Value-for-money in practice

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Value-for-money in practice
EU Twinning Project Implementing PPP policy

• 6 June 2008

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Content

• On Value-for-Money in practice
• Real-life examples
• Its sources
• Its drivers
• Its management
• The affordability-dilemma
• The dos and donts

Morning session
Afternoon session
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Real-life examples
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N31 Motorway Project

• A 25 km provincial road
• Upgrading to a two-lane motorway
• Road infrastructure, bridge and aqueduct.
• DBFM-contract
• Contract value 80 million
• Contract duration 15 years

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N31 PPP Motorway Project
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Adam Brussels High Speed Rail Link

• A 125 km high-speed rail line
• Greenfield Upgrading existing rail
• Infrastructure and superstructure.
• 2 DBFM-contracts / 1 O-contract
• Contracts value 7 billion
• Contract duration 15 25 years

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Adam Brussels High Speed Rail Link
Value-for-money 2
Non-application of unproven technologies
Greater availability
Embedded-rail
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Renovation Finance Ministry

• Accommodation of Finance Ministry
• Renovation
• 1 DBFMO-contract
• Contracts value 175 million
• Contract duration 25 years

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Renovation Finance Ministry
Value-for-money 15
Energy efficiency
Improved logistics
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Montaigne School Building

• School building
• Greenfield
• DBFM-contract
• Contracts value 27 million
• Contract duration 30 years

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Montaigne School Building
Value-for-money (Quality)
Multi-purpose rooms
Large learning spaces
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Delfuent Water Sanitation Plant

• Water sanitation plant
• Greenfield modernization
• DBFMO-contract
• Contracts value 450 million
• Contract duration 30 years

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Delfuent Water Sanitation Plant
Value-for-money 17
Lower exploitation costs
Shorter construction
Process innovations
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Real estate development
Value-for-money

• Port and accommodation
• Greenfield, expansion renovation
• Multiple DBFM-contracts

Flexibility
Phased-implementation
Alternative usage
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The sources of value-creation
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The main principles
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The Value-tree
Value-for-money
Timing
Cost-saving
Revenue-generation
Flexibility
Quality-improvement
Life-cycle costing
Innovations
Exploiting commercial value
Off-balance financing
Technical know-how
Business process skills
Commercial expertise
Incentive structure
Risk allocation
Output specifications
Payment mechanism
Competition
Project scoping
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Key Value-drivers N31 Motorway Project
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Output specifications
Functional output specifications on safety and
comfort standards
By Ministry of Transport
Technical specifications
By private partner
Conditions tree
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Responsibility matrix
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Risk allocation
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Incentive structure
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Payment mechanism
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Payment mechanism N31 / trends
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Payment mechanism
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Payment mechanism
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Competition
Competitive dialogue procedure
Stages
Final Evaluation Phase
Selection Phase
Dialogue Phase 1
Dialogue Phase 2
Final Negotiation phase
Preperation for Realisation
Dialogue Phase 3
Realisation Phase
Operation Phase
Key Decision-making points
Announcement
Invitation for Dialogue Ph. 1 (Incl. Selection)
Invitation for Dialogue Ph. 2 (Incl. Shortlist
of three firms)
Invitation for Submission BAFO
Selection of preferred bidder
Contract close / financial close
Oplevering
Aanvangs-certificaat
Invitation for Dialogue Ph. 3 (optional)
Certificate of Completion
Certificate of Commence-ment
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Value-for-money management
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Process, instruments and time
Dynamic PPC
Qualitative
Quantitative
Conventional implementation
PPP potential scan
Time
Business case
PPP implementation
Procurement
Request for proposals
6 months
6 months
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Organization
PPP Unit
Treasury
Market
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Contract management
Private consortium Project organization
Ministry of Transport Project organization
Process management / supervision
Quality management plan
Contract management plan
Show performance and contract compliance
Quality supervision
Civil works Maintenance activities
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Contract management
Ministry of Transport
Verify process
Verify product quality
Main focus
Process control
Product control
Private consortium
Contract management plan
Quality Management Plan
process
product
On an exceptional basis
Check process directly
Check product directly
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The affordability-dilemma
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Conflicting objectives
Optimal risk transfer
Value-for-money
Affordability
Risk transfer to private sector
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The dos and donts
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The dos and donts

• Do allow for task-integration by private sector
  partner
• Do parallelize the interests of public and
  private partners
• Do ensure competitive tendering
• Do promote cooperation and partnership
• Do make use of international - both UK and
  continental - experiences
• Do not create, but enable value-creation
• Do not transfer all risks to private sector or
  keep everything yourself
• Do not increase project scope indefinitely (do
  create appetite)
• Do not create extensive tender procedures causing
  high transaction costs
• Do not tender unfeasible projects

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Risk transfer
Government
Private sector
Traditional model
Early DBFM-contracts
New PPP deals. .
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Contact information
Rebelgroup Advisory BV Geert Engelsman Wijnhaven
3-O, 3011 WG Rotterdam, The Netherlands Tel
31 10 2755995 Fax [phone] www.rebelgroup
.nl geertjan.engelsman_at_rebelgroup.nl