Select Committee on Environment, Transport and Regional Affairs Appendices to the Minutes of Evidence


Annex C

CONTRACTUAL ARRANGEMENTS

  1.  The types of contractual arrangements adopted will have a major influence on the development of any light rail scheme. It may well be influenced by the proposed funding arrangements to build and operate the network.

  2.  Traditionally, the Client employed his own staff or Consultants to design the system, to prepare contract documentation, to assist in the evaluation of bids and then to supervise the contracts and to ensure co-ordination of them so that the scheme came to fruition as an entity. More recently, in the UK, light rail schemes (and many other "public" works) have been developed on a Design, Build, Operate and Maintain (DBOM) basis or some close variation. One contract is let by the client following competitive international bidding from Consortia (often specially established for the Contract). Sometimes such Consortia have also been responsible for funding, at least in part, the proposed scheme. Whilst the new UK approach has a number of advantages, it also has a number of weaknesses. The traditional form of Contract is still used extensively in Continental Europe.

  3.  For the F/DBOM-type Contract it is essential that the Contract is let to a single Company who takes complete responsibility for the timely achievement of all aspects. Clearly such a company would need to be well-founded to accept the risks involved and must be able to manage the numerous sub-contractors involved. It is for this reason that a Consortium of Companies is assembled to bid for the F/DBOM Contract since few single companies have all the skills required. On successfully winning such a Contract the Consortium then lets "back-to-back" Contracts to the consortia members—usually the Civil partners, the M & E partners, the rolling stock builder and the operator. Immediately it becomes very difficult to ensure co-ordination of the different elements with each partner "looking after his own interests" rather than focusing on the project as a whole. This can, possibly, be alleviated by having a strong project management organisation set up independently or as part of the Consortium.

  4.  F/DBOM-type Contracts rely on performance specifications leaving the detailed design, construction, commissioning and operation to the Consortium. Again self-interest can come to the fore to the detriment of the project as a whole. Either the client must prepare, possibly with the assistance of Consultants, the relevant performance specification or the future Operator and Maintainer of the system must be involved at the outset. It is the Operator who will have to interpret the scheme promoter's desire and plans. Throughout the detailed design and construction stage plans must be inspected and approved by the operator to ensure a satisfactory and cost-effective scheme is produced and one which will actually work in practice.

  5.  The Client must draw-up (or have drawn up) Performance Specifications covering the main areas of Operation, Civil Engineering, Mechanical and Electrical Engineering and Architectural matters. The detail should be sufficient so that the bidders know at the tendering stage what will be required of them, but should be broad enough for them to develop original solutions. The importance of "fitness-for-purpose" must be stressed and milestones of physical achievement should be identified for payment purposes.

  6.  At the tendering stage the contractors should be required to submit an outline programme of how they propose carrying out the works and outline method statements. They should also submit their proposals for consultation with interested parties: the City authorities, bus operators, motoring, pedestrian and cyclist groups and the disabled. The construction programme which will, inevitably, require street closures and disturbance should be subject to extensive consultation.

  7.  Any restrictions on working, over and above any National/local legislation should be clearly identified. Environmental issues relating to such things as noise, dust, vibration, hours-of-work, etc should be included in the documentation. The Contractor's project management proposals and general work programme should be required as part of the bidding process. Once appointed these will be subject to detailed development to show daily and weekly progress. Depending upon the type of track construction, including stray current provision, and the anticipated number of services buried in the streets along the line of route, will be degree of cost/risk faced by contractors. In the UK it has been the practice to present the contractors with a "clean" site, ie one from which all extraneous items have been removed so that the Contractor knows the base from which he is starting.

  8.  Whilst there is little doubt that the DBOM approach can achieve time and, possibly, cost savings to the project, the Client will have to ensure, through his own arrangements, or those built into the contract, that he has sufficient safeguards regarding quality (in its widest sense) so as to ensure the achievement of the scheme which he first envisaged. Whilst there are commercial pressures for consortia to cut corners, linking design and build with the operational and maintenance concession (often 15+ years) attempts to reduce this risk. However, UK experience shows through the non-integrated consortium approach that the Operator and Maintainer, can often be left with problems and expenses and the Promoter/Client with a system that disappoints him. Providing policy and funding allows, there are considerable benefits in adopting the conventional contracting arrangements.


 
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Prepared 8 June 2000