Case Study

Case
Study

Heathrow Express

Case purpose

Sometimes "the way we do things around here" has to be challenged firmly and decisively. This is a case study that shows two business leaders stepping up to a crisis and managing to achieve the outcomes they wanted to.

Case Description

Background

BAA needed a fast passenger link to central London from Heathrow, to cut journey times especially for business passengers. They chose to build a fast rail link into Paddington but not to let it be integrated with the rail network and to run it privately. The main construction contract, including building the tunnels beneath the airport was let to Balfour Beatty.

Traditional construction industry organisation is to have teams both sides of each major contract making sure that the terms of the contract are complied with. So the client has a team of people watching the main contractor do their job, and there is man-to-man marking in project meetings.

As Sir John Egan, then chairman at BAA, tells the story, the crucial engineering concern was the airport tunnels. If the airport was disrupted by problems with the tunnels, the losses to BAA could easily outstrip the entire future value of the rail link.

The organisational issue

BAA had chosen Balfour Beatty as the best possible tunnelling contractor as they had just completed the channel tunnel. BAA considered that they did not understand tunnelling techniques well enough to challenge Balfour Beatty on their performance.

The key measure in the contract was the subsidence of the ground surface due to tunnelling underneath. This was supposed to be an indicator that problems might be developing. Above a certain threshold, Balfour Beatty were supposed to stop tunnelling and take remedial action. This would incur time penalties and extras costs.

The danger signs

For several weeks in succession the subsidence figures reported by Balfour Beatty were right at the threshold limit. Further, there were reports by workers in the tunnel that subsidence was excessive. None of this led to remedial action and BAA did not ask for the situation to be reviewed, despite the normally fierce challenges about performance.

One night while the tunnel was empty, it collapsed, leaving huge hole in the surface of the airport. By sheer chance the hole did not disrupt airport operations beyond the initial safety checks.

A crossroads

Normal practice in such cases would be to immediately sue the contractor for damages to operations and to the project. However, Sir John Egan decided to put the project first: there was no way the rail link would get built on time if there was a legal battle, and the revenues from the link were more important to BAA than the damages.

A crisis meeting was held with Balfour Beatty with the following main agreements:

The main aim was to get the link built on time and to cost.
The only way to change the cost and time profile of the project was to change the culture.
The design would be changed to use the site of the collapse as a station.

The new culture

The size of the project team would be slashed by eliminating man-to-man marking altogether. The client and contractor would work together as partners and a team of consultants was hired to help them do so. Any issue that came up between client and contractor that could not be resolved by the team was guaranteed to be sorted between the company chairmen.

The programme went ahead on that basis after a delay of more than six months while the Health and Safety Executive (HSE) investigated the tunnelling method being used to see if it was safe to use. The project was completed on time and went into service. After the project was finished there was some legal argumentation about the status of the contracts that had been abandoned mid-project.

Leadership outcomes

The judgment Sir John Egan made was this. If the existing culture of close marking bought in practice no protection from the key risk he had identified, then it was not worth having. If it was not worth having, its large cost had no justification and the entire system of checking and cross checking other people’s work should be done away with, in favour of the team taking joint responsibility for its actions.

In taking that decision, the received wisdom and practice of the entire industry sector was overturned. One reason Egan was able to do that was that he came from a different sector, from manufacturing, another reason was the dominant position of BAA in the industry and a third was political support.

Despite the excellent performance of the project under the new culture there has been no general move towards copying the style in order to improve performance elsewhere in construction.

Questions about leadership

What risks did the company chairmen take by taking the decisions they did? What risks to themselves? What risks to their companies?

Given the traditions of the industry would you emphasise the leadership shown after the crisis or the lack of leadership before the crisis?

How did the crisis change the nature of leadership and the demands for leadership?

Source

Prepared by Aidan Ward, October 2001. Revised October 2002.

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