7 Crossrail is past the point of no return. Nearly £16 billion has already been spent. Tunnelling completed in 2015, trains have been ordered and some are already in service, and Network Rail has lengthened platforms, and enhanced stations and signalling on the existing network in readiness for Crossrail services. In our view, there is no going back. We are not TfL's auditors and have not looked in detail at TfL's finances. It is, however, the case that TfL's financial position depends, in part, on the timing and scale of future revenue that it raises from Elizabeth line services, which remains uncertain, and the final cost of the programme to build the railway (paragraphs 3.1 and 3.16 to 3.21).
8 Crossrail was always going to be complex and challenging. Crossrail involves constructing around 26 miles of tunnels beneath London and 10 new, bespoke stations, most of which connect to the existing underground network. Much of the construction work is taking place in small, enclosed, hard to reach places beneath London, which makes it more difficult to do. Taken together, the Crossrail works on the national rail network are among Network Rail's largest infrastructure projects. The programme also requires software to be developed for a new fleet of trains that can switch between the three different signalling systems along the route (paragraph 1.3).
9 Crossrail has been dominated by a fixed completion date of December 2018. On top of the inherent complexity of the project, in 2010 sponsors and Crossrail Ltd agreed a fixed opening date of December 2018 for the central section, which drove much of Crossrail Ltd's decision-making on the programme. The sponsors set the requirements for the programme, including the scope, budget and timetable. But by providing Crossrail Ltd with a high degree of autonomy, sponsors had few effective contractual levers to enable them to take action, particularly towards the later stages of the programme (paragraphs 1.3 to 1.8, 2.16, 2.20 and 3.12, and Figures 2 and 3).
10 Delivering by December 2018 meant multiple activities ran in parallel. This approach meant that some work to install systems required to operate the railway, and complete stations, would take place at the same time during the latter stages of the programme. This created vulnerability on the critical path. The delivery approach, delays to some contracts and the decision to set and then stick to the December 2018 opening date, led to increased compression in the programme and increased risks. A number of stakeholders we spoke to expressed the view that the Crossrail Ltd executive team recognised the challenges but believed this was an exceptional team capable of delivering exceptional results and overcoming these challenges (paragraphs 2.12, 2.16 to 2.17, Figure 7, and case example 3 in Appendix Three).
11 Thirty-six main contracts increased delivery and cost risks. Costs on most of the 36 main contracts have increased substantially. Crossrail Ltd did not require individual contractors to manage interfaces with other contractors, and so protected contractors from changes that were outside their control. Therefore, Crossrail Ltd had to compensate individual contractors for delays that occurred on other contracts, on which their work depended, and had to engage in costly change control negotiations. Changes to the design of construction and systems installation work, and changes to contractors' delivery schedules cost around £2.5 billion between 2013 and 2018. This resulted in substantial drawdowns of contingency, which Crossrail Ltd had set aside to manage such risks. Settlement of accumulated compensation events with contractors accounted for nearly £1 billion of these cost increases. Crossrail Ltd decided to hold the delivery and cost risks itself. Crossrail Ltd originally hired Bechtel and Transcend as project management partners to support it in managing the overall programme, including integrating the work of multiple contractors. However, in 2011, Crossrail Ltd chose to fold the Bechtel and Transcend teams into its own project management effort, rather than hold them at arm's length and accountable for integration of the overall programme (paragraphs 2.3, 2.8 to 2.9, and 2.11 to 2.19, Figure 4, Figure 5 and Box 1).
12 Crossrail Ltd did not have a sufficiently detailed delivery plan against which to track progress. Crossrail Ltd started to produce a detailed, realistic, bottom-up plan in late 2018. Prior to this, from 2015, it had based its management of the programme on an aspirational plan designed to improve progress by suppliers, rather than to provide a reality check on overall progress. Crossrail Ltd presented the plan as the critical path for completing the overall programme. However, the plan did not adequately reflect interdependencies across the programme. Consequently, Crossrail Ltd had a gap in its understanding of delivery risks and the likelihood of meeting the December 2018 opening date (paragraphs 2.22 to 2.27 and 3.5).
13 During 2015 and 2016, pressures on the programme began to show and continued to escalate through to the end of 2018. There were three main points when costs escalated:
• From 2015, Crossrail Ltd renegotiated some of its main contracts, to settle historical compensation claims and address the delays that had emerged, by aligning contractors' delivery milestones to its revised programme plan. By November 2016 Crossrail Ltd had drawn down substantial contingency and was forecasting that it would need to use contingency held by TfL, later in the programme.
• Soon after Crossrail Ltd revised the delivery plan in 2015 , a number of key contracts were behind schedule again. To meet the December 2018 opening date, Crossrail Ltd accelerated work on key contracts, which increased costs.
• In the run up to, and since, Crossrail Ltd's August 2018 announcement that it would not open the central section in December 2018, costs have increased further because completing the programme depended on contractors' workforces being required for longer than planned. Between March 2018 and December 2018, for example, the forecast final cost of the contract to install track and key systems in the tunnels increased by £189 million (25%), from £767 million to £956 million.
The lack of a realistic programme plan and the frequent re-planning meant that the reducing likelihood of delivering in December 2018 and the sharp increase in cost suddenly became apparent in late 2018 (paragraphs 2.20 to 2.25 and case example 2 in Appendix Three).
14 Between 2015 and 2019, there was little pressure on key contractors to deliver the programme efficiently. During 2015 and 2016, some key contracts were moved from a target price to a cost reimbursement basis. This change meant that Crossrail Ltd removed the key incentive on contractors to minimise costs and took on the financial risk itself. The frequent re-planning of the programme, combined with increasing interfaces between contracts, meant that contractors continued to raise compensation events, and costs continued to increase. After it had announced that it would not open the central section in December 2018, Crossrail Ltd began negotiating fixed price contracts for some of the remaining work to improve certainty about costs. However, this form of contract means that Crossrail Ltd risks losing commercial levers to ensure that contractors prioritise completion of Crossrail over other projects and opportunities (paragraphs 2.13 to 2.14 and 3.8 to 3.9 and Box 1).
15 Crossrail Ltd took some decisions that drove unnecessary cost into the programme. In early 2018, to account for delays to the schedule, Crossrail Ltd began carrying out train and signalling system testing and construction activity in alternating time periods, to allow for early sight of potential train and signalling system issues. However, delays to the train and signalling software development meant that few meaningful results could be acquired at this point and took any spare time and space from construction workers on site. Crossrail Ltd also reduced its central programme and risk management capability during 2018, on the basis that they anticipated the programme reaching completion in December 2018. It is currently rehiring staff now that it is clear that significant work remains, although it has faced challenges recruiting the skills it needs (paragraphs 2.21 and 3.10 to 3.11, and case example 4 in Appendix Three).
16 Crossrail Ltd now needs space and time to complete and deliver its plans. In April 2019, Crossrail Ltd announced that it plans to introduce Elizabeth line services on the central section between October 2020 and March 2021. While it has made progress with the development of a detailed and realistic plan, Crossrail Ltd has not yet completed its assessment of the financial implications of this opening schedule. It is still unclear when the full Elizabeth line service will start . Crossrail Ltd will continue to come under pressure to open the railway, drive down costs and complete the programme as soon as possible. Notwithstanding these pressures, Crossrail Ltd's new executive team should take the time to make sure that this plan is deliverable and prudent (paragraphs 3.5 to 3.7).