Highways Agency

• 1 introduction
• 3 the principles of the dbfo contract
• 3 the principles of the dbfo contract
• 4 payment mechanism
• 5 technical requirements
• 6 timetable and procedure
• 7 prequalification assessment
• 8 information required from candidates for prequalification
• 9 responses and enquiries
• Appendix a a249 stockbury (m2) to sheerness dbfo project
• Appendix b payment mechanism
• Appendix c
• Appendix d draft agreement summary

A249 Stockbury (M2) to Sheerness DBFO Contract

3 The Principles of the DBFO Contract

3.1 The Private Finance Initiative ("PFI") was launched in 1992. It is intended to facilitate closer co-operation between the public and private sectors and introduce private sector skills and disciplines into the delivery and management of projects and services traditionally undertaken by the public sector. The Government is committed to these principles through the Public Private Partnerships initiative (PPP).

3.2 The main principles of PPP evident in DBFO contracts are:

3.2.1 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 design, construction, maintenance, operation and financing of the new road and the maintenance and operation of the Project Road. These risks will include the risks of construction to time and to budget and making whole life cost judgements.

3.2.2 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.

3.2.3 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.

3.2.4 Payment for a Service
The Agency will make payment in relation to the receipt of a service, namely, asset enhancement, use and handback as described in more detail in Section 4 and Appendix B.

3.2.5 Incentives for Better Performance
The DBFO Co will be incentivised to provide high levels of service quality throughout the life of the DBFO Contract. There will also be specific incentives for better performance in congestion management and improving safety.

3.2.6 Partnering
The Agency considers that the DBFO Contract is more likely to be successfully delivered if the Agency and the DBFO Co agree their common objectives and adopt a co-operative attitude. The Agency intends to promote and encourage a partnering style relationship with the DBFO Co.

It is recognised that successful partnering requires considerable efforts by the parties, especially in the initial stages when it is likely to be necessary to employ facilitators to assist in developing the right relationship.

Tenderers will be required to submit proposals on how, in addition to the Network Board (see below), partnering with the Agency and Interested Parties could be successfully introduced and the extent to which other interested third parties should be involved.

Such proposals should also:

• demonstrate the Tenderer's understanding of the benefits that such partnering will bring to the DBFO Contract;
• demonstrate the extent of the Tenderer's commitment to such partnering;
• identify the steps needed to implement such partnering; and
• detail any previous partnering experience.

The Network Board is a strategic partnering forum to be established and maintained in respect of the Project Facilities by the Agency and the DBFO Co.

The Agency and the DBFO Co shall each appoint two senior members (director level or equivalent) of their organisation to the Network Board. The appointees to the Network Board shall have delegated powers through their respective organisations to ensure that decisions can be made to improve the operational efficiency of the DBFO Contract and the services that are to be delivered. Tenderers shall identify their proposed appointments to the Network Board when submitting tenders.The Network Board will wish to seek input from the Agency's Performance Review and Improvements Delivery (PRIDe) team.

The PRIDe team operates outside formal contractual arrangements. PRIDe audits and monitors the performance across many of the Agency's long-term works and maintenance contracts. In addition, PRIDe will analyse performance and establish benchmarks for future performance based on its experience and observation of industry best practice.

3.3 Under the terms of the DBFO Contract the DBFO Co will be

• responsible for the design, construction, maintenance (i.e. capital, routine and winter maintenance) and operation of the Project Road;
• responsible for financing the Project;
• granted a long term right of access (probably 30 years or more) to the Project Road to perform its responsibilities under the DBFO Contract; and
• paid for delivery of the specified services in the form of payments over the life of the DBFO Contract ("DBFO Payments").

3.4 A summary of the main terms of the Draft Agreement is set out in Appendix D.