• Local Community Concerns. Environmental and local concerns regarding the project were apparent when preliminary planning began in the late 1960s and extended into the 1980s. After a year-long public inquiry into the project during 1982, it was decided not to proceed with the project but upgrade other major roads in the vicinity of the project. Patience paid off in 1993 when following eight years of further study and public consultation that relocated the route of the link to a more acceptable location, the Government announced its decision to proceed with the project as a DBFO PPP.
The DBFO contract was awarded in 1996 as a shadow toll-financed PPP. By waiting for the environmental, routing, and public concerns to be fully heard and addressed, the Government was able to quickly proceed with the project though the DBFO contracting process. This avoided significant cost and schedule risks to the concession team by not beginning the procurement process until these issues were resolved through an on-going process of planning, consultation, refinement, and resolution.
• Environmental Concerns. Recognizing the environmental sensitivity of the area through which the M1-A1 Link would pass, the concession team sought to integrate the new road into the existing landscape and incorporate environment and landscaping mitigation measures as well as a range of environment benefits and enhancements into the overall design plan. It turned out that this project passed through an Area of Specific Scientific Interest (ASSI) due to the presence of a rare thistle, the broomrape (Orobanche Reticulata), which flourishes within the bank of exposed magnesium limestone that runs north-south through the alignment of the M1-A1 Link.
Instead of stopping the project, it was discovered that the proposed embankments for the highway would provide ideal habitat conditions for the rare thistle. As a result this area has become one of the top two sites for this species in Britain, as confirmed by annual inspections by the environmental watchdog group, English Nature which has found the plant present in four of the five designated areas.
• Public Opposition to Direct User Charges for Road Use. While the Government was moving ahead with its PPP agenda to expand the transportation infrastructure across England, promote competition, and improve service to users in the 1990s, public opposition to direct user fees (direct tolling) served as a major impediment to securing private sector interest by concession teams. To reconcile the dilemma, the Government elected to reimburse the private sector concessionaires directly over the term of the contract by using shadow tolls that were based on the volume of traffic using the highways built in this way. This avoided direct tolling of users, the user inconveniency of stopping to pay toll, and the cost of building, maintaining, and operating tolling facilities
On its part, the concession team financed the project through a combination of equity from the two members of the joint venture, augmented by loans (debt) obtained from a combination of 32 banks. This spread the financial risk among a wide group of stakeholders, with the joint venture demonstrating its commitment to the project through its contribution of equity at the beginning of the contract.
The use of the shadow tolling approach encouraged the concession team to promptly deliver the project to begin the cash flow from the Government. The scheme also encouraged the concession team to operate and maintain the facility to maximize its appeal to prospective users, to minimize the need for unscheduled maintenance and rehabilitation, and to promptly clear incidents along the road way to minimize the removal of lanes from service that could reduce use of the roadway.
• Public and Private Risks of Shadow Tolling. Using the shadow tolling approach to fund this DBFO PPP placed the project funding risk on the Government, who needed to find various sources of revenue to pay the concessionaire the shadow tolls over the term of the contract. The concessionaire took the traffic and financing risks that the level of traffic using the new facility would be adequate to generate sufficient shadow tolls to reimburse it for the full costs of the project plus an adequate rate of return on their investment. The concession team was able to mitigate this risk because even though this was a new highway, it linked existing major trunk highways that had long histories of traffic data to support the traffic analysis for the proposed link.
• Potential for Excessive Private Profits from Shadow Tolling Agreement. Some accused the Government of using shadow tolling as a financial device that disguised government borrowing and guarantees, with greater potential financial risks taken by the Government and greater potential financial returns accruing to the private development team. Public concerns over the potential that the shadow toll arrangement might lead to excessive profits for the concession team led the Government to place a cap on the level of shadow toll revenues that could be awarded to the concession team, provided highway usage exceeded projected traffic levels that formed the basis for the predetermined cap. This safeguarded the Government from paying excessive shadow tolls to the concession team.
• Managing the Complexity and Scope of the Project. Given the complexity and large scope of the project and the newness of the DBFO project delivery approach, this project challenged the capability of both the project's public sponsor and private development team. To address project issues promptly as a partnership, the PPP established a Project Forum to discuss and resolve various administrative and other issues that could affect the project schedule and cost during the period of project design and construction. The Project Forum included senior representatives of the sponsoring agency and the key companies comprising the project delivery force. The Project Forum was also supported by several Technical Forums that addressed more specialized areas.
• Concessionaire Performance Reporting and Accountability under Contract Agreement. With a thirty-year concession to build and operate the M1-A1 Link, the concession team is held to certain standards of performance that are reported on in their annual report. This includes such factors as traffic volume, network improvements (such as the recent installation of eight variable message signs linked to the National Traffic Control Center), maintenance (both preventive and unscheduled), emergency response, crashes, claims, equipment requirements, lane closures, and structural inspections. With the M1-A1 Link designed and built for a 120-year service life, the concession team places an emphasis on life-cycle asset management, including the introduction of innovative approaches to highway preservation, regular inspections, and programming of preventive treatments. This helps the concession team minimize lane closures, whether scheduled or unscheduled, and cost-effectively preserve the highway for its full concession contract term.