Innovative Project Delivery Methods for Infrastructure - An International Perspective

Pekka Pakkala
Finnish Road
Enterprise
Helsinki 2002
Finnish Road
Enterprise
Innovative Project Delivery
Methods for Infrastructure
An International Perspective

Pekka Pakkala
Innovative Project Delivery Methods for
Infrastructure
An International Perspective
Finnish Road Enterprise
Headquarters
Helsinki 2002

Cover: Tapio Kalliomäki
ISBN 952-5408-05-1
Oy Edita Ab
Helsinki 2002
Finnish Road Enterprise
Opastinsilta 12 B
P.O.Box 73
FIN-00521 HELSINKI
Tel. + 358 20 444 11

PAKKALA, Pekka: Innovative Project Delivery Methods for Infrastructure –
An International Perspective. Helsinki 2002. Finnish Road Enterprise, Headquarters.
ISBN 952-5408-05-1
Executive Summary
Many countries around the world are attempting to answer the key
challenges to the construction and maintenance of the infrastructure
networks that are essential to the economic stability within their respective
countries. Society is rapidly changing and public clients are trying to meet
the critical needs of this fast-paced society. Aging infrastructures, cost
escalation, limited resources, productivity, acute regional development,
environmental issues, and sprawling growth are causing concern to the
management and administration of infrastructure networks. These are
strong incentives for seeking alternative and innovative means to procure
the main foundations of society and maintain economic stability.
This study, called “Innovative Project Delivery Methods For Infrastructure -
An International Perspective”, attempts to demonstrate practices and
methods that can be utilized by client organizations to more effectively
secure products and services. The goal is to share some of the most
innovative or at least the most progressive methods used in several
countries. It is important to distinguish between the delivery methods used
for “Capital Projects” and “Maintenance Contracts”. The details contained in
this report are from data and information gathered mostly from the road
sector, but they have implications that can be utilized in other infrastructure
sectors, as well. The countries included in this study are Australia, Canada
(Alberta, British Columbia & Ontario), England, Finland, New Zealand,
Sweden, and the USA.
Capital Projects
Most countries use traditional methods (Design-Bid-Build) to procure capital
investment projects, and all countries seem to be continuing with this
process, except for England, which uses alternative or innovative methods
extensively. The innovative or progressive methods identified in this study
are listed as follows:
• Design-Build (DB)
• Design-Build Operate Maintain (DBOM)
• Design-Build Finance Operate (DBFO)
• Full Delivery or Program Management
Figure 4 in the introduction section displays these methods quite well and
indicates some of the attributes included in these methods. Other innovative
aspects that could be used in conjunction with traditional and innovative
procurement methods are as follows:

• Partnering
• Value Engineering
• Constructability Reviews
• Incentive and Disincentives
• Performance Specifications
• Multi-parameter Bidding (A+B+Quality)
• Lane Rental
More details on capital investment projects are discussed in the “Capital
Project Delivery Methods” section.
Maintenance Contracts
Maintenance procurement is quite a different aspect because the
infrastructure is already in place, but it needs to be maintained properly and
rehabilitation and/or improvements need to be provided before any major
deformation or deterioration occurs that effects safe usage. Previously, most
organizations retained in-house staff for most maintenance activities, but
now many client organizations must procure these services and products
from the private sector.
Earlier practices for procurement of maintenance were via yearly or multi-
year agreements, using separate contracts for each activity and with a labor
rate or unit price. More recently, there are innovative methods of procuring
maintenance activities for all products and services under one contract and
for a long term. The more innovative types of contracts are also beginning to
specify “outcome-based criteria”, which provides the contractor with more
flexibility, innovation potential, and cost savings measures for the client
organization. The contract mechanism is via a “Lump Sum” contract for all
these products and services over the duration of the contract period, and by
using a “quality-based contractor selection method” to ensure the success
of the project. More details can be found in the “Maintenance Procurement”
section.
Innovative maintenance contracts can be categorized by the following:
• Traditional 3 – 5-year duration
• Hybrid type contracts (Combination of Lump Sum and Unit Price -
Schedule of Rates)
• Longer term maintenance contracts (some are for 10 years)
• Performance Specified Maintenance Contracts (PSMC – Outcome-
Based Criteria)

The advantages and disadvantages of using PSMC type contracts are
summarized as follows:
ADVANTAGES DISADVANTAGES
• Cost savings
• Fully integrated client services
• Transferring risks
• Innovation
• Better asset management
• Better level of service
• Partnering potential
• Developing a new industry
• Benefits of economy of scale
• Costly tendering for PSMC
• Longer tendering period for
PSMC
• Reduction of competition
(social justice), usually for
large contractors
• Uncertainty of long term
relationships
• Mobilization issues need to be
addressed
• Loss of control & flexibility
For the benefit of the Tekes INFRA National Technology Program, the
maintenance sector could maximize the potential for innovation via:
• Long-term Agreements - longer than 7 years
• Partnering is essential (both Client & Sub-Contractors)
• Lump Sum Contracts
• Using quality-based Contractor selection methods
• Providing most of the Sub-Contractors with similar long-term
agreements or at least sharing the risks/rewards (or forming alliances)
• Ability to use innovation throughout the length of the contract
Realistically, there are many aspects and details involved when considering
a change to these more innovative methods, and it can be considered as a
paradigm change. Change usually seems to be difficult, but sometimes it is
a necessary part of keeping pace in today’s society. The remainder of this
report includes more details and hopefully describes the merits of these
innovative practices.

FOREWORD
Tekes (National Technology Agency of Finland) initiated a new National
Technology Program in January 2001, called INFRA. The INFRA program
was created to assist in the development of a more sustainable,
competitive, and innovative environment for the infrastructure sectors.
These sectors, sometimes referred to as public works, consist mainly of
transport, communications, utilities, and other physical networks. Some
aspects of infrastructure includes design, construction, raw materials,
production, maintenance and upkeep, improvements, and possibly removal
after its life cycle is exhausted.
This project is mostly funded by Tekes, the Finnish Road Administration
(Finnra) and the Finnish Road Enterprise, and partially by VR-Track Ltd.,
The Association of Finnish Local and Regional Authorities, and The Central
Association of Earthmoving Contractors in Finland (SML). This specific
project is managed by the Finnish Road Enterprise, and its content is mainly
focused on project delivery processes for the road sector. Other sectors of
infrastructure use these same traditional or innovative methods in their
procurement of transportation networks and projects, and the project
delivery methods discussed in this report can be utilized by most public
infrastructure projects. However, it should be understood that most of the
content in this report is focused on issues and studies from the road sector.
Part of the INFRA program’s objective is to formulate and improve project
delivery processes that are expected to create a more competitive setting,
which leads to improved management, quality, innovative products and
services, partnering initiatives, and a more sustainable environment. This
lead to the development of the vision for this project. Global changes and
previous studies have demonstrated that creating an innovative
procurement delivery system leads to improvements. For example, the
building technology sector has demonstrated improvements and innovation
as a result of clients’ innovative project delivery systems. These similar
concepts could be adapted to the infrastructure sector.
There are several project delivery models utilized in transportation projects
throughout the world, but the “traditional“ project delivery model seems to be
the most broadly accepted practice and most extensively used. The type of
project delivery model used by the public entity can have a significant effect
on the ability to adapt new, not fully-tested technologies, the degree of
management burden, financing, and indirectly, the competitive market. As
society has progressed, increased pressure and accountability have been
placed on public administrations to provide a safe, reliable and functional
transport infrastructure, while effectively maintaining budget and financial
constrictions. This needs to be accomplished despite possible staffing
reductions, an aging infrastructure, and the need to account for future
technologies (such as Information Technology) that are not presently
available, but may be available in the years ahead.
Hence, this project was developed in order to seek out and evaluate the
most innovative project delivery systems in use by the most progressive
countries, not only for new construction projects, but especially for

maintenance type contracts. The project duration is from January 1, 2001
through December 31, 2001. Considering the budget and time constraints, it
is not practical nor possible to evaluate all countries, but rather to
strategically incorporate and analyze the most progressive ones. That is the
process and objectives that were adapted in this study.
The research approach to this project was to gather as much written details
via reports, technical papers, conferences, internet searches, and contacts
throughout the industry. It is important to understand that there is only a
limited amount of information available through these sources, and it was
necessary to hold informal interviews/meetings with the appropriate
authorities in the progressive countries included in this study, which are
Australia, Canada (Alberta, British Columbia & Ontario), England, Finland,
New Zealand, Sweden, and the USA. The goal was to uncover innovative
practices for both capital and maintenance contracts, evaluate the best
practices, outline the lessons learned, and determine which methods might
be appropriate as a model in Finland. As part of the Tekes project, the
objective was to determine which delivery mechanisms would stimulate
innovation in the infrastructure sector.