Conclusions and recommendations
1. The Department and Transport
for London are jointly sponsoring the Crossrail programme to deliver
a new rail service for London and the South East. When complete,
the railway will run from Reading and Heathrow Airport in the
west, to Abbey Wood and Shenfield in the east. The programme involves
construction and improvement works costing up to £14.8 billion,
including: building a new underground railway across central London;
improving existing tracks to the east and west of London, and
building and upgrading stations. It also includes buying a new
fleet of trains at a cost of £1 billion, and appointing a
new operator for the service. Crossrail Limited is delivering
most of the programme, with Network Rail undertaking the work
on existing sections of railway.
2. Crossrail is a textbook example
of how to focus on the essentials of programme management, including
defining a realistic scope, establishing a management team with
the necessary skills and securing the required funding. Two
years of planning took place before the construction programme
began on Crossrail, allowing the scope of the programme to be
well defined, resulting in only a handful of subsequent changes
being required. Roles and relationships were clearly established
in the programme's founding agreements, and Crossrail Limited
had to pass the sponsors' early programme reviews to prove it
had the right skills and capabilities in place. The current funding
of £14.8 billion for construction work was agreed after a
series of early examinations into costs, partly driven by the
2010 spending review.
Recommendation:
The Department should capture the lessons it has learned
from the Crossrail programme and apply these to its other projects,
most notably High Speed 2. It should also promote the lessons
from Crossrail, which are applicable to other major projects,
widely across government.
3. Transport projects are assessed
using benefit-cost ratios that do not capture the full benefits,
thereby understating the case for investment. The Crossrail
programme followed standard practice for transport investments
by developing two benefit-cost ratios. While one included an assessment
of some wider economic impacts, such as increased productivity
from greater clustering of firms and labour market effects, the
ratio used in deciding whether the project should go ahead excluded
these and other measurable benefits, such as changing property
values or land use. Crossrail Limited and Transport for London
have been researching how to develop more robust estimates of
these wider benefits, which are challenging to measure.
Recommendation:
The Department needs a clearer understanding of the wider
economic benefits of transport projects which should be included
in its investment decisions.
4. The full rationale for proceeding
with Crossrail was not made clear. The business case for Crossrail
had a benefit-cost ratio of less than 2:1, and focused on the
need to provide transport for a rapidly increasing population
and to avoid choking economic growth in the South East. It was
not made clear that the Department also took into consideration
factors such as the better use of land in East London when deciding
to invest in the Crossrail programme, rather than alternative
projects elsewhere.
Recommendation:
The Department should clearly set out how it weighs up different
factors, including the benefit-cost ratio, in its decision making,
and apply consistent criteria to appraising the projects in its
portfolio.
5. Smaller transport projects
have access to fewer resources and less expertise making it more
difficult for them to secure funding from the Department.
The Department has a portfolio of both large and small projects
across the country. However, small projects appear to be at a
disadvantage, despite some of them having very high benefit-cost
ratios, as they find it harder to secure funding. This is partly
a result of local authorities having differing levels of skill
and capability to develop business cases, and a lack of resources
compared to central government to secure help with this.
Recommendation:
The Department should share its data and expertise in assessing
transport projects with local authorities to strengthen the relative
case for smaller projects.
6. The Department cannot maximise
contributions from private sector beneficiaries of transport projects
if it does not fully understand the benefits that projects will
bring. The Department did not fully realise how the Crossrail
programme would benefit London businesses. As a result, it had
mixed success in securing the contributions it had negotiated
with businesses. While Heathrow Airport Limited will now only
provide £70 million, less than a third of the funding originally
agreed, the Department has been more successful with London businesses
where the benefits of the project have been better understood
and explained to the beneficiaries.
Recommendation:
The Department should establish and use a better understanding
of the wider economic benefits of transport projects to help it
to maximise contributions from beneficiaries of future transport
projects.
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