HS2 –Britain’s New High Speed Railway
HS2 – Britain’s new high speed railwayManagement of RiskJeremy Harrison, Director Risk & Assurance, HS2 Ltd25 January 2018www.gov.uk/hs2
HS2:the new backbone of Britain’srail network
www.gov.uk/hs2
More than double the seats201712,1003,4901,72031,2008,6204,860London EustonManchester PiccadillyLeeds(Crewe/Stoke Corridor)(Doncaster Corridor)evening rush hourtotal seated capacity2033 withHS2
Fast, frequent and reliable
Trade & competitionLocal & regional marketsNew employmentNew investmentHS2 opens up neweconomicopportunities for:New exports
HS2 strategic goalsCatalystfor growthCapacity ue formoneyWorld classstandardsSkills andemploymentSustainable and agood neighbour8
25,000 during construction2,000 new apprentices1,200 NCHSR3,000 jobs to100,000s jobs throughgraduates a yearmaintain and operateregeneration/growthHS2 will providejobs for Britain:
Building HS2
Phase 1 construction statistics128 mt230km46km74kmROUTE LENGTHTUNNELSCUTTINGS14515231299STRUCTURESOVER BRIDGESSTRUCTURES UNDERBRIDGESMAIN COMPOUNDSFOR CONSTRUCTIONSATELLITECOMPOUNDSEXCAVATED MATERIAL(90% TO BE RE USED)11
HS2’s timeline
Risk Management PrinciplesPrinciple 1: Risk management applies to all aspects of HS2.Principle 2: Risks derive from objectives and stakeholdersPrinciple 3: Risk management is undertaken to reduce risk exposure, increasecertainty, improve confidence and generate greater value.Principle 4: Risk is multidimensional and values both soft issues and hard absolutes.Principle 5: Ensure clear accountability for risk.Principle 6: Provide the right information to the right people at the right time.Principle 7: Implement a pragmatic risk management solution.Principle 8: HS2 Ltd risk management is based on continuous improvement.
Enterprise Risk Management Documentation: Theory into PracticeDevelopment AgreementHS2 Risk AppetiteStatementHS2 Risk ManagementStrategyHS2 StrategiesHS2 Risk ManagementProcedure.Detailed ProceduresInterfacingProcedures/ProcessesHS2 Risk ManagementPolicyHS2 Risk ManagementPlanHS2 Strategic RiskManagementProcessDetailed Processes(maps)Template ReportsOutputs: Registers/Risk ReportingTrainingSubsidiary RM Plans
Enterprise Risk Management FrameworkIncluding Secretary ofState Retained RisksStrategicRisksHS2 Ltd Strategic RisksHS2 al risksHS2 Development &Delivery RisksBottom-UpHS2 Delivery (&Operational) RisksHS2 Operational Risks15ProceduresWider IntegrationRisksProcessesTop-DownHS2 Risk Appetite Statement“the amount of risk HS2 is prepared to accept, tolerate or be exposed to”StrategyHS2 Delivery Strategy“our approach todelivering HS2”
Risk ProcessEstablish theContextBaseline info(objectives,goals,stakeholders)Communication &ConsultationProcess and Framework based on ISO3100016
Differentiating between Generic and EmergingRisks and Inherent, Current and Target StatesGeneric RisksEmerging RisksStandard risks for our line of business“Inherent”New risks – or variants to generics“Current”“Target”Where we arenowWhere we hopeto get toWhere westartedControl FrameworkManagementactionsOur Policies, procedures,processes and guidanceRiskProfileRisk ToleranceRisk AppetiteGeneric ProfileEmerging ProfileNowTime
Creating confidenceStress Test Worst case Risk trigger 30, 70 model Wider rangesRCFBottom UpTestingP (X)QCRA 3070Bottom uprecalculationP95‘Cost to go’Absolute Risk Value18
Reference Class Forecasting – in 3 steps1. Identify relevant reference class of past, similar projects2. Establish probability distribution for the selected referenceclass3. Compare specific project with distribution, in order toestablish most likely outcome19
Building a Reference ClassWhichprojects aresuitablecomparatorsfor HS2?Statistical analysis of risk profile Risk profile characterised by distribution of cost risk in reference classes Peak P50 risk Tail Risks P50* The p-value of statistical tests indicates the strength of the evidence, if p 0.05 the test is significant – hereindicating that there is strong statistical evidence that these project types are different from HSRSource: Oxford Database, August 2015 (Sample of n 361 projects)20
Building a Reference Class Selecting past similar projects, based on statistical similarity Testing whether average, median (P50), P80, P90, P95 are statisticallysignificantly different from HSRIs this project type asuitable comparator forHSR projects? (n 39)Conv. rail (n 113)Fixed link (n 132)Metro (n 196)Road (n 658)AverageP50 P80P90P95 Statisticallysignificant difference No statisticallysignificant difference Only fixed links are comparable for the full range of estimates fromP50-P95 Final selected reference class included 39 high-speed rail projects and132 fixed links 171 projects21
Building a Reference Class for HS2 Bottom-up QRA estimates the35% contingency to be a P90 P90 9 out of 10 projectswould not exceed this envelope RCF shows that 35%contingency is equivalent to P6622
Comparison of the Different Reference Classes for DifferentPoints of the Estimate for Levels of Certainty between P20-P80140%Strategic Business Case130%120%110%Cost Risk Exposure100% 90%80%70%40% contingency covers cost riskexposure of SBC: P63 OBC/FBC: P68 Contract control totals: P79Outline Business CaseFull Business Case60%50%Contract Control Totals(total value of contracts)40%30%20%10%0%-10% 20253035404550556065Level of Certainty of the Estimate (P Value)23707580
Contingency neededKey Concern is the Tail %20%10%0%-10% 090100
Causes in the TailStated causes25 Early delays (procurement, political decision making) (Late) design/scope changes, e.g. changes discovered during testing and commissioning; station changestriggered by local government; environmental mitigation Geological risks (sinkholes, archeological finds, water tables, ground levelling, ) “Rare” risks, e.g. contractor bankruptcy, political influence (for example on contractor selection), fraud bycontractors (for example using poisonous sealants) Nominal cost increases due to Unforeseen Inflation Reduced number of rolling stock Quality risks and resulting rework Cutting of funding Unknowns in the design (particularly of safety and operations systems) Intermodal integration (long distance bus, commuter rail)
Responses to Raise Maturity26AreaDescriptionResponseDesignLate design changes due to externaldemandsHybid Bill process controls scopeFundingProblems with funding causing changesto profile. Including excessive interestpayments.Agreed funding profile up front andfunding mechanisms including necessaryinsurance strategy.AmplificationProblems on critical path escalate rapidly Designing schedule to create higherconfidence at critical points eg end ofwithout vement in designIntegrationFailing to appreciate and understandscale of integration required to deliverQualityProblems with quality of work completed Assurance design. Hand over pointscontrol.ArchaeologySignificant volumes of archaeology andgeology issuesAn allowance made and base case istowards the worst caseInflationInflation greater than expectedSpecific recognition and approach to thisissue.Structure of contracts. Assuranceapproach. Technical specification andassurance
Front-End Capability Maturity Model(Said Business School, Oxford – Prof Bent Flyvbjerg)5. Master BuilderLeadership Wide range ofcapabilities with fewpockets of excellenceSlow management Careful balanceinformation leads tobetween individual andpredictable surprisesorganisationalcapabilitiesBiased and narrowmanagement reporting High-powered expertsdeaf to weak signalslack understanding ofway of workingOverly complexprojects (social, political Lack of empowermentand time complexity)of experts (stifled bywith management ofprocess)symptoms not causes No culture of excellence(ie sources ofbut a culture of heroesuncertainty andcomplexity)Tight coupling andinteractive complexitymake project fragile4. Black SwanManagement3. ReferenceClass Forecasting No systematicapproach to taking the2. Due Diligenceoutside view No internal capability to Variability betweenprojects’ and subchallenge cost and1. Benchmarkingprojects’ ability toschedule forecast ofreduce biascontractors Projects planned with Ignorance of unknown Nocapabilitytoidentifyan inside view onlyunknowns‘lowballed’bids Optimism bottom-up inestimates unchecked No understanding of the Incentives to de-riskuncertainty of estimates projects and safeguard contingencies notaligned in supply chains27 Is the project How is the procurement Has the project taken a Has the project How confident is theconducting internal andstrategy and earlysystematic view toanalysed its sources ofproject in theexternal benchmarks?contractor involvementcompare itself to othercomplexity?capability of itsstructured?projects? What level of realism Have complexities been leaders?does this show? What are the incentives How mature is the riskactively managed or How mature are theforforecasters?management(ifany)mitigated?PM processes? Have lessons learnedandotherPMbeen incorporated? Is probabilistic How compressed is the Do the project anddisciplines to manageforecasting usedschedule?supply chain sharethe front-end process?consistently?understanding ofsuccess factors?
Risk Maturity LevelMaturity AreaLevelBench marking1Potential response (examples)Inside view only with optimism bias unchecked 2Due diligenceNo challenge to cost, schedule forecasts ofcontractors.Minimal understanding of uncertainty in estimate 3Reference ClassForecastingNo systematic outside view.Variability between projects and subprojects abilityto align and reduce bias.Ignorance of ‘unknown unknowns’; lack ofexploration. 4528Problem factors Black Swan(predictablesurprises)Slow management information communication.Management of symptoms not causes.Tight coupled system.Overly complexLeadershipHigh powered experts lack understanding of how to work effectively. No culture of excellence rather oneof heroes. Lack of empowerment of experts Programme of learning from others.Benchmarking against other projects,industries and sectorsInternal assessments of costs, schedules.Separate estimating from contractorsSystematic and ongoing Reference ClassForecasting across different aspects ofprogramme.Exploration of scenarios to understand‘unknown unknowns’.Understand characteristics of tailQuick, clean, independent managementinformation reportingAmplification of weak signals.Recognise complex scenarios and breakdownIdentify necessary pockets of excellenceand encourage culture. Continuouslearning.Focus on ways of workingLeadership engage in scenario planningIncrease reliance on ‘qualitative’(needsmore development)
Maturity ModelHS2 Aggregate Maturity100ERM Framework25Implementing risk managementCapability:Implementation of the -5Leading 5No ERM Framework, if RM isutlised in some areas it isimprovised and providesminimal direction.ERM is starting to bedeveloped. Pockets offocused ERM exist.A Framework is signedoff supporting a RMPolicy Statement.ERM is systematicthroughout theorganisationERM is embedded and drivesdecision making.Risk skills and capabilities notunderstood or developedRisk skills and capabilitiesunderstood and developedbut only for certain types ofriskRisk skills andcapabilitiesunderstood across allorganisational risktypesRisk skills and capabilitiesare recognised andregularly reviewed.Capability continuouslyreviewed, evaluated andevidence of recentmodifications to suitevolving risk environment.75No clear risk culture within theorganisation and littleunderstanding of what riskCulture, behaviours, engagement, continuous 25improvement culture should be.Corporate culture has littlerisk managementaccountability.Risk culture exists only forcertain types of risk.Risk culture is enforced bypolicy interpreted ascompliance.Continuously improvingConsistent organisationalClear organisationalorganisational risk culturerisk culture andrisk culture but notand behaviours.behaviours.consistantly embeddedRisk culture is analyzed andRisk culture is associatedin behavioursreported as a systematicwith career advancement.view of evaluating risk.The ERM Framework is being efficiently and effectively implemented50throughout the organisationEvidenced Based on ISO31000 with referenceto other maturity models Pushes boundaries for “leading”ERM practice Covers enterprise-wide maturity: Document review (25%) Evidence based application(75%) Initial qualitative assessment at“Level 1” Drill down to L2 and L3quantitative assessment usingweighted scoring L4 will be a behaviouralquestionnaire similar topsychological profilingReview of written documentationWeightingPrimaryCorporate/ strategic riskAll corporate/ strategicNo discrepencies betweenrisks (threats,corporate/ straegic reportsopportunities andMinimal if any formalCorporate/ strategic threatsand risk managementuncertainties) allidentification of corporate/identified.information.formally captured andstraegic risks.Risks to plan identifiedAll uncertainties inunder activeNo identification of risks to Informal EWI's, not allignedstrategic plans identifiedmanagement.strategic planto KPI'sand managed.Emerging risks to planEWI's embedded inidentifiedbusiness processesEWI's defined to KPI'sOperational riskMinimal if any formalidentification of operationalrisksSome operational risksactively managed.Minimal if any formalidentification oforganisational risksOrganisational riskscaptured in primarybusiness risk areas (e.g.finance, HR, IT)Organisational riskRisk managementinformation drives decisionmaking.Opportunities are realised.Uncertainty modelling andrisk adjusted KPI's in use asbeneficial to drivemanagement.Portfolio of correlatedEWI's tied to uncertaintydriversAll operational areas useContinuous controlsrisk managementmonitoring and analytics areproactively to improveused to support the RMmanagement of theprocess.There is a clear linkagebusiness with all threats,between risk managementopportunities andand reduced operationaluncertainties identifed andincidents.managed.All organisational areasdemonstrate use the ERMKRIs in use across allFramework and RMorganisational areas withAll organisationalProcess to enhanceclear evidence that riskareas have a relevant delivery of their objectivesinformation is drivignRM Processwith frequent anddecision making andimplemented.effective communicationenhancing the ability of theon risks (threats,organisation to succeed.opportunities anduncertainties).All operational areashave a relevant RMProcess activelyimplemented.Risk adjusted view availableDelivery riskMajor programmes notsubject to risk assessmentfor all programmes with RMConsistent RMAdvanced risk analysisframework utilised for undertaken on all delivery information driving decisionAdhoc, non standardmaking.all delivery areas.programmes to demonstrateprogramme risk assesssment;Clear evidence that theCriteria for programme confidence of delivery tolikelihood of achievingobjectives.risks implemented.delivery objectives isimproving over time.Development riskBusiness change riskRisk adjusted view availablefor all developmentConsistent RMAdvanced risk analysisopportunities with RMframework utilised forundertaken on allinformation driving decisionDevelopment objectives not Adhoc, non standard approach all deveopment areas. development areas with keymaking.to risk assesssment;criteria for measuring successsubject to risk assessmentCriteria forClear evidence that thein developmentdevelopment riskslikelihood of achievingopportunities.implemented.objectives is improving overtime.Business change projectsare not subject to riskassessmentAdhoc, non-standard businesschange project riskassesssment in use.Risk adjusted view availableConsistent RMAdvanced risk analysisfor all business changeframework utilised fortechniques (quantitative &/ projects with RM informationall business changeor qualitative) undertakendriving decision making.projects.on all business changeClear evidence that theCriteria for specificprojects to drive successlikelihood of achievingbusiness change riskscriteria.delivery objectives isimplemented.improving over time.
Maturity ModelRisk Maturity ScoresApplication All orgs all areas score variesbetween 2 and 4 Most orgs strong on 3 areasand weak on 25432CulturePeople10 Further analysis onparticular questions tofollow SystemsPrevious12Process3456789Average
Management of Risk in Government(Manzoni & Cheshire, Jan 2017)31
Thank youAny Questions?
HS2 Delivery Strategy our approach to delivering HS HS2 Risk Appetite Statement the amount of risk HS is prepared to accept, tolerate or be exposed to Wider Integration Risks HS2 Organisational Risks HS2 Delivery (& Operational) Risks Including Secretary of State Retained Risks HS2 Ltd Strategic Risks Strategic Risks gy s s Top-Down Bottom-Up HS2
of HS2 as the HS2 Bill passes through Parliament G G SNC received a petition response document from HS2 Ltd in December 2014 and is considering where this satisfies our petition requests. SNC have appointed a QC and is in negotiations with HS2 Ltd prior to an anticipated appearance before a Select Committee in February 2015 (date to be advised)
HS2 under the last Labour Government and he is still one of the project’s most staunch supporters. This paper therefore starts from the proposition that HS2 will happen and focuses primarily on its effects on Birmingham which is the first phase of the project. Work is expected to start in 2017 on Phase One of HS2 which will run
HS2 Ltd (2016), Sheffield and South Yorkshire Report Department for Transport and HS2 Ltd (2016), High Speed 2: Crewe to . 1.3 In 2015, Transport for the North (TfN) was established to transform the . This decision contributes towards the Corporate Plan where there is a stated ambition to have an HS2 connection in Sheffield city
executive summary to the midlands engine partnership midlands engine independent economic review february 2020 hs2 phase 1 hs2 phase 2a hs2 phase 2b m m m m m m m m m a a a a a a a a a m m toll worcester leicester dery stoe-on- trent irmingam wolveramp ton ereford lincoln grimsb segness boston grantham newar stratford-upon-avon stafford .
HS2 context 26. The Chancellor’s 2015 Autumn Statement confirmed the Government’s commitment to the delivery of HS2. 27. When the project was first announced the greatest focus of interest was on the proposed speed of the trains. Now, however, far greater emphasis is being placed on the need for HS2 to help to meet future rail capacity needs.
In the UK, a new double track railway, like HS2, will cost around 76million per km. (HS2, 2011). A modern train will use up to 1.5million per vehicle. Signalling systems will be up to 3million/km. Power supplies an
Northern Powerhouse Network Connectivity 34 7.1.6. Integration of NPR with HS2 35 7.1.7. A Vision for Northern Powerhouse Railfreight 36 7.1.8. Minimised Dependency on HS2 38 7.1.9. A Complete Vision for Northern Powerhouse Rail 39 7.1.10. Technical Excellence for the Northern Powerhouse 39
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