Where Lame Ducks Dare? Benchmarking the London Cable Car

Today has seen the announcement that the London Cable Car has finally found its sponsor – Emirates Airline. Emirates will contribute £36m to the project (more on this figure later), and in return will receive branding rights, naming rights and joint logo rights. [Indeed JB now owes this author a crisp fiver, for betting that it would be the Abu Dhabi National Exhibition Company instead]

What this means in reality for the Cable Car (which it appears will now likely be known as the Emirates Air Line) can be seen in the flythrough video above.

It would be easy to focus solely within this post on this announcement itself, but in truth there are many questions to be asked about the Cable Car of which the sponsorship is only one.

Throughout Britain, athletes are getting ready for next year’s Olympics. As one Olympic coach said, “Everyday they tell me about their breakfast then work so hard they feel the need to show me their breakfast”. Competition is tough and to meet the challenge athletes compete in two ways. First they compete against themselves, pushing onwards for a personal best performance and second they calibrate this performance against that of their rivals. In sport, both athletic and tran, what gets measured gets managed. It is described as benchmarking.

We have written on a number of occasions about the proposed cable car in London before and in July our chum IanVisits reported in his blog on a design exhibition at the Building Centre.

With our ever child-like curiosity for new toys, we have pestered various press officers for more details of this project but somehow never managed to make a lot of progress. We asked a simple question – because the cable car uses proprietary technology which system, now in operation, was it like? E-mails went unanswered; questions of client confidentiality and/or organisational communication’s silos in the subcontractor chain were inferred. We were obliged to content our souls with patience. But recently a scintilla, if not a scintilla and a half, of doubt has crossed our mind were some of the aforesaid media interface personnel treating us to a master class of Yorkshire cricket’s famous attritive batting techniques?

There is a story of a young cricketer from Derbyshire who crossed the county boundary to play for team in Sheffield. A keen batsman with a good eye for the ball, he was asked to open the batting with his team captain at the other end. He started crisply swiping the first ball over the boundary for six and then the next for four. He then proceeded to treat the next three balls in the same manner before stealing a single from the final ball. Whilst the fielding side were changing over, he joined his captain tamping divots in the wicket expecting a brief word or two of encouragement. To his surprise, the captain glared at him. “What’s tha’ doin’?” he muttered, “Tha’s not out ‘ere to score runs, tha’s supposed to make their bowlers tired.”

So it is cap doffing time to our chum, the intrepid Tom Edwards of Auntie, for taking out the middle and leg pylons with his story on the cable car which broke the news that the cost of the project has now risen to £60 million, just three days after the TfL Board meeting.

I’ve learnt the cost of the mayor’s flagship cable car project has gone up – again.
Initially, Transport for London (TfL) estimated the cost at £25m and said it would use only private finance to pay for it.

Then the estimate increased to £45m, with TfL admitting it would use its own budget.

Now, we find out that figure did not take into account “technical and legal advice, project management and assurance, land acquisition and procurement costs”.

TfL says the total cost will now be £60m and it is actually paying for it out of the rail budget.

So far, so confusing.

This is what TfL sent to me: “TfL is forecasting to spend approximately £60m on the build cost for the cable car.

“This includes the £45.1m for Mace [the construction company] build, £9.3m for other build costs.

“In addition an allowance of £5.2m has been set aside as, with any project of this scope and scale, funding for a contingency (set at 15% of the contract value) is required to cover unforeseen costs, although this may not be used.

“TfL is seeking to recoup the build cost through a combination of sources including a commercial sponsorship, third party funding (via an application to the European Regional Development Fund) and fare revenue.”

TfL is in discussions with a potential sponsor and hopes to make an announcement soon.

Once finished, the cable cars will run 50m (164ft) above the Thames, carrying up to 2,500 people an hour between two Olympic venues: the O2 arena in North Greenwich and the Excel exhibition centre at the Royal Victoria Dock.

It is stuff like this that makes the licence fee seem such a bargain.

The following day our chum, Rachel, at the Londonist had picked up on Tom’s and exposed insult to go with injury.

Yesterday’s news that the Thames Cable Car costs have risen to £60m didn’t surprise us that much – Caroline Pidgeon got an admission out of Boris in June that it was pushing the £57m mark, but what’s made us eye-poppingly enraged is TfL telling the BBC that they’re paying for it out of the rail budget.

If TfL were swimming in cash this would be fine, but this is the same TfL that’s just announced PAYG fare increase of 10p per bus journey and an 8% rise for travel cards. A TfL that’s committed to huge upgrades on the tube network (surely a nobler cause for raiding other parts of their budget?). A TfL that’s expanding the Overground network and involved in Crossrail.

Hmm… “Eye-poppingly”- a nice revival of Barry Took and Marty Feldman’s “Round the Horn” vocabulary there, Rachel. [NB note to self – Do not challenge Rachel to play Scrabble]

As was noted at the beginning of this article, a sponsorship deal for the Cable Car is now in place. It does not require eagle eyes, however, to spot that the Emirates figure is below the £50m sponsorship target floated around before the announcement was confirmed and even further below the now anticpated £60m possible cost. Indeed it’s a point that Liberal Democrat Assembly Budget Spokesman Mike Tuffrey has already begun to vocally make, echoing Rachel’s comments on the Londonist:

Transport for London admit that this sponsorship deal only meets 80% of the construction cost. This leaves many millions of pounds worth of funding to be found from TfL’s budget. At a time when fares are set to rise by well over the rate of inflation people will be asking why the Mayor has failed to live up to what he had promised and ensured the cable car was entirely self financing.

The question of value for money seems now even more important to ask and so it is to the Gondola Project team that we now turn.

This is a Canadian blog founded in 2009 by Steven Dale, an urban planner and researcher. He believes that Cable-Propelled Transit (CPT or cable for short) is a capable and proven form of mass transit that also happens to be remarkably cost-effective. In terms of being a game changer in opening up deprived urban barrio areas around South American cities, this is undoubtedly the case.

In order to address the fact that CPT is relatively unsung and often misunderstood, Steven created The Gondola Project – its goal to collate data and analysis necessary for benchmarking to take place. This is rather like a “highly strung” London Reconnections for both cable car fans and practitioners.

Steven’s initial appraisal of the London Cable Car is – what is the phrase? ; Ah yes, eye-poppingly and even jaw-droppingly critical.

It must be read with the caveat that he, like us, is unsighted as to the detailed background, and as we will see later details can be important. There is, however, an emerging drip feed pattern in the Cable Car’s project history of unforeseen costs and unheralded shakes in the financing scheme that will make many readers uneasy, especially those who have read our oft recommended study text on project snafus, Bent Flyvberg, Nils Bruzelius and Werner Rothengatter’s “Megaprojects and Risk”. Steven applies informed logical inference that results in a testable hypotheses; that is he is interpreting the known facts to give a plausible explanation. The economist John Maynard Keynes famously said, “When the facts change. I change my mind. Don’t you?” And as Karl Popper pointed out all such hypotheses are there just waiting to be disproved. As LR readers’ comments show we sometimes see a stick and make the wrong choice of ends. But have we, or he, done so in this case? By the way, if you read Steven’s article at source it is well worth ploughing on to read further details that emerge from the associated comments’ stream -they’re reminiscent of home here on LR.

Over the weekend it was announced that the estimated project cost for London’s Thames Cable Car (Gondola) has ballooned to an estimated £60m. For those interested, that means the system will cost roughly $100m USD per kilometre.
With the possible exception of the Caracas Metrocable, the London Thames Cable Car will easily be the most expensive gondola/cable car ever built. It’s even more expensive than the overpriced Burnaby Mountain Gondola, whose cost has also yet to be explained or justified.

The London Thames Cable Car appears to be nothing more than the latest example of largely English-speaking transit agencies’ unwillingness and/or inability to rein in costs related to transit projects.

There is absolutely, positively, completely no reason whatsoever this project should cost London taxpayers ~$100m USD. Not a single good reason:

Off-the shelf Monocable Detachable Gondolas (MDG) technology is being used.

While we have no confirmation of this fact, we can use a little something called logic to figure it out. Construction on the project started just a few months ago. As the goal is to complete the system by next summer, the only possible way in which to do that is to use MDG technology. This is the most common CPT system you’ll encounter as their low cost has made them an attractive addition to public transit systems in the developing world. Characterized by a detachable grip (where rubber drive wheels lift the cable car off the cable) which allows for intermediary stations and corner turning, MDG’s utilize a single cable (hence, monocable) for both propulsion and support. This means that the cable that pulls the vehicles is also the cable that supports the vehicle.

An example of MDG technology is shown here in Caracas. This is the system and gondola car size that is generally expected to be used in London. Note that when carrying disabled passengers the seats are tipped up to allow access and egress.

The Gondola team then go on to discuss the alternative technology offered by Doppelmayr, the London Cable Cars’ supplier, known as 3S which uses 3 ropes (cables). This 3 Seil (the German for rope) system allows larger cars to be operated and has greater adverse weather tolerance. An example of 3S technology in operation at Koblenz is shown here. The advantages of using cars this size when accommodating cyclists and the disabled are self-evident. Another feature to note is that the London Cable car is only 100 metres longer than that in Koblenz. Steven goes on to draw some pertinent comparisons

3S technology would be the sexier (possibly even better) choice here, but the reality is this: MDG technology has virtually off-the-shelf availability; 3S has to be built to order. That’s why an MDG can be turned around in such a short period of time.

Widely available renderings also indicate MDG technology.

All-in, an MDG system can be built for $10m – $30m USD per kilometre. Max.
At their most expensive, Medellin’s Metrocable systems were coming in at ~$25m USD and that included intermediary stations, turns, 4,000 passengers per hour per day (pphd) capacity (compared to London’s 2,500 pphpd), land acquisition and all station and tower architecture.

Where the technology is manufactured invalidates questions of where it’s built.

Okay, sure. Medellin isn’t London and it certainly doesn’t cost as much as London. But remember: As the majority of the cable system itself is manufactured in a western-European location (France, Austria, Switzerland and/or Italy), that means the cost of the systems’ electro-mechanical components (cabins, cable, towers, stations, etc.) will not vary much from place-to-place.

The only thing that’s likely to cause any sort of shift in price is currency and/or commodity fluctuations. But as the Euro has been depreciating against the British Pound for much of the last two years, shouldn’t the price actually be decreasing?

The one counter-argument to this could be if much of the system is being manufactured in Switzerland – in which case the rapid over-inflation of the Swiss Franc could be leading to these increases but

a) Much of that over-inflation has been recently stemmed due by Switzerland’s Central Bank.

b) As we understand it the system is being built by Doppelmayr not Garaventa.

This is important because Doppelmayr is an Austrian company that trades in Euros and Garaventa is a Swiss subsidiary that trades in Francs. In other words, somewhere between 75 and 90% of the cost of this system is being incurred purely in London alone.

The capacity of this system invalidates the need for large scale station infrastructure.

As reported, the Thames Cable Car is expected to move roughly 1,000,000 people in its first year of operations with a throughput of 2,500 persons per hour per direction (pphpd). One million looks like a big number, but it’s really not when you consider how many hours there are in a day and how many days there are in the year.

Oversized station architecture typically accounts for the bulk of costs in a cable system such as this, but given the modest number of people this system is anticipated to move, there is absolutely no reason to invest in large scale stations.

To demonstrate: The Koblenz Rheinseilbahn utilizes the above-mentioned 3S technology and moves ~3,600 pphpd. It has been an enormous success and I’m told is moving tens of thousands of people per day due to the bi-annual (and inexplicably popular) BUGA horticultural festival. The Koblenz Rheinseilbahn is also only 1 km long and cost ~$20m USD all in.

With regard to the $20 million cost for Koblenz, we feel it is worth pointing out that – like the London Eye – the facility was always described as temporary. Part of the reason for the low cost is that the plan is to reuse the equipment in subsequent 3S installations. So Koblenz is essentially renting a 3S for three years for that amount, not buying it, and the cost from Doppelmayr is based on that business plan.

Now whether as a result of its success it does get handed back is a moot point, given that temporary attractions like the Eiffel Tower and the London Eye proved so popular they were transformed from temporary to permanent structures. So the Koblenz numbers may change but probably not to the magnitude of London’s costs.

Suffice be it to say that given there was not a pre-determined budget for London’s investment and that it hinged on what turned out to be, a somewhat nebulous private funding arrangements with a promise of no public funding involvement – was there a better way of financing the cable car?

This is what the Koblenz stations look like:

A Koblenz Station (more images here)

That’s the entire station, infrastructure and all. Now compare that to London:

Cable Car South Station

See the difference?

Granted the London system has two things that the Koblenz system does not. Owing to Koblenz’s current status as a temporary installation, it does not have the maintenance bay and custom-designed towers that the Thames Cable Car will. Fine. But do those two items justify the Thames Cable Car’s absurd price premium over the Rheinseilbahn? Not when the Rheinseilbahn carries almost double the number of people.

Transport for London and Mayor Boris Johnson owe the people of London an explanation – particularly as they now plan to pay for it “out of the rail budget”
Suffice it to say, this isn’t going to win Urban Gondolas any fans – likely just a few more enemies in one of the most highly visible cities in the world.

So there we have it. We still do not have the answers but we do have more questions:

1. Do the Mayor and TfL agree with the observation and conclusions of the Gondola Project analysis?
2. Are the adverse comparisons drawn with Koblenz valid and if not, why not? If as appears to be the case, would not a similar lease or rent before you buy scheme as in Koblenz been a better way of testing the market?
3. Has a valid analogy be drawn?

Other questions also spring to mind – against which other cable car system installation are TfL benchmarking their performance, for example? What have been the major cost drivers resulting in the apparent over-run and can a breakdown of these costs be released?

Mott MacDonald act as project advisers to TfL on this project. They are a respected engineering consultancy responsible for similar projects such as the, much longer Ngong Ping Cable Car in Hong Kong.

They are also owners of Franklin and Andrews, a household name in households where banter about project construction costs is the norm across the breakfast table. Franklin and Andrews are collators and disseminators of benchmark construction cost standards through a series of “Black Books”. Mott’s could well be able to contribute international comparator information on this matter.

Further questions also seem pertinent – at what point in the project risk register were the cost omissions and deviations recognised and what mitigation processes were put in place? To what extent do the London specific tailored features, the pylons and the stations, impact on the increases in cost? To what extent, if any, did the imperative to get something done before the Olympics influence the life cycle project procurement and management process?

Perhaps most importantly at this stage, it is also worth asking whether a lessons learnt review been initiated. Indeed if, as reported in Steve’s comments, the Koblenz Rheinseilbahn, situated as it is in a small city in Germany, carries twice the number of passengers that London is projected to do – then it is likely also worth asking how robust the original demand study was and whether the system has been built to an expected load or down to a budget?

Finally, we have become used to mock ups of future transport systems in London – for example, the New Bus for London, being available in particular for scrutiny by the disabled and other interested parties and the design modified (in theory at least) to meet their particular concerns. Will the Cable Car be subject to the same degree of critical user consultation?

We are not unsympathetic to the Cable Car concept. Many people believe that the Mayor should have prioritised other areas of transport investment but at the end of the day taking visionary decisions is part of his job description. After all, Mayor Livingstone’s punt on regenerating Stratford came off. Some may still choose to question the Mayor’s judgement but, now that this choice has been made, a more relevant question is probably this – how well has this choice been implemented?

Has Boris made the right bet and, if he has, is it going to large enough to benefit a wide spectrum of Londoners, particularly those in dire need of improved cross river communications? Cross river cable cars, as demonstrated by Koblenz, can become popular tourist attractions and do work. We always knew that the Cable Car was a high risk project in terms of reaching its completion horizon. Indeed in our earlier article we touched on the “near miss” triumph that was the Millennium Bridge between Gateshead and Newcastle. We raised the issue as to whether the system was sized and designed with not only tourists but London travellers in all their shapes and conditions, in mind. Perhaps unfairly, alluding to the Mayor’s affection for matters Latin and his excellent book on the subject, we referred to Juvenal’s quotation on bread and circuses.

“For every complex problem, there is an answer that is clear, simple – and wrong.” With these words the famous journalist, H L Mencken was right. It would be far too easy to create a caricature default perception that London is blowing away chunks of its dough by sending in the clowns. Tempting as it might be to hunker in the bunker, with the yips and yaps and emboldened questions of running jackal blogs echoing outside, one thing is almost certain. As the electoral thermometer begins to rise, the next Mayor’s Question Time Sessions with either the whole assembly or the Transport Committee will raise these or similar questions. So even if nobody wants to respond us now – the time spent in preparing answers will not be wasted. It could well be an absolute must-watchingly webcast.