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Thames Tideway 'win one only' policy to protect contractor resources

Thames Tideway Tunnel has put a ‘win one only’ rule on its tunnelling contracts to “provide resilience” against over-extending contractors and to ensure resources are available for each of its 24 construction sites.

Eighteen contractors, in eight joint ventures, have been shortlisted for three main construction contracts worth between £1.4bn and £2.3bn.

Both a Balfour Beatty, Bam Nuttall and Morgan Sindall joint venture and a Bachy, Costain and Vinci JV have been shortlisted for each of the central, west and east sections of the scheme but, due to the project’s ‘win one only’ rule, will not be able to bag more than one of the deals.

Three contracts are up for grabs in total: the west contract, worth between £300m and £500m; the central contract, valued at between £600m and £950m; and the east contract, worth between £500m and £800m.

A spokesman said the ‘win one only’ approach would provide resilience for the supply chain and “ensure that sufficient grade A resources are available from across the market to support 24 different sites across the breadth of London”.

Overall only four UK-owned firms made the shortlists: Balfour Beatty, Costain, Laing O’Rourke and Morgan Sindall.

Speaking to Construction News, newly appointed Thames Tideway Tunnel chairman Sir Neville Simms said he was cautious about criticising this result.

“We must go on expertise,” he said. “[The project was] open to international competition and [you have to] choose the best.”

He highlighted the power of partnerships in schemes of this scale. “It’s a risk-sharing aspect and it’s a skills sharing aspect,” he said. “I always believe it’s a much more intelligent way of going about projects of this scale.”

Sir Neville, formerly chief executive of Tarmac and chairman of Carillion, said the scheme would benefit from knowledge passed on by Crossrail.

Thames Tideway wanted to share information with future programmes as it gears up to be “next in the ground” after the rail project.

“The Crossrail team is in the lead and if they were precious about their information then it wouldn’t be happening, but they’re not – they understand,” he said.

“We’re learning a lot from Crossrail and exchanging information, not directly about the tunnelling but around the logistics of working on so many sites around London and around health and safety.

“We’re also hopefully going to have continuity with their miners and their tunnellers coming towards our scheme.”

Last week Construction News revealed the full details of Crossrail’s performance management framework, which compares major contractors’ performance data to share innovation and improve outcomes.  

Thames Tideway is taking an approach, informed by discussions with Crossrail, that will manage and reward contractor performance through financial incentives.

However, health and safety will be excluded from the initiatives under the contracts.

A spokesman said: “With regards to specific mention of performance management framework utilised by Crossrail, Thames Tideway Tunnel has adopted a different mechanism for managing and rewarding contractor performance but one which is informed by the experiences of Crossrail.

“Contractors are directly financially incentivised through an alliance agreement to work together and manage to successful programme outcomes, as an overlay and in addition to the contract-specific incentive mechanisms.”

He added that health and safety was not going to be financially incentivised as “it is simply too important to accept anything less than total commitment to the Thames Water’s Triple Zero (zero incidents, zero harm, zero compromise) vision”.

Sir Neville will join the project with 40 years of experience on major infrastructure schemes, including the Thames Barrier and the Channel Tunnel.   

He said that as “a believer in the legacy projects” he was first attracted to Thames Tideway after hearing details around its delivery model set out by managing director Mike Gerrard.

Both the scheme’s financing and construction elements are broken down into competitions and will be governed by a new “separately regulated utility”, detached from Thames Water — described as an Infrastructure Provider.

Upfront capital for the project will be privately financed and buoyed by a government support package – the exact breakdown of which has yet to be decided by Thames Water, which is currently in talks with government and regulator Ofwat.

Sir Neville added: “Everything is very transparent and the consumer is going to be protected by the regulator from people bidding financial packages that are unrealistic.”

Financial group UBS is working with the scheme to define how the group will present the project to the market and once in place, Thames Tideway will have the ability to offer a package to interested investors.

Private investment is expected from pension, infrastructure and sovereign wealth funds from UK and international investors. The new utility will then bill customers to pay back the initial investments.

Sir Neville said his first job as chairman will be to gather an executive team, hiring both internally and externally for the roles, which he hopes to have “completely established” by H1 2014.

He added: “A lot of responsibility will be passed on to the contractor groups as well.

“They’re there not to do just as we tell them but to interact with us, collaborate with us, innovate with us and then actually run the schemes, run the labour and all the various things that need to be done.”

Construction is set to commence in the first half of 2015 and will span more than six years and encompass 24 construction sites across London.

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