Abstract. 1 Introduction

Transcription

1 Public Private Partnership for Integrated Development of Infrastructure H. A J de Ridder Delft University of Technology, Faculty of Civil Engineering and Geo sciences Sub faculty Civil Engineering Section Design and Construct Management Stevinweg 1, 2628 CN Delft, the Netherlands H.A.J.deRidder@ct. tudelfi.nl Abstract The development of infrastructure in the environment is complicated. A decision support model has been developed in order to simplify the development process. The model helps to find solutions of the planned infrastructure, which are satisfactory for all interested parties (stakeholders). The model can be reduced to two basic steps. The first step is the evaluation of variants of infrastructure on total social benefit, ine second step is the evaluation of the most promising variants on feasibility of financing, leading to a satisfactory solution. 1 Introduction It is complicated to assess the most suitable method for developing infrastructure such as ports and transportation networks due to both the wide variety of aspects imposed by the adjacent urban and rural area(s) as well as the large number of people involved in such instances. Up to the

2 100 Maritime Engineering and Ports present day, the development of infrastructure has had to undergo a series of time consuming procedures in order to arrive at a satisfactory solution. In most cases, two types of infrastructure are attainable with respect to integration into the neighbouring areas. The first type of infrastructure is the cheapest solution where integrationis aimed at reduction of annoyance to more or less acceptable levels. The second type of infrastructure is a very expensive solution, which is characterised by avoiding any annoyance within the surrounding areas. Examples are underground roads and railways, near shore ports and offshore airports. In between these two extremes, a number of more satisfactory solutions can be reached in the case that the development process is aimed at the integration of infrastructure into the environment. By applying the basic principles of integrated design, a model is developed for integration of infrastructure in the environment. In this paper the main issues of this model are presented and illustrated with a showcase. The showcase concerns the famous section of the A4 highway between Delft and Rotterdam, which is the lacking part (with a total length of 8 km) in the road connection between Main port Rotterdam and Main port Amsterdam Airport in the Netherlands. The situation is outlined in fig. 1. NORTH SEA Figure 1 The missing link of A4 highway in the Netherlands For a long time (more than 25 years) this project had been successfully held up by a number of individuals and groups from areas adjacent to the planned highway, since they expected an unacceptable deterioration of their interests in the event that the highway would be realised as planned

3 Maritime Engineering and Ports The purpose and the principle of the model The purpose of the model is to support the decision making process. The model helps to find solutions of the planned infra structure which are satisfactory for all interested parties (stakeholders). The model can be reduced to two basic steps. The first step is to evaluate promising variants of infrastructure in the environment on social benefit. The social benefit is defined as the total value minus the total cost. The total value iscomposed of transportation value and environmental value. The second step is to check most promising variants with respect to social benefit on feasibility offinancing.adding value to the system can create feasibility f Value 1*_ social benefit offinancing.this ^" ^^ added Value is to be N. Condition for financing provided by private \X parties. The model is X schematically sketched in figure 2. Figure 2: Basic framework of the development model 3 Integrated development approach Integrated development approach of infrastructure is an important part of the model. Starting with a problem, subsequently one goal (transportation goals and optimalfitin environment), one functional model (transportation functions and environmental functions) and one form are developed. This is quite in contrast with the traditional development model, which aims at finding a form for the infrastructurefirstand then at finding measures to reduce deterioration of environmental values. The difference between the two models is shown in figure 3. Integrated development approach of infrastructure in the environment prevents conflicts with interested parties from areas adjacent to the planned infrastructure and therefore enables acceleration of the whole process. Application for showcase A4 The considered section of the highway crosses both a municipal and a rural area. For the rural area the following functions must be integrated: (1) landscape, (2) ecology and (3) recreation. For the municipal area the

4 102 Maritime Engineering and Ports following functions should be taken into account: (1) economical functions, (2) housing, (3) recreation. Environmental Functions Transportation Functions Traditional approach Integrated approach Figure 3 The integrated approach versus the traditional approach 4 Widening of scope The infrastructure can be considered as a system. The choice of system boundaries is essential. Loose boundaries lead to high complexity inside the system. Narrow boundaries lead to difficult relations with the environment. The impact of infrastructure on its environment can be negative or positive. Negative influence leads to obstruction and delay. Positive influence leads to profits, which cannot be used to add value to the system, itself. By widening the system boundaries it is possible to: (1) prevent loss of profits extracted from added value as a result of the infrastructure, (2) transform negative environmental values into positive system value and (3) use profits of valuable parts of the system to invest in vulnerable parts of the system. In consequence the value of the total system will increase. The effect of widening of system boundaries is shown schematically infigure4, 5 and 6.

5 Maritime Engineering and Ports 103 \ t, _c y+ ^ y+ V+ V* \ "-^.-. Narrow boundaries Wide boundaries Figure 4 Effect of widening system boundaries on loss of money V V ^ / y+ V^" V* " " \ v \ Narrow boundaries Wide boundaries Figure 5 Transformation of negative environmental values into positive system values / s^ ^-+. x V+ V /' yt V" \ / \ " ' ; - - ZZZZZZZZZZZZZ 1 \ y. V / V+ ' V- \. ^ Narrow boundaries Wide boundaries Figure 6 Use of profits in order to enlarge total value

6 104 Maritime Engineering and Ports Application forshowcase A4 In fact, the system boundaries of the A4 between Delft and Rotterdam should be extended from Amsterdam Airport to the Port of Rotterdam or even Port SYSTEM \ of Antwerp. This however BOUNDARY makes the matter too complex and difficult to handle. For practical purposes the system boundaries are chosen from VLAARDINCEN Delft South to the crossing of A4 with A20. This system area is sketched in figure 7. Figure 7: System area A4 5 Partnering of stakeholders, providers and public authority For the development of infrastructure three partners (same goal but different interests) can be distinguished: - Stakeholders (interested parties like individuals, groups, companies, institutes, users) are dealing with what is "wanted". - Providers are interested in the profit to be made by working multidisciplinary on the infrastructure and its environment These providers (private professionals) make things "possible". - Public authority establishing what is "allowed". The partnering is shown in figure 8. What is allowed? What is possible? What is wanted? Figure 8 Proposed partnering

7 Maritime Engineering and Ports 105 The procedure is as follows: Step 1: Providers develop variants with specific characteristics with respect to what is wanted and allowed. They present the variants with an assessment of the total value of each variant; Step 2: Stakeholders and Public Authority judge the set of variants. Stakeholders check whether their interests are dealt with correctly and Public Authority checks variants on legal aspects. Both parties add things, correct things, change things and are allowed to introduce even new variants; Step 3: Together, Public Authority, Stakeholders and Providers, evaluate variants on the total social benefit being the total value minus the total cost (realisation + exploitation), which leads to a ranking of favourable variants; Step 4: Providers are invited to work out a limited number of favourable variants, including the feasibility of financing; Step 5: Together, the three partners select the most promising variant for realisation; Step 6: Start of Public Private Partnership between Public Authority and Provider for realisation of the works. The above described partnering combines optimal professional contribution with creation of broad public support what leads to acceleration of the development process. 6 Organisation ofstakeholders and Providers The proposed partnering must be organised adequately. Participation with a million stakeholders is difficult if not impossible. Therefore the stakeholders must be clustered according the criterion "common interest". A cluster leader who attends the periodically organised partnering conferences represents each cluster. The cluster leader has mandate to act on behalf of the cluster members. The providers must also be organised. They must cover a broad spectrum of disciplines. Providers are selected on their competence in relevant disciplines and on their capability of interdisciplinary co-ordination. Application for showcase A4 For the organisation of partnering of stakeholders the following clusters could be considered: (1) inhabitants, (2) recreation, (3) nature and

8 106 Maritime Engineering and Ports ecology, (4) sports, (5) shopkeepers, (6) industry, (7) transport and (8) services. For the composition of the providers' organisation at least the following disciplines must be represented: (1) civil engineering, (2) town planning, (3) project development, (4) financial engineering, (5) landscape engineering, (6) ecology, (7) architecture and (8) economy. 7 Environment as a variable for the generation of variants The interests of the stakeholders play an important role in the search for form. The main aspects are (1) noise, (2) physical barrier and (3) visual barrier. In the simplest form each variant scores "yes" or "no" on these aspects. This theoretically leads to 8 basic variants. For infrastructure like road and rail networks, these basic variants are given in table 1. For shipping ports and airports the same principles apply but the basic variants are of course different. Application for showcase A4 The A4 section under consideration is comprised of two parts: The rural part "Midden Delfland" and the Municipal part "Vlaardingen- Schiedam". For the showcase the basic variants A, F and H were selected. A number of combinations were formed, which are given in table 2. These combinations are called "variants". The first letter of the combination refers to the rural parts "Midden Delfland" whereas the second letter refers to the municipal part "Vlaardingen Schiedam".

9 Maritime Engineering and Ports 107 Table 1: Generation of Basic Variants Basic Variant Visual barrier Physical barrier ise \ _J J B / N/ N C 1 E i r~ F G ~T ^P^ " IMn 1NO Table 2: Selected variants for showcase A4 Variant no Combination AB AB AC Variant no Combination BA BB BC Variant no Combination CA CB CC 8 Monetization of values Monetization of values is necessary for the assessment of the total social benefit. The value of infrastructure can be divided into four parts:

10 108 Maritime Engineering and Ports Positive transportation value (V%^) The monetization of transportation value is mostly done by the government and is primarily based on capitalised profits extracted from the use of infrastructure (for instance saving waiting time and saving fuel). In addition the increase of economic activity as a consequence of infrastructure is capitalised. Negative transportation value (Vf) This negative value is given with respect to the variant which can at fastest is implemented. This value is caused by both delays, as consequence of "hold up power" of environmental activists as well as extra time needed for official procedures for integration infrastructure in the environment. The negative value is calculated by capitalising the missing profit of the infrastructure during the delay period. Positive environmental value (\V) This value is caused by for instance possibilities for development, increase of local employment and increase in value of existing real estate Negative environmental value (V:) These negative values is caused by the effects on existing values such as landscape, nature, culture, geomorphology, silence, quality of water, fresh air and clean soils of the environment. TNO Delft [1] developed in co-operation with COB Gouda a number of methods to convert environmental values into financial values. The most effective method is the compensation method This method is based on determination of costs of projects aimed at compensation of lost values. Application for showcase A4 All figures presented in this paragraph show an enormous spread. Sometimes up to 100%. This is hardly a problem since the integral development model is a decision support system and is certainly not the only basis on which decisions will be taken. For a clear presentation the figures in this paper are presented without spread. Monetization of transportation value is based on the yearly profit of this part of the A4, which is 85 million Dfl/yr. [2]. With 5% interest and an assumed lifetime of 25 years the total transportation value is Dfl 1818 million. The transportation value depends in a minor way on the variant considered. Aspects are safety, accessibility and flexibility in use. Each variant scores in its own way on these aspects. These scores result in variant-specific transportation values. For the A4 there are two negative transportation values. The first one is a negative value due to delays as a consequence of the choice of a form that is different from the form used in the official procedure for integrating the highway in the environment. This

11 Maritime Engineering and Ports 109 delay is 2 years for variant 5 and 3 years for variants 6, 8 and 9. Missing two respectively 3 years profit causes the negative value. (Dfl 165 million). The second one is the delay as a consequence of the "hold up power" to be exercised by environmental groups. This delay is at least 5 years, which result in a negative value of Dfl 385 million. Variants 1 and 9 have been taken as base cases for the monetization of the environmental values off all showcase variants. Variant 1 gives maximum negative environmental value (noise, physical barrier and visual barrier) while variant 9 gives maximum value (no annoyance and good development possibilities). Based on these two extremes the environmental value of the other showcase variants can be determined. The score of each variant on the selected aspects of environmental values result in environmental values. The transportation values and the environmental values of all showcase variants are shown in table 3. Table 3 Transportation values and environmental values in millions Dfl. Variant no Vi Vf Vz Vf VtoW Evaluation on Social Benefit: Value minus Costs Evaluation of social benefits results in an order of preference with respect to the quality of the variants. The higher the social benefit of a variant is the more public support for that variant will be. The evaluation is as follows: V, (A) + V, (A) - C, (A) - Cz (A) > V, (B) + V, (B) - C, (B) - 2

12 110 Maritime Engineering and Ports With: Vi (x) = Transportation value of variant x V2<x) = Added value of variant x Ci (x) = Costs of transportation cost Vi (x) C:(x) = Costs of added value 2 (x) For the evaluation the total costs (Ci + 2) of each variant must be assessed. Application forshowcase A4 Prior to the evaluation of social benefits, the cost of the selected variants needs to be assessed. The total costs of each variant is build up by (1) the costs for the infrastructure (foundation and surface) and (2) the costs for added value. The evaluation of social benefits is given in table 4. Table 5 Social benefit expressed in millions Dfl Variant no V,+V: c, L_ c Social benefit Ranking It can be seen that variant number 2 shows the largest social benefit whereas variant no 7 shows lowest social benefit. 10 Feasibility of financing The feasibility of a variant depends on the feasibility of financing. Financing starts with a relation between Value, Costs and Profits. In general the feasibility of financing is given by:

13 Maritime Engineering and Ports With V = Value P (V) = profit of value V C = cost of value V P(V)>C Having two values e.g. transportation value and environmental value, it is obvious that these two values should be treated separately. The public partner finances the transportation value. The public partner does not have intention to make profit on P (V%) = Ci transportation. Their starting point is: In reality P (V%)» Ci since Wi»Ci The private partner finances the added environmental value. The probability of arranging private financing is proportional with the difference between the added value and the cost to be made for the added value. However, the condition for private financing is enough benefit, which is given by: With P (Vz)= profit from added value 2 C2 = cost to be made for added value 2 It is important to realise that some added environmental values as for instance ecological values or landscape values do not generate profit. Only buildings on, under or beneath the infrastructure generate profits. The feasibility of financing can probably lead to a ranking of variants which is significantly different from the ranking obtained as result of the evaluation on social benefit. A few possibilities can be distinguished tofitthe ranking on social benefit in the ranking on feasibility of financing (1). Private partners try to obtain money from owners who experience increase of value of their real estate, (2) Stakeholders support their preference for a certain variant with a conditional injection of money, (3) Public Authority decides to contribute an amount of money which equals the monetized environmental values which don't generate profit, (4) Public Authority decides to obtain profits from the transportation value (from users).

14 112 Maritime Engineering and Ports Application for the showcase A4 For the A4 showcase only the feasibility of private financing is dealt with. The probability of private financing is given in table 5. Table 5: Probability of private financing (all amounts in millions Dfl) Variant V> C; Vz-C: It is concluded that variants 2, 3 and 5 are probably feasible. The feasibility of financing is given in table 6. Table 6 Feasibility of financing (all amounts in million Dfl.) Variant no P(Vz) Cz P(Vz)-C The following conclusions can be drawn (see also table 5): * Variant 2 is the most favourable solution with respect to social benefit. Variant 1 is the most favourable solution with respect to feasibility of financing. It is attractive, though not easy, to bring a part of the benefits of the total value into the project, in order to come to solutions which combine high social benefit with feasibility of financing. For illustration the following additional measures in order to change the feasibility of financing has been assumed: Private partners succeed in obtaining money from increase of value of real estate (50 % of the calculated increase of value)

15 Maritime Engineering and Ports 113 Public Authority contributes monetized value of environmental value which don't generate profit (100% of the calculated value) Public Authority contributes 10% of the transportation value. The results are given in table 7 Table 7 Effects of additional financing Variant no C P(Vz) Increase real estate 50% Environmental value 100% Transportation value 10% Benefit It is concluded that variant no 2 is not only the variant with largest social benefit but also feasibility of financing shows highest score on. 11 Risk sharing Risk sharing is not a main issue in the development phase. It is, however, one of the most important issues during the realisation phase. Since the public and private partners commit themselves in the development phase, the PPP model must give the principles of risk sharing. The basic principle of risk sharing is that that party who is best able to estimate the risk should carry risk and to control the risk should carry risk. It is obvious that the risk associated with establishing the transportation value is to be borne by the public partner and that the risk associated with establishing the added environmental value is to be borne by the private partner. The public partner carries all risks as consequence of overruns of estimated costs of the infrastructure (Ci). The private partner carries all risks ad consequence of lower benefit than is expected. The benefit of the private partner is defined as O (V:) Conclusions The presented model is an adequate tool for the complex decision making in the development of infrastructures like highways, airports and shipping

16 114 Maritime Engineering and Ports ports. The model gives structure in the co-operation between public partners, private partners and stakeholders. With the model infrastructure and environment are dealt with integrally with active participation of all relevant partners. The model leads to clear and useful rankings of variants on respectively total social benefit and feasibility of financing. References [1] Nijland, J.R.P., Quick Scan, Assessment of Environmental Effects, TNO Report, 98-BKR-R/1211, Delft, 1998 (in Dutch) [2] Nijland, J.R.P., Quick Scan, Assessment of Economical Effects of A4, TNO Report, 98-BKR-R/1212. Delft, 1998 (in Dutch)