client-story
client-story
CLIENT STORY

On track for high speed

KPMG is helping the California High Speed Rail Authority with long-term planning and commercial strategy for the first high-speed rail.

Client
California High-Speed Rail Authority
Sector
Government and infrastructure
Project
Building a commercial enterprise for long-term results
  • Client challenge
  • Benefits to client
  • KPMG approach
  • KPMG insights

Client challenge

The state of California has a clear vision: the nation’s first high-speed railway run as a self-sustaining private sector enterprise overseen by a lean and efficient government agency. The scale and scope are huge; connecting San Francisco to Los Angeles in 2 hours 40 minutes at a cost less than a plane ticket. With multiple segments and stations built out over 2 decades, this will be one of the biggest infrastructure projects in the world.

The project's success hinges on much more than construction excellence. Just as vital is a long-term business plan that aligns the development goals and schedule with available funding and financing and serves as a road map for major budget approvals. The California High-Speed Rail Authority (CHSRA) needed to present an approach to designing, constructing, operating, funding, and delivering an extraordinarily complex 25-plus year project. And it was starting the project from the ground up.

Benefits to client

The business plan and initial $6 billion construction budget was approved in 2012. The first 100 miles of construction began in 2013 and the first segment is due to open in 2025. CHSRA is equipped with:

  • $12 billion in state bond financing and federal funds
  • an approved plan for the opening segment from San Jose through Fresno in the Central Valley
  • over $4 billion of signed construction and support contracts
  • a workforce that’s grown from a handful of people to one that’s currently some 200-strong
  • over 500 carefully vetted contractors
  • accounting and reporting systems and controls that support a growing project and highly transparent monthly public reporting.

KPMG approach

There’s no high-speed railway in the U.S. but there’s certainly a need for one — especially in California. When California’s state government set an ambitious goal to connect San Francisco and Los Angeles with the nation’s first ever high-speed rail system, they knew the potential benefits would be enormous. Connecting the megaregions of the state would promote economic development, a cleaner environment, and job creation and preserve agricultural and protected lands.

To drive the project, the state established the CHSRA. CHSRA had to be a self-sustaining commercial enterprise with no government operating subsidies. That called for sound, long-term financial, commercial, and business advice.

The first priority was a plan featuring a segmented development and funding strategy strong enough to address public and stakeholder review. CHSRA needed to create a road map to show how it could develop a $60 billion project. Not only that, they needed to be equipped to manage the project effectively to maintain the pace of the project and confidence of funding agencies. Rigorous processes and controls across everything from commercial procurements, financial and technical systems, reporting, and contract management were essential. These, together with a strong development plan, have created a firm foundation to build on.

We’re now helping CHSRA transition from a planning organization into a megaproject delivery organization supported by strong commercial, financial, reporting, and contract management processes.

The project is already generating jobs and economic growth. High-speed rail contractors have hired workers throughout the state. By paying suppliers for goods and services, these contractors have further stimulated industries in each of the state’s megaregions. Money has been pumped back into the local economy and California is on course to meet its 21st-century transportation needs.

KPMG insights

Agility fuels longevity

Every project involves changes. In a megaproject, thee can be mgachanges. The business vision should remain consistent; howeer, the means of accomplishing each phase and activity will be affected by markets, government changes, planning prioirties, and other outside factors. Develop the right mind-set that allows you to flex your approach quickly without losign sight of hte goal. More than that, foster a culture in which people have the confidence toinnovate. Original thiking is vital in projecs with few precedents and many unkowns.

Take a broad view

Getting a commercial venture up and running is just the beginning. You must also look further ahead and consider what the operation will need to thrive and deliver in the right away, for years to come. That means seeing the big picture and analyzing all aspects of the operation—from markets, services, and funding to people, suppliers, and technology. Make decisions in their time, neither too early before all information is known nor too late, which results in lost opportunity.

Foster a culture in which people have the confidence to innovate. Original thinking is vital in projects with few precedents and many unknowns.

 

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