Street Lighting PFI Project by xdKhg06

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									                                                                              Agenda Item No: 4

STREET LIGHTING PFI PROJECT

To:                             Environment and Sustainability Scrutiny Committee

Date:                           27 September 2010

From:                           Acting Executive Director: Environment Services

Electoral divisions:            All


Forward Plan ref:               Not applicable                Key decision:    No

Purpose:                        To provide Members with information on

                                     to what extent are the Committee’s recommendations
                                      from the 2007 street lighting review reflected in the
                                      contract?
                                     information on the Contract flexibility particularly in
                                      respect to technical advancements and changing
                                      social and environmental expectations
                                     the environmental and climate change impact of the
                                      project
                                     how the service provider will incentivised to maintain
                                      efficient and effective street lights.

Recommendation:                 The Committee is asked to note and comment on the
                                contents of this item




           Officer contact:                                   Member contact:
Name:      Chris Capps                           Name:        Councillor Roy Pegram
Post:      Head of Transport Asset               Portfolio:   Growth and Infrastructure and
           Management                                         Strategic Planning
Email:     chris.capps@cambridgeshire.gov.uk     Email:       roy.pegram@cambridgeshire.gov.uk
Tel:       01223 715640                          Tel:         699173
   1          Background

   1.1        As a result of many years of under funding, the condition of the
              street lighting, illuminated signs and illuminated bollard stock in
              Cambridgeshire has deteriorated and now the age profile is such
              that there is a high percentage of the stock which is beyond its
              design life of 15 years.

   1.2        In 2004 the Government invited Councils to submit Expressions of
              Interest for PFI Credits to be used to address the condition of the
              street lighting stock. In that round the Council was not successful,
              however in 2006, Government released a further tranche of funding
              of PFI Credits and on that occasion the Council was successful.

   1.3         Cambridgeshire was invited to submit an Outline Business Case
              (OBC) which was a more detailed business case from that of the
              Expression of Interest.

   1.4        The OBC showed that the age profile of the street lighting columns
              was as follows:-


Age profile at 2008

Age of columns                Numbers    Cumulative    Percentage    Cumulative %
                                         (increasing                 (decreasing
                                         age)                        age)

0-20 years                    35,694     53,612        66.7%         100%

21-25 years                   5,392      17,918        10.0%         33.3%

26-30 years                   3,776      12,526        7.0%          23.3%

31-40 years                   5,151      8,750         9.6%          16.3 %

Over 40 years                 3,599      3,599         6.7%          6.7%

Total                         53,612                   100%



   1.5        This demonstrated that as a column has a design life of 15 years, a
              high percentage of the stock was close to or beyond its design life.

   1.6        The OBC was approved for submission to DfT by Cabinet in May
              2008 and then approved by the Treasury’s Project Review Group
              (PRG) in July 2008. This allocated £57.2 million of PFI Credits to
              be spent on replacing approximately 60% of the street lighting
              columns, and all of the illuminated signs and bollards in the County.
              It was not to provide funding for additional street lighting.




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1.7   As part of the OBC, Government were keen that Authorities worked
      with other Councils in the procurement phase to reduce costs and
      determine whether there were efficiencies from working together
      post contract award. Cambridgeshire and Northamptonshire
      mutually agreed to work together using a single set of external
      advisors and a single project team.

1.8   The Project is to procure a service provider to replace the street
      lighting equipment beyond its design life, together with all the
      illuminated signs and bollards within 5 years and to maintain all
      lighting for the full 25 years.

1.9   In 2007, Scrutiny Committee undertook a Member Led Review into
      the Street Lighting Service. That Review concluded with 6
      recommendations relating to Street Lighting Policy, monitoring trials
      of new technologies, and decisions relating to lighting provision in
      new communities and their consistency with the intentions of
      creating vibrant and sustainable communities.

2     Progress

2.1   The street lighting policy for street lighting was revised as a result of
      the Member Led Review into the street lighting service and taken to
      the Highways and Transport Policy Development Group on 22
      November 2007. One of the notes of that Group was:

      ‘The PDG agreed that no further consultation was required with
      regard to taking forward the Street Lighting Policy at the current
      time, especially as the next round of the PFI might require further
      consultation.’

      The revised street lighting Policy was approved by Cabinet on 15
      April 2008.

2.2    As part of the Street Lighting PFI, Project Officers participate in a
      National Networking Group involving all the Councils who have
      been awarded street lighting PFI credits. This forum provides good
      information on new technical developments and as a result the
      solution the Council has approved will produce the right balance
      between performance and energy saving.

2.3   Since the PRG approval in 2008, the Project Team has been
      working through the procurement process and have reduced the
      numbers of bidders from the original four to now a single preferred
      bidder.

2.4   The procurement is regulated under European Law and is a major
      project requiring the Competitive Dialogue process to be used.




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2.5       The requirement from Government for all PFI funded projects is to
          use Standardisation of PFI Contracts Version 4 (SOPC4) which has
          variants for different sectors such as Waste, BSF and street lighting.

2.6       All departures from the standard wording within SoPC4 requires
          derogation approval from Government as part of the Final Business
          Case before financial close.

2.7       The contract delivers a street lighting output specification
          (determined by the Council) in respect of the lighting standards and
          classes which was converted into bidder solutions. The preferred
          bidder’s solution is that which was evaluated by the Project Team as
          delivering the most economically advantageous for the Authority.

3.        Implications

3.1       Scrutiny Committee has asked clarification in respect to

            Scrutiny Recommendations – to what extent are the
             Committee’s recommendations from the 2007 street lighting
             review reflected in the contract?
            Flexibility – what scope will there be to adapt street lighting
             provision to reflect:
            o       Technical advancements
            o       Changing social and environmental expectations
            Environment – How will the contract take account of
             environmental and climate change issues?
            Incentivisation - How will the contractor be incentivised to
             maintain efficient and effective street lights over the course of
             the contract?

      Scrutiny Recommendations

3.2       The street lighting policy in place at the time of the Member Led
          Review was changed to reflect the need to move from a street
          lighting specification approach to a policy approach. The revised
          street lighting policy was taken to Highways and Transport Policy
          Development Group in November 2007 and approved by Cabinet in
          April 2008.

3.3       The revised street lighting policy set out the following objectives:

         The provision and maintenance of street lighting to promote and
          maintain safety for all users of the highway with special
          consideration for all vulnerable user groups, e.g. pedestrians,
          cyclists, the elderly or people with disabilities and children, the
          principal aim of which is to reduce night-time accidents and
          encourage modal shift.
         Working with district councils to contribute to the promotion of Crime
          and Disorder schemes in urban areas when it is feasible to do so to


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           reduce the fear of night-time attack on individuals and to deter
           vandalism of property.
          The avoidance of detrimental environmental impact through the
           visual appearance of lighting, both day and night, adjacent to and
           on the highway and the overall impact to the environment through
           energy conservation and light pollution.
          The provision of cost-effective lighting systems which are energy
           efficient, incorporate whole-life costs, Local Agenda 21 via
           sustainable development, and recycling initiatives, whilst promoting
           the purchase of energy derived from renewable resources.
          The need for consultation with locally elected bodies and district
           councils specifically as regards designated conservation areas.
          To ensure all new lighting within new developments is of the correct
           design and specification as set out in the Street Lighting Section 38
           Specification as included in the Cambridgeshire County Council
           Design Guide for ‘Housing Estate Road Construction’.

    3.4    The solution developed by the Project Team and Preferred Bidder
           for the street lighting PFI project, takes account of the above
           objectives and utilises all the most up to date technologies within
           the market place and as a result it will deliver significant savings in
           energy and our Technical Advisers who have worked on other PFI
           projects has stated that the Cambridgeshire solution is one of the
           most cost effective solutions of any of those successfully completed
           PFI Projects to date.

    3.5    The street lighting output specification where the lantern design
           options are presently set out, provide for a flexible approach to
           street light design and allows for the street lighting in new
           developments to contribute to creating vibrant and sustainable
           communities.

Flexibility

    3.6 The output specification will deliver the most up to date technical
        innovations in street lighting there are today because the Project
        Team has worked with the preferred bidder to ensure all known
        technical advancements have been included.

    3.7    With respect to future technical advancements, it is incumbent on
           both the service provider and the Council to identify any
           advancement from the present. The contract has a Change
           Protocol through which any changes can be introduced and agreed,
           and is broken down into low (less than £10,000), medium (between
           £10,000 and £250,000) and high value (over £250,000) changes,
           with each tier having a slightly more complex process to follow.

     3.8 The Change Protocol is designed to allow for any either Authority or
         service provider changes which should improve the delivery of the



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        project which may include technical advances such as LED light
        sources.

   3.9 The Change Protocol would also allow for the eventuality of a
       review of the street lighting policy which may allow for the removal
       of street lighting from parts of the network and thus reducing the
       numbers of units to be installed and maintained by the contract.

   3.10 The project also includes a central management system (CMS)
        which will provide the Authority with control of the light levels for the
        market towns and larger villages whereby lights could be dimmed
        further from the proposed 40% or even switched off.

Environment

   3.11 The solution proposed will deliver a 50% reduction in energy usage
        once all the replacement equipment has been installed.

    3.12 This includes lower wattage lanterns than present, as the
         replacement lanterns are white light and produce a greater level of
         light (lumens) than the higher wattage ‘orange’ lanterns.

    3.13 The solution also includes the dimming of residential roads (the
         bulk of the lights) by 40% from midnight to 6am and a double
         dimming on traffic routes to 60% between 10pm and 6am.

    3.14 The solution also reviews the need for illumination on road signs
         because the most recent Traffic Signs Regulations (TSR) has a
         more relaxed approach to illuminated signs. It is envisaged that
         about 50% of the presently illuminated signs will be de illuminated.

     3.15 The TSR allows for the use of fewer internally illuminated bollards.
         Additionally those that are installed will be powered by solar
         energy rather than mains supply.

     3.16 Street lighting energy is purchased as unmetered supply and the
          payment arrangements are based upon the total wattage of all the
          units on the inventory multiplied by the annual burn hours. Once
          the CMS is operational, it will be used as an energy meter and as
          a result the Authority will get more accurate information on the
          energy used by its street lights.

     3.17 The consumption risk for the street lighting under this project is
          with the service provider; therefore if the actual consumption is
          greater than that agreed at the start of the contract, the service
          provider will pay the difference. At the same time there are
          incentives for the service provider to make suggestions which will
          result in energy savings and if these are achieved, the service
          provider is entitled to a share of the savings.



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Incentives

      3.18 The contract has a Payment Mechanism (Paymech) which sets
           out how the unitary charge is made up. It also sets out the
           Performance Standards (PS) applicable in this contract.

      3.19 Effectively the Output Specification is what the authority wants,
           the Paymech incentivises the service provider to perform and the
           model contract is used if the service provider fails to perform.

      3.20 The Paymech set out how the Service Provider can achieve the
           maximum Monthly Payment over the life of the Contract by
           achieving the availability and the performance targets. It also
         • sets out how the Monthly Payment increases as a result of
            progress of the CIP.
         • defines the performance targets - intended to be challenging but
            realistic and achievable.
         • provides incentives for the Service Provider to:
                – meet the performance targets by placing the Monthly
                    Payment at risk of failure to meet these targets.
                – correct any failures as rapidly as possible and to avoid
                    repeated failures.
                – innovate and secure efficiency gains over the life of the
                    Agreement.
         • matches payments to outputs by stepping up the maximum
            possible Monthly Payment as the public lighting equipment is
            refurbished and replaced on an agreed, phased basis.

      3.21 The full list of performance standards are set out in Appendix A
           however the most important two are PS1 and PS2.

      3.22 PS1 Lighting Installation sets out the percentage of installations
           required by the service provider month on month for the first 5
           years of the contract. Completed installations only occur once
           installed and the independent certifier has approved the whole
           road (not individual columns). An example of the levels of
           deductions involved for instance if the service provider is
           supposed to deliver 8,000 columns in year 1, but only installs
           7,000, then the deduction will be £185,000 per month until back
           on programme. The mile stones associated with this PS are set
           out in Appendix B.

      3.23 The PS2 Performance and Planned Maintenance sets out the
           ‘lights in light’ i.e. the percentage of lights illuminated. This
           includes the Distribution Network Operator (DNO) supply faults.

      3.24 The contract requires the light level to be at 99% each month, if
           the percentage drops to 98.5%, then the deduction would be
           £19,000 per month. If the percentage drops to 98%, then the
           deduction would be £26,000 per month.


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     3.25 All this information is provided from the service providers
          Management Information System (MIS) which has its own
          contractual performance requirements in respect of its accuracy,
          availability and timeliness of reports.




Source Documents                                           Location
Outline Business Case                                      Castle Court A Wing
Draft Final Business Case                                  (Chris Capps)




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Appendix A



 Performance Standard Adjustments:
 Summary

    Performance Standard 1      Lighting Installation

    Performance Standard 2      Performance and Planned Maintenance

    Performance Standard 3      Operational Responsiveness and Reactive Maintenance

    Performance Standard 4      Customer Management and Records

    Performance Standard 5      Best Value

    Performance Standard 6      Working Practices

    Performance Standard 7      Monitoring and Reporting to the Authority

    Performance Standard 8      Post Core Investment Programme Period


 Government and Public Sector                10                       PricewaterhouseCoopers LLP




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Appendix B

Performance Standard 2 - Proposed Capital Investment Programme




    CIP Programme
    •   6 Months     2,331or    5% of Total
    •   12 Months    4,662 or 10% of Total
    •   18 Months    9,323 or 20% of Total
    •   24 Months   13,984 or 30% of Total
    •   30 Months   18,645 or 40% of Total
    •   36 Months   23,306 or 50% of Total
    •   42 Months   30,298 or 65% of Total
    •   48 Months   34,959 or 75% of Total
    •   54 Months   41,951 or 90% of Total
    •   60 Months   46,612 or 100% of Total

    •   Totals      46,612




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