COMMONS

Taxpayers let down by delay and climbing costs of Crossrail

19 July 2019

The Public Accounts Committee has today published a report called Completing Crossrail.

  • Crossrail is expected to be two years late and £2.8 billion over budget
  • Crossrail Ltd. has failed to manage the Crossrail project
  • Crossrail Ltd. continued to pay executives bonuses despite delays to project
  • Department for Transport is ultimately responsible for use of taxpayers’ money on Crossrail
  • PAC is sceptical of DfT’s ability to oversee major rail projects

Report summary

Crossrail will eventually be an important part of the transport network in London and the south of England. Once opened, it will lighten the load for London’s overburdened transport network and is expected to increase the city’s rail capacity by 10%, However, while it is badly needed, commuters have been let down by a programme that is well behind schedule and has seen costs escalate far beyond what was originally planned. The central section between Canary Wharf and Paddington was supposed to have opened in December 2018 but Crossrail Ltd now expects it to open between October 2020 and March 2021; around two years late. Until the entire railway is open, passengers will not receive the full benefits of the railway, and Transport for London’s expected revenue from rail fares on Crossrail will be limited. Crossrail Ltd says that the full railway may not open until as late as 2022.

Funding for the programme has already increased by around £2.8 billion to £17.6 billion and yet, the final cost still remains unknown. As Crossrail has not yet determined and agreed an opening date for the full railway, costs for the programme are likely to continue to climb. Crossrail Ltd has so far failed to understand the complexity and risks involved in the programme, failed in its management of   its main contractors and failed to integrate different strands of the programme successfully. While the Department for Transport is ultimately responsible for the use of taxpayers’ money on Crossrail, the way in which it set up Crossrail Ltd left it with limited powers to step in and take action, including on executive remuneration, when the programme faltered. While the Department is now working to learn and apply the lessons from what went wrong with Crossrail, it should acknowledge that this is far from an unfamiliar tale, We have witnessed cost increases and delays on major rail projects several times over the past few years and the Department still does not appear to have got a grip on the problem. Until the Department properly embeds the lessons learned from the programme, we remain sceptical about its ability to oversee major rail projects.

Chair's comments

“Crossrail is two years late and £2.8 billion over budget. Unfortunately, delay and being over-budget now appear to be par for the course for major rail projects.

“Crossrail Ltd. has failed to understand the complexity and risks of Crossrail, to manage its main contractors, and to integrate different strands of the programme successfully.

“The Department for Transport is ultimately responsible for the use of taxpayers’ money on Crossrail; it still does not appear to have got a grip of the problems.

“It has also failed to get a grip of Crossrail Ltd., continuing to pay its executives bonuses, despite the programme going off track.”

Conclusions and recommendations

Completion of the programme is well behind schedule and it remains uncertain when the entire railway will be open. The Crossrail programme aims to bring substantial benefits to rail passengers in London and the south of England, including reduced congestion and journey times, increased capacity on London’s transport network and support for economic growth. However, completion of the crucial central section of the railway is well behind schedule. Crossrail Ltd now plans to open the central section between October 2020 and March 2021 rather than December 2018 as originally planned. Despite the delay, it is still unlikely that Bond Street station will be open to passengers initially. The Elizabeth line, as the new railway will be known, will be an important source of income for TfL. TfL’s fare revenue will not increase significantly until the full railway opens, which could now be as late as spring 2022. Meeting these revised windows for opening the railway is still uncertain and there remain risks to manage. After years of continuing delays, the challenge of motivating and incentivising contractors to prioritise Crossrail means that the programme risks losing momentum.

Recommendation: The Department and Crossrail Ltd should inform us as soon as they know when they expect the full railway to open. 

Given the scale and complexity of the remaining work, it is staggering that Crossrail Ltd continued to believe until as late as July 2018 that the central section of the railway would open in December 2018.  This over-optimism which was prevalent throughout has proved hugely damaging to the programme. Crossrail is a large and highly complex programme. The programme involves the development of new software to allow the trains to switch between three different signalling systems and the construction of miles of tunnels and new, bespoke stations, much of which is taking place in small, enclosed and hard to reach places beneath London. Given the amount of work still to be done, it is clear that Crossrail Ltd did not have a full appreciation of the scale and complexity of the outstanding work until recently, particularly the work to bring together all the infrastructure and systems required for the railway to begin operations. The previous Chair and Chief Executive assert that sticking to the December 2018 opening date was important to keep contractors motivated and costs low, and they continue to emphasise that they had overcome significant engineering challenges at earlier stages in the programme. The new Chair and Chief Executive have focused on understanding what work is remaining and sequencing this to arrive at a detailed programme plan and appear to have placed the programme on a more stable course. However, there remains a great deal of work to do and risks to manage, including finishing development of the software onboard the trains, completing fit out of the stations, finishing installation of the signalling systems and testing that the trains can operate safely through the tunnels and stations.

Recommendation: Building on the recommendations in our April 2019 report, the Department and Crossrail Ltd should report to us every six months on:

  • progress across the programme, including on the performance of contractors;
  • how they are monitoring progress against the plan; and
  • how they are countering the risk of optimism bias and assuring themselves that the revised schedule and cost to completion are robust

Crossrail Ltd’s failure to manage effectively the high number of main contractors needed for the programme contributed to substantial cost increases and delays. Crossrail Ltd split the main works into 36 separate contracts, rather than dividing the programme into a smaller number of larger contracts. This resulted in an increase in the number of dependencies between the work of different contractors and high levels of costly change to the programme. The former Chief Executive is adamant that this approach, which resulted in Crossrail Ltd retaining responsibility for manging the knock-on consequences from delays across the remaining work of the contractors, was the right one, despite clear evidence that Crossrail Ltd did not manage these dependencies effectively. No one was coordinating the activity of all contractors and acting as an effective ‘controlling mind’, despite the fact that the programme partners, Bechtel and Transcend Ltd, were originally contracted by Crossrail Ltd to fulfil this role. The former Chair placed some blame for performance falling behind schedule at the feet of some of the key contractors who had been “causing problems”, but it was Crossrail Ltd’s job to manage its contractors. Crossrail Ltd failed to understand the extent to which contractors’ levels of productivity were diverging significantly and repeatedly from its expectations and effectively manage the consequences of this on the programme. Crossrail Ltd is now resetting its commercial and contracting approach to complete the programme.

Recommendation: As it examines its other projects and programmes, the Department and its delivery bodies’ commercial teams should review their commercial and contractual models, including where risk sits, to gain assurance that commercial and contractual approaches protect value for money.

Crossrail Ltd continued to pay its executives bonuses, even as the programme was going off track. The Crossrail Ltd Executive were paid large salaries and performance bonuses for managing a programme that, it is now clear, was not delivered successfully. The Chief Executive of Crossrail Ltd, for example, was paid a bonus of £481,000 for performance in 2015-16 and £160,000 for 2016-17. The Department told us that it is important that remuneration levels for those delivering large projects allow the Department and its arm’s-length bodies to recruit people with the right level of skills and experience. But, in the case of Crossrail, sponsors did not provide enough oversight of, and challenge to, remuneration decisions made by Crossrail Ltd. The Department asserts that the practices it has in place for its other arm’s-length bodies provide greater accountability. We have previously raised concerns about how the Department oversees the remuneration practices, including redundancy payments, of HS2 Ltd.

Recommendation: Before the end of the year, the Department should:

  • carry out and publish the results of a full review of pay, including redundancy arrangements, at its delivery bodies; and
  • set out how it will ensure that remuneration in its delivery bodies aligns with the overall success of projects, and how it will maintain appropriate control and oversight of executive remuneration.

Despite it being a key learning point from previous projects, the Department failed to ensure Crossrail Ltd gave enough attention to planning and integrating the programme. Our work on the Thameslink and Great Western modernisation programmes found that the Department did not focus early enough on integrating the various elements of the programmes. Some of the causes of cost increases and delays on Crossrail relate to the poor integration of complex IT and operational systems and the lack of a fully integrated plan to complete the programme. The Department explained that Crossrail Ltd presented its plan to sponsors as a fully integrated plan to complete the programme. However, it is now apparent that the Department did not understand what a fully integrated plan looks like, and therefore was unable to scrutinise the Crossrail Ltd executive effectively on the realism of its plans. Crossrail Ltd is now undertaking a substantial amount of work to produce a more detailed plan to completion. It is encouraging that the Department has reflected on what has gone wrong on Crossrail and has taken steps to formally capture these lessons, and those from other programmes.

Recommendation: In order to assure itself about how its delivery bodies are managing major rail projects and bringing them into passenger service, the Department should better understand what a fully integrated plan comprises. To do this, it should build on the work now being done by Crossrail Ltd.

It is unacceptable that the Department devolved so much accountability for taxpayers’ money on this major programme. The Department has repeatedly blamed the Crossrail Ltd Board and Executive, and the overall ‘system’ of management and governance for the failings of the programme. However, the Department is ultimately responsible for the successful delivery of the programme and ensuring that taxpayers’ money is being spent wisely. As one of the sponsors of the programme, the Department played a leading role in establishing the governance arrangements and what the Department and Crossrail Ltd now acknowledge was an “extreme” version of autonomy. The Department acknowledges that striking a balance between autonomy and oversight of its delivery bodies is one of the main lessons from Crossrail.

Recommendation: The Department should examine whether its oversight of its existing delivery bodies provide it with appropriate accountability and governance arrangements over the life of programmes and set its arrangements out in accountability systems statements for its major programmes.

Further information

Image: PA

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