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    Highways PFI Public Presentation June 2011

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    OnTheWightNews
    This document summarizes a public information session about a highways PFI project on the Isle of Wight. The PFI will involve private financing to refurbish and maintain the public highway network over 25 years. It will include £260 million in capital works, life cycle maintenance for 18 years, and routine maintenance and network operations for 25 years. The project aims to upgrade roads and bridges while creating local jobs and apprenticeships. Supporters believe it will efficiently deliver improvements while ensuring cost certainty, accountability for performance, and potential savings compared to the current approach. Critics worry about excessive profits or reduced public control, but the document outlines steps taken to address these concerns.

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    Highways PFI Public Presentation June 2011

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    OnTheWightNews
    781 views26 pages
    This document summarizes a public information session about a highways PFI project on the Isle of Wight. The PFI will involve private financing to refurbish and maintain the public highway network over 25 years. It will include £260 million in capital works, life cycle maintenance for 18 years, and routine maintenance and network operations for 25 years. The project aims to upgrade roads and bridges while creating local jobs and apprenticeships. Supporters believe it will efficiently deliver improvements while ensuring cost certainty, accountability for performance, and potential savings compared to the current approach. Critics worry about excessive profits or reduced public control, but the document outlines steps taken to address these concerns.

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    This document summarizes a public information session about a highways PFI project on the Isle of Wight. The PFI will involve private financing to refurbish and maintain the public highway network over 25 years. It will include £260 million in capital works, life cycle maintenance for 18 years, and routine maintenance and network operations for 25 years. The project aims to upgrade roads and bridges while creating local jobs and apprenticeships. Supporters believe it will efficiently deliver improvements while ensuring cost certainty, accountability for performance, and potential savings compared to the current approach. Critics worry about excessive profits or reduced public control, but the document outlines steps taken to address these concerns.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF or read online from Scribd
    Download as pdf
    781 views26 pages

    Highways PFI Public Presentation June 2011

    Uploaded by

    OnTheWightNews
    This document summarizes a public information session about a highways PFI project on the Isle of Wight. The PFI will involve private financing to refurbish and maintain the public highway network over 25 years. It will include £260 million in capital works, life cycle maintenance for 18 years, and routine maintenance and network operations for 25 years. The project aims to upgrade roads and bridges while creating local jobs and apprenticeships. Supporters believe it will efficiently deliver improvements while ensuring cost certainty, accountability for performance, and potential savings compared to the current approach. Critics worry about excessive profits or reduced public control, but the document outlines steps taken to address these concerns.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PDF or read online from Scribd
    Download as pdf
    of 26

    Welcome to Public Information Session

    IW Highways PFI
    16 June 2011
    Edward Giles Stuart Love Jay Jayasundara

    Purpose
    To explain
    What is Highways PFI How it is funded What are the benefits

    Timescales

    Answer your questions

    What is PFI?
    Private Finance Initiative (PFI) Private funding for delivering public services A means by which
    Private sector makes capital investment in a public asset front up Private sector provides service over life time of contract Public sector makes service payments over the project

    lifetime
    Performance rewarded through Service payments -linked

    to quality & minimising disruption

    What is included in the PFI?

    What is included in the PFI?


    Publicly maintained Highway Network Refurbishment capital works over 7 years Roads, bridges, footways, retaining walls, lighting, street furniture, traffic signs, CCTV, drainage schemes, 17 major capital schemes, car parks, new highway depot, cycle ways

    Life cycle maintenance capital works over 18 years Maintaining upgraded assets to standard
    Routine maintenance over 25 years Street cleansing, grass cutting, hedge trimming, ornamental planters, cleaning bus shelters, signs, street lighting Operating highway network over 25 years Winter maintenance; energy payment; attending road traffic accidents; emergencies (flooding..); operations of CCTV; traffic lights; car park ticketing machines; removal of animal carcasses

    How is PFI Funded?


    Government Grant For Capital works - 260m NPV (Cash over 25yrs 487m) Biggest ever Grant not a loan Council Contribution For Maintenance & Operations Maximum 8.3m in first year Not new money Simply transfer of current spend on Routine Maintenance & Operating Highway Network

    260m Govt Grant + IWC Contribution = Project Cost Final Cost of IWC Contribution, expected to be around 1m to 1.5m less finalised in November 2012 Hence, 8.3m is upper end of IWC contribution Total Investment just under 0.8bn over 25 years.

    Where is 8.3m currently spent?


    IWCs Statutory Responsibility - maintenance & operation

    Employs over 70 staff in area within PFI scope salary, accommodation, overheads
    Contracts for street cleansing, winter maintenance, street lighting energy, lighting maintenance, CCTV 24 hr operation, traffic lights, grass cutting, planters, hedge trimming Cleaning of signs, bus shelters, street furniture, attending road traffic accidents, animal carcasses, highway trees, trees adjacent to highways..

    Emergencies, flooding, supporting special events, festive decorations


    Road space allocation for Statutory Undertakers, NRSWA, collection of fines, administering licences skips, scaffolds, hoarding, oversailing Temporary traffic orders, highway support to planning application, unauthorised attachments, A boards Condition surveys of the highway network, safety inspections, bridge inspections

    Customer inquiries, FoI requests, government statistics responses, insurance claims

    Local Employment opportunities


    Civil Engineers & designers Technicians site setting out, quality control, supervision, inspection, geologists.. Environmentalists pollution control, flora & fauna, drainage, archaeologists, tree & grass maintenance, water, carbon Lighting/electrical engineers & technicians Admin IT experts, Accountants, Quality controllers,

    Ground workers, kerb layers, machine operators, masons, painters, drainage workers
    Concrete/black top technicians

    Immediate Supply chain aggregate industry, transport industry


    Wider supply chain hotels, farm products, local shops,

    Climate projections for 2020

    Summer rainfall: -10%

    Winter rainfall: +10%

    Summer temperature:+1-2C

    These projections show us the future we need to avoid, and the future we need to plan for Hilary Benn Source: UK Climate Impacts Programme

    Carbon & Water


    Carbon Footprint & Water Footprint Tool to measure usage Modeling Embedded & Consumed

    Isle of Wight predicted to be an area of significant water scarcity by 2025


    30% of water already sourced from mainland

    Bidders bid total carbon & Water likely to be consumed in construction & operations Bid evaluated as part of selection process Winning bidders Carbon & Water locked into contract Required to report carbon & Water consumption annually If consumption exceed bid penalty applies Key drivers significant incentive to locally source material, reduce transport, max recycling, reduce energy consumption

    First ever bid model in a PFI Contract


    Practical delivery of Eco Island theme

    Street lighting & Energy


    Major contributor to Carbon footprint - incentive to change to an efficient lighting system Proposed LED lighting replacement in the early CIP years Central Management system providing ability to reduce lighting levels, vary on/off times, turn off lights, detect faults remotely, integrate with other remote control system Housed in single control room with CCTV - ability to increase lighting when an incident happens Incentives to reduce energy consumption & lighting cost by 50% or more

    Lots of innovation in this area

    Flexibility post contract


    Refinancing Best Value Reviews Future changes to technology, innovation, efficiencies gain share 75:25 in Authoritys favour 3rd Party income 75:25 in Authoritys favour

    Fully priced works schedule


    Requirement for market testing

    External competition

    Will I see any difference?

    Upgrading the Islands roads

    What are the time scales?


    Initial Design
    6 months

    Detail Design
    10 months

    Refinement
    5 months

    Final Tender
    6 months

    Preferred Bidder Mobilisation


    5 months November 2012 April 2013 5 months

    December 2011

    October 2010

    May/June 2012

    July 2011

    What the Critics say?


    Critics Rigid contracts
    Actions to address Build in provision to change contract; ascertain cost of making change up front

    Excessive profits Introduce sharing of refinancing gains in the future; Fixed cost (except inflation) market from refinancing test future costs; build in best value reviews Private sector Contractors operational efficiencies greater cannot borrow than additional cost of borrowing cheaper Cost of borrowing Contractor Fixes borrowing rate for the 25 years unknown for
    contractor Loss of member Write in reporting/ approval controls in control contract; make reporting transparent

    What the Supporters say?


    Supporting Efficient Why?

    Payments linked to performance; tasks combined removing conflicts; no overlapping contracts; efficient planning; modern technology

    Price certainty Fixed price contract provides cost certainty; only variable is inflation - common to any procurement Effective No Service No Payment; Delivery delivery measured by performance targets; failure leads to loss of income big incentive Better public Payments link to service leads to improvements in the service public receives service

    Excessive profits secondary markets


    Radio 4 programme 14 June Treasury Select Committee & Public Accounts Committee hearings Back ground funding structure of contractor Mix of Debt & Equity = typically 15 to 20% equity around 20m Debt terms based on best borrowing deals at contract Equity what the shareholders invest accept both risks & rewards Internal Rate of Return determines profit they expect 10% to 15% If contract performs well share price goes up If share price goes up shareholder may want to sell their shares Question should they be entitled to sell shares & make profit?

    Share price increase when performance exceeds expectations


    Gains typically through aggregation mainly FM, hospital types of contracts

    Refinancing to manage share of gains in Debt financing


    IWC Contract will deal with Equity side gain without destroying incentives for improving performance

    How is IWC dealing with PFI?


    30 months of detailed contract planning, negotiations before award of contract

    Comprehensive asset base and condition strong basis for contractors to bid on significant work done to build this data
    Allocation of 7.6m of funding to plan, prepare & manage procurement buying expertise where appropriate Dedicated team - building in-house capability & capacity for the future

    What are the benefits?


    One stop shop refurbishment, maintenance & operations

    Refurbishment of the existing public highway network to current standards roads, structure, cycleway, lighting, control room, street scene retaining the heritage Life cycle maintenance of refurbished network for 18 years Hand back network in specified condition with residual life (typically 8 10 years minimum) at end of 25 years Operate & maintain highway network to higher standard Carry out routine maintenance to maintain safety of the network A new depot & Central Control Room housing CCTV, Traffic signal, Yar Bridge controls purchase land, build & handback Creation of apprenticeships & training schemes for next generation Island wide employment opportunity between 100 to 500 jobs Economic regeneration - 0.8bn worth of investment economic benefit could be many times over

    Significant up-skilling of Island Contractors & opportunity to deliver services

    Key features

    Summary

    260m non-repayable only way to get huge investment

    Council contribution same as what we spend now with potential for savings Council no borrowing no repayment of any form Fixed price contract Service payments linked to inflation Significant opportunity to create construction industry on the Island Massive regeneration opportunity for next generation

    If no Highways PFI Piecemeal patching & mending Opportunity for greater efficiency missed Opportunity for potential savings missed Further public sector spend reduction-road closures inevitable

    Our Contacts

    Email:
    [email protected] Website: http://www.iwight.com/highways-pfi

    Any Questions?

    The Highways PFI is the single largest engineering project the Island has ever committed to

    www.iwight.com

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