Project evaluation: The Edinburgh Tram Project

1. Introduction

1.1 City of Edinburgh

The City of Edinburgh Council is the local authority charged with providing basic amenities and services for the 440,000 residents of the city (The City of Edinburgh Council, 2014). These services range from transportation services, parking, healthcare, sanitation, recycling, and education among others. Of relevance to this implementation is the transportation function where the council takes measures to ensure that people can move from one section of the city to the other with ease. It does this by facilitating investment into the public transportation sector and sponsoring and implementing projects such as the Trams project. This increases speed, reliability, and cost effectiveness of the transportation systems (Audit Scotland, 2011). It also focuses on limiting the level of environmental degradation arising from operations in the transportation sector. These services provide a wholesome impact of improving the quality of life and promoting economic, social and environmental sustainability.

1.2 The Edinburgh Tram Project

The Edinburgh Tram Project was conceived in 2003 and endorsed by the Scottish government in 2007 (The City of Edinburgh Council, 2014). It aimed at improving public transportation within the city of Edinburgh. It also aimed at growing the local economy while creating a healthy, safe and sustainable environment within the city. It entailed the construction of tram lines at different parts of the city as shown in the figure below. 

The project was cost conceived in 2003 and estimated to cost £375 million. However, subsequent revisions of the project had the budget revised to £776 million (Audit Scotland, 2011). This was double the initial estimate. There were also delays with the project completion being pushed from 2011 to 2014. In spite of the delays, the building of the project infrastructure was completed in October 2013 with testing ongoing pending the projected project launch in May 2014.

The project implementation was initially spearheaded by Transport Initiatives Edinburgh (TIE), a wholly owned subsidiary of the City of Edinburgh Council (Edinburgh Trams, 2014). The company was registered to shield the Council from liabilities related to the running of the project. TIE was the overall manager of the project and was tasked with the responsibility of contracting suppliers to cater for sections of the contract. For instance, the operation of the trams was initially contracted to Transdev. This was cancelled in December 2009 and awarded to Edinburgh Trams Limited (Audit Scotland, 2011). The main player in building the tram system was BBS. This was a consortium of three companies including Bilfinger Berger, Siemens and Construcciones y Auxiliar de Ferrocarriles.

Contractual disputes arose between BBS and TIE leading to a delay in the implementation of the project. Funding challenges were also experienced prompting the council to shorten the length of the line. On the whole, the level of success in the project implementation was low when gauged against budgetary considerations, timelines, and the level of collaboration between the main stakeholders.

The key stakeholders were as follows:

1. City of Edinburgh Council CEC: The owner of the project
2. Transport Initiatives Edinburgh (TIE): The project manager, a private company wholly owned by CEC
3. Tram operator: This role was initially given to Transdev but was later awarded to Edinburgh Trams Limited
4. Infrastructure contractor: This was done by BBS, a consortium of three companies including Bilfinger Berger, Siemens and Construcciones y Auxiliar de Ferrocarriles
5. Utility diversion contractor: Alfred McAlpine Infrastructure Services was awarded this contract in October 2006 and completed its work by November 2009
6. Tram constructor: Apart from being a member of the BBS consortium, Construcciones y Auxiliar de Ferrocarriles SA (CAF) was awarded the contract to develop trams and deliver them to them in time for the testing of the project (Audit Scotland, 2011). BBS was also responsible for overseeing the activities of Parsons Brinkerhoff to the Systems Design Service (SDS) which was responsible for installing overhead power lines and electronic systems. 

2. Project planning

2.1 Project overview

The aims of the Edinburgh Tram Project were as listed below:

1. To boost the city’s economy by facilitating access
2. To reduce the level of environmental harm caused by traffic by establishing a transportation system that doesn’t produce carbon emissions
3. To reduce traffic congestion by providing a viable alternative to the use of vehicles for city dwellers moving around the city
4. To promote safety and security in the transport sector
5. To promote social benefits

The Edinburgh Tram Project was first conceptualised in 2001 and the Transport Initiatives Edinburgh (TIE) formed as a wholly owned subsidiary in of the City of Edinburgh Council in May 2002 (The City of Edinburgh Council, 2014a). TIE was charged with the responsibility to investigate into how best to deliver the Council’s local transport strategy. It would also be in charge of overseeing implementation the project including contracting suppliers, paying suppliers, and ensuring that quality standards are upheld in the process of implementation (Edinburgh Trams, 2014). This arrangement of letting a private company oversee the project was intended to insulate the project from politics, and also shift the risks involved from the council to the private sector. TIE was responsible for the Edinburgh Tram Project until August 2011.

The plan produced comprised of two phases: 1a and 1b. 1a was planned to include an 18.5km line stretching from Newhaven, through Princes Street, to Edinburgh Airport (BBC News, 2013). 1b was planned to cover 5.6km running from Haymarket, through Crewe Toll, to Granton Square. The second phase 1b was cancelled in 2009 due to the economic difficulties faced by the country at the time. The project was consented to in December 2007.

2.2 Phases and stages of the project

The project was divided into the following sections, each of which was contracted to a different supplier:

1. Project design: This included drawings for all the infrastructure needed, coordinating the purchase of the land needed, and alignment with the existing traffic regulations
2. Utilities diversion works and other enabling works: This included the construction of a park and ride at Ingston.
3. Infrastructure construction (Infraco): This would be the core of the project. It would include the construction of the tramlines and tram depot. It would also include procurement and installation of ticketing machines, construction of passenger shelters, and the installation of overhead power lines. This is because the trams would be powered using electricity.
4. Construction of 27 trams (Tramco). This would need to be completed in time for testing prior to the official launch of the projects.

2.3 Budget and projected benefits

The cost of the project was estimated at £375 million in 2003. The Scottish government set an upper limit for the project at £500 million noting that if the cost exceeded £545 million, it would cost more than the projected benefits (Audit Scotland, 2011). The budget was, however, revised several times with the final estimated cost being at £776 million.

The project was projected to provide benefits of 231% over the cost of the project. It would include the construction of 3800 residential units, 930 jobs (530 attributed to phase 1a), improved quality of air, low noise levels, and improved access to key sections of the city.

2.4 Timelines

The project timeline was estimated at 3years running from 2008 to 2011. It was expected that the trams transportation system would be operational by February 2011. However, delays in the project implementation led to several revisions with the current projection being for the project to be launched by May 2014.

The project timelines and milestones are shown in the figure below:

2.5 Risks and mitigation

Budgetary uncertainties were among the risks anticipated in planning the project. These were reduced by early award of the design contracts. This would facilitate an early conception of the project and accuracy in cost estimation.

The utilities’ infrastructure in the city was viewed as a potential risk to timely execution of the project. This would be due to the need to relocate certain utilities to ensure that the delivery of services to the city is not interrupted (The Guardian News, 2014). To avoid this risk, utility diversion was conceived as a separate contract to ensure that the project is not delayed.

The other risk anticipated was related to the likelihood of suppliers delivering unevenly on services concentrating on their core strengths. This risk is very likely where one supplier handles a wide range of services in projects. This risk was minimised by separating core elements of the project where infrastructure construction and development of trams were separated.

The separation of the contracts was nevertheless limited to reduce the risk associated with coordination weaknesses (Audit Scotland, 2011). The entire contract for infrastructure development was handed to the BBS consortium. This was done to promote coordination of the complex aspects of the project and reduce the risks associated with poor coordination between different organisations.

Cost fluctuations were also anticipated. Cost fluctuations can be very risky as they could not only affect the affordability of the project, but also make the costs higher than the benefits. This was a real concern, considering that the project approval was tagged to the assurance that the project would not exceed a specific budgetary allocation. TIE sought to minimise this risk by seeking to make the contract amounts fixed. The commitment was evident in the provision of compensation mechanisms in case part of the project was not implemented. For instance, £3.2 million demobilisation fee was to be paid in the event that phase 1b of the project failed to kick off.

The likelihood of disputes between suppliers and TIE was also anticipated with the potential impact of paralysing the project. TIE sought to minimise the likelihood and impact of this risk by providing mechanisms for mediation in the contracts. Disagreements would therefore be mediated first before any legal action is taken. As a result, project implementation would be guaranteed to continue with little or no interruptions.

3. Implementation

3.1 Budget and timelines

None of the projections at the planning phase were achieved. By December 2010, only 28% of the project had been completed making it unrealistic to expect the launch to be in February 2011 as earlier projected.

Despite the initial budget of £375 million in 2003, the council had already spent £402 million in by December 2010 when only 28% of the project had been completed. The projection at the time was that £545 million would be sufficient to complete the project. However, 2014 estimates are that the project has cost a total of £776 million. This is double the initial estimate, displaying serious flaws in budgeting and actual implementation.

3.2 Implementation hitches

Being a government project, the Tram Project has come under intense scrutiny and at times fought based on party manifestos alone. For instance, the Scottish National Party included the project in its manifesto as one of the unnecessary projects that it would scrap in its bid to save public resources. Questions on the cost of the project were raised with accusations of mismanagement being high. This prompted the appointment of an auditor to determine the extent to which the project has delivered value for money. The pressure is expected to have dampened public support for the project. Pressure from lobby groups such as the cyclist associations had the impact of shedding a dark shadow on the project. The cyclists decried the fact that their bicycles would frequently be caught up in the tram lines, often leading to injury. This led to a commitment to repair roads for the cyclists to use; further complicating the project.

The legal dispute between TIE and BBS has been the main cause of delay for the project. In this dispute, BBS demanded compensation for design changes brought about by incomplete utility diversion works in part of the sections. This compensation demand was for £50-80 million (Audit Scotland, 2011). TIE dismissed this claim as unsubstantiated causing a delay of the project pending resolution of the matter. A project management panel was constituted in June 2009 to try and mediate on the fallout with failure of the talks leading to a legal suit. The disagreements were bad enough to get TIE to consider terminating the contract. The project stalled for the duration of the legal dispute hence causing a serious delay on the project timelines. By December 2010, it was estimated that the new deadline for the project would be February 2013. This was later revised to May 2014 (BBC News, 2013).

Funding challenges were also experienced. This was related to the frequent budgetary adjustments that went beyond the limits recommended by the Scottish government. An upper limit had been set at £545 million. However, by June 2010, the project cost estimate had been raised to £600 million. The extra £55 million would be met by either borrowing funds or reducing the length of the tram lines being constructed (Audit Scotland, 2011). The option of truncating the line was picked to reduce the cost estimates. However, costs would further be raised as a result of TIE being disbanded in late 2011 with consultants Turner & Townsend taking over the management of the project. The new cost estimates were revised to £770 million with the council voting to truncate the line further to save on the cost of the project.

The project scope was revised several times. In 2009, phase 1b was cancelled due to the financial crisis that made funding difficult. In June 2010, budget constraints led to the council seeking proposals on the cost savings that would be made if the tram line was truncated in 4 different points including the Haymarket station and York Place. The decision to truncate the Haymarket station was made in June 2011 with an impact of reducing the budgetary estimate by £72 million. This means that the final project is much shorter than and twice as expensive as initially planned.

The problem was faced with several problems related to quality and failure to meet deadlines. By May 2008, the company was yet to complete design for parts of the sections making it difficult for the infrastructure construction designs to be completed. These delays had the impact of delaying the whole project because of the interconnectedness of the different project phases. For instance, Parsons Brinkerhoff to the Systems Design Service (SDS) was found to be very inefficient in resource mobilisation leading to delays in delivery of electronic systems and overhead power lines (Audit Scotland, 2011). This delayed the process of infrastructure construction. Moreover, quality problems identified warranted revision of the work hence causing further delay of the project.

Another crucial delay was occasioned by poor quality in delivery of the utility transfer function. After failing to execute on its mandate on ensuring completion of utility transfer, the infrastructure developer was forced to redesign its infrastructure at an additional cost prompting them to seek compensation. This led to the long legal suit that is credited for the long delay of the project.

3.3 Risks and mitigation plans

The current status of the project is that infrastructure construction is complete. The trams have also been delivered and all systems in place. Testing is expected to be ongoing pending the official launch of the system in May 2014 (BBC News, 2013).

A number of risks can be anticipated that could lead to further delay and additional expenditure on the project. This can happen upon discovery of quality hitches leading to revision of sections of the work. For instance, a section of the tramline is already observed to have cracks (McCann, 2014). The likelihood of this risk occurring is relatively high considering the fact that the project has been marred with quality hitches in the course of the implementation. The necessity of revisions cannot be overruled as failure to facilitate them could lead to the trams transportation system being risky for the passengers. However, revisions do not necessarily need to lead to delay of the launch. Minor changes can be conducted while the system is operational. It is unlikely that large quality issues warranting substantial delays would be discovered given that inspection must have been conducted thoroughly before infrastructure development was declared as complete in October 2013.

Risk of budgetary allocations being inadequate is also high. The impact of such a risk is likely to be low as it is not expected that the council would entertain the idea of aborting the project after the far it has come with it. However, this would further complicate issues surrounding it. Given that each part of the project was contracted to specific suppliers, the council would only need to hold those responsible to account and require that revisions of work be conducted at their own costs. Where legal hurdles are encountered, the council can fund the revisions while pursuing a legal process for compensation of the amounts incurred.

The system is designed for use by members of the public. It would be futile if such a system is launched and members of the public opt to maintain their lifestyles in terms of the transportation modes that they prefer. This calls for public awareness and marketing campaigns aimed at making the system more acceptable. In this regard, there is already a delay as little has been done to procure public support for the new system of public transportation. While it may be rational to assume that the public would quickly embrace a faster means of transport that would enable them beat the traffic congestion, it would be necessary for a publicity campaign to be conducted to weaken the level of attachment that people have with their cars and approach to transportation. This is more likely considering that the trams project only covers a limited length within the city and people may not be at ease letting go of their cars just yet.

4. Conclusions and recommendations

4.1 Project plan

As has been discussed earlier in this report, the project was initially commissioned to Transport Initiatives Edinburgh (TIE) and later to consultants Turner & Townsend. These private companies would oversee implementation and contract suppliers to work on different parts/stages of the project. The project model was to insulate the City of Edinburgh Council from liabilities arising from the project, and also to insulate the project from partisan politics as would be characteristic of government-related projects.

The planned design was to create certainty in the budget and implementation. These were not achieved with the project being delayed by over 3 years and the budget being more than twice the initial budget.

The project balanced between the need to have suppliers deliver on their areas of specialty and the need to have projects coordinated with ease. This is why the project was broken down into stages with different contracts being made with specific suppliers. To aid coordination, BBS, the developer of infrastructure, was made to oversee elements such as the development of power lines and electronic systems.

4.2 Risk mitigation and implementation

Measures to reduce budgetary uncertainties included negotiating for fixed project cost amounts. This was arguably achieved. The legal dispute with BBS was related to compensation for a job not done by a different contractor, and not a revision of their contractual fees. This was the argument that led to them being awarded the compensation in the protracted legal battle initiated by TIE. The presence of the legal dispute also means that the mediation mechanisms established to eliminate the risk of delay did not bear the desired fruit. It was after the project management panel failed that the acrimonious court battle began.

The project was characterised by delays related to poor quality warranting revision of work and a legal dispute with the main supplier BBS.  The details of the delays differed with estimates for time of completion being revised in 2010 to February 2013 and later to May 2014 (Audit Scotland, 2011). The construction of infrastructure was finally completed in October 2013 pending project launch in May 2014.

As was the case with the budget and timeline projections, the scope of the project was revised several times. From the cancellation of phase 1b of the project to truncation of several parts of the line, the final project was significantly different from the anticipated project. This has the impact of making it difficult to estimate the benefits of the project in terms of the economic and social benefits in the absence of new research.

4.3 Recommendations

Instead of being involved in supervising every aspect of the project, a better project model would have been to make the main supplier responsible for the whole project. This would have helped to ensure that the cost estimates are final and that there are no justifiable reasons for demanding an increase on the cost of the project.

The aims targeted using this project design would still be achievable in the all-inclusive project contracts recommended. The process of prequalification or evaluation would include gauging the competence of the main supplier and that of the sub-contractors responsible for handling different aspects of the project.

It is anticipated that this project will be launched in May 2014. However, possible risks related to discovery of quality issues warranting revisions are likely. There is also the risk of the new transportation system to attract little public support due to its scope and the extent to which the public may be attached to their current lifestyles. This makes it necessary to invest in publicity and get city residents to leave their vehicles to use the tram systems.

References

Audit Scotland, 2011. Edinburgh Trams: Interim Report. (Online) Available at: http://www.audit-scotland.gov.uk/docs/central/2010/nr_110202_trams.pdf (Accessed 27 April 2014)

BBC News, 2013. Edinburgh trams: Services 'will be running by next May'. (Online) Available at: http://www.bbc.com/news/uk-scotland-edinburgh-east-fife-24124047 (Accessed 27 April 2014)

Edinburgh Trams, 2014. Our Trams. (Online) Available at: http://www.edinburghtrams.com/ (Accessed 27 April 2014)

McCann, D., 2014. Cracks appear on Shandwick Place tram route. (Online) Available at: http://www.edinburghnews.scotsman.com/news/transport/cracks-appear-on-shandwick-place-tram-route-1-3374224 (Accessed 27 April 2014)

Prior, G., 2014. Edinburgh Trams testing to go daily. (Online) Available at: http://www.britishtramsonline.co.uk/news/?cat=11 (Accessed 27 April 2014)

The City of Edinburgh Council, 2014. Trams. (Online) Available at: http://www.edinburgh.gov.uk/trams/ (Accessed 27 April 2014)

The City of Edinburgh Council, 2014a. The Tram Project. (Online) Available at: http://www.edinburgh.gov.uk/info/20126/trams/177/the_tram_project (Accessed 27 April 2014)

The Guardian News, 2014. Edinburgh trams: The story so far. (Online) Available at: http://www.theguardian.com/edinburgh/2010/jun/23/edinburgh-trams-timeline-facts-tram-latest-transport (Accessed 27 April 2014)

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