Hounslow highways pathfinder private finance initiative case study

1 Introduction
2 Hounslow's approach
3 Benefits of the Highways PFI model
4 Progress and achievements to date
5 Lessons learned and transferrable features
6 Related articles on Designing Buildings Wiki

[edit] Introduction

For a number of years, local highways authorities have been encouraged to develop Highways Infrastructure Asset Management Plans (HIAMPs), and the benefits of such an approach are widely acknowledged. However, changes to funding arrangements mean that authorities now have to demonstrate they not only have a HIAMP in place, but that an asset management approach is in operation and delivering benefits.

[edit] Hounslow's approach

Following a rigorous procurement process to secure funding and grant, the London Borough of Hounslow's highways pathfinder Private Finance Initiative (PFI) contract commenced on 1 January 2013. The project includes the upgrade of 259 miles of carriageway, 458 miles of footway, street lights, signs, street furniture, trees, structures, drainage and street cleansing.

The whole project was founded on highways asset management principals, which was instrumental in securing government approval.

The main features of the PFI model are:

Financing comes from capital borrowing, supported by the government, and is released to the PFI contractor in monthly unitary charge payments, conditional on the contractor meeting the required performance standards.
Contractual performance targets cover both operational aspects and infrastructure condition. This includes a requirement to improve highway infrastructure assets to a specified ‘steady state’ condition during the first five years of the contract and to maintain that condition for the remainder of the 25 year contract.

While it is unlikely that there will be any new highways maintenance PFI projects over the coming years, the current plan has been running for three years. This presents an opportunity to assess whether the projected asset management-related benefits are being realised, and to consider lessons learned to date.

[edit] Benefits of the Highways PFI model

The highways PFI model has a number of advantages over the conventional local authority funding model:

Certainty of funding over 25 years.
Opportunity for innovation.
Economies of scale.
Contractual service level standards.
Commercial incentives to minimise whole life cost.

As with any HIAMP implementation there is a need for high-quality data and supporting models to ensure that contractual performance measures can be calculated, reported, audited and achieved. There is also a need to certify that the contractor is able to plan future interventions to reduce cost over the life of the project, and a need to minimise the risk of performance failures.

Ringway and Jean Lefebvre have developed their own sophisticated asset optioneering model (AOM), which can calculate whole life costs of various road construction and rehabilitation options over the network. This helps minimise costs, carbon emissions and energy consumption, while maximising performance, durability and recycling of construction waste.

[edit] Progress and achievements to date

As of July 2015 Hounslow's PFI contract has delivered the following:

571 carriageway schemes and 435 footway schemes.
Around 14,000 new street lights resulting in 40% energy savings.
68.8% improvement in overall road and footway condition – ahead of the contract improvement profile.
All signs and road markings replaced with long-life solutions.
Completed upgrade of two out of the five bridges needing improvement.
Completion of five Special Engineering Designation Schemes.
Reduction in the level of defect reports and accident claims.
Improved street cleansing performance and Local Environmental Quality survey scores.

[edit] Lessons learned and transferrable features

While many local authorities faced with implementing a HIAMP regime may not have the luxury of the levels of funding and long-term consistency that highways maintenance PFIs enjoy, there are a number of lessons that can be applied from projects such Hounslow's:

It is important to be explicit about the level of performance that can be expected and afforded, with all parties signing up to measures. There should be clear, published criteria on the standards.
There are considerable benefits to taking a long-term, technical and commercial view.
A capital injection to build life into the network represents the lowest whole life cost solution, and can be justified by a clear business case.
The advantages of predictability of longer-term funding, so that if the best value solution is to delay treatment for a number of years, funding will still be available, allow decisions to be made on maintenance options based on optimal timing and minimum lifecycle cost rather than availability of funding.