Reference no: EM131882082

Problem: DEALING WITH TRAFFIC JAMS IN LONDON

As London entered the 21st century, it was confronted with a major issue that plagues many cities throughout the world-excessive automobile traffic. Many Londoners-and particularly the business community-rated traffic congestion as the city's most serious problem. At peak periods, the average speed was less than 10 miles per hour, a slower speed than the horse-drawn carriages of previous centuries. Drivers spent about half their time waiting in traffic. Not only was this congestion nightmare a major source of driver frustration, but it contributed to both environmental and economic problems as well. By one estimate, traffic-related problems cost London businesses roughly £2 million-more than $3 million-every week. Clearly, the city needed an aggressive policy to address this issue. The solution, proposed by a government study titled Road Charging Options for London (ROCOL), authorized by the 1999 Greater London Authority Act, and endorsed by incoming Mayor Ken Livingstone, was congestion charging. As the name suggests, the city would assess a fee, or charge, to every automobile that entered high-traffic sections of London during peak hours. Rather than attempt a broad citywide implementation, the government focused specifically on the highly congested section of central London, where roughly 1 million people entered every day, about 150,000 of them by private automobile.

Beginning in February 2003, drivers who entered this area between 7 AM and 6:30 PM had to pay a fee of £5 ($8) by midnight. (Certain types of vehicles, such as ambulances, buses, and taxis, were exempt.) Drivers have the option of paying the charge by mail (prepay), text messaging, telephone, or in person at various pay points. Failure to pay the fee results in a fine of £80 (roughly $130). Significantly, this solution makes extensive use of current technologies. The city installed almost 700 cameras at more than 200 sites in the designated high-traffic area. These cameras photograph the license plates of every vehicle that enters the area. They then transmit these photos to a data center that translates the photographic images into license plate numbers utilizing automatic number plate recognition technology. Drivers who fail to pay the fee receive a notice of the fine in the mail. To create and implement the congestion charge plan, the government had to face a number of project risks: Tight Schedule: The project needed to be completed under tight deadlines in order to meet multiple statutory requirements and minimize disruptions to commuters.

Technology: The cameras had to be strategically placed in order to accurately photograph tens of thousands of license plates every day. Lack of Pre-existing Models: There were no pre-existing models in the world to follow. Limited Experience and Expertise: Mayor Livingstone was newly elected, and the supervising governmental agency-Transport for London-had only recently been created. Thus, neither were experienced in building such a system. Political Fallout: The political risk of a system failure to the new mayor was so huge that it would be extremely damaging to his career. Transport for London adopted a series of management strategies to navigate these waters and limit the risks resulting from their limited experience, IT ability, and management time. Perhaps the most significant decision was to outsource the basic management activities to firms that specialized in these areas. For example, to manage the competitive bidding process they contracted first with PricewaterhouseCoopers and then with Deloitte & Touche. Early in the project, project managers identified the critical technical elements and divided the project into five "packages" that could, if required, be bought and managed separately.

These included (1) the camera component; (2) the image store component that collected images, converted them into license numbers, and condensed the images (duplicates would occur when one vehicle was photographed by several cameras); (3) the telecommunications links between the cameras and the image store component; (4) the customer services infrastructure, including the ability to pay by phone, Web, and mail; and (5) an extensive network of retail outlet kiosks and gas stations where people could pay the toll. The retail side was seen as a big enough risk that it was bought and managed separately. To further reduce the risks, it was decided to select the best available technologies for each of the five packages. Another risk-aversive move was to utilize only established technologies for the actual process of identifying the vehicles in the designated zone. For example, Transport for London rejected proposals to employ electronic tags because this technology had not been proved effective in scenarios such as this one. Finally, the city added roughly 200 buses to its fleet to accommodate increased ridership. Transport for London requested bids on the project early in 2001. The estimated $116.2 million project was large enough to require listing in the European Union's public-sector register.

Companies throughout Europe were allowed to bid on the project. Separate bids could be tendered for the camera and communications packages, whereas the remaining three could receive bids on a combined basis or individually. Deloitte & Touche reviewed more than 40 bids before deciding on a single contractor to manage the entire program. Their choice was The Capita Group, England's largest business process outsourcing firm. Significantly, before accepting Capita's bid, Deloitte required both that firm and the other final candidate to submit technical design studies. In addition, Capita's contract included penalties if the company failed to meet the established deadlines. After awarding the contract to Capita, Deloitte closely monitored every step of the process, and it kept additions to the original plan to a minimum. As a result, scope creep-the process whereby a project increases in both size and costs as new features are added-was never a serious issue. One of the few changes added to the requirements was an option for motorists to pay fees through the popular SMS text messaging format.

Throughout the implementation of the new system, the city continually sought feedback from key stakeholders. In addition, it regularly updated the public concerning the project's status. Consequently, few drivers were caught unawares when the new policy went into effect on February 17, 2003. The mayor also wisely decided to begin operations during a school holiday period, when traffic volumes are significantly lower. Thus, by the time traffic returned to normal, drivers generally had adapted to the new procedures. What were the results of these concerted efforts? Unlike so many systems projects, London's congestion charging plan was completed on time and within budget. Significantly, however, the demanding schedule did not compromise the quality of the work. Instead, the new program appears to have achieved its basic goals. A follow-up study indicated that traffic in central London had diminished by as much as 20%, and average driving speeds had improved. The fines and fees resulted in a project payback period of about one and a half years. It was estimated that total revenues would amount to $2.2 billion over a ten-year period. Moreover, vehicular emissions of toxic substances such as nitrogen dioxide were also reduced. One potential problem that did not emerge was "rat runs" in which traffic jams would appear in areas outside the zone as drivers altered their routes to avoid the charges. After reviewing the outcomes of the London program, many observers predicted that congestion charging would become a standard practice in cities throughout the world.

Discussion Questions

1. Assess the risks of this project. Given your assessment of the project complexity, clarity, and size, what management strategies would you recommend? What, if any, of these strategies were adopted in this project?

2. Describe the development methodology that was applied to this project. Was this the most appropriate approach? Provide a rationale for your response.

3. When a project is outsourced, who should manage the project-the internal group or the outsourcer? Why?