Contemplating known changes to the scope of work early (even where the costs are not known) makes it helpful to manage once the costs become known.
Although an increased use of the rail infrastructure and different rolling stock was anticipated at financial close, there was no relevant data available to forecast the costs associated with increased maintenance. The fact that the contract provided an option to allow for increased use made it possible to devise a formula later, which would, through carefully designed monitoring of asset deterioration, estimate the impact on the asset condition and forecast the amount of additional costs needed to provide additional maintenance. As such, there were no significant issues related to the payment mechanism when the project scope was linked to the wider light rail network of Antwerp and some sections of the project were subject to greater usage and therefore more maintenance. The joint efforts of both De Lijn and the Project Company to assess the financial impact were perceived as exemplar by De Lijn.
Poor document control management can slow down and create inefficiencies during transition periods.
The transition from construction to operations was perceived as challenging by the Procuring Authorities due to staff turnover and an inadequate document control system. This made the transition slow and inefficient. It is therefore of critical importance that a document and information management system is carefully designed, adopted from financial close and continuously and consistently used throughout the contract duration.
Inadequate timing for approvals of change orders may lead to delays and create tension in the relationship between the Project Company and the Procuring Authority.
The protocol for change orders is prescribed in the PPP contract and the change procedure itself is considered well defined and robust. However, the timelines for reviews and approvals are considered too tight. Inadequate timings may lead to delays and create tension in the relationship between the Project Company and the Procuring Authority. A workable solution acceptable by both parties is needed as soon as the protocol for change orders is found to be deficient. This should preferably be agreed to before the contract is signed.
Building on relationships with all relevant stakeholders can assist in managing issues with permitting in an efficient manner.
One issue that occurred during construction was a situation in which the Project Company's construction permit was revoked because of public objections to the proposed developments. A new permit was, however, issued a few months later. Together with the Project Company, De Lijn worked as a partner to resolve the issue. Although construction works were suspended on the part of the light rail section affected by the revoked permit, other works subject to different permits continued. In the end, the delay of four months did not have any material impact on the overall completion and timing of the project.
The Project Company may need time to adjust into the operations phase and become fully compliant with its operational KPIs.
As a result of the generic nature of the identified KPIs, the Procuring Authority and Project Company had more discussions about the intention and applicability of payment deductions in the initial years of the operations period.
However, after two years, an operational understanding of KPIs was developed and a working solution was found by both parties.
Failure to meet KPIs may require proactive management from both parties to resolve the cause of non-compliance.
The overall operational performance of the project has been good and there have been minimal deductions to date. Failures are minor and there have been no critical issues for the purposes of the KPIs. There was an issue with excessive noise due to the use of the light rail. The mitigation, however, was proactively managed by both parties. Data was collected during noisy periods and appropriate mitigations were developed and implemented.
Creating a working group and appointing a financial advisor during a refinancing can assist the Procuring Authority to attain a positive outcome from a refinancing of the Project Company.
Due to the financial crisis at the time of financial close, the Project Company did not succeed in raising long term debt financing. As a result, a refinancing was completed in 2016 and new debt was raised for the remainder of the contract period.
De Lijn took the lead in the refinancing as part of the overall refinancing that they were leading across its portfolio of projects. De Lijn and the Project Company created a working group for the refinancing and hired an external financial advisor. The refinancing took eight months to complete.