Summarize the original contractual rearrangements of the Eurotunnel project and the evolution of the contractual terms over time
From the very beginning, to lower the costs of the project, the construction companies were forced to agree on the 6.5 year construction period, even though it was less than considered necessary. The conclusion of a contract with TML required numerous negotiations on the contract outline that had already been approved. Besides, the new banks entering the picture had their own ideas regarding how the work should be done. Considering all of this, the final construction agreement covering areas of tunneling, equipment works, and rolling stocks was signed. To solve potential conflicts in the future, the disputes panel was created.
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Summarize the problems that the project participants encountered in the construction phase of the project
It was assumed that the ground condition in the areas of tunneling would not present any surprises. When the tunneling process proved the opposite, new equipment and techniques needed to be tried, and that increased the costs and delayed the project. Driven by the desire to meet the deadlines, TML constructed 60 cm doors in passenger trains without waiting for the confirmation from Inter-Government Commission, which eventually claimed that the doors should be widened to 70 cm.
A change cost nearly £6 million and caused further delays. Numerous disputes between Eurotunnel and TML raised, which hindered the whole project even more. Finally, when it became apparent that the tunnel would not be constructed without extra costs, banks were very reluctant to provide new loans, worrying that the project had become too risky.
What are the root causes of these problems?
As Sam Garg stated in the report, Eurotunnel “found itself in a web of contractual relationships without knowing much about any of them” (7). And that was the central root of all the subsequent problems. The costs to build the Eurotunnel, as well as the terms to do it, were underestimated from the very beginning. Many substantial nuances (like the ground condition) were ignored, which caused a lot of delays, increased the costs of construction, and reduced the future revenue.
The contract with TML was not well thought out, which is why, soon after it was signed, Eurotunnel felt like a lot of amendments should have been moved. That, in its turn, became the reason for the controversy and numerous disputes in the relationships of Eurotunnel and TML. Finally, the project lacked guarantees and financial support from the governments, which made the whole deal very risky for the investors.
What are the potential approaches to mitigate these problems?
Probably the biggest mistake was the rejection of the government’s financial support and guarantees. Providing it, it would be possible to motivate investors more. Besides, the whole project would have been controlled better in such a case. Additionally, better research should have been conducted to evaluate the risks, such as a bad condition of the ground. The terms and costs of the construction should have been estimated by people competent in this, not the amateurs.
Garg, Sam. Eurotunnel: Eyes Wide Shut. 2016. Web.