Logan Water Alliance A model for local government infrastructure planning and capital works

Presentation Overview

•Background on Logan

•Why the Alliance option?

•Type of Alliance selected

•Alliance establishment

•Alliance contract features

•Alliance functional framework

•Alliance governance

•Benefits of the Alliance

•Performance and outcomes

3

Where is Logan?

• Heart of SEQ

• 5th largest city in

Queensland

• 960km2

• 295,000 residents

• Mix of urban,

greenfiled & townships

• 468,000 population by

2031

4

Characteristics of Logan

• 2008 SEQ local

government boundary

reform 220 – 950km2

• Former Logan area

• Northern Gold Coast

area

• 2/3 Beaudesert Shire

• 3,000 km of mains

• 200 pump stations

• 4 wastewater

treatment plants

5

Former Logan area

•85% developed

•Redevelopment &

infill

•Limited greenfield

areas

•Ageing assets

•Capacity constraints

Characteristics of Logan

Characteristics of Logan

6

Gold Coast transfer

area

•Ageing assets

•Capacity constraints

•Greenfield areas

Characteristics of Logan

7

Beaudesert transfer

area

•Small townships

•Ageing assets

•Capacity constraints

•Multiple urban growth

nodes

•Planning deficiencies

•Major investments

Challenges facing Logan

• Diverse range of assets (type & age)

• Significant investment in infrastructure

required to service new urban growth nodes

• Infrastructure planning deficiencies

• Backlogged works programs

• Limited asset information

• Maximise use of existing assets

• Insufficient in-house capacity

• Regulator requirements

• SEQ water reform (Allconnex)

Available options

• Increase in-house staff by 60 new FTP (lowest cost)

• Outsource for equivalent contractors and consultants (highest cost)

• Partner with consultants and contractors in a procurement model (balanced cost)

• August 2008, Council resolved to establish a ‘Program Alliance’

What is an alliance?

An alliance is a relationship based contract (ie a partnership) between two or more

parties to establish a vehicle to deliver a complex business outcome.

For Logan City Council, the complex business

outcome was planning and delivering water and sewerage infrastructure required to

address the infrastructure challenges resulting from boundary reform.

Why the Alliance Option?

• Access to scalable capacity not available within Logan Water to deliver infrastructure planning and capital works to support growth

• Access to specialist resources through established, mature organisations to develop innovative, optimised solutions

• Integration of ‘value chain’ activities (infrastructure planning, design and construction) to achieve efficiencies and unlock value

• A partnership approach rather than traditional adversarial contractual relationships i.e. ‘cost-based’ rather than ‘price-based’ contract rates

• Increased confidence in achieving the right technical and financial outcomes

• Better allocation of risks and associated costs

• Leave a positive legacy within Logan Water through transfer of knowledge, skills and experience

Alliance Models

Logan Water Program Alliance Conventional Project Alliance

Owner

Client

Other Participant/s

(Consultant/s)

Participant 1

(Constructor)

Participant 2

(Consultant)

Logan Water

Alliance

Contract

Tenix

(Constructor) Cardno

(Consultant)

Parsons Brinckerhoff

(Consultant)

Alliance

Contract

The ingredients

• Logan Water – Provides core resources and LG experience

– Continues to deliver projects

• Our Alliance Partners – Provide experienced, skilled resources

– Has a strong planning focus

• Together, the Alliance will – Increase planning and delivery capacity

– Ensure depth and breadth of skills

– Provide a planning-driven value chain

– Unlock value at each phase

– Is an extension of Logan Water

Alliance establishment

• 12-month process

• Specialist services including:

- Transaction advisor (ongoing)

- Probity advisor

- Legal services

• Auditor (ongoing)

• 7 high quality tenders

• 3 short-listed tenders

• Tender awarded August 2009

• $450,000 establishment cost

Program Alliance Agreement

• 3+1+1 contract term (in final year)

• Potential value to $300 million

• Back-to-back contracts with Cardno and Parsons Brinckerhoff

• TOC development framework

• Gain/Pain share model

• ‘Opt Out’ provision at gateways

• Payment of ‘actual costs’ to contractor

• Scope change/variation process

• Functional areas covered: − Program management

− Planning and project development

− Project delivery

Commercial arrangements

• Negotiated ‘cost based’ contract rates vs ‘price based’

• Consultant partners:

- Actual cost plus negotiated % (as opposed to typical hourly charge out rate of say 2.8 x salary rate)

• Contractor partner: - Actual costs plus negotiated %

•Gain share/pain share: cost base adjustment process on project completion

Language of the alliance

• Alliance contractor: Tenix

• Alliance partners: Council, Parsons Brinckerhoff, Cardno

• ALG: Alliance Leadership Group

• APMT: Alliance Program Management Team

• Task: Planning projects

• Work Package: package of capital works to be delivered

• Work Package Definition Statement: detailed project scope (30% - 80% design)

• TOC: Target Outturn Cost or total estimated value

• TOC Development Budget : budget to prepare TOC Report

• AOC: Actual Outturn Cost or actual delivery cost

Benefits to Council

Enhanced capability and capacity

• Better least cost, whole of life investment outcomes

• Increased ability to deliver innovative solutions

• Optimised infrastructure delivery through planning-led decisions – right project, right time, right cost

• Better able to service growth, provide enhanced service levels and achieve environmental compliance

Opportunities for Logan Water staff

• Exposure to experienced professionals brings skills and capabilities from other organisations

• Alliance environment brings opportunities for enhanced roles and new responsibilities

Points of difference

• A ‘virtual organisation’

• Own identity/culture/branding

• Program based rather than project based

• Concept to commissioning – value chain

• Planning-led, unlocking value at all stages of

the project lifecycle

• High level (25%) of owner staff

• Scalable (85 – 110 personnel)

Features & Principles

• True partnership rather than client/servant relationship

• ‘Best for program’ decision making

• Non-adversarial culture

• Trust, trust, trust

• Shared risk – ‘skin in the game’

• Early operator and constructor involvement

• Value for Money framework

• Lessons Learned register

• KPI framework

•Zero Harm Safety Program (Tenix)

•Value management workshops

•Challenge workshops

•Planning Opportunity and Risk (POAR)

Workshops - early operator involvement

•Design Opportunity and Risk (DOAR)

Workshops - early constructor involvement

•Safety in Design process

•Program Management Plans

•Risk management

•Gateways – opt out provisions

Alliance Processes

Established by Logan City Council in 2009, the Logan Water Alliance is one of a few infrastructure alliances in Australia that

incorporates planning, design and construction functions.

The Alliance comprises personnel from Logan Water, constructor Tenix and engineering service providers Parsons

Brinckerhoff and Cardno.

Meet the team

Alliance charter

Performance objectives/KPIs

The Alliance’s seven performance objectives are:

1. Program delivery

2. Community and stakeholder satisfaction

3. Owner satisfaction

4. High performing team

5. Value for money

6. Public and workplace safety

7. Environmental sustainability

Functional areas

Overall program management Safety management

People management and training Community and stakeholder engagement

Financial management and accounting Quality and environmental management

Information management and reporting Internal communications

Alliance health and change management Information technology and telecommunications

Office overheads Annual budget ~$5m

Master infrastructure planning

Servicing strategies

Capex program development

Detailed asset planning

Feasibility studies

Network optimisation

Hydraulic modeling

I/I investigations

Project development

Work package definition

Preliminary design

Annual budget ~$4m

Works packaging

TOC development

Statutory approvals

Easement / land acquisitions

Detailed design

Risk and contingency planning

Tendering and contract awarding

Contract management

Project management

Construction and commissioning

Annual budget ~$60m

Program management

Planning and project development Project delivery

Program Management Functions

• 15 FTE staff

• Overall program management

• Program Management Plans

• Human resource management & training

• Community & stakeholder engagement

• Financial management & accounting

• Safety, QMS and EMS

• Information management & reporting

• Marketing, promotions & branding

• Alliance health and change management

• IT and communications

Planning & Program

Development Functions

• 30 FTE staff

• Infrastructure planning

• Capex program development

• Detailed project development

• Preliminary design

• POAR workshops

• Challenge and value management

• Hydraulic modelling

• I/I investigations

• Network optimisation/improvement studies

• Work package definition

Project Delivery Functions

• 40 FTE staff

• TOC development

• Approvals & acquisitions

• Design inc DOAR workshops

• Risk & contingency planning

• Work packaging

• Tendering & contract awarding

• Contract management

• Project management

• Construction & commissioning

Alliance value chain

Governance

Logan City Council

Deputy CEO Roads and Water Infrastructure

Alliance Leadership Group (ALG) Alliance Manager

Alliance Program Management Team (APMT)

Program management / wider team

Planning and project development

Project delivery

Strategic

leadership

▼

Operational

leadership

▼

Delivery

Checks & Balances

• LCC DCEO RWI and Water Business Manager on ALG

• Water Infrastructure Manager and two WIB Program Leaders (rep Infrastructure Planning & Delivery) on APMT

• Alliance Advisor has ongoing role on ALG

• Key Performance Indicators agreed by partners

• Defined program management plans and procedures along entire value chain including ‘gateway’ approvals

• Open book visibility of all partner costs and margins

• LW staff involved in all planning and delivery activities

• Independent Estimator – ‘market based’ audit of all ‘first principle’ estimates ahead of competitive tenders

• Financial auditor – quarterly audits

• ALG meets monthly

• APMT meets fortnightly

• Monthly alliance program review

• Monthly P&PD task program review

• Monthly works delivery program review

• Annual program management budget TOC

• Annual program KPIs (reported monthly)

• Alliance health surveys (six monthly)

Reporting

Gateways

Logan

Water

Task

Notice

Task

Budget

Request

Planning Task

Investigations

Draft

Task

Report

Task

Completion

Report

Work

Package

Definition

Statement

Work

Package TOC

Development

Work

Package

TOC Report

Work

Package

Delivery

Work Package

Commissioning

Completion

Report

Work

Package

Completion

Report

Asset Handover

to Logan Water

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LW / LCC QA / CWP Processes

Hold Points (5)

Projects

Round Mountain Reservoir:

- $13M

- 20ML water reservoir

- 4.5km of water pipelines

Projects

Logan Village sewerage transfer:

- $13M

- 13km of pipelines & 2 PSs

-Decommission WWTP

Projects

Beenleigh STP upgrade:

- $12.5M

Projects

Loganholme STP inlet works:

- $22.5M

Projects

Slacks Creek to

Loganholme

sewerage

pipeline

duplication:

- $48.5M

- 6.4km pipeline

Projects

Longest @ 1.2km and largest @

1200mm diameter HDD attempted

in the southern hemisphere

Projects

Greenwood Lakes Reserve:

- $1.9M

- 13.5ha rehabilitated to offset native

vegetation removal at sites

- 92,500 native tube stock planted

- 45 nest boxes installed

• Enhanced value chain capacity

• Robust planning framework established

• Enhanced infrastructure outcomes

• Affordable investment programs

• Early operator and constructor

involvement

• Maximum value from existing assets

• Capital programs delivered

• Risks managed

• Regulatory compliance

Outcomes for Logan

Performance

Planning tasks

•More than 150 planning tasks completed, with up to 40 underway at any time

•Largest planning task - $1.2m Logan City PIP

Capital works

•40 capital projects completed, value $140m

•10 capital projects in progress value $80m

•62km of pipelines, 13 pump stations, 2 reservoirs, 4 SPS & 1 WWTP decommissioned

Performance

Value for money

•Planning-led approach unlocks value at every stage of the infrastructure delivery process:

e.g. $84m capital cost saving Slacks Creek to Loganholme sewerage pipeline duplication when compared with Council’s original solution

Projects

Longest @ 1.2km and largest @

1200mm diameter HDD attempted

in the southern hemisphere

Performance

Key performance indicators (KPIs)

•‘Exceptional performance’ for 10 of 15 KPIs in: safety, program delivery, owner satisfaction, high performing team, community and stakeholder satisfaction, and environmental sustainability

Safety

•One Lost Time Injury over alliance life

•Zero public safety incidents over alliance life

•Around 900,000 working hours completed

Performance

Environment

•Zero significant environmental incidents

•4,146 trees saved in construction corridors

•More than $1.1m saved by reducing vegetation removal

Community and stakeholders

•92% stakeholders satisfied with community engagement and project delivery

•Proactive community engagement (= few complaints)

Independent Review

In 2011, an independent business consultant engaged by Allconnex Water reviewed the performance of the Logan Water Alliance.

The results showed:

The Alliance’s governance systems are rigorous.

The Alliance team demonstrates value (for money) in delivery.

The program-style Alliance model is well suited to the planning and delivery of water and wastewater infrastructure.

The Alliance’s planning-led approach contributes to a high level of certainty in enhanced engineering solutions, least cost planned outcomes and project delivery costs.

Industry recognition

• 2012 Queensland Engineering Excellence Awards - Reports, Procedures and Systems

• 2012 Institute of Public Works Engineering Australia (Qld Division) Awards - Water, Wastewater, Sewerage and Drought Management (projects $1m to $5m)

• 2012 Infrastructure Partnerships Australia – Contractor Excellence Award (Finalist)

• 2011 Australian Water Association (Qld) - Infrastructure Project Innovation Award

• 2011 Australian Water Association (Qld) Awards:

- Water Professional of the Year (Ian Cameron)

- Young Water Professional of the Year Finalist (Liliana Castro Araoz)

Rocks in the road

• Risk allocation

• Gold plating

• Demonstrating VfM

• Key staff turnover

• SEQ water reform

• Operator participation

• Close out process

• Business integration

• Reliable asset Information

• Contract gaps

Media coverage

A model for others?

• Logan Water Alliance model well suited

to water infrastructure planning and

delivery

• Framework relies on robust systems and

processes - easily replicated

• Council now considering model for

infrastructure planning and delivery post

August 2014

Questions?