Highways Agency

General DBFO Policy and DBFO Philosophy

Policy

There is a successful track record of public and private partnerships for trunk roads. We expect that around 25 % by value of current and new major schemes will be procured using private finance contracts, including Design, Build, Finance and Operate (DBFO) contracts. The Highways Agency is also developing new procurement approaches for maintenance so as to introduce long-term maintenance contracts on DBFO lines.

The DBFO concept started life as a precursor and transition to motorway tolling, designed to create a private-sector road-operating industry that took a long-term commercial view and which might manage tolled motorways in the future. Under DBFO, the emphasis rests on the provision of an operating service rather than an asset, over the 30-year life of a contract, with the private sector assuming responsibility for the operation and maintenance of a length of existing road (where appropriate) and for building specified improvement schemes.

The principal benefit of DBFO lies in the increased value for money to the taxpayer of procuring a road service in this way. This is achieved through a combination of transfer of risk and the introduction of private-sector innovations.

Philosophy

The main principles of PPP inherent in DBFO contracts are:

The Transfer of Risk

The allocation of risk and reward between the contracting parties should be clearly defined and private sector returns should be genuinely subject to risk. The DBFO Co will be expected to assume the majority of the risks associated with the design, construction, maintenance, operation and financing of the Project. These risks will include the risks of construction and maintenance to time and to budget and making whole life cost judgements.

Value for Money

The Agency will establish whether the proposed levels of payment are justified by the benefits of the Project. Part of the assessment of whether the Project constitutes value for money involves using a public sector comparator which makes allowance for risk transferred.

Managerial Responsibility

The Secretary of State is the Highway Authority for the motorway and trunk road network. The managerial, operational and maintenance responsibility for the Project Road will be undertaken by the DBFO Co.

Payment for Service

The Agency will make payment in relation to the receipt of a service, and payments may be adjusted to reflect the satisfaction of certain performance criteria.

Partnership

The Agency is committed to establishing an effective partnership with the DBFO Co's in particular to ensure co-operative and non-adversarial working practices, well aligned objectives and constructive arrangements for quickly resolving differences.

Private-sector innovation

Transferring many of the risks to the private sector has resulted in increased innovation and efficiency (for example, in matching design and construction with long-term service needs), which has led to significant savings in comparison with traditional procurement methods.

The DBFO concept encourages a productive partnership between the public and private sectors, harnessing private capital and commercial expertise to fund initial construction and long-term maintenance of DBFO roads.