Edinburgh tram system opens – late, over budget, de-scoped. Why?

Edinburgh’s tram system finally opened today to its first paying customers. When we say “system”, you might get the image of a huge network of expertly interlocking lines covering the historic City. Actually, what we mean is a single line, linking the airport to the centre, with 16 stops along the 8.7 mile route.

(OK, let's be honest, the picture is one of Lisbon's quaint old trams, not the new Edinburgh models).

Cost so far? Around £1 Billion, or over £100 million per mile. That’s pretty impressive – and no, we’re not talking about solid gold tracks here.  So that cost is for about a quarter of the original network envisaged, the entirety of which was supposed to come in at around £500 million. Oh yes, and the completed section is over three years late.  So the word “fiasco” seems pretty appropriate here, and there have been plenty of inquests already around what has happened.

From a browse around relevant analysis, it looks like a number of classic procurement and programme management failings here.

  1. The whole strategy was based on grandiose ideas. A ‘vanity project’ as many have described it,  with some obvious questions unanswered . Edinburgh is not a city of flat wide streets that lend themselves well to tram tracks – that must have been obvious from the start, one might think?
  2. There may have been misplaced faith in the power of ‘fixed price contracts’.  The construction got bogged down in disputes between the contractor and the buyer (the council), which ended up in court cases which went, in the main, in favour of the contractor.

“Edinburgh’s tram developers have lost a significant dispute with contractors in a ruling that is likely to add millions of pounds to the cost of the troubled project, The Herald has learned.An independent arbiter bought in to decide on the disagreement between Transport Initiatives Edinburgh (Tie), the council-owned company overseeing the project, and the consortium BSC, led by construction giant Bilfinger Berger, has found significantly in favour of the latter”. (Herald Scotland, Jan 2010).

  1. Fixed price is hard to implement when there really are unforeseen elements that genuinely change the contractor’s (and buyer’s) cost assumptions. That appears to have been the case here. Underestimating the risks and ‘unknown unknowns’ in any major construction programme can lead to false confidence in your initial contract robustness!
  2. Once things start to go wrong, the contract manager has a difficult decision. Take an aggressive stance with the contractor, and hope this will drive better performance? Or  approach matters in more of a partnership manner? Here, it appears that the aggressive approach was taken, but in the end, it didn’t pay off.
  3. Audit Scotland produced an interim report in 2010 and identified – amongst many other issues – that the contract management organisation (Tie) was having problems retaining staff with the necessary skills and experience. We all know that’s a problem and a warning sign for any major programme.
  4. Whilst we’d argue this was intrinsically a tougher project than the Olympics construction work, might some of the approaches used there have paid off here? We haven’t established what contracting model was used here, but the NEC3 contract worked very well for the Olympics. Amongst other benefits, it has very detailed procedures in place to handle changes and contract variations – something that might have helped in this case.

We assume Audit Scotland might want to take another look at this now that it is “completed” (in some sense). That should be an interesting report ...

First Voice

  1. Trevor Black:

    Is it me? Or do I foresee similar issues with HS2, only bigger?

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