All across Victoria potholes are a common sight, as finding for basic repairs has been funneled away for grand traffic congestion inducing projects like the West Gate Tunnel. But there is one exception – a few roads in Melbourne that were upgraded as part of the ‘Western Roads Upgrade’ project. So why are they different?
The Western Roads Upgrade
The $1.8 billion Western Roads Upgrade project was launched in 2018 and completed in 2021.
And included upgrades to eight arterial roads in Melbourne’s west.
Massive new intersections.
And the resurfacing of 260 km of existing roads between Footscray to Werribee.
So why haven’t these roads fallen apart in the years that have followed?
It’s because the upgrade was delivered part of a convoluted public–private partnership between the Department of Transport and Planning and a private consortium called ‘Netflow’, which sees the government give them buckets of money for the next 20 years to maintain the road, with a compliance regime that will penalise them for as little as a pothole.
To manage these contractual obligations, you need data – so the Netflow consortium has a fleet of inspection vehicles continually doing laps of the western suburbs.
Covered in LiDAR sensors looking for faults in the road surface.
And maintenance crews in ‘Western Roads Upgrade’ branded vans ready to swoop in and fix faults ASAP.
Their marketing blurb describing it as:
Netflow is transforming the way road maintenance is performed in Victoria, using real-time data on the condition of the network to employ maintenance strategies that minimise disruption and maximise whole-of-life value.
This more efficient maintenance program is resulting in an average of one road per week being resurfaced.
The core of Netflow’s whole-of-life maintenance solution is the central Network Delivery Hub.
The 24/7 hub monitors the performance of the network in real time, providing a seamless interface with the Department of Transport, local councils and other third parties to implement dynamic-scheduled works, keep communities informed, predict and prevent issues, and coordinate timely responses to incidents.
The use of vehicle-mounted street scanning technology, drones, 3D modelling and physical inspections allow Netflow to schedule preventative maintenance and reduce road closures.
This whole-of-life approach provides best-in-class maintenance of the road network at a lower cost.
Meanwhile for every other road in Victoria, the government just keeps kicking the can down the road, because they aren’t accountable to anyone.
So why not keep doing it
If the Western Roads Upgrade project was so successful in getting rid of potholes, why doesn’t the government do more upgrades like this? Turns out the private companies behind it lost money by underbidding.
The Andrews government’s $1.8 billion Western Roads Upgrade has stalled after a key subcontractor walked off the job with just $920 remaining in its accounts, leaving other subcontractors millions of dollars out of pocket.
The Sunday Age can also reveal the head contractor on the project, South-African headquartered and Perth-based WBHO, has reported $133 million in losses after it admitted to under-bidding to win the work, and its executive chairman, Louwtjie Nel, conceded the project was the company’s “biggest error in 50 years”.
WBHO’s main subcontractor, little known western suburbs-based civil engineering firm Civilink, quit in August and has gone into liquidation, owing creditors at least $13 million.
And so the tender process on the South Eastern Roads Upgrade Project and Northern Roads Upgrade Project were terminated in July 2020 – replaced by the $2.2 billion Suburban Roads Upgrade to be delivered as 12 individual projects by a pre-qualified panel in an approach modelled on the Level Crossing Removal Project.
Footnote: digging into the legalese
The full details of the public–private partnership can be found in the “Outer Suburban Arterial Roads Program – Western Package” Project Deed.
For a start, look at the corporate structure.
Minister for Roads and Road Safety on behalf of the Crown in right of
the State of Victoria
(State)
Netflow OSARS (Western) Pty Ltd as trustee for Netflow OSARS (Western) Unit Trust for and on behalf of the Netflow OSARS (Western) Partnership and Cintra OSARS (Western) Pty Ltd as trustee for Cintra OSARS (Western) Unit Trust for and on behalf of the Netflow OSARS (Western) Partnership (Project Co)
And it’s contractors, investors and financiers all the way down.
D&C contractor
The D&C contractor is WBHO Infrastructure Pty Ltd. Project Co has appointed the D&C contractor to design and construct the eight Arterial Road Upgrades and the Initial Rehabilitation Works.
Significant subcontractors
The D&C contractor has appointed the following significant subcontractors to deliver elements of the Arterial Road Upgrades:
• Ace Infrastructure Pty Ltd;
• Civilex Victoria Pty Ltd; and
• Winslow Constructors Pty Ltd
Contracts with other subcontractors are expected to be executed shortly.
Equity investors
The following entities have committed to provide the equity required for Project Co:
• Plenary Investments (Western OSARS) Pty Ltd
• Cintra OSARs Western Ltd
Financiers (long term)
The following entities have provided the long term debt required for the Project:
• DB Life Insurance Co. Ltd.
• Pensionskasse Des Bundes Publica
• Samsung IFM Global Infrastructure Debt Professional Investment Private Investment Trust No. 1
• Manulife Asset Management (Hong Kong) Limited
• Teachers Insurance and Annuity Association of America
Financiers (short term)
The following entities have committed to provide the short term debt required for the Project:
• Westpac Banking Corporation
• Bank of China Limited
• Mizuho Bank, Ltd
• Industrial and Commercial Bank of China Limited
VicRoads gives this as their justification for completing the upgrade as a public–private partnership.
A range of procurement options that are typically considered for high-value road construction projects were assessed based on their suitability and value for money drivers in reference to the specific characteristics of the Western Roads Upgrade. The following four procurement options were shortlisted on the basis that they represented models currently in use and have a history of utilisation by VicRoads or other State agencies:
- design and construct;
- alliance;
- design, build and maintain; and
- design, build, finance and maintenance (availability-based PPP).
Following a procurement options assessment of the shortlisted procurement options, the availability based PPP delivery model was the highest ranked procurement option. This option was recommended, and subsequently approved by the State, for delivery of the Project.
The key considerations in recommending an availability-based PPP model are summarised below.
- The model provides increased opportunity for the State to harness private sector innovation and structure a contract that incentivises whole-of-life efficiencies to arterial road investment.
- The bundling of construction and maintenance tasks under a long-term agreement (subject to vigorous competition) can drive efficiency in delivery and asset management. Introducing private finance also provides additional discipline and scrutiny of risk (for example, financier due diligence and oversight). The PPP model can also be expected to deliver improved and more consistent road asset conditions under a PPP commercial structure involving an appropriate KPI and abatement regime.
- On a ‘whole-of-life’ cost comparison basis, PPPs have been documented to deliver better value for money outcomes as compared to traditional contracting delivery methods (separate, unbundled contracts) and have been successfully deployed across a range of sectors (including roads) in Victoria. These benefits are not only limited to cost savings but also include improved and more consistent road asset conditions. A focus on longer term, ‘whole-of-life’ contracting also incentives private sector innovation in terms of how best to maintain the asset over the term in the most cost effective and efficient manner.
Prior to the release of an invitation for EOI, a market sounding of the relevant industry, including sponsors, contractors, road maintenance providers and financiers, was undertaken. The feedback from this process supported the State’s selection of a PPP model to deliver the Project and achieve the State’s objectives.
Along with a calculation of the ‘Public Sector Comparator’ that they used to argue that a PPP saved the government money.
The Public Sector Comparator is an estimate of the hypothetical, risk adjusted, whole-of-life cost of the Project if delivered by the State. The PSC is developed in accordance with the output specification and risk allocation proposed for the private sector party arrangement and is based on the most likely and efficient form of conventional (that is, non-PPP) delivery by the State.
The PSC is expressed in terms of the net present cost (NPC) to the State, calculated using a discounted cash flow method taking full account of the costs and risks that would arise through State delivery. The PSC includes amounts for the design and construction of Arterial Road Upgrades and Initial Rehabilitation Works, as well as maintenance and lifecycle and other costs during the Maintenance Phase of the Project.
The PSC is made up of a number of elements as contained in Table 7.
| Components of the PSC |
NPC ($millions) |
| Arterial Road Upgrades and Initial Rehabilitation Works (construction costs) |
$ 622 |
| Maintenance and lifecycle costs |
$ 438 |
| Raw PSC |
$ 1,060 |
| Transferred risk |
$ 100 |
| Proposal Comparable PSC |
$ 1,160 |
The quantitative value for money assessment, as demonstrated by the estimated savings between the Proposal Comparable PSC and the final Proposal is shown in Table 8.
Public Sector Comparator
(NPC – $millions) |
$ 1,160 |
| Final Proposal (NPC– $millions) |
$ 1,133 |
| Estimated savings (%) |
2.3% |
Something much easier to understand is the scope – divided up into three objectives:
Arterial Road Upgrades (ARU)
The design, construction and financing of eight ARUs in Melbourne’s west during the Initial Phase, consisting of:
• The duplication of Dunnings Road between Point Cook Road and Palmers Road and the duplication of Palmers Road between Dunnings Road and Overton Road;
• The duplication of Palmers Road between Overton Road and Boundary Road and Robinsons Road between Boundary Road and the Western Freeway including the realignment of Palmers Road across Sayers Road;
• The duplication of Derrimut Road between Sayers Road and Dohertys Road;
• The duplication of Leakes Road between Fitzgerald Road and Derrimut Road;
• The duplication of Dohertys Road between Fitzgerald Road and Grieve Parade;
• The duplication of Dohertys Road between Foundation Road and Palmers Road;
• The duplication of Forsyth Road between Old Geelong Road and Wallace Avenue, including the re-alignment of Forsyth Road and Old Geelong Road; and
• The replacement of the existing Duncans Road Bridge over the Princes Freeway West and the addition of westerly (or Geelong) orientated ramps.
Initial Rehabilitation Works
Improvement works on road pavements and structures within the Maintenance Network during the Initial Phase to meet service standards.
Maintenance Services
Delivery of maintenance and lifecycle services (routine and periodic) within the Maintenance Network during the Maintenance Phase.
As are the key performance indicators Project Co is required to meet.
The KPIs set out in the KPI Summary of this Annexure B are separated into 7 categories, being:
1. Inspections;
2. Response;
3. Compliance;
4. Pavement performance;
5. Structures performance;
6. Reporting; and
7. Safety.
Which then explodes into an enormous level of detail regarding the Project Scope and Delivery Requirements (PSDR).
1.1 Hazard Inspection
During the Maintenance Phase, Project Co must ensure that safety inspections are carried out in accordance with the safety inspections requirements set out in the Code of Maintenance Standards.
1.2 Defect Inspection
During the Maintenance Phase, Project Co must ensure that inspections are carried out in accordance with the defect inspections requirements set out in the Code of Maintenance Standards.
1.3 Structure Condition Inspection
During the Maintenance Phase, Project Co must ensure that inspections are carried out in accordance with the condition inspections requirements set out in section 8.2(b)(i)(B) of Part F7 and section 8.3(b)(ii) of Part F7 of the PSDR and the Code of Maintenance Standards.
2.1 Hazard Response
During the Maintenance Phase, Project Co must ensure that the hazard response, from the time Project Co identifies a hazard by inspection or receives notification from the State or VicRoads of a hazard to the time the hazard is rectified by Project Co, is compliant with the requirements set out in the Code of Maintenance Standards.
2.2 Defect Response
During the Maintenance Phase, Project Co must ensure that the Defect response, from the time Project Co identifies a Defect by inspection or receives notification from the State or VicRoads of a Category A and/or a Category B Defect to the time the Defect is rectified by Project Co.
2.3 Emergency Response
During the Maintenance Phase, Project Co must ensure that the emergency response, from the time Project Co receives notification from the State or VicRoads of an Emergency Event to the time the Emergency Event is responded to by Project Co.
3.1 Code of Maintenance Standards
During the Maintenance Phase, Project Co must ensure that all activities (to the extent not already captured under KPI items 1.1, 1.2, 1.3, 2.1, 2.2 and 2.3) set out in the Code of Maintenance Standards, under items RM411 to RM416 and RM611 to 613 and RM 615 identified in the Table 750.H11 -Routine Maintenance Intervention Criteria and Response are completed in accordance with the requirements set out in the section 7 of Part F7 of the PSDR.
3.2 Forecast Maintenance and Refurbishment Plan
During the Maintenance Phase, Project Co must ensure that all activities set out in the Forecast Maintenance and Refurbishment Plan are completed in accordance with that plan (as updated and reviewed by the State in accordance with the Review Procedures on an annual basis to reflect the condition monitoring of Project Assets).
3.3 Communications and Community Relations Plan During the Maintenance Phase, Project Co must ensure that all activities set out in the Communications and Community Relations Plan are completed in accordance with that plan.
And into the gory details of road surface quality.
4.1 Roughness – Network based
During the Maintenance Phase (Initial), Project Co must ensure roughness limits set out in section 8.2(a)(ii) of Part F7 of the PSDR, are as a minimum achieved for pavement on the Project Roads.
4.2 Rutting – Network based
During the Maintenance Phase (Initial), Project Co must ensure rutting limits set out in section 8.2(a)(iii) of Part F7 of the PSDR, are as a minimum achieved for pavement on the Project Roads.
4.2.1 Rutting – Pavement Reporting Section based
During the Maintenance Phase (Full) an individual KPI Incident will occur for each 100m lane section of any Pavement Reporting Section failing to meet these requirements as set out in section 8.3(a)(iii)(B) of Part F7 of the PSDR.
5.1 Structures Performance
During the Maintenance Phase (Initial) in relation only to Existing Structural Assets, Project Co must ensure that Existing Structural Assets are operating at their designed load, speed, and availability levels with no restrictions applied, in accordance with the requirements set out in section 8.2(b)(i)(A) of Part F7 of the PSDR.
Submitting paperwork.
6.1 Asset Management System Availability
During the Maintenance Phase, Project Co must ensure the Asset Management System is available to the State and VicRoads, in accordance with the requirements set out in section 1 of Part D of the PSDR.
7.1 General Reporting
During the Initial Phase, Project Co must submit Monthly Development Phase Progress Reports and the Monthly Maintenance Phase Performance Reports in accordance with the Deed.
And finally – Safety.
8.1 Safety
During the Initial Phase and Maintenance Phase, an individual Safety KPI Incident is an Event for incidents which result in a Lost Time Injury (LTI), Total and Permanent Disability or Fatality to any employee, or contractor, or consultant of Project Co or its contractors or sub-contractors in connection with the performance of the Services or Works.
at least they’ve created a lot of email jobs along the way.
