Construction Phase

The project was tendered based on a conceptual design and relevant specifications developed by the Procuring Authority. All detailed designs were developed by the Project Company after the award of the PPP contract, which were then approved by the Procuring Authority, and subsequently implemented during construction.

The original construction duration was nine years, with completion expected to occur in 2014, however as of 2017, only 50% of the network had been completed. There have been various challenges to completing the design and construction which have caused this delay. The specific challenges which had the greatest impact on the construction were related to the lack of demand from the landowners, who are the key intended beneficiaries, and the project scope change required to comply with environmental laws.

During the tender process, it was assumed that landowners would be generally supportive of the project, and would sign up in groups, agreeing to procure the additional infrastructure required to connect the water directly to their individual plots of land. This would mean the Project Company would pipe water to individual areas that would not be required to be less than 12.5 hectares (referred to as the "Minimum Irrigation Area"), with the landowners covering the costs of piping the water to the individual lots within these areas. However, due to poor stakeholder engagement combined with a lack of interest from farmers, this Minimum Irrigation Area ended up averaging 2.8 hectares. This meant that the total length of pipes has increased by approximately 30%, with a direct impact on the time and cost of construction.

A ruling by the European Court of Justice on the project's lack of compliance with the relevant legislation meant that the Project Company had to introduce what are referred to as "Special Protection Areas" for birds in the area covered by the project. This reduced the areas assigned for irrigation and added costs due to re-routing of pipes around the protected regions. This is further explained under the heading "Key Events" below.

The project's contract requirements are perceived as more prescriptive than is common for PPP contracts in terms of the prescribed design solution. For example, the PPP contract specified the use of polyester pipes, which did not turn out to be the optimal solution from the whole lifecycle point of view. However, as it was a contractual requirement, it was difficult to change.

Predicting the final cost to complete the outstanding work is complicated, but the Project Company estimates that there will be a deviation of approximately 20% from the original contract sum, with approximately half of that being attributable to the compliance with the European Union environmental requirements, and the other half due to the increase in pipe length due to the reduction of the Minimum Irrigation Area. Both of these risks, and therefore the cost overruns, were retained by the Procuring Authority.