Finnish Transportation Agency (FTA) pilot projects in lean project alliancing

Pekka Petjniemi, Finnish Transport Agency Lauri Merikallio, Vison Alliance Partners ltd

Short bios
M.S. (eng.) Pekka Petjniemi, Finnish Transport Agency Director, Investment Projects over 25 years experience in infrastructure industry in Finland and Germany

Partner, M.S (eng.) Lauri Merikallio, Vison Alliance Partners ltd Consultant and researcher 2008 Executive and project tasks for over 20 years in infrastructure industry Visitor scholar in UC Berkeley 2006/2007

19/9/2013

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Key points we want to present

EU-legislation issue vs projects alliance / IPD

Why FTA is using project alliance? How have we established alliances?

The pilot projects and results so far

What have we learnt and what has to be developed?

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Some History
Research project of the Project Alliance 2007/2008, no piloting

LCI comes to Finland 2008 Lean principles, Integrated project deliveries and Lean Construction tools and methods started to achieve understanding
LIPS in Karlsruhe Germany 2009, Jim Ross introduced the Project Alliance EU-legislation challenge in the public sector LIPS in Washington DC 2010 We might be able to challenge the EU-legislation LIPPI in Brisbane Australia 2011 First Project Alliance has been established, several others coming LIPS in Tampere Finland 2012 We have four alliance projects LIPS in Nottingham 2013 We have six alliance projects and some hybrids, more coming LCI-Finland has 4,5 M R&D project 2013-2015
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Alliancing versus European union procurement legislation

The Alliance contracting model in Australia has two aspects, which are not in line with European Union legislation:

There is no need to use price in comparison

There is no need to write out verbal comparison about every comparison criteria

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We need price component in EU

No price component, pure alliance and Single TOC

Full price competition between two NOPs (Dual TOC)

Budget critique and quality of pricing methods

Fee as a price component

Price is made up of unit prices and fee %

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Alliancing versus European union procurement legislation

According to the EU directives and Finnish legislation
The price should be used, when contracting authority is making comparison of tenders

Two possible selection criteria: The lowest price or the most economically advantageous tender (so-called quality and price) In our case, we are going to use limb 2 as a price element. Contracting entities should write out justifications for every comparison criteria

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The same overall process as in Australia

11/25/2010

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The Finnish Transport Agency (FTA) in brief

The Finnish Transport Agency is responsible for maintaining and developing the level of service in the transport infrastructure administered by the government. The Agency is accountable for an infrastructure property of nearly 19 billion euro.

The aim of the Agency is to promote the functioning of the transport system as a whole, to improve transport safety and to contribute to a balanced and sustainable development of the regions. Of the Agencys approximately 700 employees about 150 are stationed in the regions (20 %).
The Agency procures transport infrastructure services from the market. Yearly procurement budget is 1,5 billion euro
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Contractors and Consultants estimate FTA every year

Scale (16)
17 100

Procurement capability

52
61

Network skills

64 67

We are far from top level

Partnership skills

61 62

61 FTA

62 FTA + Regional Organization

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FTAs strategic targets for using procurement models which improve productivity
Background:

Increase in productivity has been much lower in construction industry

than in other industries Productivity potential has been recognized and a significant part of it is connected to the way of acquiring services and cooperating during the project FTA has been obliged to develop the industry in cooperation with Finnish infrastructure builders to be the most effective in Europe by 2015
Strategical targets for Alliance and Lean models by Public procurements

To improve productivity of the entire industry To change the culture into a more open and trusting way of working To improve the customer satisfaction for end products faster, better quality
and cheaper To develop innovativeness and knowledge

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Establish the alliance/ selecting the NOPs

Expression of Interest
Stage 1
Request for Expression of Interest issued in Hilma

Competitive negotiation Request for Proposals process phase 3-stage selection process
RFP response stage Stage 2 Stage 3 Stage 4

The Alliance under Alliance way

under way

PDA

Intersted companies submit written Expression of Interest

Selection of the Proponents

Evaluate written Proponents submissions submit RFP

responses

Request for Proposals issued to Proponents

Info-meeting with the proponents

Proponents prepare and submit RFP responses and prepare their teams for the selection process and eventual alliance.

Request for proposals

FTA assesses submissions and selects suitable Proponenst to RFP process

Workshops with 4 Interview with proponents

Selection to stage 3

each Proponent Drop to two

proponents

Final agreement on PDA and all relevant aspects of PAA

Evaluattion and preliminary scoring of written submissions

Commercial discussions with Development each Proponent Workshops workshop with with 2 Proponents each Proponent proponents tender their The Fee proponent

selected

Final scoring of the RFP responses and selection of the two best proponents Establishment Audits
Estimate Systems Audits

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Final evaluation of RFP responses Selection of and scoring preferred Proponent www.liikennevirasto.fi

Procurement decision and Memorandum of explanation

Sign Project Development Agreement (PDA)

Selection criteria
Weight Evaluation criterion A. A1. A2. Capability Project implementation plan and organsation A1.1 Project implementation plan and organisation Track Record A2.1 Track record in Key Result Areas A2.2 Learning from mistakes Value for Money A3.1 Setting the target outturn cost A3.2 The budjet critique Alliance ability and leadership A5.1 Alliance understanding and demonstrated leadership capabilities Price Fee % A+B Total Stage2 total 100 % 25 % 35 % 25,00 % 10,00 % 40 % 25,00 % 15,00 % 0%
no eva l ua tion

sub

25,00 %

Stage3 total sub 75 % 10 % 10,00 % 10 % 10,00 %

no evaluation

A3.

30 % 15,00 % 15,00 % 25 % 25,00 % 25 %

no evaluation

A4.

B B1

25,00 % 100,00 %

100,00 %

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Challenges
Contract tendering takes time and resources maybe more than other procurement models Very hectic 6 months period for competitive bidding Many participants to coordinate

No chance to modify the time table So far the Alliance model is new to everyone

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Experiences of the selection process

After announcing that Rantatunneli will be an Alliance project NOPs began to seek partners one year prior RFP Consortiums started coaching and training process

New resources and commitment required during selection process Construction and consultant companies Owner
Common information and development workshops are very important for the owners and NOPs Better understanding of each others business

New roles
The feedback of NOPs has been mainly positive Consortiums are waiting for the next projects
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Yli-Villamo 11.9.2012

Liekki The First Alliance Project

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Pilot Railway renovation project Lielahti Kokemkialliance Liekki present status

First Public sector Alliance Pilot in Europe Project time 2012-15, used 50% PTU Current phase Implementation phase

Railway renovation project, total length 90 km

Project budget 106,4 M - NOPs TOC 85,6 M - OPs 20,8 M materials not included in TOC Goal for the renovation is to: Improve safety for railway section and reduce maintenance costs by renewing and repairing constructions (railway sleepers, rails, ballast, culverts, bridges, drainage, build new and tear down old platforms)

Besides the renovation there are needs for improvements, such as: Removal of railway level crossings. Reinforce surface and bench structures of the railway track so that it is possible to operate on 250 kN in 80 km/h.
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Achievements, Collaboration is efficiency

Total management of construction works, construction plans and owners administrative procedures. All decisions are made best for project

Taking lean-principles to practice:

Close collaboration in safety issues. Everyone works together with jointly agreed goals and common rules. Collaboration in work coordination, management of change and innovative problem solving create efficiency. Training and guiding play a key role New way of collaboration requires constant learning during the project Continues improving (plus and delta)

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Project Implementation Phase, Key Performance Indicators status are tangible and easily measurable (KRA) ESTIMATE 60/30% PTU
Key Performance Indicators
LielahtiKokemki alliance, project implementation phase Key Result Area Performance Indicator Performance levels 2012 performance 99,493 99,974

Poor Usability and interference Passenger traffic precision (%) Freight traffic precision (%) Schedule Project completed (including commisioning and all necessary documendation) Traffic and work safety Railway traffic safety defects Work safety indicator (%) Accident frequency 25 75 100 31.5.2016 70 70

Minimum 85-90 85-90

Excellent 98 98

31.5.2015

28.2.2015

31.5.2015

6-10 93 18

0 100 0

1 95,1 12,7

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Achievements, working on operated track section

Coordination between construction works and railway traffic has been excellent Construction works influence on railway traffic in Lielahti-Kokemki railway section in 2012:

Freight traffic precision 99,97 % Passenger traffic precision 99,49 %

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Achievements, schedule
Alliance Schedule
Railway planning Construction planning Construction

Traditional project
2011 2012 2013 2014 2015 2016 2017 2018

Commissioning

Alliance model enables more efficient lead times by overlapping project phases (goal is to complete three years in advance compared to traditional models) In particular, managing administrative procedures and doing actual construction works simultaneously has been efficient
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Achievements Compensation model works

Open book principles are adopted and taken to practice -> builds trust Openness in costs and cost management have been successful despite many separate cost controlling systems. Compensation model has worked as planned: as an incentive and a controlling element of the project Cost monitoring is systematic and auditing is done rutinely and reliably TOC has not been modified -> risk assessment and pricing have been successful Budget estimate was cut down from 106 M to 103M while project completion (time and cost) about 50% Project has succeeded well due to innovative solutions and key result areas. NOPs estimated reward has increased +8 % from original estimate

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Summary of Liekki alliance

Work safety on a good level Schedule under control

Costs under control

Risks and project scope under control Pilot project has succeeded so far and outcomes are evident Liekki Alliance pilot was recognized as Construction site of the year 2012 in Finland

WE
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20.9.2013

KI

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27.9.2012

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City of Tampere The Tunnel project

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2 pieces of one-way 2,3 km road tunnels in Tampere city center Interchange in both ends and provision for one in the middle Daily traffic volume now > 40 000 In the future 2030: 54 000 The estimated costs 185 M Development period July 2012 autumn 2013

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The same overall process as in Australia

Administrative decisions have been very complicated

11/25/2010

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Lean tools and methods used in the Tunnel Project developing phase

Early involvement Depency Structure Matrix, DSM Target Value Design process Last Planner System Modularization in Tunnel construction and Tunnel Systems (safety and control)

Continues Improvement

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Challenges

Adopting the working culture when people are working also in other projects, turning the alliance mode on Finding good incentive elements for subcontractors Key employees possibilities to focus enough, because the working in alliance is very effective things do not wait they go on Find the right and important experiences from the Pilot project

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Idea

Research If there is value for the money Innovation

Lessons learnt

APPROVED

Clear evidence of innovation promotion Explode the ideas and innovations systematically Direct costs and fees will always be paid for the service providers We can plan and prepare right things in the right time

UNFINISHED FROZEN CAST OFF

More than 50 ideas More than 20 innovations

Time table is not stretching because of the changes

ROAD

BRIDGE

One and only Big room is better

Rather workshop than meeting

TUNNEL

TECNICAL SYSTEMS

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Tecnology groups takes responsibility to explode the ideas

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Exploding the innovations systematically brings results

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Compensation Model
Everyone's financial result
depends on the result of the Alliance, not just on their own performance
Profit
Corporation overheads Project-specific overheads Fee Limb 2

Gainshare/ Painshare Regime (limb3)

Compensation model
Direct costs are reimbursable (project costs) Corporation overheads and the profit (Fee) are maximum risk for the proponents Gainshare / Painshare regime is common and will be shared in rations that are agreed in advance

Reimburseable costs (limb1) Direct project costs

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Limb 3 in Tampere Tunnel Project

AOC (actual Outcome Cost)
under run < 5 % OP NOP Bp Under run > 5 % OP NOP Bp Overrun OP NOP 30 % 50 % 20 % 40 % 30 % 30 % 50 % 50%

Key result areas

Schedule Safety Usability Image

Bonus pool 2,0 % of TOC Positive/negative modifier -10+20 p Traffic arrangements during execution + Lifecycle costs + Damages + Black market Rail Highway 12 -

Cost and Key result area gain/pain

Major Event Modifier Rail Catastrophe

Final gain/pain
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Value for money issue

Value for money report

- Work in progress

Value for money as the management tool

- In every project team and leadership teem meeting

Value for money as a leadership tool

- Coaching teams what value for money means and how everyone can add value

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And Where are We Now?

TOC agreed (180,3 M) in June 2013

Key result areas and metrics agreed in June 2013

Implementation phase plan agreed in August 2013 Tampere City council voted of the Tunnel Project on the 16th of September 2013. The result was 36 (for) 31 (against). The implementation phase will start on 1th of October 2013 The Supreme Administrative Court rejected all the claims against administrative designs 18th of September 2013 The European commission rejected claim against using Alliance Model September 2013
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Summary

Flexibility, innovations, culture change, commitments can be achieved by using alliance model Implementing Lean in Alliance projects is useful and powerful Project alliance is useful in very complex environments (political, social, technical, etc) Price-component development has to be continued

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Ongoing Alliance project in Finland

Vuolukiventie 1b Helsinki University, SRV Oy ja Arkkitehtitoimisto SARC Oy Implementation phase 06/2012-12/2013 TOC 18million

Jrvenp Hospital 2013-15 Establish the alliance 05-08/2013 Project developing phase 09/2013 Target estimate cost 50 million

Terveyden ja hyvinvoinnin laitos 2012-14 Senaatti Properties, NCC Developing phase 2012-2013 TOC 18 million hybrid Helsinki-Vantaa Airport pavement services 2012-14 Finavia ja Lemminkinen Infra Oy TCE 20 million Hybrid Lielahti-Kokemki rail 6/2012-15 FTA & VR Track Oy TOC 106 million

Tampere Tunnel 2012-17 City of Tampere, FTA NOP: Lemminkinen Infra Oy, A-insinrit Oy ja Saanio & Riekkola Oy Project developing phase 08/2012-09/2013 Target Outcome Cost 180,3 million

Strategy decision

Establish the alliance

Project developing phase

Implementation Phase

Defect correction period

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THANK YOU
Questions!
pekka.petajaniemi@liikennevirasto.fi lauri.merikallio@vison.fi
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