Case Studies:

• Melbourne Metro Tunnel (Australia) will provide a new end to end rail line in Melbourne’s west to its south-east via twin nine km rail tunnels to improve network capacity. It includes five new stations, improved rolling stock and high-capacity signalling. The project used an Early Works Package to conduct land acquisitions, investigative works and reduce utilities and interface risks. Broader information on the project can be found in the case study from the GI Hub Reference Guide on Output Specifications for Quality Infrastructure.

Resources:

• ACA Construction Industry Practice Note 02 Early works packaging (Australia) provides an explanatory note on the stages of early works packaging, including the assessment and due diligence stage.

Case Studies:

• Happy Valley Underwater Storage Scheme (Hong Kong SAR, China) project developed an underground stormwater storage tank to alleviate flooding in a low-lying part of the island. The project used a NEC3 ECC target cost contract (activity schedule) due to the project’s complexity. The contract used early warning notices as soon as either the client or contractor became aware of any major issues and held meetings to discuss these within 24 hours to ensure they were mitigated, resulting in the project being completed a year ahead of time and under budget.

• Port of Miami Tunnel (USA) created a contingency fund to pool risk in the event of unforeseen costs, and shared the O&M risk premium between the public and private sectors. This was important as the project was constructed under a busy shipping channel in an environmentally sensitive area, and insurance or potential unforeseen costs were both high (case study from GI Hub PPP Contract Management Tool). 

Examples:

• Cost-based procurement approach (Hong Kong SAR, China) has been promoted by the Hong Kong Government for its public works projects. This approach includes the use of NEC ‘Open Book’ target cost models to avoid paying a risk premium unnecessarily through a traditional design and build contract. By adopting the NEC contract form, the risks are more equitably shared, and the government will only pay for the risks materialised.
• NEC 4 Open Book Target Cost approach provides the mechanism to work collaboratively between contractor and client, sharing the benefits of cost savings as well as the risks of cost overruns. Using a target cost with an incentivised mechanism termed a painshare or gainshare regime, contractors can find innovations to improve outcomes or mitigate risks, with the client equally incentivised to do all it can to deliver an optimal outcome.

Case Studies:

• Heathrow T5 (UK) was the largest construction project in Europe at the time, involving the building of a new airport terminal. It used an innovative approach with the client holding all the risk for the project, with an integrated team that was co-located delivering to target cost contracts on an open book basis. This approach demonstrated how a large complex project can be delivered using a collaborative method with good risk mitigation practices by contractors, aligned with a commercial incentive to perform.

Case Studies:

• New Dunedin Hospital (New Zealand) is a new 411 bed hospital to be constructed in the lower South Island of New Zealand and set to be the largest hospital in the country. A market engagement process was undertaken to provide information on the project and to inform the market’s view on aspects such as packaging and risk allocation. This informed the final packaging released to the market.

Resources:

• Infrastructure NSW Interactive Tendering Guidelines Draft (Australia) develops a set of best practice interactive tendering guidelines for government and industry. Its objectives are to improve proposals from the private sector, minimise misunderstanding between the tenderer and the procuring authority as well as ensuring a collaborative exchange of information to maximise the value of the proposals received. It reduces the probability of avoidable risks being priced into proposals by tenderers through this information exchange.
• GI Hub PPP Risk Allocation Tool provides a reference guide for government on the appropriate allocation of project risks for a variety of project types. The tool helps ensure that risks in PPP contracts are allocated in a way that achieves value for money and are viable for the private sector.