Accessed on 28th October 2020]

Venkatesh, P.K. and Venkatesan, V. 2019 Delays in construction projects: a review of causes need and scope for further research. Malaysian Construction Research Journal, 23(3), pp. 89-113

Vickerman, R. 2018. Can high-speed rail have a transformative effect on the economy?. Transport Policy62, pp. 31-37.

Worsnop, T., Miraglia, S., and Davies, A. 2016. Balancing open and closed innovation in megaprojects: insights from Crossrail. Project Management Journal47(4), pp. 79-94.

Wright, S., Palczynski, R., and ten Have, P. 2017, November. Crossrail program organization and management for delivering London’s Elizabeth line. In Proceedings of the Institution of Civil Engineers-Civil Engineering, 170 (6), pp. 23-33. Thomas Telford Ltd.

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