A derailed vision
Technical success overrides a weak business case in a Chinese high-speed train project
A DERAILED VISION
Technical success overrides a weak business case in a Chinese high-speed train project.
To travel at an amazing 430 km per hour (267 mph), go to Shanghai. Since the Transrapid Shanghai train began commercial operation in late December 2003, you can trek the 30 km (20 miles) from close to Shanghai's business center to Pudong International Airport in under 8 minutes. Today, the trains run on 10-minute cycles, one of which achieved a world record in November 2003 when it ran as fast as 501 km per hour (311 mph).
The high-speed train relies on magnetic levitation (maglev) technology developed by the German companies Transrapid International, ThyssenKrupp and Siemens, which also supplied the vehicles, the linear propulsion and the operations control systems. The Shanghai Maglev Transportation Development Co. Ltd. erected the guideway infrastructure and stations.
Project: Construction of Transrapid Shanghai, China's first commercial magnetic levitation rail train
Budget: 8.9 billion yuan ($1.08 billion) to build the 30-km rail line
Start Date: June 2001
Completion Date: December 2003
Achievements: The project team, including members from Shanghai Maglev Transportation Development Co. Ltd., Transrapid, ThyssenKrupp and Siemens, completed the project on time and on budget.
Project Pitfalls: The trains are running virtually empty, stakeholders' return on investment has been inadequate and the continued financial viability of the owner is in question. Technical project success did not underscore financial feasibility.
From an engineering perspective, the project was deemed a great success. It finished on an aggressive three-year schedule, on budget and met all technical requirements. The project, nevertheless, is experiencing financial difficulties, according to Oliver F. Lehmann, PMP, vice president of professional development for PMI's Troubled Projects Specific Interest Group. While each train can carry up to 453 passengers, only 500 to 600 passengers total travel the line each day, according to the Taipei Times. “We are not lucky with ticket sales,” Fang Haiqing, vice director of the Chinese company operating the trains, told the Times. The trains are running virtually empty.
Not linking the final deliverable with return on investment shows how project management is an important part of strategy and planning. If executives had employed critical thinking powered by project management processes, the result may have been different. In hindsight, leaders should have:
FORMULATED A STRONG BUSINESS CASE BEFORE OR WHILE INITIATING A PROJECT OF SUCH POLITICAL SIGNIFICANCE. The analysis would have had to consider the scope with the maximum benefit for the key stakeholders. This would have involved identifying the most popular route and the associated costs and building time. Furthermore, a well-founded assumption would have identified which fare would yield the highest return.
Two elements strongly factor into low travel rates. For one, project leaders insisted that the maiden trip must be made before 2003. The original project discussed a guide-way from the business center of Shanghai to Pudong. This route would have been 20 percent longer. It would have taken more time for building, while adding costly complications of crossing the Huangpu River and of integrating the guideways into the center of a major city. Therefore, the plan was shifted to its Long Yang Road station.
As a result of this scope reduction, riders now must use traditional public transportation to travel six miles from downtown Shanghai to Long Yang Road Station, at which point they then can transfer to the high-speed train that runs to Pudong (after waiting up to 10 minutes). Considering the time lost getting from the city center to the train station as well as the waiting time for the next train, the net time savings can be quite small.
INTENSIVELY INVOLVED THE PUBLIC IN PLANNING THE PROJECT TO DETERMINE TRUE COMMUNITY NEEDS. Unfortunately, the needs of the most important stakeholders—the public—were not adequately considered.
Another reason for the empty rail cars might be pricing. The 75 yuan (US$9) second-class and 150 yuan (US$18) first-class tickets are far beyond what most Chinese families can afford.
As a result, stakeholders' return on investment has been inadequate, and the continued financial viability of the owner is in question. Nonetheless, due to the project's overarching technical success, Chinese officials are considering constructing another maglev line between Shanghai and Hangzhou, which would cut the travel time between the two cities from two hours to 30 minutes.
If you know of a troubled project in which a project manager could have (or did) save the day, share your lessons learned. Contact us at email@example.com.
APRIL 2004 | PM NETWORK
PMI research shows project teams that draw from an array of perspectives and skillsets deliver powerful outcomes.