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The Business of Leading Edge Infrastructure Management

The Business of Leading Edge Infrastructure Management. Wednesday 28 th March 2012 Paul Northey General Manager Capital Projects. BARWON WATER. Assets $1 billion Revenue $128 million Connected properties 133,000 Growth 2% p.a. 20 treatment plants 10 reservoirs, 38 service basins

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The Business of Leading Edge Infrastructure Management

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  1. The Business of Leading Edge Infrastructure Management Wednesday 28th March 2012 Paul Northey General Manager Capital Projects

  2. BARWON WATER • Assets $1 billion • Revenue $128 million • Connected properties 133,000 • Growth 2% p.a. • 20 treatment plants • 10 reservoirs, 38 service basins • 6 groundwater bores+7 under construction • 6,000 km water and sewerage pipes MELBOURNE 70 km

  3. CONTEXT: CLIMATE UNCERTAINTY

  4. CONTEXT: MULTI – SITE DEVELOPMENT

  5. CONTEXT: ASSET MANAGEMENT Create Assets Capital Works Process Operate & Maintain Above Ground - FMMS Below Ground - FOCUS Rehabilitate / Replace Above Ground - Spreadsheets Below Ground - PARMS (Water) - SIMS (Sewer) Decommission

  6. CONTEXT Historic Capital Delivery Performance

  7. CAPITAL PROGRAM • “Horses for courses” for major projects • Recurrent works by operations departments (term & individual contracts) • Majority of works through a program alliance Approach to Delivery

  8. BARWON WATER ALLIANCE • 150 individual projects • 4 (+2) years • ~$450m • 80 EFT staff • Local subcontractors

  9. Barwon Water Capital Works – Project Phases Barwon Water Alliance Barwon Water Project Initiator / Asset Planning Capital Works Alliance Client Dept Functional Design Detailed Design Concept  Planning    Construct  Handover  Operation  Project Initiation DTF Gateway Risk Management Risk Management Risk Management Risk Management Final Cost Reporting Project Prioritisation Risk Management Envir Management Envir Management Envir Management Envir Management Project Review Capital Works Management Committee Charter Procurement Policy Safety Management Safety Management Safety Management Safety Management Project Completion Project Program Contract Delivery Strategy Probity Probity Inspection & Test Plans Community Engagement Procurement Policy Procurement Policy Design Management & Review Commissioning Plan Project Program Project Program Statutory Engagement Quality Plans Community Engagement Design Management & Review Community Engagement Relevant Policy / Procedures Statutory Engagement Business Case Statutory Engagement Quality Plans Project Reporting Project Reporting Community Engagement Statutory Engagement Budget Variation Project Reporting Budget Variation Statutory Engagement Project Transfer Budget Variation Project Reporting Project Transfer Project Reporting Budget Variation Budget Variation Milestone 1 Project included in BW Corporate Plan Budget Milestone 2 Planning Business Case approved. Project handed over to Alliance Milestone 3 Functional design developed. Procurement strategy approved. Milestone 4 Detailed design developed (>75%). Bus Case / TOC approved. Milestone 5 Asset is operable. Milestone 6 Commissioning and Testing complete. Handed over to Client. Milestone 7 Asset capitalised. Gain/Pain share determined.

  10. CONSTRUCTIONUse of Subcontractors • Most construction delivered by subcontractors • Limited ‘self-perform’ on higher risk jobs with day-hire labour. • Safety inducted over 1000 inductees in contractor induction program. Colac Pipeline • SQE contractor forums – network forming between subcontractor. • Lead to pre-qualification panel  reduce site supervision over time.

  11. MELBOURNE TO GEELONG PIPELINE

  12. Shell Refinery NORTHERN WATERPLANT Proposed Northern Water Plant CORIO BAY N GEELONG 10 km to Black Rock Water Reclamation Plant and ocean outfall

  13. NWP PROCUREMENT MODEL Getting the Model Right

  14. BIOSOLIDS DRYING FACILITY AT BLACK ROCK$76 million

  15. TO PPP OR NOT? • Is project of sufficient value? • Is there a history of in-house delivery and operation of this service? • Is it ‘core’ business? • Characterise risks • Are risks significant? • Which party is in the best position to manage risks (can risks be transferred)? • How will the private sector cost the risks that will fall with them? • Will a PPP deliver economic value to the public sector? • Will the project’s value bear the transaction costs (typ. $2-3 million)?

  16. CONCLUSIONChoosing The Best Model Project Procurement Options (adapted from PricewaterhouseCoopers, 2005,unpublished paper) CFD MAX MAX A L L I A N C E EPCM E P C M D&C FLEXIBILITY TO CHANGE CONTROL OVER BUILD QUALITY DBO PPP DBFO F i n a n c e & s t r O u p c e t , r a t e ) MIN MIN RISK TRANSFER (PRICE PREMIUM) MIN MAX PRICE CERTAINTY MIN MAX TRANSACTION COSTS LOW HIGH

  17. SUMMARY • Five year Water Plan requires assessment of required capital spend and appropriate delivery strategy • Bundling of projects enables cost savings in procurement of materials and construction • Alliance has delivered increased capital works program • Thorough business cases and demonstrated ability to deliver increases potential to obtain government funding

  18. Thank you

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