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APPENDIX 1

ISLE OF WIGHT COUNCIL HIGHWAYS PFI OUTLINE BUSINESS CASE (DRAFT)

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Index

1. Executive Summary 1.1 Introduction 1.2 Background 1.3 Strategic Context 1.4 The Need 1.5 Scope 1.6 Benefits 1.7 Achieving Value for Money 1.8 Affordability 1.9 Programme Delivery 1.10 Member and Stakeholder Support 1.11 Conclusion 2. Strategic Case 2.1 Introduction 2.2 Pathfinder Project 2.3 Local Background 2.4 Strategic Policy Context 2.5 National Policy Context 2.6 Regional Policy Context 2.7 Local Community Strategy – Eco Island 2.8 The Isle of Wight Economic Strategy 2.9 Isle of Wight Council Corporate Plan – One Island 2.10 The Island Plan 2.11 Local Transport Plan 2006 – 2011 (LTP2) 2.12 Area of Outstanding Natural Beauty (AONB) Management Plan 2.13 Historic built environment 2.13.1 Public Realm 2.13.2 Archaeological Heritage 2.13.3 Natural Environment – Species and Habitats 2.13.4 Historic Environment Action Plan (HEAP) 2.14 Transport Asset Management Plan

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2.15 The Network 2.15.1 Asset Inventory, Condition and Survey Data 2.15.2 Road Pavement Condition 2.15.3 Street Lighting 2.15.4 Traffic Signals 2.15.5 CCTV 2.16 Current Service Delivery and Performance 2.16.1 Current Spending on Highways Services 2.17 Drivers for Change 2.17.1 The Service Gap 2.17.2 Carriageways 2.17.3 Footways 2.17.4 Bridges and Other Structures on the Highway Network 2.17.5 Street Lighting 2.17.6 Traffic Signals 2.17.7 CCTV 2.17.8 Drainage 2.17.9 Rural Rights of Way 2.17.10 On and Off Street Car Parking 2.17.11 Major Works – Bouldnor Road 2.18 Project Overview 2.19 Project Scope 2.19.1 Roads 2.19.2 Structures 2.19.3 Rural Rights of Way 2.19.4 Street Furniture 2.19.5 Footways and Footpaths 2.19.6 Traffic Signals 2.19.7 Street Lighting 2.19.8 CCTV 2.19.9 Grass Cutting and Street Cleansing 2.19.10 Floating Bridge 2.19.11 On and Off Street Car Parking

2.19.12 Bouldner Road Improvement 2.20 Standards of the Project 2.20.1 Core Investment Period 2.20.2 Post CIP

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2.21 Conclusion 3. Economic Case 3.1 Introduction 3.2 Options Appraisal 3.3 Service Improvements and Community Benefits

3.3.1 Time savings from higher traffic speeds as a result of better road conditions 3.3.2 Changes in travel times from changes in the volume of road works and road closures 3.3.3 Vehicle operating cost savings 3.3.4 Reduction in the number of accidents 3.3.5 Reduction in the Council’s public liability payments 3.3.6 Reduction in accidents and street crime as a result of improved street lighting 3.3.7 Time savings from the removal of weight and width restrictions 3.3.8 Efficiency gains from two sources – 1) the transfer from public to private sector management of the road network and 2) being able to undertake more effective maintenance measures because of the availability of more funds.

3.4 Value for Money Assessment (TQAT) 3.5 NATA 3.6 Assessment of Funding 3.7 Preferred Investment/Service Delivery Option 3.8 Conclusion 4. Commercial Case

4.1 Introduction 4.2 Procurement Appraisal for PFI

4.3 Procurement Process 4.4 Competitive Dialogue (CD) 4.4.1 Evaluation Criteria

4.5 Output Specification 4.5.1 Performance Requirements 4.6 Project Agreement 4.7 Payment Mechanism

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4.8 Derogations from SOPC4 4.9 Commercial Issues 4.9.1 Wharf Facilities 4.9.2 Isle of Wight Mineral Background 4.9.3 IWC Property Considerations 4.10 Market Soundings/Market Interest 4.11 Procurement Data

4.12 Encouragement of Competition 4.13 Bankability 4.14 TUPE 4.15 Summary 4.16 Conclusion 5. Financial Case 5.1 Introduction 5.2 Costs 5.2.1 Core Investment Period (CIP) 5.2.2 Lifecycle, Operations and Maintenance Costs 5.3 Shadow Bid Model 5.3.1 Shadow Bid Costs 5.4 PFI Credits and Calculation Methodology 5.4.1 Gapfunding 5.4.2 Revenue Abatement 5.4.3 Requirement 5.4.4 Sensitivities 5.5 Affordability 5.5.1 Budgetary Contribution 5.5.2 Cash flows from PFI Credits 5.5.3 Interest on cash balances 5.6 Preferred bidder debt funding competitions 5.7 Value for Money 5.7.1 Pre and Post Optimism Bias 5.7.2 Risk Transfer Costs 5.7.3 Qualitative Assessment 5.7.4 Quantitative Assessment 5.8 Initial View on Accounting Treatment

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6. Management Case 6.1 Introduction 6.2 Project Management and Project Governance Structure (Pre and Post OBC 6.2.1 Project Team Structure – to OBC 6.2.2 Project Team Structure – Post OBC 6.2.3 Contract Management Team – Post contract award 6.3 Expert External Advisors 6.4 Meetings 6.4.1 Internal 6.4.2 External 6.5 Project Delivery Plan and Timetable 6.6 Operational phase and contract monitoring 6.7 Project Interface and Dependencies 6.8 Stakeholder Consultations and Communications Strategy 6.8.1 Local Residents 6.8.2 Network users 6.8.3 All council staff 6.8.4 Statutory Undertakers 6.8.5 Local Suppliers 6.9 Sponsorship and Support 6.10 Risk Management 6.11 Data Management 6.12 Gateway Reviews/Independent Scrutiny 6.12.1 Gateway Reviews 6.12.2 Independent Scrutiny 6.13 Statutory processes 6.14 Readiness to Proceed to Procurement 6.15 Conclusion

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Appendix Number  Appendix Name 

1  Inventory and Condition Data 2  Technical Modelling Process 3  Core, Non‐Core and Retained Services 4  Traffic Modelling 5  Justification of CIP Duration 6  Non‐Financial Options Appraisal 7  Time Savings and Network Improvements 8  NATA 9  Estimated Costs of Required Work 10  OJEU 11  Key Aspects of the Output Specification 12  Derogations from SOPC4 13  PIN 14  Letters of Support from Soft Market Testing 15  A Basic Guide to TUPE 16  Admitted Body Status 17  Pension Rights 18  Monte Carlo Narrative 19  Qualitative and Quantities Assessment 20  TQAT 21  Letters of Support from External Advisors 22  Project Plan 23  Risk Management Strategy 24  Risk Register  25  Gateway Review Report 

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Isle of Wight Highways PFI

Foreword Statement from Leader of the Council / Lead member

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1. Executive Summary 1.1 Introduction The Isle of Wight Council has developed a holistic approach to delivering the

Highways PFI, bringing in all aspects of highways services within the single

delivery PFI mechanism. The Highways PFI will upgrade the entire adopted

highway network between fence to fence and all associated assets and

streetscene and then maintain and operate throughout the life of the project.

The PFI project will raise the standard of the highway, offer a higher standard of

service, improving safety and enhance the street appearance.

1.2 Background The Department for Transport (DfT) selected the Isle of Wight Council (IWC) as

one of the three “pathfinder” Highways PFI Projects in March 2008. The Island’s

highway network has suffered from years of under investment and is badly in

need of significant investment to bring it to an acceptable standard. Without

such major investment, restrictions of the network will continue to grow to a

point that the highway network will not be operated in a safe manner. The

approval of the IWC’s Expression of Interest has therefore given the Council the

impetus needed to rehabilitate and operate a safe highway network.

1.3 Strategic Context The Council’s and its partner’s vision is to make the Island a world renowned

Eco Island with a thriving economy and a real sense of pride where residents

and visitors enjoy healthy lives, feel safe and are treated with respect. The

Island, despite being part of the more prosperous South East region suffers

from low productivity, low wages and low skill levels. We are determined to

improve the job opportunities and create a sustainable economy and it is

imperative that we address our failing transport infrastructure. The Highways

PFI has been developed to align itself with the national, regional and local

strategic objectives by placing sustainable development at the heart of Island’s

regeneration plans. The project, in addition to offering a higher standard of

highway services, will help to create a significant stimulus to the local economy,

offering an opportunity to regenerate parts of the Island and create highway

maintenance related industry on the Island. With an improved transport network

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and a lower wage based economy, the Island will also be better placed to

attract inward investment.

1.4 The Need The Island’s highway network has suffered from years of less than required

levels of investment. The condition of the roads, footways and street lighting

has reached a level where weight and width restrictions are now becoming a

regular feature. The Island’s roads condition has fallen to below the bottom

quartile of all the national highway condition indicators. The Island wide

customer survey indicates that the state of the roads is now the biggest concern

for the residents and visitors. The need to refurbish the Island’s highway

network is therefore overwhelming.

1.5 Scope The Council has adopted the “fence to fence” approach to defining the project in

order to achieve considerable synergies and efficiencies in the delivery of

highway related services. This approach also enables the Council to limit

contractual interfaces to the minimum to deliver a holistic service with single

point responsibility. The Highways PFI project will deliver the upgrading and

maintenance of the roads, bridges, retaining walls, footways, rural rights of

ways, street lighting, CCTV, traffic controls, on and off street car parking,

floating bridge, street furniture, grass cutting and street cleansing. The Council

has carried out soft market testing to ascertain the market appetite for the scope

and is pleased to receive considerable support for the approach being taken.

1.6 Benefits The Highways PFI project will upgrade the Island’s infrastructure and provide a

much improved highways service to Islanders and tourists alike. These direct

benefits will be derived from smoother carriageways and footways, better

lighting, better quality rights of ways for walking and riding and a more reliable

crossing between Cowes and East Cowes. The softer benefits of safer, clean,

well lit streets will have a major impact on building higher self esteem among

the local citizens and help to contribute towards shaping a community that is

proud to be part of a naturally beautiful island that has built a sustainable

economy around a major investment on its highways. The Council is working

with its local partners to develop the local industries to become ready to

become partners for delivering the works at sub contractor level; the Council is

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also developing its strategy to work with local schools, technical colleges and

universities to build the Island’s skills base to ensure there is enough capability

and capacity needed to support the Highways PFI over the 25 year period. This

Council believes developing the local industry and educational base can help to

regenerate the Island and retain a very high proportion of the PFI investment

within the Island, producing a multiplier growth effect for the local economy.

1.7 Achieving Value for Money The Council’s holistic approach to delivering highway related services will help

to achieve significant synergies and scale benefits. In addition, the Council will

be using carbon footprint to effectively manage the Island’s mineral resources

and use of energy; encourage the use of local labour; all of which will have a

significant impact on reducing the cost base. The Isle of Wight is determined to

produce a highway refurbishment solution that addresses some of the major

structural issues of the infrastructure but beyond that, it has taken a pragmatic

approach to raise the average condition by classification of road usage. At the

lowest level of usage, the level of upgrade is kept to a minimum to deliver a less

invasive treatment, while capitalising on adding strength to the surface.

The Council has demonstrated using the DfT’s New Approach to Appraisal

(NATA) that the project delivers sound economic benefit. In addition, there are a

number of non-quantifiable, qualitative benefits which have been captured in the

appraisal. The Council has developed a shadow bid model in line with the HM

Treasury methodology and compared it with the Public Sector Comparator to

demonstrate that this Project delivers value for money.

1.8 Affordability The Council has built up a robust inventory of all its assets and a

comprehensive database of its condition. Using this, it has built a Cost Model

which provided the basis for the PFI Shadow Bid Model. The Council has taken

the opportunity to model the current financial market uncertainty and taken the

worst market conditions at the beginning of this year to calculate the PFI Credit

requirements. On the basis of this conservative estimate, the Council is seeking

a PFI Credit of [£399.5million]. The Council has doubled its contribution from

previously allocated budgets to £11.15million per annum to deliver this Project.

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1.9 Programme Delivery The Council has put in place a robust governance structure, a dedicated

Programme Delivery team led by a very experienced Programme Director,

supported by in-house professional Engineers, Accountants and Lawyers to

bring together the necessary local highway background and experience.

Supporting the in-house team is a strong group of external advisors, who bring

a wealth of PFI experience. The Council has paid particular attention to building

a single “integrated project team”, setting up a dedicated office where advisors

and the Council officers work in a single team.

The Programme Director has developed a deliverable programme and a

procurement stage budget of £7.6million, which includes a contingency of

£0.5million, should the programme get extended due to external factors by up to

6 months. The Council has formally approved this programme and budget and

has made a strong commitment to making other shared corporate resources

available. The Council is increasing the full-time capacity of the in-house PFI

Team, post OBC submission to enter the procurement phase and has

developed the Contract Management structure post financial close. The post-

OBC structure will provide the foundation for building capability for the longer

term Contract Management team. Those who are involved in the competitive

dialogue phase will gain considerable insight into contract negotiations and the

final contractual terms agreed with the Service Provider.

The Council has built an excellent inventory and condition database and this will

be made available as part of the data room to bidders. This information will also

be available in GIS format and a video of the network. The Council now has a

very high degree of confidence in its data. The condition assessment will now

be repeated annually to maintain the robustness of the data.

With the combination of a strong governance framework, adequate resourcing,

experienced project leadership, deliverable time scales and an excellent asset

base, the Council now has all ingredients for successful Project delivery.

Moreover, it has a very high degree of confidence in delivering a Project with an

appropriate commercial package suitable for the Isle of Wight conditions.

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1.10 Member and Stakeholder Support The Highways PFI Project has strong all party support. The Project was initially

developed under Island First (a Liberal Democratic/Independent administration)

and has continued to progress under the Conservative administration. The

Project plays a vital role in supporting all party aims of creating sustainable

employment on the Island.

[Members have approved the scope (to be submitted to Cabinet on 11 August)]

of the Project, the procurement strategy, resources and the delivery timescales.

The Members have delegated appropriate authority to the Project Board and

the Project Sponsor to make all procurement decisions following the approval of

the OBC until the Preferred Bidder selection and appointment.

The Project has wide support among the Island’s stakeholders; the businesses,

community groups and partners are aware of the significant social, economic

and regeneration benefits the Project will bring to the Island. The council staff

who are likely to be affected by the Project are regularly briefed and the

Highway PFI Project intranet site provides the regular updates.

1.11 Conclusion The Council values and protects the pathfinder status it gained following the

successful submission of the Expression of Interest. It has now developed the

Project taking a practical and pragmatic approach to developing an attractive

but challenging package for the market, in a sensible timescale backed up by a

strong delivery team. The ethos of this team is “partnership working” and that

spirit will continue, even through the dialogue period with the ultimate aim of

delivering a “win-win” approach to this Project. The Council is now ready to

embark on the procurement stage of the Project, following approval of this

Outline Business Case.

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2. Strategic Case 2.1 Introduction The Isle of Wight Council and its strategic partners have grasped the

opportunity to address some of the major challenges that are fundamental for

the regeneration of the Island. The Council is leading the way by implementing

both challenging internal reform and modernisation, and external service

reforms in the education and highways maintenance sectors. These reforms

are driven by the Island’s strategy, the Eco Island Vision 2008-2020, for a

sustainable community that thrives amidst the natural beauty and surroundings.

The Highways PFI forms an integral part of the strategic reform to increase the

capability and capacity of the Island and improve its attractiveness for inward

investment. The Highways PFI is seen as the significant catalyst not just for

improving the condition of the highway network, but also to create a road

construction and maintenance industry and its supply chain, using local natural

and physical resources. The Council and its Strategic Partners are working

towards an economic regeneration programme, underpinned by the Eco Island

vision, to derive significant economic benefits, for example through a multiplier

effect from the Highways PFI investment over the 25 year life of the project.

External Drivers for change stem from National, Regional and Local Policy.

These in turn relate to National Planning Policy Guidance, the special policies in

the South East Plan relating to the Isle of Wight, which underpins the Isle of

Wight Community Strategy, the Isle of Wight Economic Strategy, and AONB

Management Plan formulated and agreed with local partner organisations.

Within this context Internal Drivers are identified from the strategies and policies

developed by and within the Isle of Wight Council, including the Isle of Wight

Development Plan and Local Transport Plan.

The Council has a clear vision for the Highways PFI which is:

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To create an efficient highway network and public realm, providing

sustainable, high quality, value for money service to residents and

visitors, whilst acting as a catalyst for social and economic regeneration

of the Island.

Based on this vision, the Council has set the following Project Objectives:

• To ensure the provision of a high standard, fit for purpose highway

network to meet the needs and aspirations of residents, business and

visitors for the movement of goods and people.

• To promote sustainable transport options and initiatives by ensuring

the availability and maintenance of the whole physical highway and

rights of way asset and appropriate traffic management.

• To provide a comprehensive and seamless service for all parts of the

highway, fence to fence, both in built up areas and the countryside

with appropriate standards and use of materials to reflect local

distinctiveness and character.

• To create a safe highway environment within the context of a well

managed public realm/whole street scene

• To create a highway maintenance industry that act as a stimulus for

the economy.

The Project will be developed to deliver these objectives by designing an

appropriate contract structure defining the project which can be achieved within

the affordability envelope.

The Isle of Wight Highways PFI is a unique Project. In an Island context,

surrounded by water, there are no overlapping local authority boundaries with

neighbours or trunk road network that come under Highways Agency

responsibility. The highway boundaries, ownership and responsibilities are

therefore clearer in comparison to any other local authority on the mainland. As

one of the three pathfinder schemes, it is also well placed to provide valuable

knowledge, direction and lessons for future tranches of maintenance PFI

programmes. In particular, the Council intends to explore new opportunities,

innovative approaches, and future proofing to introduce advances in technology

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during the life of the PFI. It also intends to build a locally based highway

industry with its partners in the education sector, industry and the PFI provider.

2.2 Pathfinder Project In technical terms, the highways on the Island are largely rural in nature, in an

area of outstanding natural beauty, with pockets of urban roads surrounding the

local towns. The pathfinder approach taken by the Council will provide a

number of opportunities to learn lessons for the future and share knowledge for

the benefit of the highway industry:

• The Council has built up a complete list of its highways inventory and

condition. Using this data, it is building a Condition Index using certain key

parameters. The Council is keen to reflect the island conditions in its

deterioration model and to ensure an affordable specification. Similarly it will

develop skid resistance policy and a road condition model. Standards

appropriate to the island needs will also be appropriate to rural and semi rural

communities elsewhere in the UK.

• The Council will develop an output specification for rural rights of ways and

this is likely to become a base document in future projects.

• The Council will record progress and key issues faced at each of the key

stages and to share solutions developed with DfT and the other pathfinder

authorities.

• The Council is setting in place the foundation for a collaborative framework

with schools, technical colleagues, local universities and other educational

institutions to build the technical capability and capacity needed to create an

Island based Highways Maintenance Industry. The Island is in a unique

position to use the investment on the roads over the 25 years project period

to regenerate the local economy through planned, strategic investment in the

educational sector.

• The Council intends to seek proposals from bidders for setting up training and

apprenticeship schemes in association with the educational sector.

• The Council aims to create an economic regeneration climate that delivers

visible improvements across the Island and for Islanders and which acts as

the trigger for major regeneration. The economic regeneration benefit of

investment in transport projects is usually very difficult to measure, but the

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Island context offers an ideal contained market place to measure investment

and economic growth.

• The Council is keen to work with other local authorities, universities, research

organisations and international highway authorities to share the benefits of

the experience for the PFI model maintenance procurement.

2.3 Local Background The Isle of Wight, a diamond shaped island, separated from the UK mainland

by the sinking of the Ancient River Solent during the Bronze Age to become an

Island in its own right. The Island, separated from the south coast by the Solent,

measures approximately 13 miles by 23 miles along its diagonals and covers an

area of 38,014 hectares.

The Island has a rich history dating back to the Duke of Warwick, the first King

of the Isle of Wight, to Charles the 1st being held as a prisoner in Carisbrooke

Castle, and Queen Victoria’s favourite home Osborne House, which still stands

proud on the Island. In 2009 however, the Island is now part of the England and

Wales Local Authority system and has Unitary Authority status.

The Island has a unique and important natural environment, which is protected

by national and local designation. A majority of the Island is rural in character

with isolated farms, hamlets and villages and with over half the area designated

as Areas of Outstanding Natural Beauty, (AONB). Much of the coastline is

defined Heritage Coast and the majority of the coast and some inland areas are

designated for European and/or International nature conservation of wildlife

species and habitats. There is a cluster of five areas designated as the Isle of

Wight AONB, 41 Sites of Special Scientific Interest (SSSI), 28 existing and 4

proposed Conservation areas and 34 kms of heritage coast. The Island has

over 2000 listed buildings of which 28 are Grade 1, including the historic

Osborne House and Carisbrooke Castle.

Travel to and from the Island is via privately operated and un-subsidised vehicle

and passenger ferry services. The vehicle ferry routes are between Lymington

and Yarmouth in the West, Southampton and East Cowes centrally and

Portsmouth and Fishbourne in the East, creating pulses of traffic generation

onto the highway network. High speed passenger boat services are from

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Southampton to Cowes, Portsmouth to Ryde and a hovercraft service runs from

Southsea to Ryde.

The main settlements are around the centrally located county town of Newport

with a primarily radial road network linking the other main settlement areas such

as Cowes, East Cowes, Ryde, Sandown, Shanklin and Ventnor, distributed

around the coast. There is a coastal road system, linked by the Floating Bridge

at Cowes, encircling the Island which is valued by tourists and Islanders alike.

The Island has an integrated public bus network, but services are not available

in some rural areas. Island Line, part of the Stagecoach South Western Trains

franchise, operate the eight and a half mile of passenger railway serving the

towns of Ryde, Brading, Sandown, Lake and Shanklin. A leisure steam railway

operates between Wootton and Smallbrook.

In the absence of a comprehensive public transport network, the largely rural

community relies heavily on private transport. The 2001 census data showed

that compared to England and Wales, the Islanders have slightly higher car

ownership; some 64,000 cars/vans were recorded in the census, some 0.49

cars/vans per person or 67 per km. In addition, there is the daily influx of

passenger and heavy goods traffic, to meet the day to day needs of the

Islanders.

The Island’s 803 km of road network has become the lifeline for the Islanders,

playing a vital role in the social, commercial and recreational life of the

community. However, the conditions of the roads have deteriorated over the

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years and many roads are no longer fit for the purpose. Currently seven roads

have weight restrictions whilst a large number have width restrictions. The

failing road network is considered to be one of the key factors contributing to a

slow down in the economic regeneration of the Island.

The 2001 census recorded an Island population of 132,000. The Island’s

population distribution is skewed towards the elderly in comparison to national

averages; over 28% of the population were aged 60 years or over, compared

with around 20% for England and Wales; at the other end of the scale, those

aged 16 years and under were significantly lower at around 18%. The skewed

age distribution reduces the available pool of economically active citizens,

impacting the economy of the Island.

The public sector is one of major employers in the Island – namely, the Isle of

Wight Council, NHS, the Prison Service and the Police. The Island also

supports a number of specialist niche industries – wind turbine research and

development, Radar electronics/communications, yacht/boat building,

composite and resins, pollution control equipment, Royal National Lifeboat

Institution inshore lifeboats, cosmetics and fashion.

The Island’s economy is heavily dependent on the tourist industry and during

the summer months the Island’s population can double, with total numbers of

visitors reaching about 2.7 million each year. This can lead to traffic volumes

doubling during the summer month. The majority of the world’s leading

yachtsmen and women descend on the Island during Cowes week. The Island’s

Music Festivals and Walk the Wight are now nationally famous events attracting

many thousands from far a field. The Island is a paradise for walkers, cyclist

and horse riders. It has over 850km of Rural Rights of Ways traversing through

some of most beautiful parts of the Island.

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Whilst the Island sits geographically within the south-east of England it does not

benefit fully from the regions prosperity. The Island has pockets of deprivation

and five wards fall within the 20% most deprived areas in England. The rate of

unemployment has continued to reduce from the historical highs of 10% in the

mid 90’s to currently nearer 4% but much of the employment is seasonal, with

high dependency on the tourist industry. Recent economic changes have further

affected locally based industries causing an increase in the claimant count. The

Island has the second lowest average wage in the UK.

The image of an Island full of natural outstanding beauty, buzzing with an influx

of tourists in the summer, sits in stark contrast with the huge need for economic

regeneration, better employment opportunities, and improved standards of

living.

Isle of Wight Council works closely with the the South East Economic

Development Agency and stakeholders to support and develop the Island’s

economy through regeneration programmes, business critical infrastructure and

targeted business support. In recent years, the Island economy has grown

faster in both employment and GVA measures than the South East and UK

averages. The Island's economy is well placed to continue to grow, particularly

drawing on its environmental assets and strengths in growth sectors such as

renewables, aerospace, composites, tourism and marine related industry and

quality infrastructure/well maintained roads are critical to supporting this.

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2.4 Strategic Policy Context The Council’s vision of making the Island a great place to live, work and visit is

being achieved through an integrated series of underlying strategies and

policies consistent with regional and national policies. In this context, the

Highways Project has been developed in line with National and Regional

Strategies and driven by local strategy and polices as shown in the following

diagram.

National Policies

Transport

Economy

Planning

Regional Policies

South East Plan

Regional Economic Strategy

Local Policies

Eco Island

Island Plan

Economic Plan

Corporate Plan

IWC Highways PFISustainable Development, Economic Growth, Enhanced Social and Environmental Benefits

2.5 National Policy Context The Chancellor of the Exchequer, in his pre-budget statement in November

2008 set out the Government’s long-term economic goal - to secure and

maintain economic stability, in order to achieve its objective of a fair society

where there is security and opportunity for all. Its aim is to raise the rate of

sustainable growth, and achieve rising long term prosperity and a better quality

of life with economic and employment opportunities for all.

The 2004 Government White Paper “The Future of Transport, a network for

2030” sets out the Government’s vision for transport up to 2030. It recognises

the need for a transport network that can meet the challenges of a growing

economy and the increasing demand for travel, but a network that also achieves

environmental objectives. This strategy is built around three key pillars –

sustained investment, improvement in transport management, and planning

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ahead. This means coherent transport networks providing a more reliable and

free-flowing service for both personal travel and freight.

The Government’s Climate Change Bill introduces a legally binding target to cut

greenhouse gas emissions by at least 80 per cent by 2050, the most ambitious

in the G8, building on plans to deliver a one-third reduction in emissions from

1990 levels by 2020.

Against this back drop of the need for long term economic stability, supporting

increasing demand for travel whilst continuing to reduce greenhouse gas

emission, the Department of Transport announced a Highway Maintenance

Pathfinder Programme.

The Government ten-year Plan, Transport 2010, sets out the Strategy for

modernising the transport network nationally. The Plan sets several strategic

objectives including the elimination of the maintenance backlog on local roads,

bridges and street lighting. In addition, the July 2004 White Paper, The Future

of Transport - a network for 2030, reinforces the strategic importance of the

transport network in promoting sustainable, national and local economic growth

and in enhancing social and environmental well-being.

2.6 Regional Policy Context The South East is a major gateway to Europe and beyond and is the most

prosperous region in England. Even though the Island is part of the South East

Region, it does not share proportionately in the wealth of the Region. However,

the Island has a rich history of innovators and entrepreneurs who have made

valuable contributions to the South Eastern and the national economy.

However, sustaining inward private investment relies heavily on appropriate

regional and national strategies to support transport and other infrastructure

development.

The Regional Spatial Strategy (RSS) for the South East of England, known as

the South East Plan, published in May 2009, sets out the long term spatial

planning framework for the region over the next 20 years. The Plan is to

develop a healthier region by achieving more sustainable development,

protecting the environment and combating climate change.

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A healthier region means working to improve, among others things, the

provision of community transport facilities, sustainable transport links, a feeling

of security and an approach to a sharing the benefits of regeneration. The

South East Plan will deliver these through local policies which, in the case of

Isle of Wight, will focus on maintaining a high quality of life whilst increasing

prosperity and opportunities for the Islanders, at the same time nurturing and

enhancing the environmental assets, and promoting the efficient use of

resources.

The Regional vision is “By 2016 the South East will be a world class region

achieving sustainable prosperity.” The Region faces increasing challenges from:

• Globalisation – increasing competition but an opportunity to build on past

entrepreneurial culture,

• Smarter growth – higher levels of prosperity per head without increasing

ecological footprint,

• Sustainable Prosperity – innovating to provide economic prosperity within

environmental limits.

Investment in the Isle of Wight’s Highways PFI is aimed at strengthening the

highways network and transport across the Island to enhance its attractiveness

as a place for investment, thereby contributing to the success of the Region and

the Island. The Island has a relatively low cost base and an eco friendly

business environment which, with the support of SEEDA, is being revitalised

through economic regeneration. The Highways PFI is the key strand that runs

through this regionally supported regeneration and development.

2.7 Local Community Strategy - Eco Island The Island’s local strategic partnership is known as the Island Strategic

Partnership (ISP); the ISP is made up of leading organisations in the Island

including the Isle of Wight Council, the Health Authority, the Police, Voluntary

and Community Organisations, IW College, the Chamber of Commerce,

Business Community and Government Departments. The Community Strategy

“Eco Island” sets the vision for the next decade by aiming:

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“to be a world renowned Eco Island, with a thriving economy and a real

sense of pride, where residents and visitors enjoy healthy lives, feel safe

and are treated with respect”

The four main themes that underpin the strategic vision are:

• Thriving Island,

• Healthy and Supportive Island,

• Safe and Well-kept Island,

• Inspiring Island.

This Island Vision is being delivered through a series of prioritised policy

initiatives and the Highways PFI is one of the vital delivery mechanisms for

achieving this vision.

Through this vision the ISP is committed to protecting and enhancing the

Island’s natural beauty; creating wealth and reducing carbon footprint;

supporting economic development and regeneration; reducing crime and fear of

crime; and enhancing how our local area ‘looks’ and ‘feels’. The Highways PFI

is being developed to support each of these areas and is the cornerstone for the

final project options presented in this OBC. The ISP is now committed to

deliver, by 2020, the lowest carbon footprint in England and renewal of

infrastructure to the highest ecological standards.

2.8 The Isle of Wight Economic Strategy The Isle of Wight Economic Strategy supports ‘Investing in success to produce

a more mixed economy, creating opportunities for increased inward investment

and sustainable prosperity by prioritising quality of life.’ The strategy cites the

road infrastructure on the Island as one of the key weaknesses for attracting

inward investment and the Highways PFI is seen as vital to both cementing and

reinvigorating a fragmented highway maintenance industry on the island and

providing an attractive and fit for purpose road infrastructure.

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2.9 Isle of Wight Council Corporate Plan - One Island

The IWC Corporate Plan, known as “One Island,” provides the vehicle for

delivering the Eco Island through a number delivery strands.

Whilst focusing on the external delivery, the Council also has an internal

modernisation programme, known as “One Council”, equipping the Council with

the appropriate infrastructure, capacity and capability which is fundamental to

delivering the much wider vision.

The Highways PFI is an integral part of that transformation vision; the Council

has taken a strategic decision to bring in an experienced Programme Director

and build a team around him using the Council’s own internal staff and

experienced expert advisors to gain maximum skill transfer. The Highways PFI

programme is also setting the standards for all projects and programmes in the

Council and a Governance and scrutiny framework appropriate for major

complex projects is now in place. The Highways PFI also forms the cornerstone

of the Council’s contributions towards creating a sustainable, thriving economy

for the Island. Plans are already under development to engage with schools at

all levels to create interest in civil engineering and allied highway maintenance

industries, to set up technical study programmes and apprenticeship as part of

the PFI, and to build technical capability and a highway maintenance industry

on the Island. In addition, the Council, along with its strategic partners, are

working with the local industries, both those directly connected with highways

and the remaining supply chain to provide them with the best possible

opportunity to prepare for and engage with a future PFI provider. This has the

potential to reduce the cost for the future PFI provider and hence the cost of the

PFI for the public purse whilst creating the impetus needed to pump-prime the

Islands economy.

The Council, along with its strategic partners, is setting the key educational and

employment plans in place and will be working with educational institutions to

make this a reality over the next four years and to sustain engagement

throughout the 25 year project period. The aim is to create economic benefit

and legacy that will outlast the PFI programme and create wealth for the

Islanders and therefore the nation, significantly higher than the direct

investment made in the Island’s highways.

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The framework below shows the strategic link between the Eco Island Strategy,

One Island Plan and the Highways PFI programme.

2.10 The Island Plan The Local Development Plan, the Island Plan, is in the final stages of the

statutory approval process, but its Core Strategy is used to set the planning

vision for the Island through to 2026. Building and creating sustainable

communities is central to the Sustainable Community Strategy that is focused

on delivering the Eco Island vision.

Eco Islandthemes

A thrivingIsland

1 Protect and enhance our Island’s natural beauty.2 Create wealth and reduce our carbonfootprint at the same time.3 Produce as much of our energy aspossible from renewable sources.4 Support economic development andregeneration, enabling all to be able toshare in the Island’s economic success, through increasing the skills of the whole community.

Modernisingthe council

OneCouncil

An inspiringIsland

A safe andwell-kept

Island

A healthyand

supportiveIsland

9 Reduce crime and substance misuse.10 Reduce anti-social behaviour anddisorder.11 Reduce the fear of crime and increase public confidence.12 Enhance how our local areas look and feel, now and in the future.

1 Protect and enhance our Island’s natural beauty.2 Create wealth and reduce our carbon footprint at the same time.

4 Support economic development and regeneration, enabling all to be able to share in the Island’s economic success, through increasing the skills of the whole community.

16 Putting the customer first.17 Supporting staff.18 Improving performance and value for money.19 Reducing the council’s impact on the environment.20 Making our buildings fit for purpose.21 Improving our reputation with residents, visitors and local businesses.22 Establish, maintain and improveeffective partnership engagement.23 Organisational development and improvement.

13 Make sure our children achieve better than the national average at school and college.14 Reduce childhood inequalities, bytackling poverty, neglect and domesticviolence.15 Support families and carers to provide a safe and positive environment for our young people.

5 Reduce levels of obesity in all ages.6 Improve health, emotional wellbeingand life expectancy across the Island.7 Support vulnerable people to liveindependent lives.8 Ensure people of all ages have places to live and things to do in their local area.

16 Putting the customer first.17 Supporting staff.18 Improving performance and value for money.19 Reducing the council’s impact on the environment.

21 Improving our reputation with residents, visitors and local businesses.

23 Organisational development and improvement.

9 Reduce crime and substance misuse.10 Reduce anti-social behaviour anddisorder.11 Reduce the fear of crime and increase public confidence.12 Enhance how our local areas look and feel, now and in the future.

6 Improve health, emotional wellbeing and life expectancy across the Island.

Corporate Themes Corporate Priorities Highways PFI

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The Island sustainable travel plan supports a multi-modal transport strategy.

This relies on the highway network for public and private transport, whilst the

rural rights of way network provides the vital links for walking, cycling and riding;

the combination of the two provides a highly integrated interlinked transport

network across the Island. The public therefore rely on a good transport network

for people and goods to travel from wherever they are to destinations of their

choice, both on and off the Island, with safety, reliability, ease of access, and at

a convenient time. The Island is a renowned destination for walking and cycling,

not only through celebrated annual events, but as a real means to getting

around, delivering a healthy Island both in terms of benefits to the population

and the environment.

The strategy aims to achieve improved transport infrastructure, travel plans and

improved public transport provision and an increase in opportunities for walking

and cycling. The aim is to offer people more choice about the ways in which

they travel, whilst seeking not to penalise those for whom the car is the only

realistic solution.

Car ownership on the Island continues to remain relatively high, due in the main

to the rural nature of the Island, which places additional reliance on the car for

certain types of journey. However, during the summer season the traffic on the

Island, changes significantly with the influx of tourist traffic.

The ferry ports, both passenger and vehicle services, are important gateways to

the Island. The numbers crossing the Solent for business or pleasure have

increased steadily over time and this increase in cross-Solent traffic, coupled

with increased car ownership and use, has further added to the transport

challenges the Island faces.

A number of new and improved park and ride facilities are being promoted to

reduce congestion. Whilst the improvement, maintenance and management of

the highway network alone cannot deliver all of the aspirations set out in the

strategy, improved road and rights of way networks will make a significant

contribution to delivering the strategy. The PFI Project will provide a focused

and comprehensive means of injecting much needed resources to overcome

past backlog maintenance and, once appropriate standards have been met,

maintaining these over the longer term. As such, a high quality, fit for purpose

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highway network should become a consistent, reliable and integrated part of the

Island’s infrastructure to support implementation or other strategies and

policies.

2.11 Local Transport Plan 2006-2011 (LTP2)

The Local Transport Plan sets the policy framework for determining the

transport needs of the Island, and brings together the transport policies and

strategies in a cohesive manner. The statutory Isle of Wight Local Transport

Plan was adopted in March 2006 and sets out how transport will be improved

on the Island over the period 2006 -2011. The Plan was approved by the DfT

and developed through extensive consultation to achieve the following

objectives:

• To increase accessibility for all.

• To encourage and support economic prosperity and regeneration.

• To make Island roads safer.

• To improve local air quality and conserve and enhance the

environment.

• To tackle congestion.

• To ensure effective management of the highway network.

• To achieve value for money solutions.

The LTP supported the development of the PFI bid and acknowledged the key

role that the initiative would have in delivering the plan and in particular the road

maintenance and road safety targets set out in the Plan.  The PFI will clearly be

instrumental in delivering a large part of the LTP strategy which is set out below

• The plan seeks to promote alternatives to the car and reduce

congestion and pollution

• Increased numbers of people will walk or cycle using improved

cycleways, urban paths and pavements.

• The Plan seeks to reduce traffic accidents through a range of

engineering solutions and hearts and minds initiatives.

• The road infrastructure on the Island will be maintained to good

standards, and will assist the public transport network using it.

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• Provide investment in a safe, well maintained road system, including a

network for buses, lorries and coaches, through for example the private

finance.

The 2006 LTP set a series of ambitious targets for achieving high quality

highways by 2010 - to have no overall deterioration in condition of the principal

road network and the unclassified road network, footway condition and reduce

death and injury on roads. Although 2010 is now recognised as an

unachievable date, the target standards will be achieved on completion of the

PFI project core investment period.

The LTP incorporates a Rights of Way Improvement Plan, the primary aim of

which is to ensure the most effective use of the rights of way network. The Plan

recognises the significant contribution that the Island’s 837 km of non-vehicular

highways make to sustainable transport on the Island. It also seeks to ensure

that the rights of way network continues to be managed as an important

component of the overall highway network. The Rights of Way Improvement

Plan is wholly concerned with improving facilities for walking and cycling of all

kinds away from road traffic and will therefore assist in delivering the quality of

life objectives of the LTP. Thus the PFI project allows achievement of strategies

which will improve quality of life through improving transport choices for

Islanders and visitors alike.

Whilst the current LTP2 does not cover the whole period of the PFI contract, the

5 year renewable plan will continue to build the Eco Island theme, consistent

with the Highways PFI.

Revised LTP guidance is expected in the summer of 2009 and whilst there may

be some changes from the original draft it is anticipated that the final guidance

will still require local authorities to produce a two part plan, including the overall

strategy and detailed delivery programme.

The draft guidance indicates that the plan should take account of the following

five key goals:

• Tackle climate change.

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• Support economic growth.

• Promote equality and diversity.

• Contribute to better safer, security and health.

• Improve quality of life.

The PFI Project will support these goals and will be a fundamental part of the

delivery programme.

2.12 Area of Outstanding Natural Beauty (AONB) Management Plan The Island has a unique and important natural environment, which is protected

by national and local designations covering both landscape and ecology to help

protect the character of the Island. The Isle of Wight AONB Partnership is a

broad based Independent organisation with representatives from many local,

regional and national organisations and individuals with a direct interest in the

AONB. It seeks to ensure a co-ordinated approach to the conservation and

enhancement of the AONB.

The rights of way network, and to some extent the minor and unclassified road

network, are often key features in the AONB landscape. Coastal roads, highway

verges and hedgerows that form the boundary define the contours of the

undulating landscape; the unclassified roads contain a number of historic signs

which form the rural character; lighting in rural areas is managed

sympathetically to prevent light pollution. The treatment of the rural rights of

ways and the coastal roads in particular will play a crucial part in preserving the

natural landscape and ecology. The management of the natural environment is

therefore an integral part of highway management. Both the investment

programme and the services of the PFI Project will need to be sensitive to areas

of outstanding natural beauty and the natural environment through carefully

designed output specification requirements.

The aims and objectives of the IWC Highways PFI programme are consistent

with the national economic, transport and environmental policies, enabling

these to be delivered at local level, in order to achieve the nationally set

objectives. The Isle of Wight Council Highways PFI is one of the three

Highways pathfinder projects and will provide a constructive model for

delivering highway maintenance and operations in a largely rural context. The

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uniqueness of the Island’s road network, characterised by the following,

provides a valuable benchmark for future policy and standards development:

• A largely rural road network and an extensive rights of way network

• a largely captured economy allowing

o correlation between transport investment and economic

regeneration

o a significant proportion of the investment and multiplier effects to

remain in the Island to regenerate its economy,

• an operational regime for delivering a comprehensive highways service

in an environmentally sensitive area.

This PFI project clearly meets national regional and local strategic objectives by

removing the backlog of highway and street lighting repairs, providing a long-

term service strategy to maintain assets at an acceptable and appropriate

standard, over a long period, by environmentally sympathetic and sustainable

means.

The IWC Highways PFI, together with the other two Highways pathfinder

projects, will provide the Department for Transport with an ability to develop

national standards to cover the full spectrum of highway network characteristics

across local authorities in England and Wales.

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2.13 Historic Built Environment 2.13.1 Public Realm The visual impact of highway works can significantly affect the quality and

appearance of the public realm. This is particularly important in designated

areas such as AONBs, conservation areas or directly affecting the setting of

listed buildings and historic assets. Traditional materials for surfacing, kerbs,

structures and other details should be maintained or replicated.

In addition there are some remaining traditional street lamps, railings, signs and

other structures which make an important contribution to the locally distinctive

character of towns and villages. Any historic street furniture will therefore be

recorded and retained.

The overall quality and appearance of the Island’s public realm is important to

residents and businesses and directly affects the tourist industry. The use of

appropriate design and materials should therefore be given prominence in the

output specification.

2.13.2 Archaeological Heritage The Island has in excess of 6500 known Archaeological Sites and Monuments.

In addition there are other Scheduled Monuments and Areas of High

Archaeological Potential. It is unlikely that the reconstruction and resurfacing of

carriageways will result in disruption of any archaeological site; however, the

Council will set out all know sites to prevent the PFI Provider unwittingly

trespassing into these areas. Where the refurbishment of the highway is likely to

encroach into an identified site, the PFI Provider will be required to carry out a

comprehensive assessment and develop appropriate mitigation measures.

2.13.3 Natural Environment - Species and Habitats The Island is home to a number of rare and endangered species and also to

significant and varied areas of sensitive habitats. Works within the boundary of

the highway and public rights of way land have the potential to adversely impact

on these or nearby species and habitats.

Whilst the highway surface itself does not form a natural habitat, verges,

hedges, banks, ditches and roadside trees contribute to the natural

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environment. Natural habitats are recognised through a hierarchy of

designations from those of local importance such as Sites of Importance to

Nature Conservation (SINC), national as Sites of Special Scientific Importance

(SSSI), through to European Special Protection Areas (SPA) and Special Areas

of Conservation (SAC) and wider international designation as Ramsar Site for

wetlands and wildfowl. Some species have specific protection under UK or

International legislation.

The PFI Provider will be expected to develop highway schemes that protect the

natural environment for these species. Good practice and protocols built into the

maintenance of highways and verges in rural environment will ensure that the

natural environment will be protected and enhanced throughout the PFI contract

period.

2.13.4 Historic Environment Action Plan (HEAP) The HEAP contains the historic roads, tracks and lanes and their associated

boundaries, hedgerows and earthworks. These are described in the "Historic

Routeways" HEAP report. The HEAP requires early liaison with the County

Archaeology Service, the Conservation and Design Team and the AONB Unit to

ensure that any work does not have an adverse effect on the historic

environment. These requirements will form part of the Output Specification and

the PFI Service Provider will be required to carry out the required consultations.

2.14 Transport Asset Management Plan A Transport Asset Management Plan (TAMP) was produced, in partnership with

Chris Britton Consultants, during 2006 to aid knowledge based decision making.

The highway inventory was initially prepared by John Reid Consultants. This

has now been updated to take into account the fact that the Isle of Wight

Council has been chosen as a pathfinder Highways Maintenance PFI authority.

The TAMP is the Council’s primary document for detailing the standards and

priorities applied to maintaining the Island’s transport network for all users. The

plan mirrors the proposed PFI since it covers all elements of the transport

infrastructure. The TAMP will serve as a baseline to the PFI Project.

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2.15 The Network Existing assets that will become the components of the project can be

summarised as follows:

• Highways (803km in length)

• The network of public rights of ways (PROW) for which the Council is

responsible is 827km in length, comprising 514km of footpaths, 266km of

bridleways and 47km of byways open to all traffic (BOATs), and which

together make up about half of the Island’s total highway mileage.

• Bridges and Structures

• Footways and Kerbs

• Drainage

• Safety Fencing

• Street Lighting

• Street Furniture

• CCTV

• Grass Cutting

• Car Parking

2.15.1 Asset Inventory, Condition and Survey Data The council has built an exceptionally thorough record of its assets and

repeatedly surveyed the network to improve the confidence level in related

condition data. The information is fully digitised and held in layers linked to an

in-house Geographic Information System (GIS) and will be available in the

project Data Room. The council will continue to survey assets and maintain

records up to the point at which responsibility is handed over to the PFI

Provider.

A full inventory of street lighting, illuminated signs, bollards and other electrical

apparatus (e.g. CCTV), linked to a GIS system and including substantial

column, lantern, control and supply data forms part of the commercial database,

together with annual assessments of condition of the entire stock.

The asset inventory information available in the Project Data Room is outlined

below;

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a. A detailed inventory of all bridges and retaining walls supported by six-

yearly Principal Inspections (PIs) and bi-annual General Inspections (GIs)

of all structures on the highway network. Complete data for the last three

rounds of both PIs and GIs will be kept in the Data Room. About 40

culverts are in the process of being re-classified as bridges, due to

redefining their span.

b. An independent sample site survey based on inspection of 272 lighting

points on the 32 streets selected at random across the network indicated

an error rate for the street lighting inventory of just 1%.

c. A drainage inventory made up of surface features, gullies and manholes,

has been completed and partial information is available on underground

features such as pipe locations and size. The sub-surface inventory is

about 60% complete but with an accuracy of 90+%. Some "poor"

condition drains have CCTV footage coverage to compliment visual

surveys.

d. A comprehensive rural rights of way inventory with fully completed

Definitive Map and Statement directly linked to a GIS system. Records of

one hundred percent condition surveys undertaken each year by trained

volunteers supervised by the Council's staff.

e. Car parking inventory data on the primary assets, including ticket

machines, the number of parking spaces (on and off-street), their

locations and type of surfacing. A Secondary asset and condition survey

is due for completion in Autumn 2009.

f. Full inventory data for all other assets including:

• Traffic signals (with age profile data)

• Road signs and street nameplates

• Street furniture (bollards, benches, bins, shelters, planters)

• Safety fencing

• Highway trees.

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A summary of the assets covered in the asset data base is set out below;

appendix 1 sets out the details.

Asset Item Type

Length/Number

PEDESTRIAN GUARDRAIL 13.1 km Safety Fencing SAFETY BARRIER 2.3 km GULLY 19626 no MANHOLE 8512 no LINEAR DRAINAGE CHANNEL 4.2 km CARRIER PIPE 370 km

Drainage

CULVERT 189 no CARRIAGEWAY - A ROAD 128.3 km CARRIAGEWAY - B ROAD 92.1 km CARRIAGEWAY - C ROAD 171.9 km CARRIAGEWAY - UNCLASSIFIED 410.4 km

Pavements

FOOTWAY - 1, 1a and 2 Footways FOOTWAY - 3 and 4

767.22 km

FOOTPATH 514 km BRIDLEWAY 266 km BOAT 47 km

Rights of Way

GREENWAY 31 km KERB 1031.2 km Kerbs and

Channels CHANNEL 145.6 km ROAD SIGN (NON-ILLUMINATED) 14815 no STREET NAMEPLATE 3501 no Road Signs

ROAD STUD 127.1 km

STREET LIGHT Electrical Items

ILLUMINATED SIGN OR BOLLARD

14327 no

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OTHER (CCTV, BEACON, ETC) TRAFFIC SIGNAL 79 sets BRIDGE 119 no Structures RETAINING WALL 599 no BOLLARD 3812 no HAZARD MARKER 4634 no SHELTER 241 no BIN 1046 no SEAT 1027 no

Street Furniture

PLANTER 219 no Landscape TREE 1715 no

TICKET MACHINE 142 no PAY-AND-DISPLAY ON-STREET PARKING SPACE 890 no

PAY-AND-DISPLAY OFF-STREET PARKING SPACE 4899 no

FREE OFF-STREET PARKING SPACE 1009 no

PAY-AND-DISPLAY ON-STREET PARKING ZONE 15 no

PAY-AND-DISPLAY OFF-STREET CAR PARK 52 no

Car Parking

FREE OFF-STREET CAR PARK 29 no

The following information on asset condition will also be available in the Project

Data Room;

1. A video of the entire network is available from SCANNER. This provides

additional information to the basic numerical data, and enables a view the

network without having to repeatedly drive it.

2. SCRIM for the A, B and C class roads measured annually.

3. Annual SCANNER data for all A, B and C class roads. This data has

recently been updated by mini-SCANNER survey of the unclassified roads.

4. Annual Coarse Visual Inspection (CVI) data for the unclassified road

network.

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5. 100% Detailed Visual Inspection ("DVI") data for all Category footways for

the last year.

6. Deflectograph data for all A class roads, together with those B and C class

roads that are subject to substantial HGV traffic.

7. A full inventory and condition data of kerbs, channels (solid and linear

drainage), edgings, street furniture, road signs, safety fencing and bollards.

2.15.2 Road Pavement Condition The Council, through its consultant WDM Ltd, commissioned a survey condition

assessment model to calculate the carriageway/footway backlog and on-going

life cycle requirements of the network incorporating suitable hand-back

provisions. Through the model, industry standard survey data is translated to an

output based performance measurement which is repeatable, transparent, and

accurately reflects asset condition at specified milestones during the project life.

The model operates at three levels; network hierarchy, condition banding, and

road section criteria.

An overall hierarchy based Network Condition Indicator (NCI) is generated to

reflect the specific needs of the network where differing target criteria are

applied depending on the road hierarchy to which it relates. Surface condition

(SCANNER) together with skid resistance (SCRIM) and residual life as a

measure of structural strength (Deflectograph) are used as survey inputs.

Individual thresholds are set to represent the required service levels. The use of

nationally recognised survey methods will give prospective Service Providers

confidence in the resulting information and allow future prediction based on the

trend analysis of previous annual data.

SCANNER surveys are be used for all Hierarchies 1-4. The DfT national

indicator, the Road Condition Indicator (RCI), allocates road lengths, or

networks, into three condition bands Red, Amber, and Green. “Red” indicates a

length of highway “where maintenance should be considered”. For Hierarchies

1 to 3 the prime NCI will be a maximum % of RCI by length; the value chosen

reflects the performance of good standard of service. As “Red” levels can be

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maintained or reduced by allowing the “Amber” band to increase at the expense

of the “Green” the NCI will be required to have default levels of Amber and

Green.

Previously, Coarse Visual Inspections (CVI) has been used as the basis for

Hierarchy 4 roads condition. In a move to embrace innovation, SCANNER

output has recently been developed nationally for unclassified roads and these

now form the basis from which IWC models Hierarchy 4 condition.

In order that an indicator cannot be influenced by visual assessment of the

surface alone the NCI for Hierarchies 1-2 will include an assessment of

“strength”, from Deflectograph. Safety must also influence the indicator; skid

resistance from CSC values will provide the necessary inputs. Upper threshold

of RCI, and/or intervention levels for individual parameters will act as trigger for

maintenance.

The national indicator for footways (Class 1 and 2) will form the Footway

Condition Index (FCI), based on the results of DVI surveys. A lower standard

FCI will apply to Class 3 and 4 footways to reflect an appropriate service level.

The detailed operational aspects of the technical modelling process are

discussed in further detail at appendix 2.

2.15.3 Street Lighting The table below provides an overview of the age and stock profile of the street

lighting asset.

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Age Steel Conc Alum Wood

Pole Other Total Profile

0-10 Years 3535 0 0 145 19 3699 30.65%

10-20 Years 3149 8 55 292 40 3544 29.37%

20-30 Years 429 259 1033 456 13 2190 18.15%

30-40 Years 235 468 1483 161 1 2348 19.46%

40-50 Years 39 61 103 36 48 287 2.38%

Total 7387 796 2674 1090 121 12068

Profile 61.21% 6.60% 22.16% 9.03% 1.00% 100.00%

Electrical Supply Network

Information within the Street Lighting and Illuminated Traffic Signs Inventory

indicates that between 2% and 5% of the electrical supply network consists of

private cable network. The remaining 95% to 98% of the electrical supply

network is provided by the Distribution Network Organisation (Southern

Electric).

2.15.4 Traffic Signals The council has assessed the condition of the Traffic Signals asset throughout

the Island to determine the level of refurbishment/upgrading required. The

assessment works have indicated that the asset is in very poor condition and

could result in electrical safety issues in the future.

Details, including age and stock profile of the Traffic Signals are provided

below:

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Age SitesSites

Profile

Signal

Points

Signal

Profile

0-10 Years 51 66% 304 76% 10-20 Years 24 31% 90 22% 20-30 Years 2 3% 6 2% 30-40 Years 0 0% 0 0 40-50 Years 0 0% 0 0

Total 77 100% 400 100%

2.15.5 CCTV The council has assessed the condition of the CCTV asset throughout the

Island to determine the level of refurbishment/upgrading required. This

assessment indicates that the asset is in poor condition The Council is

currently progressing a CCTV refurbishment scheme for which tenders were

returned in May 2009; the scope includes an increase in the number of

cameras, refurbishment of the control room and maintenance of the existing

stock.

2.16 Current Service Delivery and Performance The majority of the Council’s highways related services are managed from

Newport, with satellite stations at Ventnor, Ryde and Cowes. Most of the

professional, technical, administrative and financial functions are carried out in

house with only a small amount of backup from technical consultants.

In relation to works, the Council acts as a commissioning agent and, with the

exception of a 3 man team on the rural rights of way network, no longer has a

direct labour organisation. Construction and maintenance work is carried out

through annual or framework contracts. On and off street parking enforcement

is undertaken by the Council’s in house team, and revenues on the Floating

Bridge are collected by Council’s in house staff.

Performance is monitored by a combination of National and Local performance

indicators. Service performance is good regarding cyclical maintenance, such

as highway verge maintenance and street cleansing. However, national

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indicators show the Council is generally in the bottom quartile on asset

condition

2.16.1 Current Spending on Highways Services Following years of less than adequate investment in highway services, the rate

of deterioration has outstripped the rate of investment, resulting in continually

declining standards of service. Last year, the network condition had reached

such a low point, that the council had to find additional funding to prevent

further deterioration. The current levels of annual spend is:

2006/07 2007/08 2008/09

Capital £

1,254,691

332,490

2,073,049

Revenue £

1,658,866

1,490,700

1,837,900

2.17 Drivers for Change 2.17.1 The Service Gap The Council's statutory duty under the Highways Act 1980 to maintain the

highway network means that it will be necessary to provide a highway

maintenance service for the foreseeable future.

Paragraph 3.4.1 of "Well-maintained Highways - Code of Practice for Highway

Maintenance Management" published by the UK Roads Liaison Group of CSS

in 2005, declares that the purpose of highway maintenance is to maintain the

highway for the safe and convenient movement of people and goods. The core

objectives of highway maintenance are stated as the delivery of:

• Safety;

• Serviceability; and

• Sustainability.

The seven most significant elements of work on the Council's highway network

are:

1. Carriageways

2. Footways

B - 66

3. Bridges and other structures

4. Street lighting

5. Drainage

6. Public rights of way

7. Car parking

The differences between the current and desirable positions (the "Service Gap")

for each of the three core objectives in relation to the seven most significant

elements of work on the Council's highway network are described below.

2.17.2 Carriageways Safety

The safety of carriageways can be quantified by:

• Surface skid resistance;

• Number of carriageway Insurance Claims by third parties; and

• Number of urgent defects (ie. those treated within 24 hours)

Surface skid resistance - the skid resistance of A, B and C class roads on the

council's network is tested annually. The 2008 surveys indicated that 32 percent

of A roads, 22 percent of B roads and 31 percent of C roads are currently at or

below the Investigatory Level.

The number of third party insurance claims relating to carriageway defects

increased by a factor of three in the past five years, as shown in the chart

below.

Third Party Claims Relating to Carriageway Defects (June 2009 Data) 162

104

56 47 51

04/05 05/06 06/07 07/08 08/09Year

Num

ber o

f Cla

ims

B - 67

The number of instructions to attend highway emergencies due to urgent

carriageway defects, such as potholes, has increased by a factor of three in the

last three years, as shown in the chart below.

Carriageway Emergency Instructions Issued (2 hour response)

hese charts indicate an increasing number of events that are compromising

Serviceability

The serviceability of carriageways can be quantified by:

• Asset condition; and

• Ride quality (e.g. smooth, pothole free surface);

Asset Condition

T

the safety of the carriageway.

- Until recently, the general condition of carriageways was

measured and compared nationally using a series of BVPIs which indicate the

08 BVPI results for the Isle of Wight in

quartile thresholds for that year. The Isle of

bottom quartile for both unitary authorities and

uthorities.

1892

iden

ts

747581

No

of In

c

06/07 07/08 08/09Year

percentage of the network where structural maintenance should be considered.

The table below shows the 2007/

comparison with the top and bottom

Wight results mostly fall into the

all English a

B - 68

C

P

arriageway Condition Indicators 2007/08

erformance Indicator Unitary authorities All England

R07/08 quartile quartile quartile

quartile

ef Description

IWC Actual Top Bottom Top Bottom

BV223 % of the principal road

network where structural

maintenance should be

considered

9 3 7 3 7

BV224a % of the non –principal road

network where structural

maintenance should be

considered

10 4 11 5 10

BV224b % of the Unclassified road

network where structural

maintenance should be

considered.

38 7 15.5 8.5 18

Since 1 April 2008, national indicators NI168 and NI169 have replaced best

value performance indicators BV223 and BV224a. However the national

indicators are measured on the same basis as the 2008 best value performance

indicators. A comparison of the BV results and the available NI results are given

in the table below, which shows that carriageway condition continues to

deteriorate.

Carriageway Condition Indicators 2007/08 and 2008/09

IWC Actual Performance

2007/08 2008/09

Performance Indicator BV223 NI168

Percentage of the principal road

network where structural

maintenance should be considered

9 12

BV224a NI169

B - 69

P

road network where

structural maintenance should

c ere

ercentage of the non –principal

10 15

onsid d

c f a ategories of the council's carriageways falls

well sh he best performing, or even average performing,

authori an only be closed by a significant increase in

investment in the future.

Ride Q

In all ases, the condition o

ort of that achieved by t

ties and these gaps c

ll c

uality - Longitudinal R

. The latest 10m Pro

oad Profile has been used as a measure of ride

quality file and 3m Profile SCANNER results given in the

table below indicate the percentage of A, B and C class roads that have road

old c tained w UKPM

Percentage of network above the upper threshold

profiles worse than the upper thresh on ithin S.

Road Cla

10m Profile 3m Profile

ss

A 18 12

B 17 14

C 34 27

ling of carriageway material takes place at present, and some in-

situ recycling has been undertaken. There are no carriageways surfaced with

2.17.3 Footways

Safety

ays can be qua y:

nce claims by third parties; and

defects requiring treatment within 24 hours)

As shown in the chart below, the annual number of third party insurance claims

relating to footways defects is variable but has been on a generally upward

trend in recent years.

Sustainability

Some recyc

noise attenuating materials on the council's network.

The safety of the footw ntified b

• Number of footway insura

• Number of urgent

B - 70

Relating to Footway Defects (June 2009 Data)

dom annual

variation or indicative of the impact of a deteriorating network condition.

ergency Instructions Issued (2 hour response)

ion of footways, until recently, was measured and compared

lly using BVPI 187. The table below shows the 2007/08 BVPI result for

bottom quartile thresholds for

for both unitary

218

149 153

07/08 08/09

No

of In

cide

nts

Third Party Claims

30 28 27

04/05 05/06 06/07 07/08 08/09Year

Cla

im23 18

Num

ber o

fs

As shown in the chart below, the number of emergency instructions to attend to

urgent footway defects has also been on an upward trend but dramatically

increased in 2008/9. It remains to be seen whether that is a ran

Footway Em

06/07

Serviceability

Year

The general condit

nationa

the Isle of Wight in comparison with the top and

that year. The IOW performance falls into the bottom quartile

authorities and all English authorities.

B - 71

Footway Condition Indicator 2007/08

erformance Indicator Unitary authorities All England P

Ref Description

IWC Actual07/08

Top quartile

Bottom quartile

Top quartile

Bottom quartile

BVPI 187 Conditions

surface footway 46 12 30.3 14 29

Sustainability

Sustainability is not currently a significant factor in the maintenance of highway

2.17.4 Bridges and Other Structures on the Highway Network

Parapet risk assessments (PRAs) were undertaken in 2005 by OPUS and a

priority ranking for upgrade works was derived from its report. Three bridge

parapet upgrades are being carried out in 2009/10, and more will be undertaken

prior to commencement of the PFI contract.

This assessment of parapets did not include the 600 or so retaining walls which

are the Council's responsibility. It is anticipated that a substantial number of

these will not conform to modern standards.

erviceability

nce of regular routine maintenance)

Structural condition

pavements.

No recycling of footway material takes place at present.

Safety

S

From a user perspective the key requirements for structures are:

• Structural condition (i.e. safe for use and structurally sound);

• Adequate parapets (in terms of height and strength);

• Full access (no temporary weight restrictions or height limits); and

• Aesthetic appearance. (i.e. evide

– The Council calculates a Bridge Condition Score (BCS)

from its inspection data. This is an 'existing condition' score with a numerical

value between 1.0 and 5.0, but it does not recognise structurally sub-standard

B - 72

pet without significant defects would be

given a BCS score of "good", even though that parapet does not meet current

The current dis es w.

2009 Highway and Car Park e a lls

Good Poor Failure

elements. For example, a bridge para

containment standards. tribution of BCS valu is shown belo

s Bridg s and Ret ining Wa BCS Values

Very Good Fair Poor Very BCS Value

1.00 - 1.30 1.31 - 1.80 1.81 - 2.70 2.71 - 3.7s

0 3.71 - 4.70 4.71 - 5.00

No. 238 (33%) 306 (42%) 56 (8%) 6 (1%) Nil

structures 112 (16%)

Total Number of bridges and retaining walls for Highways Department / Car Parks = 718

t the majority

ndards.

orrosive

columns

due

to the combination of age and environmental conditions. Additionally it is

Structural assessments are undertaken on an intermittent basis bu

were carried out over 10 years ago and reviews are required to re-evaluate the

load-carrying assessment calculations.

The BCS figures demonstrate that the overall 'existing condition' of the bridge

stock is in fair to good condition, however, given the lack of progress on

structural assessment and as illustrated by the backlog of PRA’s significant

work may be required to upgrade to current sta

Sustainability

Sustainability is not currently a significant factor in the maintenance of highway

bridges.

2.17.5 Street lighting Safety

In common with many other local authorities the Isle of Wight has a history of

under investment in its lighting stock. This is compounded by the c

effect of the salt-air which accelerates the degradation of street lighting

and traffic sign posts. Consequently, a significant proportion of the IWC street

lighting and illuminated traffic signs asset is in seriously degraded condition

estimated that 50% of the existing lighting levels fall below current European

and British lighting standard requirements. As part of this Project, lighting levels

B - 73

erviceability

the

provision of a street lighting maintenance service with SEC Ltd. The contract is

operated under a traditional term contract arrangeme cured CE

el or ported

performance in rectifying street lighting faults against the BVPI performance

he table below, which details the term maintenance contractor’s self reported

faults against the performance

rs set by the IWC, indicates a performance which would be accepted as

will be reviewed and modifications made to provide a solution inline with

BS5489.

S

The Isle of Wight has a term maintenance contract arrangement for

nt pro using the I

model form of contract.

The table b ow, which shows the term maintenance contract ’s self re

indicators, indicates a performance levels consistently above target standards.

T

performance in rectifying street lighting

indicato

a high standard nationally, even though it falls below the very demanding local

target;

Performance Indicator

Definition Target IOW Actual Performance Ref

05/06 06/07 07/08

BV215a

Average no of days taken to repa

a street lighting fault which is

under the control of the local

authority

3 1.89 2.39 1.98

BV21

Average time taken to repair a

street lighting fault where

e is under the contr5b

response tim o

of a DNO

20 9.01 6.13 9.91

B - 74

PI Ref PI Definition Target Actual

05/06 06/07 07/08

LPI % Lights in Light 100 99 99 99

Sustainability

Sustainability is not currently a significant factor in the maintenance and

peration of highway lighting.

The maintenance regime for Traffic Signals is constrained by budget pressures

and the age and condition of a significant proportion of the asset. Reactive

maintenance and fault r ion tak ede the

budget is re s. In some cases pole corrosion is in such

an advanced state that the security of lantern and bracket to the pole cannot be

guaranteed.

Service

Siemens Traffic Controls maintains the traffic signal network through a term

mainten joint agreement with Portsmouth City Council.

reak llow for termination of the co

allow fo cement of a PFI contract.

o

2.17.6 Traffic Signals Safety

ectificat

quired for these purpose

es prec nce and a vast majority of

ability

ance contract which is a

clause has been negotiated t

r commen

A b o a ntract to

Functions specified within the contract include those activities detailed below:

B - 75

Sustainability

Sustainability is not currently a significant factor in the maintenance and

operation of the traffic control equipment.

2.17.7 CCTV Safety

In common with many other local authorities, the Isle of Wight has a history of

under investment in its CCTV stock. This issue is compounded by the corrosive

effect of the salt-air which is an important consideration in the delivery of the

Function F crequen y Electric ting o , loop detection, variabmessage signs and sch stallations Annual al tes f all Traffic Signals

ool warning signs inle

General Maintenance - Traffic signal poles, lanterns and brackets, push button controls, outstations, MOVA, monitoring and detection systems, electrical and communications infrastructure

Bi-annual

Numbering s and controller cabinets As required and renumbering of pole

Cleanin aintenance above): g only (additional to general m> Exterior of all road traffic, pedestrian and light rapid transit signal lenses, wait panels, box signs, variable message signs and school warnin

Bi-annual g signs

> Inter it panels, box signs and fibre-optics Annual ior of wa

Cleaning only (additional to above on ‘High Maintenance’ sites) > Extelenseswarning sig

rior of all road traffic, pedestrian and light rapid transit signal , wait panels, box signs, variable message signs and school

ns Quarterly

Bulk lamp changes

> Road traffic, wait, pedestrian and light rapid transit lanterns Bi-annual

> Box sign lanterns and School Warning Annual Respond to faults identified / reported – from inspections, vandalism,accident s > Priority one faults - emergency faults 2 Hours

> Priority one faults - urgent 4 Hours

> Prior 24 Hours ity two faults - normal

> Priority three faults - other 7 days

> Priority four faults - outstanding As agreed

B - 76

ervice - the sea air affects many of the CCTV masts and cameras.

Consequently a significant proportion of IWC’s CCTV asset is seriously

graded due to age and environmental conditions

rcent of the CCTV

p .

r in the maintenance and

og of renewals and

t being

han programmed preventative

maintenance. Whilst it is not possible to explicitly assess the effect that the poor

red that the presence of

es have safety implication. ally it is a

Serviceability

y or local indicators identifying the con highway

Sustainability is not currently a significant factor in the maintenance and

ghway drainage.

he rural rights of way play a significant role in the Eco Island vision through a

tiative to re-integrate the rights of way network with more

al forms of transport and thus support and promote sustainable

s

de

Asset condition surveys have confirmed that some 75 pe

apparatus is in an unsafe condition or suffers from degraded erformance

Sustainability

Sustainability is not currently a significant facto

operation of the CCTV equipment.

2.17.8 Drainage

Safety

Again due to budget constraints, there is a significant backl

improvements, which requires a substantial proportion of the budge

devoted to reactive maintenance rather t

condition of this asset has on safety, it can be conjectu

surface water and local flooding do Addition

recognised nuisance in streets with pedestrian movement.

There are no statutor dition of

drainage systems.

Sustainability

operation of hi

2.17.9 Rural Rights of Way T

pioneering ini

tradition

transport, health and tourism.

B - 77

ct to the highway bridge

spection regime. Thus, whilst there are no reported safety concerns, this

sured the percentage

of the total length of rights of way that are easy to use by the general public,.

e council has completed a 100% survey of its PROW using

volunteers supervised by its own staff, This information, together with

Wight was the only authority to attain the

overnment’s national target for bringing its public rights of way network into

the largest walking festival in the country based

ell-used by residents.

70%60%

10%0%

2002 2003 2004 2005 2005 2007 2008

Eas

y to

Safety

There are a number of bridges on the network which do not currently form part

of the road network bridges and are not subje

in

position is based on visual inspection rather than comprehensive inspection by

professional engineers.

Serviceability

The condition of Public Rights of Way (PROW) was reported using BVPI 178

until 2008. Based on a 5% annual sample, BVPI 178 mea

For some years, th

trained

regular reports of problems from many user groups, has allowed the council to

maintain its PROW network in a good condition, as shown by the consistently

high percentage in ‘easy to use’ condition shown below.

100%90%80% U

se

50%40%30%20%

% o

f PR

OW

Ten years ago the Isle of

Year

g

usable condition. It now hosts

around a major charity walk and also holds a cycling festival. In 2008, the

walking festival attracted over 24,000 participants (see table below) and thus

the PROW network is a key element for the Island’s tourist economy, as well as

an amenity highly valued and w

B - 78

Sustainability is not currently a significant factor in the maintenance and

operation of the PROW network although by its nature it tends to be

managed in line with sustainability principles.

2.17.10 On and Off-Street Car Parking The Council currently manages both on-street and off-street parking as a co-

ordinated whole via a Civil Enforcement Area. Both on-street and off-street

car parking are key elements in meeting the Council's aims for community

safety and congestion reduction.

Serviceability

onsidered to be generally

fair to good but with some exceptions which fall into the category of poor.

5,000

25,000

20,000

15,000

10,000Pa

rtic

ipan

ts

0

Participation in the IOW Walking Festival 1999 to 2008

The Council has produced a statutory Rights of Way Improvement Plan

(ROWIP) as part of the Local Transport Plan. The Highways PFI Project will

enable the Council to deliver the aspirations contained within the ROWIP.

Sustainability

1999 2003 2004 2005 2006 2007 2008Year

Since 2007, the Council has operated a Civil Enforcement Area, the

objectives of which are to contribute to the effective delivery of wider

transport objectives.

The Council is responsible for 15 chargeable on-street parking zones, 52

pay-and-display off-street car parks and 29 free off-street car parks/lay-bys.

The condition on the surface on the cark parks is c

B - 79

However the ambience of many of them is not commensurate with an area of

high tourist demand.

The Council formally inspects its off-street car parks quarterly and

encourages its Civil Enforcement Officers to report defects during their daily

visits.

Sustainability

The Council currently operates a proportion of solar powered ticket machines

a f its air pollution

control measures. Otherwise Sustainability is not currently a significant factor

he A3054 Bouldnor Road is the coastal road in the far north west of the

ajor access route to the car and passenger ferry terminal in

ad above it. This is considered

be both unsafe and unserviceable.

Island’s Strategic aims for sustainable

evelopment and the council’s ambitions for providing a transport network

prove the condition of the highway and act as a stimulus for

f maintenance sustain the network at a steady state

and part of a holistic approach including operation and maintenance to

managed and monitored effectively.

nd provides free parking for low emission vehicles, as part o

in the maintenance and operation of car parks.

2.17.11 Major Works - Bouldnor Road

T

Island and a m

Yarmouth harbour. The road runs along the top of a shallow cliff or

embankment, supported by a sea wall at its base. Movement of the sea wall

is threatening the safety and stability of the ro

to

2.18 Project Description/Overview

The IWC Highways PFI Project follows the “fence to fence” concept to

develop a holistic approach to highway maintenance. The Project provides

the best strategic fit with the

d

that will both im

the Island’s economy. The Project focuses on the key elements of the

highway with an intention to improve the current network condition to a level

where normal levels o

create synergies and avoid contractual boundaries with third parties within

the fence to fence boundary. The focus is on ensuring that the PFI provider

can be charged with an output based specification that has minimum conflict

with Council retained services thereby enabling the PFI contract to be

B - 80

2.1The high-level summary of the Highways PFI scope is described below;

ap

se

2.19.1 Roads The Island’s 803 km of rural and urban roads that are currently being managed

pu

cla

ref

ma footways, such that the

development of category 1 defects is arrested and the general condition of the

ne t’s highway network at the median

lev

Sk

for

10

cy

remainder of the 25 year period. Roads that are currently privately maintained

will not form part of the PFI scope.

2.19.2 Structures It is intended that, on c

tonne capacity. Currently, 10 struct

However

number will be kept

include tho

Full access

9 Project Scope

pendix 3 sets out the details of the PFI scope and the council retained

rvices.

blicly, will form part of the PFI network. These would include the A, B and C

ssified roads and the unclassified roads. The scope will include

urbishment of a significant proportion of all classifications of publicly

intained road network including kerbs and

twork is raised to position the Isle of Wigh

el of Local Authorities when assessed in accordance with National Indicators.

idding resistance of the network will be brought above the investigatory level

the relevant hierarchy. The highway drainage system will be brought to

0% operational capacity. Throughout the PFI period there will be on-going life

cle, routine and winter maintenance and operation of these roads for the

ompletion of the CIP, works all structures will have a 40

ures require works to achieve this position.

works are currently programmed for some of these structures and the

under review throughout the PFI tender period to only

se not already treated.

- There are currently 8 structures on the network with a temporary

of these structures belongs to Network Rail. The non-

s will be strengthened as part of the PFI Project and the

s removed. There are currently two bridges with height restrictions on

gs to Network Rail (as above) and one to the privately

Steam Railway. There are no plans to remove these

weight restriction. One

Network Rail structure

restriction

the network. One belon

owned Isle of Wight

restrictions

B - 81

As part of the PFI Project, the assessment and provision of containment in line

97/07 to parapets, piers and soffits for bridges, retaining

and follow-up repairs will be undertaken to ensure their continued

tegrity and functionality. Parapet work will only be considered on retaining

an 1m high. While parapets on Network Rail bridges will not be

.19.3 Rural Rights of Ways of rural rights of way interlink with the road network and

project will also require upgrading of the

urfacing, bridges, stiles and signage and the on-going maintenance of these

roads contain compulsory, directional and tourist signs, roadside

eating, bus shelters and roadside pot plants. During the CIP, signage will be

with TD19/06 and IAN

walls and other structures will be undertaken and implemented during the core

investment period. Thus, safety deficient parapets will be upgraded and regular

inspections

in

walls greater th

included, since they are not the responsibility of the council, the PFI Project will

include undertaking risk assessments and carrying out any necessary safety

fence works on the approaches to Network Rail bridges, in order to minimise

the risk of errant vehicles encroaching onto the railway.

Aesthetic appearance is not seen as a major issue, and routine painting and

graffiti removal is currently undertaken as required as part of routine

maintenance. The Council consults with the local community where large-scale

works are undertaken within the AONB to ensure that new or improved

structures are visually acceptable. This will continue under the Project.

The PFI contract will include the normal annual maintenance and life cycle

replacement works to all structures.

2The Island’s 827 km

form part of the Island’s highway network. The rural rights of ways will form part

of the PFI network. During the CIP, they will be upgraded to provide an

acceptable level of surface quality providing unimpeded access. Subsequently

an appropriate level of life cycle maintenance such that the asset is fit for

purpose will be implemented. The

s

assets and the adjoining hedgerows. There will be a degree of synergy between

road maintenance and rural rights of ways; if acceptable planings from the

roads are able to be used as the main source for upgrading the rights of way

surface.

2.19.4 Street Furniture The Island’s

s

B - 82

reduce the risk of third

arty claims. The combination of footpath renewal with the carriageway renewal

at some

f the major junctions. The Traffic Signal associated assets are in very poor

intended that all traffic signal installations

re upgraded to comply with the relevant standards, reduce the risk of failure

ology to reduce lamp changes and power

n, through a low carbon footprint based output specification. The PFI

ontractor will then maintain the whole system for the PFI contract period.

refurbished such that visibility is compliant with current standards. As

appropriate, other assets will be available for use, clearly visible and in a good

state of repair. Again, the upgraded assets will be maintained at the refurbished

standard throughout the PFI contract period. It is intended that the

refurbishment and maintenance of street furniture, coupled with carriageway

and footpaths will uplift the Island’s street scene.

2.19.5 Footways and footpaths The urban roads and town centres have an extensive network of footways. As

part of the CIP works the footways will be upgraded to provide an acceptable

structure and surface, minimising the current defects to

p

offers the opportunity to have a single upgrade programme, which will resolve

utility diversions and address drainage issues all at the same time.

2.19.6 Traffic Signals The Island has 79 sets of traffic signals that help to control traffic flows

o

condition and have been identified as a safety hazard. In addition, the

technology is now out of date. It is

a

and adopt the latest techn

consumption in line with the carbon reduction aims of government.

2.19.7 Street Lighting The 12,068 lighting columns on the Island fall well below the current standard

for lighting. It is assumed that all lighting columns over 20 years old will be

renewed during the CIP. All remaining columns will be renewed if necessary

due to structural condition and by default at year 20 of their life; such that the

whole stock will have been replaced by the end of the contract. The

specification will be to current codes of practice and will require the application

of modern technology, such as remote switching and energy saving equipment

and desig

c

B - 83

mounted on special masts or

ghting columns, both of which fall within the project’s “fence to fence” boundary

e project availability regime. Additionally, the

.19.9 Grass Cutting and Street Cleansing roach allows all services that need to be carried out on

t scope and

racticality of delivering these intertwined services using different delivery

ced the council that they should be part of the wider

d by

e council and is tolled for all vehicular traffic, and free for foot passengers. It is

tended that the Floating Bridge will be renewed as part of the CIP works.

2.19.8 CCTV The existing CCTV unit and control room are in poor condition and the council is

currently undertaking a renewal programme. Consequently, the next round of

life cycle renewal in 10 years time will be at the end of the proposed 7 year core

investment period. However, CCTV cameras are

li

and replacement would disrupt th

power required for CCTV is likely to come off lighting columns where

appropriate and synergies in the maintenance of the CCTV and street lighting

are likely to result in operational cost savings. CCTV is therefore included within

the Project scope assuming replacement of all cameras after a ten year life and

full transfer of responsibility for operational performance and structural integrity

2The fence to fence app

and adjacent to the highway to be synchronised, deriving maximum efficiency in

service delivery. This integrated approach enables grass cutting to be followed

by street cleansing and drain cleansing to meet the output specification

requirements.

Street cleansing was excluded from the scope at the Expression of Interest

(EOI) revision in 2007. However, the detailed analysis of the contrac

p

mechanisms has convin

Highways PFI Project. In addition, following detailed analysis and soft market

testing, the council has decided to include all grass cutting, including parks and

gardens, within the PFI scope to gain the financial benefits of economies of

scale.

2.19.10 Floating Bridge The coastal road network provides the vital circulatory route around the Island.

The Floating Bridge linking Cowes and East Cowes provides a link which is vital

to completion of the coastal route. The Floating Bridge is currently operate

th

in

B - 84

he Expression of Interest did not include the Floating Bridge in the scope;

g a more strategic approach to delivering the PFI, the Council is

cket machines are utilised in both locations and tariffs are inter-linked. It

on and off street car parking as a

fs will remain with the council.

capital funding to address the stability of the highway and it was

xpected that the refurbishment would have been completed ahead of the

wever, based on the latest timescales, funding for the

T

however, takin

convinced that its inclusion is vital for the success of the PFI. Soft market

testing confirms that the industry’s appetite for managing the tolled crossing

offers considerable scope for commercial innovation. The crossing tariff will be

set by the council and future tariff increases will be limited to an index linked

formula.

2.19.11 On and Off Street Car parking On-street car parking is considered to be an integral part of the carriageway and

is included in scope to avoid a risk mitigation strategy on the part of prospective

service providers by manipulation of an inessential interface. Off-street car

parking is currently managed by the same officers as on-street parking, similar

ti

therefore makes immense sense to keep both

single package within the PFI scope to prevent conflict with service delivery and

thereby gain significant benefit from operational synergies. The revenues from

the car parks will be a council income, collected by the PFI provider, and will be

offset against the Council’s Unitary Charge contributions. The powers to change

car parking tarif

2.19.12 Bouldnor Road Improvement The Council identified a major road reconstruction project on Bouldner Road

along the coastal road between Cowes and Yarmouth. This section of the road

has shown signs of significant movements over a period of time and the Council

developed plans for a major refurbishment of this section in 2006. This stretch

of the coastal road is strategically important for the Island and closure would not

be a practical option. The council made an application for Integrated Transport

scheme

e

Highways PFI Project. Ho

stability work is unlikely to be available before the PFI works commence in April

2013. Given the strategic importance of this road for the Island, the council has

decided that it should form part of the Highways PFI Project. This scheme was

not included at Expression of Interest stage.

B - 85

nd physical requirements of the Output Specification. The latter will

e developed to meet the standards of the Design Manual for Roads and

the requirements of Well Maintained

7 year CIP.

urist trade for economic survival. Cost

ll Lit Highways.

2.20 Standards of the Project

2.20.1 Core Investment Period (CIP) The works carried out during the Core Investment Period will be assessed by

the PFI contractor from the survey data provided by Isle of Wight Council. The

quantum of the works will be assessed by the PFI contractor to meet the

lifecycle a

b

Bridges and to achieve compliance with

Highways, Management of Structures and Well Lit Highways.

The Island’s highway network stands alone and does not allow traffic to divert

across boundaries into another authority’s area. Because of this, the successful

completion of the infrastructure renewal must be very carefully undertaken to

prevent the Island’s traffic coming to a halt. To minimise disruption a traffic

model, see appendix 4, has been produced, which will be made available to the

contractor so that the effect of road closures and the use of temporary traffic

control can be analysed prior to any road being attended. A seven year CIP

has also been chosen to allow the major works to be spread over a longer

period. appendix 5 gives the rationale behind a

The Isle of Wight relies heavily on the to

models for the CIP and also for whole life cycle maintenance include an

allowance for night time working on major traffic routes. Using the traffic model

for guidance it will be necessary to build, within the contract documentation,

constraints on times of working during the peak holiday periods and, in

particular, to avoid traffic delays in the vicinity of major events such as Cowes

Week and the two music festivals.

2.20.2 Post CIP The Output Specification for the post CIP period will be developed to require

steady state maintenance of all assets at the condition achieved by the CIP

investment. The operations and maintenance elements of the specification will

be developed to achieve compliance with the requirements of Well Maintained

Highways, Management of Structures and We

B - 86

2.21 Conclusions

B - 87

se 3.1 Introduction The Economic Case identifies possible options for the Highways PFI, building

on the business need described in the Strategic Case. The Options analysis

takes the Do Minimum option and compares that with seven other possible

options, using a weighted scoring based on the Island’s and the Council’s

strategic priorities. The preferred option is taken forward for the Economic Case

using a NATA style appraisal. The net cost of the preferred option in present

value terms is compared against the present value of benefits to give a Benefit

to Cost ratio

3.2 Options Appraisal There was an initial appraisal of eight options, a Do Minimum and seven

alternative Do Something options, which are briefly described in the table

below.

Option Description

3. Economic Ca

1 Do Minimum: continue with current levels of expenditure and small

amounts of capital investment to maintain the network in its current

condition

2 Strategic network PFI including on-going maintenance but no capital

works on the unclassified network

3 Full network PFI including on-going maintenance and street cleansing

but excluding on/off street car parking services

4 Full network PFI including on-going maintenance but excluding street

cleansing and on/off street car parking services

5 Full network PFI including on-going maintenance, street cleansing and

on street car parking services but excluding off street car parking

services

6 Full network PFI including on-going maintenance, street cleansing and

on/off street car parking services

7 Full network PFI including on-going maintenance and street cleansing

but excluding public rights of way and on/off street car parking services

8 Full network PFI including street cleansing but excluding any life cycle

capital replacement and on/off street car parking services

B - 88

n appraisal system was developed which drew heavily on the Island’s strategic

Criteria were taken from the Eco Island Vision 2008-2020,

Overall

weighting

A

policy documents.

and the Island’s Local Transport Plan 2006-2011 (LTP2), the Island’s Highways

PFI Expression of Interested submitted to the Department for Transport

supplemented by a number of other criteria. Around 80 criteria and objectives

were defined from the different sources and assembled under 12 sub-headings.

Weightings were applied to the different criteria, based on the strategic

importance, to give a 200 point scoring system as follows;

Ec lthy and Supportive, Safe, Well-Kept

an

30 o Island: A Thriving; Hea

d Inspiring Island.

EoI and LTP2 25

Sustainability 20

Political acceptability 15

Affo cost 20 rdability and

Val ue for money 15

Com mercial appetite 10

Env l 15 ironmenta

Project deliverability 15

Man 10 agement of risk

Innovation and improvement 10

Sta 15 keholder impact

Total 200

T by the

p The scores

ascribed to the different options are summarised below, full detail is in appendix

6

he appraisal was carried in a series of workshop sessions and reviewed

roject team. Policy experts were used to challenge assumptions.

.

B - 89

Option

Description Score Risk Evaluation

1

royed ’s

in the risk profile of the

Do Minimum: continue with current levels of expenditure and small amounts of capital investment to maintain network in its current condition

0 Substantial sunk costs (project costs) with no benefit. Significant reputational impact as the expectation which has been built is destand leading to questioning of the councilability to deliver on strategic projects. No improvement network.

2 Strategic network PFI including on-going maintenance but no capital

75 Continuing deterioration of the lower status routes and pathways.

pec ons not met)

Failure to maximise opportunity to regenerate tourism.

works on the unclassified network

Reputation impact (ex

tati

3 k PFI including nce and

king

134 Increased congestion. Potential for conflict between Parking Services and/or the enforcement contractor and the PFI contractor. Loss of potential cost savings (maintenance of car park surfaces coulundertaken at marginal rather than full cost).

Full networon-going maintenastreet cleansing but excluding on/off street car parservices

d have been

4 cluding nce but

king

107 Increased congestion. Potential for conflict between Parking Services and/or the enforcement contractor and the PFI contractor. Potential for conflict between street cleansing operation and PFI contractor (bin provision,

nce

undertaken at marginal rather than full cost).

Full network PFI inon-going maintenaexcluding street cleansing and on/off street car parservices

street/gully cleansing) Loss of potential cost savings (maintenaof car park surfaces could have been

5 Full network PFI including on-going maintenance, street cleansing and on street car parking services but excluding off street car parking services

127 Potential for competition for parking revenue between PFI contractor and off-street parking operation. Risk of loss of potential redevelopment opportunities presented by off-street car parks.

B - 90

Full network PFI including intenance, street d on/off street

163

n the Council finding a

6on-going macleansing ancar parking services

Option is reliant ocapable PFI partner to deliver the full scope.

7

uding

et car parking services

116 Increased congestion.

ce

n at marginal rather than full cost).

n ays.

of way maintenance

Full network PFI including on-going maintenance and

clstreet cleansing but exts of way andpublic righ

on/off stre

Potential for conflict between Parking Services and/or the enforcement contractor and the PFI contractor. Loss of potential cost savings (maintenanof car park surfaces could have been

ndertakeu Differential standard of maintenance betweerights of way and highw Risk of further deterioration of the rights of way network which would impact other strategic objectives (health and well-being etc.). Increased cost of rightsas a stand-alone operation. Lack of clarity of definition between an urbanpath and a rural right of way

8 Full network PFI including street cleansing but excluding any life cycle

46

orcement contractor

ather than full cost)

capital replacement and on/off street car parking services

Increased congestion. Potential for conflict between Parking Services and/or the enfand the PFI contractor. Loss of potential cost savings (maintenance of car park surfaces could have been undertaken at marginal r Risk of deterioration following the rehabilitation phase and poor standard of network on handback. Reputation impact as the condition of the highways deteriorates back towards the pre-existing standard.

B - 91

we prais d relative to the Do Minimum, which

. Option 6

hest score. Optio

st s, ex on or off street

hts of way.

FI with a full ran fore identified

ferred option.

The Economic Case for the preferred opt

makes use of standard DfT approaches a

The Economic Case presents a mix of

derivation of which is described below

Appraisal Summary Table.

3.3 Service Improvements and CommuThe table below relates different serv

benefits they will generate. The princip ng from

ad faces esistance and

g. The principal im acts flowing from the PFI will be time

ces, savings in

levels of street crime and disorder and

fficiency gains.

Benefit item Better road

improved s

resistance

The Do Something options re ap e

, a full network PFI with a full range of

ns 3, 5 and 7, which all had similar

therefore has a minimum score

services, had the hig

scores and were the next be option cluded combinations of

parking services or public rig

Option 6, a full network P

as the pre

ge of services, was there

ion follows a NATA style appraisal and

nd values where possible.

quantified and qualitative impacts, the

with the findings summarised in an

nity Benefits ice improvements to the community

al service improvements flowi

the PFI will be better ro sur with better skidding r

p

vehicle operating costs, reductions in

improved street lightin

savings from several sour

the number of accidents, reduced

general e

surfaces and

kidding

Improved street lighting

Time savings from higher

traffic speeds

Time savings from fewer

road works and road

closures

Vehicle operating cost

savings

Reduced numbers of

B - 92

accidents

Reduced public liability

payments

Reduced street crime and

disorder

Time savings from

removal of weight and

width restrictions

Efficiency savings from private sector involvement

Efficiency savings from undertaking the right

options

h benefit item is set out below and full detail is in

ppendix 7.

applied for the remaining 18 years. This profile is

taken into account in the estimates made below in the assumptions about the

‘ramp-up’ of benefits through

closures over the CIP and the

In i of the Island’s road network has been

de e highway condition model operated for the Isle of Wight

Co tify the schemes needed to bring the Island’s

roa o standard and the costs of those schemes. A recent

run of the model has shown that maintaining expenditure at around current

lev itio f the road network is broadly maintained at

today’s level. We are therefore adopting this model run as representing our Do

Mi

The basis for estimating eac

a

The Isle of Wight Highways PFI is expected to be a 25-year concession starting

in early 2013, so benefits are calculated over the 25-year period from 2013 to

2037 inclusive.

Over the first seven of the 25 years there will be a 7-year Core Investment

Period (CIP) to get the network up to a defined standard, with life-cycle

maintenance then being

the CIP and the volume o

following 18 years.

f road works and road

recent years the cond

teriorating. Th

tion

uncil allows the council to

ds and footways up t

iden

els will mean the cond n o

nimum.

B - 93

3.3.1 Time savings from higher traffic speeds as a result of better road co

Ru highway condition model have been undertaken for the Do

Mi Do Something. The sc es needed to get

fro Minimum to a Do Something are phased over seven years – with

the worst NI score road sections being undertaken first.

It is generally believed that traffic speeds are constrained on sections of road

wit As se sections of road are improved from the Do

Mi , speeds and journey reliability will improve and

time savings will be generated. Our central estimate assumes that speeds

thr roads of poor quality will increase by 2 mph (3.2 kph).

The Island’s road network has been divided into four categories of road based

fit from an improved road surface on roads

in each category:

nditions

ns of the

nimum and for the preferre

m the Do

d hem

h poor surface quality.

nimum to the Do Something

the

ough these sections of

on traffic flow, as follows. These values have been used in estimating the

numbers of vehicles which will bene

Category Vehicles per day, AADT

1 >10,000

2 5,000 – 10,000

3 2,000 – 5,000

4 <2,000

s from all the schemes to be

plemented during the CIP are assumed to be built up evenly over the seven

sumed to be slowed down by two minutes – at, say, temporary

traffic lights or in taking a longer, alternative route.

These flows are combined with the kilometres of road in each category to have

improved road surfaces and the central assumed speed change of 3.2 kph to

give estimates of time savings. The time saving

im

years of the CIP then maintained over the remaining 18 years of the

concession.

3.3.2 Changes in travel times from changes in the volume of road works and road closures

Currently there are around 5,000 job tickets for road works on the Island each

year. The average duration of road works is estimated at half a day and

vehicles are as

B - 94

IP, the number of road works might be expected to increase,

or the Do Minimum, the current situation of around 5,000 job tickets per year

chemes would impose an average delay of five minutes on each vehicle

3 e operatiThere is some eviden ularly from the USA, that the poor condition of

roads can substantial operating and maintenance costs. Work

b RIP (The Road I gramme) has indicated that roads in poor

condition can cause additional vehicle costs, from accelerated vehicle

deterioration, additional maintenance needs and higher fuel consumption, of

claims that potholes cost UK road users £320m per year and

since there are 32.4 million registered vehicles in GB this works out at an

he Isle of Wight would mean that the cost on the Island

During the C

adding to delay. From years eight onwards, however, there should be a

substantial reduction in road works and a consequent benefit from reduced

delays.

F

was assumed to continue.

For the Do Something, the modelling of the road network indicated that there

would be some 235 major schemes, with an average duration of three weeks,

undertaken during the core investment period. It was assumed that these

s

affected. It was assumed that the number of job tickets issued for smaller items

of road works would decline steadily over the Core Investment Period and from

year 8 onwards there would be some 500 job tickets issued per year, one tenth

of the current rate.

.3.3 Vehicl ng cost savings ce, partic

ly add to vehicle

y T nformation Pro

around $200-300 per vehicle per year.

The USA is different from the UK in the types of cars that people drive, the

condition of the road network and the extent to which they use their cars, so the

values generated by a USA lobby group may not apply in the UK. In the UK,

Potholes.co.uk

average of around £10 per vehicle per year. We assume that the relatively poor

quality of roads on t

would be higher than the average and have assumed a central estimate of an

additional £20 per vehicle per year.

B - 95

he number of vehicles owned by the Island’s households is recorded as

ced vehicle operating costs.

reases in the summer months. Traffic count data

cross a number of the Island’s roads indicated that summer traffic flows were

T

63,874 cars and vans in the 2001 census. Allowing for growth since 2001 and

the cars, vans, HGVs and buses owned by the public sector, the utilities, the

private sector, bus operators, etc we assume that 75,000 vehicles could benefit

from redu

Common experience, supported by an analysis of traffic counts, indicates that

the Island’s vehicle fleet inc

a

on average around 11% higher than flows in neutral months. This increased

vehicle flow, for a period of four months in the summer, was also assumed to

benefit from a saving in vehicle operating costs.

Summer increase…

3.3.4 Reduction in the number of accidents

he Island’s road accident data for previous years – the three years from mid

to identify the accidents in which poor

ll allow at least a proportion of these and

ther non-fatal accidents to be avoided, depending on the relative contribution

ility payments average around

500,000 per year, though there is considerable variation from year to year. A

major claim, in relation to a fatality for example could push the claim in any year

T

2005 to mid 2008 has been analysed

road conditions might have been a major factor. Over this three year period,

there were 13 fatalities from accidents involving wet shunts and loss of control

where a road’s poor skid resistance might have been a contributory factor.

Over the PFI’s seven year core investment period the skid resistance of the

road network will be improved which wi

o

of poor skid resistance and other factors to these accidents. The council’s

general experience is that the implementation of a road safety measure can

normally lead to a reduction of around one third in the number of relevant

accidents, so we assume that in the completed Do Something option one-third

of these accidents could be saved. Standard DfT accident values are then

applied to the estimates of the reduction in the number of accidents.

3.3.5 Reduction in the Council’s public liability payments The council’s current road-related public liab

£

B - 96

urrent levels of public liability payments

ould be maintained and that this risk will be transferred in the Do Something.

(of the order of 15%-

25%). There might also be an increase in night-time pedestrian and social

ts as a result of increased perceptions of safety and the

ality of life more generally.

g will be improved to new EU

ccidents during the hours of darkness are assumed to be reduced by one-third

considerably higher than this. The council would not be liable for any such

payments if it maintained its proper schedule of road inspections, as we assume

it would in the Do Something.

For the Do Minimum we assume that c

w

3.3.6 Reduction in accidents and street crime as a result of improved street lighting The 4Ps guidance on the estimation of benefits from enhanced street lighting

indicates that benefits might arise from a reduction in night-time accidents (of

the order of 15%-35%) and night-time crime and disorder

activity on well-lit stree

qu

We assume that under the PFI street lightin

standards in the Island’s towns and that some villages currently with limited

street lighting would have street lights replaced to the relevant appropriate

standard under the PFI and that accidents and street crime/disorder will be

reduced as a result.

A

in line with the normal impact of the Council’s road safety-related measures.

Street crime and disorder

3.3.7 Time savings from the removal of weight and width restrictions The removal of weight and primarily width restrictions will benefit heavy goods

vehicle movements. The number of restrictions to be removed from each

category of road is combined with the average traffic flow on each category of

road and the following proportions of HGV in the traffic flow by category of road.

ach affected HGV is assumed to save 5 minutes from being able to take a E

more direct route as a result of the removal of a restriction.

B - 97

Category HGVs as % of traffic flow

1 6%

2 7.5%

3 7%

4 4%

3.3.8 Efficiency gains from two sources – 1) the transfer from public to

re effective maintenance measures because of the

that this efficiency gain is worth 15% of the

xpenditure under the PFI.

fective, higher cost measure with an overall saving in life

ycle costs.

ted

inor repairs have been made to sections of road when the cost effective

a more major road reconstruction which would have

moved the need for future repairs. At Appleford Road, Chale, for example,

d at

private sector management of the road network and 2) being able to undertake moavailability of more funds.

Better value for money can be expected from two different sources under the

PFI. The first source of efficiency gain has been identified generally from

previous PFIs and is generally attributed to the greater incentivisation and

efficiency of the private sector in doing what the public sector had previously

been doing. We assume

e

The second source of efficiency gain arises from the availability of more funding

under the PFI which means that more efficient measures can be undertaken. In

effect, the repeated application of lower cost, less effective measures can be

replaced by a more ef

c

The Isle of Wight Council is able to point to a number of cases where repea

m

solution would have been

re

some £4,300 has been spent on abortive work since January 2007 an

Calbourne Road, Calbourne some £26,000 has been spent since June 2006.

These sums exclude additional money spent on infilling potholes where the

records do not allow the location of the work to be identified.

We assume that such efficiency savings could be worth a further 5% of the

expenditure under the PFI.

B - 98

3.4 Value for Money Assessment (TQAT) The Value for Money assessment is fully described in the financial case, section

5. A detailed public sector comparator and a shadow bid model have been

constructed. Comparing the PFI shadow bid with the Public Sector comparator,

the PFI option is found to 2.3% value for money over the PSC option.

be 1

3.5 NATA The NATA-style Appraisal Summary Table, attached at appendix 8,

summarises a wider-ranging appraisal, covering the economy, safety, the

environment, accessibility and integration.

£ million present

values, 2009 price

The principal quantified benefit estimates are summarised in the table below,

calculated over the 25-years of the concession period and expressed as

Present Values in 2009 prices.

Benefit Item

s

Time savings as a result of better road surfaces 225.9

Time savings from changes in road works and road closures 44.1

Vehicle operating cost savings 23.0

Accident savings from improved skid resistance 26.0

Public liability payment savings 76.0

Accident savings as a result of improved street lighting 74.6

Street crime reduction as a result of improved street lighting [xx]

Time savings from the removal of width and weight

restrictions

23.0

Efficiency savings from private sector involvement 49.8

Efficiency savings from improved road maintenance

measures

16.6

Total £ [559] million

he costs of the Preferred Scheme are detailed in appendix 9 and are

Figures removed for commercial purposes

T

described more fully in the Financial Case. They include un-inflated (2009/10)

costs as follows:

B - 99

£ million

Capital costs over Core Investment Period Figures removed for commercial reasons

Life cycle replacement costs Figures removed for commercial reasons

Operation & Maintenance costs over 25 years Figures removed for commercial reasons

Contract Management Costs over 25 years Figures removed for commercial reasons

Total £588.8 million

Present Value £[365.7] million

The un-inflated costs of the Do Minimum, of maintaining the hi

in

£ million

ghways network

its current condition, are as follows.

Capital costs over Core Investment Period Figures removed for commercial reasons

Life cycle replacement costs Figures removed

for commercial reasons

Operation & Maintenance costs over 25 years1 Figures removed or com al reasons

f merci

Total £374 million

Present Value £216 million

lue terms is [£149.4] million; the benefits

re [£544] million and the Benefit: Cost ratio is [3:3:1].

1 Includes the costs identified as Contract Management Costs in the Preferred Option

The net cost of the PFI in present va

a

B - 100

3.6 Assessment of Funding The PFI credit will make funding available which is not available through

ma e council is currently fu lion

of capital expenditure per year (so around £35 million ov

Period) but capital funding of around £44 million over this period would be

ne dition uld

be needed to bring the network into an acceptable con

make this funding available.

Good value for money would be obtained from this add

the benefit:cost ratio around [3.3:1].

as far the highest scoring option when

appraised against a set of criteria and objectives which draw heavily on the

Island’s strategy as set out in Eco Island Vision 2008-2020 and in its Local

Tra network

cleansing and on and off street parking services.

Th halt the decline in the Island’s roads and to

ensure that the Island’s roads, footways and public rig

part in contributing to the Island vision will only be available through the PFI, our

pre es rce to

do this itself.

3.8 Conclusions

instream council funding. Th nding around £5 mil

er the Core Investment

eded to maintain the network in its current con and £192 million wo

dition. The PFI would

itional expenditure, with

3.7 Preferred Investment / Service Delivery Option The Preferred Option 6 emerged by

nsport Plan. The Preferred Option is a full PFI which includes street

e level of funding needed to

hts of way can play their

ferred service delivery option as the council do not have the resou

B - 101

Commercial Case

al for PFI ublic sector procurement is governed by legislation set by the European Union

otential bidders

• Non-discrimination

Transparency

uality, best value public

r the open advertisement of all opportunities exceeding the published value

n of a PFI service provider.

ommission published Directive 2004/18/EC in the spring of

2004, introducing the Competitive Dialogue (CD) procedure. This mechanism

has been introduced as an alternative to the negotiated procedure for complex

procurements such as the letting of a PFI contract.

4

4.1 Introduction The Commercial Case focuses on the key areas of the procurement strategy

and process, commercial considerations, soft market testing and the human

resources implications of the project. Risk has been considered within the

context of the Commercial Case although this is dealt with in more detail within

the Management Case. 4.2 Procurement AppraisP

mandating three core principles:

• Equality of treatment between all p

•

Effective procurement is crucial in securing high q

services and the Government has highlighted that the development of a clear

procurement strategy is a key step towards achieving Value for Money and

delivering the demanding efficiency targets.

The process requires use of the Official Journal of the European Union (OJEU)

fo

thresholds as will be the case in this project.

It is mandatory for the council to comply with these regulations and also council

Standing orders; therefore a compliant procurement mechanism will be utilised

for the selectio

The European C

B - 102

taking OJEU procurements:

• The Open Procedure – whereby any organisation expressing an interest is

ull contract documentation and invited to tender. This

•

ontract negotiation using this mechanism.

• The Competitive Negotiated Procedure – which allows the Council to pre-

to negotiate over the required service

the Council pre-qualifies

reate a shortlist of those who are invited to participate

rocess, affording them opportunity to discuss and refine the

required solutions. Once the solution has been confirmed the dialogue is

x contracts” (ref: Regulation 18 -

ublic Contracts Regulations 2006).

ct can be classified as a “particularly

omplex contract”. The Council is not able to objectively define the technical

4.3 Procurement Process The Council will follow the following procurement process and timescales:

Four regulated mechanisms exist for under

provided with the f

method does not include any opportunity for short-listing or contract

negotiation.

The Restricted Procedure – which allows a pre-qualification stage to be

performed to short list the suppliers that will be invited to tender. Again no

opportunity exists for c

qualify suppliers that will be invited

provision. There is no formal end to the negotiations prior to the contract

signature.

• The Competitive Dialogue Procedure – whereby

service providers to c

in the dialogue p

brought to a halt through formal notification to all participants and final

tenders are invited. After the Call for Final Tender has been issued only

limited discussion and clarification is allowed – there is no provision for

further negotiation at this stage.

Guidance states that the Competitive Negotiated Procedure should now only be

used in exceptional circumstances, whilst the Competitive Dialogue procedure

should only be used for “particularly comple

P

Under the Public Procurement Directive (2004/18/EC) and the Public Contracts

Regulations 2006, the proposed PFI contra

c

means capable of satisfying its needs or objectives and therefore the

Competitive Dialogue procedure is the mandated process.

B - 103

The key stages of the Procedure can be defined as below; [The OBC

submission is 2 months ahead of scheduled and is likely the timescales

below will be brought forward by 2 months, subject to DfT and HM

Treasury approval.]

a. Post OBC to Pre Dialogue (September 2009 to May 2010)

• Planning and initial preparation (pre OJEU notice) – commencing

following submission of OBC.

• OJEU contract notice (see draft attached at appendix 10) for short-

listing of bidders through the use of a Prequalification questionnaire

loutions.

luate outline solution

• Invite detailed solution and evaluate

efine solution

• Selection of bidders and preparation for the dialogue stage – agree a

shortlist.

b. Dialogue Phase (June 2010 – October 2011)

• The dialogue – issue invitation to submit outline so

• Eva

• Invite final dialogue and r

• Close CD.

B - 104

c. Post-dialogue Phase (October 2011 to November 2012)

• Submission of Final Tenders and Bid Evaluation

• Bid Clarification

• Preferred Bidder to Contract Close

• Final Business Case to DfT and HMT.

• Cabinet Approval

• Financial Close

4.4 Competitive Dialogue (CD) The CD process is likely to be longer than the negotiated route and more

resource intensive. The council is keen to minimise bid costs and will keep this

in focus when drawing the Project Agreement and will work with bidders to

achieve this. The council itself has made considerable investment in assembling

a post-OBC team structure described in the Management section of this OBC,

including full time Legal and Procurement support. In addition, the Programme

Director will be able to draw on the wider Advisor team, also identified in the

mana

The c

and ground rules to facilitate an orderly conduct of the dialogue. The process

will be co-ordinated and managed centrally.

w session followed by dialogue conducted

E e

Post ISDS through to CFT, the same methodology will be used except that

l, Financial and Legal.

uration of

necessary to undertake this

nd the financial commitment necessary to bid and the

likely investment in time necessary to bring a successful conclusion to the

gement section.

ouncil will design detailed CD process and announce a set of protocols

The council expects the early dialogue up to ISDS to be conducted on a two

eekly rotation, with a plenary opening

by two teams – one leading on technical and the other on commercial/legal.

ach dialogue team will have a back room support team to help with th

effective management of the overall process.

three dialogue teams will be set up – leading on Technica

Each dialogue team will also have a back room support for the full d

the dialogue.

Experienced bidders of the size and shape

Contract will understa

B - 105

procu s that the

fully appreciative of

on minimising bid costs.

ets the authority is approaching

ng full account of the opportunities for innovation

hich are available from working with others in the

public tary sectors. Importantly, this strategy seeks to balance

Evaluation Criteria for each of the

tages with the full scoring methodology before commencing CD. The Council

• Financial

rement process. The Council’s soft market testing indicate

market is fully aware of the resource implications but will be

any client body that focuses

In order to achieve best value and efficiency targ

the competition positively, taki

and genuine partnerships w

, private and volun

two priorities:

• delivering efficiencies and quality

• sustainable procurement, engaging with local and regional suppliers

to promote the local economy taking into account the social and

environmental impact of spending decisions

4.4.1 Evaluation Criteria

The council will determine the detailed Evaluation Criteria once the full

specification is developed. It will publish the

s

intends to publish an affordability NPV envelope for bidders to use as a guide to

prevent abortive work being undertaken. The following may be included when

forming the basis of the Evaluation criteria:

• Technical

• Legal

• Payment Mechanism

• Staffing

• Resourcing

Detailed Evaluation Criteria will be determined through a series of project

workshops and will be tested for robustness before formally adopting them for

evaluation.

B - 106

sis of a workable scheme

pecifically adapted to particular local needs. The council’s service

set out in appendix 11. These standards have been tested for

appropriateness for Isle of Wight conditions and affordability. In costing the

e activities under an output based

practices,

• Existing output specifications on other highway and lighting PFI projects

• Current best practice across other Local Authorities

• Well-maintained Highways – Code of Practice for Highway Maintenance

Management

way Structures – Code of Practice, UK Bridges

will necessarily be closely aligned with

ds for litter and detritus grading will be set at the

rd, and for graffiti and flyposting at grade A. The

Service Provider will be required to co-ordinate and programme its works with

e council, that this requirement is being met. It is expected that

4.5 Output Specification The council has drawn on the experience of other Authorities that have

procured Highways PFI projects in formulating the ba

s

requirements will be set out in detail in the output specification based on 4ps

guidance – the first draft of this document is being prepared at present.

The council has set a number of standards for each highway asset category,

and these are

effects of delivering operation and maintenanc

PFI specification, the Council has taken account of meeting the standards,

and obligations, contained in the following documentation:

• Management of High

Board

• Well Lit Highways – Code of Practice for Highway Lighting Management

• Code of Practice on Litter and Refuse, Defra

• DfT design manuals

• Highways Act 1980

• The New Roads and Street Works Act

• Traffic Management Act

• IWC internal Policies

Core services relating to highway assets

industry standards. Standar

COPLR intermediate B+ standa

any contractor with responsibilities for waste collection management on the

Project Network and shall be able to demonstrate from time to time, at the

request of th

B - 107

within the normal scope of the service providers

B.4 –

ighting Classes for Subsidiary Roads (pedestrians and cyclists)).

this interface will be well

current duties on other Networks.

The lighting requirements for lighting on subsidiary roads and associated areas,

footpaths and cycle tracks will be determined based on crime figures, traffic flow

and environmental criteria as set out within BS5489-1: 2003 (Table

L

Lighting Class Crime Rate

Ra value Area ID Area ID Area ID

Low traffic flowa

Normal traffic flowb

High traffic flowc

E1/E2d E3/E4d E1/E2d E3/E4d E1/E2d E3/E4dLow Ra<60 S5 S4 S4 S3 S3 S2 Ra≥60 S6 S5 S5 S4 S4 S3 Moderate Ra<60 S4 S3 S3 S2 - S1

Ra≥60 S5 S4 S4 S3 - S2 High Ra<60 S2 S2 S2 S1 - S1 Ra≥60 S3 S3 S3 S2 - S2

Lighting Classes for Subsidiary Roads (pedestrians and cyclists).

The lighting class appropriate for each type of traffic route within the IW shall be

fic flow and environmental

out within BS5489-1:2003, Table B.2 – Lighting

d Traffic routes and Table B.3 – Lighting Classes for

ion the appropriate lighting class for each

town/district centre within the IW shall be determined based on usage, traffic

Type of Traffic

determined in accordance with the road type, traf

criteria selection process set

Classes for Motorways an

Conflict Zones.

Within the Output Specificat

flow and environmental criteria as set out within BS5489-1: 2003.

Lighting Class

Normal Traffic

Flow High Traffic

Flow

E3 E4 E3 E4

Pedestrian only CE3 CE2 CE2 CE1 Mixed vehicle and pedestrian with CE2 CE1 CE1 CE1

B - 108

separate footways Mixed vehicle and pedestrian on same

rface CE2 CE1 CE1 CE1

su

L

ach car park

ithin the Isle of Wight shall be determined based on usage and traffic flow

set out within BS5489-1: 2003

ighting levels for town centre areas as extracted from BS5489

Within the Output Specification the appropriate lighting class for e

w

criteria as

.

Lighting lev car pa 9

ontrolle

nd the output specification will contain a standard whereby no traffic signal

h Standards, NJUG guidelines, local authority best practice,

nd trade association recommendations.

• The high level requirements of the council for each aspect of the Service

ed Outcomes’

• The performance requirements of the er gainst

the Service Delivery Outputs and their correspon Performance

Targets

the Payment Mechanism and Service Performance

els for outdoor rks as extracted from BS548

The Council has accurate installation dates for its traffic signal c r assets

a

controller shall be more than 10 years old after the core investment period and

no more than 8 years old at Handback.

Arboriculture and grounds maintenance standards will employ relevant statutory

legislation, Britis

a

Each component of the detailed Output Specification will be drafted to provide:

as ‘Requir

Service Provid , measured a

ding

• Clear “Clause” links to

Schedules

B - 109

sm by which the Output Specification shall be measured in

P ure t o th ject

reement

he Technical and Financial modelling has applied market rates to the costs of

elivering these standards of service and taken account of scale, continuity and

he council’s Highways PFI Contract will be an output based service contract

designed raise the standard of service through efficiency gains in the delivery.

Service payments will be based on either meeting milestones or Output

Specification requirements and hence the contract documents will have detailed

outcomes and key performance indicators for each aspect of service delivery.

The council will adopt the model standard form framework but will devise its

d specific issues,

y, carbon footprint, night working and restrictions on refurbishing

l dates for tourism. The council

Period

– PS1(b) Life cycle

PS3 Environmental Maintenance Service

PS5 Emergency Responsiveness

– Traffic Management, Network Integrity Inspection, UTC,

ct Management and Customer Interface

• The mechani

accordance with the Monitoring

Ag

roced s se ut in e Pro

T

d

private sector operating efficiencies. 4.5.1 Performance Requirements T

own detailed specification, post OBC. This will include Islan

sustainabilit

certain parts of the network during certain critica

will follow the following Performance Standards (PS) model form as a guide:

PS1 Network and Infrastructure Condition

– PS1(a) Core Investment

– Series of Milestone Targets

PS2 Network Performance

– Operation & Maintenance

PS4 Winter Maintenance Service Operations

– Civil & Highway Emergency

PS6 Safety Performance

– On-going Improvements

PS7 Network Management

Fault Management

PS8 Contra

B - 110

ic Assistance

– Strategic reporting responsibilities, Best Value Duty in the

– Compliance with Authority's Working Practices, Codes of

luntary Codes

of

the Project Agreement include: the Streetlighting Model Contract (due to the

numb ntenance PFI projects already

dealt with in this Model Contract); the Standardisation of PFI Contracts versions

4 ("SoPC ement Procurement Pack issued earlier

this year tracts.

Initial legal Piper and WSP (the Council's

technical ad s on certain key issues

for inclu

sector from t ct and the Sheffield

Highways Maintenance ke advantage of this

knowledge he sector.

The Co to adhering to the drafting

conta r, there are likely to be a number of sector-

specific

in the main, nce project rather than a design and

build e advantage of the

– Annual Service Reports, MIS, Inventory, Customer

Services

PS9 Strateg

delivery of the Service, Gershon efficiency, Audits, LTP

assistance, Service Improvement Plans

PS10 Working Practices

Practice and Vo

The Output Specification and Performance Requirements will link to the

Payment Mechanism detailed at 4.7 and all three documents are dependent on

one another in determining the PFI contractor’s performance and payment. The

Project Agreement will also be fully cross referenced to the Output Specification

and Payment Mechanism ensuring a cohesive suite of Contract Documentation.

4.6 Project Agreement The Council is currently developing a draft Project Agreement with its external

legal advisers, DLA Piper. The precedents being used to inform the drafting

er of analogous issues relating to the mai

4"); the draft Highway Manag

by 4Ps; and other relevant highways con

meetings have been held with DLA

visers) to discuss and reach agreed position

sion in the Project Agreement. As DLA Piper has experience of this

he Birmingham City Council Highways PFI proje

PFI project the council is able to ta

on all key issues within t

uncil is committed, wherever possible,

ined within SoPC4. Howeve

derogations for which approval will be sought. These derogations arise,

because this is a maintena

project. The Council will, wherever possible, tak

B - 111

lessons lear

and Sheffield project any derogations it proposes to SoPC4 drafting.

The C list of derogations from SoPC4 which it will

frequent

confirm the

of legal mee el summary of the

derog it currently expects to seek on the project which

is set out a

The drafting of the Project Agreement will be completed prior to the start of the

payments to the contractor will vary according to agreed standards, measured

es.

nt on any sector-specific derogations approved in the Birmingham

s to inform

ouncil will keep a running

ly review as the drafting of the Project Agreement is developed to

necessity of any such derogations. Following on from the initial set

tings, the council has provided an initial high lev

ations from SoPC4 which

t appendix 12.

procurement process and will be made available to bidders at the

commencement of procurement.

4.7 Payment Mechanism It is presently envisaged that the payment mechanism will be based on a

Unitary Charge for the delivery of the key elements of the Highway service,

in accordance with pre-set rul

The Council will develop the Payment Mechanism to:

• Incentivise the contractor to deliver to required standards, timetable and

project objectives

• Encourage the contractor to extend asset lifecycle through the use of

innovative design and new technology

• Be bankable

• Be objective, clear, simple, cost effective and capable of measurement.

The approach will build on the experience of the previous projects in the

highway maintenance sector and from key guidance from the 4Ps and HM

Treasury.

In keeping with practice on earlier projects, performance during the CIP will be

measured through achievement of milestones. The initial level of Unitary

Charge will reflect the total contract value less the value of core investment

works. As each milestone is achieved, the Unitary Charge will step up in

B - 112

PS1A of the standard form relates to the CIP, the performance of which is

astructure Condition-PS1(b) Life cycle

eness

mance

• S8 Contract Management and Customer Interface

ctices

us projects in the sector included

gainst each service delivery criterion of the performance

k

position, but considers that there will be some merit in exploring the benefit of a

part from simplifying the application and monitoring of the payment

service delivery criteria.

increments set to make the Unitary Charge reflective of the total contract value

on completion of the CIP.

It is intended that Service Provider performance will be measured against the

service delivery requirements of the Output Specification for each of the

performance standards of the model standard form. These will be appropriately

modified to reflect the service and network conditions of the Island.

monitored and paid for through the milestone mechanic outlined above. The

following performance standards will be monitored against service delivery.

• PS1 Network and Infr

• PS2 Operation & Maintenance

• PS3 Environmental Maintenance Service

• PS4 Winter Maintenance Service Operations

• PS5 Emergency Responsiv

• PS6 Safety Perfor

• PS7 Network Management

P

• PS9 Strategic Assistance

• PS10 Working Pra

Some payment mechanisms used on previo

bespoke deductions a

standard, albeit with some banding. The Council will retain this as a fallbac

simple hierarchy of deductions related to the impact of the performance failure

which would apply to all service delivery criteria.

A

mechanism, the common hierarchy approach may allow the introduction of a

small set of Key Performance Indicators into the Payment Mechanism. These

would allow the Council to include some overarching aggregate performance

requirements in addition to the disaggregate requirements of the individual

B - 113

nce will be largely self monitored with a requirement

r independent review and approval by third party on a random sample of

he interface with other contractual remedies will also be carefully considered.

that

all three documents are dependent on one another, when determining the PFI

12. The Council will update

intends to work with DfT and PUK

re that the approval for derogations can be

4.9.1 Wharf facilities

orts of gravel, aggregates and

ther bulk cargos. Medina Wharf has direct road access on to the main highway

Service Provider performa

fo

indicators. The approach to be adopted will be based on irregular and random

sampling but, to incentivise accurate self monitoring, payment deductions for

inaccurate or false reporting will be high.

T

The Payment Mechanism will be closely integrated and calibrated in line with

the Output Specification and Performance Monitoring Regime, to the extent

Contractor’s performance and payment.

4.8 Derogations from SOPC4 An initial derogations table is attached at appendix

the table as and when necessary and

throughout the procurement to ensu

obtained in a timely manner.

4.9 Commercial Issues

There are three operating commercial wharfs on the Island, all on the Medina

estuary off the Solent.

The main wharfs are Medina Wharf in Cowes, and Kingston Wharf in East

Cowes, both of which currently accept regular imp

o

network via a specially constructed link road. Kingston Wharf is due to have

access to the main road network via a new road link through a proposed

employment development area, due for completion at the end of 2009. On

average (between 2003 and 2008) 72,500 tonnes of stone and 102,000 tonnes

of shingle and ballast per annum were imported to the Island through Cowes

Harbour.

B - 114

he smallest wharf, Blackhouse Quay, is in the built up heart of Newport.

4.9.2 - Isle of Wight Mineral Background

halk, and 1 limestone (producing crushed rock). These are distributed across

ut the Island, with the main centre for

rocessing being located just to the south east of the capital town, Newport.

e arry out some form of material recycling.

signated for their (European, national, or local)

ignificance for nature conservation interests (i.e. wildlife and habitats). Other

ccess, existing development and allocations.

ating to the Island Plan and Mineral Planning Authority

ill be held in the Project Data Room.

onsiderations ntil the Highways PFI Provider is identified IWC will not be in a position to

cil has developed an in-depth understanding of the potential service

providers through both the completion and planning of tasks including;

T

Although road access is restricted adjacent to the site, and leads onto an

industrial estate road before reaching the main road network, the wharf still

accepts occasional cargos of gravel for local distribution, but access by sea is

limited by a narrow tidal window and relatively shallow waters.

The Island has a number of currently active quarries: 5 sand and gravel, 3

c

the Island on a predominately east/west axis orientation, following the

geological occurrence of economically significant reserves. The locations of all

of these quarries can be considered rural (i.e. outside development envelope

boundaries) and they are spread througho

p

Ther are currently 3 quarries that c

There are a number of environmental constraints to mineral operations, bearing

in mind that extraction is limited to resource occurrence including major chalk

aquifers, AONB, and sites de

s

physical constraints include a

Further information rel

w

4.9.3 - IWC Property CU

determine which, if any, of the currently held highways related Isle of Wight

council sites might be of interest to that Provider, and how they might be

transferred. However, in order to ensure that all prospective Providers are able

to consider the issue of council held properties a schedule of such properties

will be held in the Project Data Room.

4.10 Market Soundings/Market Interest The Coun

B - 115

d the Council to

potential service providers, encouraging interest and participation.

e

otential service providers to the Isle of Wight and our project. The Industry

with

e Council. As well as presentations giving information about the Isle of Wight,

eo to provide an overview of the Island,

e highways condition and give a flavour of some of the residents and visitors’

sual demonstration of some of the good

be a world-leading company in its field,

and also that the Isle of Wight is a place where potential bidders can do, and

ill want to do, business.

• Market research

• Market warming on both formal and informal mechanisms including face-

to-face meetings and the publication of a Prior Information Notice in the OJEU

(see appendix 13)

• A series of industry days to “sell” both the project an

Soft market testing was undertaken as part of the EOI process and this has

continued to date (see appendix 14). There has been a great deal of interest

shown by the Industry and suggestions from regular meetings have helped

shape the scope outlined in the OBC.

An Industry Day on the Isle of Wight will be held on 3 September 2009 at the

Royal Yacht Squadron, Cowes, Isle of Wight. The results of this will be

appended to the OBC in due course. The Industry Day is intended to introduc

p

Day will be led by the Leader of the Council and the Chief Executive. The

Programme Director will outline the scope and approach the Council will take in

seeking a PFI partner for the Council. The Technical Manager and the

Commercial Manager will cover detail aspects of the Project and there will be

an opportunity for prospective bidders to raise issues on a one to one basis

th

our challenges, our vision for the project and the process through to contract

commencement, there will a short vid

th

views about Island roads, including a vi

and bad areas. This will be supplemented by a bus tour of some of the roads

and assets around the Island to further illustrate the rural nature of the Island,

the current state of our network and the logistics of what the project entails.

Additionally, the Council intends to demonstrate that it is a partner capable of

doing business with what will inevitably

w

4.11 Procurement Data

B - 116

ss once it receives the formal approval to proceed from DfT

shed on the

ouncil’s website.

through the procurement process. The

ouncil has comprehensive records of our Inventory and asset condition. These

ise

e need for bidders to travel to the Isle of Wight. Bidders will however be

In preparing both the EOI and OBC the following key assumptions have been

The Council will continue the soft market testing process beyond the Industry

Day to ensure any queries raised are addressed. The Council will enter the

Procurement proce

and the HM Treasury Project Review Group. A draft copy of the OJEU Contract

Notice is attached at appendix 10. A copy will also be publi

C

The Council will set up an extranet system to support the procurement phase of

the Project. The extranet system will act as the virtual data room and will

provide information to the Bidders

C

will be available to the bidders through the extranet. The Council also has

digitised maps in the GIS format; these will be made available on the extranet.

All documents that are on the extranet will also be available in the Project Data

Room. There some old construction drawings, paper maps and other historic

records; these will be listed on the extranet but available for review in the

Project Data Room.

4.12 Encouragement of Competition In order to ensure a sufficient number of bidders to achieve a successful

Competitive Dialogue process, we have included as broad a scope as we feel is

relevant to the Isle of Wight project, although this can be refined as the

Competitive Dialogue progresses and dictates.

In order to minimise early bidder costs and thereby have a reasonable number

of initial bidders, the Council have aimed to set a realistic timetable for

achieving the various stages of the CD process (see 6.5.1) and intend to hold

meetings in London, or other mainland locations where appropriate, to minim

th

encouraged to come to the Island to verify the nature of the assets for

themselves and discuss other matters as they require.

4.13 Bankability

made:

B - 117

The project will attract bidders. The Council is taking measures to ensure that

vide the finance for PFI projects to go ahead, has provided

degree of confidence that money will be available for projects that are

•

this is the case as evidenced above. In addition, the market research

undertaken to date, evidenced at 4.10 indicates a strong commercial interest in

this project.

• Availability of bank funding. The Treasury statement that, if necessary the

Government will pro

a

currently in or near to commencing procurement. In addition, with a Contract

Close for this project not due until late 2012, it is likely that there will be a very

different economic climate at that time and IWC has been encouraged by recent

projects closing without the need of funding from HM Treasury. Further

discussion on this is covered in the Financial Case.

4.14 TUPE

Given the current scope of the project, we anticipate the transfer of XXX staff

which amounts to a release of a payroll obligation of £*******.

tain a core group of staff who will take

ill be offered the opportunity to enter into a service level

nt or transitional basis to ensure continuity for transferring staff is

aintained.

The Isle of Wight Council proposes to re

responsibility for the management and oversight of the contract and maintain

the residual functions. This will ensure that the Isle of Wight Council can monitor

delivery, services and outputs. Further detail on the management of the contract

is set out in the following section.

The transfer of staff will take place in accordance with the Transfer of

Undertakings (Protection of Employment) Regulations 2006 (“TUPE”)

The council is committed to open and transparent communications with staff

and unions ensuring a good working relationship and therefore has produced “A

Basic Guide to TUPE” which will be shared with all staff who are eligible to

transfer. A copy of this guide is attached as appendix 15.

The new provider w

agreement with IWC’s Payroll, HR and Legal departments either on a

permane

m

B - 118

e Council's position and the process for such a situation can be

und in the document marked at appendix 16.

tment whose principles are

et out in “Assessment of broad comparability of pension rights, Statement of

practice by the Government Actuary, May 1999” which is attached at appendix

intaining a list of

urrent contractors to monitor any legal implications that the PFI will have on

schools

s to develop skills.

he Council is committed to ensuring that Equality and Diversity and Health and

the organisations practice.

The Council's pension fund administrator has considered the position should a

bidder choose to apply for admitted body status in the LGPS. A detailed

account of th

fo

However, in the event that the successful bidder does not enter the LGPS,

under the terms of TUPE they will be required to offer a pension broadly

comparable to the council’s Local Government Pension Scheme.

Broad comparability relates to the protection of transferring employees’ future

pension rights. Assessment of whether a scheme is “broadly comparable” falls

within the remit of the Government’s Actuary Depar

s

17.

As well as the council’s staff considerations the Council is ma

c

these and to ensure that businesses are notified of any implications on them

upon which they will need to seek independent advice. In addition, where

potential TUPE implications arise, the council will facilitate contact between

contractors and the successful bidder for the PFI to ensure a smooth transition

is guaranteed.

The bidder will be required to demonstrate a commitment to developing

apprenticeship opportunities through joint working with Island-based

and college

The Council has successfully conducted TUPE transfers in the past with no

ongoing obligations.

T

Safety issues are paramount in its own and its partner’s practices. As part of the

council’s pre-qualification process, we thoroughly check all bidders’ diversity

and health and safety policies and ensure that these are in place and

embedded in

B - 119

4.15 Conclusion

B - 120

Financial Case

5.1 Introduction The purpose of the Financial Case is to establish the financial justification for

the project. It provides the basis for building the base costs; the assumptions

and the methodology for calculating PFI credits and Unitary Charge; the

Council’s own affordability position and the calculation of the Public Sector

Comparator. Finally, it sets out the case for proceeding with the PFI

procurement by demonstrating Value for Money.

5.2 Costs The key cost elements for the project to deliver the services that are required

can be classified under Core Investment Period (CIP) costs, Lifecycle

replacement costs, Operational and Maintenance costs, and Contract

Management costs. The scope of services and the approach to determining

costs reflects an integrated service delivery across the Island that would form

the basis of the Output Specification when going out to tender.

WDM, our engineering consultants, have undertaken Condition Surveys to

estimate the backlog of repairs required to bring the Isle of Wight network up to

current acceptable standards. The detail of their cost modelling exercise is

provided at appendix 2).

IWC staff, who are specialists in their own area, have considered the

requirements to bring other project assets up to acceptable standards and these

costs, together with the WDM costs above, have been fed in to the Technical

model appendix 9 for verification and then submission to the Financial Advisers

for financial modelling.

The base costs (real, un-indexed) over a 25 year period are:

• Core Investment Period (7 years) Figures removed for

commercial reasons

• Lifecycle costs (18 years) Figures removed for commercial reasons

5

B - 121

nance (25 years) Figures removed for

commercial reasons

• Contract Management Costs (25 years) Figures removed for reasons

ificant disruption to Island

residents and also tourists and others that visit the Island. The detailed rationale

is supported by the results of Council’s Island-wide traffic model, the

• Operation and Mainte

commercial

5.2.1 Core Investment Period (CIP) IWC tested the CIP costs for a 5 and 7 year period and concluded that, from the

Island’s perspective, a 7 year CIP was optimum to facilitate a smooth

rehabilitation programme without causing sign

behind this

results of which are in appendix 4 and is supported through the traffic model

analysis described.

A summary of the CIP costs is provided below:

Figures removed for commercial reasons

Capital - Core Investment - Scenario 1 Hierarchy 1 Network Hierarchy 2 Network Hierarchy 3 Network Hierarchy 4 Network Scrim Treatments Kerbs/Channels - Costed Separately Footway Network Street Lighting, Signs, Bollards Street Furniture - Non-Illuminated Signs etc. Safety Fencing Drainage Traffic Signal Rehabilitation Bridges & Structures Rural Rights of way including associated Cycleways Environmental Measures Major Capital Works (Bouldnor) Cowes Ferry Replacement Wharfage Costs Car Park Resurfacing CCTV Annual Total 155,863,067 5.2.2 Lifecycle, and Operations and Maintenance Costs

B - 122

:

A summary of the Lifecycle (18 year) and Operation and Maintenance (25

years) costs is provided below

Figures removed for commercial reasons Life Cycle Replacement - Scenario 1Hierarchy 1 NetworkHi rarchy 2 & H3 Network - Combined

archy 4 Network - Halcrow Highlight Note

r Parking Meters

185,250,937

eHierHierarchy 1-4 ResurfacingScrim Treatments - Inclusive on H1-4 Resurfacing?Kerbs/Channels - Costed SeparatelyFootway NetworkStreet Lighting, Signs, BollardsStreet Furniture - Non-Illuminated Signs etc.Safety FencingDrainageTraffic Signal RehabilitationBridges & StructuresRural Rights of way including associated CyclewaysEnvironmental Measures

r Park ResurfacingCaCaCCTV RenewalsAnnual Total

sons

Figures removed for commercial rea

Operation & Maintenanceaintenance

Walls/Embankments To be provided by IWC

cerass Cutting / Environmental works

o. To be provided by

nanceiated Cycleways

- provided by IWC167,641,050

Carriageway Routine MStructures/RetainingStreet Cleansing - Pending Further Info.

itching, quartering)Drainage (gullies, dTraffic Signs / Plates Traffic Signals MaintenanceStreet Lighting MaintenanceWinter MaintenanHighway GInspectionsCondition SurveysOn/Off Street Car Parks - Expenditure pending futher infIWCCowes Ferry - Operations & Mainte

assocRural Rights of way including etered EnergyMetered & Non-M

Annual Total

.3 Shadow Bid Model

e cost of that work

meet the council’s required standards, under a PFI delivery model. The

model seeks to replicate the cost that the council and its technical advisors

5

The Shadow Bid model estimates the work required, and th

to

B - 123

of the project and the proposed risk allocation

account the current state of the

economy and its impact on funding markets.

The key output of the Shadow Bid model is the Unitary Charge calculation,

which is then used for estimating the project’s affordability. The Unitary Charge

(UC) is based on a base case assumption of tighter market conditions being

prevalent at the time of financial close, as opposed to what has been extant in

the past few years, and also takes in to account the commercial terms that

equity providers will want to see.

UC for Affordability

Calculations First Full Year Year 8 Year 25

believe would be proposed in a commercial bid from potential bidders for this

project, given the requirements

developed to date. The model takes into

£22.7m £42.7m £61.35m

the best estimates on information

available, sensitivities have been undertaken to determine the impact of

changes in the funding market; these are discussed in a 5.4.4.

5.3.1 Shadow Bid Costs The Shadow Bid costs, which are the key technical inputs into the Shadow Bid

Model, have been developed to take into consideration efficiency factors

associated with a long-term integrated services delivery contract delivered

through the private sector. The efficiencies have been applied as reductions to

the Public Sector Comparator (PSC) base costs to determine the PFI base

costs as follows:

• CIP 7% • Lifecycle 7% • O&M 5%

een built in to the PFI Model to take account of a PFI

ontractor’s ability to achieve economies of scale, procurement savings, long-

Whilst the base case assumptions represent

These efficiencies have b

c

term contract security, integrated service delivery through effective coordination

and reduction in duplication, and the ability to bring about innovation.

B - 124

Advisor and IWC:

CIP 11.1%

The commercial risk pricing that a PFI service provider would typically use for

pricing has been determined through a series of risk workshops and is

discussed in more detail under VfM 5.7. The following uplifts were agreed

between the Technical Advisor, the Financial

Lifecycle 6.5%

O&M 2.5%

5.4 PFI Credits and Calculation Methodology PFI credit calculations have been undertaken through both the ‘Revenue

Abatement’ and ‘Gap Funding’ approaches. IWC’s credit requirement is based

on the ‘Gap Funding’ method, however the ‘Revenue Abatement’ method was

nstrate C is s I

support the capital elements of the Project.

5.4.1 Gap Funding Method Based on the cost of works calculated by the Shadow Bid model and IWC

t Method

echnical Advisors. The PFI credit requirement using the

Revenue Abatement method is £399.5m.

used in line with CLG guidan

credits only to

ce and to demo that IW eeking PF

budget contribution to the project, the required funding to meet the project costs

is calculated using the Affordability Model. The PFI credit requirement using the

Gap Funding Method is £400.3m.

5.4.2 Revenue AbatemenThe Revenue Abatement method used is in line with CLG guidance and

calculates the overall project costs, making abatement in respect of the revenue

component. For this project, the split between Capital and Revenue spend

based on detailed costing is assumed as 65:35. The classification of costs into

capital and revenue has been based on discussions with the council’s technical

team and our T

5.4.3 PFI Credit Requirement The council’s credit requirement is based on the ‘Gap Funding’ method as

discussed above. Credits have been calculated for an integrated highways

maintenance service that has the potential for greater efficiency and economies

of scale, details of which are discussed under Shadow Bid Costs 5.3.1. Funding

7 when themarket conditions have changed significantly since 2006/0 original

B - 125

impact of a

worsening base points, and a series of improving

conditions. sitiviti discussed at 5.4.4.

The council has revisited the PFI Project Scope since the Expression of Interest

nergies between the various

e negative impact of

e financial markets.

g factor of 1.0 to be used in the calculation of

FI Credits as specified in CLG’s Local Government PFI Project Support Guide

EOI was submitted and the PFI credit requirements set out in this document

reflect current financial market conditions.

The council has also carried out sensitivities to assess the

credit market by a further 50

These sen es are

stage and this has helped to gain greater sy

highway related services and achieve greater efficiencies. Although the Council

has increased its financial contribution from £5.5m per annum to £11.15m per

annum, the PFI credit requirement has increased from that set out at the EOI

stage. This is due to increased capital requirements, and the increase in

Council contributions has helped to reduce the effects of th

th

The different PFI credit calculation methodologies indicate a PFI Credit

requirement of £400.3m (Gap Funding) and £399.5m (Revenue Abatement).

Both methodologies assume a discount rate of 5.4%, for projects endorsed in

2009-10 and 2010-11, and a scalin

P

(2008-09) p1.

The following table shows the base case Unitary Charge and PFI Credit

requirement:

£’m NPV Revenue Abatement

Gap Funding UC in first full year

OBC Base Case 399.5 400.3 Figures removed for commercial reasons

A

m

r

t the EoI stage, the PFI Credit requirement was £325m (Gap Funding

ethod) or £391m (“Capital Costs” method). At that time PFI Credit

equirement under Revenue Abatement was not calculated.

B - 126

£’m NPV Capital Costs Revenue Gap Funding UC in first full Abatement year

E

removed for commercial

OI Case 391 - 325 Figures

reasons

5

In requirement, a number of sensitivities on financial

terms and scope have been undertaken. The results of these sensitivities are

p

.4.4 Sensitivities

calculating the credit

resented below:

£’m NPV Revenue Abatement Gap Funding UC in first year

OBC Base Case £399.5m £400.3 Figures removed for commercial reasons

Improved terms

ase TBC TBC TBC

C

Im terms-

higher margins

Case

TBC proved TBC TBC

5.5 Affordability The affordability model calculates IWC credit requirement based on the Gap

Funding method, after considering all sources of funds available for the project.

The main sources for funding available for the project are:

B - 127

5.5.1 Budgetary Contribution The current highways budget contribution and additional resources approved by

cil is Project

indexed annually at RPIX). At the EoI stage IWC committed £5.5m p.a. (real

oug the life of the contract but has now been able to more than

double this budget through increasing the scope of the servic

additional funds for client monitoring.

Annual spend

as at 23/7/09 £mHighways 2.300Design 0.430

0.160treet lighting 0.390

0.490Parking 1.700Rights of Way 0.350

.11.40.490

CCTV 0.280Central Services 0.690Additional contribution agreed EOI 0.500

10.450

the Coun £281m over the life of the in nominal terms (£11.15m p.a.,

terms) thr hout

e and committing

Structures SEnergy 0.500Traffic 0.480Network Management 0.160Cowes Ferry

Support 0 30Street Cleansing Public Realm

00

Client side monitorin 

g 0.7 

5.5.2 Cash flows from PFI Credits PFI credits have been assumed as payable on an annuity basis from the point

encement in accordance with CLG guidance (Local

00

of service comm

Government PFI support guide (2008-2009). The annuity grant receipts are

£743.9m (in nominal terms) over the life of the project.

B - 128

s 5.5.3 Interest on cash balanceInterest on cash balances calculated @ 3.5% arising from the project cash

flows is £50.5m in nominal terms over the life of the project.

5.6 Preferred bidder debt funding competitions Since late 2007 there has been a substantial deterioration in the market for

lending to PFI projects as a result of d

ecreased liquidity in the financial markets.

here is considerable illiquidity among commercial lenders which has resulted

in a reduced availability and increased cost of funds and put a strain on the

enors.

on the Council’s current estim costs, it is expected that the

FI will be looking to raise between £130m and £150m of senior

rrent market, it is unlikel here would be sufficient market

for this amount to be raised effectively through a funding competition,

s of market improvements in the last quarter:

onths there have been signs of a limited improvement

rket, demonstrated throug igh profile M25 deal closing;

There have been some 15 other projects that have closed in the

and

he project is not expected ch financial close until late 2012,

e the market may have substantially recovered.

Council and its Financial Advisors w inually monitor the lending

arket in order to determine the optimum financing strategy at each stage of

e project, and consider possible opportunities for competition in the future.

.7.1 Pre and Post Optimism Bias

eries of risk workshops

have been undertaken to determine the OB levels to be included in the PFI

Financial Model.

T

length of PFI t

Based ated

Highways P

debt. In the cu y that t

interest

however there are sign

• In recent m

in the ma h the h

•

last quarter;

• T to rea

by which tim

he T ill cont

m

th

5.7 Value for Money 5

Optimism Bias (OB) has been calculated in accordance with CLG guidance

note, “Adjusting for Optimism Bias in FRS PFI projects”. The main strategies for

reducing OB, including stakeholder consultation, accurate costing and project

and risk management, have been undertaken and a s

B - 129

le

Expenditure Category OB Pre OB Post

The figures that have been applied for optimism bias are set out in the tab

below;

Initial capex 5% 37.7% Lifecycle 7% 8.0% Opex 5% 12.9% Public sector transaction costs 5% 10.0%

ges added to the PSC costs and set out in the table

bove were agreed at the risk workshops and also include a 5% residual risk

t cover all

of the risks is wrong.

The Council

has used a number of precedents in determining the risk register and had

m

ve

to

quantify them separately.

f risks may be wrong is clearly real;

quantification is essentially a series of informed judgements. However, in the

The OB post percenta

a

allowance. The PSC ‘residual risk’ was considered to be 5% in total and was

allocated to the CIP, Lifecycle and Operation & Maintenance cost categories

pro-rata to their contribution to the overall risk total.

However, the quantification arising from the risk workshops does no

possible risks; it focuses on the quantification of the top 14 risks. There is

therefore a possibility that

• A significant risk has been missed; and/or

• The quantification

The risk of missing something significant out is very small indeed.

significant input from all our advisers, bringing in a wealth of experience fro

similar PFI projects. Risks not within the top 14 are covered by qualitati

analysis which indicates that they have minimal value and it is not necessary

The risk that the quantification o

Council’s view, the risk is just as likely to be on the upside as the downside, and

therefore its expected value is zero.

On the basis of these factors, the Council has taken a judgement to add a

"residual" optimism bias figure of 5% to the numbers arising from the detailed

risk workshops.

B - 130

.7.2 Risk Transfer costs

, to identify all risks relevant to the project including those that will be

t are likely to transfer to the PFI Service P he

identified the key capita cycle and operating risk e:

ificant in impact or likelihood or both; and

ate se service provider.

ms and provide a basis for

sk adjustment to be made to the Public Sector Comparator as part of the

5IWC has conducted a series of robust risk workshops, including our expert

advisors

retained and those tha rovider. T

risk workshop l, life s that ar

a) sign

b) can be transferred to the priv ctor

The commercial value of each of the risk elements was assessed based on

their underlying technical costs, and scenarios for their minimum and maximum

likelihood were defined. The outputs of this process were used as inputs to run

a Monte Carlo simulation to quantify the key risks. Monte Carlo simulations

allow the calculation of risks in net present value ter

ri

Value for Money assessment. The table below presents the NPV of risks as

derived from the Monte Carlo simulations and the risk adjustment as a

percentage of costs.

B - 131

£'m NPV of costs NPV of risk Risk adjustment % of cost

CIP

Figures

reasons

Figures

reasons

Figures removed for commercial reasons

removed for removed for commercial commercial

Lifecycle

Figures removed for commercial reasons

Figures removed for commercial reasons

Figures removed for commercial reasons

O commercial reasons

commercial reasons

commercial reasons

&M

Figures removed for

Figures removed for

Figures removed for

Total

Figures removed for commercial reasons

Figures removed for commercial reasons

Figures removed for commercial reasons

appendix 18 provides the detailed narrative of the risks and the outputs of the

Monte Carlo simulation.

5.7.3 Qualitative Assessment Full detail as to the Qualitative Assessment is in appendix 19.

5.7.4 Quantitative Assessment IWC has followed the HM Treasury guidance in demonstrating Value for Money

(VfM) from the PFI option as compared to the PSC option (also referred to as

the Conventional Procurement ‘CP’ option in the Treasury guidance). IWC

adopted the following process in order to quantitatively assess Value for Money.

B - 132

A series of risk workshops were held to identify and quantify

s. A long list of poten ev onsi en to

whether the risk would be retained, transferred, or shared under the PFI, and

whether there were any actions the council could take to mitigate the risks. The

likely impact of each risk

council may take to mitiga

t ap

A Monte Carlo analysis of the outputs from the risk workshops for the CIP,

Lifecycle and O&M phase rried out to determine the Post Financial

Close Optimism Bias. The

ent.

PSC (Post-OB) PFI (Post-OB) Pre-OB

the key contract

deration givrisk tial risks was d eloped and c

was scored, both before and after any action the

te the risk. The

pendix 19.

resulting risk matrix which was

developed is attached a

s was ca

following table provides a summary of the Risk/OB

assessm

CIP 37.7% 11.1% 5% Lifecycle 8.0%% 6.5% 7% O&M 12.9%% 2.5% 5%

The results of this exercise ere used as inp sury VfM model and

the PFI option was found t % agains option. The details of

this exercise and the detaile

5.8 Initial view on Accounting Treatment Communities and Local Government issued the following “Accounting opinion

(as set out in CLG’s Local

) is that local authorities should produce

te No 1

inly not going to produce information which

w uts to the Trea

o be 12.3

d assumptions she

t the PSC

et are attached at appendix 20.

.

requirements for PFI credits” on 18 November 2008:

for PFI credit support“A current pre-requisite

Government PFI Project Support Guide

an initial accounting view, following the methodology in Technical No

nt for PFI transactions. Central government recognises (Revised) How to accou

that this requirement is almost certa

will still be current when the contract is actually signed, give the change in

accounting arrangements made in April 2009.

B - 133

iven this, the accounting view criterion will be changed for local authorities G

with immediate effect. Local authorities should now include in their Outline

Business Case their best view of the likely accounting position assuming that

available draft IFRS guidance (www.cipfa.org.uk/pt/download/

LAA_SORP_2009_ITC_exposure_draft.pdf) is put in place for 2009/10. At the

same time, authorities should continue to include risk registers showing the

likely risk profile of the contract”.

Paragraph 2 of the above guidance states that the accounting treatment set out

ownership, beneficial entitlement or otherwise - any significant

sidual interest in the property at the end of the term of the arrangement.

re these co sts are met, this Appendix applies to all property

constru nhanced b perator for urpose of the PFI

gement, inc erty to w e local autho ives the operator

access.

l

thority. A related liability shall also be recognised at the same time. The

asset shall be recognised in accordance with FRS 15 .....”. Paragraph 6 further

rty. FRS 15 requires

as relevant.

The Council has discussed this likely accounting treatment with our external

auditors and we will continue to maintain dialogue with them, as well as other

within it shall apply where the local authority controls:

(a) or regulates what services the operator must provide with the property, to

whom it must provide them, and at what price; and

(b) through

re

Whe ntrol te

acquired, cted or e y the o the p

arran luding prop hich th rity g

In addition, paragraph 5 of the above guidance says that “Property used in a

PFI arrangement shall be recognised as an asset or assets of the loca

au

says that “Where the operator enhances property already recognised on the

balance sheet of the local authority, the local authority shall recognise the fair

rying value of the propevalue of the enhancement in the car

the different components of an asset to be accounted for separately if they have

a different useful life, and this approach shall be adopted where appropriate”.

In accordance with the above, our best view of the likely accounting treatment

when the Highways PFI project commences in April 2013 is that it is likely

assets within this project will remain ‘on authority balance sheet’ and

component accounting/fair value accounting will be adopted

B - 134

interested parties, during the procurement process issuing further opinions on

Accounting Treatment as relevant through to Financial Close.

B - 135

.1 Introduction

The Management Case sets out the governance arrangements regarding the

project including differentiating between decision making and operational

activities. It outlines current structures and structures post OBC, and describes

the experience and contribution of the advisors we have appointed to assist us

with this project. It sets out our delivery plan and discusses our approaches

during both the operational and contract monitoring phases. Our approach to

stakeholder management is detailed, together with risk and data management

considerations. We have considered statutory process issues and finally our

readiness to proceed to procurement.

6.2 Project Management and Project Governance Structure (Pre and Post OBC)

The Council’s Highways PFI organisation structure is shown in the diagram

below:

6 Management Case

6

B - 136

ull Council is responsible for adopting various plans and strategies and also

ng financial resources. Reports, e.g. progress reports or

quests for approvals, about this project are made to Full Council as

ly Member Panel)

er Review Board (MRB) for this project consists of the Portfolio

s,

an of the Scrutiny Panel for the Economy, Environment & Transport,

r.

ead of Highways and Transport is an observer member. The MRB meets

on a bi monthly basis to update members on progress and maintain dialogue

between Members and the Project Team.

• Project Board

The Project Board has delegated authority to make relevant decisions affecting

the procurement of the Highways PFI project and, as such, is the main decision

making body for the project. It has approved the scope of the project and

approved the Outline Business Case before submission to the Cabinet.

Although day-to-day responsibility for managing the project has been delegated

to the PFI Programme Director, the Project Board acts as the final arbiter for

issues referred upwards by the Programme Director, either because they fall

outside the remit of the Programme Director, or because he is unable to resolve

a given issue internally.

The Project Board, chaired by the Senior Responsible Owner and including the

Programme Director, the Head of Highways and Transportation, the Section

151 Officer, the Legal Team Leader, and DfT representative, meets at least

• Full Council

F

identifying and allocati

re

appropriate.

• Cabinet

Cabinet consists of the Leader and a number of other councillors, with

portfolios, nominated by the Leader. The Cabinet carries out all of the local

authority's functions which are not the responsibility of any other part of the local

authority, whether by law or under the Constitution. This includes approving

documents such as this OBC.

• Member Review Board (formal

The Memb

Holder for Environment and Transport, the Portfolio Holder for Major Project

the Chairm

the Senior Responsible Owner, and the Highways PFI Programme Directo

The H

B - 137

more frequently by agreement when more immediate

Throughout the project:

sources are allocated including human, physical and

fM and Risk are identified, monitored and

• To report to the Council on the Project’s progress, referring appropriate

oject until it enters procurement:

• To agree the objectives and scope of this project

To agree the procurement plan.

e; Output Specification; Project Agreement; Payment

echanism.

once a month, or

decisions are required.

The specific responsibilities of the Project Board are:

• To ensure sufficient re

financial resources

• To review the Project’s progress against its Project plan.

• To monitor the Project’s budget.

• To ensure a robust quality management process is in place

• To ensure Affordability, V

managed:

issues to Cabinet or Full Council, for approval as required.

• To appoint external advisors as required.

• To champion excellent design, ensuring that it features as a priority in the

selection criteria developed as part of the procurement process.

• To act as ambassadors for this project, and the procurement and delivery of

the facilities thus provided.

From the start of the pr

• To sign off the Outline Business Case before submission to Cabinet

From the start of procurement until contract commencement:

•

• To oversee the progress of the procurement process including the timing of

the OJEU notice; short-listing of bidders; the timing of the ISOS and ISDS;

selection of the Preferred Bidder.

• To agree the contents of key procurement and contractual documents

including the OJEU notic

M

• To ensure that a pre-contract risk review is completed.

• To sign off the Final Business Case.

• To recommend the award of contract.

B - 138

le Officer (SRO)

s the Senior Responsible

fficer and, therefore, the lead officer ultimately responsible for the project

organised with key

stream.

• Senior Responsib

The Director of Environment and Neighbourhoods i

O

6.2.1 Project Team Structure – to OBC

The diagram below illustrates how the current project team

responsibilities shown for each work

untant; FCMA, MICE, MIAustE, BSc Civil

and international levels and considerable highways and PFI

– Chartered Civil Engineer, Member

mber of the Institution of Highways

and Transportation, Prince 2 Practitioner. 37 years Highway experience

The full-time core project team consists of:

• Programme Director, Jay Jayasundara – Chartered Civil Engineer and

Chartered Management Acco

Engineering, MSc Construction Management; Prince2 Practitioner;

significant experience in delivering major complex projects at local,

national

project delivery experience.

• Technical Manager, Malcolm Smith

of the Institute of Civil Engineers, Me

B - 139

including 17 years heading up the Highway Maintenance Section of the

• Commercial Manager, Tracy Ringer – FCCA, BSc Applied Accounting,

Programme Office Manager, Anthony Hiscock – BA Business

er, MSP Practitioner.

This team is dedicated to the project and there are no demands upon it with

regard to other projects. They are supported, as appropriate, by specialists

drawn from other relevant disciplines within the IWC including Property, Planning,

Stakeholder Management, Risk, Legal, Procurement, HR. Whilst these resources

are part-time with regard to the project, their relevant departments are aware of

the strategic importance of this project and have committed to supporting it as

appropriate. Programme Directors from strategic projects meet each other

regularly to discuss progress on their projects, for example since the council is

running a major reorganisation of the Island’s school system at the same time as

the Highways PFI Project, regular meetings are scheduled between the

Programme Director and senior staff associated with the schools project. This

interaction ensures that programmes are compared so that there is no conflict

around specialist skills, material supplies or the necessity for traffic diversions.

Additionally, the Strategic Projects team is responsible for co-ordinating and

monitoring progress on major projects and has synchronized the resourcing

needs on a priority basis to further assist programme planning.

there are a number of specialists, drawn

th

e,

,

t,

e

mitted to the project and understand their role

at

Isle of Wight Council.

BA Humanities with English Language. 7 years Local Authority

accounting experience.

•

Management and Economics, Prince 2 Practition

• PA, Sarah – Louise Foley

• Project Administrator, Maureen Graham

With regard to the technical workstream

from the Environment and Neighbourhoods Directorate, each assisting wi

information around the relevant assets/services including Highways Maintenanc

Highways Renewal Programme, Traffic Management, Structures, Street Lighting

Rural Rights of Way, Parking Services, Contracts and Waste, Environmen

Cowes Ferry and CCTV. Although these staff are part-time with regard to th

Highways PFI project, they are com

within it. There is currently, or foreseen, no other relevant major project th

would conflict on their resource availability.

B - 140

st

l,

two additional technical resources joining the team

y from the Council.

w:

6.2.2 Project Team Structure – Post OBC

The Council is planning to increase the full time resources of the PFI team, po

OBC to support the procurement phase. There will be full time lega

procurement specialists and

during this phase. The legal resource will join the team in September and the

procurement resource and data manager recruitments have commenced. The

Technical Support for the dialogue will be recruited internall

The proposed team structure for the next phase is show belo

6.2.3. Contract Management Team – Post Contract Award

The Council is determined to put in place a strong contract management

structure to establish effective contract management from day one. It has

agreed a provisional structure for the on-going management of the PFI

Contract, post award. It is intended that the post-OBC staff, who are involved in

the CD process, would have built up the vital expertise needed to manage the

contract and will transfer to the on-going Contract Management Team. The

Council will ensure that there is continuity between the procurement and

B - 141

urces with appropriate skills. The

proposed Contract Management Team structure is show below:

contract management phases selecting reso

Contract Manager

PFI Director

Manager:Roads, Footways &

Structures

Manager:Environment, Rural Rights of

Ways

Manager:Car parking, Street Lighting

Manager:Street cleansing, Street Furniture, Public Realm

Manager:Finance

Contractual paymentsCertification

Performance monitoringLegal

Assistant:Roads, Footways &

Structures

Assistant:Environment, Rural Rights of

Ways

Assistant:Car parking, Street Lighting

Assistant:Street cleansing, Street Furniture, Public Realm

Assistant:Finance, Contract & Legal

PA

Director Environment & Neighbourhoods

It is recommended that the proposed Contract Management Team structure

is reviewed after the first two years of operations.

6.3 Expert External Advisors IWC has appointed a number of expert external advisors to assist it with

ensuring a robust project methodology right through to contract commencement

and beyond. These external advisors are described below and letters of

support from them are attached at appendix 20.

 • DLA Piper, appointed September 2008, are providing legal advice to the

project, right through to contract commencement and into the early days of the

contract. The key lawyers appointed to this commission include Allison Page,

l have significant

experience of PFI projects and are currently supporting Birmingham City

Descriptive document, the ISOS/ISDS/ISRS/CFT documentation and the

Natasha Luther-Jones, Steven Johns, Lee Dixon. These al

Council and Sheffield City Council on their highways maintenance PFI projects.

DLA Piper will be primarily involved in the production of the project agreement

and relevant schedules and annexures. They have also provided assistance in

respect of the risk register and production of the OBC and going forward they

will be providing assistance with competitive dialogue training, producing

evaluation criteria across work streams, assisting with the production of the

necessary procurement documentation such as the OJEU, the PQQ, the

B - 142

ncial close, in

producing a guide to the project agreement for the council's retained staff who

will be managing the project

• PricewaterhouseCoopers LLP (PWC), appointed October 2008, are

providing financial advice to the project from Outline Business Case through to

contract commencement. The key personnel supporting this project include

Paul Davies, John Carr, Sukhy Duggal, Manisha Misri, Ian Shore, Jonathon

Muga, all of whom have significant experience of PFI projects including

Transport PFI projects. For example, this team includes individuals that have

supported the Portsmouth Highways Maintenance PFI project, the M25

widening project as well as numerous Street Lighting PFI projects across the

country. PwC are also providing support on other highways maintenance PFI

projects including client side support on the Sheffield project and bid side

ith the financial modelling to

establish the cost of the PSC and the PFI project, the level of credits required

tion of the Council. They have also provided

requested of them including

preferred bidder letter. They will continue to attend the monthly project team

meetings. They will also assist, once the project reaches fina

support on the Birmingham project.

PwC’s main tasks so far have included assisting w

and the resultant affordability posi

key assistance in understanding the procurement and contract risks associated

with the project and, where appropriate, quantifying these for the purposes of

the risk analysis to be included in the OBC. Additionally, they offer support on

commercial, financial and procurement issues

providing advice in terms of the latest positions given the current funding

climate.

Going forward, PwC will provide key financial/commercial support at all stages

of the Competitive Dialogue process, from OJEU to financial close, and support

the Council’s project team in procuring the project as well as developing the

capabilities of this team to manage the contract that arises from the project.

The technical advisor (TA) appointment was divided into two phases – pre OBC

that required detailed knowledge of assets, asset condition, economic analysis,

cost modelling and PFI costs and post OBC the longer term technical advisor

appointment went through the OJEU procurement route and evaluation criteria

reflected the expertise needed in the next phase, availability of the key

B - 143

uary 2009, have assisted with options appraisal,

economic modelling, and verification of asset conditions and costs of

PFI projects and are currently working with

M Limited have nearly 40 years experience in undertaking highway

condition surveys and providing asset management consultancy and software

n

ata from the 2008/09 surveys they have predicted the carriageway and

resources and strength of the project management capability. Halcrows were

appointed as the TA to OBC submission with WSP appointed post OBC.

• Halcrow, appointed Jan

rectification and maintenance. They are currently finalising their work for the

OBC and in the process of handing over to WSP Ltd who will continue technical

advice.

• WSP appointed in July 2009, are providing technical advice to the project

from the outset of the procurement process through to the early delivery stages

of the Contract. The key staff appointed to this commission include Steve

O’Donnell (project manager), Gordon Lewis (highways and structures), Robin

Cathcart (PFI contract and paymech), Ian Townhill (street lighting) and they will

be further supported by colleagues within the relevant disciplines. All of these

staff have significant experience of

other clients, including Local Authorities, across a range of sectors. Their main

task is assisting in the development of the Output Specification and Payment

Mechanism. They will also assist in providing technical input to the Project

Agreement and support on technical issues across the project as required.

In addition to these advisors we have also had specialist support for particular

aspects of our project development:

• WD

to highway authorities throughout the UK. They have undertaken annual

SCRIM, Scanner, Deflectograph, Carriageway CVI and Footway DVI surveys

for the Isle of Wight Council for the last 20 years. In addition they maintain and

operate the Council’s Pavement Management System (PMS). Using conditio

d

footway costs for the PFI using the latest modelling techniques developed over

the last 9 years in conjunction with the DfT, Transport for Scotland and highway

authorities. Two of their very experienced Directors and several Pavement

Engineers have been involved in the project.

B - 144

years.

orking closely with the Council's appointed Technical and Economic Advisors

JLT as the Council’s appointed insurance broker have provided specialist

one (also perceived as a training/learning

pportunity) with day two being a working day addressing the issues from day

eir

d

s

these.

also

, as appropriate.

• Colin Buchanan are developing a high level SATURN traffic model of the

Island for the purpose of establishing future traffic flows over the next 25

W

for the Highways PFI project, the model will be used to accurately determine

current and future traffic volumes and assist bidders for the Highways PFI in

their submission. The model will also be used to assess the impact of

developments and changes to the network including for planning control.

•

advice as required in support of the preparation of the OBC.

All of our advisors have significant experience in their field and we meet

regularly with them either on the IW or at their offices and ensure that there is

relevant discussion between them on cross-over topics.

6.4 Meetings 6.4.1 Internal The core project team, and specialist internal staff, meet on a weekly basis to

discuss progress and issues dependent on others in the team.

On a monthly basis we hold a full two day workshop that addresses various

issues relevant to the project on day

o

one. The expert advisors join us for these two days, which also include th

monthly progress update meetings with the Programme Director an

appropriate PFI team member.

6.4.2 External The DfT set up a monthly network meeting with the three pathfinder Highway

authorities, and the Project Director and Technical Manager attend

Additionally they attend the well established Street Lighting Network meeting,

as street lighting is within the scope of this project. We have utilised the DfT

appointed Transactor in developing our project and this OBC, and have

had discussions with other relevant authorities

B - 145

6.5 Project Delivery Plan and Timetable

The project delivery plan has been formulated in Microsoft Project and has been

produced incorporating modified Prince2 methodologies. The project plan is

attached at appendix 22.

Below is a summary of the key milestones.

Activity Scheduled Completion

Submission of OBC 29 October 09 DfT/PRG Approval 23 Feb 10 Issue OJEU 26 Mar 10 Issue ISOS 14 July 10 Issue ISDS 18 Jan 11 Issue CFT 29 Oct 11 Select PB 27 April 12 Financial Close 30 Nov 12 Commence rehabilitation 17 Apr 13

Progress against delivery plans is being measured weekly to ensure that the

programme schedule remains viable. Workshops, containing the IWC internal

will be held every six months to review the

ll Council staff associated with the project have received training on Microsoft

as been used to develop the project plan. The Programme

.6 Operational phase and contract monitoring

team and the external advisors,

programme. These reviews will enable the team to plan in detail the specific

resource requirements and activities that will need to be completed within the

next six months. Further, the workshop gives the project team the chance to

identify any potential issues they may have with the timescales and the ability to

put in place a plan to resolve them.

A

Project which h

Director, Technical Manager and the Programme Office Manager are all Prince2

practitioner qualified and the Programme Office Manager is also a Managing

Successful Programmes practitioner. Both of these methodologies will be used to

manage the programme and form a robust and efficient programme office.

6

B - 146

the successful service provider, the

council will implement a robust mechanism by which the agreement will be

t

ability envelope.

in place to carry out the contract

management activities, including both the direct contract management team and

the wider stakeholders across the organis gion. As detailed

elsewhere, going contra place as

early in ess as possible so that potential bidders can establish

the qua ources we will have available them on the long-

term co aving the intended Isle of Wight contract management team

in plac the dialogue process they will b liar with the project

agreement and key requirements of it and we hope elationships will be

built up ders, particularly with the ultima l bidder.

The Isl aware of particula tinent to the Isle of

. The Council is prepared to vary its contract

been

ompleted.

.7 Project Interface and Dependencies

Once the contract has been awarded to

managed. It is proposed that the principles outlined by the Office of Governmen

Commerce will be adopted, utilising the key areas as a means to ensure delivery

of the best solution within the afford

IWC will ensure that the right people are

ation and re

we intend to have the on ct management team in

to the dialogue proc

lity of the res to work with

ntract. By h

e early on in e fully fami

that good r

with all bid te successfu

e of Wight team is already r issues per

Wight where the PFI provider can be encouraged to address local needs. We are

already working with local learning establishments and residents to highlight

where local skills can be developed to assist with the Project. By utilising local

resources within this service, the Service Provider will have a readily available

solution to ensuring service performance.

For such a complex service provision as is envisaged by the Highways PFI

project it is likely that contract management considerations will require a long

period of development and transition

management quite significantly over the term of the agreement. The overarching

theme must be one which is both robust and flexible enough to handle any

changes; the early stages of transition and mobilisation will require a completely

different set of skills and methods to the long term delivery stage. Performance

management, contract development and supplier relationship management will

become the key elements once the initial stages of the agreement have

c

6

B - 147

r transport operators. Where

ppropriate, the Project Agreement will contain provision to ensure no adverse

lders and

associated communications relating to the project. This document lays out the

s.

nstraints).

Managing stakeholders to keep, or get, them on board for the duration of

The Project has identified a number of interfaces and dependencies that may

affect it, and will attempt to manage these to ensure no detriment to the project in

the long-term. These interfaces and dependencies include fence to fence issues,

utilities, local events, Rights of Way land owners, Network Rail, Havenstreet

Steam Railway, Environment Agency, ferry and othe

a

impact to the project will occur from these.

6.8 Stakeholder Consultations and Communications Strategy

With an anticipated project duration of 25 years, the Isle of Wight Council

Highways PFI Project Team recognises the need to put in place a strategic

framework for the management of stakeholders and communications generally.

This document is the Stakeholder Management Strategic Framework for the Isle

of Wight Highways PFI Project. It defines the strategic framework employed by

the Council’s Highways PFI Team for the management of all stakeho

structures, processes, tools, and human resources typically required to manage

the stakeholder and communication elements of a major project through to

successful completion, with regard to the high level objective of supporting the

successful delivery of the Highways PFI project through the structured and

systematic identification, analysis, and management of Stakeholders, and the

implementation of effective communication

This document does not engage in the specific detail for the execution of the

various stages of the Highways PFI Project. Such plans will be developed and

recorded at a later stage, specifically tailored to meet the needs of the project and

its stakeholder audiences, including

• Identifying and mapping stakeholders in order to understand their influence

on the project and support the decision making process.

• Providing accurate, timely, and relevant information (communications) to

stakeholders using the most appropriate communication channels (within

budgetary co

•

the project.

B - 148

act a large number of people and

rganisations (stakeholders) in a multitude of ways. Therefore, the Highways PFI

h the right

he IWC Highways PFI Project Team will ensure an appropriate framework is in

ication & stakeholder management.

they will be the main beneficiaries of

reement for the service

oviders, delivery drivers and tourists. Additionally interest groups

• Keeping the project team appraised of the general and specific nature of

stakeholder opinion/support/risk (informing ongoing project management

decisions or mitigation planning).

• Providing a communication and engagement audit trail to evidence best

practice and to support a learning/improvement culture within the IWC. The IWC Highways PFI Project will imp

o

Team recognises the need to put in place an appropriate framework wit

structure, tools, processes, and people in order to effectively manage and

communicate with stakeholders from the outset.

T

place that will provide the necessary:

• Structure – Team make up, and how the team is organised.

• Processes – What is done, when, and how.

• Tools – Providing the analytical and data storage backbone of the project

• People (resources) – The human element that reaches and connects with

stakeholders

These four areas make up the core elements of the framework that the Council’s

Highways PFI Project will employ for commun

6.8.1 Local residents The condition of the Isle of Wight roads is one of the major concerns for local

residents. The Residents Surveys have highlighted this as a concern repeatedly.

Hence residents recognise that

improvements, although they will suffer some disruption, particularly during the

Core Investment Period. We aim to keep them informed of the projects’

progress, and provision will be made within the project ag

provider to continue with this precedent.

6.8.2 Network users As well as residents, the Island’s highway network is used by others such as

transport pr

B - 149

project and regular information meetings are

Transport

artnership, while local media are used to keep local residents in the picture as

taff likely to be affected by the PFI have been invited to meetings whereby the

re attending individual team meetings to

cilitate a platform for discussion at every level. Information is being shared with

h

roach can be adopted. Union representatives are also encouraged

raise additional issues as and when they arise.

cludes details of all employees currently in-scope. This system will record all

munications and will ensure that all staff who have been

addition to the above, once the preferred bidder has been selected, the council

ication and meetings between trade union and staff

such as the Ramblers Association and land owners have an interest in the Rights

of Way network. Ensuring wider local stakeholder support has been seen to be a

priority since the inception of the

held with Town and Parish Councillors along with other local interest groups.

Transport operators are kept informed through the council’s Quality

P

to progress. Once the PFI is in the operational phase then the successful

contractor will be required to keep stakeholders updated as to the programme of

works.

6.8.3 All Council staff S

process has been fully outlined and explained. In addition to that, senior

members of the PFI project team a

fa

staff at the earliest opportunity.

The Council has also established regular bi-monthly consultative meetings wit

the local trade union to ensure that continuous consultation occurs to ensure that

an agreed app

to

The Council has created a strategic stakeholder management plan which

in

individual and group com

identified as falling within the scope are kept informed at all stages.

Once we have reached the “Call for final tender” stage, all employees in -scope

for transfer will be provided with the opportunity to meet with Human Resources

advisors and trade union representatives. In addition, meetings with pension staff

will be arranged in the event that the successful bidder does not enter the LGPS.

In

will facilitate commun

representatives and the transferee to enable consultation under TUPE to take

place.

B - 150

advance of the PFI. However, it is anticipated that there may be

ontracts still extant which may give rise to a further TUPE implication. Through

r communication mechanisms, all current

ue to the separation by sea, it will be essential that local contractors and

present

ing from external risks that are outside the control of the

m. Project progress is, and will continue to be, monitored regularly to

6.8.4 Statutory Undertakers

Co-ordinating the highway network refurbishment with the statutory undertakers

will be essential to the success of the project. Initial talks have been held and

there will need to be an on-going dialogue to ensure that their works dovetail with

that of the PFI contractor.

6.8.5 Local suppliers The Council has a co-terminus date for as many of the external contracts as

possible in

c

the Local Industry Day and othe

contractors and the bidders will be advised to seek independent legal advice in

relation to TUPE, and bidders will be provided with contact information to

facilitate direct communication with current contractors on the TUPE implications

ensuring a smooth transition for any non-council TUPE transfers.

D

material suppliers have an opportunity to participate in the project and, whether

TUPE applies or not, the selected bidder will be encouraged to demonstrate a

commitment to utilising local companies and workforce throughout the term of the

contract.

6.9 Sponsorship and Support

6Ever since the idea of using a PFI project to rejuvenate the Isle of Wight’s

highway network was suggested in 2004, there has been cross-party political

litical control has changed during that period but thesupport. Po

controlling Conservative group have had no hesitation in setting aside a £7.6

million budget to see the PFI through to contact commencement. This budget is

considered to be sufficient for the necessary costs including internal staffing,

external advisors, accommodation costs, project networking, training, resources

(ICT) and communications and stakeholder management until April 2013.

The procurement budget of £7.6m contains £0.5m contingency, £0.5m sunk

costs from EoI stage. The contingency has been set aside to deal with delays or

other impacts result

Project Tea

B - 151

s or delays are likely to occur. Should this be the

at local organisations including the Island Strategic

dustry Day for

rospective PFI Bidders.

lose. This will help inform the risk consideration within the council’s

ngoing contract management arrangements for the PFI contract from financial

t appendix 23.

Identify and assess the main risks including an initial allocation and proposal

could impact the project (in the development, procurement and close-out

identify whether any overspend

case then remedial action, as necessary, will be undertaken. Therefore we

expect that, should, for instance, a 6 month delay in commencement of the

project occur, this will be foreseen well in advance and actions to address it

implemented.

We have ensured th

Partnership, the Isle of Wight Economic Partnership, the Quality Transport

Partnership, the Chamber of Commerce, AONB, the Environment Agency, and

other environmental organisations, have been informed about the project’s

intentions and all are supportive of the project.

We have carried out soft market testing as described in the Commercial Case

section to ensure interest in the Project is maintained. We will be holding a local

Industry Day to inform existing contractors and a wider national In

p

6.10 Risk Management A risk management strategy has been developed for the project designed to

manage those risks which could impact the project between the OBC stage and

financial c

o

close. The strategy is attached a

To support the implementation of the risk management strategy, a number of

risk workshops have been held facilitated by the Risk Workstream Lead and

attended by the project team (including the external advisers) in order to:-

• Agree a common approach to risk within the project (in accordance with the

risk management strategy)

•

of a risk action plan for each material risk exposure.

The key outcome of these workshops was the establishment of the risk register

for the PFI Project (see appendix 23). The register records those risks which

B - 152

d, for each material exposure, a target exposure level and risk

ction plan detailing countermeasures in progress or planned to achieve that

ouncil’s corporate objectives. As

consequence of this, the potential failure of the project is a risk captured

following the OBC leading to a direct impact on road

Project risk register. The most

ignificant risks within the Project risk register are reported monthly to the

phases) including both risks which impact the council’s current highways

operations and risks which could impact the anticipated (post-implementation)

business model. For each risk, the register records the nature and potential

impact of the risk exposure identified, its significance in terms of both likelihood

and impact an

a

target level. The register is divided into the key phases of the project –

procurement and award, capital rehabilitation, financial and commercial.

The successful completion of the Highways PFI project represents a major

investment and is key to achievement of the C

a

within the council’s strategic risk register. This, in common with the council’s

other strategic risks, is reported to and monitored by the council’s Directors

Team and Cabinet. This risk is defined in the Council’s strategic risk register

as:-

Failure of the PFI process

infrastructure, economic regeneration and development and on the ability of the

council to maintain a safe highway infrastructure for all users.

This risk summarises, at the highest level, the risk profile of the project

reflecting the more detailed risks within the PFI

s

Project Board. As part of their standing agenda, the Project Board considers

these and any shift in the project risk profile. The current status of risks at this

level is detailed in the table below:-

B - 153

Risk Area Risk Description Impact Proximity

Impa

ct

Prob

abili

ty

Ass

essm

ent

Impa

ct

Prob

abili

ty

Ass

essm

ent

Failure to meet agreed timeline through procurement process to financial close as a result of delays in establishing a dedicated project team supported by external advisors. The consequent delay in commencement of operations will increase internal and advisor costs.

Immediate 4 3 High

(12)

3 1 Low

(3)

Failure to provide dedicated, resourced and experienced personnel to support the project from the internal corporate and technical teams. This will lead to delays and, in extremis, withdrawal of DfT support due to lack of appropriate resource.

Immediate 4 3 High

(12)

2 1 Low

(2)

Risk that approvals required from DfT for financial close are not obtained resulting in project delays, potential project failure and

Medium Term 4 3 High 2 1 Low

reputational impact. (12) (2)

Shortage of materials and/or labour result in higher rehabilitation and maintenance costs

Long Term 4 3 High

(12)

2 2 Low

(4)Increases in Landfill Tax resulting in additional disposal costs. Medium Term 4 3 High

(12)

2 4 Medium

(8)

Costs are higher than expected based on current highway condition surveys and bridge inspections leading to increased lifecycle costs.

Immediate to Long Term 4 3 High

(12)

2 3 Medium

(6)RPI increases greater than projected. Medium to Long Term 4 3 High

(12)

2 2 Low

(4)

Unknown or undisclosed existing environmental contamination resdel

Medium to Long Term 4 3 High 2 3 Mediumulting from inadequate records leads to additional cost and ay. (12) (6)

Availability of funding on reasonable terms during procurement impacting affordability and possible delay

Medium Term 4 4 High

(16)

3 3 Medium

(9)Opportunity for refinancing - risk of refinancing being forced through shorter funding periods in future resulting in sub-optimal outcomes and reduced opportunity for positive impact on affordability.

Medium to Long Term 4 3 High

(12)

3 1 Low

(3)

Risk that required land is not available for depot (plant and material storage) and maintenance yards resulting in delayed commencement.

Immediate to Medium Term

4 3 High

(12)

2 2 Low

(4)Service interfaces with other service providers (waste disposal etc.) not properly identified amnd accommodated leading to

Long Term 4 3 High

delay and service disruption. (12)

2 3

Funding

Other Low

(4)

Project Manageand Resources

Cost and Afford

ment

Target Risk ScoreCurrent Risk Score

ability

have then been combined into a

single overall assessment of each risk at the current level and at a target level

(taking account of the actions planned to mitigate that risk). The assessment

process uses a scale of 1 to 4 (1 being low and 4 being high) for likelihood and

impact and these are combined to give an overall assessment for each risk on a

1 to 16 scale:-

At a more detailed level, using a risk management methodology based on the

council’s risk management practices, each risk has then been assessed on the

basis of both likelihood and potential impact (including, among others, both

financial and reputational impacts). These

B - 154

V

Likely

4

4

Low

8

Medium

12

High

16

High

Likely

3

3

Low

6

Medium

9

Medium

12

High

Unlikel

y

2

2

Very Low

4

Low

6

Medium

8

Medium

Like

lihoo

d/Pr

obab

ility

Remot

e

1

1

Very Low

2

Very

Low

3

Low

4

Low

Scale

Low 1

Medium

2

High 3

Major 4

For each risk, a risk action plan has been drawn up in conjunction with the

workstream leader (i.e. the owner of that risk) and this represents the process to

be followed to reduce the risk exposure to the target level. Progress is tracked

A

th

been allocated to the party deemed best able to manage each

risk at the lowest cost. Clearly those risk allocation decisions will be

reappraised and informed through the procurement phases of the project.

against the risk action plans particularly in respect of the high level risks.

n allocation decision has then been recorded against each risk with one of

e following three markers;

Retained by the council

Shared

To be transferred to the successful bidder.

The risks have

B - 155

These risk identification, assessment and allocation decisions have been

validate rough

The operation of a series of risk workshops and other risk

considerations undertaken by the internal project team, and

v idation revie by the uncil’s external professional

advisors to the proje

expertise and previous experience in the PFI field

A the isk wo s co ed to he ents for each

risk earmarked for potential transfer in order to arrive at an agreed price for that

risk. The initial risk allocation and pricing decisions determined at this stage are

s ct m on or chang hrough the competitive dialogue stage of the

p re nt pro risk ng pr and o e is detailed in

appendix 18.

This process identified key risk exposures potentially impacting:-

• Bidders,

• The PFI contractor

• The council.

or

commercially confidential information, procurement timetables and the costs

reement. Plans are in place to mitigate these

nfidence with the bidders by meeting programmed dates

• Making all data readily available to the bidders via the Project Data

• Development of protocols to ensure IP is protected for all the bidders

• Setting a tight but realistic timetable and keeping to it;

d th :-

o

o A al w co

ct who have significant commercial

fur

ubje

rocu

r r rkshop wa nduct identify t cost elem

to confir

me

ati e t

cess. The prici ocess utcom

A key risk which has been considered relates to the position of the bidders.

Naturally, potential service providers will have concern over a number of

factors including bid costs, protection of intellectual property and/

associated with the early involvement of funders and the due diligence

associated with the PFI ag

through:-

• Building co

for the key stages

Room

• Working openly with the bidders to minimise all costs such as

unproductive or unnecessary meetings

B - 156

• Providing other information to bidders(in an appropriate format), at the

• er,

nal);

o Preparing all necessary collateral on the areas of

ring ways to reduce the costs associated with due diligence.

ement

ses the need for two main areas of data management .

d

re

t

e

s begun formulating a Project Data Room and is in the process of

al

and virtual data will be available to bidders

e

an appointment will have to be

a

heir own unique log-in. The virtual

be

ments. Bidders will

• Supplying information gathered via condition and other surveys at an

early stage;

earliest possible stage;

Undertaking the procurement in an efficient and effective mann

including:

o Ensuring sufficient capacity and capability in the

procurement team (both internal and exter

dialogue in advance of the dialogue sessions so that

bidders have sufficient time for analysis and to develop

their responses;

• Ensuring that the approval process is completed at the appropriate

stage and within appropriate timescales;

• Conside

6.11 Data Manag

The Council recogni

Firstly there is data sharing of key project documents between IWC an

relevant external advisors, with appropriate version control, so that all are awa

of the content of the latest versions of the Project Agreement, Outpu

Specification, Performance Requirements and Payment Mechanism.

Secondly there is the issue of sharing information with potential bidders. Th

project ha

recruiting a Data Manager. This Project Data Room will incorporate physic

and virtual data. Both the physical

on the project, although only one bidder at a time will be allowed to view th

physical material in the Project Data Room and

made prior to viewing any documents. Virtual data will be available through

secure online portal with each bidder having t

data room will have to apply document security in order for the files not to

forwarded on to third parties and to limit printing of the docu

B - 157

new

documents have been produced. A record will be kept to monitor who has seen

y

eviews

Gateway Re il

2003. The principle dependent

individuals, d

in project de re

any actions/a s.

The benefit of using independent individuals is to use people who are able to

d

view.

The Council had the first Gateway review, number 0, carried out in June 2005.

The Gateway 0 highlighted staff resources as being the main area of concern

livery. This has now been fully addressed and is

emonstrated in other sections of this OBC; we have a core team in place,

iate

xperience. Following discussions with the 4P’s, to recommence the Gateway

ttached at

ppendix 25 to the OBC. The Project has been given an amber/green delivery

relevant, about the project.

be notified when new versions of documents have been released or

which document, when they viewed the document and for how long.

6.12 Gateway Reviews / Independent Scrutin

6.12.1 Gateway Rviews were launched in the local government sector by 4ps in Apr

s behind the review process are for a team of in

with experience in project delivery to speak to key players involve

livery and with other stakeholders to consider whether there a

ctivities that could enhance the project’s probability of succes

think about issues without having been party to earlier decisions an

consequently see things from a different point of

for successful project de

d

supported by other specialist staff and external advisors with appropr

e

process it was agreed that Gateway 0 did not require a refresh but that we

would continue with Gateway 1.

This took place on the 21st, 22nd and 23rd July 2009 and the report is a

a

confidence assessment (successful delivery appears probable however

constant attention will be needed to ensure risks do not materialise into major

issues threatening delivery) and we already are aware of the risks identified and

have plans to mitigate them where possible.

6.12.2 Independent Scrutiny To ensure independent scrutiny within IWC, the Chairman of the Scrutiny Panel

for the Economy, Environment & Transport contributes to the Member Review

Board and the chair of IWC’s Overview and Scrutiny Committee was

interviewed by the Gateway Review team and will continue to be informed, as

B - 158

will be

nd Contracting Out

rry out the services, or whether the service provider

n the powers if they are

elegated, the likelihood of any delegated power ceasing to be able to be

ocurement C believe that, upon approval of the OBC, we are ready to proceed to

6.15 Conclusion

6.13 Statutory processes

The Project Team is currently considering whether statutory powers

delegated to the service provider under the Deregulation a

Act 1994 to enable it to ca

will be required to provide the services as an agent of the council under section

1(1) of the Local Government (Contracts) Act 1997.

Discussions have focussed on the precise scope of services required from the

service provider, the services currently able to be delegated under the

Contracting Out (Highways Functions) Order 2009 (including powers able to be

delegated under the New Roads and Street Works Act 1991 and the Traffic

Management Act 2004) together with any restrictions o

d

delegated, and whether any powers that are currently not delegated are likely to

become delegated prior to the of the project agreement.

The final decision regarding the statutory process to be adopted will be made

following consultations between the Project Team and the Project Board.

6.14 Readiness to Proceed to PrIW

procurement. Our delivery plan remains relevant and we have considered what

needs to happen in the forthcoming stages of the project. We have a draft

OJEU notice, work has commenced on the Output Specification, Payment

Mechanism and Project Agreement, and we have considered the resources and

approaches needed to ensure a successful procurement process.