McKinsey: Stuttgart 21 turns out to be a huge nightmare

04 January 2013 Consultancy.uk

The renovation of the Central Station of Stuttgart is likely to become one of the largest European infrastructure nightmares of the past decade. In the late nineties, when the massive renovation was budgeted, the total cost to transform the train station was estimated to be around €2.5 billion. According to a recent study from McKinsey & Company, the actual cost is likely to amount to more than €6.8 billion.
 
‘Stuttgart 21’, as the project is called, aims at transforming Stuttgart Central Station and improving its high-speed connection with large European cities such as Paris and Vienna. When the construction work began in February 2010, the total costs were estimated and capped at €4.5 billion. In the past two years, the costs accumulated so quickly that the municipality of Stuttgart became suspicious. McKinsey & Company was hired to assess the business case of the infrastructure project. The strategic advisory firm came to the shocking discovery that the total expenses were underestimated by €2.3 billion. The additional money required can according to the consultants be attributed to three areas:

  • €1.1 billion for services and products that were previously not recognized or have been under-budgeted.
  • About €800 million which result from additional requirements of the country and the city.
  • About €400 million that is a consequence of the large delays in planning and delivery.

McKinsey - Stuttgart 21

End of project?

Calculations by McKinsey have brought the management of the project in a difficult situation. They have always told stakeholders that Stuttgart 21 would only have a positive MKBA if it would not cost more than €4.7 billion. Now that it is a given that the project will overrun, political pressure is mounting on killing the project. In the coming weeks the German government will decide on the future of the project.

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