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Value-for-money in practice. EU Twinning Project: “Implementing PPP policy”. 6 June 2008. Content. On Value-for-Money in practice: Real-life examples Its sources Its drivers Its management The affordability-dilemma The do’s and don’ts. Morning session. Afternoon session.
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Value-for-money in practice EU Twinning Project: “Implementing PPP policy” 6 June 2008
Content • On Value-for-Money in practice: • Real-life examples • Its sources • Its drivers • Its management • The affordability-dilemma • The do’s and don’ts Morning session Afternoon session
N31 Motorway Project • A 25 km provincial road • Upgrading to a two-lane motorway • Road infrastructure, bridge and aqueduct. • DBFM-contract • Contract value: € 80 million • Contract duration: 15 years
Value-for-money 21% 11 months shorter construction Cost savings from different material use 25% less lane closures N31 PPP Motorway Project
A’dam – Brussels High Speed Rail Link • A 125 km high-speed rail line • Greenfield + Upgrading existing rail • Infrastructure and superstructure. • 2 DBFM-contracts / 1 O-contract • Contracts value: € 7 billion • Contract duration: 15 – 25 years
A’dam – Brussels High Speed Rail Link Value-for-money 2% Greater availability Non-application of unproven technologies Embedded-rail
Renovation Finance Ministry • Accommodation of Finance Ministry • Renovation • 1 DBFMO-contract • Contracts value: € 175 million • Contract duration: 25 years
Renovation Finance Ministry Value-for-money 15% Improved logistics Energy efficiency
Montaigne School Building • School building • Greenfield • DBFM-contract • Contracts value: € 27 million • Contract duration: 30 years
Montaigne School Building Value-for-money (Quality) Large “learning spaces” Multi-purpose rooms
Delfuent Water Sanitation Plant • Water sanitation plant • Greenfield & modernization • DBFMO-contract • Contracts value: € 450 million • Contract duration: 30 years
Delfuent Water Sanitation Plant Value-for-money 17% Shorter construction Lower exploitation costs Process innovations
Real estate development • Port and accommodation • Greenfield, expansion & renovation • Multiple DBFM-contracts Value-for-money Flexibility Phased-implementation Alternative usage
Quality The main principles
The Value-tree Value-for-money Timing Cost-saving Revenue-generation Quality-improvement Flexibility Life-cycle costing Innovations Exploiting commercial value Off-balance financing Technical know-how Business process skills Commercial expertise Incentive structure Risk allocation Output specifications Payment mechanism Competition Project scoping
Output specifications Functional output specifications on safety and comfort standards By Ministry of Transport Technical specifications By private partner Conditions tree
Financial selection criteria Market testing € Procurement Contract implementation Qualitative Minimum requirements Payment mechanism Output specifications Incentive structure
Competition Competitive dialogue procedure Stages Selection Phase Dialogue Phase 1 Dialogue Phase 2 Final Evaluation Phase Dialogue Phase 3 Final Negotiation phase Preperation for Realisation Realisation Phase Operation Phase Key Decision-making points Announcement Invitation for Dialogue Ph. 1 (Incl. Selection) Invitation for Dialogue Ph. 2 (Incl. Shortlist of three firms) Invitation for Submission BAFO Selection of preferred bidder Contract close / financial close Aanvangs-certificaat Certificate of Commence-ment Invitation for Dialogue Ph. 3 (optional) Certificate of Completion Oplevering
Process, instruments and time Dynamic PPC Qualitative Quantitative Conventional implementation PPP potential scan Time PPP implementation Business case Request for proposals Procurement 6 months 6 months
Organization PPP Unit Treasury Market
Contract management Private consortium Project organization Ministry of Transport Project organization Process management / supervision Quality management plan Contract management plan Show performance and contract compliance Quality supervision Civil works Maintenance activities
Contract management Ministry of Transport Verify process Verify product quality Main focus’ Process control Product control Private consortium Contract management plan Quality Management Plan product process On an exceptional basis Check process directly Check product directly
Conflicting objectives Optimal risk transfer Value-for-money Affordability Risk transfer to private sector
The do’s and don’ts • Do allow for task-integration by private sector partner • Do parallelize the interests of public and private partners • Do ensure competitive tendering • Do promote cooperation and partnership • Do make use of international - both UK and continental - experiences • Do not create, but enable value-creation • Do not transfer all risks to private sector or keep everything yourself • Do not increase project scope indefinitely (do create appetite) • Do not create extensive tender procedures causing high transaction costs • Do not tender unfeasible projects
Risk transfer Government Private sector • Traditional model • Early DBFM-contracts • New PPP deals..
Contact information Rebelgroup Advisory BV Geert Engelsman Wijnhaven 3-O, 3011 WG Rotterdam, The Netherlands Tel +31 10 2755995 Fax +31 10 2755999 www.rebelgroup.nl geertjan.engelsman@rebelgroup.nl