Putting a Multibillion-Euro Rail Project Back On Track
A rail project was headed for massive cost and timeline overruns. We helped save costs and win back political support.
The vision was bold: transform a major European city center by moving its main train station underground, thus freeing up a square kilometer of prime land for redevelopment, and connecting the city to the high-speed rail network. With a multibillion-euro budget and a ten-year development plan, it would be one of Europe's largest infrastructure projects ever. Backed by national, state, and local government, as well as the national rail company, the project created high expectations—and then dashed them as budget estimates proved inaccurate and were repeatedly revised upward, and delays pushed the completion date by years.
With our consortium partners, we focused on four main priorities: revising the overall project-cost calculation to create a credible number; reviewing the entire design, construction process, and technical specifications to identify cost savings; solving the issues that had caused project delays; and building world-class project-management capabilities to see the development through to completion.
The first task, revising the overall project cost, resulted in more bad news. The budget had been too optimistic in its planning assumptions and had underestimated complexities and risks. Thorough risk analysis added around fifty percent to the overall cost, a figure verified by accounting firms. This finding, though sobering, gave financial and political backers confidence that they now had transparency on the project’s full costs and risks. Just as important, it created impetus for our second task: identifying major savings.
This effort followed a step-by-step process, involving numerous internal and external experts, to identify ideas for more cost-effective design, validate and prioritize those ideas through simulations, and translate them into construction plans. As a result, we identified several major redesign opportunities—for example, optimizing rolling stock handling facilities could cut the relevant costs by half while changing specifications and procurement of railway electronics could save twenty percent.
The revised overall cost, along with the transparency we created on project risks and opportunities, restored the project's credibility in the eyes of funders—and helped reconfirm their support for full implementation. Backers were also impressed at the depth of the design-to-cost effort, which pinpointed cost-reduction opportunities in the region of ten percent of the total budget. At the same time, our operational task forces stabilized the project delivery and broke through major bottlenecks that had caused delays, thus accelerating implementation and making it feasible for the project to be completed as planned.