isle of wight highway maintenance pfi, expression of interest (external)

8/7/2019 Isle of Wight Highway Maintenance PFI, Expression of Interest (External)

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Local Government Private Finance Initiative (PFI):Highway Maintenance (HM) Pathfnder SchemeIsle o Wight Council

Expression o Interest

September 2006

Expression o interest submitted by:

Isle o Wight Council

County Hall, Isle o Wight PO30 1UD


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Local Government Private Finance Initiative (PFI): Highway Maintenance (HM) Pathfnder Scheme

Foreword:

Councillor Andy Sutton, Leader, Isle o Wight Council iii

Introduction:

Joe Duckworth, Chie Executive, Isle o Wight Council iv

Statement o support v

Executive summary vi

1 Description o the project in a strategic context 11.1 Local authority objectives 11.2 Plans and government policies 11.3 Political support 2

2 Scope and need or the project 22.1 Scope 22.2 Need 32.3 Commercial interest 4

3 Option appraisal 53.1 Options appraisal 53.2 value or money 63.3 Procurement Options 63.4 Value or Money o the Preerred Option 7

4 PFI Credits 7

5 General PFI criteria 10

6 Risk 10

7 Stakeholder consultation 12

8 Project management 138.1 Experience o PFI projects 138.2 Programme management and project delivery 138.3 Proposed advisors 148.4 Learning rom others 15

9 Timetable 15

10 Conclusion 18

Index


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Isle of Wight Council Expression of Interest September 2006

The Isle o Wight is unique. It is an island o contrasts.Despite being an area o outstanding natural beauty

with developing high tech industries and a major touristhub, we have the second lowest average wage in theUK. The Island is in desperate need o regeneration todeliver our vision o better employment opportunities,standards o living, education and support or islandersat the same time as retaining its natural landscape.

Central to this vital regeneration is the need to radicallyimprove our inrastructure. Our roads have sueredrom years o limited expenditure and maintenance and

are no longer t or purpose. Without major investment in our inrastructure the

regeneration o the Island as a whole is in peril.

Not only will a Highways Maintenance PFI change the ace o the Island and how it

works, but it will be a major catalyst to the Islands development as a whole.

We are ully committed to delivering this PFI project to an exceptional standard andour proposal provides an excellent learning opportunity or PFI projects in general.We are looking to innovate and bring a resh approach to managing a major PFIscheme. We want to do this ully in partnership with the Department and see this asbeing critical to our success.

We see our bid as being the natural third element o a triumvirate comprising

an urban PFI in Birmingham, a provincial PFI in Portsmouth and our largely ruralscheme here on the Island.

The council along with its partners ully endorse and support this Expression o

Interest, the success o which is vital to the uture aspirations o the Island.

Forewordby the leader o the Isle o Wight Council, Councillor Andy Sutton


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We, the undersigned individuals and organisations, believe that the Isle o Wightdeserves a modern and well maintained highway network to deliver our vision o

a progressive Island built on economic success, high standards and aspirations ora better quality o lie or all. We recognise there is a substantial backlog o repairsrequired to be completed to bring the network back to an acceptable level, andstrongly support this proposal to secure a PFI or Highway Maintenance which weconsider to be the only aordable option or the Isle o Wight.

Statement o support

Cllr Andy Sutton

LeaderCllr Ian Ward

Cabinet Member or Environment,Planning and Transport

Cllr Deborah Gardiner

Labour Group LeaderCllr Muriel Miller

Independent Group Leader

Isle o Wight Council

Joe Duckworth

Chie Executive(Project Sponsor)

Derek Rowell

Director o Regenerationand Development

Mark Chiverton

IW UNISONBranch Secretary

Stephen Matthews

Head o EngineeringServices (Project Director)

Kevin Smith

IW Chamber o CommerceMarc Morgan Huws

Southern VectisMike King

IW Economic Partnership

Partners

Estelle Thomas

IW Rural Community CouncilNigel Smith

IW Tourism

Stuart Love

Director o Environmentand Neighbourhood


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This document details an EOI rom the Isle o Wight council or a highwaysmaintenance PFI scheme.

Background

The council is a unitary authority o the south coast o England. It is responsibleor the management and maintenance o 822 kilometres o highway and 827kilometres o public rights o way. It has a revenue budget (2006-07) o 5.5 millionor the provision o its highways service and an additional 2.03 million capitalbudget (2006-07) or road structural maintenance through Local Transport Planunding.

Case or investment

The council undertook best value reviews in 2001 and 2002 which clearly identiedthat the Isle o Wight has a road network in poor condition. There has been asignicant rise in insurance claims over the past three years. There is a clear body oevidence supporting the need or a PFI as ollows:

The 2004/05 returns showed that the councils gures or BV96, BV97a andBV97b placed the Isle o Wight in the bottom quartile or local authorities inEngland and Wales.

In a recent comparison using the revised indicators BV223, 224a and 187 or2005/06, the Isle o Wight was ranked worst among local authorities in the southeast o England.

Currently seven roads (156 km) on the Island have weight restrictions and a largenumber o roads have width restrictions. Without unding, an additional nineroads (24km) will either have to be closed or have restrictions placed upon them.

O the councils 11,700 street lighting columns an estimated 5,534 (47 percent)are over 30 years old and in need o replacement.

The ailing network is seriously inhibiting the economic development o the Islandand without urther unding the situation will deteriorate urther putting pressureon businesses and the communities they support.

Executive Summary


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Preerred option

A preliminary options appraisal and qualitative assessment indicate that a holisticapproach to the provision o the highway service oers the best value.

Thereore the scope o the proposed PFI comprises a ence to ence approach andincludes rehabilitation o the highway network, maintenance o bridges to currentassessment criteria, whole lie cycle maintenance, replacement o lie expired street

lighting columns, routine and cyclical highway maintenance, winter maintenance,network management and street cleansing.

Sta and stakeholders have been kept ully inormed as the PFI has been developedthrough workshops and regular communications with the PFI project team and areully supportive o the initiative.

Costs

To support its case or investment, the council is seeking a notional credit approval

(PFI credit) o 322 million. The council considers that the project is aordable,subject to the award o PFI credits and has committed to meet the revenue undingindicated in the aordability calculations.

To support the case or investment and demonstrate the councils commitment, theIsle o Wight is assigning its current budget plus a urther 0.5 million per annum to

this PFI project.


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Description o the project in a strategic context

1.1 Local authority objectives

The Isle o Wight Council along with its partners is poised to regenerate theIslands economy and deliver the local communitys realistic aspirations describedin the Islands 2020 Vision. The Islands aspirations are underpinned by the needto secure signicant investment to restore the Islands decaying highway network.This investment is critical i we are to achieve many o the targets in our IslandAgreement and the South East Plan.

The council has ve corporate objectives, three o which are directly dependent ona well maintained highway inrastructure, these are:

Sustainable regeneration and development o the Island.

Creating saer and stronger communities.

Being a high-perorming, cost-eective council.

Over the past three years we have developed a new approach to highwaymaintenance and network management to support the planned regeneration othe Island. The objective o the HM PFI project is to provide a ully comprehensiveapproach (ence to ence) or highway maintenance including the completereurbishment o the entire network. Thereater whole lie cycle techniques will beused to provide VFM sustainable maintenance with an improved customer ocus onservice delivery.

This HM PFI is the rst stage in a wider strategic transport Public Private Partnership(PPP) which seeks to ully integrate transport on and o the Island. Our ambitionis to implement a HM PFI to restore and maintain the network, and integrate travelon the Island as well as across the Solent.

1.2 Plans and government policies

The governments policies to deliver sustainable communities and Island Planobjectives will rely on a cross departmental approach to investment in inrastructureto achieve value or money outcomes. In this case, unding or highwaysmaintenance will act as a catalyst to deliver regeneration and housing projectssupported by SEEDA, English Partnerships and the Housing Corporation. Inaddition, the council is taking a proactive stance with public and private partnersto combine property assets in a Local Delivery Vehicle to ensure that land assemblywill sweep ahead to provide suitable sites or new and existing employers and so

build a successul economy. Without adequate maintenance to the existing highwaynetwork this progressive Island wide initiative starting at Cowes Waterront will ailto maximise the opportunity to attract substantial private sector investment.


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1.3 Political support

The proposal or PFI has ull political support. A recent ComprehensivePerormance Assessment (CPA) concluded that the Council actively promotesand champions the needs o the Island and is showing bold community leadership.Political leadership is strong.

The councils cabinet approved the option appraisal on 20 April 2005, and ull

council on 22 February 2006 agreed to allocate 1.73 million towards the costs andees or setting up the PFI project. Councillors are kept up to date with the projectthrough regular briengs and updates by the lead cabinet member and ocers.

At its meeting on the 5 September the councils cabinet agreed to submit this EOIand also asked that the Councils Scrutiny Committee make the PFI process a key

line o enquiry to act as a quality check and question the robustness o the processat each key stage.

2Scope and need o the project

2.1 Scope

The scope o the project moves on a stage rom both the Portsmouth andBirmingham models and has been determined through a selection process lookingat service suitability, VFM and deliverability. The process was urther inormedthrough work with elected members, senior ocers, stakeholders and our nancialand technical advisors. More recently the process o sot market testing o thescope with potential contractors has urther rened those services to be included

in the nal scope. During this process a number o other areas were examined orinclusion but ater careul evaluation the council decided to exclude them rom thescope o the proposal. VFM is addressed in 3.4 o the EOI.

The scope o our HM PFI project will be ence to ence and includes the ollowing:

Rehabilitation o the highway network.

Maintenance o bridges to current assessment criteria.

Whole lie cycle maintenance.

Replacement o lie expired street lighting columns.


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Routine and cyclical highway maintenance.

Winter maintenance.

Network management.

Street cleansing.

2.2 Need

Over a number o years the council has systematically undertaken surveys andinvestigative works to establish the condition o its highways asset. Results indicate

that the condition o the Islands highway network is amongst the worst in England

and Wales and this is illustrated by the BVPI results shown in Table 1.

Table 1: BVPI Indicators

2004/2005 BV perormance indicators

BV96 65.4%

BV97a 63.75%

BV97b 62.95%

Working with SECSIG on preliminary gures or 2005/2006, using the revisedindicators BV223, 224a and 187, the Isle o Wight was ranked worst among all

local authorities in the south east o England.

Twenty per cent o the highway network is subject to weight or width restrictions inconnection with structures and a large number o roads have 6 6 (1.98m) widthrestrictions. It is estimated without adequate unding, an additional nine roads, witha total length o 24 kilometres will either have to be closed or restrictions placedupon them in the near uture.

These weight and width restrictions impact adversely on accessibility and impedeeconomic growth o the Island. Without additional unding the number o weightrestrictions will have to be increased causing greater pressure on businesses and thecommunities they support.

The council maintains 14,300 items o illuminated street urniture including anetwork o 11,700 street lighting columns with an estimated 47 per cent over 30years old and in need o replacement. This network also needs to be modernised to

meet current codes o practise in the provision o street lighting.


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Table 2: Age o street lighting network

Age o columns No %0-20 years 3,032 25.9

21-30 years 3,117 26.7

31- 40 years 2,989 25.6

Over 40 years 2,545 21.8

Total 11,694 100

The council has retained specialist consultants WDM Ltd to validate the extentand cost o the highway maintenance backlog and also to conrm the whole liecycle maintenance costs or the required service levels or the network during theproposed 25 year contract period. The council believes that this is the rst time thismodel has been used in England and Wales; a copy o the report is contained inAppendix 4. WDM Ltd also undertakes annual highway condition surveys or thecouncil comprising Scanner, CVI, DVI and Defectograph.

This summer has also seen the completion o the Transport Asset Management Plan

(TAMP) and highways inventory. The TAMP has been prepared in partnership withChris Britton Consultants to provide a knowledge based decision making processor ecient management o the highway asset. The highways inventory has beenprepared by John Reid Consultants and provides a complete, up to date register oall highway assets; this inormation is stored electronically on an integrated localstreet gazetteer/Ordnance Survey Mastermap base. Validation o the inventory hasbeen undertaken in-house by checking approximately 25 per cent o the network.

The investment required to halt this decline and return the councils highway

inrastructure to a reasonable and sustainable condition is beyond the scope o theexisting revenue and capital maintenance unding. The timing o such investment isalso important, as delayed intervention results in signicantly higher costs, increasedscope and complexity o work, lane unavailability and associated delays, while noinvestment would render the network unusable within the medium term.

The total investment required is 169.2 million or backlog, 134.1 million orwhole lie cycle maintenance, 163.7 million or operating costs and 7.6 million or

energy costs, and these gures are set out in greater detail in Appendix 2.

2.3 Commercial interest

The council has undertaken sot market testing with ve international companieswith PFI experience to test a range o service models with the highwaymaintenance project at its core. The positive response has not only infuenced thescope o this proposal but also how the council will integrate other contracts todeliver a design-led approach to improve the public realm to achieve aordableenvironmental enhancements at a neighbourhood level. The council is able toconrm rom this senior level contact that there is signicant interest in tendering


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or the PFI project on the Island. This will be ollowed up with a series o workshopswith these companies and their advisors i our bid is successul. In particular, we

would be keen to explore the high level o interest shown rom the PFI contractorin Portsmouth and how this may be advantageous in achieving economies oscale. An international company with wharage acilities on the Island has alsoexpressed keen interest in the PFI process. Discussions have been held and thecompany is keen to invest in its Island business to support cross Solent movemento construction materials.

Options appraisal

3.1 Options appraisal

In order to establish options, both the scale o the PFI and the inscope services

have been examined in detail by the council and its advisors. The scale options

considered were principal network only; principal roads and selected secondaryroads; principal and all secondary roads; and nally the complete network. The donothing option was rejected immediately given the rapidly deteriorating conditiono the network and the impact on saety and accessibility. Work undertakenaround the time o the best value reviews concluded that the councils agendaor regeneration and the Islands high dependency on tourism demanded thatthe scope o any highway maintenance project would need to include the entirenetwork given the extremely poor condition o all classes o road. Details o thiswork will be expanded on within the Outline Business Case.

Table 3: Options considered

Option Description

A Rehabilitation only

B Rehabilitation and selected other services where economies o scaleacross the complete network would provide added value

C All relevant services

The scope options were assessed or the complete network against the ollowingcriteria: aordability, saety, sustainability, policy fexibility, deliverability o optionsand market testing. The results are shown in Table 4.


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Table 4: Options appraisal matrix

Weighting Score Weighting x scoreCriteria Rehab-

ilitationonly

Rehab-ilitationandselectedservices

Allrelevantservices

Rehab-ilitationonly

Rehab-ilitationandselectedservices

Allrelevantservices

Aordability 20 4 4 5 80 80 100

Saety 15 3 4 5 45 60 75

Sustainable 18 4 4 5 72 72 90

Policy

fexibility

12 5 4 3 60 48 36

Fit toobjectives

12 3 4 5 36 48 60

Deliver-ability ooptions

13 5 5 4 65 65 52

Markettested

10 4 4 5 40 40 50

Totals 398 413 463

A NATA appraisal has been undertaken in accordance with HM Treasurys newGreen Book Appraisal and Evaluation in Central Government and 4Ps BestPractice Guidance which indicates a BCR o 2.64 or Option C (see Appendix 3).This urther supports the outcome o the Qualitative appraisal as summarisedabove.

3.2 Preerred Option

The appraisal indicates that Option C delivers the required outcomes in strategic,corporate and highways service delivery terms. It also delivers substantial

community and local economy benets, achieves a positive Cost to Benets Ratio o2.64 and has the highest score o non nancial benets.

3.3 Procurement Options

In concluding that Option C represented the best value or money approach, anumber o other procurement options were initially appraised including prudentialborrowing, capital receipts and revenue unding.

From April 2004 local authorities have been able to borrow under the Prudential

Code to und capital schemes. However, they have to nd the revenue unds to


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nance such borrowing. The council does not have the resources required in thelight o current spending pressures and other commitments to be able to nance the

level o revenue costs associated with prudential borrowing.

The investment in highways will not in itsel generate capital receipts and thecouncil has no other such receipts available that could und such a project, thereoreunding by this route is unsustainable.

In the absence o other sources o capital unding, the council substantially investsits own revenue resources into unding its capital programme. However, it wouldnot be possible to divert anything like sucient revenue rom other activities tomeet the objectives o this project without the council undermining a whole rangeo essential services. The revenue-unding route is thereore not a realistic option.

3.4 Value or Money o the Preerred Option

To demonstrate that the PFI procurement route provides better Value or Money

than can be achieved through a conventional procurement route, a benchmarkequivalent public sector price has been generated through the TQAT (TreasuryQuantitive Assessment Tool) which shows a crude VFM actor o 15.32% inavour o PFI. Full details o this exercise can be ound in Appendix 2.

PFI credits

The cost o the reerence project has been estimated on the net present value o

the capital, lie cycle and relevant nancing costs over 25 years or the preerredoption. The estimate used WDM survey results and advice on treatment optionswith appropriate industry rates. Additional actors such as the need to deal with tarcontaminates, separation by sea, climate change in relation to a high percentageo the network being on shrinkable clay soils, maximised use o in situ recycling toreduce the carbon ootprint and enhanced night working to mitigate disruption toIsland tourism have all been refected in the estimated cost.

Detailed consideration has been given to the length o the core investment period,particularly in relation to the extremely large backlog o repairs and the likelyimpact o these works on the Islands tourism industry. A CIP o seven years has

been identied as being appropriate given the unique characteristics o the Islandshighway network and the vitally important role o tourism to the local economy.


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Isle o Wight Council is seeking a notional credit approval (PFI credit) o 322.219million.

The methodology or the calculation o the PFI credit in these highways PFIschemes has not been prescribed. The alternative methodologies have beendiscussed with our nancial advisers, the DT and 4Ps, in order to provide a balancebetween compliance with the DT requirement to link PFI credits to capital spend,

while also delivering an aordable solution.

The PFI credits have been calculated based on the overall capital costs. This includesthe removal o the backlog, the liecycle capital cost over the remainder o thecontract and the capitalised nancing costs. An allowance has also been made oroptimism bias. The calculation o PFI credits using this methodology is detailed atAppendix 2.

The calculation has been based on the assumption that the council would ollow theapproach taken by Birmingham City Council, ie that capital unding or structuralmaintenance through the LTP process will discontinue. The council will o course beprepared to consider an alternative approach which can be developed through theOBC i this is considered to be advantageous. The council will also seek to enhancethe maintenance outputs by investing planning gain and other resources in a designled approach to improve the public realm.

The council budgets used to und the service ater deducting a small amountor xed costs, provide a total o 6,358,616 (08/09 prices) per year to und

the project. Table 5 shows that the council has committed an average o 114.06per cent o FSS on its highway network over the last ve years. The council willcontinue to und at these levels.

Aordability has been modelled over the 25 year contract period on the basis o

the gures above. This indicates that the project is aordable to the council. Thecabinet resolved at its meeting on 5 September 2006 to underwrite the operationalunding requirement o the PFI project; this has been calculated as 498,289 perannum at todays prices. This is in addition to the historic level o spend and equatesto 3.73 per head o population.

It is estimated that eciency savings o at least ve per cent will be achieved as aresult o:

a PFI contractors economies o scale in personnel, equipment, purchasing,nance;

asset management and investment based on whole lie cycle maintenance

techniques;

a schedule o rates or the contractor to price up other responsibilities outside thescope o the PFI bringing economies o scale and savings to the council;

establishing a planned maintenance regime to replace the current reactive regime.


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General PFI criteria

The council is condent that it meets all the general PFI criteria and specically thecouncil believes it has the authority under the Highways Act 1980 and the Local

Government (Contract) Act 1997 to enter into a PFI contract or the delivery o itshighway maintenance service. This authority was conrmed by the councils Cabinetmeeting on 20 April 2005. The council does not believe that there are any planningor legal issues that would delay procurement o a PFI contract.

6Risk

6.1 Risk analysis

An initial analysis o the risks inherent in the project has been undertaken as parto the development o this Expression o Interest. The council intends to allocaterisk in accordance with this analysis and the guidance given by advisors Deloitte. Adetailed strategy or allocating risks and the management o retained residual risks

will be developed at Outline Business Case (OBC) stage.

The implementation o a HM PFI will reduce the risk o claims resulting rom the

poor quality o the highway network and their link to trac accidents and thirdparty trip and damage claims.

The council has examined the risks o the PFI project using the expertise o thecouncils risk and insurance manager and in line with the councils agreed riskmanagement strategy. A specic risk management strategy is being designedand will be implemented to ensure that risks are managed both at a project andcorporate level with respect to the proposed PFI project. As part o this processa comprehensive risk register has been established or the proposed PFI, and

appropriate risks rom the proposed PFI have been included in the councilscorporate risk register.

6.2 Risk transer

The allocation o risk between the council and the possible PFI contractor hasbeen looked at in detail in preparation o this EOI. The council recognises thatbest practice in this area is centred on each party in the PFI having a uniormunderstanding o the denition, scope and reach o the risks involved. In line with

the existing two pilot schemes the PFI contractor would take on all the risk o the


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highways network, but the council would retain and manage the risk caused bymajor landslips and coastal erosion.

The councils PFI transaction will be structured such that a sucient balance orisks is transerred to the private sector operator to enable the transaction tobe treated as o balance sheet under the TTF TN1. A denitive opinion on theaccounting treatment will not be possible until the transactions contractual eatures

are nalised. Given this, it is clear at this stage that once we have applied the keyprinciples, and the qualitative and quantitative indicators and methodologies thatmake up the accounting guidance in TTF TN1 to the transaction, the newly createdassets in the project transaction may be accounted or as o the councils balancesheet.


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Stakeholder consultation

Table 6: Summary o consultation undertaken and planned

Stakeholder ConsultationSta Workshops and briengs. Strong sta support. The council has

no highways sta issues as the direct labour organisation wasoutsourced in the late 1980s.

Unions Workshops and briengs. Mark Chiverton, secretary o theUnison branch on the Isle o Wight has stated: On behal o itsmembers, the local Unison branch ully supports this bid or PFImoney as representing an unprecedented opportunity to developthe transport inrastructure on the Island. We will plainly wishto be actively involved to ensure that this investment can alsoenhance employment opportunities and conditions.

Best ValueReviewsand LTP2stakeholders

Briengs and written submissions. This highlighted the issue ohighway maintenance as a priority or extra expenditure.

Environmentgroups

Consultation with key environmental stakeholders, such asthe local AONB Partnership, will take place to examine theimplications to the local environment and rural landscape o thePFI project.

Economicdevelopment

partnershipand LSP

Further work led by the Islands economic development agencywith key local partners will look at the implications or skills

development (IW College), economic regeneration and thelegacy o the PFI project to the local economy. The proposed

public/private regeneration vehicle, the Island InvestmentCompany, will be consulted on managing the provision o workbases or the PFI contractor. While nal mobilisation or thestart o the contract is likely to occur in early 2009, businesssupport and skills development will be examined and planned inadvance to help ease the transition to the contractor. The Islandis now a European composites hub and close partnership workingwith the Council will be continued to ensure that growth and

development potential is ully supported by the PFI proposals.Businesses Several briengs have taken place via the Chamber oCommerce.

Transportproviders

Through the LSPs Quality Transport Partnership, all publictransport operators have been consulted.

Residents A ormal communications plan is currently being developed toinorm the public on the Isle o Wight through all stages o thePFI process.

Parish andtown Councils

Workshops and briengs.


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Project management

8.1 Experience o PFI projects

The council recognises the major benets o employing innovative processes indischarging its statutory duties as a local authority. The council has demonstratedits commitment to the PFI approach by successully developing an integrated wastemanagement PFI with Bia Waste Services Ltd, the rst such scheme in the country,which won best long running operational scheme in the Public Private FinanceAwards 2004. This existing PFI was short-listed or Beacon status in this yearsawards.

8.2 Programme management and project delivery

Our 4Ps Gateway Review was carried out in June 2005 and a number orecommendations were made; these have since been put in place by the project

team including:

Commitment rom the council and its members

A project board o elected members, sta and advisers who can combineexperience o the key issues and market expectations

Resources (budget, sta) available at the peak period in the development process

A realistic programme and commitment to meet the programme

A bankable set o project documents

The experience and ability to negotiate contract terms through a dialogue process

An experienced and capable contractor

To enable us to successully develop this large-scale public sector project, wereviewed our resources to ensure they are t or purpose. We identied where thereare gaps and where necessary we will headhunt sta with specialist PFI experience.We will implement and manage this project in line with its QMS (ISO 9001) andInvestors in People accreditations and adhere to PRINCE2 project management

methodology. We are soon to appoint a strategic transormational partner withspecialist expertise in programme and project management as well as procurement.Utilising the expertise o our new partner will be a key part o our deliveryprogramme.

To date a budget o 1.73 million has been allocated to develop the PFI project bythe council. This sum was identied ater detailed discussions with Portsmouth CityCouncil, Birmingham City Council and proessional advisors.

A corporate governance structure has been put in place to ensure properownership, management and control o the project with clear lines o responsibilityand accountability.


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The project management structure comprising the ormal project board is detailedin Appendix 5. The board meets on a monthly basis and receives reports on the

progress o the project and reports to the councils Cabinet.

Day-to-day development and management o the PFI project will be carried outby the project delivery team led by the project director and comprising internal andexternal resources required to deliver the various stages o the PFI procurement

process. The project director and manager will be seconded ull time to the PFIproject. This team will report to, and will be directed by, the project board on amonthly basis. The project sponsor (owner) is the Chie Executive.

The team led by the new Director o Environment and Neighbourhoods includessenior engineering ocers combined with senior ocers rom legal, nancial,procurement and risk sections o the council. The team is urther strengthened withthe inclusion o ocers with experience o the existing waste management PFI. Theteam includes the Head o Regeneration to provide links to the regeneration work

o the council and its partners. Full details are included in Appendix 6.

8.3 Proposed advisors

The council will be procuring appropriate proessional support or uture phases othe PFI. A budget o 1.73m has been approved by the council or this purpose. In-house expertise will also be utilized rom across council departments when required.

The council has procured the ollowing rms to provide specialist nancial andtechnical support at the EOI stage:

Deloitte & Touche is a big our proessional services rm working closely withlocal authorities, 4Ps and central government across a range o services, romexternal audit to human capital. The Deloitte PFI team assisting the Isle o Wightcomprise the transport PFI specialists who are advising Birmingham City Councilon their Highways PFI; have worked on a range o other transport, highwaysand street lighting PFIs (rom EOI to nancial close), including the PortsmouthHighways Management PFI project to ITN stage, and recently signed streetlighting PFI schemes.

Mott MacDonald is a major management, engineering and developmentconsultancy providing solutions or both the public and private sectors. The PFIteam assisting the council comprises specialists at the oreront o developingPPPs to deliver transport solutions to local and regional authorities aroundthe world. This team has also worked on the highways maintenance PFIs orBirmingham and Portsmouth.


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8.4 Learning rom others

The council has carried out extensive consultation and dialogue with a range ooutside organisations to achieve a better understanding o the PFI market and theimplications or regional objectives in the south east o England. Organisationscontacted include:

Major PFI contractors.

Ocers at Birmingham and Portsmouth City Councils and other local authoritiesinterested in PFI.

4ps; Audit Commission; GOSE; Partnerships UK; SEEDA; SEERA.

Timetable

The council has been developing this PFI since 2003, and has maintained an opendialogue with the DT as details o the Pathnder round or highways maintenancePFI were developed. The ollowing represent the key dates, actions and activitiesrelated to the councils development o a proposal or a highways maintenance PFI:


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Table 7: Record o progress to date

September 2003 The council approved the preparation o a PFI EOILate 2004 Mott MacDonald retained by the council to advise on PFI

options

December 2004 Sta consultation began

20 April 2005 Option Appraisal Report approved by the councilsexecutive

June 2005 4ps Gateway 0 Review carried out

January 2006 Deloitte appointed as advisers to the council or the EOI

January- August 2006 Consultation carried out with key stakeholders

15 February 2006 DT HM Pathnder letter published

22 February 2006 The council approves a budget o 1.73m to progress thePFI

February - July 2006 Sot market testing with possible contractors

March 2006 LTP2 submitted

March - August 2006 Council attends all 4ps HM Network Group meetings

August 2006 Highways inventory completed

August 2006 Transport Asset Management Plan completed

The council has consulted the market place and proessional advisors and believesthat the project timetable set out below is both realistic and achievable. The council

has allocated considerable resources to develop the project and a signicant amounto work has already been undertaken on the preparation o the OBC to expeditethe PFI programme. The council is condent that early submission o the OBC willbe achieved in line with the dates set out below. The council ully recognises theneed to work in partnership with the DT as part o this pathnder process.


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Table 8: Proposed timetable

September 2006 Submission date or EOIDecember 2006 Anticipated date to proceed with Outline Business Case

(OBC)

January 2007 4ps Gateway 1 Review to be carried out

April 2007 Submission o the OBC

May 2007 Project Review Group (PRG) approval

June 2007 Appointment o nancial, legal and technical advisors

June 2007 Publication o Ocial Journal European Union Notice

August 2007 Issue o Pre-Qualication Questionnaire (PQQ) andinormation pack

September 2007 Completed PQQs returned, evaluated and long- listcompleted

September 2007 Open competitive dialogue and Invitation to Submit

Outline Solutions (ISOS)

November 2007 Evaluation, dialogue and approval o short-list

December 2007 Renement o key documents to refect issues raised

January 2008 Issue Invitation to Submit Detailed Solutions (ISDS)

July 2008 Evaluation, clarication and dialogue on detailed solutions

October 2008 Close competitive dialogue and call or nal tenders

November 2008 Final tender completedJanuary 2009 Final evaluation and selection o preerred bidder

February 2009 Commencement o mobilisation

May 2009 Commencement o contract


25/25

0Conclusion

The Island has many advantages that support its selection as a partner in aPathnder Scheme or PFI Highway Maintenance project. Support is strong, need is

great and the council has put in place the necessary resources and project structureto successully deliver an innovative and eciently run PFI project. Our track recordon PFIs is good as evidenced by our successul Integrated Waste ManagementContract. Access to the Island is excellent with over 350 erry crossings every dayand planning or this vital increase in economic activity has already commencedwith all our key partners.

There is nowhere else in the UK that has the opportunity to bring such joined-upbenets through a Pathnder Highways Maintenance PFI. The Isle o Wight is aresourceul place, but cannot aord to tackle the maintenance backlog, which hasnow taken on national unding proportions. The Department or Transport has a

pivotal role in providing a clear catalyst to support innovation in a well-managedenvironment and the Island community urges the Minister to conrm Pathnderstatus to trigger all the benets outlined in this document.

isle of wight highway maintenance pfi, expression of interest (external)

Documents