E18 Muurla - Lohja Motorway Project
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1 TEN - T Project finance & PPPs Experiences from a Finnish PPP project using project life-cycle management from the order perspective to maximise efficiency Matti Vehviläinen Finnish Traffic Agency 13.10.2009 /M.Vehviläinen 2 Director General Juhani Tervala Communications Director General’s Staff Internal Audit Anna Jokela Timo Hiltunen Marja-Liisa Peltomaa Transport System’s Maritime Department Rail Department Road Department Administration Department Raimo Tapio Ossi Niemimuukko Jukka Hirvelä Department Anne Herneoja Hannu Mäkikangas • Transport • Sea Traffic • Rail Traffic • Road Operations • Economy Management Management • Development • Road Investments • Personnel • Public Transport • Waterways • Railway • Road and Bridge • IT/ICT • Hydrographic Office Investments Engineering • Administration • Rail Network • Road Traffic • Information and Centres Archives 13.10.2009 /M.Vehviläinen 3 Use of the life-cycle model in Finland Decision-in-principle of the Finnish Government’s Ministerial Committee for Economic Policy 12/2003: The life-cycle (PPP) model can be used for traffic infrastructure projects The Ministerial Committee’s decision in February 2004 on use of the life-cycle model for the E18 Muurla - Lohja motorway project Good experiences with the life-cycle model in Finland and internationally. The EU promotes use of the life-cycle model for traffic infrastructure construction. Quick completion of the project is particularly important, and the life-cycle model makes faster completion possible. Preliminary calculations indicate that the life-cycle model is the most economic overall solution. The life-cycle model provides the opportunity to implement other traffic infrastructure projects in the near future. 13.10.2009 /M.Vehviläinen 4 Life-cycle Contract logical step DBFO ??? DBMO DB Plus Financing Design-Build B Plus Long-Term Maintenance & Design-Build Upkeep Integrated Design & Traditional Construction Design-Bid-Build (Public Funding) Life-cycle Consideration Life-cycle Responsibility 13.10.2009 /M.Vehviläinen 5 Procurement model of E18 Finnish application of the PPP model: life-cycle model The client orders the long-term service entity by means of a service contract - Contract period autumn 2005 - autumn 2029 The service provider must establish a special purpose company (SPC) to take responsibility for construction design, construction, maintenance and financing. The service requirements are described as performance specifications (top surface of the road, environmental factors, fittings and equipment etc.) technical product requirements (long-term structures) The payment mechanism combines the quality and quantity of services produced with the service fee availability of service defines the basic amount monitored criteria create variability 13.10.2009 /M.Vehviläinen 6 The client´ s cashflow in traditional (DB) and life-cycle model 90 80 PHASE 1 OPENED STDB MODEL-MALLI 70 PHASE 2 OPENED 60 ELINKAARIMALLILIFE-CYCLE MODEL 50 40 D 30 20 10 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Years 13.10.2009 /M.Vehviläinen 7 GROSSGROSS SERVICE SERVICE PAYMENT PAYMENT (Price of the service when quality at agreed level) AVAILABILITY PAYMENT AVAILABILITY PAYMENT PERFORMANCEPERFORMANCE PAYMENT PAYMENT MeasurementMeasurement of of the the Service Service Availability Performance Unavailability Maintenance Extent and duration Surface Condition Location Fixed dates Time Period Failures DEDUCTIONSDEDUCTIONS Maintenance Compensation SafetySafety Performance Performance Maintenance Compensation - Traffic volume higher -Accidents-Accidents compared compared - Traffic volume higher than expected toto reference reference roads roads (Price of the service according to quality) than expected -Safety-Safety bonus bonus NETNET SERVICE SERVICE PAYMENT PAYMENT 13.10.2009 /M.Vehviläinen 8 E18 Muurla-Lohja the 2nd PPP project of FINNRA 13.10.2009 /M.Vehviläinen 9 E18 Muurla - Lohja Part of the Nordic Triangle, prioritised by the EU Currently a two-lane highway that is geometrically poor: weak traffic safety and smoothness of traffic Conversion to a motorway on the basis of legally valid road plans (12/2003) The order authorisation 700 million euros (budget of the State in 2004, nominal value) 13.10.2009 /M.Vehviläinen E18 Muurla - Lohja motorway 10 Muurla-Lahnajärvi section open to traffic in 2008 Lahnajärvi-Lohja section open to traffic in 2008 Muurla grade Separated intersection Kruusila grade separated intersection Suomusjärvi grade separated intersection Lahnajärvi grade separated intersection Sammatti grade separated intersection Nummi grade separated intersection Karnainen grade separated intersection Lempola grade separated intersection 13.10.2009 /M.Vehviläinen 11 13.10.2009 /M.Vehviläinen 12 Hepomäki 270 m Lakiamäki 430 m Tunnels Tervakorpi 560 m Pitkämäki 595 m Orosmäki 600 m Karnainen 2200 m Lehmihaka 300 m 13.10.2009 /M.Vehviläinen 13 Complemented road plan Extensive, documented soil and bedrock surveys Basic road plan solution with updated starting information Degrees of freedom in the plan – for example, motorway altitude 0 - ± 2 m Absolute boundary conditions - environmental impact Graphic thematic maps Starting points for risk management (plan solutions) 13.10.2009 /M.Vehviläinen 14 Schedule for the bidding process 2004 2005 2006 1234567891011121234567891011121234567891011 12 13.2.2004: decision on applying life-cycle model 6.3.2004 procurement announcement 30.7.2004 12.00 deadline for pre-qualification registration preparation of the bidding documentation calculation period opening the bids negotiations service contract contract period until 2029 13.10.2009 /M.Vehviläinen 15 Shortlisted bidders - Bouygues Travaux Pub- lics France - Kesälahden Maansiirto and Oy Finland (- NCC Roads aliurakoitsijana) - Cintra Concesiones de Infrastructuras de Spain Transporte, S.A and - SRV Teräsbeto ni Oy Finland (- Ferrovial Agroman aliurakoitsijana) - Tieliikelaitos Finland - YIT Rakennus Oy Tieyhtiö Ykköstie Oy: - Skanska BOT AB Sweden, - Laing Roads Ltd UK and - Lemminkäinen Oyj Finland - Vinci Concessions France 13.10.2009 /M.Vehviläinen 16 Structure of contract (investment period) 13.10.2009 /M.Vehviläinen 17 Status of the project Motorway opened for traffic in two phases : 19th Nov 2008 and 28th Jan 2009, due date for both phases 15th Nov 2008 short delays because of difficulties related to traffic management and tunnel safety systems investment period closed Jan 2010, yet some problems remaining in the functionality of the traffic management system the interface between the client´s traffic center and the Road Company challenging conclusion: more accurate technical requirements for definition of traffic management and tunnel safety systems instead of performance specifications 13.10.2009 /M.Vehviläinen 18 Objectives set for the PPP model E18 Muurla-Lohja, Invitation to tender October 2004 Quickly opening the motorway for traffic Good traffic safety --> motorway standard, payment mechanism Reducing congestion Æ similar to traffic safety Top-class road maintenance services for road users --> technical requirements for the maintenance period, and availability/service level as payment mechanism bases Optimal allocation of risks (administrative/technical risks) Economically most advantageous approach 5/28/2010 18 13.10.2009 /M.Vehviläinen 19 Overall economy of the E18 Muurla – Lohja contract Main benefits of the life-cycle model in comparison to budget-financed implementation quick and cost-effective construction degrees of freedom made possible by responsibility period of more than 20 years Reasons for quick implementation initiation of service fees only after the road is taken into use encourages the designers, builders and sponsors to focus on quick implementation in a competitive situation the private sector has more flexible and free procurement procedures compared to the public sector the private sector also has better capacity to optimise financing during construction efficient project management and capacity to react quickly to the need for changes direct the entire value chain of the project towards optimal implementation Net present value savings in investment, maintenance and financing costs of about 3.5 % In addition, savings in driving costs of about EUR 34 M 13.10.2009 /M.Vehviläinen 20 E18 Muurla-Lohja (”Public Sector Comparator 2”) 13.10.2009 /M.Vehviläinen 21 Starting points for procurement preparation of new PPPs Utilising documentation and experience obtained from the E18 Muurla-Lohja project Focus areas in development of agreement documents More specific preliminary funding solution planning Possibly compressing the service agreement, potential changes caused by the funding solution, assessing allocation of risks Simplifying the payment mechanism Developing technical requirements based on a post-analysis, possible changes pertaining to the allocation of risks Clarifying the traffic management system and the related technical requirements, interface to the Traffic Centre, period of liability Road company's role in controlling and managing technical quality Co-operation between client and service provider 5/28/2010 21 13.10.2009 /M.Vehviläinen 22 Objective for the E18: Achieving motorway level by 2015 in compliance with approved EU-level plans Project Road Cost est. 2009 2010 2011 2012 2013 2014 2015 2016 H1 Mw 1 Muurla-Lohja, completion 2009 299 H2 Ring III Vanhakartano-Lentoas.tie 255 H4 Mw 7 Hamina Bypass 175 H3 Mw 7 Koskenkylä-Loviisa-Kotka