Crossrail: textbook example of how to get things right
23 Jul 2014 04:01 PM
The Public Accounts Committee publishes its Eighth Report of Session 2014-15, HC 574
Richard Bacon MP, member of the Committee of Public Accounts, today said:
"Major, complex infrastructure projects are notoriously difficult to deliver on time and in budget. With Crossrail we see a textbook example of how to get things right. Happily, this means Crossrail – a £15.8bn programme in total – is on course to deliver value for money to the taxpayer.
The joint sponsors of the Crossrail programme, the Department for Transport and Transport for London, are working well with the delivery organisation, Crossrail Limited, to deliver the programme, which at present is broadly on schedule and being delivered within budget.
The team has focussed on the essentials of programme management, including defining a realistic scope, establishing a management team with the necessary skills and securing the required funding. Two years were spent on planning before construction began, and roles and relationships were clearly established.
The Department should capture the lessons it has learned from the Crossrail programme and apply these to its other projects, most notably High Speed 2.
There are also lessons to be learned about how transport projects are appraised. Benefit-cost ratios are used that do not capture the full benefits, and the case for investment is understated.
With Crossrail, the ratio was around 2:1, or medium value for money. However, when wider economic benefits, such as increased productivity from greater clustering of firms and labour market effects, it was more like 3:1. The full rationale for proceeding with Crossrail was not made clear.
The Department cannot maximise contributions from private sector beneficiaries of transport projects if it does not fully understand the benefits that projects will bring.
In this case, the Department did not fully realise how Crossrail would benefit London businesses, and so it had mixed success in securing the contributions it had negotiated with businesses. While Heathrow Airport Limited will now only provide £70 million, less than a third of the funding originally agreed, the Department has been more successful with London businesses where the benefits of the project have been better communicated.
Construction of Crossrail is not yet complete, and considerable risks remain in delivering the programme by 2019, particularly managing the transition from building the railway to operating it, and delivering the Crossrail trains. So far, though, the signs are good."
Richard Bacon was speaking as the Committee published its 8th Report of this Session which, on the basis of evidence from Philip Rutnam, Permanent Secretary, Department of Transport, Sir Peter Hendy, Commissioner, Transport for London and Andrew Wolstenholme, Chief Executive, Crossrail Ltd, examined the subject of Crossrail.
The Crossrail programme is proceeding well and is on course to deliver value for money to the taxpayer. The joint sponsors of the Crossrail programme, the Department for Transport (the Department) and Transport for London, are working well with the delivery organisation, Crossrail Limited, to deliver the programme, which at present is broadly on schedule and being delivered within budget.
The programme provides an opportunity for the Department and the rest of government to learn valuable lessons about delivering major projects, such as the importance of careful early preparation. However, construction is not yet complete, and considerable risks remain in delivering the programme by 2019, particularly managing the transition from building the railway to operating it, and delivering the Crossrail trains.
This project also raises questions about how government compares different transport projects when making its investment decisions.
Conclusions and recommendations
The Department and Transport for London are jointly sponsoring the Crossrail programme to deliver a new rail service for London and the South East. When complete, the railway will run from Reading and Heathrow Airport in the west, to Abbey Wood and Shenfield in the east. The programme involves construction and improvement works costing up to £14.8 billion, including: building a new underground railway across central London; improving existing tracks to the east and west of London, and building and upgrading stations. It also includes buying a new fleet of trains at a cost of £1 billion, and appointing a new operator for the service. Crossrail Limited is delivering most of the programme, with Network Rail undertaking the work on existing sections of railway.
Crossrail is a textbook example of how to focus on the essentials of programme management, including defining a realistic scope, establishing a management team with the necessary skills and securing the required funding. Two years of planning took place before the construction programme began on Crossrail, allowing the scope of the programme to be well defined, resulting in only a handful of subsequent changes being required. Roles and relationships were clearly established in the programme’s founding agreements, and Crossrail Limited had to pass the sponsors’ early programme reviews to prove it had the right skills and capabilities in place. The current funding of £14.8 billion for construction work was agreed after a series of early examinations into costs, partly driven by the 2010 spending review.
Recommendation: The Department should capture the lessons it has learned from the Crossrail programme and apply these to its other projects, most notably High Speed 2. It should also promote the lessons from Crossrail, which are applicable to other major projects, widely across government.
Transport projects are assessed using benefit-cost ratios that do not capture the full benefits, thereby understating the case for investment. The Crossrail programme followed standard practice for transport investments by developing two benefit-cost ratios. While one included an assessment of some wider economic impacts, such as increased productivity from greater clustering of firms and labour market effects, the ratio used in deciding whether the project should go ahead excluded these and other measurable benefits, such as changing property values or land use. Crossrail Limited and Transport for London have been researching how to develop more robust estimates of these wider benefits, which are challenging to measure.
Recommendation: The Department needs a clearer understanding of the wider economic benefits of transport projects which should be included in its investment decisions.
The full rationale for proceeding with Crossrail was not made clear. The business case for Crossrail had a benefit-cost ratio of less than 2:1, and focused on the need to provide transport for a rapidly increasing population and to avoid choking economic growth in the South East. It was not made clear that the Department also took into consideration factors such as the better use of land in East London when deciding to invest in the Crossrail programme, rather than alternative projects elsewhere.
Recommendation: The Department should clearly set out how it weighs up different factors, including the benefit-cost ratio, in its decision making, and apply consistent criteria to appraising the projects in its portfolio.
Smaller transport projects have access to fewer resources and less expertise making it more difficult for them to secure funding from the Department. The Department has a portfolio of both large and small projects across the country. However, small projects appear to be at a disadvantage, despite some of them having very high benefit-cost ratios, as they find it harder to secure funding. This is partly a result of local authorities having differing levels of skill and capability to develop business cases, and a lack of resources compared to central government to secure help with this.
Recommendation: The Department should share its data and expertise in assessing transport projects with local authorities to strengthen the relative case for smaller projects.
The Department cannot maximise contributions from private sector beneficiaries of transport projects if it does not fully understand the benefits that projects will bring. The Department did not fully realise how the Crossrail programme would benefit London businesses. As a result, it had mixed success in securing the contributions it had negotiated with businesses. While Heathrow Airport Limited will now only provide £70 million, less than a third of the funding originally agreed, the Department has been more successful with London businesses where the benefits of the project have been better understood and explained to the beneficiaries.
Recommendation: The Department should establish and use a better understanding of the wider economic benefits of transport projects to help it to maximise contributions from beneficiaries of future transport projects.