Case Study Water and Waste Water Infrastructure Northern Ireland Martin Darcy

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Case StudyWater and Waste Water
InfrastructureNorthern IrelandMartin Darcy
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Drivers

• EU Directives
• Scale of overall investment needs
• Water reform and lack of internal implementing
  resource
• Strategic Investment Board (SIB)

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Options

• Mix of public and private sector investment
• New build or renovate
• Greenfield or existing sites
• Low technology or new technology

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Preferred Solution

• Publicly financed investment only to the credible
  limit of the public sectors ability to implement
  effectively
• Private sector investment would deliver the rest
  - estimated at 350m of 1.4bn total
• Private sector investment programme (PPP
  Programme) broken into two major multi-site
  procurements
• Drinking Water projects named Project Alpha
• Waste Water projects named Project Omega

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Project Alpha - Objectives

• To provide 50 of Northern Irelands drinking
  water capacity
• To achieve quality standards compliant with EU
  Drinking Water Directive
• To achieve the above to meet legal deadline

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Water Treatment Project Alpha

• 5 Existing sites
• Estimated 200m of investment
• No land acquisition issues
• Few planning difficulties anticipated
• Relatively straight forward contract structure
• One procurement process for all five

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Water Treatment Issues Project Alpha

• The most attractive and bankable structure had
  balance sheet issues this led to a major
  crisis of confidence amongst some stakeholders
• Raw water data
• Raw water consistency
• Sludge management

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Preparation, Procurement and Initiation Project
Alpha

• May 2003 Inception
• January 2004 Project Launch
• May 2004 Call for competition
• May 2006 Financial Close (ahead of schedule by
  3 months)
• March 2008 construction work almost complete
  and ahead of schedule

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Outcomes Project Alpha

• Winning bid 70m capital cost saving over
  initial engineers estimates
• Whole life savings of 19
• Project procured 3 months ahead of schedule
• Claimed by the advisers to be a World Record
  time for a major infrastructure financing

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Waste Water Project Omega

• Renovation / new build and rationalisation with
  investment requirement estimated at 150m
• Three key geographical areas
• One procurement process for all three areas
• Rationalisation element gave great scope for
  innovation
• No preconceptions about which technical solutions
  to use
• Several bankable templates already in existence

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Project Omega Issues during Preparation Stage

• Sludge management
• Trade effluents
• Infiltrations
• Flow and Composition base data
• Planning issues concerning some sites
• Land acquisition required on at least one site

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Project OmegaIssues During Procurement Stage

• Urgent investment need requiring an Advance Works
  Contract high risk strategy for Authority
• Reform of the Northern Ireland Water Service
  the Authority
• The sale of the Preferred Bidder to a private
  equity consortium
• Inadequate leadership from senior management at
  Preferred Bidder

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Project Omega Key timings

• Advisers appointed January 2004
• OJEU December 04
• Preferred Bidder appointed January 06
• Financial Close March 07
• Construction almost complete on schedule

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Project Omega Outcomes

• Project signed one month later than forecast
• 11 improvement in whole life vfm compared to the
  Public Sector Comparator
• Construction on Schedule
• Represented the successful conclusion of a major
  PPP Programme

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Main Lesson Learned on the Entire Programme

• Investment in thorough evaluation and good
  preparation pays back through good results in
• On time delivery
• Value for money
• Avoidance of legal challenges