4 The 1998 restructuring arrangements enabled LCR to raise the finance it required at the outset of the project. Project managers were therefore able to focus on delivery of the Link and plan work without being unduly influenced by the timing of funding. To achieve continuity and momentum on large and complex infrastructure projects, departments should ensure that dedicated funding is committed from the start.
5 Section 1 is, by itself, a major piece of infrastructure. LCR successfully completed the construction of the section on time and at a cost slightly below the target set in the 1998 restructuring. Drawing on the reasons for this achievement, lessons for other similar projects include the importance of:
■ appropriate contractual provisions and incentives between the client, the project manager and contractors;
■ once the design brief is established, designs that are kept as stable as possible during the pre-construction and construction phases;
■ stability and continuity of management personnel during the pre-construction and construction phases; and
■ basing allowances for contingency on thorough risk appraisals and releasing the allowances as risks materialise rather than treating contingency as avoidable expenditure.
6 There were good reasons at the time to put the cost overrun insurance in place and to transfer part of the construction risk of Section 2 from the public sector. From the Government's perspective, the cost overrun insurance represented good value compared to the alternative Railtrack proposals and it was more than an insurance policy because it provided a clear and additional incentive on the private sector to manage and mitigate risk. Nevertheless, departments considering such commercial insurance for future projects should clearly identify the benefits and assess the expected costs. Departments should be particularly wary of one-off novel insurance arrangements. These types of arrangements are likely to be expensive because the insurance market will have limited experience of the risks and, as a consequence, underwriters will, in their pricing, take a risk averse approach.
7 Part of the justification for public sector involvement in the project was that the project would stimulate local regeneration in Government priority areas. It is essential that there is a robust appraisal of the benefits for projects of this kind. LCR's approach in proactively developing partnerships with property developers has worked well and should be adopted in future transport projects.