EXPERIENCE FROM the industry suggests that, during the project to build Crossrail, the brand new underground railway line across London, eight people should die, killed while at work. Asked what keeps him awake at night, this is the issue that finance director David Allen centres on.
“If you were to extrapolate industry norms across the volume of work that we expect to do on Crossrail, we would kill eight people and we don’t want to kill anyone – we don’t want to hurt anyone at all if we can help it,” says Allen, adding: “That’s the thing that worries me most.”
Crossrail is worth a huge £14.8bn, the largest civil engineering project in Europe at this moment, an epic sum to spend on infrastructure at a time when austerity has become the mantra of governments everywhere. Involving thousands of staff, the Crossrail line will run 73 miles from Maidenhead, out west in Berkshire, to Shenfield and Abbey Wood in Essex to the east, including 13 miles of tunnels under the capital. Its complexities are immense, not least the effort to keep it on track to meet its budget. But it’s the safety issue that Allen unhesitatingly airs when prompted about what really worries him. He reveals Crossrail has a special project tackling construction work fatalities.
“We have a big programme of work around Target 0. And the thing is that I have two sons and I would like them to be able to work in the construction industry, but it has to be a safe industry and we have a job to do to make sure that we are making it as safe as possible,” he says.
Billions at stake
Crossrail’s offices are in Canary Wharf, less than a tube stop from the site of the new Crossrail station. It is here that Allen talks with obvious enthusiasm about the challenges and intricacies of his involvement in this grand scheme.
And it is a big job – considerably bigger than the Olympics in terms of cost. The job will run for nine years from 2009 to 2018, and currently involves about 4,000 staff with 22 worksites along the route. A report to Parliament in July last year forecast the project would meet its budget and said that, up to that point, £1.9bn had already been spent. Spending for the current year is expected to be £1.1bn, but it should be at an annual rate of £2.5bn by 2015. Contracts worth £4.5bn have so far been awarded, including the tunneling and construction work for stations at Paddington, Farringdon, Whitechapel and Liverpool Street. Visitors to the West End will already be aware of the work underway to clear the Tottenham Court Road site.
Complexity does not end with planning for the construction. Even the funding is multi-faceted. The biggest chunk, £7.1bn, comes from the mayor through the Greater London Authority. The second-biggest, £4.7bn, comes from the Department for Trnsport, with £2.3bn coming from Network Rail. The rest of the money, around £700m, comes as a mix of funding from various people including BAA and Canary Wharf Group.
As we meet for this interview, the tunnel boring has just started, which marks the beginning of the major construction phase. However, what most impresses about Allen is that all of this seems front of mind, perfectly recalled like a military planner mustering his forces. When questioned, he at first appears to be playing a straight bat, hitting the approved project messages. But as the conversation goes on, it becomes clear that Allen is not putting on a front. This is how it is. He believes in Crossrail.
And with billions at stake, that is how it should be. It should be complex and Allen should be revelling in that. The legions of contractors, the time constraints, the engineering challenges, the spending limits, the legacy issues, the safety concerns and the question of how it all adds up to be a vast flagship project for the British construction industry.
Indeed, Allen says the complexity is the reason he joined Crossrail, from Laing O’Rourke. “It is a networked set of activities we are undertaking,” he says, “and that complexity was a big part of why I wanted to come here. I think it is such a fascinating jigsaw to be doing: a project like this, bang in the middle of one of the world’s great cities.
“It is an incredible undertaking and applying the mix of finance and strategic decision-making, and clear communication skills – which I hope sit in my team and which I believe sit in my team – can make a difference to how we do the job.”
Crossrail’s job is to ensure the project is delivered, on budget and with value for money. In effect, it manages the army of contractors pulling the whole thing together. That task creates its own complexity, especially now that the construction work is under way in earnest. Monitoring this host is demanding and Allen is at the heart of this as part of the risk management. The team uses a tool supplied by Dunn & Bradstreet (also used by the Olympics project) to bring some rigour to monitoring the financial health of contractors.
“It is incredibly disruptive if a major subcontractor goes to the wall: you will have a delay while there are arguments over material, over plant, over how the workforce will be treated, and it is always better if you spot those,” explains Allen.
Cost control is an ever present issue for the Crossrail team. Allen has to report on spending rates to his stakeholders every period-end. His guard can never be dropped. This is a public sector project and the accountability is fierce. “All of our governance around change and the allocation of budgets is driven to ensure that we have a clear line against which to report progress, and that enables us to see where we are against the limits of funding. So it is a pretty relentless part of the finance job,” he says.
Delivering on the budget is not just about after-the-fact reporting. It was embedded in the preparation. In part, this was managed through a so-called NEC3 contract, a template drawn up by the Insitute of Civil Engineering to help define the responsibilities of employers and contractors. Allen believes this is helping hit the project schedule. Last year, Crossrail hit 45 out of 46 targets, narrowly missing only one, he says. But even Allen admits this is only the story so far. The building phase will bring its own stresses.
“As we now begin construction, we will enter the world in which some tough conversations will have to be had, and I think that will be a test of the maturity of our relationship with the supply chain,” says Allen.
Those relationships have been carefully nurtured, not just through the FD’s role, but also through regular structured meetings with Crossrail’s CEO. But it is possible that the moment tough conversations take place is when Crossrail will start making headlines.
For the time being, the project is overshadowed by the coming Olympics. It has, however, had some time in newspaper pages, not least when the current government was elected and wrung Crossrail through the Comprehensive Spending Review. Suddenly, there were doubts about the project’s future. An especially difficult time for an FD focused on cost.
Allen describes it as “a very intense period” and concedes Crossrail faced a threat from people who were “not in favour” and with “other things that they wanted money spent on”.
He saw his job as explaining the benefits case and pitch for the scope of the project to be retained: “We were certainly not complacent. We felt then and now that this is a fantastic project for Britain and a fantastic thing to do in a recession because of the value it brings to the economy and to employment locally.” In the end, the result came through while he was on leave in Cyprus. Happy holidays.
Confirmation was only the beginning and the budget pressures are not just about beating cost overrun. “The pressure we face, and what the sponsors at the Department for Transport and Transport for London want us to respond to, is to try to give back as much as possible of our contingency funding to government and that, in terms of our own stretched target, is what we are after,” says Allen.
The precise level of contingency is not disclosed for “commercial reasons”. But Allen adds he is confident. “There is a process with delivering these sort of programmes of converting risk into measured works, so you can estimate the firm cost of the work you see and then you have risk on top of it. Over time, the risk reduces as you spend the money. So we’re on that narrowing trajectory and we’re on the right sort of trajectory,” he explains.
Getting it all right and completing a project like Crossrail on time and on budget would be the pinnacle of any director’s career. An FD who achieved that might be able to write his own cheques. But Allen won’t be drawn. If it goes well, he “doesn’t expect to struggle to find my next job. If it goes badly, I’ll probably have to emigrate,” he says. The future is “only relevant” once this job is finished.
“My plan is to be here, nail this job and then hope that does earn me a shot at something interesting afterwards,” he concludes. ?