lean construction 7 finnish transport agency

Finnish Transportation Agency (FTA) pilot

projects in lean project alliancing Pekka Petjniemi, Finnish Transport Agency

Lauri Merikallio, Vison Alliance Partners ltd

www.liikennevirasto.fi

Short bios

19/9/2013 www.liikennevirasto.fi 2

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

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


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?

www.liikennevirasto.fi 3


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


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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www.liikennevirasto.fi 6

We need price component in EU

Full price competition between

two NOPs (Dual TOC)

No price component, pure alliance

and Single TOC

Price is made up of unit

prices and fee %

Fee as a price

component Budget critique and quality

of pricing methods


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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www.liikennevirasto.fi 11/25/2010 www.liikennevirasto.fi 8

The same overall process as in Australia


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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62

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Contractors and Consultants estimate FTA every year

Procurement capability

Network skills

Partnership skills

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64

61

61

FTA

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FTA + Regional Organization

Scale (16) 17 100

We are far from top level


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


Request for Proposals processExpression of Interest

Request for Expression of Interest issued in Hilma

Intersted companies submit written Expression of Interest

Info-meeting with the proponents

Request for Proposals issued to Proponents

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

Evaluattion and preliminary scoring of written submissions

Interview with each Proponent

Final scoring of the RFP responses and selection of the

two best proponents

Development workshop with each Proponent Proponents

tender their Fee

Commercial discussions with each Proponent

Establishment Audits

Estimate Systems Audits Final evaluation of

RFP responses and scoring

Final agreement on PDA and all

relevant aspects of

PAA

3-stage selection process

Stage 2 Stage 3 Stage 4

Sign Project Development

Agreement (PDA)

Alliance under way

PDA

Stage 1

Selection of preferred Proponent

Selection to stage 3

Proponents submit RFP responses

Selection of the Proponents

FTA assesses submissions and selects suitable Proponenst to RFP process

RFP response stage

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Establish the alliance/ selecting the NOPs

Re

qu

est

for

pro

po

sals

Competitive negotiation phase

Evaluate written

submissions

Workshops with 4

proponents Drop to two proponents

Workshops with 2

proponents The proponent

selected

Procurement decision and

Memorandum of explanation

The Alliance under way

www.liikennevirasto.fi www.liikennevirasto.fi 13

Selection criteria

total sub total sub

A. Capability 100 % 75 %

A1. Project implementation plan and organsation 25 % 10 %

A1.1 Project implementation plan and organisation 25,00 % 10,00 %

Track Record 35 % 10 %

A2.1 Track record in Key Result Areas 25,00 % 10,00 %

A2.2 Learning from mistakes 10,00 % no evaluation

Value for Money 40 % 30 %

A3.1 Setting the target outturn cost 25,00 % 15,00 %

A3.2 The budjet critique 15,00 % 15,00 %

Alliance ability and leadership 0 % 25 %

A5.1 Alliance understanding and demonstrated

leadership capabilities

no evaluation 25,00 %

B Price 25 %

B1 Fee % no evaluation 25,00 %

A+B Total 100,00 % 100,00 %

A4.

Stage2 Stage3

Weight

Evaluation criterion

A2.

A3.

www.liikennevirasto.fi Liikennevirasto 14

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


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

Yli-Villamo 11.9.2012


Liekki The First Alliance Project


Pilot Railway renovation project LielahtiKokemki-alliance 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.

www.liikennevirasto.fi/lielahti-kokemaki

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www.liikennevirasto.fi 27.5.2013 www.liikennevirasto.fi/lielahti-kokemaki

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Achievements, Collaboration is efficiency

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)

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.


Project Implementation Phase, Key Performance

Indicators status are tangible and easily measurable

(KRA) ESTIMATE 60/30% PTU

27.5.2013 www.liikennevirasto.fi/lielahti-kokemaki

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Key Performance IndicatorsLielahtiKokemki alliance, project implementation phase

Key Result Area Performance Indicator Performance levels

Poor Minimum Excellent

2012

performance

Usability and interference

Passenger traffic precision (%) 70 85-90 98 99,493

Freight traffic precision (%) 70 85-90 98 99,974

Schedule

Project completed (including commisioning

and all necessary documendation) 31.5.2016 31.5.2015 28.2.2015 31.5.2015

Traffic and work safety

Railway traffic safety defects 25 6-10 0 1

Work safety indicator (%) 75 93 100 95,1

Accident frequency 100 18 0 12,7


Achievements, working on operated track section


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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 %

www.liikennevirasto.fi 27.5.2013 [email protected] 21

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

2011 2012 2013 2014 2015 2016 2017 2018 Schedule

Railway planning

Construction planning

Construction

Commissioning

Traditional project Alliance

Achievements, schedule


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 27.5.2013 www.liikennevirasto.fi/lielahti-

kokemaki

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www.liikennevirasto.fi 20.9.2013 KI 24

www.liikennevirasto.fi 27.5.2013 www.liikennevirasto.fi/lielahti-kokemaki

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27.9.2012


City of Tampere The Tunnel project

www.liikennevirasto.fi 27 Liikennevirasto

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

www.liikennevirasto.fi 11/25/2010 www.liikennevirasto.fi 28

The same overall process as in Australia

Administrative decisions have been very complicated


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

Liikennevirasto 29


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


Lessons learnt

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

Time table is not stretching because of the changes

One and only Big room is better

Rather workshop than meeting

APPROVED

UNFINISHED

FROZEN

CAST OFF

More than 50 ideas More than 20 innovations

ROAD

TUNNEL

BRIDGE

TECNICAL SYSTEMS

Tecnology groups takes

responsibility to explode the ideas

Idea Research

If there is

value for the

money

Innovation


Exploding the innovations

systematically brings results


Compensation Model

Everyone's financial result depends on the result of the

Alliance, not just on their own

performance

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

2.9.2011 33

Direct project

costs

Project-specific

overheads

Corporation

overheads

Profit

Gainshare/ Painshare Regime (limb3)

Reimburseable costs (limb1)

Fee Limb 2


Limb 3 in Tampere Tunnel Project

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

Major Event Modifier Rail Catastrophe

Cost and Key result area gain/pain

Final gain/pain


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


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

Liikennevirasto 37


Ongoing Alliance project in Finland

Strategy decision

Establish the alliance

Project developing

phase

Implementation Phase

Defect correction period

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

Lielahti-Kokemki rail 6/2012-15 FTA & VR Track Oy TOC 106 million

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

Helsinki-Vantaa Airport pavement services 2012-14 Finavia ja Lemminkinen Infra Oy TCE 20 million Hybrid

Terveyden ja hyvinvoinnin laitos 2012-14 Senaatti Properties, NCC Developing phase 2012-2013 TOC 18 million hybrid


THANK YOU Questions!

[email protected] [email protected]

lean construction 7 finnish transport agency

Documents

alliance projects lips

finnish legislation

pure alliance

finnish transport agency

price competition

lowest price

transport infrastructure

price element