AASHTO Construction Sub-Committee Annual Meeting Virginia Beach

1. AASHTO Construction Sub-Committee Annual MeetingVirginia Beach Adrian Sheppard “Director for PPP and Asset Management”

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

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

4. The City of Portsmouth • Unitary Authority - 1997 • Population 190 000 • Predominantly Urban • Gateway to Europe • Total Road Length 455km • PRN 66km • SRN 94km • TRN 295km • 84 Structures • 20 000 lighting units

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

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

7. Bid Process • OBC Outline Business Case • EOI Expression Of Interest • PQQ Pre-Qualification • ISOS Outline Solutions • ISDS Detailed Solutions • ISRS Refined Solutions • CFT Final Tender • PB Preferred Bidder • FC Financial Close

8. The HighwayMaintenance Project • Ensign Highways Ltd • 25 year Contract • 5 year CIP • $850m

9. Contract Value Core Investment Period 5yrs $100m Life Cycle Replacement 20yrs $80m Operations & Maintenance 25yrs $670m Total $850m

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

11. Exclusions fromthe Contract • Urban Traffic Control Systems • Bus Stops • Refuse Collection • Coastal Protection • Retained Highways Functions • Abandoned Vehicles • Other City Council Services

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

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

14. Structure

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

16. Role of the SPV • Core tasks for the SPV management function include: • Develop and deploy processes, systems and procedures • Technical and commercial risk assessment and management • Financial reporting • Performance monitoring

17. Role of the SPV • Core tasks for the SPV management function include: • Management of funding arrangements • Contract profile and promotion • Dispute management • Partnership development

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

19. Payment Mechanism • Usage Payment = Shadow toll (10%) • Availability Payment = Monthly lump sum (90%) • Deductions (Performance based) NCI AP 18.6 100% 12.5 65% 5 yrs 20 yrs Investment period Maintenance

20. Monitoring • Surveys • Inspections • Internal Audits • PCC Independent Certifier • Bank’s Technical Advisor • Residents / City Help Desk • Councillors • Newspapers

21. Liaison and Dispute Resolution Procedures ‘Expert’ ‘Expert’ ‘Principals’ ‘Principals’ Network Board Network Board Progress MeetingOperational Meeting Progress MeetingOperational Meeting

22. Default Notice Periods • Service Points • Warning Notice • Contract Termination

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

24. Performance Measures Number of public enquiries

25. Performance Measures

26. Performance Measures

27. Performance Measures

28. Performance Measures

29. Performance Measures

30. Performance Measures

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

32. Efficiency Savings • Integrating design with construction ▪ Improved buildability ▪ Better budget management ▪ Speedier construction process ▪ Better interface management ▪ Improved response

33. Recognition • Public Satisfaction 2005 • 4Ps Excellence Award 2006 • IHT Effective Partnership Award 2008 • Other Local Authorities in UK following model • Public Satisfaction 2008 • Highways Partnership Awards 2009 • ICE Award 2010 - Best Community Project

34. Local CommunityInvolvement • Mayfield School • Tidy School • The News “We can do it” • PCC Tidy campaign • Portsmouth in Bloom • Brunel commemoration • Kid safe • University of Portsmouth

35. THANK YOU asheppard@colasinfrastructure.com