Managing the Dutch Waterworks using long-term Maintenance Contracts

Functional Risk Allocation between Public and Private Parties

Master thesis by

O.D. Brommet 1368915

Master Construction Management and Engineering

Delft University of Technology

27 August 2015

Graduation committee:

Prof. dr. ir. M.J.C.M. Hertogh |TU Delft, Civil Engineering and Geosciences dr. R. Schoenmaker |TU Delft, Civil Engineering and Geosciences ir. Y. Chen |TU Delft, Architecture ir. G. R. Kleijn van Willigen |Rijkswaterstaat

PREFACE

In front of you is my graduation thesis, which is part of my graduation project for the master Construction Management and Engineering at the Delft University of Technology. This thesis is the result of my research into the responsibility allocation between public and Private parties in a long-term maintenance contract of waterworks.

I could not have done this research without the internship within Rijkswaterstaat and the excellent supervision of my graduation committee and I would like to thank all of them. I would like to thank Rob Schoenmaker for giving me inspiration and excellent feedback on my research. Yawei Chen, thank you for your enthusiastic feedback which motivated me to deliver an understandable and structured report. And Marcel Hertogh, thank you for supervising this research and your valuable feedback.

Gwen Kleijn van Willigen and Peter Blanker, thank you for your enthusiasm, the many interesting discussions, keeping me sharp by critical feedback, and the time which both of you used to improve my research.

In addition, I would like to thank everybody who took time to help me during this research. Without the interviewees this research would not have been possible. The interviews provided necessary information about the risk allocation, but also gained insight and different perspectives in the world of asset management and waterworks. The site visits on the Haringvliet barrier, Oosterschelde barrier and Nuclear Power Plant Borsele showed the applications of LPAM, and the tour on the Volkerakcomplex showed the practical application of the operation of such a large complex, which definitely made my research more interesting.

Further I would like to thank Nikki and Philine, for all the coffee moments at CME, my parents, especially my father for reviewing my English, and other family and friends for the fun times in between.

Last but not least I would like to thank Mark for his support and patience during my graduation, by being there for me and making lovely dinners while I was working on my graduation project.

Olga Brommet

Delft, August 2015

v

vi SUMMARY

INTRODUCTION On the 22th of January 2015 the first DBFM contract for waterworks reached its financial close. In the next 30 years, 50 of the 83 locks in the Netherlands need to be renovated (Willems, 2015). The Dutch Government prefers the use of Design, Build, Finance and Maintenance contracting as agreement. In this contract model the public party enters a long-term contractual agreement with the Private sector in which the Private sector is responsible for the design, construction and maintenance of public sector infrastructure facilities. This type of outsourcing of waterworks to the Private party is rather new, compared to road- and rail infrastructure. This gives reason for concern, because of the differences in functional requirements: next to facilitating shipping (Availability), the lock prevents the hinterland against flooding (Reliability). To verify these RA- requirements, and thus the performance, Living Probabilistic Asset Management (LPAM) is used. This methodology requires translation of the Water act into requirements expressed in failure rates of the asset in order to verify the performance of the asset. The methodology indicates respective risks of the lock divided in hardware, software, human failure and external risks. A performance requirement is the set of criteria regarding the condition of the main functions of the lock that must be met all times during its lifecycle.

A proper risk allocation between parties is vital for the project performance (Ward, Chapman, & Curtis, 1991). In this research a risk is an event, which may lead to the functional failure of a system: non-performance of the requirements. Research on how to distribute the risks, whereby the level of outsourcing to the Private party is in line with the desired degree of control of the pubic party during the maintenance and operation phase, is missing. The objective of this research is to find a proper risk allocation method, with respect to the performance and the costs so the Dutch Government manages infrastructure adequately. The main question of this research is:

‘What can be the allocation of risks of functional failure of a lock between public and Private parties in a DBFM contract, with respect to the optimisation between performance and costs, so the public party still manages the infrastructure adequately during the Operation and Maintenance phase?’

First, in order to establish a suitable risk allocation between the public and Private party, a ‘to be’ situation based on theory is developed. The ‘to be’ situation is a theoretical risk allocation method, consisting of a risk allocation matrix and conditions, based on the theories of DBFM, LCC, uncertainty of failure probabilities and suitable management structures according to the Transaction Costs Economics. Second, the application of risk allocation is analysed by practical case studies. In this way, the ‘as is’ situation can be described and the risk allocation method can be validated and improved. Three cases from the LPAM portfolio of the Dutch Government are selected: the Volkerak complex (lift locks), Safety Lock Heumen and Safety Lock Limmel. The Volkerak complex and Safety Lock Heumen are both in the Operation and Maintenance phase. Safety Lock Limmel is currently in the design phase. The observations of the first two cases are used in the last case for finding the current culture of risk allocation. Data and observations of each case are conducted from contracts, reports and through interviews with critical stakeholders. In this research critical stakeholders have a significant contribution to the performance of the lock: they are the operator, the contracting team of the Dutch Government and the contractor.

RESULTS The risk allocation method derived from literature consists of a risk allocation matrix and conditions. The risk allocation matrix, see Figure 1, provides a management structure for long-term contracting based on the degree of two uncertain variables. The first non-consistent variable is the failure rate, which is translated into the expected frequency of failure of a critical element during the contract period. The second variable is the

vii repair time. Repair time can have negative influence on the Reliability and Availability of the lock, therefor high repair time will be priced into the costs as risk premium. The degree of uncertainty of the variables influences the involved risk premium costs. Postponing the decision of allocation provides control by the Public party on the maintenance strategy, and thus the consideration of costs versus performance. The risk allocation matrix gives for each element a management structure for the public party to keep control on the asset and the related performance and costs.

Figure 1 Risk allocation matrix The risk allocation conditions are related to the assessment and effective management of risks. They ensure a reasonable and fair allocation. The desired risk assessment of the critical stakeholders is risk averse for the operator and contractor in order to maximise the performance of the lock. On the other hand, the desired risk assessment of the Dutch Government is risk averse combined with risk neutral to keep in control of the optimisation of performance and costs. The compliance to the nine risk allocation criteria by the critical stakeholders, as in table 1, indicates the effective manageability of the risk.

Table 1 Risk allocation criteria Risk allocation criteria Operator Rijkswaterstaat Contractor 1 Whether the party is able to foresee the risk / Has been made    fully aware of the risks they are taking 2 Whether the party is able to assess the possible magnitude of    consequences of the risk 3 Whether the party is able to control the risk chance of occurring   4 Whether the party is able to sustain the consequences if the risk occurs 5 Whether the party will benefit from bearing the risk   6 Whether the premium charged by the risk receiving party is    considered reasonable and acceptable for the owner 7 The party is able to manage the associated uncertainty, and    thereby mitigate risks 8 The party has the necessary risk appetite to want to take the risk  9 Whether the party is able to make use of the prescribed LPAM    methodology.

viii CONCLUSIONS All three case studies validated that the risk allocation matrix is suitable to allocate the hardware and software related risks. In case 1, the hardware and software risks are outsourced in line with the risk allocation matrix, project problems which came up were related to the organisation and contractual requirements. Case 2 involved a short-term maintenance period for a fixed price, whereby the management suggestion for hardware and software risks of the risk allocation matrix is applicable. In the last case, every hardware and software risk is outsourced under several functional contractual requirements in DBFM. This disagrees with the risk allocation matrix which suggest outsourcing the risks which will possible, likely or often occur in order to control the performance versus costs of the object. Stated can be that the risk allocation matrix provides, a suitable management structure for long term contracting to keep in control of the performance versus the costs. In practice, the application of the matrix showed that the political acceptance of risk premium costs with respect to the performance and the degree of control by the public party have various considerations.

The risk allocation conditions must be considered first for risks related to human failure and external factors. In practice, the allocations of these risks in long-term contracts are highly influenced by the criteria related to the ability to control and mitigate the risk. It is not reasonable and fair to account the public party for a fault of the Private party and vice versa. Both parties cannot control the probability of occurrence of external risks, but the risk can be mitigated by control measurements, which are in every case study outsourced to the Private parties. Those measures are hardware and software related and therefore it is possible to outsource the control measurements according to the risk allocation matrix.

A long-term contract including lump sum payment, like DBFM, includes a financial reward for the Private party to optimise the maintainability, reliability and availability in the design. The optimisation is enhanced by the Private party in case 1 and case 2 by hiring a specialised Private party to ensure effective management of the mechanical, electrical, operational and control installations.

The application of the risk allocation method in a DBFM contract implies an increased responsibility and control mechanism for the public party during the Operation and Maintenance phase. By this mechanism they can achieve their desired result. Besides enforcing the contract, the public party becomes able to steer the maintenance strategy on long-term. In addition, this control mechanism requires collaboration between the critical stakeholders and some organisational changes. Every case study confirms that collaboration between the critical stakeholders is necessary in order to achieve an adequate functioning lock.

RECOMMENDATIONS The following recommendations are done, in order to achieve a supported risk allocation, with respect to the performance and the costs, according to the given risk allocation method. This method includes the recommended allocation of the risk between the parties, who are able to manage them effectively and assess them properly, so the Dutch Government is sufficiently in control of the performance during the Operation and Maintenance of the Dutch Lift and Safety Locks.

o The risk allocation conditions should be first considered by the allocation of Human failure and External risks. In this way the risk allocation is feasible, reasonable and fair. o Early involvement of and collaboration between the critical stakeholders and banks during the whole life cycle enhances the risk allocation support and provides the opportunity for the Public party to remain close to the functioning of the object and to partly control the maintenance strategy. o Execution of maintenance according to the prescribed LPAM methodology requires adaption of the (traditional) organisation of the Private party. By focussing on long-term benefit, the Private party should update the failure data in order to determine the optimal maintenance interval with respect to performance of the lock. This differs from the maintenance activities which are currently used.

ix o An adaptive lump sum payment regime during the first years of maintenance creates solution space for the Private party to optimise the maintenance activities according the LPAM methodology. In this way immediate penalties, in case of disappointing results, are prevented. Optimisation of the maintenance requires sufficient solution space in order to find an optimal maintenance strategy which leads to long-term benefit. The solution space is determined by the performance requirements and the periodical inspections, both indicators for the periodical payment (lump sum). Currently, these limitations are present from the beginning, while optimising the maintenance according the LPAM methodology requires time. Therefore, in the beginning the solution space must be able to bear disappointing results so the uncertainty of maintenance optimisation according the LPAM methodology decreases in such a way that that the public party is still able to enforce the contract and steer the maintenance strategy in order to achieve the desired result. o Sufficient technical knowledge, experience and skills of the Public party is required to be able to test the provided reports and RA analysis made by the Private party. In this way, the current condition of the lock can be assessed and an appropriate decision regarding life cycle costs optimisation can be reached.

x CONTENT

Preface ...... v Summary...... vii Content ...... xi List of Tables ...... xiii List of Figures ...... xiv 1 Introduction ...... 1 1.1 Context ...... 2 1.1.1 Living Probabilistic Asset Management (LPAM) ...... 2 1.1.2 Definitions...... 4 1.2 Research on risk allocation during the Operation and Maintenance phase ...... 5 1.3 Problem Statement ...... 6 1.3.1 Research Objective and Main Question ...... 6 2 Research Design ...... 8 2.1 Research Framework ...... 8 2.2 Case Study Methodology ...... 9 2.2.1 Research Questions ...... 9 2.2.2 Case Selection ...... 10 2.3 Reading Guide ...... 10 3 Risk identification ...... 11 3.1 Hardware critical elements ...... 11 3.2 Software critical events ...... 12 3.3 Human failure critical events ...... 13 3.4 External critical events ...... 13 3.5 Subconclusion 1: Risks of Functional Failure ...... 14 4 Theoritical Framework...... 16 4.1 Design, Build, Finance and Maintenance contract ...... 16 4.1.1 Advantages and Limitations of PPP constructions and DBFM ...... 17 4.1.2 Contract type considerations...... 18 4.1.3 Contradications ...... 18 4.2 Maintenance: Risk-based Life Cycle optimisation ...... 19 4.2.1 Living Probabilistc Asset Management: Risk-based Maintenance ...... 20 4.2.2 RAMS (SHE€P) ...... 20 4.2.3 Maintenance and life cycle & Costs ...... 21 4.2.4 Findings from DBFM and LCC ...... 22

xi 4.3 Risk uncertainty and classisication ...... 23 4.3.1 Classification methods ...... 23 4.3.2 Uncertainty of failure Probability ...... 24 4.3.3 Findings: Risk Classification matrix ...... 26 4.4 Transaction cost Economics (TCE) ...... 27 4.4.1 Frequency, Uncertainty and Asset Specificity ...... 27 4.4.2 Management regime and payment regime ...... 28 4.4.3 Findings: Risk allocation management structure ...... 29 4.5 Subconclusion 2: A risk allocation method ...... 30 4.6 Conditions of Risk allocation ...... 32 4.6.1 Risk assesment ...... 32 4.6.2 Managed effectively ...... 33 4.6.3 Stakeholders involvement ...... 34 4.6.4 Political accepted ...... 35 4.7 Subconlusion 3: risk allocation conditions ...... 36 5 Case study ...... 37 5.1 Case introduction ...... 38 5.1.1 Case 1 Introduction: Volkerak complex ...... 38 5.1.2 Case 2 Introduction: Safety Lock Heumen ...... 39 5.1.3 Case 3 Introduction: Limmel ...... 39 5.2 Case 1: Volkerakcomplex ...... 40 5.2.1 Case 1: Risk allocation matrix ...... 40 5.2.2 Case 1: Risk allocation criteria ...... 42 5.2.3 Case 1: Risk allocation assessment ...... 45 5.2.4 Case 1: Observations...... 46 5.3 Case 2: Safety Lock Heumen ...... 47 5.3.1 Case 2: Risk allocation matrix ...... 47 5.3.2 Case 2: Risk allocation criteria ...... 49 5.3.3 Case 2: Risk allocation assessment ...... 51 5.3.4 Case 2: Observations...... 52 5.4 Case 3: Safety Lock LImmel ...... 53 5.4.1 Case 3: Risk allocation matrix ...... 53 5.4.2 Case 3: Risk allocation criteria ...... 55 5.4.3 Case 3: Risk allocation assessment ...... 58 5.4.4 Case 3: Observations...... 59 5.5 Subconclusion 4: Observation case studies ...... 60 5.5.1 Compliance to Risk allocation critiria ...... 61

xii 5.5.2 Improvements for risk allocation ...... 62 6 Conclusion ...... 63 6.1 Risk allocation method ...... 63 6.1.1 Consequences risk allocation method for DBFM ...... 65 6.2 Recommendations ...... 66 6.3 Supported research ...... 67 7 Discussion ...... 68 8 References ...... 70 Appendixes ...... 74 Appendix A ...... 74 Appendix B ...... 75 Appendix C ...... 77 Appendix D ...... 82 Appendix E ...... 85 Appendix F ...... 88

LIST OF TABLES

Table 1 Overview risks analysis methods and analysis levels of the LPAM methodology ...... 4 Table 2 Hardware disciplines with failure mode and causes ...... 12 Table 3 Risks of functional failure ...... 15 Table 4 R,A, M and P description (Adapted from (Rijkswaterstaat, 2014b, p. 28) ...... 21 Table 5 Frequency of failure during contract length ...... 26 Table 6 Perspective of Stakeholders...... 35 Table 7 Risk allocation conditions of critical stakeholders ...... 36 Table 8 Desired Risk assessment of the critical stakeholders ...... 36 Table 9 Risk allocation criteria Volkerak complex ...... 44 Table 10 Risk assessment critical stakeholders Volkerak complex ...... 45 Table 11 Risk allocation criteria Heumen ...... 50 Table 12 Risk allocation assessment critical stakeholders Heumen ...... 51 Table 13 Risk allocation criteria Safety Lock Limmel ...... 56 Table 14 Risk allocation assessment critical stakeholders Safety Lock Limmel ...... 58 Table 15 Performance effectivity ...... 61 Table 16 Desired compliance to risk allocation criteria ...... 62 Table 17 Risk allocation criteria of critical stakeholders ...... 64

xiii LIST OF FIGURES

Figure 1 Deming Cycle ...... 3 Figure 2 Reliability and Availability assessment ...... 4 Figure 3 Six stage model by Schoenmaker and Verlaan (2013) ...... 6 Figure 4 Methodology (based on (Verschuren & Doorewaard, 2013)) ...... 9 Figure 5 Reading Information Flow Chart ...... 10 Figure 6 Concepts and interrelations theoretical framework ...... 16 Figure 7 Allocation of responsibility in a DBFM contract (adapted from MRWA (2015)) ...... 17 Figure 8 LCC classified of every project phase (adapted from Woodward (1997)) ...... 19 Figure 9 Deterioration curve of a structure and influence maintenance strategy (adapted from Kaneuji, Yamamoto, Watanabe, Furuta, and Kobayashi (2007, p. 55)) ...... 22 Figure 10 Economic life of an object (Cho, Frangopol, & Ang, 2007, p. 174) ...... 22 Figure 11 Probability density function & probability distribution function (adapted from TU Delft (2014, p. 21) ...... 24 Figure 12 Uncertainty of failure versus contract length ...... 25 Figure 13 Frequency of failure during contract length ...... 25 Figure 14 Step 1: Risk Allocation matrix ...... 26 Figure 15 Step 2: Risk Allocation matrix ...... 30 Figure 16 Step 3: Risk Allocation matrix ...... 31 Figure 17 Elaboration case study methodology ...... 37 Figure 18 Case 1: Volkerak complex ...... 38 Figure 19 Case 2: Safety Lock Heumen ...... 38 Figure 20 Case 3: Safety Lock Limmel ...... 38 Figure 21 Volkerak complex: Risk allocation matrix ...... 41 Figure 22 Safety Lock Heumen: 'As is' risk allocation matrix ...... 48 Figure 23 Safety Lock Limmel: Risk allocation matrix ...... 53 Figure 24 Risk Allocation matrix ...... 64 Figure 25 Allocation of responsibility by application of the risk allocation method ...... 65 Figure 26 Role of private party during the maintenance process by risks which will probable, possible and rare occur during the contract length: left the initiation phase and right the implementation phase (adapted from Schoenmaker (2011, p. 364)) ...... 67

xiv 1 INTRODUCTION During the last 60 years the organisation of the Dutch waterworks changed considerable: in the beginning the waterworks were almost completely built, maintained and managed by Rijkswaterstaat. During the last years, the waterworks are entirely (design, construct and maintenance) given to the market (Geels, Disco, & Lintsen, 2003, pp. 13-93) (Jorissen, Looff, & Labrujere, 2013, pp. 66-71). Nowadays the maintenance activities are carried out by the Private party, while Rijkswaterstaat stays responsible for the functional requirements of the waterworks and the operation thereof. This division of tasks which influence one and other and the responsible parties are indicators to analyse this situation further.

The first Dutch DBFM contract for road and rail infrastructure projects is executed in 2005. The first return of a DBFM object will be in 2022: there is no practical experience. On the 22th of January 2015 the first DBFM for waterworks reached its financial close; thereby the tender phase of the lock Limmel has been ended (Lesterhuis, 2015). This is the first pilot project out of six designated locks; the second DBFM contract has been concluded recently. In the next 30 years, 50 of the 83 sluices in the Netherlands need to be renovated (Willems, 2015). The scope differs from a renovation of the subsystems towards a complete renovation or adding a new lock next to the old lock.

During the past two decades the knowledge has increased substantially on outsourcing the Operation and Maintenance of road infrastructures in DBFM contracts, contrary to the waterworks where this type of outsourcing is rather new. This gives reason for concern: because of the differences in complexity between the road-, rail- and water- infrastructure it is important to gain more knowledge how to realise the outsourcing of maintenance and responsibilities of locks. A lock differs from road and rail infrastructure in the functional requirements; next to availability it must be reliable to a certain degree according the Water Act. Rijkswaterstaat is responsible for the performance of the waterworks, while a DBFM contract implies risk responsibility transfer to the Private party during the contract length. However, to a certain degree some responsibilities are non-transferable.

Important for the project performance is the allocation of risks between the parties (Ward, Chapman, & Curtis, 1991). Risk management and allocation deals with optimising the benefits compared with the disadvantages. The ‘market unless principle’ of the Dutch Government must be considered for each public work. The question is not if the market can play a part during the maintenance, but where the line should be drawn between the government and the market to optimise the allocation of risks with their uncertainties and the maintenance tasks to a level that is acceptable politically (public opinion) and cost optimal. In the case of a unique object an object specific implementation based on risks and responsibilities must be developed (Keulen, 2007, p. 76). Available strategies how to outsource maintenance of existing infrastructure are based

on performance requirements to gain maximum benefits and minimum disadvantages. Research how to control the maintenance phase so the public party is aware that the chosen degree of outsourcing implies a degree of uncertainty of the performance is missing (Schoenmaker, 2011, pp. 13,16,367). This research is about the allocation of risk between public and Private parties in a DBFM contract during the Operation and Maintenance phase of a lock so the public party is in control of the performance.

1.1 CONTEXT

The public sector in this research is the Directorate – General for Public Works and Water Management (Rijkswaterstaat), who is responsible for the to her assigned and legal responsibilities and frameworks (Rijkswaterstaat, 2014c, p. 4).

Currently, the Dutch Government is interested in limitation of her core tasks and providing citizens an improved service (Ministry of Infrastructure and Transport in Eversdijk and Korsten (2009)), by making use of the Private creativity and innovatively for life cycle optimisation to achieve ‘Value for Money’. Therefore, they prefers the use of Design, Build, Finance and Maintenance contracting (DBFM) as Public Private Partnership construction (Ruding in Eversdijk and Korsten (2009)). A Public Private Partnership is an agreement where public sector bodies enter into long-term contractual agreements with Private sector entities for the construction, management or provision of services of public sector infrastructure facilities by the Private sector. (Grimsey & Lewis, 2000) (National Council for Public Private Partnerships, 2015).

The core task of Rijkswaterstaat is protection against flooding, delivery of sufficient clean water, smooth and safe flows on the nation’s road and waterways and providing reliable and useful information (Rijkswaterstaat, 2015c). Hence indicators to determine the performance of a lock become:

1) Facilitate Shipping on the waterways 2) Prevent the hinterland against flooding

Therefore, Rijkswaterstaat focusses on the quality of the performance of a structure. The importance of adequate performance of the waterworks can be found in the estimated consequences when it will fail. The average flood damage in South-Holland is estimated at 6 billion euro if whole South Holland overflows (Westen, 2005, p. 8). Non-availability of the waterways has an economical damage, depending on the time window of the non-availability and the number of affected people.

Thus, locks have two types of functional requirements. First, Facilitating shipping, this is similar to the measurement of the road availability: it is possible to count the passed ships. Second, Prevention of flooding, which can be determined by the probability of failure of the lock (Tuijl, 2014). These performance requirements are translated into failure rates. The methodology to verify the performance level is available, known as Living Probabilistic Asset Management (LPAM), stipulated in Reliability and Availability (RA) requirements (Bogaard & Akkeren, 2011, p. 33). This method is based on the LPAM methodology used in the aviation and the nuclear power industry. The difference between those industries and the waterworks is the public involvement: the aviation and nuclear power industry are private.

1.1.1 LIVING PROBABILISTIC ASSET MANAGEMENT (LPAM)

Risk-Based Asset Management, also named Living Probabilistic Asset Management (LPAM), is used as methodology by the Directorate – General for Public Works and Water Management (RWS, Rijkswaterstaat) to manage their assets. In the DBFM program on sluices the use of this methodology is prescribed in the contract in order to verify the performance, stipulated in Reliability and Availability requirements. These performance requirements are regularly based on laws and regulations, like the Water act, or on service level

agreements. Generally, in every contract the contactor is made responsible to define and manage the risks which can lead to non-performance of the object.

When implemented successfully this risk-based methodology enables transparency and traceability of the performance requirement and the performance level during Operation and Maintenance. Further benefits of the use of this methodology are (Bogaard & Akkeren, 2011, p. 10):

- Remain consistently in control of the domain - Demonstrable comply with legislation - One clear mean of communication with the Private party - Optimization between maintenance (reducing risks), costs and performance - Clear organization of tasks, roles and responsibility

The calculated performance, using the prescribed LPAM methods, shows the reliability or availability of the analysed object. In order to calculate the performance a vast number of functional risks need to be quantified. The respective risks can be subdivided into (Manen, 2014a, p. 18):

. Hardware . Software . Human failure . External risks

Furthermore, the LPAM methodology prescribes not only how the probabilistic risk assessment should be made, but also the manner in which it should be maintained in order to be fully in control over the performance of the asset. This process is based on the Deming-cycle, as shown in Figure 1. At the plan stage the risk analysis is translated into the actual asset maintenance plans for the object. The do stage inhibits the fulfilment of the plans as dictated in the plan stage. The information gathered in the do stage, such as frequency of failures, actual repair times, inspection results and so on are then reviewed in the check stage in order to determine if the object is functioning and being maintained according to the expectations. Finally any exemptions are incorporated in the risk analysis during the act stage. A typical result of the going through the cycle is the decreased difference between the risk models (theory) Figure 1 Deming Cycle and the practice (Bogaard & Akkeren, 2011, p. 31).

OPTIMISATION MAINTENANCE INTERVAL (Θ), COSTS (€) AND PERFORMANCE (Λ) The data gathered within the LPAM methodology enables the optimisation between the maintenance strategies, life cycle costs and performance practice (Bogaard & Akkeren, 2011, pp. 125-126). This optimization can be induced during all four stages of the deming-cycle, however, before being set into place the effects should always be calculated during the act stage and programmed in the plan stage.

VARIANTS AND METHODS LPAM is applicable for every kind of water work, however, there are differences between the depth of the analysis of various objects. A qualitative analysis is sufficient for simple standard objects such as dams. A quantitative analysis is required when the performance of the object is expressed in terms of probabilities. A standard quantitative analysis is applicable for objects which are built according a certain level of standard characteristics, such as locks. In case of a more complex object, without any standardisation, a specific quantitative analysis is required. In Table 1 an overview of the various methods for risks analysis is given, together whether it is required by the depth of the analysis.

Table 1 Overview risks analysis methods and analysis levels of the LPAM methodology

Qualitative Quantitative standard Quantitative specific System and functional analysis X x x FME(C)A X x x External Events analysis x (qualitative) x (qualitative & standard x (qualitative & specific quantitative) quantitative ) Human Failure Analysis x (standard) x (specific) Qualitative model – Fault tree x analysis (FTA) Quantitative model X x Analysis and Evaluation x X x

The basic principle of the risk analysis is to indicate all the elements which can influence the performance of the system. These elements are partially system bound and require maintenance (Hardware and Software) and partially elements which are not part of the system but can influence the performance (Human Failure and External Risks). The LPAM methodology requires a different approach towards each element by application of the proposed risk analysis methods, as in Figure 2 (Manen, 2014a, p. 18).

Figure 2 Reliability and Availability assessment

1.1.2 DEFINITIONS

This research is about risk allocation based on the performance requirement of the lock. Therefore, the definition of risk and performance requirement is given below.

PERFORMANCE REQUIREMENT According to the Oxford dictionary a performance requirement can be explained as necessary condition for the success of the functional performance of the capabilities of an object. (Oxford dictionaries, 2014a, 2014b). This is in line with the definition used in construction works: they state that a performance requirements is a regulation expressed in measures and numbers regarding the property of a civil structure or a part (Encyclo, 2014).

In the guidelines for risk-based maintenance and operation of Rijkswaterstaat (Bogaard & Akkeren, 2011, p. 76) a performance requirement is defined as the criteria set for the main function(s) of an object that must be met at all times during its life cycle. The performance requirements are translated into failure rates, the definition given by the guidelines RAMS (Bogaard et al., 2010) for failure is an event or a cluster of events, which causes functionality loss of the system, or a part of the functionality.

The definition of a performance requirement in this thesis becomes:

‘The criteria set of numbers (expressed in failure rates and resulting down time) regarding the condition of the main functions of the lock that must be met all times during its lifecycle. ‘

RISK The definition ‘a risk is a function of the probability and the consequences’ is the most general, because within this definition it is possible to assign weight to the consequence of an undesired event (TU Delft, 2014, p. 32). This type of risks can be defined as a probability based risk (Martijn Leijten, 2013, p. 5). A further distinction of risks can be made by considering the difference between a risk what can be an opportunity and a risk what is a threat (Turner, 2014, p. 295). In this research a risk is considered as a threat, for example the risk of flooding is considered as a combination of the probability of flooding and the consequences of the event flooding (Most, Wit, Broekhans, & Roos, 2010, p. 10). Rijkswaterstaat (Bogaard & Akkeren, 2011, p. 75) defines a risk as an undesired event, with a probability and consequences. An undesired event can contribute to the functional failure of a system. An undesired top event implies at least a partial loss of function.

The risk as threat, functional failure of the system which leads to non- performance of a requirement, is the main risk in this research. This risk consists of many basic events, with each a failure probability which can lead to the functional failure of a system. The definition of risk becomes:

‘A risk is an event, which can lead to the functional failure of a system’

The definition of a risk is in line with the LPAM methodology used by Rijkswaterstaat. LPAM is aimed at monitoring and reducing the likelihood of the probability of an event, or at reducing the consequences of an undesired event. The more the undesired event associated with the risk threatens the performance level requirements, the more control is applied. The LPAM methodology considers a risk as the non-performance of a requirement Rijkswaterstaat (Bogaard & Akkeren, 2011, p. 75).

1.2 RESEARCH ON RISK ALLOCATION DURING THE OPERATION AND MAINTENANCE PHASE

Outsourcing of functional performance requirements over a longer period is rather new in civil infrastructure projects. Little attention is paid to the operation and maintenance phase in scientific research compared with the design and build phase of projects. The principles of maintenance management used by Rijkswaterstaat is partly based on the methodology of Duijvenvoorden and Verdoes (1995). The most well-known concept were maintenance is included is Life Cycle Costing, what is an Asset Management tool to optimise the costs during the whole life cycle.

The subject risk allocation is an adequate discussed item in scientific research, also focussed on the technical risks. Xioa-Hua Jin (2009) has done research about how different kind of risks are allocated in different countries in combination with the opinion of the public and Private parties. The Transaction Costs Economics of Williamson (1981) provides concepts for a suitable governance structure of a project, based on its characteristics.

Based on the type of project, which include a lot of requirements during the operation and maintenance phase, the theory of Complex projects related to dynamic contracting by Hertogh and Westerveld (2009, pp. 109,120) make a proposition about the desired situation. They state that a governance structure needs to be adaptive, because with a long-term maintenance contract not everything can be known in advance. But a further elaboration of this contract during the maintenance period is missing. Rob Schoenmaker (2011) defined a six stage model of maintenance, see Figure 3, by investigation maintenance and the outsourced level of activities by different contract models. In a standard DBFM contract model, every activity in the dotted square is outsourced to the Private party, except the prioritisation. This step is absence in a DBFM contract.

Figure 3 Six stage model by Schoenmaker and Verlaan (2013)

1.3 PROBLEM STATEMENT

The Dutch Government is responsible for the functional requirements of waterworks; they have to comply with the prevention of flooding according to the Water Act in a verifiable way and they have an availability requirement to facilitate shipping. Due to the fact that the Dutch Government prefers the use of the Design, Build, Finance and Maintenance contract model for Lift and Safety Locks, the control of the performance of the lock during the life cycle is outsourced. A methodology to verify the performance, stipulated in Reliability and Availability requirements is available, but how this should be distributed between Rijkswaterstaat and Private parties, especially regarding cost efficiency, is unclear. This gives reason for concern, because the Dutch Government remains responsible for the overall performance of the lock: they will bear the risk to their public reputation if failure occurs.

1.3.1 RESEARCH OBJECTIVE AND MAIN QUESTION

The risk allocation between the public and Private party influence the project performance, therefore, the objective of this research is to find a proper risk allocation method, with respect to the optimisation between performance and the cost. Since the methodology of risk-based asset management for Operation and Maintenance and the performance requirement is prescribed in the contracts, the risks which can lead to functional failure of the lock are known. This research will give a risk allocation between Rijkswaterstaat and the Private party seen from the risk-based Maintenance and Operation methodology.

MAIN RESEARCH QUESTION ‘What can be the allocation of risks of functional failure of a lock between public and Private parties in a DBFM contract, with respect to the optimisation between performance and costs, so the public party still manages the infrastructure adequately during the Operation and Maintenance phase?’

SUB QUESTIONS In order to answer the main research question, the following sub questions are formulated. The sub questions are about the functional failure risks, risk allocation methods and risk allocation conditions, which will give more insight in the research domain. All sub questions are correlated to the maintenance and operation phase. The decisions regarding the operation and maintenance phase are made in the design phase: this indicates that the redefinition of risk allocation will influence the design.

1. Which risks influences the functional failure of a lock?

To allocate risks based on characteristics and conditions, first the risks must be identified which risk can lead to functional failure.

2. Regarding the characteristics of the maintenance phase and based on literature, what is an intelligent method to allocate risks during the Operation and Maintenance phase?

This sub question will provide the first set of independent (quantitative and qualitative) variables which influence the risks allocation how it should be optimal between Private and Public Parties.

3. Under which conditions should the risks of functional failure be allocated to the public or Private party based on literature?

This sub question refers to the qualitative conditions of the risk allocation, whereby the derived conditions will be added to the theoretical risk allocation method.

4. What observations from the current risk allocation during the Operational & Maintenance phase are validations and improvements for the theoretical risk allocation method?

The current risk allocation with the RA-verification of the performance during operation and maintenance will give insight in the real-life context (case studies), whether the risks are managed properly and which parties are involved in this phase (stakeholder analyse). Experience and the observations conducted from these projects will give input and verification of the theoretical the risk allocation method.

2 RESEARCH DESIGN ‘A research design is a logical plan for getting from here to there, where ‘here’ may be defined as the initial set of questions to be answered, and ‘there’ as some set of conclusions.’ Yin (2003, p. 20).

2.1 RESEARCH FRAMEWORK

The research framework in Figure 4 is derived with help of the steps described in Verschuren and Doorewaard (2013, pp. 101-106). This method described four steps: Step (a) focusses on the theories the researcher needs in order to establish the research perspective. This theoretical framework provides a desired situation ( ‘to be’ situation). The ‘to be’ situation will be analysed by practical case studies to find the ‘as is’ (the current situation), this is step (b). Step (b) entails an analysis of the data gathered of the objects of the research case study. The data will be collected by an exploratory research. In an exploratory research the data is the dominant factor: the investigator must be open for unknown events (serendipity) (Swanborn, 1996, p. 47). Knowing the ‘to be’ and the ‘as is ’situation will be in another momentum. Step (c) is there for the comparison of the results of the analysis for each of the research objects. What the differences are and what must be done to come from ‘as is’ to ‘to be’ situation is step (d) of the research and the objective of the research. In this method the define, design, prepare, collect, analyse and conclude phases required for a case study are covered (Yin, 2003, p. 50). See Figure 4 for the methodology, from this figure the research methodology is: The research objective is (desired situation) by concerning (a) and (b), what results in (c) and give (d).

Figure 4 Methodology (based on (Verschuren & Doorewaard, 2013)) Conformation of the research methodology can be found in the standard steps to manage and allocate risks proposed by (Flyvbjerg, Bruzelius, & Rothengatter, 2003, p. 82; Turner, 2014, pp. 285-301). This method is mostly used to identify possible project risks what can influence the project outcome, but can also be used to identify and allocate possible risks which can influence the non-functioning of the object during operation and maintenance.

2.2 CASE STUDY METHODOLOGY

When the investigator has little control over events, and when the focus is on a contemporary phenomenon within some real-life context than you should use a case study.’ Yin (2003, p. 3)

The theoretical framework provides the ‘to be’ situation how the risk should be allocated between the public and Private party. The objective of the case studies is validation and improving the risk allocation method by analysing the differences between the desired situation (‘to be’) and the current situation (‘as is’). This implies an exploratory case study, what should be preceded by statements about what is to be explored (case study questions) and the criteria by which the exploration will be judged successful (Yin, 2003, p. 32). Also, finding the ‘as is’ situation is the answer of the third sub question.

2.2.1 RESEARCH QUESTIONS

To find the ‘as is’ situation of the risk allocation, the following research question will be answered during the case studies. The questions are derived from the theoretical framework and are on level 3 out of the five distinguished levels by Yin (2003) . The research question on level 4 and 5 are named in section 1.3.1 as main research question and sub questions. The case study questions are on level 1 and 2 and are specified for an individual case (Yin, 2003, pp. 69, 76), therefor, they are included in Error! Reference source not found..

1) How is the risk allocation between Public and Private Party related to the risk allocation matrix? 2) In comparison with the desired risk allocation criteria derived from literature, how are the criteria fulfilled by which critical stakeholders in practice ?

3) What is the actual risks assessment of the critical stakeholders compared with the desired assessment based on the literature study?

2.2.2 CASE SELECTION

The main research question involves the following criteria, which the selected cases should meet:

- The case is a lock with a water safety requirement: LPAM is applied - The organisation structure is a Public Private Partnership - The case is in the operation and maintenance phase - The case includes design, build, finance and maintenance

As mentioned in the Introduction, the first DBFM water work contract is financial closed in January 2015: the third and fourth criteria are contradicting. Using a research focus on an optimal risk allocation of a lock during the operation and maintenance phase with respect to the performance and costs, given a DBFM contract, provides order in the criteria. The selected cases must meet the first three criteria or the first two criteria and the last criteria. This criterion provides three cases from the LPAM portfolio of Rijkswaterstaat: Volkerak complex, Safety Lock Heumen and Limmel. The cases are introduced and further elaborated in section 5.1.

2.3 READING GUIDE

This research is divided in seven chapters; in the first two chapters the introduction and the research design is given. In chapter three the first sub question will be answered: which risks can lead to functional failure. Chapter four is the theoretical framework, were from a theoretical risk allocation method is developed, providing an answer to research question two and three. The risk allocation method as proposed in this research is then verified and improved by mean of case studies, as shown in chapter five. The case study provides knowledge and observations of the application of risk allocation, which lead to the conclusion of this research and recommendations. In the last chapter the research will be discussed. Figure 5 presents a flowchart of the introduced concepts in this research, along with the divisions in chapters.

Figure 5 Reading Information Flow Chart

3 RISK IDENTIFICATION There is so much talk about the system. And so little understanding.

Robert M. Pirsig in Nicholas and Steyn (2012, p. 46)

In this chapter the first sub question: ‘which elements will lead to functional failure of a lock?’ will be answered. To allocate functional failure risks, the critical elements which influence the functional failure of a lock must be identified. These risks form the baseline on which the practical risk allocation in the case studies is tested.

As mentioned in the introduction, there are according LPAM four types of elements, which can lead to functional failure: hardware, software, human failure and external risks (Manen, 2014a, p. 18). A lock exists of object-related hardware software, human failure and external elements, and for each of these elements a related failure rate can be determined. Which elements lead to functional failure and at which decomposition level the elements will be analysed within this research is elaborated in this chapter.

In this research for analysing which elements can lead to functional failure, the qualitative approach of LPAM is applied: all possible failure modes which can lead to the undesired event of non-compliance to the Reliability and Availability requirements are added and analysed which are critical and which are not.

3.1 HARDWARE CRITICAL ELEMENTS

A hardware risk is a risk related to the failure of the construction itself: the failure to meet the performance criteria caused by quality shortfall or defects during the life cycle of the construction (Ke, Wang, & Chan, 2010) (Grimsey & Lewis, 2000). The NEN 2767 (NEN, 2015) provides standard decompositions of all the building elements and materials of different construction objects, including Lift and Safety Locks.

In this research only the events which contribute to the functioning of the lock will be included. Identification of these critical events is derived from the FMEA analysis of RINK reports (Arcadis, 2014a) (Arcadis, 2013) (Persoon, 2011). This result in a list of critical hardware elements categorised in disciplines, see Table 3. In RINK reports and in this research the hardware elements are divided in five disciplines: civil-, steel-,

mechanical-, hydraulic- and operation-, control- and electrical engineering. Analysing the failure of elements of the hardware elements resulted in similar failure modes and causes within each discipline, see Table 2.

Table 2 Hardware disciplines with failure mode and causes Discipline Failure Mode Cause Civil Engineering Construction Failure Degradation / Overload Steel Engineering Construction Failure Degradation / Overload Mechanical Engineering Construction Failure Degradation / Overload / Collapse Wear and Tear / Fatigue Hydraulic Engineering (Waterbouw) Construction Failure Degradation / Overload Operation-, Control-, Electrical Engineering Non – Functioning Defect / Broken cable /Short Circuit

Based on the analysis, the main characteristics of the elements in each discipline are:

o Civil Engineering includes the elements with concrete structures. o Steel Engineering includes all the elements of steel structures o Mechanical Engineering includes mostly all the dynamic elements in the object. o Hydraulic Engineering (Waterbouw) involves the elements of the civil structures that interface with water mechanics. o Operation-, Control- and electrical engineering include the systems and installations that enables the operator to control the functionality of the object.

The characteristics of each discipline suggest specific knowledge to manage the elements effectively and efficient during the operation and maintenance phase. Within each discipline the failure probabilities of the elements are similar as visible in the tables presented in the in-depth case analysis in Appendix D, E and F. The similarity within a discipline is a reason to use the level at disciplines in the risk allocation matrix need to be considered. Elements in this research can be seen as subsystems of the lock, and include all the related hardware elements of that subsystem, examples are the drive and motion works, the foundation, the CCTV installation and the lock gate.

3.2 SOFTWARE CRITICAL EVENTS

Software risks are related to failure of the computer program (software) which controls the functionality of the hardware elements. Therefore non –performance of the software can lead to functional failure of the lock. Software can be found in the elements of the electrical engineering of a lock, like the control panel, CCTV-installation, shipping signal system and the water level installation.

Basically two events related to software are possible which can lead to non-functioning or wrong functioning of the object or system (Brandt et al., 2011, p. 21):

1. Incorrect Input, due to unforeseen wrong input data 2. Incorrect output, due to fault in the decision logic of the software

Characteristically the input and output of software is directly visible, however, the process in between is invisible, scripted in the software. The traceability of a software fault is the most difficult part by software failure: During the software development phase is it easier to find the problem than in the execution phase.

Due to the complexity and coherence of software, it will be seen in this research as one critical risk which needs to be allocated: non-functioning or wrong functioning of the software. Note that in general the market has knowledge to manage software effectively.

3.3 HUMAN FAILURE CRITICAL EVENTS

There are three kind of human actions which contribute to the functioning of the object. These activities require different type of behaviour which depends on the different influence factors. The possibilities are (Bogaard & Akkeren, 2011, p. 92):

1. the risks around carrying out operational activities, like manual control 2. the risks of conducting regular maintenance activities, including testing 3. the risks of the effectiveness of technical repairs by reactive maintenance activities

The human failure by reactive maintenance activities is a recovery action: failure of the critical element already has taken place. The probability of this failure is already covered in other parts of the risk analysis; there for the third human failure type will not be considered in this research. For this study the other two types of human failure need to be considered, which leads to five options of human failure (Bogaard & Akkeren, 2011, p. 93):

1. An operational error 2. Negligence: Non repair of a fault (within the available time) 3. Fault made during the maintenance activities 4. Forgetting to carry out maintenance activities 5. Non – detection of the necessary maintenance or making an incorrect diagnosis

The third, fourth and fifth human failure options can all three included within the category maintenance faults. Thus, in this research, three human failure events are considered: an operational error, negligence and a maintenance fault. All the maintenance failure modes in a DBFM are for the contracting party, distinguishing the subcontractors is not relevant for this research.

To predict the human failure, a human reliability analysis will provide an estimation. A methodology is developed in the Nuclear power sector by Swain and Guttman (1983, pp. 2-4), known as the Technique for Human Error Rate Prediction. The method and data proposed by Swain and Guttman is derived over a period from 1960 till 1980 what makes the method reliable, assumed that the human failure actions are comparable with the present environment. The methodology used by Rijkswaterstaat in the LPAM methodology, called the OPSCHEP-model is based on this method. This model identifies and quantifies human errors.

3.4 EXTERNAL CRITICAL EVENTS

An external risk is defined by (Bogaard & Akkeren, 2011, p. 94) as an undesired event from outside the normal functioning of the system that may possible lead to failure of the object. Due to the fact that the cause of the external risk is outside the control of the project team and its organization, and the occurrence of the risk is rare, these risks are generally more difficult to predict and control (Nicholas & Steyn, 2012, p. 354).

The list of external risks used in the LPAM methodology is based on the ASME standard. The ASME standard is an extensive general accepted list of potential external risks, which forms the input of an external risks screening analysis, which is developed and used in the nuclear power sector (ASME/ANS RA-S-1.4-2013 in Bogaard and Akkeren (2011, p. 94)). The screening performed by this standard provides a smaller list of external hazards which can affect the object. The list of the considered external hazards for infrastructure and waterworks will be discussed below.

The first three risks are common risks with a high impact on the functioning of the object. The LPAM methodology provides for each of these risks a guideline how to quantify them, as well as quantification of various control measurements for these risks.

1. Fire 2. Lightning 3. Ship Collision

Control of the risks 4 till 29 is not prescribed in guidelines provided by the LPAM methodology. Risks 22 till 29 are controlled by international standards, which are prescribed by design strengths (NEN norm and Euro code). During design the risks 15 till 21 are included by monitoring the frequency of occurrence and the related impact. The measurements to control the risks 4 till 14 are object specific, and must be analyse for each individual project. Generally, the risk allocation due to weather events depends on the predictability and occurrence of the region (Ke et al., 2010). Therefore, two risks are relevant to include in this research: poor sight (fog / rainfall) and obstacle in the waterway (ice cover / three branch /objects). The last four external risks will not occur in the Netherlands and therefore negligible in this research.

4. Transportation accidents 18. Forest Fire 5. Aircraft impact (or meteorite / satellite) 19. Release of chemical in onsite storage 6. Extreme winds and tornadoes 20. River diversion 7. Poor sight (fog / rainfall) 21. Soil settlement 8. Low winter / High Summer temperatures 22. Waves 9. Obstacle in the waterway (Ice cover / 23. Storm surge three branch / objects) 24. Low / high water level 10. Internal flooding 25. Seiche 11. Intense rainfall 26. Hail 12. Turbine – generated missile 27. Snow 13. Facility accident in nearby area’s 28. Seismic activity (pipelines / military / industrial) 29. External flooding 14. Toxic gas 30. Landslide 15. Ecological effects 31. Tsunami 16. Coastal erosion 32. Volcanic activity 17. Drought 33. Sandstorm In literature (Grimsey & Lewis, 2000) (Ke et al., 2010) the mentioned external risks are ‘acts of God’ and other calamities which are of ‘force majeure’. Force majeure’ involves war, other calamities and ‘act of God’, regulatory risk like legal changes and political risk due to unsupportive government policies. The ‘force majeure’ do not directly contribute to the reliability or availability, and therefore excluded in this research. Political issues or legal and regulatory issues are called ‘new risks’. New risks arise from changing circumstances, which have its origin in changes with respect to the design principles, maintainability, usage and control or in the changes in governance structure, political issues or laws and regulations (Rijkswaterstaat, 2011, p. 4). Further analyses of new risks are excluded in this research because it is certain that some of these risks will happen during the Operation and Maintenance phase, but It is unknown which, the impact is unknown and the consequences are unknown: the TCE approach suggests to keep the risk by the public party until there is more certainty of occurrence of the risk.

3.5 SUBCONCLUSION 1: RISKS OF FUNCTIONAL FAILURE

Hardware, software, human failure and external risks influence the Availability and Reliability of the lock. Table 3 gives a full list of all identified risks which can lead to functional failure and is thereby the answer on

the first sub question. These identified elements all influence the performance requirements of the object. Note that it does not mean that actual failure will cause the consequences Flooding or a Closed Waterway.

Table 3 Risks of functional failure Critical elements Hardware disciplines and related critical elements 1.1 Civil Foundation 1.2 Operational builidng 1.3 Lift tower 1.4 Cellar 1.5 Retaining structure 1.6 Lock head 1.7 Lock chamber 1.8 Anchoring 2.1 Steel Break and guidance construction 2.2 Lock gate 2.3 Slide construction 3.1 Mechanical Drive and motion work 3.2 Main pivot 4.1 Hydraulic Soil protection 4.2 Retaining structure 5.1 Operation, Control and electrical Drive and motion work

5.2 Grounding and lightning protection system 5.3 Boarding and signage 5.4 Operation and control installation 5.5 CCTV installation 5.6 VHF radio 5.7 Voltage installation (high / low) 5.8 Water measurement system 5.9 Object lights 5.10 Shipping signal system

Software critical events 6 Non-functioning or Wrong functioning

Human critical events 7 Making an operating error 8 Negligence error, non-repair of a fault (within the available time) 9 Maintenance fault

External critical events 10 Fire 11 Lightning 12 Ship Collision 13 Poor sight (Fog / Rainfall) 14 Obstacle in the Waterway (Ice / Tree branch / objects)

4 THEORITICAL FRAMEWORK In this chapter a theoretical overview on risk allocation is given in order to create a framework for the main research objective, as presented in section 1.3.1. Figure 6 provides the concepts and their interrelations of this theoretical framework. First the DBFM contract will be discussed in 4.1, deepened by elaboration of the Maintenance phase and Life Cycle Costing in 4.2. Then the issues of risk classification seen from uncertainty of risks and their failure frequency is discussed in 4.3, followed by the Transaction Costs Economics in 4.4. Both the risk uncertainty and the Transaction Costs Economics form the bases of a risk allocation matrix. This matrix will provide the answer on the second sub question: ‘Regarding the characteristics of the maintenance phase, what is an intelligent method to allocate risks based on literature?’

The third sub question will be answered in 4.6: ‘Under which conditions should the risks of functional failure be allocated to the public and Private party during the Operation and Maintenance phase based on literature?’ The risk allocation conditions provide insight in the conditions on which the risk should be allocated to whom and why, strengthening the probability of success while applying the method.

Figure 6 Concepts and interrelations theoretical framework

4.1 DESIGN, BUILD, FINANCE AND MAINTENANCE CONTRACT

A Design, Build, Finance and Maintenance (DBFM) contract is a contract model applied by Rijkswaterstaat to renovate and build waterworks, including new Lift and Safety locks. Knowledge of the advantages and limitations of this contract model is important to understand the problem context; therefore, the DBFM contract is discussed in this section.

A typical DBFM contract is characterized by the following principles (Eversdijk & Korsten, 2009):

o One integral contract where one Private party is responsible for the design, construction, finance and maintenance of a public object. See Figure 7, for a visualisation of the allocation responsibility. o The public party payment is based on the service or function provided by the Private party o The service is based on functional requirements instead of product requirements o It includes Private financing and payment from public money o The principle of risk –responsibility is: the risks are for the contracting party who is best able to manage those risks. o The banks are included in the contract. o Every contract involves a fixed time period, in Dutch Infrastructure between the 15 and 30 years. The contract period depends on the technical life time of the subsystems. The Private party must have an incentive to optimise the design; therefore, the contract period is based on several representing technical lives of subsystems, which is further elaborated in section 4.2.3.

Figure 7 Allocation of responsibility in a DBFM contract (adapted from MRWA (2015))

4.1.1 ADVANTAGES AND LIMITATIONS OF PPP CONSTRUCTIONS AND DBFM

A major driver to use Public Private Partnerships (PPP) for the public party is to achieve ‘Value for Money’ as a result of life cycle optimisation. The contract can be seen as a dynamic contract type, whereby the public and Private parties optimise the value cost ratio in the set requirements (Ridder, 2013, p. 95). Integration of the building disciplines (design, build, finance and maintenance) gives the Private party the possibility to optimise the investment-, realisation- and maintenance costs by creativity and innovative solutions, resulting in cost reduction for the public party (Eversdijk & Korsten, 2009) (Grimsey & Lewis, 2004, p. 128) To achieve Value for Money the public party has to decide how the risks are distributed at best between the parties, because risk allocation has a high contribution to the life cycle costs of a project. (Jin, 2009). Involvement of Private parties helps to identify risks more clearly, to reduce risks and to place risks with parties which are the best able to manage them (Flyvbjerg et al., 2003, p. 105). A joint risks identification during the construction and design by the public party and the tendering Private parties ensures that both parties are fully aware of the risks involved (Ward et al., 1991), resulting in a clear, for both parties identical list of risks. A joint risk identification results in awareness of both parties the importance to draw up an appropriate maintenance plan to manage these risk effectively. Furthermore the clustering of procurement activities results to less coordination risks for the public party (Eversdijk & Korsten, 2009).

Another advantage of a DBFM contract is the role of the banks as guardian: the banks monitor the risk optimisation and therefore the income flow of the Private party for the repayment of the loans granted by them (Eversdijk & Korsten, 2009). The Private party must answer the performance requirements during the Operation & Maintenance phase for payment by the public party. Therefore, the Private party will optimise the investment and maintenance costs including the risk allocation during the realisation, maintenance and operation phase. Flyvbjerg et al. (2003, p. 105) expects that finance and banks involvement in a project will have positive effect on the cost control. Note this advantage is the banks’ interest: repayment of the granted loan. They are interested in assurance of the repayment, resulting in a construction whereby the Special

Purpose Verhicle (consortium of contractors) transfer all the risks and their related costs towards the subcontractors. The relation between the Special Purpose Verhicle and subcontractors is regulated in a DBM contract. The bank monitors the project during the realisation phase and checks the technical feasibility monthly and during the operation and maintenance phase they monitor yearly. The monitoring is done by a technical consultant hired by the bank (Expert bank, 2015)

Realisation of the project within the set time is an advantage of DBFM (Eversdijk & Korsten, 2009): it is an incentive for the Private party, because the payment mechanism is based on the availability of the object. Earlier payment implies earlier repayment of the interest-bearing loans. Note that this aspect has a negative effect: the Private party can be so interested in realisation in time that the performance during the Operation and Maintenance phase is neglected. The interests of the Private party can be manipulated by the public party to get the desired result by creating incentives for the Private party (House of Commons in (Eversdijk & Korsten, 2009)).

Another limitation is the hierarchical organisation between public and Private party, which results in not using the available knowledge, experience and creativity optimal. The preparation costs and transactions are higher for the public party, the contract has an increased finance and juridical complexity and the contract is inflexible to adjust changes (Ruding and Ministerie van Verkeer en Waterstaat in Eversdijk and Korsten (2009)).

4.1.2 CONTRACT TYPE CONSIDERATIONS

During procurement, the contract model is an consideration regarding the following aspects (Jansen, 2009, p. 87):

o The internal context; including organisation, financial, policy and manageability aspects o The external context; including the market, political acceptance and law and regulation. o The project context; including the budget, time, quality, influence on the project, complexity and risks.

The investment efficiency is a main consideration for the contract type. The efficiency is based on financial (financial and budget consequences) and economic (definable monetary social impacts) advantages, the added value is tested by the Public Private Comparator and the Public Sector Comparator (Eversdijk & Korsten, 2009). In practice the political prioritization is often the decision base for execution in Public Private Partnership form (de Algemene Rekenkamer in Eversdijk and Korsten (2009)).

In this research the risk allocation regarding maintenance considers only aspects of the project context for a proper governance structure. The considerations regarding the internal and external aspects is neglected in this research, and the provide contract type is considered a ‘fait accompli’.

4.1.3 CONTRADICATIONS

The main contradiction in the application of this contract model is outsourcing the design, build and maintenance while Rijkswaterstaat remains publicly responsible for the performance of the object and Rijkswaterstaat will be the operator. Outsourcing implies periodic inspections by third parties, while Rijkswaterstaat make use of it every day. A DBFM contract is a concessional contract type, while an alliance contract type will be a more logical choice in the case of waterworks seen from the nature of the contract types.

A DBFM contract gives the Private party an incentive for innovative concepts, but the procurement is still based on the sharpest bid whereas Private parties feel more comfort by proven technologies and solutions to

minimalize the risks. On the other side, the Public Party wants to meet the desires of the public stakeholders and to meet the requirements of the planning procedures with a DBFM contract (Eversdijk & Korsten, 2009).

During the life cycle of an object it is unknown when maintenance activities are necessary, therefore the system of the contract must be adaptive (Hertogh, Demirel, & Ridder, 2013). DBFM contracts are during the Design and Build phase only adaptive if it considers regular changes (Leeuwen, 2015), but for all the other changes and the maintenance phase a DBFM contract is fixed: there is little space left for optimisation of the life cycle.

4.2 MAINTENANCE: RISK-BASED LIFE CYCLE OPTIMISATION

I know why there are so many people who love chopping wood. In this activity one immediately sees the results. Albert Einstein (Nicholas & Steyn, 2012, p. 197)

The maintenance phase is part of a DBFM contract and starts simultaneously with the operation phase at the end of the realisation phase. The Operation and Maintenance phase finish when the structure is demolished. In an average project this phase takes the largest time (Figure 8), and the way how the maintenance is carried out contributes to the performance of the structure.

Figure 8 LCC classified of every project phase (adapted from Woodward (1997)) Operation and Maintenance are the range of activities, measurements and processes which contributes to the condition of the object or system so it can fulfil and will accomplish the set requirements during the lifetime of the object or system (Webbers, Bouwman, & Bakker, 2012, p. 8) (Dhillon, 2010, p. 146). Different maintenance strategies are possible to achieve the desired set requirements of the object. More information about maintenance strategies can be found in the book ‘Principles of Maintenance Management’ by Duijvenvorden and Verdoes. Nowadays the Operation and Maintenance activities regarding the water works are performed by different parties.

The definition by Dhillon (2010, p. 146) of Maintenance covers the aspects which are considered as Maintenance in this research. ‘Maintenance is defined as all scheduled and unscheduled actions necessary to keep an item or piece of equipment in a serviceable state or restoring it to serviceability. It includes items such as inspection, testing, repair, modification, replacement and servicing’.

The set requirement of a lock is to comply with the reliability requirement during its life cycle to Prevent the hinterland Against Flooding and the availability requirement for Facilitate shipping. Therefore, contractual requirements and a verification method are drawn up which are applicable during the Operation and Maintenance phase of the lock. The requirements and the verification method (Living Probabilistic Asset Management) are based on risk based maintenance and life cycle costing. What these concepts include is further elaborated below.

4.2.1 LIVING PROBABILISTC ASSET MANAGEMENT: RISK-BASED MAINTENANCE

The Living Probabilistic Asset Management (LPAM) methodology verifies the contractual performance requirements and identifies ways how to optimise the Operation and Maintenance activities (if there is sufficient leeway for the performance requirement). This is carried out by performance-based maintenance: necessary maintenance to keep the dominant failure mechanism of an object so small that it complies with the set requirements (Webbers et al., 2012, pp. 9-11). The requirements are based on the RAMSSHEE€P requirements, as described in the next section. An important note is that the reliability performance requirement is only applicable for locks with a single set of storm surge barriers doors, because if the lock has two set (or more) of storm surge barriers doors in the same corridor failure of both doors at the same time is considered as negligible (Manen, 2014b).

The maintenance activities which cannot neglect (like lubricate the moving parts) are included in the RA analysis as repair time of the failure mechanism. The LPAM methodology assumes thereby that the non- performance based maintenance activities, daily maintenance which is not dominant for the RA performance requirements and stewardship, are adequate executed (Webbers et al., 2012, pp. 9-11).

4.2.2 RAMS (SHE€P)

The risk based Maintenance and Operation approach for assets to deliver value and achieve the organisation’s explicit purpose is a characteristic of asset management. Other characteristics are a multi- disciplinary approach which is focused on the best net value for money. It is systematic included in the organisation strategy. Asset management is systems-oriented: using the assets in their system context, not individual. It is a tool to optimise costs, risks and performance during the total life cycle, what requires a sustainable plan which integrated all the aspects so it works as a whole (IAM, 2012, pp. 5-8)

An asset management tool to express the organisation’s explicit purpose of the total objects lifecycle is RAMS Engineering. The performances of the Dutch public works are expressed in Reliability, Availability, Maintainability and Safety (RAMS). Reliability is expressed as the probability of success of the system during a time period. Availability says something about the ability of the system to perform in the way it should perform under given circumstances. Maintainability considers the maintenance plan, which is necessary for the accomplishment of the performance. The maintenance plan includes downtime and ways how the system should be maintained (maintenance strategies). Safety is the technical safety of the system and provides the guarantee to people that they will remain free of injury provided normal circumstances. In this research safety is expressed in the reliability and availability performance requirements. Compliance to the requirements is called RAMS engineering (Bogaard et al., 2010, pp. 11,12) (Stapelberg, 2009, pp. 5,6). The extension of RAMS considers Security, Health, Environment, Economics and Politics (SHE€P) (Bogaard et al., 2010, p. 29). Of the extension, the Politics are included in this research by the requirements regarding the water safety and smooth flow on the waterways.

The LPAM methodology expresses the performance in Reliability and Availability. The downtime of Maintenance activities influences the Reliability and Availability requirements. Note the Private party is paid based on compliance to these RA – requirements. The Economics represents the social consequence costs if the object fails. In general high social consequence costs indicate a low allowed downtime, because of the set RA requirements based on adequate managing infrastructure which is also correlated to Safety. Therefore, only the Maintenance (expressed in repair time) is included in this research. The politics influence the degree of optimal (performance versus costs) by considering the degree of image loss by consequences. The remaining variables SHE are analysed and applied in other programs of the Dutch Government.

Thus, given the LPAM approach and the core task of Rijkswaterstaat (providing an available and reliable lock) during the life cycle of the lock, four variables from the RAMSSHE€P are relevant to consider in this research: the R, A, M and P.

VARIABLES R, A, M AND P Rijkswaterstaat (2014b, p. 28) defined each of the RAMSSHE€P aspects into four types of consequences: Negligible, Low, Major and Catastrophic, see Table 4 for the qualitative consequences of the R, A, M and P. The M is in this table already quantified with a time component; the times are based on the required process by a failure report (Mans, Haesebrouck, & Hendriks, 2012, p. 18) (Vialis & Rijkswaterstaat, 2014, p. 43). The R and A are quantified in section 4.3.2

Table 4 R,A, M and P description (Adapted from (Rijkswaterstaat, 2014b, p. 28) Consequences Negligible Low Major Catastrophic R No damage to the Damage to the primary Damage of one of the next Damage of two or more of the primary functions of functions of the object, corridor functions: next corridor functions: the object. not for the corridor. 1) Road Traffic 1) Road Traffic 2) Shipping 2) Shipping 3) Water management 3) Water management A Non or brief Corridor disruption less Corridor disruption between Corridor disruption is longer than disruptions for the than lower limit of the the lower- and upper limit for the upper limit for one or more primary functions of functions: one or more of the functions: of the functions: the object; 1) Road Traffic 1) Road Traffic 1) Road Traffic No corridor 2) Shipping 2) Shipping 2) Shipping disruption 3) Water management 3) Water Management 3) Water Management M Easy local repair (less Repair with additional Repair with major additional Repair is not efficient compared than 3 hours) effort within a day (by effort during a month (like with the economic life of the use of special equipment forcing accessibility to object: other remedial actions or waiting for spare parts) execute maintenance or are necessary (like large-scale waiting for permits or special replacement). Repair will take fabricated spare parts) longer than a month. P Complains Local image loss Regional image loss National image loss

4.2.3 MAINTENANCE AND LIFE CYCLE & COSTS

The interests of the Rijkswaterstaat (Eversdijk & Korsten, 2009) ‘more quality with less people’ and ‘a better, cheaper and faster public service in the fields of infrastructure’ are applications of life cycle optimisation to achieve ‘Value for Money’, which is a major driver for public Private partnerships constructions. Life cycle optimisation considers the costs and performance compared to the life cycle of an object.

The Operation and Maintenance phase includes high costs: these costs can be up to 75% of the objects Life Cycle Costs (Dhillon, 2010, p. 77) , an example is provided on page 22. The Life Cycle Costs of an object are a total of several elements, divided over the different phases during the lifecycle. Dhillon (2010, p. 119) developed the following expression for calculating the total Life Cycle Costs (LCC):

퐿퐶퐶 = 퐶표푛푠푡푟푢푐푡푖표푛 푐표푠푡 + 퐼푛푠푝푒푐푡푖표푛 푐표푠푡 + 퐷푒푠푖푔푛 푐표푠푡 + 퐹푎푖푙푢푟푒 푐표푠 + 푅푒푝푎푖푟 & 푀푎푖푛푡푒푛푎푐푒 푐표푠푡

To achieve Life Cycle Costs optimisation the public party is interested in an optimal performance cost ratio to maximise his benefit, while the Private party is interested in achieving the return of their investment (Ridder, 2013, pp. 15,16). As example, given an adequate built object seen from performance and costs ratio, an optimal solution for the public party at the end of the economic life can be renovation or replacement of an element, while the Private party has an incentive to extend to economic life of the element at the end of the contract. The objects economic life can be extended by applying a more vigorous maintenance, as such

manipulating the deterioration curve as seen in Figure 9. A deterioration curve shows the deterioration of the performance of an element over time. Each maintenance strategy has its own influence on the deterioration curve: two main maintenance strategies can be distinguished preventive maintenance and corrective maintenance. The applied maintenance strategy is influenced by the involved maintenance costs (Duijvenvoorden & Verdoes, 1995, pp. 57-59).

Which maintenance strategy is applied is mostly a trade-off between costs and performance of the object, considering the optimal economic life of an object and the current state of the object. The economic life of an element ends when the annual Operation and Maintenance costs exceeds the annual investment costs. The combination of the annual Operation and Maintenance and the annual Initial Investment costs give the Life Cycle Costs, see Figure 10.

Figure 9 Deterioration curve of a structure and influence maintenance Figure 10 Economic life of an object (Cho, Frangopol, & Ang, strategy (adapted from Kaneuji, Yamamoto, Watanabe, Furuta, and 2007, p. 174) Kobayashi (2007, p. 55))

EXAMPLE LIFE CYCLE COSTS In the design report of the sluice by Limmel (Hart & Groot, 2010, pp. 29-30), the distribution of the maintenance costs compared with the construction costs are known from experience. It can be assumed that the average maintenance costs each year for a fixed bridge are 0.5-1 % and for a water defence lock 1.5 – 2% of the construction costs (excl. VAT), depending on the sustainability of the design. The maintenance and operation costs are divided in different type of activities; the cost distribution between the different activities is as given below. With the given average costs per year the maintenance and operation costs over 30 years are between 4.40 million and 7.50 million. Compared with the construction costs (total 25 million) are the average maintenance costs over 30 years 18.5 % of the LCC.

Type of Maintenance Distribution Costs [€/year]

Operation Costs 10% 17.500 – 30.000 Daily Maintenance 20% 35.000 – 60.000 Periodic Maintenance 50% 87.500 – 150.000 Renovation 15% 26.250 – 45.000 Other 5% 8.750 – 15.000 Total: 100% 175.000 – 300.000

4.2.4 FINDINGS FROM DBFM AND LCC

The Life Cycle Costs optimisation will have a positive and a negative impact on the risk allocation in a DBFM contract. A long-term contract is an incentive to optimise the design, like the use of innovation to decrease life cycle costing and increase the performance of the lock. But this is followed by the negative aspect; the different perspectives of the Dutch Government (Public) and the Private parties. The life cycle for the public

party is the possible technical life of the lock, while the Private party considers that the life cycle is equal to the contract length. This influences the risk allocation: for optimal performance versus costs, strategic behaviour at the end of the contract to extend the economic life of a subsystem becomes an incentive for the Private party.

Optimisation of the Life Cycle Costs according the LPAM methodology can be measured by the performance indicators derived from the RAMSSHE€P: the R, A, M and P. The R and the A measure the Reliability and Availability which are the contractual indicators of the performance. The Maintenance indicator influence the non-availability, since the payment regime of DBFM contracts is based on availability it influences the costs (and transaction cost to transfer risks to Private parties). The P represents the core tasks of Rijkswaterstaat: managing infrastructure adequately. The overall effectiveness of the maintenance level can be measured by dividing the actual performance by the required performance.

4.3 RISK UNCERTAINTY AND CLASSISICATION

When our world was created, nobody remembered to include certainty Peter Berstein in Nicholas and Steyn (2012, p. 351)

To achieve Life Cycle Costing and a related proper maintenance strategy, the uncertainties of failure and different management structures will provide insights. Four gradations of failure probability in Reliability and Availability terms are already given in Table 4 (negligible, low, major and catastrophic). This section will come to an applied classification of these gradations for a risk allocation method based on the uncertainty and differences of failure of a risk. Therefore, characteristics of risks and classification methods will be discussed to frame and prioritize these in a matrix. This provides the first solution on the second sub question, as visualized in Figure 6 by risk uncertainty and classification, to come to an intelligent method to allocate risk.

4.3.1 CLASSIFICATION METHODS

Several risk classifications, prioritisations and evaluation methods are used by engineers and risk analysts in project management, like the probability impact scoring scheme, F-N chart and cost-benefit analysis. The probability impact scoring scheme and the F-N chart are based on the risk formula (Turner, 2014, pp. 294, 295) (Cooper, Grey, Raymond, & Walker, 2005, pp. 69, 78) (Gardoni & Murphy, 2014). These methods are based on prioritizing risks during realisation phase, and are therefore not necessary applicable on the operation and maintenance phase. For plotting, the risks based on their characteristics during the operation and maintenance phase, a special method is developed on the basic theory of a risk-based approach (Grunsven, 2010, pp. 29-46). Identical with the existing methods, the risk formula will be the basis of this method.

RISK FORMULA Risks can be classified by using the risk formula:

푅푖푠푘 = 푃푟표푏푎푏푙푖푡푦 표푓 푓푎푖푙푢푟푒 ∗ 퐶표푛푠푒푞푢푒푛푐푒

This formula gives two independent variables of the risk: the probability of failure of the event and the possible consequence if the event occurs. A further distinction of risks can be made by considering the difference between a risk what can be an opportunity and a risk what is a threat (Turner, 2014, p. 295). For each failure an effective maintenance plan can be determined to reduce the probability of failure. Adding set

thresholds in the prioritization creates categories consisting of elements with a similar maintenance need (Duijvenvoorden & Verdoes, 1995, pp. 81, 83-84). Adding weight factors to the consequences of failure gives prioritization of the different risks. In this research the consequences are noncompliance with the Reliability and Availability requirements. The first weight factor is the expected probability of failure during a certain period, which is further elaborated in section 4.3.2. The second weight factor is determined by the amount of downtime of the lock due to maintenance activities or failure as categorised in Table 4. A last weight factor is the differences in consequence due to flooding or non- availability for shipping. This is a political issue which is discussed in section 4.6.4.

Other characteristic which influence the probability and impact of an undesired event is the degree to which the risk is managed effectively by (Turner, 2014, p. 292), this is elaborated in section 4.6.2. The LPAM methodology includes already the following aspects related to if and when the risk potentially affects the functionality in terms of reliability and availability: the frequency with which the risk might occur, what reactive measures could be taken to restore the objects functionality (how often) and which counter measures could be installed to manage risk more effectively.

4.3.2 UNCERTAINTY OF FAILURE PROBABILITY

The probability that the failure probability of an element will attain a certain value exactly is unlikely. The failure probability of an event has a probability distribution which is based on the best set of data to measure the risk. The derivative of the probability distribution is in general useful to known: the probability density function. The most common probability density function is the normal distribution, see Figure 11. Characteristics of each function is the expected value and a standard deviation, with a mean value of probability (µ) and a variance (σ) (TU Delft, 2014, pp. 20-21).

Figure 11 Probability density function & probability distribution function (adapted from TU Delft (2014, p. 21)

OCCURRENCE IN TIME The failure rate of an element is given in units of a certain time (hour, day, year), for example the requirement on failure of a dike ring is 1/100 per year or smaller. The probability of occurrence of the failure of the element during a certain period depends thereby theoretical on two factors: the time period and the failure rate. Given a short period and a small failure rate, the probability of occurrence of the failure is very small and vice versa for a longer period and a large failure rate. How often failure is expected during the contract is the expected frequency of failure.

The contract period of a DBFM contract is mostly between 20 and 30 years, depending on the expected efficiency period (expected performance versus costs) and the average expected life cycle of elements of a lock, (expert RWS, 2015a). The contract period is based at the average life cycle of an element, because the Private party is than at least once responsible for large maintenance activities of the lock.

Looking at the failure probability during the contract period, the following options can occur:

o The failure probability of an element is much smaller than the contract period (is not expected to occur within the contract period), considerations of the outsourcing of this element can be made. o Elements which life cycle is expected around the end of the contract period are the most discussible elements: the public party preference is a new element before the contract end and the Private party want to postpone the replacement until the contract period has past. This problem is already identified in section 4.2.3. The uncertainty of the probability density function makes this problem more complex (Vrijling & Verlaan, 2013, p. 104), Figure 12 illustrates the uncertainty compared with the contract length. o Elements which failure probability are high and are expected to occur within the contract period, outsourcing this element can achieve Value for Money.

Figure 12 Uncertainty of failure versus contract length

FAILURE FREQUENCY DURING CONTRACT PERIOD Taking the contract period and the failure probability of the critical elements into account, a risk classification can be made which represents the expected frequency of failure during the contract length. This classification of the frequency of failure is based on a probability density function and matched with the contract period. As probability density function a normal distribution is used, because the set of data is considered in this research as a large set of random variables (Dekking, Kraaikamp, Lopuhaä, & Meester, 2005, pp. 64, 196-198). The normal distribution represents the sum of all expected failure frequency of every elements of the object over time, whereby some elements fail rarely during the contract length, while failure of other elements are possible, probable, likely or often.

Considering the fact that the length of a long-term contract is based on the average expected life cycle of elements of a lock, the contract length is assumed in this research as the average (µ) of all expected failure frequencies. When the probability of failure is larger than the average, thus that the life cycle is smaller than the average lifecycle of an element, like µ - 2 σ, this element will be replaced more often. In Figure 13 this is indicated by the three grey coloured lines. At the expected moment of failure, the element will be replaced and the life cycle of that element begins again. In this way, the expected frequency of failure during the contract period is classified.

Figure 13 Frequency of failure during contract length

In Table 5 the frequency of failure is classified in the categories often, likely, probable, possible and rare. This classification will be used in this research. Redundancy of systems is not taken into account, because it varies per design and thus per lock. Redundancy improves the reliability of the (sub) system and will have a positive effect on the reliability and availability.

Table 5 Frequency of failure during contract length f (frequency per contract length) Times of occurrence Probability density function based Often > 3 f > + 2σ Likely 3 > f > 1.05 +2 σ > f > µ Probable 1.05 > f > 0.95 ≈ µ Possible .95 > f > .6 µ > f > -2 σ Rare < .6 -2 σ > f

4.3.3 FINDINGS: RISK CLASSIFICATION MATRIX

Based on the uncertainty of the Operation and Maintenance phase, with respect to performance and the costs, a risk allocation matrix is developed, see Figure 14. This matrix is based on existing risk classification methods. In order to be able to categorise the risks, the risk allocation matrix is based on two characteristics of an element: first the failure probability and secondly the expected average repair time by failure. By translating the failure probability to the expected frequency of failure during the contract length management structures are provided. The average repair time by failure can influence the downtime and thus the RA- requirements of an object, since the operator is paid based on the compliance to these RA-requirements, the average repair time will influence the involved transaction costs.

Figure 14 Step 1: Risk Allocation matrix Based on the ‘Value for Money’ philosophy the applicability of outsourcing as strategy is plotted in the matrix. For a proper risk allocation, governance strategies to manage risks are required to allocate the events between Private party and the public party. The Transaction Costs Economics theory provides suitable management structures, elaborated in section 4.4.

4.4 TRANSACTION COST ECONOMICS (TCE)

Allocation of risks during the Operation and Maintenance phase, based on the characteristics of risks, is a contracting problem. Therefore, the theory of the Transaction Costs Economics (TCE) is suitable for risk allocation in public Private partnerships projects because any issue that can be formulated as a contracting problem can be investigated to advantage in TCE terms (Jin, 2009). The TCE provides a suitable management structure based on the transaction type, those transactions can be during realisation phase and operation and maintenance phase.

According to (Williamson, 1981) ‘a transaction occurs when a good or service is transferred across a technologically separable interface: one stage of activity terminates and another begins’. Transaction costs are the costs of running the economic system: costs which are involved by transactions (ex-ante and ex-post) excluded the production costs (Arrow and Williamson in Jin (2009)). TCE considers the risk allocation as a contracting problem, where actors are subject to bounded rationality (behaviour is intended rational but limited) and given opportunism (Williamson, 1981) (Schoenmaker, 2011, p. 56). Principle dimensions of a transaction are the frequency in which they occur, the degree and type of uncertainty to which they are subject and the condition of asset specificity.

4.4.1 FREQUENCY, UNCERTAINTY AND ASSET SPECIFICITY

FREQUENCY A high transaction frequency gives incentive for a specific governance structure for the transactions instead of using a standard contract. A public Private partnership project indicates a higher frequency of transactions due to its long-term commitment (Williamson, 1985, p. 60), thus suitable for a specific governance structure. The governance of a transaction is the means by which order is accomplished in a relation in which potential conflict threatens to undo or upset opportunities to realize mutual gains, examples of governance are in house (firm), outsource (market) and alliance (hybrid) contracting (Williamson, 1998).

UNCERTAINTY Uncertainty arises from the ‘state of nature’ or changes in the external environment affecting the system or when incomplete contracting and asset specificity are joined (Jin & Doloi, 2010). There are three levels of uncertainty. Primary uncertainty is of state –contingent kind: the result of natural circumstances and changes. Secondary uncertainty arises from lack of communication: one actor is having no clue of the decisions and plans of a (concurrent) party. Behavioural uncertainty is the third type, like strategic behaviour of the involved parties (Schoenmaker, 2011, p. 58; Williamson, 1985, p. 60).

In this research the uncertainty arises from a state-contingent kind: the primary uncertainty in the LPAM methodology is the uncertainty of the failure probability, including the uncertainty when the element will fail. The accuracy of failure probability of components is increasing over time by monitoring faults and Bayesians updating. The failure probability of a new technique is also unknown and teething troubles give a higher failure probability in the beginning. The second uncertainty is the result of the natural circumstances (changes in the environment like weather, aging, and law changes), the LPAM methodology simulates the reality as good as possible, but the uncertainty of occurrence will remain.

Since the Private party is paid based on compliance to the RA- requirement, risk premium costs will be involved to transfer risks with a large average repair time (due to non-availability). Risk premium discounts the risky or uncertain cash flow to get its certainty equivalent at due time (Zhang, 2013, p. 65). The risk premium represents the compensation to the risk of the investment (to the asset). The risk premium exists of two

factors: first the average risk premium of the market and second the Beta coefficient of the asset, which measures the asset risk. In this research the second factor, the Beta Coefficient, is included, because this represents the asset related uncertainty which arises from the failure probability and the average repair time (Zhang, 2013, p. 56).

ASSET SPECIFICITY The TCE approach includes six kinds of asset specificity (Williamson, 1985, pp. 59-60). First the site specificity is when a buyer or seller locates its facilities next to the other to economize on inventories or transportation costs. The physical asset specificity considers the investments which are made in specialized equipment or tooling designed for a particular customer. The human asset specificity is when one or both of the parties develop skills or knowledge specific to the buyer-seller relationship. The fourth kind is related to dedicated assets: discrete investments in general purpose plants that are made at the behest of a particular customer. By this kind capacity is created to serve a customer who is relative large to market size, so it would be difficult to find alternative customers. The fifth asset is the brand name capita whereby the parties must maintain the reputation of a shared brand name and the last one is the temporal specificity

The asset specificity of a lock is high, but the consequences of the high asset specificity of a lock will not affect the management structure. The asset specificity set requirements for the organisation. The involved transactions will be more complex, which requires specific knowledge of the transactions for a smooth transaction process.

4.4.2 MANAGEMENT REGIME AND PAYMENT REGIME

A suitable management regime for each transaction depends on the frequency and uncertainty of the transaction and its asset specificity. Transaction of specific assets which involves a special purpose technology fits best in ideal market governance. Protection of the investment is regulated by contracting safeguards. Two kinds of safeguards can be devised: first insert added support into the contract (creating incentives) and second take transactions out of the markets and organise them under unified ownership. If a decision provides these two safeguards, the TCE approach recommends a hybrid contract (Williamson, 1985, pp. 61- 62).

In certain cases, depending on the frequency and uncertainty of the transaction, it can be more efficient to postpone decisions until the actual occurrence of an event instead of bargaining in the ex-ante contracting stage. The statement implies that in certain cases the responsibility of the transaction is not contractually fixed: the responsibility of the risk event is postponed until the event occurs (Williamson, 1985, p. 29).

The management structure and the payment regime are closely related. Payment mechanisms are central to success of the project. First, because they can be an incentive for the Private party to manage risks properly. Second, the payment itself delivers an incentive for optimizing performance versus the costs. In other words, the payment mechanism can steer the behaviour of the Private party of risk assessment. The difficulty is how to deal with the uncertainty in a long term public Private partnership to achieve life cycle costs optimisation. Especially given the fact that a level of uncertainty will be incorporated into the price (like warranted higher discount rate) (Grimsey & Lewis, 2005). The Highway Agency introduced a mix of three payment mechanisms, lump sum, target pricing and costs reimbursable, to realise a balanced and appropriate risk allocation to who is best able to manage it between the public and Private party (National Audit Office, 2009, pp. 11-12). Lump sum payment is periodic and performance based, the amount is based on the sum submitted in the tender of the contract and increased annually in line with the inflation. This payment is suitable for most routine maintenance activities and includes a penalty regime by non-compliance to the contractual requirements. Lump sum has a financial reward for the Private party to optimise the design for minimising the life cycle costs. Target pricing is more suitable for specific planned maintenance activities, which are in advance difficult

to plan and predict. Target costing demands an open attitude and transparency of the involved maintenance costs, which makes benchmarking the performance and costs over time possible (National Audit Office, 2009, p. 25). Cost reimbursable is often used for incident response maintenance activities. The fixed price mechanism provide possibilities to postpone the decision of maintenance activities when it is actual necessary, whereby the public party remains responsible for these maintenance activities and thus the performance versus costs. This is according the TCE approach an indicator to recommend hybrid contracting. .

The contracting scheme suggested by the TCE approach is similar as the approach of Rijkswaterstaat, known as the ‘market unless’ principle. In this principle most of the transactions are transferred to the market, unless there are grounded reasons not to do so. To prevent hazards safeguards (penalty system) are included in the contracts. The payment regime of the Dutch DBFM waterworks contract is lump sum, where the Private party is paid based on what he is able to influence and the risks which he is bearing (Houben & Groot, 2012). Payment will be based on inspections, RA analysis and maintenance reports made by the Private party, which creates an incentive for the Private party to work efficient and effective (Schoenmaker, 2011, p. 241).

4.4.3 FINDINGS: RISK ALLOCATION MANAGEMENT STRUCTURE

First, the Transaction Cost Economics confirms the use of a specific governance structure in a public Private partnership project. The asset specificity set requirements on the capabilities of risk-bearing party to manage the risk effectively. An effective maintenance management structure will reduce the average repair time, which increases the availability. Therefore, the risk management capabilities and the risk allocation conditions are discussed in section 4.6.

Secondly, uncertainty of the future cash flow will be priced in addition on the transaction costs, known as risk premium costs. Transaction costs are present in every transaction, and risk premium costs represents the uncertainty of the transaction. The future cash flow of the Private party is determined by compliance to the RA-requirements: a higher average repair time increases the probability of possible non-compliance to those requirements. Therefore, risk premium costs will be higher in case of larger repair time, to get certainty of the future cash flow.

Third is stated that postponing decisions until occurrence is more efficient, based on frequency and uncertainty. In relation with the risk allocation matrix, the TCE approach suggests to postpone decision about risks which will probably not occur during the contract length or when it is uncertain if they occur.

The fourth finding is related to the asset specificity, which requires a quality level of the organisation to manage the asset effectively, which is further elaborated in section 4.6. Effective management will influence the quality of the risk management and in the risk allocation matrix also the average repair time, because the maintenance strategy fits the risk assessment better.

The last criterion which influences the risk management is the payment regime. Two different payment strategies are mentioned: lump sum for routine maintenance activities and target pricing/cost reimbursable for unplannable and unpredictable maintenance activities. Elements with a low maintenance interval are harder to predict when maintenance will be necessary. By postponing the decision till there is an increased knowledge (certainty) of the occurrence, the control of the maintenance strategy by the Public Party is increased in order to achieve their optimisation of performance versus costs.

Adding these findings in the theoretical risk allocation matrix, as shown in Figure 15, provides management structures regarding the characteristics of a risk.

Figure 15 Step 2: Risk Allocation matrix In the matrix one consideration becomes visible: the performance versus the costs. The question which arises is whether the costs (risk premium) are worth outsourcing the risk in order to realise the most effective management strategy to achieve a high performance. What is desirable depends on what is public accepted: it is a political consideration which will be further discussed in section 4.6.4.

4.5 SUBCONCLUSION 2: A RISK ALLOCATION METHOD

The answer on the second sub question is presented in Figure 16: a matrix to allocate risks with respect to the characteristics of the uncertainty of the maintenance phase so the public party is still in control of the performance requirements of the lock.

In this matrix the management suggestions provided by the Transaction Costs Economics and the outsource philosophy to create ‘Value for Money’ are plotted into the matrix. In this way, the matrix can be used to find a suitable management structure by plotting the risks into the matrix. The location of the risk will be in an area with a management suggestion. As mentioned, who can manage the risk most effective are conditions for the risk allocation, elaborated in section 4.6. Therefore, the risk allocation method will exist first of the risk allocation matrix as presented in Figure 16 and secondly of the risk allocation conditions, which are discussed in section 4.7.

Figure 16 Step 3: Risk Allocation matrix

Application of the risk allocation matrix requires data of the failure probabilities of the relevant risks over time and data of the average repair time, which both depends on the design and location of the object. Therefore, the matrix will be applied for analysing each case study.

Analysing the risk allocation matrix of the case studies will be done by analysing the discrepancies between the applicable management structure (who is responsible and under which payment regime, both contractually regulated) and the suggestion given by the risk allocation matrix. The interfaces of a system are taken into account as follow: if a single element of a discipline, which is dependent on other elements of the discipline, is plotted in a different area, the area with most elements of the discipline is considered as leading. As example the element VHF radio of the discipline operation, control and electrical engineering in a lump sum contract: if all other elements have a higher frequency of failure whereby lump sum is suggested, while the VHF radio fails rarely (target price or cost reimbursable is suggested by occurrence), the dependency of the element to the discipline is an argument to outsource the element also lump sum.

4.6 CONDITIONS OF RISK ALLOCATION

Two dimensions in the matrix are not sufficient for the evaluation and allocating of risks: risks may be identical along these dimensions, and yet require different treatment because of the manageability of the risk and the public acceptance (Gardoni & Murphy, 2014). The risk allocation conditions enrich the matrix with the consideration which risk has to be allocated to whom and why. This section will give answer on the third sub question: under which conditions should risks of functional failure be allocated to the public or Private party based on literature?

The following conditions need to be considered in the risks allocation:

The risk will be allocated to the risk owner who will be responsible for ensuring that the risk is assessed properly and managed effectively. (Turner, 2014, p. 292) (Cooper et al., 2005, p. 4)

Which risk responsibility can the public party outsource politically.

First the conditions of risks assessment and effective management are discussed, followed by how stakeholders influence the risk allocation. In the last part the political influence on the risk allocation is discussed.

4.6.1 RISK ASSESMENT

The first condition is whether a risk can be assessed properly. A risk attitude determines the behaviour towards a risk; it is the internal response to a risk of a person or company. Four risk attitudes can be distinguished (Turner, 2014, p. 301):

o Risk averse : preference for secure pay offs, uncomfortable feeling with uncertainty o Risks seeking: liberal attitude, preference for speculative payoffs, adaptable and resourceful, underestimate threats. o Risks tolerant: no strong reaction to uncertain situations, which can lead first to more problems from impacted threats and second to loss of potential benefits (result of missed opportunities) o Risks neutral: seeking strategies and tactics that have high future payoffs, abstract and creative thinking, envisage the possibilities, not afraid of change or unknown, focus on long term, only likely to take action when it is expected to lead to significant benefit

Every risk attitude can lead to a response strategy. Four risk response strategies are possible (Turner, 2014, p. 297; Ward et al., 1991): Avoid/exploit, transfer / share, reduce / enhance and accept. Which response is adequate towards the risk depends on the initial objective of the risk: if it is necessary that a risk is assessed properly. An appropriate response strategy can be steered by taking into account that who carries the risk has the incentive to minimize the risk (Barnes, 1983). Incentives to assess a risk properly require a clear linkage between the party’s management of the risk and the party’s receipt or reward (Ward et al., 1991). Risk responsibility is associated with a possible future loss or gain, this loss or gain is the incentive for the responsible party to either manage the risk adequately or to neglect the risk. The principle of an optimal risks allocation in a public Private partnership is that the public party must create incentives like financial subsidies or contractual responsibilities. (Lam, Wang, Lee, & Tsang, 2007) (Jin, 2009).

Performance based maintenance is risk neutral: an optimal maintenance strategy over the life cycle is applied to create ‘Value for Money’. The interest of Rijkswaterstaat to use a public Private partnership is more quality with less people, what implies a preference for a risks neutral attitude. But the core task of Rijkswaterstaat is Managing infrastructure adequately by Prevention against Flooding and Facilitate shipping, whereby a risk averse attitude is desirable. The LPAM methodology is risk averse: a higher uncertainty implies a higher

probability of failure, while the methodology aims to minimalize the risks of flooding. Therefore, the LPAM methodology prefers reducing the risk to minimalize the failure probability of the object. Accepting the risks is the first step to ensure the calculated failure probability, because the risk is recognised.

4.6.2 MANAGED EFFECTIVELY

A second condition of risk allocation is that the possible risk is managed effectively. The manageability considerations of risks due to Prevention against Flooding or Facilitating shipping can lead to different managing choices. This depends on the political influence which is explained in 4.6.4. Three aspects influence the manageability (Turner, 2014, p. 298) (Grimsey & Lewis, 2000) (Ng & Loosemore, 2006): The resource capability, this is the availability of resources to implement the chosen response and sufficient authority / competence. Knowledge, which is sufficient expertise to manage the risks and experience (experience with similar project is a pre). The financial capability for the Private parties to bear the risk and the manageability of secondary risks, what is left of the first risk and how is the residual risk managed.

These aspects are described by the following risks allocation criteria, which determine if the risk is managed and approached effectively (Lam et al., 2007) (Ward et al., 1991) (Ng & Loosemore, 2006).

1. Whether the party is able to foresee the risk / Has been made fully aware of the risks they are taking 2. Whether the party is able to assess the possible magnitude of consequences of the risk 3. Whether the party is able to control the risk probability of occurring 4. Whether the party is able to sustain the consequences if the risk occurs 5. Whether the party will benefit from bearing the risk 6. Whether the premium charged by the risk receiving party is considered reasonable and acceptable for the owner 7. The party is able to manage the associated uncertainty, and thereby mitigate risks 8. The party has the necessary risk appetite to want to take the risk

Seen from the LPAM methodology, a risk can only be managed effectively when the methodology is used for determining the maintenance activities. The party must be able to make a proper system description, a FMECA and a Fault Tree Analysis. This gives a ninth criterion to the risk allocation:

9. Whether the party is able to make use of the prescribed LPAM methodology.

Consider that these preconditions can contradict each other. Important to keep in mind is to keep the total amount of risk carried by a Private party below the threshold line what a Private party can bear. This ensures that a Private party who is knowledgeable and experienced in the technology of the work, but is not a gambler is likely to submit the lowest tender (Barnes, 1983). When the risks are higher than the capability of the Private party, the public party pays a higher premium to the Private party, without necessarily receiving more functionality in return.

RISK ALLOCATION SUGGESTIONS DERIVED FROM LITERATURE In previous research by Ng and Loosemore (2006) Ke et al. (2010) and Bing, Akintoye, Edwards, and Hardcastle (2005), the preferences of risk allocation in different countries are investigated. According to literature, the Private party is responsible for:

o The failure or functioning of the object due to quality shortfalls or defects, like design fault of a technical element, labour and material availability and unproven engineering techniques. o If the frequency of maintenance activities is higher as expected o When the maintenance costs are higher as expected

The increased maintenance frequency and maintenance costs are project risks of the Operation and Maintenance, and indirectly covered in the risk allocation matrix in terms of availability and reliability. Other findings from literature are first the risks coming from weather and geotechnical events, where the allocation depends on the predictably and occurrence frequency of the region. These risks are mostly allocated to the Private party. Secondly by late design changes, the responsibility depends on which party taking major responsibility of occurrence of the risk. Final when failure of a technical (hardware or software) element occurs due to a fault in the tender specifications, the public party is responsible.

4.6.3 STAKEHOLDERS INVOLVEMENT

Attention to stakeholders is important throughout the strategic management process because ‘succes’ for public organisations depends on satisfying key stakeholders according to their definition of what is valuable. A stakeholder analysis should help the public managers to figure out who the key stakeholders are and what would satisfy them (Bryson, 2004) and decreases the strategic and institutional behaviour uncertainty of the different stakeholders (Koppenjan & Klijn, 2004, p. 7). A stakeholder as defined by Eden and Ackermann (in Bryson (2004)) is the most suitable definition for this research, they defined a stakeholder as people or small groups with the power to respond to, negotiate with, and change the strategic future of the organisation.

STAKEHOLDER IDENTIFICATION This research is interested in the stakeholders who during the Operation and Maintenance phase of a lock contribute to achievement of the contractual set performance requirements. Each stakeholder has a perception, interest and an objective in the situation. Actors who have a significant contribution to the performance of the system are critical stakeholders. A critical actor has one or more of the following characteristics (Koppenjan & Klijn, 2004, p. 147): important resources to perform the task, a small degree of replacement in the organisation and a high dependency factor to the project or project organisation.

The dependency factor is based on the resources of an actor, who is in charge of the crucial resources to accomplish the objectives. There are five types of resources, financial, production, competencies, knowledge and legitimacy (Koppenjan & Klijn, 2004, p. 145).

In the case of the Dutch locks, three types of actors are indicated as critical during Operation and Maintenance: the operator and contract team of Rijkswaterstaat, both public, and the Private party. The dependency of the actors is finance, production and knowledge based. Rijkswaterstaat is dependent on the knowledge and resources of the Private party, but they have their financial resource and vice versa.

PERSPECTIVES OF STAKEHOLDERS In general the aim of the Private sector of a project is to achieve a return on their investment by generating future cash flows which cover the initial costs and financial charges. The aim of the public sector is to ensure a level of service to the community, which is time efficient, cost efficient and with the highest possible quality. This aim of the public sector can be transferred to the Private sector by creating a strong incentive for the Private sector to think about the implications which a design or construction decision will have on the operating effectiveness and costs of managing and maintaining a facility during its operational life (Ng & Loosemore, 2006). This principle is applied in DBFM contracts. De Ridder (2013, pp. 15,85) states that more value can be achieved by collaboration of key stakeholders instead of outsourcing.

For the Dutch locks the hypothesis of the perception, interests, objectives and dedication of the critical stakeholders is as in Table 6. These expectations of the stakeholders are applicable for every contract model. Note that Rijkswaterstaat will remain responsible for the functioning of the lock (reputation risk). And that the regional department of Rijkswaterstaat is the operator (beheerder), while the maintenance activities are outsourced to the contractor (Private party).

Table 6 Perspective of Stakeholders Actor Perception Interest Objective Dedication Operator A adequate- functioning Adequate Operating the system Very High (regional public party) object to their wishes performance of the object Contract team Achieving Value for Money, Manage An object what meets High Rijkswaterstaat what is time and cost infrastructure the set performance (public party) efficient versus the adequately as defined in the performance contract. Contractor Comply to the contract Making profit Achieve return on Very High (Private party) (Maintaining the system their investment when its needed )

INFLUENCE STAKEHOLDER ON RIKS ALLOCATION The critical stakeholders influence the risk allocation by their differences in interests and objectives. By traditional outsourcing these stakeholders have certain behaviour to accomplish their goal, which will have consequences for the performance requirement s with respect to the costs. The design of the contract and the organisation will influence how the stakeholders are behaving. Early involvement of these stakeholders by collaboration and negotiations in the process will lead to better support of the risk allocation of the project, known as the network approach. Thus, commitment is created which will have positive impact on the performance versus cost ratio (M. Leijten, 2013a, pp. 17, 21-27) (Bryson, 2004, pp. 25-26). The DBFM contract suggest two parties working separately, while the contractor and operator have interfaces during the maintenance phase by planning maintenance activities and operating the same object. Expectation is that in practice the parties will collaborate more often to perform their tasks than contractual regulated.

Because every critical stakeholder is still interested in achieving their objective, strategic answers can be given in the meetings (M. Leijten, 2013b, pp. 12, 21). In this research clearly strategic behaviour will be seen as indicator for not prepared to collaborate, which can caused by previous experiences of similar projects.

4.6.4 POLITICAL ACCEPTED

The widest range of economical focus is the political level of risk allocation. According to Vrijling and Verlaan (2013, p. 16) political considerations are based on benefits like environment, health, culture and national economy, which can be analysed by a multi criteria analysis and a cost-benefit analysis. In this research the political benefits are based on to manage the infrastructure adequately: a lock serves by flooding prevention and providing available waterways for economic stimulus. The political acceptance is in the Netherlands influenced by the public opinion.

The consideration of the allocation as presented in figure 13 is between performances versus costs. The performance of a lock is related to serving the Dutch Public by Prevention against Flooding and Providing Available waterways. The involvement of public opinion in the performance causes a political consideration of the ratio costs versus political image. The political image loss is elaborated in Table 4 as Complains, Local image loss, Regional image loss and National Image loss. The differences in functional requirements have different influence on the political image: the political image loss due to Flooding will be more expensive and is immediately a national issue. Political image due to non- availability of the waterways will become a national issue if it consists over a longer period. Compared with flooding is non- availability inexpensive. The consideration what is politically accepted results in two different approaches towards risk allocation.

The politics influence the risks allocation by their preferences how to manage the infrastructure optimally. How considerations are made is unknown, it depends on the political climate. The preferences of the politics become visible in the applied programs for waterworks, like ‘Ruimte voor de Rivier’.

4.7 SUBCONLUSION 3: RISK ALLOCATION CONDITIONS

The answer on the third sub question is that risks must be allocated to the party who has a proper risk assessment and manages the risk effectively. The importance of effective management was already indicated in the risk allocation matrix, as presented in section 4.4.3 and 4.5.

The effectiveness of risk management is indicated by nine risk allocation criteria, see Table 7. How the stakeholders manage risk depends on their interests and objectives, these are presented in Table 6. Initial every stakeholder who bears a risk must meet all nine criteria to manage this risk effective. The case studies will provide practical insight which criterion is required for which stakeholder to manage the object and the related risks adequate.

Table 7 Risk allocation conditions of critical stakeholders

Risk allocation criteria 1 Whether the party is able to foresee the risk / Has been made fully aware of the risks they are taking 2 Whether the party is able to assess the possible magnitude of consequences of the risk 3 Whether the party is able to control the risk probability of occurring 4 Whether the party is able to sustain the consequences if the risk occurs 5 Whether the party will benefit from bearing the risk 6 Whether the premium charged by the risk receiving party is considered reasonable and acceptable for the owner 7 Whether the party is able to manage the associated uncertainty, and thereby mitigate risks 8 Whether the party has the necessary risk appetite to want to take the risk 9 Whether the party is able to make use of the prescribed LPAM methodology.

A proper risk assessment seen from the LPAM methodology is being risk averse and therefore interested in reducing the risk. The first step is recognising and accepting the risk, the second step is reducing the risk. Therefore, a risk neutral attitude to optimise the life cycle can be a proper risk assessment as well. Based on the critical stakeholders involved and purpose of the risk allocation (managing adequate infrastructure with respect to performance versus costs) the desired risks assessment of the critical stakeholders is as in Table 8. To create support of the risk allocation of the lock, early involvement of the critical stakeholders by collaboration and negotiations will have a positive effect on the performance versus the costs during the Life Cycle of the lock.

Table 8 Desired Risk assessment of the critical stakeholders

Risk assessment Operator Risk averse Rijkswaterstaat Risk averse / risk neutral Contractor Risk averse

The politics will influence the risks allocation by their preferences how to manage infrastructure adequately, in such a way that they will not perceive image loss. The functional requirements of a sluice, Prevention against Flooding and Facilitating shipping, have different levels of image loss. By failure of Prevention against Flooding the image loss is considered larger, therefore the political acceptance for risk premium costs will be larger.

5 CASE STUDY The case studies will answer the fourth sub question of this research: ‘What observations from the current risk allocation during the Operational & Maintenance phase are validations and improvements for the theoretical risk allocation method?‘ Application of the risk allocation method will also give validation of the method. To find improvement for the risk allocation method, the risk allocation method derived from theory in Chapter 4 (‘to be’ situation) will be used to analyse the phenomenon in real-life context (‘as is’). The risk presented in Table 3 will be the basis for the risk allocation analysis. See Figure 17 for the methodology to find improvements derived from practical case studies. Observations of the risk allocation matrix (Figure 16), risk allocation criteria (Table 8) and the risk assessment (Table 7) will give improvements. The observations will be found by the research questions given in section 2.2.1. In order to answer these questions, data and observations of each case are conducted from contracts and reports and through interviews with the critical stakeholders. The case study questions and the interview protocol are in Appendix B.

Figure 17 Elaboration case study methodology Three cases are analysed to find the ‘as is’ situation: the Volkerak complex and Safety Lock Heumen, are both in the Operation and Maintenance phase. Safety Lock Limmel is current in the design phase. The observations of the first two cases are used in the last case for finding the current culture towards outsourcing risks. Is the responsibility allocation culture changing towards keeping more responsibilities in-house? And are some observations already included in the first DBFM waterworks contract?

5.1 CASE INTRODUCTION

Three cases will be analysed in this research to analyse the ‘as is’ situation: Volkerak complex, Safety Lock Heumen and Safety Lock Limmel. In the case introduction of each case a project description, the political influence and the contract type are given

Figure 18 Case 1: Volkerak complex Figure 19 Case 2: Safety Lock Heumen Figure 20 Case 3: Safety Lock Limmel

5.1.1 CASE 1 INTRODUCTION: VOLKERAK COMPLEX

The Volkerakcomplex is part of the Volkerakdam. The complex is located in the south eastern part of the dam, between Hellegatsplein and Willemstad. The three commercial shipping locks and the recreational lock are an important link in the main corridor from Rotterdam to the Scheldeharbor of Antwerpen. It is one of the busiest and largest inland shipping locks of Europe: at an average day 300 ships will pass the lift lock (Arcadis, 2014c, p. 30). Therefore, the availability of the complex is important. The availability requirement of the lock complex is 96%, but for the commercial shipping locks 98,5% (Rijkswaterstaat, 2007b, pp. 33-36).

Next to facilitate shipping the complex regulates the water level of the Volkerak Lake and Hollands Diep. To regulate the water level it includes discharge facilities, which has to comply with the Water Act according the LPAM methodology. The reliability requirement of Prevention against flooding is 99.9% (Rijkswaterstaat, 2007b, pp. 33-36).

The initial DBM contract is imposed by dispensing policies of Rijkswaterstaat and the contractor, without involvement of the operator and the maintenance staff.

DBM CONTRACT The Volkerak complex is the first project were LPAM is included in the contract. The contract is a DBM contract for the renovation and maintenance of the electrical and installations units for a period of 15 years for the Haringvlietdam (storm surge barrier), Goereese sluice and the Volkerak complex. The maintenance of the mechanical parts is also included in the contract. The renovation project started in 2007 and was finished in 2012. The contract is based on the UAV-GC 2005.

The contract includes two safeguards (Rijkswaterstaat, 2007d, p. 9): 1) Penalties if the contractor does not comply to the contractual availability and reliability requirements of the object and 2) Warnings and from the second warning onward a penalty if the contractor does not comply to the LPAM methodology by reporting the availability and reliability.

The differences between the DBM contract for a part of the renovation of the Volkerak complex and Haringvliet and a DBFM contract model as in the new sluice program are:

1. The Finance component is missing in the DBM contract, this results in collaboration between contractor and Rijkswaterstaat, whereby Rijkswaterstaat guards the contract. There is no bank as

guardian and monitoring the feasibility and controlling the income flow: this phenome is not part of this research 2. The DBM contract is only for renovation of the Electrical and Installations and some additional maintenance activities. The other systems are maintained and controlled by another party. This will result in: a. Several parties which provide input to the RA-analysis b. Increased number of interfaces with other parties for execution of maintenance activities

5.1.2 CASE 2 INTRODUCTION: SAFETY LOCK HEUMEN

Safety Lock Heumen is part of the political project ‘Meuse works’ tide and completed in 2013 near the old lift lock Heumen to improve the shipping capacity, protect the hinterland against flooding and to create an ecologic connection. The lock is located south of Nijmegen and is part of the corridor Meuse - Waal. Every year around 50.000 ships pass the lock. The project won the concrete price 2013 because of the good integration with the environment and the visualisation of the function (Infra Automation, 2013).

The contractual requirement of the lock for Prevention against Flooding has a reliability requirement of 99.999%. and to facilitate shipping an availability of 99.8% (Rijkswaterstaat, 2009b, pp. 38, 41, 47-48). Note the fact that this lock is a Safety Lock, which has an average closure of twice each year.

D&C CONTRACT INCLUDING 2 YEARS MAINTENANCE The lock Heumen is constructed in a Design & Construct contract, including 2 years of Maintenance. Since January 2015 Rijkswaterstaat is responsible for the Operation and Maintenance. During the design of the lock, the contractor was contractual obligated to make a RAMS and RA – analysis to validate the design and the maintainability. Furthermore one of the requirements was an easy to maintain and energy neutral object. The contract scope includes drawing up a maintenance plan and the execution of maintenance until the moment of maintenance acceptance by Rijkswaterstaat (Rijkswaterstaat Maaswerken, 2009, pp. 26, 42-43).

The payment regime is based on the UAV-GC 2005 (par. 29, 32, 33, 34 36), which describes fixed prices with a penalty mechanism if the completion date is exceeded and a correction process by non-compliance of the contractual requirements. Payment of long-term maintenance is included in the fixed contract fee: the contract value fee is paid in periods of 4 weeks, minus provisional sums (Rijkswaterstaat Maaswerken, 2009, pp. 51-52)

The differences between the D&C + 2 years M contract of Lock Heumen and a DBFM contract model as used in the sluice program are:

1. The Maintenance period consists of two years. The contractor draws up a maintenance plan for a longer period, but just maintains it for two years: teething problems can still come up after the contract period. 2. The contract is based on the UAV-GC 2005, and thus the finance is based fixed price; the payment mechanism is not based on the reliability and availability performance during the maintenance period.

5.1.3 CASE 3 INTRODUCTION: LIMMEL

The third case study is selected because this is the first DBFM water work project worldwide, whereby the lessons learned of the Volkerak complex and Safety Lock Heumen are used as input for the contract (KING, 2014). The lock is one of the six designated locks of the DBFM sluice program, which is executed by Rijkswaterstaat.

The new Safety Lock Limmel replaces the old lift lock to increase the shipping capacity: larger ships are not able to pass the old lift lock. Another function is Prevention against Flooding of the hinterland. The set requirement on the reliability is an allowed failure of 1/3875 of each closure request. The requirement regarding the availability is an minimum availability of 99.988% during 100 years (Rijkswaterstaat, 2013a, pp. 33-36). The performance requirements are adapted to requirements which were insurable by the financing banks (interview RWS, 2015c, d). The new lock design has the same width of the river, what allows the Meuseroute to be fully part of the international waterways. The scope of the project includes the Safety Lock (two cylindrical towers with a steel lift gate) and a bridge for road traffic. The investment is around 34 million Euros (Rijkswaterstaat, 2015a).

DBFM CONTRACT (FINANCIALLY CLOSED JANUARY 2015) The contract model is a Design, Build, Finance and Maintenance contract, which is already discussed in section 4.1. Remarkable is that the contract model suggest complete outsourcing of the project, while in practice the contract is managed as a cooperation model (interview RWS, 2015c, d). This will be further discussed by the risk assessment of the organisation in section 5.4.2.

The payment regime is based on availability payment, safeguarded by availability correction and performance discount by non-compliance to the contractual agreement. The availability correction is dependent on the cause (time, function and measurement) and the consequences (number of annoyed people, type of function and the remaining rest function). The performance discount is expressed in penalties, to control the agreed maintenance process and strategy (Rijkswaterstaat, 2015d, pp. 18-20) (RIjkswaterstaat, 2014a).

5.2 CASE 1: VOLKERAKCOMPLEX

The first case is the Volkerak complex, an introduction is given in section 5.1.1. Relevant for this research is that this project is a DBM contract for the renovation and maintenance of the Electrical and Installations elements and maintenance of the mechanical parts for 15 years. To find the application of the risk allocation in the Volkerak complex, the risk allocation matrix is applied and analysed. The risk allocation conditions are determined through interviews and by analysing contracts and reports. Each will give observations which validate or improve to the theoretical risk allocation method, see Figure 17 for the methodology.

5.2.1 CASE 1: RISK ALLOCATION MATRIX

In the ‘to be’ risk allocation matrix derived from theory, the risks of the ‘as is’ situation of the Volkerak complex are plotted, see Figure 21, based on their failure probabilities and average repair time. This data is presented in Appendix C. The numbers correlate with the risks as presented in Table 3. The failure frequency is determined by the probability of failure of each element combined with the contract length and the average repair time is determined by expert judgement. Plotting the risks while considering the contractual condition (who is responsible and the payment regime) provides discrepancies between the application of the risk allocation and wat is based on theory (thus according the risk allocation matrix). The basis of the frequency of failure is the maintenance contract length: the contractual maintenance period of the Volkerakcomplex is 15 years.

These discrepancies between the two models are marked in red: the suggested management structure (blue boxes) and the application (grey or white figures for responsibility) combined with the payment structure (contract based) are conflicting. The discrepancy in risk allocation is the basis for the real-life risk allocation analysis. Therefore, to be able to mark discrepancies the payment regime must be taken into account: the

renovation and maintenance (number 8 and 9) of the Electrical and Installations elements (number 5.x and 6) and the maintenance of the mechanical elements (number 3.x) are paid by lump sum.

Figure 21 Volkerak complex: Risk allocation matrix

RISK ALLOCATION DISCREPANCY The application of the risk allocation of the critical events and the regarded management structure of the Volkerak complex (‘as is’) provide the following discrepancies of the risk allocation:

First, in the area with the advice to outsource the risks by lump sum payment, two risks are discrepant: the responsibility is kept by Rijkswaterstaat for Making an operational error (7) and the Poor sight (13) due to fog or rainfall. Since the operator remains public, the contractor cannot control the operational error. This risk is not allocated to the contractor due to reasonableness and fairness. The poor sight is kept by Rijkswaterstaat, because the risk is weather dependent, and thus out of control of the contractor. The risk lightning (11) is also weather dependent. Outsourcing these risks involves risk premium costs. Note that control measurements of these risks can be allocated to the contractor: control measurements are hardware or software related wherefore the contractor can be liable. Like the control measurements of the risk fire to mitigate the consequences are also allocated to the contractor, but the risk fire itself (10) is for the responsibility of Rijkswaterstaat. Likewise for the risk lightning: the grounding and lightning protection system is allocated to the Private party. During the team meetings there were often discussions about the responsibility between the Public and Private party of these risks.

Noticeable is the responsibility allocation of the mechanical parts (5.x): in the DBM contract the maintenance activities are outsourced, but a new contract is drawn up for renovation (large maintenance) activities. In the matrix the mechanical parts are plotted in two areas: outsource with lump sum and outsource to whom can manage best at a fixes price (costs reimbursable). In other words: the theoretical risk allocation matrix and the application of the risk allocation in this case are similar. The discrepancy of the VHF radio (5.6) and the water measurement system (5.8) in the theoretical risk allocation matrix can be explained by practical considerations: allocation of a whole discipline is more effective than allocating separate elements of a single discipline between different parties.

The civil elements, which are plotted in the area with the suggestion to postpone outsourcing the risk until expected occurrence by fixed price if political accepted, are in this contract managed by Rijkswaterstaat. The political acceptance in this contract was to renovate the parts which were necessary; designing and building a new complex was more expensive and probably unnecessary.

OBSERVATIONS The risk allocation matrix and the application of the allocation of hardware and software risks of the Volkerak complex are similar. For Human Failure and External risks other considerations of allocation are made due to reasonableness and fairness. The risk allocation criteria are more important, because they indicate the degree to be able to control and mitigate the risk. This phenome is briefly mentioned in section 4.6.2 as specific project risks. The control measurements to mitigate or decrease the consequence of occurrence of the external risk and human failure are outsourced. Those control measurements are hardware and software related and therefore they can be allocated according the risk allocation matrix.

Overall, it is noteworthy that the contract length, and which events are outsourced in real-life are almost as desired as the risk allocation matrix. The discipline of the hardware and software events which expected frequency of failure is larger as 1, 05 is outsourced to the Private party under lump sum payment.

5.2.2 CASE 1: RISK ALLOCATION CRITERIA

The risk allocation criteria are based on analyses of the actual organisation, which is derived first from the contractual design and second from the application of the organisation of the Volkerak complex, Haringvliet Dam and Goereese sluice. The analyses of the real-life organisation provide information and problems of the actual risk allocation. The actual application of risk allocation and the related criteria to manage risks effectively are conducted through interviews, meetings and reports. In Appendix C in-depth observations and data can be found of this case.

ORGANISATION The organisation of the operation and maintenance process exists of the following critical actors:

- The Operator (beheerder), also the manager and part of the regional department of Rijkswaterstaat - Cluster Storm Surge Barriers (CSVK) the contract owner, known as the contracting team which is part of the national department Projects, Program and Maintenance of Rijkswaterstaat. - The contractor who is responsible for the maintenance of the electrical, installation and mechanical engineering.

The current organisation of Maintenance and Operation is based on interviews with the operator, contractor and CSVK. The organisation and the observations made by the storm surge barrier are assumed similar as the Volkerak complex, because it is within one contract, including the same critical stakeholders. The contractual organisation is described in the UAV-GC 2005 (chapter 9, chapter 10 and chapter 11) and in the contractual management specifications (Rijkswaterstaat, 2007c, p. 11).

CONTRACTUAL DESIGN The CSVK enforces the contract and guards thereby the management aspects of the maintenance process. They are responsible for contract preparation by request for change or for additional activities, the payment regime and assessment whether the activities are scope or non-scope. The CSVK is able to make financial decisions which are in the contract, in contrast to the operator who has no contractual agreement with the contractor. If the maintenance activities are non-scope, another contract for these activities must be made.

The contractor is required for the execution of the RA – analysis for the elements of his scope. Every quartile they are obliged to deliver an updated report of maintenance of the product breakdown structure elements, a RAMS analysis, a probabilistic operation and maintenance report, and a new maintenance plan (Rijkswaterstaat, 2007c, p. 89). These verification and validation reports, made by sufficient results and use of appropriate actions for deviations, are the base for the invoice payment (Rijkswaterstaat, 2007a, p. 9).

For monitoring and daily maintenance the contractor is located on to the complex. In case of failure a process is designed to determine if and how it is going to be managed. This process exists of various of steps (Vialis & Rijkswaterstaat, 2014, p. 43), reaction on a failure notification will therefore be approximately around an hour.

APPLICATION The contract is imposed by dispensing policies, without any involvement of the critical stakeholders of the Operation and Maintenance phase. This caused the different perspectives of the final result of the renovation works. In the beginning the RA- analysis was not sufficient, which resulted in a workgroup to arrange an adequate RA-analysis for one of the three objects within the contract (the storm surge barrier). After this RA analysis the collaboration within the workgroup of the critical stakeholders (operator, CSVK and contractor) is improved. This collaboration is focussed on the control of the top risks and to implement the desired work processes by the contractor. In this research the workgroup illustrates the application of the organisation of the whole contract scope (storm surge barrier and the Volkerak complex).

In those meetings failure probabilities of the operational error and the responsibility are discussed, because these risks make currently the largest contribution to the failure rate (as result annoyance by the contractor). Also the allocation of the external risk of lighting is an issue: there was disagreement of the performance of the control measurements of lightning by the storm surge barrier. After the event lightning, the control system did fail and because the contractor installed the system and was responsible for the performance, he was liable for the failed control system (Teammeeting, 2015).

The critical stakeholders, the contracting team (CSVK) and the operator, are both at the management side of the maintenance activities. Due to the location differences there is a lot of communication between the CSVK and the operator, to monitor if the maintenance activities are managed adequate and to check if the assumptions derived from the fault monitoring are correct. The operator is located part time at the Volkerak, what ensures a lot of contact with the contractor on site. The operator has an auditing and monitoring role in the organisation, he provides the CSVK feedback of the relevant aspects.

The contractor has a special team for the RA analysis, besides the mechanic staff on site. The contractor extended his RA team since the completion of the renovation to realise working according the LPAM methodology (interview Vialis, 2015a). They are located close to the operator at the complex Volkerak. Realisation of RA analyses requires inspections for identifying the condition of the hardware and software elements to report the current situation, and designing a suitable probabilistic Operation and Maintenance plan, which becomes guiding for the maintenance activities. Due to the periodic payment structure it is difficult for the operator to optimise his maintenance according LPAM methodology (interview RWS, 2015a).

Since the delivery of the renovation works in 2012 the contractor and the operator are working on the transformation of the abstract contractual requirements into practical activities (interview operator, 2015a).

RISK ALLOCATION CRITERIA CHECK The manageability of the critical stakeholders the Volkerakcomplex is indicated by checking the risk allocation criteria, which are provided in section 4.7. According to theory, compliance of every criteria of each stakeholder is desirable. The real-life context of the case will provide knowledge about the compliance to the criteria of the critical stakeholders. This knowledge is derived by analysing the discrepancies: non-compliance

of a criterion of a stakeholder. The risk allocation criteria of the critical stakeholders, see Table 9, are based on the organisational description and the observations derived from the interviews, see Appendix C.

Table 9 Risk allocation criteria Volkerak complex Risk allocation criteria Operator CSVK Contractor 1 The party is able to foresee the risk / is fully aware of the risks they are    taking 2 The party is able to assess the possible magnitude of consequences of the    risk 3 The party is able to control the risk probability of occurring   4 The party is able to sustain the consequences if the risks occurs 5 The party will benefit from bearing the risk *   6 The premium charged by the risks receiving party is considered reasonable   * and acceptable for the owner 7 The party is able to manage the associated uncertainty, and thereby   mitigate risk 8 The party has the necessary risk appetite to want to take the risk  9 The party is able to make use of the prescribed LPAM methodology   

DISCREPANCIES & OBSERVATIONS RISK ALLOCATION CRITERIA Noticeable is that no parties are able to sustain the consequences by failure of the lock: the consequences of the social impact of flooding or the economic impact of a closed waterway. Furthermore, the CSVK meets the least of the risk allocation criteria derived from literature (four out of nine). This can be explained by the philosophy of Rijkswaterstaat: outsource all knowledge and only be able to enforce the contractual agreements.

The operator complies with almost all risk criteria. The asterisk of the fifth criterion is because the party will benefit from bearing the risk, by being able to control all the maintenance activities of the complex. The operator will ensure to report an adequate-functioning complex. A part of the maintenance activities are outsourced, the operator is still responsible for the other maintenance activities and is therefore able to make financial decisions about this part. The Volkerak complex is in the same contract with the critical stakeholders of the Haringvliet dam, whereby the water safety is a much bigger issue. This influences the behaviour of the operator: he feels obligated to control the performance of the storm surge barrier, which continues for the Volkerak complex.

By the contractor, the sixth criteria has an asterisk, because the contractor accepts the premium charged by the risks receiving party, but the premium only covers the items which are necessary according to the contract. The initial contract did not cover every aspect clear, which resulted in discussions about what is within the contract and what is not. Further the contractor misses the necessary risk appetite to want to take the risk: the contractor prefers to work traditionally and the differences between the maintenance of a critical element and other elements are not guiding. The organisation of the contractor is adapted to work according the LPAM methodology, but this did not result in a risk assessment to feel uncomfortable by functional failure risks. The assessment towards risks is further discussed in section 5.2.3.

OBSERVATIONS RISK ORGANISATION Based on the contractual design, the application of the organisation, and the discrepancies found in the risk allocation criteria, observations are made related to the organisation.

The first observation is the non-involvement of the critical stakeholders from the start of project, which resulted in different perspective of the result. Therefore, during the Operation and Maintenance phase team meetings are introduced to improve the perceptions in order to achieve one desired result. The overall collaboration and management process of the Operation and Maintenance of the Volkerak sluices is still struggling and improving. The perception of the stakeholders of the project is already improved since the

completion of the complex, but still more improvements are necessary for the Operation and Maintenance (interview RWS, 2015a). The collaboration by team meetings has a positive effect on the organisation: the stakeholders are already more satisfied with the current organisation and how it is developing. Like, the issues of risk allocation of the external risks and human failure raised from reasonableness and fairness are already improved by the collaboration. Thereby, the degree of the functional requirements seemed to be important, because it provide the first guidelines of the expectation of the object of the Public party.

The second observation is the role of Rijkswaterstaat as to control and ensure the performance by guarding the contractual performance requirements to be sure that the object meets its requirements. Rijkswaterstaat prefers to be in control of the responsibility. This results in in-depth analysis and reports drawn up by the contractor, including a lot of unnecessary information, because they feel obligated to report about everything (interview RWS, 2015a). The contractor also becomes careful to make statements. The analysis and reports results in a lot of additional paper and control work for the contractor (interview Vialis, 2015a).

The last observation is the organisation change around the maintenance activities of the contractor to work according the LPAM methodology. The activities transformed from execution of maintenance on site towards in-house focusing on drawing up adequate RA-analysis. Furthermore, the incentive to work according LPAM is missing due to the fixed periodical payment regime, which is not adaptive to optimise the maintenance according LPAM. This is further elaborated in section 5.2.3.

5.2.3 CASE 1: RISK ALLOCATION ASSESSMENT

As discussed in section 4.6.3 each stakeholder has an independent role, with some overlap, in the organisation of Operation and Maintenance. Every stakeholder has its own line of reasoning to comply with the performance of the system, based on their interest and objectives presented in Table 6: the contractor is interested in return on their investment while the operator is interested in an adequate-functioning object. The differences in line of reasoning and behaviour are analysed by how the actors should behave according the theoretical risk allocation conditions (see section 4.7). The information about the manageability and risks assessment of the different stakeholders are conducted through interviews and during a team meeting with the critical stakeholders.

RISK ASSESSMENT The risk assessment of the critical stakeholders of the Volkerak complex is as in Table 10. Every stakeholder is risk averse and two of them in combination with risk neutral. The individual interest of optimising the value cost ratio, causes the undesirable strategy of transferring the risks. The discrepancies with the desired risk assessment are discussed below. Further in-depth observations of the assessment are stated in Appendix C.

Table 10 Risk assessment critical stakeholders Volkerak complex Stakeholder Risk assessment Volkerak Desired risk assessment Operator Risk averse by reducing risks Risk averse CSVK Risk averse / risk neutral by reducing or transferring the risk Risk averse / Risk neutral Contractor Risk averse / risk neutral by reducing or transferring the risk Risk averse

DISCREPANCY The risk assessment of the operator is risk averse, because he feels comfortable by reducing and controlling risk, to decrease the uncertainty. This is illustrated by the following facts: first, the operator trains their employees adequate to decrease the occurrence of human failure. Secondly, the operator preferences that Rijkswaterstaat take more responsibility in case of weather circumstances. And last the operator draws up their own maintenance plan and inspection planning, because the funding request procedures take too much

time to ensure the performance based on the inspections carried out by Rijkswaterstaat. The operator prefers to repair a fault immediately, instead of reporting first (Interview operator, 2015a).

The interest and therefore the risk assessment is twofold of the CSVK: first they are interested in a reliable object and therefore adequate-functioning elements of the object. Secondly they are interested in optimal costs versus performance of the maintenance activities by recording and analysing the failure data. But they transfer the optimisation of costs versus performance to the contractor: when the contractor realises optimal maintenance activities versus performance the profit is for the contractor, this is the incentive for the contractor to work according the LPAM methodology (interview RWS, 2015b).

It is contractual regulated that the contractor is paid for the Reliability and Availability requirements: this causes a risk averse attitude. The quartile based payment structure is an incentive for the contractor to reduce the risks which they can control, and to transfer risks they cannot control. The applied risk control method by the contractor is a short term trade-off between costs and effectivity to comply with the contractual requirements. In theory the contractor can achieve profit by optimisation of the maintenance activities by using the LPAM methodology. Optimising the maintenance activities according the LPAM methodology must be the incentive, but it requires an investment (organisational and a longer period) to apply this method adequate. The contractor is interested in assurance of minimum income, adjusting the maintenance activities according LPAM (following of the preconditions) results in uncertainty whether the cost becomes less or more (interview RWS, 2015a) (interview Vialis, 2015a). Due to the periodical payment regime based on compliance to the RA-analysis there is less solution space to have disappointing results.

Based on the perceptions, interests and objectives given in Table 6, the differences between the desired and actual risk assessment of the critical stakeholders are as expected. This is probably because the DBM contract is based on the UAV-GC 2005 which is a traditional contract model and the result of different expectations and perspectives.

OBSERVATIONS RISK ALLOCATION ASSESSMENT Two observations are made from the risk assessment. The first observation is that the contractor and the operator have different perceptions of the maintenance activities with respect to the planning and the performance requirements. The operator is reducing and managing the risk so he can be certain of an optimal functioning object at every moment, while the contractor looks at the contractual requirements and his incentive to manage the risks properly every individual period to ensure the payment.

The second observation is related to the periodic payment and inspection regime, which disables the incentive for the contractor to optimise the maintenance activities and thus becoming risk averse according LPAM. The periodic performance based payment regime brings less solution space for the contractor to take losses, in case the optimisation of maintenance phase has disappointing results. This enables for the contractor an incentive to transfer risks to the Public party, so risks which can lead to non-availability are limited. The contractor is interested in the current situation to be able to close the financial year with equal costs. Optimisation according LPAM requires time to find the optimal performance versus maintenance activities, which result in uncertainty of the future cash flow of the contractor.

5.2.4 CASE 1: OBSERVATIONS

The observations of the risk allocation matrix and the risk allocation conditions made by the Volkerak complex lead to a first set of observations about the ‘as is’ situation. Case 1 is a DBM contract where by the renovation and maintenance of the Electrical and Installations elements are outsourced for 15 years by lump sum.

The first observation is of the risk allocation matrix, which is suitable to allocate hardware and software related risks. For human failure and external risks the risk allocation conditions must considered first. There

was confusion about the allocation of the external risks and human failure risks due to reasonableness and fairness (which are covered in the risk allocation criteria related to be able to control and mitigate the risk). The allocation of external risks and human failure risks is already briefly discussed in section 4.6.2 as specific project risks. The control measurements to mitigate or decrease the consequence of the external risk are hardware and software related and can be outsourced according the risk allocation matrix. The responsibility of the human failure can be outsourced if the bearing party is able to control and mitigate the human failure.

The second observation is related to the different perceptions of the critical stakeholders of the desired situation, with respect to the maintenance planning and the performance requirements. Due to non- involvement of the critical stakeholders from the start of project different perceptions of the desired result were present. Collaboration opportunities are introduced, like team meetings, during the operation and Maintenance phase create agreement of the desired result.

The third observation is the role of Rijkswaterstaat as supervisor and guardian of the contractual requirements to remain in control of the performance of the object by inspections. Carrying out these inspections requires periodical contractual required reports and RA-analyses of the object made by the Private party. This result in a lot of paper work for the Private party

The last observation is related to the organisation to work according to the LPAM methodology. Working according the LPAM methodology does not fit in the traditional way of working of the Private party: other types of activities during the maintenance phase are necessary. Another issue is the periodic payment regime which conflicts to optimise maintenance activities according the LPAM methodology; the optimisation requires a longer period than the periodical inspections so the Private party is able to have disappointing results (optimisation of the performance versus the maintenance activities had a negative effect which can lead to non-compliance to the RA-requirements).

5.3 CASE 2: SAFETY LOCK HEUMEN

The second case is Safety Lock Heumen; a Design and Construct Contract including two years Maintenance, as introduced in section 5.1.2. To find the application of the risk allocation of Safety Lock Heumen, the risk allocation matrix is applied and analysed, the risk allocation conditions are determined by conducting interviews and analysing contracts and reports. Each will give observations which validate or improve to the theoretical risk allocation method, see Figure 17 for the methodology.

5.3.1 CASE 2: RISK ALLOCATION MATRIX

In the ‘to be’ risk allocation matrix derived from theory, the risks of the ‘as is’ situation of Safety Lock Heumen are plotted, see Figure 22, based on their failure probabilities and average repair time. This data is presented in Appendix D. The numbers correlate with the risks as presented in Table 3. The method to plot the risks in the matrix is explained in 5.2.1. Plotting the risks while considering the contractual condition (who is responsible and the payment regime) provides discrepancies between the application of the risk allocation and wat is based on theory (thus according the risk allocation matrix). The basis of the frequency of failure is the maintenance contract length: this is of Safety Lock Heumen is 2 years.

These discrepancies between the two models are marked in red: the suggested management structure (blue boxes) and the application (grey or white figures for responsibility) combined with the payment structure (contract based) are conflicting. To be able to mark discrepancies the payment regime must be taken into account: the contract is based on fixed price.

Figure 22 Safety Lock Heumen: 'As is' risk allocation matrix

RISK ALLOCATION DISCREPANCY Noticeable is that there are two discrepancies between the ‘as is’ situation and the ‘to be’ situation: the allocation of the operational, control and electrical drive and motion works (5.1) and the CCTV installation (5.5, both arise from the suggested payment structure. The project is paid fixed price, while the theoretical risk allocation matrix suggests lump sum payment for these elements, but due to the short period of outsourced maintenance the payment discrepancy is not significant. Because of the short period of maintenance the risk allocation is almost not noteworthy: failure of the other hardware and software elements do not occur during the contract period. Every aspect, except the operational fault and the failure due to poor sight and obstacle in the waterway, the project is outsourced to who can manage the project best in a fixed price contract. This indicates that the risk allocation matrix performs for also for short-term contracts adequate.

The higher probability of frequency of failure of the two hardware risks plotted in the outsource area by lump sum are indicated in the Maintenance Plan: the inspection intervals of these elements are every month, while the other elements of the Operation, control and electrical elements are inspected every half year. The inspections of the civil and steel elements are even neglected in the two years Maintenance plan because their probability of failure is too small (Mans et al., 2012, pp. 8-9,11) (interview Besix, 2015).

As explained in case 1, because of reasonableness and fairness, the risks of making an error in operation (7) cannot be outsourced so long Rijkswaterstaat remains the operator. According the risk allocation matrix the occurrence of lightning (11) is too expensive to allocate by the contractor, noteworthy, is in this case this is outsourced. The reason can probably be found in the relation to the lightning protection system (5.2), which can be outsourced to the contractor. This combination reduces the consequence of lightning. Similar for the risk ship collision (12) and fire (10): Control measurements with their system requirements can be and are outsourced, what reduces the failure by occurrence of the risk significant.

OBSERVATIONS The short maintenance period causes the fact that almost every event is plotted in the lower area of the matrix: the application of the outsourcing and payment regime is as desired form theory (thus according the risk allocation matrix). Therefore, it can be concluded that the risk allocation matrix functions for a short term contractual maintenance period for allocation of hardware and software risks.

For the allocation of human failure and external risks other allocation criteria of what is reasonable and fair are made compared with case 1: in short maintenance contracts the consequences of the risk are considered, which can be reduced by control measurements. These measurements decrease the occurrence of the consequence of the risk significant; therefore, it is earlier acceptable to outsource an external risk.

5.3.2 CASE 2: RISK ALLOCATION CRITERIA

The risk allocation criteria are based on analyses of the actual organisation, which is derived first from the contractual design, which is described in Rijkswaterstaat Maaswerken (2009, pp. 24, 38) and Mans et al. (2012). And second from the application of the organisation of Safety Lock Heumen. The analyses of the real- life organisation provide information and problems of the actual risk allocation. The actual application of risk allocation and the related criteria to manage risks effectively are conducted through interviews, meetings and reports. In Appendix D in-depth observations and data are given for of this case.

ORGANISATION The critical stakeholders of the organisation of Safety Lock Heumen during the contractual Operation and Maintenance phase are:

- The regional department of Rijkswaterstaat (the asset manager and operator) - Rijkswaterstaat (contract manager) - The contractor (responsible for the first two years of maintenance of the object)

CONTRACTUEEL The operator is part of Rijkswaterstaat, but has an independent role in the organisation compared with the national department. Rijkswaterstaat guards the management aspects of the maintenance process: verifies every month the quality of the process performed by the contractor by performance measurements. Based on these performance measurements failures can be identified. Failure must be repaired by the contractor within a fixed time, unless the failure was not in the control of the contractor. After repair, a notification is sent to Rijkswaterstaat (Mans et al., 2012, p. 13). During the contractual two years of Maintenance, the operator was responsible for operating the Safety Lock.

The contractor is contractual required to draw up a maintenance plan for a longer period than two years, and to maintain the object for two years according to this maintenance plan (Rijkswaterstaat Maaswerken, 2009, pp. 24, 38). Analyses of the maintenance activities are carried out by the contractor himself. Several periodic inspections are carried out to report the condition of the hardware and software elements to Rijkswaterstaat (Mans et al., 2012, p. 11).

APPLICATION During the contract period the contractor carried out the maintenance activities according the Maintenance plan. In those two years almost nothing failed, because the object was build new. Only some small teething problems came up. At the end of the contract the contractor updated his RA – analysis as additional service for Rijkswaterstaat, while for the contractor it was part of a learning process (interview Besix, 2015). During those 2 years of Maintenance the operator was not interested and involved in the maintenance activities. As

result, after those two years the object was quite new for him: the operator was not aware what the maintenance included (interview RWS, 2015c) (interview Besix, 2015).

Due to the short maintenance period is too short did not every teething trouble came up, and the non- involvement of the operator during the whole process, the contractor suggested to extend the contract so the transmission phase will proceed smoother (interview Besix, 2015). However, this was because of procurement law impossible. Therefore, the contractor only made documents and reports to deliver an adequate functioning object, which can be maintained by the operator.

Since January 2015 the Safety Lock is maintained and operated by Rijkswaterstaat. The transfer of the Safety Lock from the Contractor to Rijkswaterstaat was combined with organisational changes within Rijkswaterstaat: the current application of the organisation is unclear. At the operator side there is knowledge of the LPAM methodology, but the application of the methodology is still in progress.

RISK ALLOCATION CRITERIA CHECK The manageability of the critical stakeholders of Safety Lock Heumen is indicated by checking the risk allocation criteria, which are provided in section 4.7. According to theory, compliance of every criteria of each stakeholder is desirable. The real-life context of the case will provide knowledge about the compliance to the criteria of the critical stakeholders. This knowledge is derived by analysing the discrepancies: non-compliance of a criterion of a stakeholder. The risk allocation criteria of the critical stakeholders, see Table 11, are based on the organisational description and the observations derived from the interviews, see Appendix D.

Table 11 Risk allocation criteria Heumen Risk allocation criteria Operator Rijkswaterstaat Contractor 1 Whether the party is able to foresee the risk / Has been made   fully aware of the risks they are taking 2 Whether the party is able to assess the possible magnitude of    consequences of the risk 3 Whether the party is able to control the risk probability of  occurring 4 Whether the party is able to sustain the consequences if the risk occurs 5 Whether the party will benefit from bearing the risk   6 Whether the premium charged by the risk receiving party is    considered reasonable and acceptable for the owner 7 The party is able to manage the associated uncertainty, and *  thereby mitigate risks 8 The party has the necessary risk appetite to want to take the risk  9 Whether the party is able to make use of the prescribed LPAM *  * methodology.

DISCREPANCIES & OBSERVATIONS Similar as case 1, no parties are able to sustain the consequences by failure of the object: the consequences of social impact of flooding or the economic impact of a closed waterway involves high costs. Another similarity with case 1 is that Rijkswaterstaat complies with the least risk allocation criteria; they have the competence and authority to steer how the risks are managed given the contractual possibilities. Most of the technical knowledge is outsourced to the contractor.

The operator misses the manageability to foresee the risk which they are taking and to control the risk in probability of occurring, because the operator was to late involved in the process, enhanced by the recent organisation changes. Both contribute to the unknown availability of knowledge. Therefore, the asterisk questions if the operator is able to mitigate the risk by the associated uncertainty. The asterisk of the ninth criteria by the operator is because it is known that the operator is familiar with the LPAM methodology, but the applicable of it is unknown. The asterisk of the ninth criteria by the contractor is with the note that they

delivered RA – analysis with the help from a consultancy firm combined with the fact that the maintenance period was too short to learn to make use of the LPAM methodology. The missing necessary appetite of the operator to want to take the risk is based on the current attitude and the organisational changes.

OBSERVATIONS RISK ORGANISATION The organisation of maintenance and managing risks has the following observations: first that the contractor complies with most criteria. They were even interested in maintaining the lock longer so the transmission phase will be smoother. A remarkable observation is the non-involvement of the operator during the two years of maintenance, which resulted in a lack of knowledge of the Safety Lock. This is enhanced by the recent reorganisation of Rijkswaterstaat, which was in the same period as the contract end and thus the return of the maintenance of the lock to Rijkswaterstaat. Similar as case 1, Rijkswaterstaat complies with the minimum set of criteria. Their interest is enforcing the contract. The general assessment of Rijkswaterstaat is to outsource the technical knowledge, this assessment is conflicting with this case: since January 2015 Rijkswaterstaat is responsible for the maintenance of Safety lock Heumen.

Seen from an organisational point of view, outsourcing maintenance for two years is not efficient. After two years of maintenance the result of the integrated maintainability, reliability and availability in the design is not noticeable. Furthermore, after two years of completion only small maintenance and some inspections were necessary, not all teething problems are known.

5.3.3 CASE 2: RISK ALLOCATION ASSESSMENT

As discussed in section 4.6.3 each stakeholder has an independent role, with some overlap, in the organisation of Operation and Maintenance. Every stakeholder has its own line of reasoning to comply with the performance of the system, based on their interest and objectives presented in Table 6: the contractor is interest in return on their investment while the operator is interested in an adequate-functioning object. Similar as in case 1, the differences in line of reasoning and behaviour are analysed by how the actors should behave according the theoretical risk allocation conditions (see section 4.7). The information about the manageability and risks assessment of the different stakeholders are conducted through interviews and during a team meeting with the critical stakeholders.

RISK ASSESSMENT The risk assessment of the critical stakeholders of Safety Lock Heumen is as in Table 12. Every stakeholder is risk averse and only the contractor is also risk neutral. The discrepancies with the desired risk assessment are discussed below. Further in-depth observations of the assessment are stated in Appendix D.

Table 12 Risk allocation assessment critical stakeholders Heumen Stakeholder Risk assessment Desired risk assessment Operator Risk averse Risk averse Rijkswaterstaat Risk averse Risk averse / risk neutral Contractor Risk averse / risk neutral by focus on the long term Risk averse

DISCREPANCIES The operator assessment towards risks is averse, illustrated by their preference to close the old lift lock when they are not able to oversee the situation, so they can reduce the probability of ship collision. A second example illustrates that the operator prefers to be in control: they rewrite partly (without involvement of others) the shipping signing software of the old lock to improve the functioning, what resulted in non- compliance to the national guidelines. These two examples based on the old lift lock shows a risk averse attitude of the operator, why it is remarkable that they were not involved in the design, build and maintenance of the new Safety Lock. Currently the operator is, also due to organisational changes, finding

their place in the whole process. This does not influence their assessment towards risks: the operator based on his actions is risk averse and wants to reduce risks, but their manageability of risks is limited.

The assessment of Rijkswaterstaat is as expected; in this project is assessed traditional whereby the client is interested in adequate-functioning lock. The risk averse attitude is based on the philosophy of the program where Safety Lock Heumen is part of. This program has to realise a safer, better navigable and more natural river the Meuse (Maaswerken). A new Safety Lock was built by Heumen to protect the hinterland against flooding and to facilitate more shipping.

Contractually is regulated that the object must be easy to maintain and that it has to perform according the RA- requirements. Therefore, the contractor integrated the maintainability and the low failure probability in the design, by designing the drive and motion works simple and solid, including redundant systems and back- up procedures to ensure the reliability of the lock (Webbers & Franssen, 2012). Because of the high performance requirement the main contractor hired a specialised contractor for the design, installation and testing the operation, control, electrical and mechanical installations to ensure the performance of those elements (Infra Automation, 2013).

OBSERVATIONS RISK ASSESSMENT Two observations are made of the risk assessment: first the behaviour of the operator. The operator was not involved during the design, build and two years of maintenance. While their assessment by the old lift lock illustrates that they want to be in control (adjusting the shipping signals program). The second observation is the risk assessment of the contractor, who integrated in the design the maintainability, reliability and availability adequate. The main contactor even hired a specialised contractor to ensure the effective management of the design, installation and testing of the operational, control, electrical and mechanical installations of the Safety Lock.

5.3.4 CASE 2: OBSERVATIONS

The observations of the risk allocation and the risk allocation criteria made by Safety Lock Heumen lead to a second set of observations about the ‘as is’ situation. Safety Lock Heumen is a Design and Construct contract, including two years Maintenance paid in a fixed price.

The first observations are related to the risk allocation matrix. The matrix is also suitable for managing hardware and software in short-term maintenance contracts. Further, external risks in a short term contract are outsourced; the probability of occurrence is combined with the failure probability of the control measurements. In this way, due to the short period, the probability on the consequence is significant small why the risk can be outsourced.

The second sets of observations are related to the attitude of the contractor; he complies with most risk allocation criteria. The contractor integrated maintainability, reliability and availability adequate in the design of the lock and was interested in maintaining the lock longer. The contractor hired a specialised contractor for the operational, control, electrical and mechanical installations to ensure the high performance requirements.

The third observation is the limited involvement of the operator in the design, build and maintenance, resulting in a lack of knowledge of the object. This is enhanced by the reorganisation at the operator side during the handover phase of the Safety Lock. Rijkswaterstaat is since January 2015 together with the operator responsible for the Operation and Maintenance of the lock which requires effective management abilities.

The last observation of Safety Lock Heumen is the two years of maintenance in the contract. This period is too short to notice the effect of integration of the maintainability, reliability and availability in the design. Further, after 2 years not all teething problems will be known and only minor maintenance activities were necessary.

5.4 CASE 3: SAFETY LOCK LIMMEL

The last case study is Safety Lock Limmel, which is the first DBFM water work project, as introduced in section 5.1.3. To find the application of the risk allocation by Safety Lock Limmel, the risk allocation matrix is applied and analysed, the risk allocation conditions are determined by conducting interviews and analysing contracts and reports. Each will give observations which validate or improve to the theoretical risk allocation method, as presented in Figure 17.

5.4.1 CASE 3: RISK ALLOCATION MATRIX

In the ‘to be’ risk allocation matrix derived from theory, the risks of the ‘as is’ situation of Safety Lock Limmel are plotted, see Figure 23, based on their failure probabilities and average repair time. This data is presented in Appendix E. The used RA – analysis of case 3 Limmel is based on case 2 Heumen, because the project is still in the design phase and the contractor uses Heumen as reference design (Soltegro, 2014) for the failure probabilities. Therefore, in this research the failure probabilities are assumed as similar, but the frequency of occurrence during the contract period is different what provides another risk allocation matrix.

The numbers correlate with the risks as presented in Table 3. The method to plot the risks in the matrix is explained in 5.2.1. Plotting the risks while considering the contractual condition (who is responsible and the payment regime) provides discrepancies between the application of the risk allocation and wat is based on theory (thus according the risk allocation matrix). The basis of the frequency of failure is the maintenance contract length: the contractual maintenance period is 30 years.

Figure 23 Safety Lock Limmel: Risk allocation matrix

The discrepancies are marked in red: the suggested management structure (blue boxes) and the application (grey or white figures for responsibility) combined with the payment structure (contract based) are conflicting. To be able to mark discrepancies the payment regime must be taken into account: the project is paid by fixed price.

RISK ALLOCATION DISCREPANCY First the hardware and software risks will be discussed, which are all outsourced in this DBFM contract to the contractor. Noticeable is the outsourcing of the maintenance of the civil, steel, mechanical and hydraulic elements: they are all plotted in the area with the suggestion to postpone the maintenance decision of outsourcing until occurrence. Seen from the average failure probability as presented in Appendix E, the steel and mechanic elements have a higher frequency of failure during the contract period (frequency > 0.3) compared with the civil elements (frequency < 0.0001). The frequency of failure of the hydraulic parts during the 30 years is even 0.8: possible that it fail, only uncertain when it will fail. For the steel and mechanic elements failure during the contract will be rare, but it can occur due to the uncertainty of the moment of failure. This is remarkable, given the non- expected failure during the contract of civil, steel and mechanical elements, because one of the considerations to determine the contract length is the life cycle of important elements (expert RWS, 2015), as mentioned in section 4.1.

The uncertainty of occurrence of failure can explain why the steel, mechanic and hydraulic elements are outsourced: it is political accepted to outsource the responsibility and pay premium costs to ensure the performance of the asset and thereby the water safety. The civil elements are seen form the probability of failure such a low probability of failure (if it is adequate designed and constructed) that the influence on the availability and reliability requirements is almost negligible. The differences in failure probability can be found in Appendix E. The low failure probability also suggests low maintenance intensity: five yearly inspections can be sufficient. Outsourcing all the hardware and software limits the control on the applied maintenance strategy by the Private party, and there for the consideration of performance versus costs.

Compared to case 1 and case 2, the improvement of this case is that all risks which the contractor cannot control are contractual the responsibility of Rijkswaterstaat. Rijkswaterstaat is responsible for the external risks. This has one discrepancy with the risk allocation matrix: an obstacle in the waterway (risk 14) is plotted in the area with the suggestion to outsource by lump sum payment. Splitting this risk provides more information: the contractor is responsible for drift waste and Rijkswaterstaat for all the other obstacles, like ice cover.

The other external risks are plotted in the area outsource if political accepted: they are not outsourced, these risk include a too high risk premium for outsourcing. The control measurements decrease the probability of the consequences of these external risks: they become political acceptable to tolerate. As discussed, in case 1 and 2 the control measurements are hardware and software related and can be outsourced. The responsibility of human failure is outsourced to the party whom is able to control and mitigate the risk. Stated can be that the lessons learned of the previous cases are to keep the external risk in-house (by Rijkswaterstaat) due to reasonableness and fairness issues and to outsource the control measurements including performance requirements on those measurements for long term contracts. Overall can be stated that risks with a high frequency of failure and a high repair time are not political accepted: these risks must be mitigate and controlled or the design must be improved in order to achieve an acceptable level of failure.

OBSERVATIONS The first observation of case 3 with respect to the risk allocation matrix is the improvement compared with case 1 and case 2 that all the risks which the contractor cannot control are contractually the responsibility of Rijkswaterstaat. These are all the external risks except drift waste in the waterway and the human failure of

making an operational error. In this case, the control measurements of the External risks are outsourced under several performance requirements.

The maintenance of all hardware and software elements are outsourced, which is typical for DBFM contracting. The steel, mechanical and hydraulic elements are outsourced, while failure of is possible or rare and the occurrence uncertain during the contract. The matrix suggests postponing of the decision of allocation until occurrence. The allocation to the contractor is remarkable, because the contract length is based on the life cycle of the main elements. The civil elements probability of failure is still almost nihil compared to case 1 and case. The allocation to the Private party of all the operational, control and electrical elements lump sum is more effective to achieve optimisation. Outsourcing all the elements to the Private party has as result limited control of the Public party on the maintenance strategy, and thus the considerations of performance versus costs. The effect of the in theory mentioned risk premium costs priced into the cash flow for the uncertainty of failure is still unknown; the future of the Operation and Maintenance has to show us.

5.4.2 CASE 3: RISK ALLOCATION CRITERIA

The risk allocation criteria are based on analyses of the actual organisation and the application of the organisation of Safety Lock Limmel. The risk allocation criteria in practice are derived by studying the organisation according to the contract and analysing the application of the contract in real-life. The actual application of risk allocation and the related criteria to manage risks effectively are conducted through interviews, meetings and reports. In Appendix E in-depth observations and data can be found about this case.

ORGANISATION The organisation of the operation and maintenance process of Safety Lock Limmel exists of the following critical actors:

- Rijkswaterstaat as Public client of the project - The regional department of Rijkswaterstaat is the asset manager and operator - The contractor in a special purpose vehicle (SPV) is responsible of maintaining the object.

Noteworthy is the similarity of critical stakeholders of case 2 (Heumen). Differences in manageability and risk assessment are probably based on the lessons learned and differences of the project.

CONTRACTUAL DESIGN Similar as by case 1 Volkerak and case 2 Heumen Rijkswaterstaat guards the management aspects of the maintenance process and regulates the payment regime. The lessons learned from the previous waterworks are used to improve the first DBFM water works contract. This resulted in more functional requirements of several functions of the object in the contract instead of a single main functional requirement. In addition the bank guards the feasibility by the insurability of the set requirements, leading to a risk allocation which is supported by every critical stakeholder and the bank.

The contractor is contractual required to maintain the lock for 30 years and to verify the performance by RA – analysis. The basis of the long term partnerships between contractor, Rijkswaterstaat and the regional department is described in the management specifications (Rijkswaterstaat, 2013b). The principles of the contract are: first a large solution space for the contractor by a high abstraction level of requirements (for the risks allocated to the contractor). Second to establish a sufficient base for the collaboration model between Rijkswaterstaat and contractor (Rijkswaterstaat, 2015d, p. 29). The contactor must draw up a Maintenance plan and will be located close to the complex to monitor and maintain the object. Rijkswaterstaat is

dependent on the contractor for the maintenance activities, but can steer the contractor by enforcing the contract.

APPLICATION The safety lock is still in the design phase; therefor the expectations of the actual situation are based on the current collaboration between the critical stakeholders. To determine the application of the Operation and Maintenance phase, currently only a basis maintenance plan for procurement is available, made by the contractor. It is known that in the current situation Rijkswaterstaat and the contractor both approached the contract as a full collaboration model, whereby both parties have necessary experienced knowledge of this kind of projects (interview RWS, 2015c, d) (interview Besix, 2015). In the application, the contractor is more reserved and uses the communication possibilities to ask questions about requirements which can be in several ways interpreted (interview Besix, 2015) (interview RWS, 2015d). In order to achieve more collaboration in the design phase, the contractor and the Rijkswaterstaat made an informal agreement to involve the technical manager of Rijkswaterstaat more into the process to prevent dissatisfaction of the end result. The operator is currently involved as part of the contract team of Rijkswaterstaat: after completion the operator will have an independent role in the organisation (interview RWS, 2015c).

In the organisation of the contractor there is a design and build department and a separate maintenance department. In both organisations the expertise of a contractor specialised in electrical, operational, control and mechanical installations is used. The maintenance department is a special purpose company existing of the contractor and a specialised subcontractor, similar as in case 2 and is involved in the design phase to achieve an integral design. They will during the operation and maintenance phase be located closely to the object (interview Besix, 2015).

Parts of the procurement documents of the contractor are maintenance control measurements to satisfy Rijkswaterstaat. This is achieved by: first full insight in the condition measurement system, communication moments (SCRUM sessions) with Rijkswaterstaat during the design period, full insight in Maintenance Management system, certification of ISO550000 (Asset management certification) and last fifty - fifty profit share between Rijkswaterstaat and contractor (interview RWS, 2015c, d). These measurements during the operation and maintenance phase provide control and insight Rijkswaterstaat at every moment of the performance of the Safety Lock, next to the contractual regulated periodic controls. Due to the fifty – fifty profit share the information of the maintenance phase is transparent: Rijkswaterstaat is able to see what the best maintenance strategy is.

RISK ALLOCATION CRITERIA CHECK The manageability of the critical stakeholders of Safety Lock Limmel is indicated by checking the risk allocation criteria, which are provided in section 4.7. According to theory, compliance of every criteria of each stakeholder is desirable. The real-life context of the case will provide knowledge about the compliance to the criteria of the critical stakeholders. This knowledge is derived by analysing the discrepancies: non-compliance of a criterion of a stakeholder. The risk allocation criteria of the critical stakeholders, see Table 13, are based on the organisational description and the observations derived from the interviews, see Appendix E.

Table 13 Risk allocation criteria Safety Lock Limmel Risk allocation criteria Operator Rijkswaterstaat Contractor 1 Whether the party is able to foresee the risk / Has been made Unknown   fully aware of the risks they are taking 2 Whether the party is able to assess the possible magnitude of    consequences of the risk 3 Whether the party is able to control the risk probability of Unknown   occurring 4 Whether the party is able to sustain the consequences if the risk occurs

5 Whether the party will benefit from bearing the risk  6 Whether the premium charged by the risk receiving party is    considered reasonable and acceptable for the owner 7 The party is able to manage the associated uncertainty, and Unknown  thereby mitigate risks 8 The party has the necessary risk appetite to want to take the risk Unknown   9 Whether the party is able to make use of the prescribed LPAM Unknown  * methodology.

DISCREPANCIES & OBSERVATIONS First, the criteria of the operator are most unknown, because the Safety Lock is still in the design phase. The operator is currently part of the contracting team. This implies first that the operator agreed with the premium charged for the risk allocation. And second, the strong collaboration enables that every party should be fully aware of the risks which there are taking and can assess the possible magnitude of consequences of the risk. Similar as in case 1 and case 2, there are no parties able to sustain the consequences by failure of the object due to the large consequences of the social impact of flooding or the economic impact of a closed waterway.

As seen in case 1 and case 2 Rijkswaterstaat complies with the least risk allocation criteria: they outsourced the technical knowledge. Rijkswaterstaat has the competence and authority to steer how risks are managed given the contractual possibilities. Noteworthy is that Rijkswaterstaat complies in this case with more criteria than in case 1 and case 2. This can be explained by the strong collaboration of the critical stakeholders.

The contractor complies with most criteria, which is also seen in case 3. The ninth criterion of the contractor has an asterisk because they use the LAPM methodology, but they used the knowledge of a consultancy firm to draw up the first RA – analysis. This analysis is based the design, during the operation and maintenance phase the ability of the contractor to make use of the prescribed LPAM methodology correctly will become visible.

Remarkable compared to case 2 is the involvement of Rijkswaterstaat in the design phase, whereby the Public party is familiar with the lock and is able to control the risk in probability of occurring. Secondly the risk appetite of Rijkswaterstaat increased: they take an increased responsibility to achieve an adequate- functioning Safety Lock compared to the costs, but the appetite is still limited.

OBSERVATIONS RISK ORGANISATION The first observation is the assessment of all the critical stakeholders towards the contract: they all access the contract as a full cooperation contract model. The contractor uses the communication moments to ask question about functional requirements to be sure that the expectations are aligned with Rijkswaterstaat. Further to achieve the desired result, the technical manager of the contractor keeps the technical manager of Rijkswaterstaat up to date of the latest developments. During the maintenance phase, there will be open book of all the information due to the fifty – fifty profit share.

The second observation is the involvement of the bank as guardian of the feasibility and insurability of the set requirements, leading to a risk allocation which is supported by every critical stakeholder and the bank. Furthermore, the contract contains more separated functional requirements for each function instead of a single main functional requirement to keep control of the object while there is sufficient solution space left for the contractor.

Noteworthy is the involvement of a specialised subcontractor, next to the main contractor to manage the electrical, operational, control and mechanical installations effectively to ensure the high performance requirement. This phenome is also seen in case 2, in combination with the risk allocation matrix this is

interesting, because the risks related to these elements are all plotted in the upper area of the matrix: the expected failure frequency during the contract is larger as 1. This area suggests outsourcing by lump sum.

Because the project is still in the design phase, the individual manage ability of risks of the operator is unknown. Currently there is one team of Rijkswaterstaat including the operator involved combined with the contractor in the design phase.

5.4.3 CASE 3: RISK ALLOCATION ASSESSMENT

As discussed section 4.6.3 each stakeholder has an independent role, with some overlap, in the organisation of Operation and Maintenance. Every stakeholder has its own line of reasoning to comply with the performance of the system, based on their interest and objectives as in Table 6: the contractor is interest in return on their investment while the operator in an adequate-functioning object. Similar as in case 1, the differences in line of reasoning and behaviour are analysed by how the actors should behave according the theoretical risk allocation conditions (see section 4.7). The information about the manageability and risks assessment of the different stakeholders are conducted by interviews and during a team meeting with the critical stakeholders.

RISK ASSESSMENT The risk assessment of the critical stakeholders of Safety Lock Limmel is as in Table 14. Rijkswaterstaat and the contractor are both risk averse combined with risk neutral. The risk assessment of the operator is unknown. The discrepancies with the desired risk assessment are discussed below. Further in-depth observations of the assessment are stated in Appendix E.

Table 14 Risk allocation assessment critical stakeholders Safety Lock Limmel Stakeholder Risk assessment Desired risk assessment Operator Unknown Risk averse Rijkswaterstaat Risk averse / risk neutral by seeking collaboration for Risk averse / risk neutral future pay-offs (focus on the long – term) Contractor Risk averse / risk neutral by think abstractly and Risk averse creatively and focus on the long- term

DISCREPANCY Rijkswaterstaat and the contractor are both risk averse, as desired. The risk assessment of Rijkswaterstaat by seeking collaboration is described in the previous section. Their risk assessment is emphasized by the fact that they completely trust the organisation and the contract and do not expect any problems during the Operation and Maintenance phase (interview RWS, 2015c).

The risk assessment of the contractor is illustrated by the tender of the contractor to share the profit of the Maintenance fifty - fifty between Rijkswaterstaat and the contractor (interview RWS, 2015c). This indicates a long- term dedication of the contractor to realise an adequate – functioning Safety Lock. Realising this requires first a risk averse attitude of the contractor to meet the functional requirements and secondly a risk neutral attitude to seek for tactics to optimise the maintenance which have high future pay –offs. This research only considers issues during the operation and maintenance phase, so neglected is the option that profit share is feasible, because the initial Ceiling price by procurement of Rijkswaterstaat was too high. The risk assessment of the contractor is created by the long-term contract: A DBFM contract provides the opportunity to improve the incentives for the contractor for future high pay – offs on the long-term.

OBSERVATIONS RISK ASSESSMENT The risk assessment of the contractor is aligned with the assessment of Rijkswaterstaat: according to theory the risk assessment can be transferred and steered by creating incentives for the contractor. The long-term contract included sufficient incentive for the contractor to assess the risks as how is desired by Rijkswaterstaat. Most remarkable is that Rijkswaterstaat completely trust the organisation and the contract. They do not expect any problems during the Operation and Maintenance phase.

5.4.4 CASE 3: OBSERVATIONS

The analysis of Safety Lock Limmel of the risk allocation matrix and the risk allocation conditions leads to a third set of observations about the ‘as is’ situation. It also provides information about the development of the outsource strategy by Rijkswaterstaat.

The observations related to the risk allocation matrix are: first the discrepancy between the application of the risk allocation and the ‘to be’ matrix is related to the risks which unlikely or rare will fail during the contract with a high repair time. In the DBFM contract these are completely outsourced to the contractor. This allocation to the contractor is remarkable, because the expected frequency of failure of civil, steel and mechanical elements is smaller as 1 during the contract length according to this matrix, while the contract length is based on the life cycle of the main elements. The direct control of the steel, mechanical and hydraulic elements and of the maintenance strategy with respect to performance and costs is in hands of the contractor. Noteworthy is the involvement of specialised contractor next to the main contractor, to ensure the effective management of the electrical, operational, control and mechanical installations. Note that these installations are in the matrix plotted in the area with advice outsourcing by lump sum payment. Rijkswaterstaat is responsible for the External Risks which the contractor cannot control. Similar as in case 1 and case 2 the control measurements are hardware and software related, thus can be outsourced to the contractor. Human failure is allocated to whom can control and mitigate the risk best.

The compliance to the criteria of the contractor and Rijkswaterstaat are adequate for realising the desired risk allocation. Thereby, assumed is that the contractor is able to work according the LPAM methodology. The criteria of the operator are unknown: they are currently part of the contracting team.

Based on the organisation, the risk allocation clarity for every critical stakeholder and the risk allocation conditions are improved compared with the first two cases. A major improvement is the full collaboration assessment of every critical stakeholder. Therefore, Rijkswaterstaat rely on and completely trust the contract for the actual progression and performance of the maintenance phase. Furthermore the contract contains separated functional requirements for each function instead of a single main functional requirement. In this way Rijkswaterstaat keeps control of the object while there is sufficient solution space left for the contractor to optimise the design. The involvement of the bank leads to feasible and insurable functional requirements, resulting in a risk allocation which is supported by every critical stakeholder and the bank. Noteworthy is the fifty – fifty profit share during the Operation and Maintenance, which indicates an open book policy.

The final observation of the risk assessment: every critical stakeholder is involved in the design process, which result in similar perceptions of the result and assessment towards problems and risks. Collaboration of the stakeholders is accomplished by communication moments, whereby questions of the interpretation of several functional requirements are discussed. Additional, the technical manager of the Public and Private party keeps each other up to date. Note that during the design phase, the critical stakeholders of the operation and maintenance phase are part of the design phase and they are performing their job as good as possible. The actual application may differ. Concluded can be that the critical stakeholders are acting more like a collaboration form, while the contract suggest complete outsource of the project.

5.5 SUBCONCLUSION 4: OBSERVATION CASE STUDIES

The main observations of the case studies provide information about the current application of risk allocation during the Operation and Maintenance phase. In order to answer the fourth and last sub question. The observations of each case study provide improvements and validation for the risk allocation method presented in chapter 4. The methodology of the case studies is presented in Figure 17. Secondly during the case studies the method is tested in practice and thereby validated and improvements are made on its applicability.

First the sequence of the risk allocation method differs for External and human failure risks. Hardware and software risks can be outsourced according the matrix, but to ensure a reasonable and fair allocation the risk allocation criteria for external risks and human failure must be considered first. The risk allocation criteria checks whether a party is able to control and mitigate the risk. This is illustrated by the observations of the case studies. In case 1 in the beginning there was confusing of the risk allocation and the input for the RA- analysis due to reasonableness and fairness issues. The contractor was not able to control and mitigate the external risks; they were only able to mitigate the consequence of the external risk and human failure through control measurements. The second case also showed that the risk allocation matrix is applicable for hardware and software risks. Compared with case 1 the reasonableness and fairness considerations of allocation external risks were different, because of the short term maintenance period the external risks were more approached as project risks: the occurrence of the consequence of the risk is so small that the risk can be outsourced to the contractor. In case 3 all the hardware and software risks are outsourced to the contractor, including the risks which are unlikely or rarely will fail during the contract and which have a high repair time, while the matrix suggests postponing the decision of risk allocation to keep control of the maintenance strategy for optimising the life cycle costs. This allocation to the contractor is remarkable, because one of the considerations to determine the contract length is the life cycle of the main elements of the asset. Noteworthy is that the contractor involved a specialised contractor to ensure the high performance requirement in case 2 and case 3. This specialised contractor can manage the electrical, operational, control and mechanical installations effective. These are installations which will likely or often fail during the contract. These installations are plotted in the risk allocation matrix with the suggestion to outsource by lump sum

The second improvement for an adequate risk allocation is the influence of early involvement of the critical stakeholders. In case 1 in the beginning of the maintenance phase there were different perceptions by the critical stakeholders of the desired situation, due to the fact that the contract is imposed by dispensing policies. To decrease the lack of clarity, team meetings are introduced to create collaboration and negotiation moments to realise similar perceptions of the object. Case 2 showed a different problem: the operator was not sufficiently involved during the design, construction and two years of maintenance, which resulted in ambiguities and unawareness of the required maintenance of the object and different perspectives of the desired result. This with the notification that since January 2015 the operator and Rijkswaterstaat is responsible for the Safety lock. In the third case study, the collaboration of the critical stakeholders is a significant improvement compared with the first two cases. The collaboration started from the start of the project (insofar the stakeholders are able to perform their role in the design phase), which results currently in agreement of the perception of the new Safety Lock. Because of the created trust by this collaboration, Rijkswaterstaat relies completely on the contract for the actual progression of the maintenance phase. In case 3 the banks were involved as well, which enables discussion of the risk allocation, resulting in a feasible and supported risk allocation.

The third set of observations is related to the long versus short term maintenance contracts. Case 2 was a short term maintenance contract of 2 years, whereby not every teething problem came up and the contractor was not rewarded by noticing the effect of realising an integrated design. A long term contract enables the reward to integrate the maintainability, reliability and availability adequate in the design of the lock. In Case 2 this was a separate contractual requirement, which resulted in an integrated design.

A last observation is that the payment regime disables the incentive to optimise according LPAM. This is illustrated by case 1. The current payment regime is not adaptive, while the result of optimisation of maintenance according LPAM is unknown: only expectations based on the LPAM methodology can be made beforehand. If there is not sufficient solution space of the performance requirement left, disappointing results of optimisation can lead to non-compliance to the contractual requirements which are inspected regularly by Rijkswaterstaat to remain in control and ensure the performance of the object. This short-term payment regime is an incentive for the Private party to maintaining the object traditional to ensure periodical payment. In addition, the payment regime influences the maintenance choices made by the Private party and thereby the Life cycle cost optimisation of the lock.

CASE EVALUATION In the beginning of the chapter the question was posed of how the allocation culture of Rijkswaterstaat was developed and if the observations of case 1 and case 2 are improved in case 3. In case 3 the risk allocation culture of outsourcing is not changed, but the risk allocation is clearer, feasible, reasonable and fair. The result is a supported risk allocation by the critical stakeholders. The early involvement of every critical stakeholder in case 3 is an improvement compared to case 1 and case 2 to prevent different ambitions and perceptions. On paper and in theory the risk allocation of the last case study is the best, with respect to the performance effectivity as seen in Table 15. The effectiveness of the performance can be calculated by dividing the actual performance by the required performance (Ridder, 2013, pp. 23,24). The deviations are minimal and will not lead to significant differences. During the application of the operation and maintenance phase the actual result of the increased collaboration of the design phase will become apparent.

Table 15 Performance effectivity

Requirement Effectivity Volkerakcomplex Safety Lock Heumen Safety Lock Limmel Prevent against flooding Reliability 0,99 1,000005 1,000008 Facilitate shipping Availability 1,01 1,002 1,00008

5.5.1 COMPLIANCE TO RISK ALLOCATION CRITIRIA

In the theory nine risk allocation criteria were presented, which are analysed in the case studies to determine how the desired compliance to these risk allocation criteria are. The desired compliance, presented in Table 16, is based first on the application of compliance of the critical stakeholders in the case studies. And second on the management structures suggested in the risk allocation method. The presented desired compliance is under the condition that the operator is a department of Rijkswaterstaat and that Rijkswaterstaat is responsible for the performance of the lock, whereby Rijkswaterstaat controls the performance by enforcing the contract.

In a similar o the first case study, the operator complies with almost every criterion. Seen from the role of the operator as suggested in the risk allocation method, the operator must be able to manage the operation of the lock effective. The maintenance will be outsourced to the contractor, thus it is not necessary for the operator to bear the risk themselves, but they must only be able to control and mitigate the risk if necessary. Therefore compliance to the criteria 5 and 8 will not lead to extra effective management and compliance is not necessary.

The increased responsibility for the Public party in the risk allocation method requires more compliance to the criteria of Rijkswaterstaat than seen in the case studies, in order to make appropriate decisions regarding the maintenance strategy. The difference in compliance compared to the case studies, whereby Rijkswaterstaat is able to enforce the contract, are the compliance with criteria 5 and 7. Compliance to criteria 5 is the result of the increased responsibility: the Public party will benefit from bearing the risk by increased control on the

performance versus the costs of the lock. Subsequently, the Public party must be able to manage the associated uncertainty and thereby mitigate the risk, thus comply with criteria 7.

As seen the case studies the contractor must comply with eight out of nine criteria to be able to manage the risk effectively, because the responsibility of the possible risks will be outsourced to the contractor.

Table 16 Desired compliance to risk allocation criteria Risk allocation criteria Operator Rijkswaterstaat Contractor 1 Whether the party is able to foresee the risk / Has been made    fully aware of the risks they are taking 2 Whether the party is able to assess the possible magnitude of    consequences of the risk 3 Whether the party is able to control the risk probability of   occurring 4 Whether the party is able to sustain the consequences if the risk occurs 5 Whether the party will benefit from bearing the risk   6 Whether the premium charged by the risk receiving party is    considered reasonable and acceptable for the owner 7 The party is able to manage the associated uncertainty, and    thereby mitigate risks 8 The party has the necessary risk appetite to want to take the risk  9 Whether the party is able to make use of the prescribed LPAM    methodology.

5.5.2 IMPROVEMENTS FOR RISK ALLOCATION

From the case study, the following improvements for the risk allocation method are derived:

o The sequence of the risk allocation method for external and human failure risks differs from the hardware and software risks: o Hardware and software risks are suitable to allocate according to the risk allocation matrix, subsequently considering the risk allocation criteria and a proper assessment. o The risk allocation criteria must be considered first for Human Failure and External risks, primarily the criteria related to being able to control and mitigate the risk, to realise a reasonable and fair allocation. This increases the support of the critical stakeholders. o Early involvement of the critical stakeholders in the projects to achieve one desired result (performance versus costs). Collaboration enables discussions about unclear issues, agreements about the design and maintenance strategy, and commitment of the critical stakeholders. o The early involvement of banks enables discussion about the contractual requirements, in a such way that the risk allocation and requirements are feasible. This creates support from the critical stakeholders. o A longer maintenance period enables the reward for the contractor to realise an adequate integrated design (Reliable, Available and Maintainable). o A payment regime which is adaptive in such way that its support maintenance optimisation according to the LPAM methodology. Optimisation requires time and sufficient solution space, to be able to bear disappointing results. The solution space is limited by the indicators for the periodical payment, namely the contractual performance requirement and the related periodical inspections. The Private party want to assure payment, but due to the periodical payment regime based on compliance to the RA requirements, optimisation according LPAM provides uncertainty for the contractor about assurance of payment. An uncertainty which the contractor does not want to take. Therefore, an adaptive payment regime during the first years of maintenance creates an increased solution space for life cycle optimisation.

6 CONCLUSION This research exists of six steps to find the ‘to be’ and the ‘as is’ situation. For finding the ‘to be’ situation based on theory a risk allocation method is determined and to find the ‘as is’ situation the application of risk allocation is analysed by practical case studies in order to answer the main research question:

‘What can be the allocation of risks of functional failure of a lock between Public and Private parties in a DBFM contract, with respect to the performance and costs, so the Public party still manages infrastructure adequately during the Operation and Maintenance phase?’

To allocate risks of functional failure of a lock, at first it is determined which elements can lead to functional failure. As presented in chapter 3 risks which can lead to functional failure are divided in hardware, software, human failure and external risks. The hardware risks are further elaborated in the disciplines of civil-, steel-, mechanical-, hydraulic and operational, control and electrical engineering.

Based on the results from the theoretical framework and the observations of the case studies, a conclusion is drawn of risk allocation of locks between Public and Private parties during the operation and maintenance, with respect to the performance and costs (section 6.1). Subsequently, the consequences are provided of the application of the risk allocation method by DBFM contracts (section 6.1.1). Consecutively, based on the observations of the case studies and on the theory, recommendations are done to achieve a supported risk allocation by the critical stakeholders with respect to performance and costs of the lock (section 6.2).

6.1 RISK ALLOCATION METHOD

From the theory a method is derived to allocate risks during the Operation and Maintenance phase with respect to the performance and costs. This method consists of a risk allocation matrix and risk allocation conditions. The risk allocation matrix, see Figure 24, is based on two uncertain variables of the operation and maintenance phase: the average repair time and the frequency of failure. The uncertainty arises from time: the occurrence of the frequency of failure of a critical element during the contract period which can lead to non-functioning is of the lock is unknown. The corresponding average repair time of an element in case of failure depends on the failure modus. Both variables have influence on the availability and reliability requirements of the lock and thus the performance. The degree of uncertainty and repair determines the risk premium costs: The matrix includes a mix of payment mechanisms, which provides a balanced and appropriate risk allocation. Payment by Lump sum is suitable for routine maintenance, because it enables an incentive for the Private party to optimise the design. Target pricing and reimbursable costs are suitable for

more specific maintenance activities. Postponing the decision to outsource the responsibility of the risks until probable occurrence provides control by the Public party of the maintenance strategy of the risk. It provides an opportunity to steer the maintenance towards a strategy which is political desirable at that moment.

Figure 24 Risk Allocation matrix The risk allocation condition exists of risk allocation criteria and a desired risk assessment of the critical stakeholders. Nine risk allocation criteria must ensure that the risk is managed effectively. These risk allocation criteria are different for every critical stakeholder due to the organisation of the Operation and Maintenance. When the risks of functional failure of a lock are allocated according to the risk allocation method, under the conditions that the operator is part of Rijkswaterstaat and Rijkswaterstaat is responsible for the performance of the lock, the desired compliance of the critical stakeholders with the risk allocation criteria will be as scheduled in Table 17.

Table 17 Risk allocation criteria of critical stakeholders Risk allocation criteria Operator Rijkswaterstaat Contractor 1 Whether the party is able to foresee the risk / Has been made    fully aware of the risks they are taking 2 Whether the party is able to assess the possible magnitude of    consequences of the risk 3 Whether the party is able to control the risk probability of   occurring 4 Whether the party is able to sustain the consequences if the risk occurs 5 Whether the party will benefit from bearing the risk   6 Whether the premium charged by the risk receiving party is    considered reasonable and acceptable for the owner 7 The party is able to manage the associated uncertainty, and    thereby mitigate risks 8 The party has the necessary risk appetite to want to take the risk  9 Whether the party is able to make use of the prescribed LPAM    methodology.

The desired risk assessment of the critical stakeholders is as follows. In order to maximise the performance of the lock, the operator and contractor have to be risk averse. The desired risk assessment of the Public Party has to be risk averse combined with risk neutral for the presented risk allocation method in this research, so they can keep in control of the optimisation of performance costs and to manage the infrastructure adequately.

The case studies validate the application of the risk allocation matrix to allocate the hardware and software risks during the Operation and Maintenance phase. Secondly the risk allocation conditions need to be considered for effective management of the hardware or software risk. In practice, the political acceptance of risk premium costs with respect to the performance and the degree of control by the Public party have various considerations.

The case studies showed that for the allocation of human failure and external risks another sequence is required. The allocation of these risks is highly influenced by reasonableness and fairness. Therefore, first the risk allocation criteria must be considered for risk allocation, in particular the criteria related to the ability to control and mitigate the risk. Human failure risks must be allocated to the party who is able to control and mitigate the risk. In case of External risk, both the Public and Private party are not able to prevent or mitigate the risk. External risks can be mitigated by control measurements. Those control measurements are hardware and software related and can be outsourced according the risk allocation matrix. An example is the grounding and lightning protection system which mitigates the consequence of lightning.

Every case study confirms the importance of early involvement of the critical stakeholders in order to achieve an optimal performance versus costs. Collaboration and negotiation will result in better supported risk allocation. Also the involvement of banks results in a feasible, realistic and therefore supported risk allocation.

The case studies show that a long maintenance period enables the reward for the Private party to benefit from the result of the integration of the maintainability, reliability and availability in the design. Further, working according the LPAM methodology requires adaption of the maintenance activities of the contractor.

6.1.1 CONSEQUENCES RISK ALLOCATION METHOD FOR DBFM

The application of the risk allocation method in a DBFM contract implies an increased responsibility and is a control mechanism for the Public party during the Operation and Maintenance, as presented in Figure 25. Initially it is one integral contract where one Private party is responsible for the design, construction, finance and maintenance of the lock whereby the allocation of the responsibility during the maintenance phase does not change, as presented in figure 7. This increased responsibility of the Public party requires collaboration and trust between the critical stakeholders during the whole life cycle to achieve the desired result.

Figure 25 Allocation of responsibility by application of the risk allocation method The increased responsibility for the Public party requires change of role from enforcing the contract towards a more active role to optimise the maintenance and life cycle costs of the lock. The maintenance strategy of the risks which will occur probably, possibly and rarely during the contract period is in control by the Public party and they can therefore better react on the uncertainty of probability of failure over time. Postponing the decision of these risk allocation requires sufficient technical knowledge and experience of the Public Party, so they are able to verify the RA - analysis and reports drawn up by the Private party. In this way, the current condition of the critical elements can be assessed properly. At the moment that maintenance is necessary, the Public part firstly must be able to make an appropriate decision regarding Life Cycle Cost optimisation and secondly react in time to draw up additional maintenance activities in a fixed price towards the Private party.

Given the traditional maintenance organisation of the Private party, optimising maintenance according the LPAM methodology requires adaption of his organisation. The Private party is required to draw up RA-analysis and maintenance reports in such way that the Public Party is able to control the performance. The payment regime is based on these reports. As long as the Public party remains the operator, collaboration between Public and Private party is required by this control mechanism to ensure the performance of the lock. The early collaboration enhances similar perceptions of the desired result and a supported risk allocation.

In a DBFM contract, the Private party is responsible for the maintenance strategy of the elements within the contract. The LPAM methodology provides possibilities to optimise the maintenance, but optimisation requires sufficient solution space to be able to bear disappointing results. The solution space is limited by the contractual performance requirement and the related periodical inspections, which are both indicators for periodical payment. Therefore, in order to decrease the uncertainty of optimisation of maintenance within DBFM contracting, the periodical payment regime must be able to be adapted in case of disappointing results caused by optimisation, in such way that that the Public party is still able to enforce the contract and steer the maintenance strategy for a desired life cycle cost optimisation.

6.2 RECOMMENDATIONS

The following recommendations are done, to achieve a supported risk allocation, with respect to the performance and the costs, according to the given risk allocation method. This method (including the recommendations) allocates the risk to the parties, who are able to manage them effective and assess them properly, so the Dutch Government is in control of the performance of the Operation and Maintenance of the Dutch Lift and Safety Locks.

For allocation of Human failure and External risks consider first the allocation conditions Support of the risk allocation is achieved when the risk allocation is feasible, reasonable and fair. Allocation of risk to the Private party which are in his control combined with a sufficient incentive results in a desired risk attitude (risk averse) to decrease the probability of occurrence of the risk.

Early involvement and collaboration between the critical stakeholders and banks during the life cycle Early involvement of critical stakeholders and the banks in the design and build phase enhances the support of the risk allocation. The increased responsibility of the Public party of the maintenance phase requires collaboration between the Public and Private party in order to achieve the desired result (with respect to the performance and the costs). The collaboration gathers support of each critical stakeholder of the maintenance activities. Subsequently, the collaboration provides the opportunity for the Public party to remain close to the functioning of the object, and to partly control the maintenance strategy without annoying the Private party.

Execute maintenance according the prescribed LPAM methodology to achieve optimal performance versus costs requires adaption of the (traditional) organisation of the Private party The Living Probabilistic Asset Management methodology is based on learning processes, with respect to the performance and the maintenance activities (and thus the costs). Application of the methodology requires a different approach compared to traditional maintenance. Instead of focussing on the short-term situation and efficiency, the Private party should update his failure data to determine the optimal maintenance interval with respect to performance of the lock. The benefit of optimisation is noticeable on the long-term.

An adaptive lump sum payment regime during the first years of maintenance creates solution space for the Private party to optimise the maintenance activities according the LPAM methodology. Then immediate penalties, in case of disappointing results, are prevented. Optimisation of the maintenance requires sufficient solution space in order to find an optimal maintenance strategy which leads to long-term benefit. The solution space is determined by the performance requirement

and the periodical inspections, both indicators for the periodical payment (lump sum). Currently, these limitations are present from the beginning, while optimising the maintenance according the LPAM methodology requires time: the effect of an adjustment of a maintenance activity become noticeable after a longer period. Therefore, in the beginning the solution space must be able to bear disappointing results to decrease the uncertainty of maintenance optimisation according the LPAM methodology, in such a way that that the Public party is still able to enforce the contract and steer the maintenance strategy in order to achieve the desired result.

Sufficient technical knowledge, experience and skills of the Public party are required to be able to test the provided reports and RA analysis made by the Private party. In this way, the current condition of the lock can be assessed and an appropriate decision regarding the life cycle costs optimisation can be reached. To determine the condition of the critical elements of the lock, whereby the allocation is postponed, requires sufficient technical knowledge, experience and skills to make an appropriate decision regarding the life cycle optimisation of the object. In addition, the availability of technical knowledge creates more trust between the Public and Private party and thus will influence the collaboration in a positive way.

6.3 SUPPORTED RESEARCH

Postponing the decision of allocation until the probable occurrence of the risk is a control mechanism for the Public party of the management strategy of the risk. They become able to steer the maintenance with respect to the costs and the performance. To realise this method, an adequate management strategy for uncertainty in the Operation and Maintenance phase is necessary. An appropriate strategy is discussed in the six stage model by Schoenmaker (2011, p. 364). This management strategy will provide first of all knowledge for the Public Party of the condition of the lock and the elements which can lead to non-functioning. Secondly, it provides control of an adequate response strategy seen from the performance versus costs. In Figure 26 the management strategy is visualised. For further reading about stages of the maintenance phase see Schoenmaker (2011): The Chosen Way.

Figure 26 Role of Private party during the maintenance process by risks which will probable, possible and rare occur during the contract length: left the initiation phase and right the implementation phase (adapted from Schoenmaker (2011, p. 364))

Two recommendations are discussed in previous research: the recommendation related to the allocation of external risk is discussed for project risks. And the early involvement of all dependent stakeholders in order to achieve the desired result is part of the network approach, which is related to process management. The network approach is elaborated by de Bruijn and ten Heuvelhof (2018): Management in Networks.

7 DISCUSSION In the discussion the research methodology and the results are reflected and recommendations for further research are given. This places the research in its context and shows limitations.

Subject of this research is the risk allocation in DBFM contracting analysed through literature and case studies. DBFM has added value as contract model in order to achieve high performance of the object through the knowledge of the Private parties. Due to these high performance requirements and the control mechanism to ensure the performance, the organisation around it become complex, why the initial DBFM contract model must become a more collaboration contract model. In the Netherlands, two issues make the added value of DBFM discussible. First, according to literature, an optimal contract period is based on representing technical life cycle of subsystems. In practice, the life cycle of most subsystems in a lock is longer than the period of the ability to make predictions of the economic environment. Therefore, in the Netherlands the contract period of a DBFM is maximum 30 years. And second, literature stated the involvement of finance and banks in a project have a positive effect on the cost control, but the banks are interested in assurance of repayment of the granted loan. In practice this is reflected in supervision on the transfer of risks with their related costs out of the DBFM consortium of contractors towards the subcontractors who are in a DBM contract.

LIMITATIONS The focus of this research was to find a proper risk allocation method to allocate risks between Government and Private parties during the Operation and Maintenance phase, therefor theory and practice are analysed. In order to derive a risk allocation method, assumptions are made which are limitations of this research and requires further research.

The first limitation is related to the classification of the frequency of failure during the contract period in the risk allocation matrix. The classification is based on the normal distribution, assumed that the expected failure in time of several of components in a subsystem is normal distributed. Further the failure rate of a component differs from that of a system: the failure rate of a system compromised many components over time The second limitation of the classification is the assumption that the failure rate is constant, but not all components or systems have a constant fail over its operating life. In practice, the failure probability of a subsystem can be subject of early failures (like due to teething problems) and wear out phase (Coetzee, 1997, pp. 64-69). These phenomes are neglected in this research, including the early failures and wear-out phase will probably lead to different failure probabilities over time Depending on the curve of the failure probability, the distribution of failure during the contract can be different than a normal distribution. Further research is necessary to find the failure pattern for certain sub systems or components of the lock.

To be able to use the risk allocation matrix, knowledge of the repair time of the different critical elements of the case studies were necessary. The repair time is determined qualitative by the use of expert judgement for each case study individually. For knowledge of the average repair time, the failure data of the component or subsystem must be analysed. By analysing subsystems of a specific lock to find failure data, the redundancy in the system is included. In this research redundancy is not include in the failure data. Another limitation which is not included is that the repair time is dependent on the kind of failure: the failure modus and cause have influence on the degree of the repair time and thus possible the availability.

In order to find a proper risk allocation the application of the risk allocation and organisation based on the present critical stakeholders is scrutinised. These stakeholders are already involved in the design, build and maintenance. The statements and objectives of the non-selected Private parties of the procurement phase are neglected. Similar for the Private parties who did not enter the procurement phase, to enter procurement high commitment of the involved parties is required: high procurement costs are necessary to meet with the EMVI criterion. This mechanism of the Public party is to assure quality and ambition of the Private party, but it might have been reason that only a few Private parties participate in the procurement (interview rws, 2015d).

The last limitation of this research is the negligence of the overhead costs. Based on three sources of overhead costs can be questioned if the costs are reduced in DBFM contracts. First the overhead costs of the organisation of the Public party in case of a Design and Construct contract are probably higher than in a DBFM contract. This is an argument to use DBFM contracting. Second is the transfer of overhead costs towards the Private party in a DBFM contract. The organisation of the project, including steering and hiring of subcontractors is transferred, which gives overhead costs for the Private party. These costs will be prices into the future cash flows as transaction costs and thereby in the final sum of the procurement. The third consideration of the decrease of total overhead costs (sum of overhead costs of Public and Private party) is based on the interest of the Public party to ensure the performance of the lock. In order to ensure the performance the Public party enforces the contract, which requires verification of the performance by inspections to control the Private party. Questioned can be if the sum of overhead costs to enforce the contract, verification the performance and the overhead costs of the Private party in a DBFM contract is less compared to a Design and Construct contract.

FURTHER RESEARCH Based on the limitations of this research, the following topics require further research:

o The kind of probability distribution of risks, which is the basis to determine the classification of the frequency of failure in the risk allocation matrix. o The quantification of the classification of the repair time, in such a way that the different kind of failure modes with their related repair time are taken into account. o The influence of the non-selected parties of the procurement phase and other Private parties which did not enter the procurement due to the high investment. o The cash flow of the overhead costs within each party of the DBFM contract in order to visualise whether the costs are decreased for the Public party or just transferred to the Private party. o Defining an adaptive lump sum payment mechanism, in which the Public party is able to control and steer the Private party and the banks have assurance of the repayment the granted loans. But the Private party is able to optimise the maintenance according the LPAM methodology.

Another aspect of further research which during this research came up is the degree of the specification of the functional contractual requirements, which appears to be influence the final design. The degree of specification differs between the case studies, and it influences the integration of the maintainability, reliability and availability and the design. Further research is necessary to determine a suitable degree of contractual specification.

8 REFERENCES Arcadis. (2013). RINK 2012/2013 Cluster 2: Complex Zandkreeksluis Bijlage 1 FMEA. Amersfoort: Arcadis. Arcadis. (2014a). RINK 2012/2013 Cluster 2, Volkerakcomplex: Bijlage 1 FMEA. Amersfoort: Arcadis. Arcadis. (2014b). RINK 2012/2013 Cluster 2, Volkerakcomplex: Bijlage 9 Foutenbomen. Amersfoort: Arcadis. Arcadis. (2014c). RINK 2012/2013 Cluster 2, Volkerakcomplex: Intergrale rapportage (pp. 116). Amersfoort: Arcadis. Barnes, M. (1983). How to allocate risks in construction contracts. Journal of Project Management, 24-28. Besix. (2015). Ongeëvenaarde kennis van maritieme bouw. Retrieved 25-05, 2015, from http://www.besixnederland.nl/Vakgebieden/Maritieme-bouw.aspx Bing, L., Akintoye, A., Edwards, P. J., & Hardcastle, C. (2005). The allocation of risk in PPP/PFI construction projects in the UK. International Journal for Project Management, 23, 225-235. Bogaard, J. v. d., & Akkeren, K. v. (2011). Guidelines for Risk-Based Operation and Maintenance Utrecht Rekafa. Bogaard, J. v. d., Blom, M., Bakker, J., Bruggink, G., Dietvorst, B., Klanker, G., . . . Zwanenbeek, T. (2010). Leidraad RAMS; sturen op prestaties van systemen. Tilburg: Drukkerij Gianotten. Brandt, E., Bucchianico, A. D., Ekris, J. v., Groote, J.-F., Geurts, W., Heslinga, G., & Kolk, G. (2011). TOPAAS. Utrecht: Rijkswaterstaat. Bryson, J. M. (2004). What to do when stakeholders matter. Public Management review, 6(1), 32. Cho, H., Frangopol, D. M., & Ang, A. H. (2007). Life-Cycle Cost and Performance of Civil Infrastructre Systems. Leiden: Taylor & Francis/Balkema. Coetzee, J. L. (1997). Maintenance. Hatfield: Maintenance Publishers. Cooper, D., Grey, S., Raymond, G., & Walker, P. (2005). Project Risk Management Guidelines: Managing Risk in Large Projects and Complex Procurements. Chichester: John Wiley & Sons. Dekking, F. M., Kraaikamp, C., Lopuhaä, H. P., & Meester, L. E. (2005). A modern introduction to Probability and Statistics: Understanding Why and How. London: Springer. Dhillon, B. S. (2010). Life Cycle Costing for Engineers. Boca Raton: CRC Press. Duijvenvoorden, C., & Verdoes, B. J. (1995). Principes van Onderhoudsmanagement. Leidschendam: Lansa Publishing BV. Encyclo. (2014). Definitie prestatie eis. Retrieved 17-11-2014, from Encyclp http://www.encyclo.nl/begrip/prestatie-eis Eversdijk, A. W. W., & Korsten, A. F. A. (2009). Concessionele publiek-private samenwerkingsrelaties. Bestuurswetenschappen, 2009(3), 18. Flyvbjerg, B., Bruzelius, N., & Rothengatter, W. (2003). Megaprojects and risk 'an anatomy of ambition'. Cambridge: Cambridge University Press. Gardoni, P., & Murphy, C. (2014). A scale of risk. Risk analysis, 4(7), 20. Geels, F., Disco, N., & Lintsen, H. (2003). Een historische analyse van het innovatief vermogen van Rijkswaterstaat (1930-2000) (pp. 118). Eindhoven: Stichting Historie der Techniek. Grimsey, D., & Lewis, M. K. (2000). Evaluating the risks of public private partnerships for infrastructure projects. International Journal for Project Management, 20, 107-119.

Grimsey, D., & Lewis, M. K. (2004). Public Private Partnerships 'The Worldwide Revolution in Infrastructure Provision and Project Finance. Northhampton: Edward Elgar Publishing Limited. Grimsey, D., & Lewis, M. K. (2005). Are Public Private Partnerships value for money? Evaluating alternative approaches and comparing academic and practitioner views. Accounting Forum, 29, 345-378. Grunsven, R. v. (2010). Risicodenken: binnen de waterwereld. 's Hertogenbosch: CMS Asset Management. Hart, C. M. P. t., & Groot, J. d. (2010). Sluiscomplex Limmel: Ontwerprapport en kostennota. Utrecht: Royal Haskoning. Hertogh, M. J. C. M., Demirel, H. C., & Ridder, H. D. (2013). Dynamic contracting: An asset management tool in controlling infrastructure maintenance activities. Paper presented at the Annual Meeting of Transportation Research Board. Hertogh, M. J. C. M., & Westerveld, E. (2009). Playing with Complexity. Rotterdam: Erasmus University Rotterdam. Houben, M., & Groot, R. d. (2012). Onderbouwing afrekenmechanisme DBFM nat. Utrecht: Rijkswaterstaat. IAM. (2012). Asset Management - an anatomy. Bristol: IAM. Infra Automation. (2013). Keersluis Heumen krijgt Betonprijs 2013. Retrieved 27 May, 2015, from http://www.egemin-automation.nl/nl/automation/nieuws-en- media_nieuwsoverzicht/259/news/1711 Jansen, C. E. C. (2009). Leidraad Aanbesteden voor de bouw (pp. 203). Gouda: Regieraad Bouw. Jin, X.-H. (2009). Allocation Risks in Public-Private Partnerships using a Transaction Cost Economics Approach: A case study. The Australian Journal of Construction and Building, 9(1), 19-26. Jin, X.-H., & Doloi, H. (2010). Interpreting risk allocation mechanism in public-private partnership projects: an empirical study in a transaction cost economics perspective. Construction Management and Economics, July 2008(26), 707-721. Jorissen, R., Looff, H. d., & Labrujere, A. (2013). Beheer Oosterscheldekering nader bekeken (pp. 71). Utrecht: Rijkswaterstaat. Kaneuji, M., Yamamoto, N., Watanabe, E., Furuta, H., & Kobayashi, K. (2007). Bridge Management system developed for the local government in Japan. Paper presented at the Life-Cycle Cost and Performance of Civil Infrastructure Systems Ke, Y., Wang, S., & Chan, A. P. C. (2010). Risk allocation in Public-private Partnership Infrastructure Projets: Comparative Study. Journal of Infrastructure Systems(16), 343-351. Keulen, B. A. M. (2007). Onafhankelijke Beoordeling en Advies Organisatie Beheer en Onderhoud Oosterscheldekering (pp. 83). Rotterdam: Horvat & Partners. KING. (2014). Meer leren van projectevaluaties met behulp van de King-Spiegel: toegepast bij project HVVOS (pp. 10). Rotterdam: King. Koppenjan, J., & Klijn, E. H. (2004). Managing uncertainties in networks. Hove: Psychology Press. Lam, K. C., Wang, D., Lee, P. T. K., & Tsang, Y. T. (2007). Modelling risk allocation decision in construction contracts. International Journal for Project Management(25), 485-493. Leeuwen, N. A. v. (2015). Flexibility of integrated contracts (groenlicht versie). TU Delft, Delft. Lecture 5 Project Management, 28 (2013). Process Management Lecture 1, (2013a). Process Management Lecture 5: Interactive Policy Making and Information, (2013b). Lesterhuis, L. (2015). Financial close keersluis Limmel was spannend. Nieuws Rijkswaterstaat. Retrieved 9-02- 2015, 2015, from http://corporate.intranet.rws.nl/Actueel/Nieuws/Nieuws_Rijkswaterstaat/2015.02.09/Financial- close-keersluis-Limmel-was-spannend Manen, S. E. v. (2014a). ABB-eisen: De verificatie van een betrouwbaarhieds- en beschikbaarheisrapportage CONCEPT. Rijkswaterstaat. Manen, S. E. v. (2014b). Sluizenprogramma en RAMS. Utrecht Rijkswaterstaat. Mans, M., Haesebrouck, T., & Hendriks, W. (2012). DMP Meerjarig Onderhoud: project Aanleg Keersluis Heumen (pp. 17). Barendrecht: Besix. Most, H. v. d., Wit, S. d., Broekhans, B., & Roos, W. (2010). Kijk op Waterveiligheid. Delft: Uitgeverij Eburon. MRWA. (2015). Organisational change. National Audit Office. (2009). Highways Agency: Contracting for Highways Maintenance (pp. 43). London: National Audit Office. National Council for Public Private Partnerships. (2015). Glossary of Terms. Retrieved 22-05-2015, 2015, from http://www.ncppp.org/ppp-basics/glossary-of-terms/

NEN. (2015). NEN 2767-4-2 Beheerobjecten. Retrieved 20-03, 2015, from http://www.nen2767- 4.nl/beheerobect.html Ng, A., & Loosemore, M. (2006). Risk allocation in the private provision of public infrastructure. International Journal for Project Management, 25, 66-76. Nicholas, J. M., & Steyn, H. (2012). Project Management for engineering, business and technology. Oxon: Routledge. Oxford dictionaries. (2014a). Definition Performance. Retrieved 19-11-2014, from Oxford dictionaries http://www.oxforddictionaries.com/definition/english/performance Oxford dictionaries. (2014b). Defintion requirement. Retrieved 19-11-2014, from Oxford dictionaries http://www.oxforddictionaries.com/definition/english/requirement Persoon, E. (2011). RINK 2010: Integrale RAMS-analyse Sluis Limmel. Sliedrecht. Ridder, H. d. (2013). Dynamic Control of Projects: developing complex systems in a fast changing environment. Delft: TU Delft. Rijkswaterstaat. (2007a). BDN 7858 Renovatie Systemen haringvliet en Volkerak Sluizencomplex (HVVOS): Bijlage 4 Procesvoorwaarden 3. Utrecht: Rijkswaterstaat. Rijkswaterstaat. (2007b). BDN 7858 Renovatie Systemen Haringvliet en Volkerak Sluizencomplexen (HVVOS). Utrecht: Rijkswaterstaat. Rijkswaterstaat. (2007c). BDN 7858 Renovatie Systemen Haringvliet en Volkerak Sluizencomplexen (HVVOS). Utrecht: Rijkswaterstaat. Rijkswaterstaat. (2007d). BDN 7858 Renovatie Systemen Haringvliet en Volkerak sluizencomplexen (HVVOS): Basisovereenkomst. Utrecht: Rijkswaterstaata. Rijkswaterstaat. (2009a). Bijlage A Randvoorwaarden bij Vraagspecificatie 1 deel Eisenspecificatie: aanleg Keersluis the Heumen. Maastricht Ministerie van Verkeer en Waterstaat. Rijkswaterstaat. (2009b). Vraagspecificatie 1 Deel Eisenspecificatie: aanleg keersluis the Heumen. Maastricht: Ministerie van Verkeer en Waterstaat. Rijkswaterstaat. (2011). Projectplan RINK 2012/2013. Utrecht: Rijkswaterstaat Dienst Infrastructuur. Rijkswaterstaat. (2013a). DBFM overeenkomst Nieuwe Keersluis Limmel: Bijlage 9 deel 2 Contractstukken. Utrecht: Rijkswaterstaat. Rijkswaterstaat. (2013b). DBFM overeenkomst Nieuwe Keersluis Limmel: Bijlage 9 deel 3 Managementspecificaties. Utrecht: Rijkswaterstaat. RIjkswaterstaat. (2014a). DBFM Overeenkomst - Nieuwe keersluis Limmel. Utrecht: Rijkswaterstaat. Rijkswaterstaat. (2014b). Eenvoudige objectrisicoanalyse beweegbare kunstwerken. Utrecht: Rijkswaterstaat. Rijkswaterstaat. (2014c). Handreiking bij het werken met prestatiecontracten. Utrecht: Rijkswaterstaat. Rijkswaterstaat. (2015a). Maas: aanleg nieuwe keersluis Limmel. Retrieved 27 May, 2015, from (http://www.rijkswaterstaat.nl/water/plannen_en_projecten/vaarwegen/maas/maas_aanleg_nieuw e_keersluis_limmel/ Rijkswaterstaat. (2015b). Maas: Maaswerken. Retrieved 27-05-2015, 2015, from http://www.rijkswaterstaat.nl/water/plannen_en_projecten/vaarwegen/maas/maas_maaswerken/ Rijkswaterstaat. (2015c). Mission. Retrieved 12-01-2015, 2015, from http://www.rijkswaterstaat.nl/en/about_us/mission/ Rijkswaterstaat. (2015d). Presentatie: Contractteam training Limmel. Utrecht: Rijkswaterstaat. Rijkswaterstaat Maaswerken. (2009). Vraagspecificatie 2 Deel Processpecificaties: aanleg keersluis Heumen. Maastricht: Rijkswaterstaat Maaswerken. Schoenmaker, R. (2011). De ingeslagen weg. TU Delft. Schoenmaker, R., & Verlaan, J. (2013). Analysing outsourcing policies in an asset management context: a six- stage model. Paper presented at the Institute of Public Works Engineering Australasia, Darwin. Soltegro. (2014). Faalkans analyse Limmel. Besix Nederland. Stapelberg, R. F. (2009). Handbook of Reliabilty, Availability, Maintainability and Safety in Engineering Design. London: Springer. Swain, A. D., & Guttman, H. E. (1983). Handbook of Human Reliability Analysis with Emphasis on Nuclear Power Plant Applications. Springfield: U.S. Nuclear Regulatory Commision. Swanborn, P. G. (1996). Case-study's 'wat, wanneer en hoe?'. Amsterdam: Boomonderwijs. TU Delft. (2014). Probability in Civil Engineering. Delft: Faculty of Civil Engineering and Geosciences. Tuijl, A. v. (2014). Presentatie: DBFM Sluizenprogramma Nieuwe keersluis Limmel. Utrecht: Rijkswaterstaat. Turner, R. (2014). Handbook of Project Management. Farnham: Gower. Verschuren, P., & Doorewaard, H. (2013). Designing a Research Project. Den Haag: Book Lemma Uitgevers.

Vialis. (2013). 2.7.7.4 & 2.6.7.4 ProBO rapportage HVVOS - 3e kwartaal, 1 Juli -30 September 2013 (pp. 71). Houten. Vialis, & Rijkswaterstaat. (2014). Probabilistisch Beheer & Onderhoud Plan HVVOS: Versie D5.0. Haarlem: Vialis. Vrijling, J. K., & Verlaan, J. G. (2013). Financial Engineering. Delft: TU Delft. Ward, S. C., Chapman, C. B., & Curtis, B. (1991). On the allocation of risk in construction projects. International Journal for Project Management, 9(3), 8. Webbers, P. B., Bouwman, E. C. J., & Bakker, P. J. T. (2012). Contractueel kader Risicogestuurd Beheer en Onderhoud. Utrecht: Rijkswaterstaat. Webbers, P. B., & Franssen, M. J. P. M. (2012). Betrouwbaarheidsanalyse sluiting kering: project aanleg keersluis Heumen. Barendrecht: Besix. Westen, C. J. v. (2005). Veiligheid Nederland in Kaart; Hoofdrapport onderzoek overstromingsrisico's (pp. 92). Utrecht: Rijkswaterstaat. Sluizen uit de houtgreep, (2015). Williamson, O. E. (1981). The economics of organization: The transaction cost approach. American Journal of Sociology, 87(3), 548-577. Williamson, O. E. (1985). The economic institutions of capitalism: Firms, Markets, Relational Contracting. New York: The Free Press. Williamson, O. E. (1998). Transaction Cost Economics: How it works; where it is headed. De economist, 146(1), 23-58. Woodward, D. G. (1997). Life cycle costing - theory, information acquisition and application. International Journal for Project Management, 15(6), 335-344. Yin, R. K. (2003). Case Study Research Design and Methods. California: SAGE Publications. Zhang, Z. (2013). Finance - Fundamental Problems and Solutions. New York: Springer.

APPENDIXES

APPENDIX A

INTERVIEWEES AND EXPERTS

Interviews

Partij Functie Object Rijkswaterstaat (RWS) Contract manager Volkerak complex Technisch manager Volkerak complex Contract manager Heumen & Limmel Technisch Manager Limmel Beheerder (Operator) Faalkansmanager Volkerak complex Objectbeheerder Volkerak complex Contractor: Vialis Maintenance Engineer Volkerak complex Contractmanager Volkerak complex Contractor: Besix Project manager Heumen & Limmel Teammeeting Operator, RWS, Contractor Volkerak complex

Experts

Partij Functie Rijkswaterstaat DBFM Contractmanager Technisch manager (2e coentunnel) Beheerder (Operator) Objectdeskundige Volkerak complex Asset Manager oa Heumen Bank DBFM specialist Referenced in this research as (Interview / Expert (party), year + addition)

Note: the Operator is a regional department of Rijkswaterstaat

APPENDIX B

CASE STUDY PROTOCOL

The case study protocol, included the interview questions, are in Dutch due to the asset specificity of the location and stakeholders. The interview questions are dived in topics, each topic references to certain case study questions to keep the purpose of the question in mind. The following case study questions are specified for every case:

1) What are the relevant hardware, software, human failure and external risks with their failure rate? 2) What is the current and required performance of the object? 3) What is the average repair time by failure of a critical element? 4) What is the current responsibility allocation between contractor and Rijkswaterstaat of the O&M phase and under which conditions (incentives/safeguards)? 5) What is the current organisation / process for maintenance activities? 6) What is the attitude of the public and private parties towards potential risks? 7) Are the potential risks which can lead to non-functioning of the object managed effectively? 8) How is the LPAM methodology used and implemented in the O&M phase?

INTERVIEW PROTOCOL

INTRODUCTION Mijn naam is Olga Brommet, student Master Construction Management & Engineering aan de faculteit Civiele Techniek van de TU Delft. Voor mijn afstudeer onderzoek kijk ik naar hoe je gezien de ProBo methodiek je risico’s wilt verdelen in een DBFM contract van een sluis tussen Rijkswaterstaat en de opdrachtnemer. Om hier een advies over te geven kijk ik naar hoe de prestatie van een sluis wordt beïnvloed door de verdeling van verantwoordelijkheden tijdens de beheer en onderhoudsfase. Het doel van dit interview is om erachter te komen hoe de literatuur zich weerspiegelt tegen de praktijk; wat zijn de aspecten die meespelen bij de risico verdeling en hoe beïnvloeden deze de prestatie? Hiervoor heb ik een aantal casussen geselecteerd, waaronder deze.

Het interview duurt ongeveer vijf kwartier, bestaande uit open en semi-open vragen.

Indien u er geen bezwaar tegen heb, maak ik graag een geluidsopname van ons gesprek wat mij helpt bij het verwerken van het interview. Deze zal ik na verwerking verwijderen.

Vertrouwelijk De informatie zal vertrouwelijk worden verwerkt, en anoniem worden meegenomen in de rapportage. Ter extra goedkeuring van u is mogelijk dat ik het verslag van het interview naar u toestuur, hetzelfde geld voor het eindverslag.

INTERVIEW Het interview start met een paar vragen over de organisatie en uw persoonlijke achtergrond, daarna volgen wat vragen over risicoanalyse en de soort risico’s. Het gesprek zal eindigen met vragen over het beheren van de risico’s gedurende de onderhoud en beheerfase. De volgorde van vragen zoals hieronder gegeven wordt tijdens het interview in een andere volgorde gevraagd, omdat het beter in de lijn van het gesprek past waardoor het minder duidelijk wat het doel van de vragen zijn. Hiermee tracht ik te voorkomen dat er gewenste antwoorden gegeven worden.

Er wordt om meningen gevraagd in de vragen, om deze te vergelijken wordt er gevraagd om deze aan te geven op een schaal van 1 tot 4. De optie neutraal wordt niet gegeven, om te vermijden dat dit als antwoord gegeven wordt.

1 = zeer ontevreden 3= tevreden 2= ontevreden 4 = zeer tevreden

INTERVIEW QUESTIONS CASES VOLKERAKCOMPLEX, SAFEFTY LOCK HEUMEN AND SAFETY LOCK LIMMEL

Algemeen & Organisatie Doel: Kennismaken, inschatten ervaring en kennis, huidige belevingswaarde organisatie/relaties ontdekken.

1) Wat is u functie bij dit object? En wat is uw ervaring van dit soort objecen of vergelijkbare objecten? 2) Hoe werkt het proces van beheer en onderhoud in de praktijk? a. Is er rechtstreeks contact met de marktpartij, of loopt alles via PPO? 3) Worden er rollen binnen deze beheer en onderhoudsorganisatie gedeeld 4) Op een schaal van 1 tot 4, bent u tevreden met hoe het onderhoudsproces nu verloopt?

ProBO Methodologie Doel: Inzicht krijgen gebruik ProBO methodologie

5) Hoe wordt hier de beschikbaarheidseis betreft LPS en KHW geverifieerd? 6) Hoe worden de (faalkans) modellen ingevuld en up to date gehouden? En hoe worden deze gebruikt? o Alleen voor Limmel: worden de modellen gebruikt voor optimalisatie in ontwerpkeuzes? 7) Op een schaal van 1 tot 4, vind u dit goed gaan? Zoja, waarom? Zonee, waarom?

Risico’s & PI Schema Doel: Inzicht verkrijgen in het gedrag van de actoren hoe er nu met risico’s wordt omgegaan

8) Herkent u deze mogelijke risico’s vanuit de ProBO methodiek? 9) Hoe word er nu omgegaan/ wat is de verwachting hoe er wordt omgegaan met het beheren van deze mogelijke events? 10) Welk risico hoort waar in dit schema? Waarom? En heeft u ervaring hiermee?

Risicoverdeling & Voorwaarden Doel: inzicht verkrijgen in houding tov risico’s en de verdeling

11) Hoe bevalt op een schaal van 1 tot 4 de huidige verantwoordelijkheid verdeling gezien de risico’s vanuit de ProBO methodiek? Waarom? 12) Hoe zou je persoonlijk de risicoverdeling doen tussen private en publieke partijen? Waarom? 13) Welke contractuaele safeguards zijn er bij u weten om de performance te waarborgen? Wordt u hierdoor geprikkeld om te handelen zoals volgens het contract verwacht wordt? o Stel dat er niet aan de contracteisen betreft de ProBO methodiek wordt voldaan, wat gebeurd er dan zodat dit wel in orde komt? 14) Op een schaal van 1 tot 4, vind u dat er voldoende safegaurds in het contract zitten?

Strategic behavior Doel: inzicht krijgen in invloed van strategisch gedrag

15) Wordt alle informatie die u verzameld heeft die betrekking hebben op de prestatie met andere partijen gedeeld? (Rijkswaterstaat / beheerder / Onderhoudspartij)

Samenwerking Doel: inzicht krijgen in de ‘willingness to collaborate’ en hoe dat nu gaat

16) Vanuit de literatuur wordt er vaker gesproken over een samenwerkings contract voor moeilijk voorspelbare risico’s die wel een grote impact hebben, hoe denkt u over de toepassing van een contract waarin risico’s gedeeld worden? Waarom wel / niet?

APPENDIX C

CASE 1 VOLKERAKCOMPLEX: DATA & IN-DEPTH OBSERVATIONS

DATA

The data of these parts are based on the reports of: (Vialis, 2013), (Arcadis, 2014c) and (Arcadis, 2014b)

Critical elements (risks which can lead to Responsibility Average Failure frequency Average functional failure) repair (-/hour) Failure time Frequency Max min [-/contract] Hardware elements 1.1 Civil Foundation OG M 3,63E-10 0,000048 1.2 Operational builidng OG M 3,63E-10 0,000048 1.3 Lift tower 1.4 Cellar OG L 2,39E-06 0,31 1.5 Retaining structure OG M 7,69E-10 3,63E-10 0,000074 1.6 Lock head OG M 3,63E-10 0,000048 1.7 Lock chamber OG M 3,63E-10 0,000048 1.8 Anchoring OG L 7,69E-10 0,00010 2.1 Steel Break and guidance OG L construction 2.2 Lock gate OG L-M 1,14E-08 3,63E-10 0,00077 2.3 Slide construction OG L 9,76E-07 0,13 3.1 Mechanical Drive and motion work ON L 3,00E-05 1,70E-07 1,98217 3.2 Main pivot ON L 5,00E-07 5,70E-10 0,066 4.1 Hydraulic Soil protection OG L 3,63E-10 0,000048 4.2 Retaining structure OG M 7,69E-10 3,63E-10 0,000074 4.3 5.1 Operation, Drive and motion work ON L 3,00E-05 1,70E-07 2,0 Control and electrical 5.2 Grounding and lightning ON N-L Assumed: protection system 1,00 5.3 Boarding and signage ON N-L Assumed: 1,00 5.4 Operation and control ON L-M 2,47E-04 2,57E-05 17,9 installation 5.5 CCTV installation ON L 7,69E-04 8,60E-05 56,2 5.6 VHF radio ON L 1,10E-07 0,014 5.7 Voltage installation (high / low) ON L 6,04E-04 7,60E-09 39,7 5.8 Water measurement system ON L 4,08E-06 0,54 5.9 Object lights ON L 1,14E-04 15,0 5.10 Shipping signal system ON L 1,35E-03 3,09E-03 291,9

Software critical events 6 Non-functioning or Wrong functioning ON N-L 1,02E-02 1,30E-04 678,681

Human critical events 7 Making an operational error OG L 4,50E-04 5,95E-05 33,47415

8 Negligence error, non-repair of a fault (within the ON L available time) 9 Maintenance fault ON L 3,33E-02 1,67E-03 547,0307143

External critical events 10 Fire OG M 5,23E-05 8,50E-10 3,436165845 11 Lightning OG M 1,25E-05 1,639872 12 Ship Collision ON M 6,95E-04 91,29672 13 Poor sight (Fog / Rainfall) OG L 3,42E-05 4,49388 34 Obstacle in the Waterway (Ice cover / Tree branch ON L 1.92E-03 16,8 h/year 252 / objects)

EXPLANATION TABLE * The responsibility is abbreviated with OG being Rijkswaterstaat and ON being the contractor. ** The average repair time is based on expert judgment of the cases. A distinction between the lift lock and Safety Lock is made for the average repair time, because of the differences in the design. The average repair time is based on the description of Maintenance in Table 4, p21:

IN-DEPTH OBSERVATIONS All the functions of the complex are: Facilitate shipping, Prevent against Flooding, Manage the Water Levels and Quality and Facilitating Road Traffic. Only the first two functions are in scope of this research. The following subparts of the complex provide the functions which are relevant of this research:

- Three commercial shipping sluices - A recreational sluice: functional length of 128m and a width of 16,1m. - An inlet sluice, existing of four openings, of which only two are operational

PERFORMANCE EFFECTIVITY The Performance requirements are derived from Rijkswaterstaat (2007b, pp. 33-36). The Actual performance of the availability is derived from the LPAM quartile report (Vialis, 2013) and the reliability from (Vialis & Rijkswaterstaat, 2014).

Normative Performance requirements Actual Performance Effectivity

Reliability requirements Prevention against flooding minimum 99,9% reliability: Closure inlet sluice both slide doors minimum reliability of 99% per 99,99643% 1.01 closure request Opening of the inlet sluice min reliability 97,5% (non-scope in this 99,74% 1.02 research) Spontaneous opening inlet sluice < 10% 0,25% 1.11

Availability requirements facilitate shipping minimum 96% availability Professional shipping locks minimum of 98,5% availability 99,00% 1.01 Central Operational complex minimum of 99,5 availability 99,62% 1.001 Recreational shipping lock minimum of 98% availability 99,99% 1.02 Facilitating Road Traffic (Non- scope in this research) minimum of 99,8% 99,83% 1.0003 availability The current performance for the requirement Prevent against Flooding is unknown, because several risk analysis (of subparts) of the complex are made by different organisations with different used variables.

Because the actual reliability performance is unknown, the effectivity of the outsourcing can only partially be determined. The discussions about the made RA-analysis indicate non-compliance to the normative

performance, because the content of the discussion is about the correct failure probabilities according the contractor versus Rijkswaterstaat as discussed in section 5.2.2. Therefore, the actual performance and effectivity of the inlet sluice is not reliable. The estimation is that there is non-compliance to the requirement Prevention against Flooding, the effectivity become than < 1.00.

The requirement Overcoming water level differences can be measured with IVS, what is a shipping tracking information system. The reliability of the actual performance is therefore considered as satisfying; the effectivity becomes an average of the efficiencies of the availability of the professional and recreational shipping lock: 1.01.

ORGANISATIONAL The CSVK is responsible for:

- Guarding the management aspects of the maintenance process: verifies if the activities are managed adequate and if the propositions are correct. - Contract preparation by request for change and additional work requests - Check if the payment is justified - Controls assessment whether the activities are scope or non-scope. - Tests if the maintenance activities is secured in the contract and prepare change requests on the existing contract.

During team meetings, o.a. the following topics are discussed (interview RWS, 2015a, b):

- Maintenance activities (and every fault) - contractual issues and changes - Risks analysis and quarterly reports. - How to manage all these maintenance activities and how they influence the risks analysis.

The invoice payment is as in the figure below (Rijkswaterstaat, 2007a, p. 9):

The RA analysis team of the contractor exists of:

- contract manager and a sub contract manager - RAMS specialist (risks analysis specialist) - Maintenance engineer - Maintenance specialist

RISK ASSESSMENT AND ALLOCATION CRITERIA OPERATOR Risk assessment examples (interview operator, 2015a, b)

To reduce human failure the employees are adequate trained and work instructions are available. Every fault is monitored and updated in the risk analysis to simulate reality as closely as possible. The operator indicates

that Rijkswaterstaat attitude towards responsibility is changed, illustrated by the decreased effort to warn and prevent ice cover, like mobilising ice breakers.

The operator has its own maintenance plan for non-scope elements, because the inspection and funding request procedures are contradicting which influence the objects functioning negative. Note that in a DBFM contract the finance of components is prefunded by the contractor, instead of Rijkswaterstaat, thus this problem will be different in DBFM contracts.

When a small fault is detected at the end of the day, the risk averse attitude become most visible: the operator feels most comfortable to repair the fault immediately instead of waiting till the next day. Immediate action is preferred, therefore it can be stated that the operator feels uncomfortable with uncertainty. ‘Is it necessary to report first in depth of the failure? Instead in that time you can better fix it! ‘

Managed Effectively

The operator has specific knowledge of the object: a RA – analysis specialist, an object manager and a project expert are in house and collaborate on regular basis. They share the same working location close to the object, which increases the commitment towards the object. The RA-analysis specialist understands the LPAM methodology and can monitor this analysis adequate. This specialist can make use of the analysis to optimise the maintenance activities with respect to the performance if all the information is valid. With their knowledge of risks they are able to perform the auditing and monitoring role sufficient.

The resource availability for reducing the risk is limited; they are dependent on the contractor. This is changed over the last 10 years: the technical knowledge in-house is reduced and outsourced. Therefore, they will not directly benefit by bearing the risk, but the appetite to reduce the risk is present. The competence and authority to steer the contractor in the DBM contract is available, but not directly. First they have to inform the CSVK of Rijkswaterstaat and they have the authority to steer and finance the contractor, if the maintenance activities are part of the scope.

CSVK Managed Effectively (interview RWS, 2015 a,b) (meeting, 2015)

Guarding the contract requires knowledge of the contract, knowledge of the technical details and the availability to make changes in the contract and how all of these support the management of the Operation and Maintenance phase.

Due to the availability of knowledge and strong collaboration with the operator they are able to assess the possible magnitude of consequences of the risk and to monitor the RA-analysis. Specific knowledge of how to conduct a RA – analysis is lacking, but knowledge of the possibilities of the analysis and how to improve the process to realise an adequate analysis is available. CSVK sees the LPAM methodology as a win-win situation; implementing this philosophy will give the contractor cost reduction during the operation and maintenance phase and the Rijkswaterstaat a verifiable adequate-functioning object. Reducing costs by optimising maintenance activities is the incentive for the contractor to make use of the LPAM methodology.

The Maintenance and Operation requirements and incentives in this contract are improved, but it has been noticed that safeguards related to Operation and Maintenance are often neglected in contracts, just like the methodology to implement changes.

CONTRACTOR Risk assessment (interview Vialis, 2015a, b) (meeting, 2015)

Contractual is stated that a RA – analysis need to be conducted, but they prefer to work traditional. The contractor changed his attitude and implemented the LPAM methodology in their work process, but the application of this methodology is not natural yet. The benefit of the LPAM methodology is not valued, because doing LPAM results in five persons are working inside on the RA-analysis while a single person is working outside. The employees working outside need now to cover the costs of all the six men, why the maintenance costs versus effectivity are increased compared by having two men outside and one inside.

Managed Effectively

The contractor is experienced with renovation and maintenance activities of the Electrical and Installation Engineering, just like the maintenance of the mechanical parts. The contractor gained specific knowledge on these type of engineering, therefore is assumed that they are able to manage the risks effective. The knowledge of risks management according the LPAM methodology was limited, but the contractor improved the knowledge by extending the team. For a part of contract the contractor makes use of the LPAM methodology for drawing up the maintenance activities. This project was the first time that the contractor experienced the LPAM methodology.

APPENDIX D

CASE 2 HEUMEN: DATA & IN-DEPTH OBSERVATIONS

DATA

The data is derived from: (Webbers & Franssen, 2012, pp. 46-49, 104-133, 135-297) and (Rijkswaterstaat Maaswerken, 2009).

Critical elements Responsibility Average Failure frequency Average (risks which can lead to functional failure) repair (-/hour) Failure time Frequency Max Min [-/contract] Hardware 1.1 Civil Foundation ON C 1.82 E-10 0.000 1.2 Operational builidng ON M 1.82 E-10 0.000 1.3 Lift tower ON C Inspection interval > 2 year Assumed: 0,000 1.4 Cellar 1.5 Retaining structure ON M 1.82 E-10 0.000 1.6 Lock head 1.7 Lock chamber 1.8 Anchoring 2.1 Steel Break and guidance construction ON M 1,44E-06 0,025 2.2 Lock gate ON C 1,20E-06 0,021 2.3 Slide construction 3.1 Mechanical Drive and motion work ON M 1,00E-08 8,88E-10 0,00018 3.2 Main pivot 4.1 Hydraulic Soil protection ON M 3,13 E-06 0.055 4.2 Retaining structure ON M 3,13 E-06 0.055 5.1 Operation, Drive and motion work ON M 6,78E-05 1,50E-07 1,2 Control and electrical 5.2 Grounding and lightning ON N 4.52E-06 0.1 protection system 5.3 Boarding and signage ON L Monthly inspection Assumed: 0.7 5.4 Operation and control ON M 3,10E-05 4,00E-06 0,5 installation (PLC + remote I/O- units) 5.5 CCTV installation ON L 1,00E-04 1,8 5.6 VHF radio ON L 4,61E-06 0,08 5.7 Voltage installation (high / low) ON M 7,80E-06 0,1 5.8 Water measurement system ON L 4,80E-06 0,1 5.9 Object lights ON L 1,00E-05 0,2 5.10 Shipping signal system ON L 1,00E-05 6,10E-08 0,18

6 Software Non-functioning (including PLC + ON L 4,57E-06 4,57E-07 0.080 SCADA)

7 Human Making an error in execution (back-up procedure) N – L 6,85E-07 0,012 Failure 8 Negligence error, non-repair of a ON L Assumed: fault 0,001 9 Maintenance fault ON L – M 4,00E-07 0,082

10 External Fire ON C 3,63E-10 0,000006 Risks 11 Lightning ON M 4,52E-04 7,9

12 Ship Collision ON M * 4,38E-05 0,8 13 Poor sight due to fog / rainfall OG L – M 3.80 E -03 66.6 14 Obstacle in waterway (ice cover/ OG L 5,03E-06 0,1 tree branch / object) 14.1 Krabbende / vallende ankers ON 2,17E-05 0,4 14.2 Gezonken schepen / obstakels ON 5,03E-06 0,1 gem 2 sluitvragen per jaar, sluitvraag heeft periode van 2u na commando sluiten moet het binnen 6u en 20 min gesloten zijn * gem hersteltijd ship collision in verhouding uitgerekend

EXPLANATION TABLE * The responsibility is abbreviated with OG being Rijkswaterstaat and ON being the contractor. ** The average repair time is based on expert judgment of the cases. A distinction between the lift lock and Safety Lock is made for the average repair time, because of the differences in the design. The average repair time is based on the description of Maintenance in Table 4 on page 21

IN-DEPHT OBSERVATIONS Every year around 50.000 ships passes the complex, including ships of class Vb (190m long, 11,4 m wide, 3,5 m depth and 8,8 m high) and the safety lock must enable bidirectional shipping. It must be able to pass the lock double-sided (Rijkswaterstaat, 2009a, pp. 20-21).

POLITICAL INFLUENCE Safety Lock is part of the ‘Maaswerken’, which is executed nationally to realise a safer, better navigable and more natural river the Meuse over a length of 222 kilometres and includes 52 projects until 2020. For these works a special project department of Rijkswaterstaat is realised (Rijkswaterstaat, 2015b).

CONTRACT TYPE - SAFEQAURDS By non-compliance the failures must be corrected without delay at the contractor his own expense and risk, unless that failure is not attributable to him (UAV-GC 2005 par. 29 lid 2). After expiry of the maintenance period and acceptance, the contractor is one year liable for failures under the condition that the shortcomings are noticed or discovered during the maintenance period or when he is to blame for those failures (UAV-GC 2005 par. 32).

PERFORMANCE EFFECTIVITY The Performance requirements are derived from (Rijkswaterstaat Maaswerken, 2009, pp. 38,41,47 and 48) (vraagspecificatie 01) and the actual performance is derived from (Webbers & Franssen, 2012, p. 295).

Normative Performance requirements Actual Performance effectivity

Reliability requirements Closure Safety Lock minimum reliability of 99,999% per closure request 99.9999% 1.00

Availability requirements Availability of shipping guidance systems minimum 99,8% 99.9989% 1.002

ORGANISATIONAL To monitor and perform daily maintenance the contractor is located close to the complex. If failure occurs a special process is designed to determine if and how it is managed. This process exists of several of steps; reaction by sending a ‘minion’ to an urgent failure notification must be within 2 hours, non-urgent will be within two working days (Mans et al., 2012, p. 13). After repair, a notification is sent to Rijkswaterstaat.

RISK ASSESSMENT AND ALLOCATION CRITERIA: STAKEHOLDER ANALYSES OPERATOR Risk assessment examples (interview RWS, 2015c)

To guarantee the safety on the waterway by poor sight, the operator prefers to close the old lift lock because they are not able to overview the situation. This illustrates that they prefer to reduce the probability of ship collision. The second example illustrates that the operator prefers to be in control: they rewrite partly (without involvement of Rijkswaterstaat and the contractor) the shipping signing software to improve the functioning, resulting in non-compliance to the national guidelines. Contradicting with this risk assessment is the non-interest of the operator during the design and build phase to discuss and prevent this kind of issues.

Managed Effectively

The operator has limited knowledge of the Safety Lock, due to the late involvement in the project. The available knowledge is divided among three persons: the object specialist and two asset managers. Both part of the regional department, what indicates that they are not close to the object. Closure of the safety lock is regulated centrally. By failure of the central operational several back-up procedures are available and trained.

Due to organisational changes, the operator is reorganising the management abilities; it is unknown how effective the maintenance phase will be managed. But it is known that several experienced asset managers are part of the organisation, they are familiar with the LPAM methodology and how to apply it correctly. Therefore, is assumed that the management capabilities are sufficient to manage the Safety Lock effectively, but the right risk attitude is missing due to a lack of commitment.

CONTRACTOR Managed Effectively

The contractor is experienced with designing and realisation of waterworks; they assume that more waterworks projects will be developed in the Netherlands so they have an interest to gain knowledge and experience in this sector. One of these elements is to understand the Public Party to meet their expectations (Besix, 2015). During the design phase several managers (general, electrical and installations and mechanical engineering) were involved in drawing up the maintenance plan, indicating that required specialised knowledge is available within the organisation. Because of the high performance requirements the main contractor hired a specialised subcontractor for the design, installation and testing of the electrical, hydraulic and mechanical installations (Infra Automation, 2013).

The long – term maintenance plan based is designed by the contractor, and they maintained the first two years the Safety Lock according to this maintenance plan. It is unknown if the maintenance is managed effectively by the contractor, because it will take several years before the effectiveness of the maintenance plan (and design) become visible in the performance. For two years the contractor managed it effectively (the maintenance existed of several inspections and a few small maintenance activities) (Mans et al., 2012, p. 11).

The experience of project Heumen, including working with RA-analysis, is used for designing Safety Lock Limmel, which is in this research the last case study.

APPENDIX E

CASE 3 LIMMEL: DATA & IN-DEPTH OBSERVATIONS

DATA The RA – analysis of case 3 Limmel is based on case 2 Heumen, because the contractor uses Heumen as reference design (Soltegro, 2014). Therefore, the failure probabilities are assumed similar, but the frequency of occurrence during the contract period is different.

Critical elements Responsibility Average Failure frequency Average (risks which can lead to functional failure) repair (-/hour) Failure time Frequency Max Min [-/contract] Hardware 1.1 Civil Foundation ON C 1,82E-10 0,000 1.2 Operational builidng ON M 1,82E-10 0,000 1.3 Lift tower ON C Inspection interval > 2 Assumed: year 0.000 1.4 Cellar 1.5 Retaining structure ON M 1,82E-10 0,000 1.6 Lock head 1.7 Lock chamber 1.8 Anchoring 2.1 Steel Break and guidance ON M 1,44E-06 0,378 construction 2.2 Lock gate ON C 1,20E-06 0,315 2.3 Slide construction 3.1 Mechanical Drive and motion work ON M 1,00E-08 8,88E-10 0,00263 3.2 Main pivot 4.1 Hydraulic Soil protection ON M 3,13E-06 0,823 4.2 Retaining structure ON M 3,13E-06 0,823 5.1 Operation, Drive and motion work ON M 6,78E-05 1,50E-07 17,8 Control and electrical 5.2 Grounding and lightning ON N 4,52E-06 1,2 protection system 5.3 Boarding and signage ON L Montly inspection Assumed: 2,5 5.4 Operation and control ON M 3,10E-05 4,00E-06 8,1 installation (PLC + remote I/O- units) 5.5 CCTV installation ON L 1,00E-04 26,3 5.6 VHF radio ON L 4,61E-06 1,21 5.7 Voltage installation (high / ON M 7,80E-06 2,0 low) 5.8 Water measurement system ON L 4,80E-06 1,3 5.9 Object lights ON L 1,00E-05 2,6 5.10 Shipping signal system ON L 1,00E-05 6,10E-08 2,64

6 Software Non-functioning (including ON L 4,57E-06 4,57E-07 1,200 PLC + SCADA)

7 Human Making an error in execution OG N – L 6,85E-07 0,180 Failure (back-up procedure) 8 Negligence error, non-repair ON L Assumed:

of a fault 1.00 9 Maintenance fault ON L – M 4,00E-07 1,226

10 External Fire ON C 3,63E-10 0,000095 Risks 11 Lightning ON M 4,52E-04 118,9 12 Ship Collision ON M* 4,38E-05 11,5 13 Poor sight due to fog / rainfall OG L – M 0,0038 998,6 14 Obstacle in waterway (ice OG L 5,03E-06 1,3 cover/ tree branch / object) 14.1 Krabbende / vallende ankers ON 2,17E-05 5,7 14.2 Gezonken schepen / obstakels ON 5,03E-06 1,3

Gemiddeld 2 sluitvragen per jaar. Sluitvraag heeft periode van 2 uur na commando sluiten moet het binnen 6uur en 20 mijn gesloten zijn * gem hersteltijd ship collision in verhouding uitgerekend

EXPLANATION TABLE * The responsibility is abbreviated with OG being Rijkswaterstaat and ON being the contractor. ** The average repair time is based on expert judgment of the cases. A distinction between the lift lock and Safety Lock is made for the average repair time, because of the differences in the design. The average repair time is based on the description of Maintenance in Table 4, page 21:

IN-DEPTH OBSERVATIONS

PERFORMANCE EFFECTIVITY The contractual Performance requirement is derived from (Rijkswaterstaat, 2013a, p. 36) and the design performance is derived from (Soltegro, 2014, pp. 4-5). Based on the design performance an estimation of the design effectivity can be made, but effectivity of the maintenance management is unknown.

Normative Performance requirements Design Performance effectivity

Reliability requirements Closure of Safety Lock minimum reliability of 1/3875 per closure 99.9821 1.00008 request

Availability requirements Overcome water level differences average minimum availability of 99.999 1.00008 99,988% over 100 years.

RISK ASSESSMENT AND ALLOCATION CONDITIONS: STAKEHOLDER ANALYSES

RIJKSWATERSTAAT Managed Effectively

The contract team is an integrated project management team of people with experience and knowledge, including a contract manager, technical manager, RA – specialist and the operator. This team has the competence and authority to guard the contract and to steer the contractor (by enforcing the contract), but is not able to manage the risk itself. Due to the availability of different kind of knowledge they are able to assess the possible magnitude of consequences of the risk and to monitor the RA-analysis.

Analyses and workshops to evaluate previous executed waterworks projects resulted in lessons learned. These lessons were input to improve all kind of aspects, like the organisation and contract, of the first DBFM contract for waterworks.

CONTRACTOR

Managed Effectively

The contractor has already designed, build and maintain Safety Lock Heumen. Thereby, they have experienced with responsibility of these aspects and RA-analyses. Based on this knowledge and the consortium with Egemin installations they are able to manage risks of functional failure of the lock effective.

APPENDIX F

OUTSOURCE HISTORY OF RIJKSWATERSTAAT

During the years the attitude of Rijkswaterstaat changed towards the water safety issue and how it profiles itself. An overview of the changes, its causes and influence is set out in this chapter, based on the report of the historical analysis of Rijkswaterstaat (Geels et al., 2003) and the report about the management and operation of the Eastern Scheldt barrier (Jorissen et al., 2013, pp. 66-71).

Development of legislation and plans combined with the governance The first Delta plans are made in 1939 by the Storm Surge commission, to handle the problems with the high water. These plans were based on comprehensive legislation. Due to the WWII there was a lack of knowledge and resources to execute the plans. The flooding of Walcheren in 1944 forced Rijkswaterstaat to increase the resources and knowledge for flooding repair and protection. One of the results is combining the knowledge in the Directory Dams and Locks in 1946. With this knowledge it became able to repair the damage of the 1953 flooding very fast. This flooding was the occasion to draw the first Delta Act.

In the years 1950 till 1970 Rijkswaterstaat had a strong authority and superior expertise as result from the previous period with a high innovative capacity, what resulted in the capability to solve problems fast with productive routines and standard approaches. During this period Rijkswaterstaat was a strong hierarchical organisation (conflicts remained indoors) and they were considered as highly skilled organisation for the waterworks. In 1956 the Delta department was founded. The influence of the large reorganisations in 1960 became visible in 1970: Rijkswaterstaat kept his regional character and the functional organisation of the department was increased.

The economic crisis in the ’70’s causes a cut budget for Rijkswaterstaat. In 1971 the budget was 7,9% of the total (national) budget. In 1981 this was decreased to 2, 8% of the total budget. As consequence the staff number decreased from 13700 to 9800. Due to this change and the neoliberal climate, Rijkswaterstaat was forced to change her outsourcing policy: next to the execution the design was outsourced. The relationship with the contractor changed towards a multidisciplinary organisation. Rijkswaterstaat kept her technical knowledge to preserve her expertise. In the beginning of the ’70 the vision of Rijkswaterstaat was based on safety, but due to public issues, like environmental groups, an integral approach was required. In 1984 the Integral Approach to Water Management was presented, hereby the different interests of stakeholders were considered. First results are found in the Eastern Scheldt Barrier, with as result movable doors instead of a dam. Later more technical high valuated barriers were built.

In 1985 the Delta department is dissolved to the regional department and the advice groups RIKZ and RIZA. Another development of this period is including maintenance in every regional department, because it creates an intervention possibility for Rijkswaterstaat to the contractor.

The maintenance and management development of the Eastern Scheldt barrier since construction is comparable with the other barriers; therefore, the information is valuable to understand the development of the problem. For maintenance and management support two counselling groups were composed of different members from the service group Delta Coast and section management waterworks from regional department Zeeland and the Bouwdienst; one for the waterworks (BNW) and one for steel and electronic (BSE). They made the decisions based on the inspection results. The two counselling groups BNW and BSE are combined into one group end of the ‘90’s and in 2001 it is included in the counselling group Maintenance and Operation of the Eastern Scheldt Barrier. But in 2004 this group is quietly dissolved. In 1987 the project organisation of the Eastern Scheldt barrier became part of Regional department Zeeland

of Rijkswaterstaat; they became ultimately responsible which is still the case. The service group Delta Coast was responsible: for the execution of the maintenance activities, drawing up multi-annual plans and maintenance plans. In this service group six people worked on the waterworks. The Department Sea & Land interprets the inspection results and advices the service group. The market unless principle was already applicable, because of the technical complexity of the Eastern Scheldt Barrier and it is an essential object they decided to commit own staff.

In the period from 1990 until 2000 the traditional commissioning changed, the water sector was one of the first sectors who involved the contractor during the design phase. The Europoort Barrier, now the Measlandt Barrier, is one of the first examples whereby the design competition was design and build. Beside that the tender phase was improving, in the decision making progress all the relevant stakeholders were involved early in the process. This resulted in a multidisciplinary organisation, civil engineers had to collaborate with another disciplines like economics, biologists and lawyers. Who leads the project and policy differs from Rijkswaterstaat, provinces and the water boards. Rijkswaterstaat was in control of two major programs: Delta plan major rivers and Space for the river. During these years a new Nota about the philosophy of Rijkswaterstaat in the years 2000 was written: Rijkswaterstaat needed to limit her activities towards describing and testing the (final) desired performance. New safety approaches were desired, in 1992 the technical advice commission for flood defences (TAW) is created, in their report presented in 2000 they stated that the waterworks are relative vulnerable in a dike ring. The non-closure of waterworks were the main cause for an increased probability of flooding, mostly because lack of a register the procedure. The report of TAW was the cause for further research on behalf of the ministry to get insight in the risks of flooding and the consequences instead of the exceedance probabilities of the delta works. The ministry was also interested in the costs and benefits of the investments in flooding protection (Westen, 2005, p. 15).

Since 2000 the governance of Rijkswaterstaat changed to a new way of working. The contracts became more performance based, what resulted in an increased responsibility for market parties during management and operation of infrastructure assets. Rijkswaterstaat is only interested to guarantee the long-term functional quality of the asset by inspections and development of multi-annual maintenance plans (Rijkswaterstaat, 2014c, p. 5). The shift in responsibilities towards the market is defined in the contract form, from a traditional contract (Design and/or Construct) towards a new contract form (Design Build Finance & Maintenance (Operation)), where the contractor is responsible for the whole service like availability of the infrastructure for the next 20 till 30 years. This change goes together with reorganisation and downsizing. For the organisation of the Eastern Scheldt changed the staff of Service group Delta Coast to one person who was responsible for civil, included the hydraulic engineering. In another reorganisation in 2006 this person became a mechanical engineer, who also had to do the civil (hydraulic) parts. In 2005 the first project carried out by a DBFM contract in the Netherlands was the Second Coentunnel. The first DBFM waterwork DBFM is Limmel, where the contract is recently concluded.

The base of the Living Probabilistic Asset Management approach and organisation was the independent written review of the Eastern Scheldt Barrier in 2007, executed by Bureau Horvat and partners (Keulen, 2007). In April 2010 LPAM was formal started in the organisation of the district Zeeuwse Delta with two people. Currently the LPAM support group, existing of eight people, is part of a national department of Rijkswaterstaat.

Concluded can be that the attitude of RWS changed the past century from almost complete control of the assets with smaller and more contracts towards a variant were even the design, construction and maintenance is outsourced in a single contract. Reorganisations and change of attitude due to a change of political behaviour in the past decades is the main cause of the change of the attitude of RWS.