Project Alliances in the Rail Industry
- Lessons Learnt, Benefits & Difficulties
Richard Morwood
30 July 2009
Topics

• Alliance Fundamentals and Options
• Types and Examples in the Rail Industry
  QR      - Trackstar (Program Allia...
Alliances Snapshot
• Collective project risk sharing
• No fault, no blame, no dispute
  (except default) (No sue)
• Commer...
Alliance Options
•   Conventional Project Alliances
•   Conventional Program Alliances
•   Dual TOC
•   Contracted Allianc...
TrackStar Program Alliance

                   SEQ Infrastructure
                   Plan : 2006 - 2024
                  ...
TrackStar Projects

Project 5
Beerburrum to                  5
Landsborough Duplication           4

Project 4
           ...
TrackStar Projects


                                   Project 2
                     Robina to Varsity Lakes
           ...
QR Horizon Alliance - Shared Project Alliance
• Rail - Road Corridor
• QR
• Main Roads
QR Network Alliances
    Program Alliances   Project Alliances
ARTC – North Improvement Alliance –
Contracted Alliance
TIDC - Kingsgrove to Revesby
Quadruplication Alliance
Participants TIDC, Leighton Contractors,
             AECOM, SKM, MV...
Lessons Learnt
Alliances Snapshot
Contract Fundamentals and the NO BLAME clause

•   Collective project risk sharing
•   N...
Woodlawn Bioreactor Alliance NSW
Containers transferred from rail wagons onto semi-trailers for
the short haul to Woodlawn
Alliance Response                  What didn’t Occur
• “Oh shit”                        • ‘Blame’ – Adversarial / Legal
• ...
Insurance
Professional Indemnity (PI)
   • no blame (no sue) events based cover (Aon, Swiss Re / Vero lead)
   • Now 3 und...
Commercial Frameworks - The Fundamentals
•   Direct costs paid (no risk)
•   Corporate overhead and profit at risk
•   Pai...
Commercial Framework – Lessons Learnt -
Gainshare
Commercial Framework – The Future
• Transperancy
• Value for Money reporting                “    Alliance
    –   FA      ...
Sub-Alliances




After excavation (old quarry)

 • Next to residential communities
 • Based on 800,000 tonnes
 • Actually...
Varsity Lakes Landfill Remediation
• 25m deep unclassified landfill for future station
• Better understand risk (volume, d...
Key Result Areas (KRA)
Driven by Key Performance Indicators (KPI)
•   Traditional (e.g. Safety, Environmental, Community &...
Seek Gamebreaking Outcomes

• Outstanding outcomes
• Non incremental development
• Achievable but not just
  extension of ...
Commercial Framework – Lessons Learnt – KRA’s
• KRA’s have hidden power
• Be aspirational
    –   Breakthrough innovation ...
Best Value – More than value for money!
What?
Understanding the clients drivers and expectations

Why?
We must always demo...
Criteria 1: Whole of Life Cost

• Net present value of capital,
  maintenance and replacements
• Political implications   ...
Criteria 2: Safety and Quality

• System safety (staging and temporary works risks)
• WH&S (Night work, fatigue issues, in...
Criteria 3: Legacy
•   Significant new quality assets
•   Long term safety improvements
•   No harm (environment and safet...
Criteria 4: Stakeholder positive impact

• Minimise disruption during construction
• Ease of maintenance
• Impact on commu...
How do we achieve VFM through Alliances?



                Risk sharing - sharing the pain
                              ...
How do we measure it?
Getting tension drivers right
Best for project
Need to measure cost and non-cost KRAs, stretch targe...
Alliance Delivery ‘Value-Adds’

Best suited to projects with complex relationships – multiple owners
Government shares sav...
Project Alliances in the Rail Industry by Richard Morwood
Project Alliances in the Rail Industry by Richard Morwood
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Project Alliances in the Rail Industry by Richard Morwood

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  • Hi Richard, Saw this while research other things to do with PAs. This is a really clear and well constructed preso, wish I could do mine as well as this! - Derek (RMIT Melbourne)
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Project Alliances in the Rail Industry by Richard Morwood

  1. 1. Project Alliances in the Rail Industry - Lessons Learnt, Benefits & Difficulties Richard Morwood 30 July 2009
  2. 2. Topics • Alliance Fundamentals and Options • Types and Examples in the Rail Industry QR - Trackstar (Program Alliance) - Horizon (Shared Project Alliance) - Services Alliance ARTC - North Improvement Alliance (Contracted Alliance) TIDC - Kingsgrove to Revesby (Project Alliance) • Lessons Learnt - Contract Fundamentals – the NO BLAME clause - Insurance (PI or not to PI) - Commercial Simplicity, Sub-Alliances - The Power of KRA’s and KPI’s - Value for Money
  3. 3. Alliances Snapshot • Collective project risk sharing • No fault, no blame, no dispute (except default) (No sue) • Commercial Framework – “Direct Cost” paid (no risk) – Corporate Overhead and Profit at Risk – Painshare / Gainshare + KRA’s • Unanimous principle based decision making • Integrated project team – best for project selection
  4. 4. Alliance Options • Conventional Project Alliances • Conventional Program Alliances • Dual TOC • Contracted Alliances • Thin Client Alliances • Services Alliances • ECI Hybrids • NEC3 Options • PPP/Alliance Hybrids
  5. 5. TrackStar Program Alliance SEQ Infrastructure Plan : 2006 - 2024 Rail projects 29 projects : 18 years 268 km of new track $107 billion (Rail component) $19 billion TrackStar Alliance Program to date is 9 projects : 6 years More than $1 billion
  6. 6. TrackStar Projects Project 5 Beerburrum to 5 Landsborough Duplication 4 Project 4 1 Beerwah Rail Crossing Project 1 Caboolture to Beerburrum Track Duplication
  7. 7. TrackStar Projects Project 2 Robina to Varsity Lakes 3 Rail Extension Project 3 Corinda to Darra Rail Upgrade 2
  8. 8. QR Horizon Alliance - Shared Project Alliance • Rail - Road Corridor • QR • Main Roads
  9. 9. QR Network Alliances Program Alliances Project Alliances
  10. 10. ARTC – North Improvement Alliance – Contracted Alliance
  11. 11. TIDC - Kingsgrove to Revesby Quadruplication Alliance Participants TIDC, Leighton Contractors, AECOM, SKM, MVM Rail, Ansaldo STS • 2 additional tracks between existing 4 tracks (Beverly Hills Station to Revesby Station) • Civil and rail systems, traction supply • Revesby Station upgrade • 12 new underbridges and extensions of 6 bridges
  12. 12. Lessons Learnt Alliances Snapshot Contract Fundamentals and the NO BLAME clause • Collective project risk sharing • No fault, no blame, no dispute (except default) (No sue) • Commercial Framework – “Direct Cost” paid (no risk) – Corporate Overhead and Profit at Risk – Painshare / Gainshare + KRA’s • Unanimous principle based decision making • Integrated project team – best for project selection
  13. 13. Woodlawn Bioreactor Alliance NSW
  14. 14. Containers transferred from rail wagons onto semi-trailers for the short haul to Woodlawn
  15. 15. Alliance Response What didn’t Occur • “Oh shit” • ‘Blame’ – Adversarial / Legal • Emergency PAB via video positions conference • Communication breakdown • Emergency AMT – • Delay to operation rectification, alternatives • Environmental harm • External expertise – Coffey Canberra • Combine PAB/AMT meetings on site • Briefings to Collex executives
  16. 16. Insurance Professional Indemnity (PI) • no blame (no sue) events based cover (Aon, Swiss Re / Vero lead) • Now 3 underwriters providing this cover for most major Alliances (currently cheaper than traditional PI) Contract Works Insurance • LEG 3 extension (allows rectification to what it should have been) Design write back on public liability insurance (policy improvement)
  17. 17. Commercial Frameworks - The Fundamentals • Direct costs paid (no risk) • Corporate overhead and profit at risk • Painshare / gainshare – costs 50/50 split • Non cost Key Result Areas (KRA’s) – Incentivised – Non incentivised – Joint TCE / TOC derivation – No dispute, no sue
  18. 18. Commercial Framework – Lessons Learnt - Gainshare
  19. 19. Commercial Framework – The Future • Transperancy • Value for Money reporting “ Alliance – FA = KIS2” – IE one report – IV • Two stage TCE’s • Always reward outstanding results • Risk linked program alliances • Services alliances – annual commercial framework review • Community legacies formulised corporately
  20. 20. Sub-Alliances After excavation (old quarry) • Next to residential communities • Based on 800,000 tonnes • Actually > 1 million tonnes removed • Staged to suit construction Worked around critical path
  21. 21. Varsity Lakes Landfill Remediation • 25m deep unclassified landfill for future station • Better understand risk (volume, density, classification) • Unique two stage TCE Process – offered real value Industry priced Dec 06 • Lump sum – $42m (high risk) Sub alliance formed Jun 07 • TCE 1 – $39m Measured density Mar 08 • TCE 2 – $37m and productivity 25% volume increase Nov 08 • Actual outturn – $37m
  22. 22. Key Result Areas (KRA) Driven by Key Performance Indicators (KPI) • Traditional (e.g. Safety, Environmental, Community & Quality) • Additional (e.g. Innovation, Industry Change)
  23. 23. Seek Gamebreaking Outcomes • Outstanding outcomes • Non incremental development • Achievable but not just extension of “Business as Usual” • Example: Lawrence Hargrave Drive environmental Approvals achieved in 6 months from commencement of concept
  24. 24. Commercial Framework – Lessons Learnt – KRA’s • KRA’s have hidden power • Be aspirational – Breakthrough innovation ( not just risk & opportunity – Alliance health (beyond safety) – Sustainability (not just environmental compliance) LHD – Community legacy (not just consultation) – Value for Money (not just gainshare) – Big Q Quality (Not just QA) INB Sustainability Initiatives • Energy management and • KRA’s greenhouse gas emissions • Waste management and recycling – Incentivised • Impacts on local business continuity – Not incentivsed • Water resource management • Intelligent integrated design
  25. 25. Best Value – More than value for money! What? Understanding the clients drivers and expectations Why? We must always demonstrate Best Value because TrackStar’s success depends on it “Options Assessment Criteria” 1 Whole of life cost 2 Safety and quality 3 Stakeholder positive impact 4 Legacy
  26. 26. Criteria 1: Whole of Life Cost • Net present value of capital, maintenance and replacements • Political implications Business Case • Reliability and availability Stakeholder World - Value add mindset TrackStar’s Option 2D $216 million •Whole-of-life cost Engineering World - •Safety Dollars mindset •Quality •Legacy Base Option $270 million
  27. 27. Criteria 2: Safety and Quality • System safety (staging and temporary works risks) • WH&S (Night work, fatigue issues, interface between trains, people, equipment) • Fit for purpose (Operational functionality, technical compliance, robustness of solution)
  28. 28. Criteria 3: Legacy • Significant new quality assets • Long term safety improvements • No harm (environment and safety) • Ecologically sustainable • Industry capability • Interface to the future – savings in future capital works spend
  29. 29. Criteria 4: Stakeholder positive impact • Minimise disruption during construction • Ease of maintenance • Impact on communities - passengers, services, security, amenity • Modal integration at stations • Timeliness of project delivery • Impact on other Government infrastructure projects
  30. 30. How do we achieve VFM through Alliances? Risk sharing - sharing the pain and gain Ability to influence outcomes Transparency Flexibility Stretching people Saving time and money Strong and trusting culture Being innovative Valuing Safety – Zero Harm
  31. 31. How do we measure it? Getting tension drivers right Best for project Need to measure cost and non-cost KRAs, stretch targets Independent estimators Cost comparison – with end result Other drivers • Time • Customer and Stakeholder satisfaction • Environmental performance • Safety (should be inherent)
  32. 32. Alliance Delivery ‘Value-Adds’ Best suited to projects with complex relationships – multiple owners Government shares savings when market improves Owner participants continuously involved in decision-making Greater control over long term maintenance/whole of life costs Can effectively address stakeholder/community issues Encourages good design Delivers government procurement priorities Creates way to encourage different thinking Moves beyond financial focus only Emphasises holistic approach and sustainability

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