REGIONAL WORKSHOP ON PPP IN HIGHWAYS

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• REGIONAL WORKSHOP ON PPP IN HIGHWAYS
• BELGRADE 7 JUNE 2006
• THE UK EXPERIENCE
• by
• ALEC BRIGGS, SENIOR PROJECT LEADER, HIGHWAYS
  AGENCY
• and
• BARRY DREWETT, TECHNICAL DIRECTOR
• PELL FRISCHMANN CONSULTANTS

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OUTLINE OF PRESENTATION
Part 1 - Alec Briggs

• The Role of the Highways Agency
• Procurement of Improvements and Maintenance
• Key Objectives of DBFO Procurement
• History of DBFO Procurement
• Risk Allocation
• Future DBFO Projects

Part 2 - Barry Drewett

• Typical DBFO Contractual Arrangements
• DBFO Payment Mechanisms
• Some Lessons Learnt

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An Executive Agency of the Department for
TransportResponsible for operating, maintaining
and improving the 8000 km strategic road network
in England, valued at 72bnIn conjunction with
the Highways Agencys Customer First
initiative, its primary aims are to provide
THE ROLE OF THE HIGHWAYS AGENCY

• Safe Roads
• Reliable Journeys
• Real-Time Information for Travellers

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PROCUREMENT OF IMPROVEMENTS AND MAINTENANCE

• Main Types of Procurement Contracts

Major Improvement Projects

• Design, Build, Finance and Operate (DBFO) (PPP)
• Early Contractor Involvement (ECI)
• Design Build (DB)

Maintenance

• As part of DBFO contracts (PPP)
• Managing Agent Contractor (MAC)

Specialist Services
Framework Agreements, e.g. design services
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Funding of Major Improvement Projects (Programme
October 2005)
Key MW Motorway Widening TRW Trunk Road
Widening J Junction Improvements B Bypasses
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KEY OBJECTIVES OF DBFO PROCUREMENT

• To foster development of a private sector road
  operating industry
• To transfer of appropriate levels of risk to
  private sector
• To provide better outturn cost certainty
• To provide earlier delivery of large projects
• To foster improved partnerships between public
  and private sectors (less adversarial contracts)
• To provide scope for innovation in all areas
  including finance
• Overall, to provides better value for money

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HISTORY OF DBFO PROCUREMENT

• 1992 - Government launched PFI
• 1992 - Department of Transport announced DBFO
  concept
• 1994 - HA launched DBFO approach
• 1994 - Tranche 1 projects announced (4 No)
• 1995 - Tranche 1A projects announced (4 No)
• 1996 - Tranche 2 projects announced (4 No, 3 No
  later abandoned)
• 1998 - PFI reinvigorated as PPP (Public-Private
  Partnerships)
• 2000 - New style DBFO projects announced
• (A1 D2D in Yorkshire and A249 in Kent)
• 2003 - Industry consultation on improving DBFO
  process
• 2003 - A1 D2D Contract awarded
• 2004 A249 Contract awarded

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DBFO Contracts Awarded to Date

• Tranche 1 Works Payment Contract
• Cost Mechanism Award
• A69 Newcastle to Carlisle 9.4m Shadow tolls Jan
  1996
• A1(M) Alconbury to Peterborough 128m Shadow
  tolls Feb 1996
• A417/A419 Swindon to Gloucester 49m Shadow
  tolls Feb 1996
• M1-A1 Motorway Link, Leeds 214m Shadow
  tolls Mar 1996
• Tranche 1A
• A50/A564 Stoke to Derby Link 20.6m Shadow
  tolls May 1996
• A30/A35 Exeter to Bere Regis 75.7m Shadow
  tolls July 1996
• M40 junctions 1-15 37.1m Shadow tolls Oct 1996
• A168/A19 Dishforth to Tyne Tunnel 29.4m Shadow
  tolls Oct 1996
• Tranche 2
• A13 Thames Gateway, London 146m Lane
  availability Apr 2000
• (Transferred to T f L in July 2000)
• A1 Darrington to Dishforth 245m Congestion Feb
  2003
• A249 Stockbury to Sheerness 100m Congestion Feb
  2004

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RISK ALLOCATION
Few risks retained by Highways Agency, such as

• Land acquisition
• Change (instigated by HA)
• Unforeseeable archaeology
• Imposition of User Paid Tolls

Majority of risk transferred to private sector
Rare Iron Age Chariot Burial
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• Current Standards for Operation and Maintenance

• DBFO Co obliged to automatically adopt revised or
  new standards for OM over whole concession
  period
• Only exception Step Change (remote
  unforeseeable change affecting whole motorway and
  trunk road network)
• Not applicable to design and construction
  (standards fixed)

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FUTURE DBFO PROJECTS
M25 London Orbital
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Part 2 - Barry Drewett

• Typical DBFO Contractual Arrangements
• DBFO Payment Mechanisms
• Some Lessons Learnt

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TYPICAL DBFO CONTRACTUAL ARRANGEMENTS
Total No. of contracts 160
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• Main Activities of Departments Nominee
• REVIEWING the DBFO Cos design and construction,
  and operation and maintenance proposals.
• MONITORING on site the construction, and
  operation and maintenance activities.
• AUDITING the DBFO Cos quality procedures.

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Development of Payment Mechanisms in DBFO Projects
DBFO PAYMENT MECHANISMS
Future M25 London Orbital likely to be
availability-based mechanism
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Shadow Toll Payment Mechanism - Typical Banding
Base Case Traffic Forecast
Band 4 0p
Band 3 3p
Traffic Levels
Band 2 6p
Band 1 9p
Time
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Congestion Management Payment Mechanism
D2D DBFO Project
O/A Length 53 Km

• Project includes
• 2 TPI Schemes
• A1(M) Ferrybridge to Hook Moor
• A1(M) Wetherby to Walshford

Works cost 245m Concession period 33 years
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Congestion Management Payment MechanismComprises
2 separate key elements based on
(a) Active management of traffic
congestion (i.e. minimising congestion)(b) Act
ive management of traffic safety (i.e.
minimising Personal Injury Accidents (PIAs))
DBFO Co takes all on- and off-Project Road risks
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(a) Active Congestion Management

• Allocation of payment amounts and measurement of
  traffic
• Whole Project Road divided into 50 NO 2 KM LONG
  CARRIAGEWAY SECTIONS (25 NB and 25 SB)
• GROSS ANNUAL PAYMENT (as tendered) allocated to
  whole project road to give amounts for EACH HOUR
  on EACH CARRIAGEWAY SECTION pro-rata previous
  hourly traffic flows
• VEHICLE SPEEDS and VOLUMES measured AUTOMATICALLY
  using a MONITORING SYSTEM based on inductive loop
  detectors (in carriageway surfacing)

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Monitoring System Out-station Equipment

• Inductive loops GR Marksman 660 counters
• CCTV cameras for verification
• Dedicated fibre optic cables for signal
  transmission

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Congestion Management Payments
Minimum Condition Criteria must be met before any
payment made
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• (b) Active Safety Adjustment
• Criteria for Safety Payments or Deductions

Zone A no adjustments Zone B enhanced
adjustments Zone C standard enhancements
-8
-2
2
8
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Stepped-Up Construction Period Payments
of Full Payments
Note During construction period, lane closure
charges also apply
Time
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SOME LESSONS LEARNT

• All projects operating successfully
• Projects with large new-build elements more
  viable (more risk)
• Need to reduce tendering costs
• Need to reduce tendering / negotiation period
• Need to streamline contractual procedures
• Possible greater claims risk from more
  competitive (lower) pricing

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Thank You
HOLMFIELD INTERCHANGE (A1(M)/M62 Junction)