AASHTO Construction Sub-Committee Annual Meeting Virginia Beach Adrian Sheppard Director for PPP and Asset Management

1 st August 2011 Delivering Highway Services through The Portsmouth PFI experience

Overview Overview Background to the Contract - Funding issues Background to the Contract - Funding issues Contract Structure & Controls Contract Structure & Controls Contract Efficiencies Contract Efficiencies Delivery through the Core Investment Period Delivery through the Core Investment Period Transition into the Life Cycle Replacement Period Transition into the Life Cycle Replacement Period

The City of Portsmouth Unitary Authority Unitary Authority Population Population Predominantly Urban Predominantly Urban Gateway to Europe Gateway to Europe Total Road Length 455km Total Road Length 455km PRN66km SRN94km TRN295km 84 Structures 84 Structures lighting units lighting units

Key Issues Key Issues Strategically important city Strategically important city Cyclical peak traffic flows Cyclical peak traffic flows Residential and business pressures Residential and business pressures 27 Political Wards 27 Political Wards Competing needs Competing needs

Key Issues Key Issues Road Condition Road Condition 48% failed or critical 48% failed or critical Insurance Claims Insurance Claims Public Dissatisfaction Public Dissatisfaction Insufficient funding Insufficient funding Lack of investment Lack of investment Other priorities Other priorities

Bid Process Bid Process OBCOutline Business Case EOIExpression Of Interest PQQPre-Qualification ISOSOutline Solutions ISDSDetailed Solutions ISRSRefined Solutions CFTFinal Tender PBPreferred Bidder FCFinancial Close

The Highway Maintenance Project Ensign Highways Ltd Ensign Highways Ltd 25 year Contract 25 year Contract 5 year CIP 5 year CIP $850m $850m

Core Investment Period5yrs$100m Life Cycle Replacement20yrs$80m Operations & Maintenance25yrs$670m Total$850m Contract Value

Advantages Transfer of risk to service company Transfer of risk to service company Local authority gains non-refundable grant from the Government to help with the cost of borrowing Local authority gains non-refundable grant from the Government to help with the cost of borrowing Service budget is ring fenced and certain Service budget is ring fenced and certain Significant and guaranteed improvements in network condition Significant and guaranteed improvements in network condition Hand-back in a guaranteed condition with residual life Hand-back in a guaranteed condition with residual life

Exclusions from the Contract Exclusions from the Contract Urban Traffic Control Systems Urban Traffic Control Systems Bus Stops Bus Stops Refuse Collection Refuse Collection Coastal Protection Coastal Protection Retained Highways Functions Retained Highways Functions Abandoned Vehicles Abandoned Vehicles Other City Council Services Other City Council Services

Key Principle Design, construction and operation risk Design, construction and operation risk transferred to the Service Provider No third party claims to PCC Fence to Fence Concept

Shared Risks Shared Risks Major Structural Repairs Major Structural Repairs BridgesBridges Highway drainageHighway drainage Change in Standards Change in Standards Other Network Changes Other Network Changes Insurance- Total Loss of the Network Insurance- Total Loss of the Network Interest Rate Risk Interest Rate Risk Inflation Risk Inflation Risk Force Majeure Force Majeure

Structure Structure

Role of the SPV The SPV is the interface between all parties to the project: The SPV is the interface between all parties to the project: The Public Authority and their advisorsThe Public Authority and their advisors The Lenders and their advisorsThe Lenders and their advisors The Contractor and their advisorsThe Contractor and their advisors The Sponsors and their advisorsThe Sponsors and their advisors

Role of the SPV Core tasks for the SPV management function include: Core tasks for the SPV management function include: Develop and deploy processes, systems and proceduresDevelop and deploy processes, systems and procedures Technical and commercial risk assessment and managementTechnical and commercial risk assessment and management Financial reportingFinancial reporting Performance monitoringPerformance monitoring

Role of the SPV Core tasks for the SPV management function include: Core tasks for the SPV management function include: Management of funding arrangementsManagement of funding arrangements Contract profile and promotionContract profile and promotion Dispute managementDispute management Partnership developmentPartnership development

Scope of Work Scope of Work Refurbishment Refurbishment Winter maintenance Winter maintenance Periodic maintenance Periodic maintenance Sweeping & cleansing Sweeping & cleansing Third party claims Third party claims Statutory Undertakers Statutory Undertakers Network Management Network Management Fence to Fence

Payment Mechanism Payment Mechanism Usage Payment = Shadow toll (10%) Usage Payment = Shadow toll (10%) Availability Payment = Monthly lump sum (90%) Availability Payment = Monthly lump sum (90%) Deductions (Performance based) Deductions (Performance based) 65% % 18.6 MaintenanceInvestment period 20 yrs5 yrs NCI AP

Monitoring Monitoring Surveys Surveys Inspections Inspections Internal Audits Internal Audits PCC Independent Certifier PCC Independent Certifier Banks Technical Advisor Banks Technical Advisor Residents / City Help Desk Residents / City Help Desk Councillors Councillors Newspapers Newspapers

Liaison and Dispute Resolution Procedures Progress Meeting Operational Meeting Network Board Principals Expert Progress Meeting Operational Meeting Network Board Principals Expert

Service Points Warning Notice Contract Termination Default Notice Periods

R & D R & D Pavement design Pavement design Project and Construction Management Project and Construction Management Model Development Model Development Products & binders Products & binders Recycling Recycling & Environment & Environment Expertise & Innovation Expertise & Innovation

Performance Measures Number of public enquiries Number of public enquiries

Performance Measures

Efficiency Savings Investment at right time Investment at right time Combined Maintenance/Improvement Schemes Combined Maintenance/Improvement Schemes Maintenance/Capital Works/Cleansing Teams interact Maintenance/Capital Works/Cleansing Teams interact Shared Office Shared Office Joint Training Initiatives Joint Training Initiatives Seeking Innovation Seeking Innovation Better management of Utilities activities Better management of Utilities activities

Efficiency Savings Integrating design with construction Integrating design with construction Improved buildabilityImproved buildability Better budget managementBetter budget management Speedier construction processSpeedier construction process Better interface management Better interface management Improved response Improved response

Public Satisfaction 2005 Public Satisfaction Ps Excellence Award Ps Excellence Award 2006 IHT Effective Partnership Award 2008 IHT Effective Partnership Award 2008 Other Local Authorities in UK following model Other Local Authorities in UK following model Public Satisfaction 2008 Public Satisfaction 2008 Highways Partnership Awards 2009 Highways Partnership Awards 2009 ICE Award Best Community Project ICE Award Best Community ProjectRecognition

Mayfield School Mayfield School Tidy School Tidy School The News We can do it The News We can do it PCC Tidy campaign PCC Tidy campaign Portsmouth in Bloom Portsmouth in Bloom Brunel commemoration Brunel commemoration Kid safe Kid safe University of Portsmouth University of Portsmouth Local Community Involvement Local Community Involvement

THANK YOU