Simulation is a powerful tool for decision making. It provides an appealing approach to analyze and improve repetitive processes such as tunnelling. Notwithstanding this appeal, application of simulation to real-life construction projects has been minimal. This paper describes the design, development, and application of a special purpose simulation tool for actual tunnel construction operations performed by the City of Edmonton Public Works Department. The implementation of this tool in industry was successful and serves as a model for others to follow. The decision-making process adopted by the model developers and the construction industry personnel during the design, development, and implementation of the simulation are described. The cost-planning tool in the tunnel template is very useful in making decisions and evaluating the feasibility of tunnel construction projects. The real-life application of various alternatives compared to the conceptual estimates prepared for a proposed tunnel project to be constructed in Edmonton is presented in three stages. The basic costs, operational costs, support costs, productivity, duration, and resources utilization data are presented for different alternatives for the proposed tunnel project. Future modifications required by the engineering staff of the City of Edmonton, and the proposed research for modelling uncertainties in tunnel construction are identified. The successful application of the simulation for actual construction project highlights the interactive collaborative research work between academia and industry.Key words: simulation, tunnelling, construction, modelling, planning.