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Similar to Capturing The Benefits Of Highways PPPs
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Capturing The Benefits Of Highways PPPs
- 1. Sources of long-term project sustainability and benefit capture in tollways and highways PPPs Dr Mark Brown, Halcrow
- 7. 2) Sources of Value of PPPs Include .... INPUTS OUTPUTS LONG- TERM SHORT- TERM Reduced delivery program time and capital costs Whole life costs minimisation & sustainability Improved outcomes (economic value) through performance management Innovation & risk-sharing through collaborative working & modern contracts
- 12. Output-based Payment Mechanisms = Payment Performance Measures Adjustment - Condition Criteria Deduction - Availability Deduction Amount Bid + - Performance management drives improved value for money and enhanced outcomes
Editor's Notes
- Good afternoon! Presentation looks at long-term benefits from PPPs Whilst good established evidence about short-term and capex savings, less about long-term…most PPPs too young But evidence starting to emerge which suggests very significant long-term benefits can arise – as great or even greater than short—term This has implications for design of PPPs and the selection of which projects to deliver through PPPs
- We take a broad view of what constitutes a PPP As time goes on, more and more variations are being developed, all of which fall into a general PPP classification.
- Over 400 Pfis….+ 200 PPPs Much of this presentation is drawn from the UK, where there happens to be up to 10+ years of experience now, so long-term benefits starting to show through the mists of time
- PPP is less likely to generate benefits in certain sectors than others (eg: IT) In fact there was HMT policy not to procure any further IT projects thro’ PFI because they were so unsuccessful – Geoffrey Spence of HMT decreed So, first point to note is need to be selective of which projects we chose to deliver using PPP if we wish to optimise benefits – short term or long term
- We show four ways (there are many more) of generating value through PPPs: 2 long-term; 2 short—term; two address inputs (eg: time and materials); 2 outputs (eg: economic value and risk) Under traditional construction contracts, the contractor is only concerned about building the project within time and budget he is not concerned about whether the design and the materials used are optimal for the best whole life cost solution. Under many PPPs (eg: DBFO) the DBFO Co has no choice he has to take into account whole life costs because he is responsible for 30 years We will now look at these in more detail, the short-term providing a context for the long term.
- This is a classic short-term, input oriented source of value – however, one source of value is that involvement of asset operator at the initial procurement stage both reduces time AND increases whole life value Streamlining planning and procurement stages – difficult to run two processes concurrently because of the desire not to prejudice the Secretary of State’s decision. There are other ways around this by including an Early DBFO Involvement process i.e. appoint the DBFO Co to help the client to take the project through planning and have a break clause that if unsuccessful they only get paid for the work to take the scheme thro PI etc….. See my notes in Connections re: streamlining procurement process in M25
- Much less optimism bias on PPP projects This data indicates clear economic benefits of PPPs over other procurement models Note – none of the DBFO roads projects overan on cost or time
- Also short term but now output oriented Other presentations cover this – so no detail here CTRL a major land-mark example of a very large PPP, nearing completion after 10 years,
- Payments can be linked to both outcomes and asset condition for example a condition precedent to any payment could be the satisfactory condition of the asset
- Following completion of the widening works the monthly payments will reflect the tendered price adjusted for lane availability, condition criteria and performance. In the next few slides I will say a bit about the basis for calculating each of these adjustments and then comment on the payment arrangements during the construction stage. I should perhaps say that development of the payment mechanism is very much work in progress, we are currently testing the application of the main principles of the mechanism and although we do not expect these to change significantly there is a lot of detail still to be sorted.
- The Agency’s most recent DBFO projects have all included payment measures related to condition criteria as condition precedemt for payment ride quality, rutting, texture depth and loss of surface treatment, these are still considered to be appropriate and will be included in the M25. TRACS survey data will form the basis of the pass / fail assessment for ride, rutting and texture depth. Lanes seriously affected by snow and ice – obviously a particularly high profile concern in the Agency. This is potentially an area of some subjectivity but the intention is to incentivise the DBFO Co to ensure that we will never end up with motorists stranded on the M25. Technology is an area of increasing importance to the Agency in its new role as network operator. Providing up to date, reliable and accurate information on the state of the network and traffic conditions is the key to meeting the Agency’s key objective of informed travellers. The loss of key information and signing facilities as a result eg of damage to a main cable link from site to one of the Regional Control Centres would seriously compromise the ability of the Agency to deliver this objective.