Crossrail report warns of cost pressures as Elizabeth line nears completion

A report into the Crossrail project by the National Audit Office (NAO) is warning that while cost increases and delays are in line with Crossrail’s 2020 estimates, they exceed the available budget and there are still significant issues that could arise as the railway is brought into service.

The report gives an overall impression is of a project where the senior management was unaware of what was going on until early 2018 and threw money at catching up, until they had to announce the first delay in August 2018. The new management took over in November and it took them a year to unravel the problems fully while at the same time trying to keep the project going. While the covid lockdowns added to the delays, they also gave the management more time to get to grips with the project, which is now being better managed.

The complexity of the project added to the problems, and the NAO report recommends that future projects of this scale need to spend a lot more time in planning before putting a spade in the ground. That may however conflict with the political need to get things started lest they be cancelled by a subsequent government.

Crossrail was due to open in December 2018, but announced a 9-month delay to the project just a few months before that deadline, which in turn later turned out to be exceptionally optimistic. New management put in place in late 2018 had to seek more money to cover the longer construction phase.

This, and the COVID-19 pandemic, resulted in a further forecast cost increase of £1.9 billion and 10 to 20 months of delay since May 2019.

The NAO report says that the cascade of delays and cost overruns during 2019 and 2020 meant that repeated opening date announcements were unachievable because the programme was further from being complete than the new management understood.

A factor in this is that the contractors were only hitting around 30% of their milestones, but the Covid related pause in early 2020 gave the management time to revamp working practices and the contractors are now hitting closer to 90% of their milestones.

As has been said a few times in the past, with hindsight, Crossrail is too complicated a project. It would have been better to launch with a simpler system, and upgrade later, but as the UK’s first fully digital railway, while the complexity has caused a lot of problems, there are hoped to be long term benefits.

A digital railway means that digital systems control all aspects of the railway, such as air conditioning, lighting, platform doors, ventilation, signalling software and train display systems.

The complexity added to the problems in running tests, and Crossrail’s initial plans to accept assurance documents supplied by the contractors and sample test maybe 20 per cent for compliance had to be scrapped and replaced by Crossrail testing everything themselves.

Crossrail is also short of cash. In August 2020, Crossrail said it would need between £800 million to £1.1 billion to complete the project. With £825 million of additional funding secured, the current estimate is that Crossrail will need an additional £30-£218 million to complete the project.

Of the 36 main contracts on the project, just 6 of them account for three-quarters of the cost increase since December 2018 — Bond Street, Paddington and Whitechapel stations, along with track equipment, signalling and control systems.

Bond Street station had been budgeted originally at £110 million, is now expected to cost £660 million. Whitechapel has risen from £110 million to £831 million, while Paddington station went from an original budget of £147 million to £647 million.

The track, overhead line equipment and logistics contracts were expected to cost £293 million, but are now estimated at £1,173 million. The communications and controls systems contracts jumped from £43 million to £263 million, while the central core tunnels signalling and control systems costs rose from an original budget of £51 million to £236 million.

Of the rest, 17 contracts did not see any cost rises, and 13 contracts accounted for the rest of the rise in costs.

Nearly two-thirds of the cost rises across the project are put down to delays in completing the project. The Crossrail team were also uncovering a lot of work that was either not completed, or completed to the wrong specification and needed to be corrected. Some specification changes, particularly related to fire safety added to the delays.

The main worry money-wise is that the current funding agreement will be exhausted sometime between next July to September, which is after the Elizabeth line is expected to open, but may cause issues with completing the next stages of the project. At the moment, how that funding gap will be addressed is still a topic of discussion between the government, the GLA and TfL.

Despite the cost overruns, Crossrail is still net profitable for the UK, as it will generate a wider economic uplift of around £1.88 when it opens for every £1 spent. Not good by DfT measures, but at least not a loss.

The NAO report however warns that there seems to be a lack of planning in the various local government bodies to maximise those economic benefits so that the nearly £19 billion spent on Crossrail can be most widely felt.

Gareth Davies, the head of the NAO, said “There are now encouraging signs that Crossrail is in a more stable position. However, it will require further funding to complete, and there are still significant risks that must be managed as the Elizabeth line undergoes operational testing. As the Elizabeth line nears the start of services in 2022, TfL and government must think through how to realise the benefits of the railway in order to maximise the return on almost £19 billion of investment.”