1. Safe roads, Reliable journeys, Informed travellers REGIONAL WORKSHOP ON PPP IN TRANSPORT RIGA, LATVIA – 6 to 8 MARCH 2007 CONTRIBUTION OF PPP TO ENHANCE TRANSPORT INFRASTRUCTURE – THE UK EXPERIENCE by ALEC BRIGGS, SENIOR PROJECT LEADER, HIGHWAYS AGENCY and BARRY DREWETT, TECHNICAL DIRECTOR, PELL FRISCHMANN CONSULTANTS LIMITED

2. Safe roads, Reliable journeys, Informed travellers OUTLINE OF PRESENTATION Part 1 - Alec Briggs The Role of the Highways Agency Funding of Motorway and Trunk Road Improvements Methods of Procurement Key Advantages of DBFO (PPP) DBFO Projects Awarded To Date Part 2 - Barry Drewett Typical Contractual Arrangements Congestion Management Payment Mechanism Some Lessons Learnt Next Privately-Financed/DBFO Project (M25)

3. Safe roads, Reliable journeys, Informed travellers THE ROLE OF THE HIGHWAYS AGENCY An Executive Agency of the Department for Transport Responsible for operating, maintaining and improving the 8000 km strategic road network in England, valued at £72bn, carrying a third of all traffic and two-thirds of freight traffic (over 170 bn vehicle-kilometres per annum) In conjunction with its Customer First initiative, its primary aims are to provide: Safe Roads Reliable Journeys Real-Time Information for Travellers

4. Safe roads, Reliable journeys, Informed travellers FUNDING OF MOTORWAY AND TRUNK ROAD IMPROVEMENTS Annual Highways Agency Budgets 05-06, 06-07 and 07-08 (£m) ACTIVITY/YEAR05-0606-0707-08 MAJOR IMPROVEMENTS (TPI)5891046905 MANAGING TRAFFIC (incl. NTCC, RCCs, Traffic Officers) 10910398 TECHNOLOGY IMPROVEMENTS (motorway communications) 138120159 MAINTENANCE (incl. payments for completed DBFO schemes) 865862838 SMALL SCHEMES and R&D191167170 TOTALS189322982170

5. Safe roads, Reliable journeys, Informed travellers Total Value of Schemes:£11.9bn Total Number of Schemes:112 (incl. completed schemes) Comprised of: Motorway Widenings28 Trunk Road Widenings30 Junction Improvements22 Bypasses32 Total Number of Schemes Completed:30 The Targeted Programme of Improvements (TPI) – February 2007

6. Safe roads, Reliable journeys, Informed travellers Main Types of Procurement Contracts Design, Build, Finance and Operate (DBFO) (PPP) Early Contractor Involvement (ECI) Design & Build (D&B) Major Improvement Projects: Maintenance: As part of DBFO contracts (PPP) Managing Agent Contractor (MAC) Specialist Services: Framework Agreements, e.g. design services PROCUREMENT OF IMPROVEMENTS AND MAINTENANCE

7. Safe roads, Reliable journeys, Informed travellers Categorisation of Major Road Projects (February 2007) Type MWTRWJB Total No.£ (bn) No.£ (bn) No.£ (bn) No.£ (bn) No.£ (bn) ECI 163.88192.20160.76151.58668.42 DBFO 61.7710.08000071.85 D&B 60.63100.2660.13170.59391.61 Total 286.28302.54220.89322.1711211.88 Key: MW = Motorway Widening TRW = Trunk Road Widening J = Junction Improvements B = Bypasses

8. Safe roads, Reliable journeys, Informed travellers Typical Procurement of a Major Highway Scheme (Private Funding) Land acquisition

9. Safe roads, Reliable journeys, Informed travellers Tranche1WorksPaymentContract CostMechanismAward A69 Newcastle to Carlisle£9.4mShadow tollsJan 1996 A1(M) Alconbury to Peterborough£128mShadow tollsFeb 1996 A417/A419 Swindon to Gloucester£49mShadow tollsFeb 1996 M1-A1 Motorway Link, Leeds£214mShadow tollsMar 1996 Tranche 1A A50/A564 Stoke to Derby Link£20.6mShadow tollsMay 1996 A30/A35 Exeter to Bere Regis£75.7mShadow tollsJuly 1996 M40 junctions 1-15£37.1mShadow tollsOct 1996 A168/A19 Dishforth to Tyne Tunnel£29.4mShadow tollsOct 1996 Tranche 2 A13 Thames Gateway, London£146mLane availabilityApr 2000 (Transferred to T f L in July 2000) A1 Darrington to Dishforth£245mCongestionFeb 2003 A249 Stockbury to Sheerness£100mCongestionFeb 2004 DBFO PROJECTS AWARDED TO DATE

10. Safe roads, Reliable journeys, Informed travellers Key Benefits of DBFO Contracts Fostering development of a private sector road operating industry Better outturn cost certainty More reliable and accurate expenditure forecasts Transfer of appropriate levels of risk to private sector Improved partnerships between public and private sectors Provide scope for innovation in all areas including finance Overall, provides better value for money

11. Safe roads, Reliable journeys, Informed travellers Part 2 - Barry Drewett – Privately-Financed DBFO Projects Typical Contractual Arrangements Congestion Management Payment Mechanism Some Lessons Learnt Next Future Privately-Financed/DBFO Project (M25 London Orbital)

12. Safe roads, Reliable journeys, Informed travellers Typical Contract Structure (A1 Darrington to Dishforth) Secretary of State Highways Agency Department's Agent (FM / PFC) Department's Representative (Highways Agency) DBFO Company (RMS) Contractor (RMG) (AMEC, A. McAlpine, Dragados, KBR) Designer (Mouchel-Parkman) Design sub-consultants (KBR, Carl Bro) Operation and Maintenance (A. McAlpine) Funders (Shareholders) (Bond Finance) (Bank Loans) DBFO Agreement (inc. Direct Agreement) Finance Company Construction Contract O & M Contract Design Contract TYPICAL CONTRACTUAL ARRANGEMENTS Total No. of contracts: 160

13. Safe roads, Reliable journeys, Informed travellers Development of Payment Mechanisms in DBFO Projects Tranches 1 & 1A shadow tolls safety payments lane closure charges congestion payments safety performance availability safety performance A13 D2D & A249 Future M25 London Orbital likely to be availability-based mechanism CONGESTION MANAGEMENT PAYMENT MECHANISM

14. Safe roads, Reliable journeys, Informed travellers Length: 53 km New D4M motorway: 22 km 2 TPI Schemes New or upgraded Motorway Communications Facilities throughout Congestion Management Payment Mechanism A1 Darrington to Dishforth DBFO Project Works cost: £245m Concession period: 33 years

15. Safe roads, Reliable journeys, Informed travellers Congestion Management Payment Mechanism – D2D Contract Comprises 2 separate key elements based on: (a)Active management of traffic congestion (i.e. minimising congestion) (b)Active management of traffic safety (i.e. minimising Personal Injury Accidents (PIAs))

16. Safe roads, Reliable journeys, Informed travellers Allocation of payment amounts and measurement of traffic Whole Project Road divided into 50 NO 2 KM LONG CARRIAGEWAY SECTIONS (25 NB and 25 SB) GROSS ANNUAL PAYMENT (as tendered) allocated to whole project road to give amounts for EACH HOUR on EACH CARRIAGEWAY SECTION pro-rata previous hourly traffic flows VEHICLE SPEEDS and VOLUMES measured AUTOMATICALLY using a MONITORING SYSTEM based on inductive loop detectors (in carriageway surfacing) (a)Active Congestion Management

17. Safe roads, Reliable journeys, Informed travellers Monitoring System Out-station Equipment Inductive loops & GR Marksman 660 counters CCTV cameras for verification Dedicated fibre optic cables for signal transmission

18. Safe roads, Reliable journeys, Informed travellers Minimum Condition Criteria must be met before any payment made Congestion Management Payments

19. Safe roads, Reliable journeys, Informed travellers (b)Active Safety Adjustment Criteria for Safety Payments or Deductions Cap Benchmark +PIAs £ Deduction £ Bonus C B A BC -PIAs Cap Zone A – no adjustments Zone B – enhanced adjustments Zone C – standard enhancements -8-228

20. Safe roads, Reliable journeys, Informed travellers SOME LESSONS LEARNT l Schemes with large new-build elements more viable (more risk) l Need to reduce tendering costs l Need to reduce tendering / negotiation period l Need for robust reality check, e.g. risk pricing l Need for well-resourced DBFO companies l Need to streamline contractual procedures l Need for appropriate monitoring

21. Safe roads, Reliable journeys, Informed travellers M25 London Orbital New-build cost: £2bn O/A cost (incl. O&M): £5bn NEXT PRIVATELY-FINANCED / DBFO PROJECT

22. Safe roads, Reliable journeys, Informed travellers ECIDBFOM1 M25 Indicative Programme Legend: J1b-3 J5 – 6/7 J16 - 19 J19 - 23 J23 - 27 J27 - 30 M1 Section 3 Section 2 Section 1a Section 1b Section 5 Section 4 J6a - 10 Junction 20062007 2008 2009 2010 2011 2012 2013 2014 2015 ECI DBFO Ongoing

23. Safe roads, Reliable journeys, Informed travellers Thank You! alec.briggs@highways.gsi.gov.uk +44(0)113 283 6303 bdrewett@pellfrischmann.com +44(0)1924 368 145