Report

by the Comptroller
and Auditor General

Department for Transport

A memorandum on the Crossrail programme

HC 1924 Session 2017–2019 28 February 2019

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The National Audit Office scrutinises public spending for Parliament and is independent of government. The Comptroller and Auditor General (C&AG), Sir Amyas Morse KCB, is an Officer of the House of Commons and leads the NAO. The C&AG certifies the accounts of all government departments and many other public sector bodies. He has statutory authority to examine and report to Parliament on whether departments and the bodies they fund, nationally and locally, have used their resources efficiently, effectively, and with economy. The C&AG does this through a range of outputs including value-for-money reports on matters of public interest; investigations to establish the underlying facts in circumstances where concerns have been raised by others or observed through our wider work; landscape reviews to aid transparency; and good-practice guides. Our work ensures that those responsible for the use of public money are held to account and helps government to improve public services, leading to audited savings of £741 million in 2017.

Report by the Comptroller and Auditor General

Ordered by the House of Commons
to be printed on 25 February 2019

This report has been prepared under Section 6 of the National Audit Act 1983 for presentation to the House of Commons in accordance with Section 9 of the Act

Sir Amyas Morse KCB
Comptroller and Auditor General
National Audit Office

22 February 2019

This memorandum sets out background information about the Crossrail programme and the current position.

© National Audit Office 2019

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007232 02/19 NAO

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Introduction to this guide

We have produced this memorandum on the Crossrail programme to support Parliamentary scrutiny of Crossrail in light of events that transpired during the second half of 2018. From July 2018, it became clear that programme costs were increasing significantly. In August 2018 Crossrail Ltd announced that it would not meet planned opening dates for the railway. In November 2018, the Chair of the Committee of Public Accounts wrote to the Comptroller and Auditor General and asked him to examine the reasons for cost and schedule increases.

The final cost remains uncertain. There is currently no date for when the railway will be fully operational.

This Memorandum sets out the background to the Crossrail programme, including why and how it is being built, and who is building and paying for it. It also includes public statements about when the Department for Transport (the Department), Transport for London (TfL) and Crossrail Ltd expect services to operate, how much they currently estimate the programme will cost, and what funding has been committed to the programme. It is based mainly on publicly available information.

The National Audit Office (NAO) will be publishing a value-for-money study on the programme in Spring 2019. The NAO’s report will examine:

the underlying causes of the delays and cost increases;

the reasons why the programme unravelled in 2018, and why issues emerged so quickly and with such a significant cost increase; and

the actions sponsors and Crossrail Ltd have taken to get the programme on track, and our assessment of whether these actions are likely to be sufficient.

Depending on the progress of the programme by the time we report, it will also set out the expected forecast cost and delivery schedule, and assess the programme’s remaining future risks.

Key facts

Summary

What is Crossrail?

Introduction

Crossrail is a major programme to run new, direct rail services between Reading and all passenger terminals of Heathrow Airport at the western ends of the railway, through a new underground section beneath central London to Shenfield in Essex and Abbey Wood in south-east London at the eastern ends.

When complete, the railway will be around 118km long, with around 26 miles (42 kilometres) of new tunnels in the central section between Paddington and Canary Wharf, and at Woolwich. There are 10 new stations being built as part of the Crossrail programme, and a further 31 are being improved.

Once Crossrail is open, it will become part of TfL’s rail and underground network, and will be known as the Elizabeth line.

History of the Crossrail project

Crossrail has a long history. In 1974 and 1980, feasibility studies concluded that it would be too costly a scheme to build and in 1994 a private members bill to build Crossrail was defeated. The current incarnation of Crossrail goes back to 2002, when the newly formed Cross London Rail Links (which became Crossrail Ltd in 2009) assessed the feasibility of the scheme again, after the Strategic Rail Authority recommended that new rail links should be built across London to relieve existing and forecast overcrowding and to reduce congestion on the rail network between east and west. Legislation required to build the railway gained Royal Assent in 2008 in the form of the Crossrail Act. Construction started in 2009 on the first Crossrail site, Canary Wharf station.

Elizabeth line services

When Crossrail is complete and fully open, passengers will have access to a large number of new services for travelling between east and west. Figure 3 summarises the promised peak-time service frequency.

Why are the government and TfL building Crossrail?

Increasing capacity and reducing congestion

One of the main objectives of Crossrail – and central to the business case for the programme – is the need to increase capacity on the underground and main-line rail network in London to meet future demand, thereby reducing congestion on some of the most overcrowded lines on the London Underground network. According to Crossrail Ltd’s website, Crossrail will increase capacity on the rail network in central London by around 10%.

In 2010, the Crossrail business case forecast that London’s population would continue to grow, with nearly 1.3 million additional people living in London and 750,000 new jobs being created between 2010 and 2031, and that annual growth in demand for peak-time public transport would increase to around 1.5% a year. At that time, Crossrail Ltd estimated that Crossrail would carry around 200,000 people each day during the morning peak.

Figures 4a and 4b shown on the right, which are taken from the 2010 business case, show that Crossrail Ltd was forecasting that the introduction of Crossrail services to the network could result in peak-time reductions in overcrowding of between 20% and 60% on the Bakerloo, Central, District and Jubilee lines of the London Underground as well as reductions in overcrowding on the national rail network.

Improving connectivity

Improving connectivity was one of Crossrail’s main objectives. When the railway is fully open and all services are running – the timing for which is not yet clear – Crossrail will provide a direct link between London’s existing major employment centres, including Heathrow, the City of Westminster and the West End (Paddington and Bond Street), the City of London (Farringdon and Liverpool Street) and Canary Wharf. Crossrail has interchanges with most London Underground lines, the Docklands Light Railway, and the London Overground, as well as main-line stations including Stratford, Woolwich, Paddington and a number of stations on the Great Western and Great Eastern main lines.

Government and TfL projections of the benefits of Crossrail

The benefit–cost ratio in the latest 2011 update of the business case was 1.97. This means every £1 invested in Crossrail would achieve £1.97 of benefits to the economy. The assessed benefits of Crossrail in the economic appraisal of the programme are shorter journey times and less congestion. This is within the Department’s definition of ‘medium’ value for money, a range of 1.5 to 2. The benefit–cost ratio increases to £3.10 of benefits for every £1 of investment in Crossrail if estimated wider economic benefits are included. Crossrail Ltd has not updated the business case since 2011.

The business case states that Crossrail will bring about a wide range of additional economic and social benefits. For example:

The Elizabeth line will bring 1.5 million more people within a 45-minute commute of the existing major employment centres of the West End, the City and Canary Wharf (up from 5 million currently), and make major international gateways like London Heathrow more accessible.

Crossrail will support up to 14,000 construction jobs and 1,000 jobs operating and maintaining the railway once complete.

Who is paying for Crossrail?

The Crossrail funding and financing model

How the funding position has changed

Funding for the project has increased by £2.8 billion to £17.6 billion

In 2007 the government announced a funding package from project sponsors of £15.9 billion for the infrastructure elements of the project, including improvements to the existing network to be delivered by Network Rail.

In 2010 project sponsors reduced available funding to £14.8 billion to reflect savings identified and revised cost estimates.

Reflecting cost pressures, in July 2018 the Department announced that project sponsors had agreed an additional £590 million of funding, bringing the overall funding to £15.4 billion.

Reflecting delays and further cost increases, in December 2018 the Department announced that it would loan £1.3 billion to the Greater London Authority (GLA). The GLA intend to repay this loan via London’s Business Rate Supplement and from the Community Infrastructure Levy. In addition the Department announced a £750 million loan could be made available to Transport for London (TfL) as additional contingency. The GLA has also agreed to make an additional cash contribution of  £100 million. The total funding package for the infrastructure project is now £17.6 billion. The final cost of the programme is not yet known.

The upfront capital cost of rolling stock and depot is around £1 billion. The capital cost of the trains was funded directly by TfL and is outside the main funding package shown in Figure 7. In January 2018, TfL announced its intention to sell the rolling stock and to lease it back from the buyer, in order to release capital to invest in the enhancement of other tube lines. This transaction has not yet been concluded.

Who is delivering Crossrail?

Post publication this page was found to contain an error which has been corrected (Please find Published Correction Slip)

How governance and delivery works

Sponsor oversight

The Department and TfL are jointly sponsoring the Crossrail project. A number of agreements formalise delivery and governance arrangements:

An agreement between the Department and TfL, which sets out the respective responsibilities of the two sponsors and how the programme will be governed.

A Project Development Agreement between the Department, TfL and Crossrail Ltd, which defines Crossrail Ltd’s overall responsibility for successful delivery of Crossrail, including construction, integrating the programme and making preparations for operating the railway. The project development agreement did not state how sponsors would gain assurance about Crossrail Ltd’s readiness to move to the operational phase of the programme.

A protocol between Network Rail and Crossrail Ltd sets out Network Rail’s responsibilities for delivering the surface elements of the route.

A joint sponsor board oversees the programme and meets monthly to discuss progress on the programme. A joint sponsor team supports the sponsor Board, and is made up of staff from TfL and the Department. The Project Representative (P-Rep) is a team of engineers and project management specialists from engineering firm Jacobs that is contracted by the sponsors to provide support and advice to the sponsor team and sponsor board. It reviews and provides commentary on Crossrail Ltd’s regular progress reports, as well as carrying out focused reviews of particular aspects of the programme.

In the project development agreement, the sponsors and Crossrail Ltd agreed a set of ‘intervention points’ to encourage Crossrail Ltd to keep its own direct costs within available funding, and set out actions sponsors could take in the event that forecast costs increased above specified thresholds. Crossrail Ltd’s forecast costs breached the first two intervention points in November 2015 and June 2017 respectively, which resulted in sponsors seeking assurance that Crossrail Ltd could bring costs under control.

The project formally breached the final intervention point in May 2018. At this stage, TfL could have required the Department to take ownership of Crossrail Ltd and either wind-up or continue with the project. In the event, sponsors decided not to take this option, but sought further assurances from Crossrail Ltd that it could bring costs under control.

How governance and delivery works

Delivery

Crossrail Ltd is a company wholly owned by TfL that is responsible for delivering the programme, from building the line and stations, through to integrating systems and providing an operational railway. The main governance body overseeing delivery of the programme is the Crossrail Ltd Board. Sponsors’ oversight of the programme has been through appointed non-executive members of the Board and through discussions with the Crossrail Executive at the Sponsor Board. The Crossrail Board does not report to the sponsor Board.

The Crossrail delivery model, which involves the establishment of a separate delivery body, was previously used on the programme to develop the Olympic Park (now the Queen Elizabeth Olympic Park) in Newham, east London, and to construct the venues required for the 2012 London Olympic and Paralympic Games. This model is now being used on, for example, High Speed 2. The Crossrail model differs from the Olympics and High Speed 2 in that the Olympic Delivery Authority was, and High Speed 2 Ltd is, a non-departmental public body sponsored by government departments, and chief executive officers who are/were also accounting officers.

Crossrail Ltd earned autonomy from the sponsors to deliver the programme – meaning that it had, for example, authority to award major contracts – by passing four review points between July 2008 and April 2011. In our January 2014 report on Crossrail we recommended that the Department should finalise its plans for the development of governance arrangements as appropriate for the transition from construction to operation.

Suppliers

Crossrail is being delivered through contracts between Crossrail Ltd and a range of private sector suppliers, including programme delivery partners, Bechtel and Transcend (a consortium of AECOM, CH2M Hill and Nichols Group), Siemens, and other joint ventures from firms including Alstom, Costain, Skanska and Balfour-Beatty. These main contractors have contracts with other suppliers for the supply of services, materials and components of the railway. The contract to design, build and maintain the trains is between TfL and Bombardier Transportation.

Although Network Rail is a public sector body sponsored by the Department, on the Crossrail programme it functions as a partner to Crossrail Ltd, funded directly by the Department, with its responsibilities set out in the protocol agreement between Network Rail and Crossrail Ltd.

Crossrail Ltd

There were significant changes to the executive team and board during 2018 to strengthen Crossrail Ltd’s capabilities:

The Crossrail Board approved the appointment of a new executive management team during late 2018. The sponsors also approved the appointment of the chair and chief executive.

Crossrail Ltd’s current Board of Directors is chaired by Tony Meggs, previously the Chief Executive of the Infrastructure and Projects Authority, following the resignation of Sir Terry Morgan in December 2018.

The new Chief Executive, Mark Wild, was previously a non-executive member of the Crossrail Board and has been appointed on secondment from his role as Managing Director of London Underground.

Three members of Crossrail’s Board have been with the project for more than one year (Figure 9).

The sponsors have increased their representation on Crossrail Ltd’s Board to increase scrutiny and support transition to operations:

The Board now includes two non-executive directors nominated by the Department.

TfL now has two appointed non-executive nominees on the Board.

Up to mid-2018, each sponsor only had one nominated non-executive member on the Board.

Crossrail Ltd, previous Board

Post publication this page was found to contain an error which has been corrected (Please find Published Correction Slip)

Issues identified with governance and information on the programme

How is Crossrail being delivered?

The main component parts of the programme

The Crossrail programme has the following main components:

Tunnels

The 26 miles of Crossrail tunnels were created by eight tunnel-boring machines, each lowered into a series of shafts along the route. The machines cut their way beneath London with precision, removing spoil and creating the main structure of tunnels as they went.

Systemwide track and electrification

Once the tunnels had been built, concrete slab track and the steel railway itself could be laid, as well as the overhead lines required to provide power to the trains, and the systems needed to operate the railway.

Stations

The Crossrail programme required the construction of 10 new stations; seven of them below ground in the central section and three on the existing network. The programme also included the enhancement of 31 existing stations. Each station platform is around 240 metres long to accommodate the 200-metre-long, nine-carriage trains. A range of complex IT systems support management of the stations, including keeping passengers  safe, and ensuring that they can move efficiently through the stations.

Trains and depots

In February 2014, TfL awarded the contract to design, build and maintain the trains that will run on the Elizabeth line (including a maintenance depot). The new Class 345 trains have new systems to provide passengers with information. Passengers are able to walk through the train from carriage to carriage and each train is designed to carry 1,500 passengers.

Railway operations

In July 2014, TfL awarded a concession contract to Mass Transit Railway (MTR), a transport operating company based in Hong Kong, to operate Elizabeth line services. MTR Crossrail began running services on the eastern section of the railway in May 2015 and has a contract to operate services for eight years, with an option to extend to 10 years.

Post publication this page was found to contain an error which has been corrected (Please find Published Correction Slip)

Integration of a complex programme

The design of the programme involves a number of complex elements.

The trains

Crossrail’s new Class 345 trains are the first of a new class of train involving new systems and software. They will be run with nine carriages and will be nearly twice the length of a tube train, and are designed to carry 1,500 passengers.

Signalling

The Crossrail trains will use an on-board Train Control and Management System (TCMS) to integrate information from a range of signalling systems to maintain safe and effective operations. The nature of the Crossrail route, which runs on both the existing national network and a new section of underground railway will use three separate signalling systems: Train Protection Warning System (TPWS), which is used on the mainline sections of the railway and is focused on ensuring safe operation of the railway; and two separate systems – Communication Based Train Control (CBTC) and European Train Control System (ETCS) – which use technology on the trackside and train to identify the position of trains and issue instructions to both maintain safety and enable the railway to operate with shorter distances between trains to increase overall capacity. The safe and efficient operation of Crossrail services depends on the TCMS software being able to switch between these three systems as the trains move from one part of the route to another. This transition between signalling systems has not been used in this way before on the UK’s railways. Figure 12 shows which signalling systems are being used on which sections of the railway.

Operational systems

To maintain safe and efficient management of stations, Crossrail will use Supervisory Control and Data Acquisition (SCADA) software. These systems require data collection sensors to be installed in stations to enable key systems such as on-platform sliding doors, lifts and escalators to be monitored effectively.

Stations

A number of the stations on the Crossrail route have been designed to a high architectural specification. Examples of complex design features include the roof and ceiling of the ticket hall at Farringdon station and the extensive use of a large steel and glass canopy at Paddington station to bring in natural light.

Mark Wild, Crossrail Ltd Chief Executive, has stated that integrating the stations into the new railway and into the wider London underground and national rail network is a significant undertaking. There are around 60,000 different elements that must be integrated for the stations to operate effectively. TfL would usually undertake this activity once a year. Crossrail Ltd is developing its schedule and approach to do this for 10 stations in a compressed timeframe.

Integration of a complex programme

When will Crossrail be complete and open?

Events leading to the announcement of delays

From late 2017, cost pressures escalated, eventually causing costs to exceed the revised £14.8 billion funding agreed by sponsors in 2010.

Risks to the schedule began to materialise. First there were delays to the train software, and then delays to the testing of the trains in the tunnels. Crossrail produced a revised schedule to allow testing while construction and fit out continued, but in August 2018 it was decided that the December 2018 deadline for opening the central section could not be met.

Progress against the timetable for opening the railway

The Department and TfL originally planned for the central section of the railway to start running from December 2018. In 2010, sponsors decided to stagger the opening of the railway by opening the railway in sections and introducing services in a phased way. This was in order to reduce risks – and therefore reduce the costs allocated to risks – associated with opening the railway ‘all at once’.

As Figure 14 on the right shows, Crossrail Ltd did not open the full, planned services for stages 1 and 2 on time, and it remains unclear when stages 3, 4 and 5 will open. New class 345 Bombardier trains are in use between Shenfield and Liverpool Street as part of the opening of stage 1 services, but are not yet in use between Heathrow and Paddington as had been planned. This is because the software required to use the ETCS signalling system that is on the line into Heathrow has not yet been successfully implemented and tested.

Project sponsors have agreed a concession arrangement with Mass Transit Railway (MTR) to operate the new railway. MTR are paid a performance-related fee for operating the railway, with TfL retaining revenues. Because of the delays to opening the railway, TfL’s revenues will not start to increase significantly until stage 5 is complete and full end-to-end journeys through central London are possible. TfL’s December 2018 business plan states that its revenues could be around £600 million lower than expected as a result of delays to the opening of Crossrail services. Because Crossrail Ltd and sponsors have not yet confirmed the opening dates for stages 3, 4 and 5, these estimates remain uncertain.

Crossrail Ltd is currently developing a new schedule for the programme.

Remaining work

There remains significant work to complete in key areas: the construction and fit-out of the tunnels and stations; and the testing of the signalling and other systems.

Construction and fit-out of the tunnels and stations:

Work to fit-out tunnels with, for example, cabling and equipment needed to support signalling systems is not yet complete.

Stations are in different states of completion and there is still significant work to be completed. Bond Street and Whitechapel stations have caused particular problems. Stations are not required to be fully completed in order for some services to start running but opening the railway without stopping at some unfinished stations will delay passengers receiving the full benefits of the railway, and significant further construction work could continue to delay testing.

Testing of the signalling and other systems:

This includes the lineside signalling systems, the signalling equipment on the trains, as well as the station systems that remotely monitor and control systems, for example, ventilation.

The software and infrastructure required to operate the complex signalling systems on trains and at the trackside has been significantly delayed. These systems are critical for the safe and efficient operations of services.

Crossrail Ltd is adopting an incremental approach to the testing of trains running through tunnels, gradually increasing the number of trains tested on the central section, before beginning testing across the entire line. Crossrail Ltd does not yet know how long this testing will take.

Trial running and preparing for operations:

Once the signalling and safety systems are complete and full testing has been carried out, the railway will be ready to be commissioned and handed over to the operator to begin trial running. This process allows operators to test how the service will work in practice, and refine areas such as passenger management, and how to address delays and faults when they occur.

Previous examinations of Crossrail by PAC and the NAO

Relevant reports and transcripts of the Committee of Public Accounts (PAC)

Crossrail, Eighth Report of Session 2014-15, Session 2014-15, HC 574, July 2014.
Available at: www.parliament.uk/business/committees/committees-a-z/commons-select/public-accounts-committee/news/report-crossrail/

Oral evidence, Rail Franchising in the UK, HC 689, February 2018.
Available at: http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/public-accounts-committee/rail-franchising-in-the-uk/oral/79138.pdf

Oral evidence, Department for Transport: Implementation of Brexit, HC 1657, October 2018.
Available at: http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/public-accounts-committee/department-for-transport-implementation-of-brexit/oral/92048.pdf

Oral evidence, Rail management and disruption, HC 1793, December 2018.
Available at: http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/public-accounts-committee/rail-franchising/oral/93794.pdf

Relevant report of the National Audit Office (NAO)

Crossrail, Session 2013-14, HC 965, January 2014.
Available at: www.nao.org.uk/report/crossrail-3/

Report by the Comptroller and Auditor General

A memorandum on the Crossrail programme

HC 1924 Session 2017–2019

ISBN 9781786042439

Ordered by the House of Commons to be printed on 25 February 2019

CORRECTION

On page 15 of the memorandum:
We propose changing the wording describing the role of the Joint Sponsor Board in the governance diagram on page 15 from:

Monthly forum sponsors to receive updates on, and challenge, programme progress

to:

Monthly forum for sponsors to receive updates on, and challenge the Crossrail Ltd executive on, programme progress

This then makes it clear that the Crossrail exec attends sponsor board and is challenged on progress. We also propose including a solid red arrow on the right hand side of the diagram from the box ‘Crossrail Ltd’ to the box ‘Joint Sponsor Board’.

See the corrected Figure 8.

On page 21 of the memorandum:
We also propose changing the date when MTR Crossrail started running services on the eastern section of the line on page 21 from:

MTR Crossrail began running services on the eastern section of the railway in June 2017

to:

MTR Crossrail began running services on the eastern section of the railway in May 2015

The corrected paragrah should read

Railway operations

In July 2014, TfL awarded a concession contract to Mass Transit Railway (MTR), a transport operating company based in Hong Kong, to operate Elizabeth line services. MTR Crossrail began running services on the eastern section of the railway in May 2015 and has a contract to operate services for eight years, with an option to extend to 10 years.

On page 19 of the memorandum:
We also propose changing the date the finance director was no longer a board member, from:

Finance Director Mathew Duncan (until 19 November 2018)

to:

Finance Director Mathew Duncan (until 9 November 2018)

See the corrected Figure 10.

007232-001 | February 2019

Design and Production by NAO External Relations
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