More haste, more speed

Norman Haste

As he delivers his speech to the Labour Party Conference, Tony Blair touches on a range of subjects, ranging from a misty-eyed reference to his 20 years of friendship with long-time leadership rival Gordon Brown to the spread of democracy in Iraq. What he fails to mention is Crossrail, the cross-London rail link that, at £9.25bn, will be the UK’s biggest construction project.

Norman Haste shakes his head as he watches the speech. “For shame,” the Crossrail chief executive chuckles as he notes Blair’s omission. “But it’s okay – as long as Crossrail is in the Queen’s speech in November”.

It’s crunch time for the project. It could be argued that this has been the case for many years on the oft-delayed and sometimes- cancelled scheme. In 1994 the megaproject was nearly introduced as a private member’s bill but the Major government got cold feet and it was thrown out. But Haste’s team is in with a chance this time with the Department of Transport willing to propose legislation in the Queen’s speech and a bill planned to be put before parliament in the spring. This bill, which is expected to take until 2006 to get on to the statute books, amounts to planning permission for the six-year build programme.

Haste is upbeat, but the problems are mounting up. The UK construction industry’s skills and capacity crisis is one of the most glaring hitches that must be tackled. Crossrail will account for 15-20% of all construction output at a time when the government also intends to build 100 hospitals and redevelop every secondary school in the country.

The strain on the construction industry may be too much to bear, yet government ministers seem unwilling to confront this. Asked if one of the government’s grand rebuilding missions will have to give way as a result of the shortages, the transport minister in charge of Crossrail, Tony McNulty, gives an answer that just does not get to the heart of the matter: “These projects will be phased – they won’t happen within 100 days of a glorious third term.” Disappointingly, former TUC president Roger Lyons, another vigorous supporter of the scheme, seems no more in touch when he responds: “We need projects like this for the industry. You see City workers becoming plumbers; the worst thing would be oversupply.” On accountants turning their hands to mending drains, it is unclear what research Lyons had in mind beyond the odd anecdotal article in The Sun or The Mirror.

Haste is more practical. Prior to his appointment on Crossrail in May 2002, he was the chief executive of UK’s largest current construction project, Heathrow Terminal 5, for six years, which is still barely half the size of Crossrail. Haste’s team has understandably looked to Europe to help deliver the Crossrail project. A recent internal research document showed that French giants Bouygues and Vinci, as well as Spanish major Ferrovial, would be among those European players that would help deliver the project. “We’re confident that we would have the whole of the capacity of the European market at our disposal. They [European contractors] are very interested in it.” Haste adds a roll call of interested UK parties, including Balfour Beatty and Laing O’Rourke.

To attract the workers, Haste would also look to implement the same kind of high-pay deal that has worked at Terminal 5, which offers skilled builders a £55,000 annual pay packet. “We do have to recognise that there is a case for modernising agreements on pay on major projects,” Haste explains, “although there needs to be some flexibility – I’m a great believer in productivity payments.”

Appreciating the skills gap, Haste would set up a Crossrail training college, expected to cost at least £150,000. This would be set up with the specialist contractors, such as the boring and tunnelling experts, that Haste hopes to have in place by next year. These firms will not be selected by cost, rather on “soft” issues, such as management strength and staff capability. This would allow a quick tender process, cutting down the overall bid costs for the project, which would be about £50m if all 11 construction contracts were competitively tendered. “Given the scale of the project it would be wrong to subject the industry to very large bidding costs,” says Haste – an attitude that would go down well with contractors bidding on large government PFI schemes. Being involved nearly two years ahead of the first construction cost would also give these specialists the time to work with design teams to reduce the cost of each project.

We have to recognise there is a case for modernising pay agreements on major projects – I'm a believer in productivity payments

Cost is Crossrail’s greatest hurdle. The £9-10bn figure that has been bandied about could be a red herring. The project is actually estimated at £7bn, but factoring in Treasury contingency cost guidelines ramps up this projection.

However, Haste admits that “the probability of us hitting that £7bn figure at the moment is 50:50. But once we’ve taken the design to a greater level of definition I think we can be 85% confident of that figure”. As long as Haste achieves that level of confidence by the time the bill reaches the floor of the House of Commons, the scheme will have the full backing of government.

This will not stop the project’s naysayers. Funding has been the focus of much of the criticism. Transport minister McNulty would not publicly commit the government to its share of the funding, vaguely referring to anything from £1bn-3bn, but Haste reveals that its share is likely to be £2bn-2.5bn.

An uplift of the business rate in the areas benefiting from Crossrail would generate a further £3.5bn. Potentially then, this could still leave a funding gap of £4.5bn.

Transport for London, which manages the capital’s transport network, is working up options to deal with this shortfall. Some of the ideas have not been popular. TfL looked at putting a tax on profits made by businesses located close to Crossrail stations as a result

of the projected boost to their trade. The likes of Tesco and the Canary Wharf Group have vehemently opposed this, and at a Crossrail fringe event at last week’s Labour Party Conference several delegates made the point that the boost to smaller businesses would not be spectacular. Haste sides with these views: “I personally think it would be very difficult for the government to impose a ringfenced tax.”

However, he does not seem to have a solution. Broadcaster John Humphrys, who chaired the Crossrail fringe event, pushed Haste, McNulty and Lyons on the funding issue, but a satisfactory resolution was not brought forward. Haste does add: “Whatever happens, the money will have to be channelled through the government [for example, through higher tax receipts].”

Haste knows how important it is to keep the government on side. As the interview draws to a close, his communications director spots secretary of state for transport Alastair Darling across a crowded room. Extremely friendly though Haste is, he does not stay to shake hands at the end of the interview, but rather runs off to exchange pleasantries with one of those key men he needs so desperately to keep on side.