DRAFT FOR DISCUSSION

1.

Rationale for Public-Private Partnerships (PPP)

1.1

Introduction to PPPs
PPPs are one of several options for infrastructure development. In a PPP, the public sector focusses
on acquiring services on the most cost-effective basis, rather than directly owning and operating
physical infrastructure and assets.
PPPs enable the use of private sector capital to assist the development and delivery of the project.
The public sector does not have to pay anything during the construction stage of the project.
PPPs encourage the early delivery of projects, cost effective service outcomes, and compliance with
key performance indicators and service objectives.

1.2

Singapores PPP initiative

The Ministry of Finance (MoF) in Singapore launched its PPP initiative with the publication of the PPP
Handbook (the Handbook) in October 2004. The Handbook recommends that government projects
which require the development or redevelopment of capital assets with a cost in excess of S$50
million to look at PPP procurement as an effective and efficient method of delivery.
However, PPP may be considered for lower value projects if the nature of the project is suitable or if it
can be bundled with similar projects. MoF is to act (through the PPP Advisory Council) as the central
co-ordinating agency in relation to PPP in order to help educate the public and private sectors and to
resolve cross-agency issues.

1.3

Rationale for PPPs

PPP delivery models are typically characterized by:

Relatively long-term relationships, involving partnership based relationships between the

public sector and the private sector to develop and maintain the infrastructure and supply
services to the agreed standards.

Funding structures that incorporate private sector financing to build the initial
infrastructure.

The private sector partner playing an important role at each stage of the project through
design, construction, completion, implementation, maintenance and funding.

The public sector focussing on the objectives (e.g. water quality and supply) to be attained
and the basis of performance measurement against those objectives.

The allocation of risks between the public and private partners following the principle that
risks are allocated to the party who can best manage the risk (e.g. customer relationships
would remain with the public sector).

Due to the risk transfer public sectors exposure to cost over-runs on construction of
infrastructure is significantly reduced under the PPP model providing greater budget
certainty compared to traditional procurement.

For a government to be able to decide on whether a project has to be procured via a PPP or a
traditional procurement conducts a Value for Money assessment.

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2.

Value for Money (VFM)

VFM assessment is at the heart of any PPP procurement which aims to establish the most
economical way of procuring an infrastructure project. VFM depends on appropriate risk transfer
between the public and private sector, and involves the optimum combination of whole life cost and
quality to meet the users requirement.
The VFM assessment is conducted both on quantitative and qualitative basis.

2.1

Qualitative assessment
A Qualitative VFM assessment involves analysis of the project to be undertaken by assessing the
extent to which the following value drivers are achieved:

Optimal risk allocation

Whole of life costing efficiencies
Innovation
Measurable outputs
Asset utilisation
Better integration of design, construction and operational requirement;
Competition

Table 1 Assessment of VfM drivers

Value Driver

Driver for efficiency saving explanation

Risk allocation

Allocation of risks to the private sector offers the potential to

generate significant value for money outcomes vis--vis tradition
procurement.
VFM assessment involves a risk evaluation which includes transfer
to the private sector of those risks it is best able to manage,
including those associated with providing the specified services,
asset ownership and whole-of life asset management.

Whole-of-life costing

PPP mechanisms incorporate the benefits of whole-of-life costing

which drive the VFM in proposed projects.
PPP bid evaluation process ensures that the contracts are not
awarded to parties who quote low construction costs and leaving
huge maintenance expenditure for a different contractor or public
sector to manage.
Instead PPP enable linking design and construction responsibility to
the same party who undertakes the long-term maintenance and
operation of the project. This ensures that whole-of-life cycle costs
have been taken into the account whilst selecting the final bidder.

Innovation

PPP enables the private sector to determine the approach for

delivering the services and provide an incentive to provide the
services in the most cost-effective manner to meet the requirements
of the output specification.

DRAFT FOR DISCUSSION

Value Driver

Driver for efficiency saving explanation

Under the payment for performance approach innovation in
maintenance planning may improve service consistency and quality
which drive the VFM.

Measurable outputs

Public sector clearly specifies the nature of the services and the
outputs in a PPP contract. This in turn enables structuring a
performance-based contract.

Asset utilization

PPP involves reducing costs to government through potential thirdparty utilisation and through more efficient design to meet
performance (e.g. service delivery) specifications.

Better integration of design,

capital cost and operating
cost requirements

PPP mechanisms incorporate the benefits of better integration of

design, capex and opex requirements which are expected to drive
value for money.
Ongoing operational, maintenance and refurbishment requirements
become a single private partys responsibility for the contract period

Competitive process

A competitive market and the use of a competitive process helps to

encourage the private party to develop innovative means of service
delivery while meeting government cost objectives

To assist with assessing the achievement of the PPP value drivers, a relative scoring system is used
to distinguish the potential capacity of the private partner to achieve the drivers. The purpose of the
assessment is to subjectively test whether the objectives, service need and proposed structure of the
project are likely to provide the private sector with sufficient scope to access and exploit the PPP
value drivers. As a general rule of thumb there should be sufficient scope for the private sector to
exploit four or more of the seven value drivers for a PPP arrangement to be likely to deliver overall
Value for Money (VfM) when compared with the traditional public sector delivery option.
The following scoring mechanism is used for qualitative assessment of the Options against the value
drivers:

Represents no scope for value generation

Represents some scope for value generation
Represents reasonable scope for value generation
Represents excellent scope for value generation

To assess the achievement of the value drivers, a range of issues are taken into account including
(but not limited to) project experience, government policy, government role and capacity, market for
procurement, project size, risks and scope.
It is important to understand that the analysis of the project against the PPP value drivers does not
take into account all of the potential savings available from the PPP approach. Further savings may
be achieved from other areas such as private sector experience and expertise for example across
general areas of project management.

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2.2

Quantitative assessment
The Quantitative VFM analysis compares the differential cost of competitively tendering the Project
under a PPP contract versus procuring the Project by conventional means. Governments generally
develop a financial model to understand the cost of a project if it was procured through conventional
means. This financial model is called Public Sector Comparator (PSC).
The PSC estimates the risk adjusted, whole of life cost to the Government of delivering the Project
under a traditional model. It is made up of raw or base costs, competitive neutrality and risk
adjustments, which are explained below:
Base costs: Base costs included in the PSC are assumed to represent the costs for the Government
to provide the project,
Competitive neutrality: Competitive Neutrality removes the net competitive advantages that accrue
to a government business by virtue of its public sector ownership. This allows a like-with-like value for
money assessment between a PSC and private bids, by removing the effects of public ownership
and including equivalent costs that would otherwise be incurred
Risk adjustments: Each risk in the project should be identified as either a Transferred or Retained
Risk.
Transferred Risks are those that are likely to be transferred to the private sector under the
PPP arrangement. The value of transferred risk in a PSC measures the cost government would
expect to pay for that risk over the term of the Project.
Retained Risks are those risks or parts of a risk that government proposes to bear itself under
a PPP arrangement. The value of retained risks in a PSC measures the cost government would
expect to bear for that risk over the term of the Project.
Figure 1: Public Sector Comparator

Transferred risk
Competative
Neutrality

Raw PSC (Base

cost)

Retained risk

The results or the net present cost of the PSC is compared with the net present cost of a shadow bid
model or a private sector model. If the private sector model has a lower net present cost as compared
net present cost of a PSC, then the project is expected to demonstrate Quantitative VFM.
Figure2: Value For Money

DRAFT FOR DISCUSSION

Value For Money

Transferred risk
Competative
Neutrality
Net Present cost
of Private Sector
Raw PSC (Base
cost)

Retained risk

PSC

Retained risk

Private sector model

Results of both the Qualitative and Quantitative VFM are considered together to establish whether a
project demonstrates a VFM.
Diligence must be applied while using the results of a VFM analysis due to following reasons:

Private sector bids at times provide a solution which deviates from RFP requirements but
still meets the government objective. Any departures from the RFP in bids must be taken
into account to ensure a like with like comparison with the PSC.
The evaluating agency (government) needs to look through the apparent certainty of any
any figure, as it is an uncertain estimate, and that it only captures some of the important
elements in choosing how to deliver a project. For some projects, a sophisticated risk
valuation process is warranted.
If the private sector bid incorporates additional innovations which will make it cheaper (or
more expensive) for government to deliver services, this needs to be taken into account
while comparing the private sector bids with the PSC.

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3.

PPP in the global water sector

Since the early 1980s, PPP has emerged as a procurement method enhancing the value for money
for Government . The model has proven an efficient way of achieving several benefits otherwise hard
to capture. The global research on the costs and benefits of PPP is comprehensive, but the motivation
for PPP can generally be summarized as:

Transfer and utilization of private sector knowledge and innovation to the Government

Efficient transfer of risk to the private sector

Enhanced whole of life approach to the asset

Global use of the PPP model

While these advantages would also apply to PPP projects in the water sector, the use of PPP as a
procurement model for water projects is less common globally relative to other infrastructure assets
(e.g. schools, power plants, etc.).
In many European countries and the US the assets in the water sector has been considered as best
owned by the Government, thus limiting the private sector involvement to separate engineering,
planning and construction contracts and operation and management contracts without the financing
and ownership implications offered by the PPP model.
Additionally, the characteristics of the water sector in the individual countries may counter
implementation of the PPP model, as with the US, where the water sector comprises 35,000 [Source:
Stephen Smith] small, local water companies, and whether the scale required by PPP is more difficult
to achieve. Additionally, the water utilities companies in the US can access cheap public borrowing,
further reducing the appetite for the PPP model.
In the UK, most utilities companies fund new plants on the balance sheet, challenging the need for
private capital as well as the value for money proposition of the private sector.
In the previous decades attempts have been made to increase the efficiency of the water sector
through system concession agreements, where both treatment plants, pipelines and tariff setting is
transferred to the private sector. The model has predominantly been applied in Southeast Asia and
Latin America. However, the private sector had difficulties implementing the required increase in water
tariffs to finance the upfront investments in new assets and refurbishment of existing assets, leading
the abandonment of the model.
Consequently, the global pool of water PPP projects is limited with a high share of projects in
developing countries such as the Middle East.
Water treatment can be described as a four-stage process, where PPP projects historically have been
focused on the first three stages:

Primary stage: Removing biosolids from the waste water

Secondary stage: Screening of the wastewater and treatment

Tertiary stage: Improving the quality of the waste water to industrial standards

Quaternary stage: Reverse osmosis and UV screening, producing potable water of the
highest standards.

DRAFT FOR DISCUSSION

4.

Research framework
We have identified [5] projects for review as representatives for successful PPPs in the water space
globally, out of the more than [xx] water PPPs having reached Financial Close since [2000]. Below is
a description of the method of selection we have employed to select the final [5] projects.
1. We have identified a gross list of more than [xx] water PPPs globally, which have reached
Financial Close
2. We have excluded brownfield projects and water projects with other assets than water
reclamation plants and NEWater plants, e.g. pipe projects and desalination plants
3. To ensure the highest value of the review, we have selected a subset of projects which match
the situation of Singapore:

The country of the project must have a highly efficient water sector with low non-revenue
water

The project should be located in an urbanized area of the country

The project must currently be in operation

The project must be less than 15 years old to reflect the age of the WRPs in Singapore

Projects with a capacity of more than 55,000 m3 to reflect the capacity of the WRPs in
Singapore

The identified projects are:

Mundaring Water Treatment Plant

Delfluent Water Treatment Plant

[6 October Water Treatment Plant]

[XXX]

[XXX]

th

DRAFT FOR DISCUSSION

5.

Case studies

5.1

Mundaring Water Treatment Plant PPP

5.1.1 Country and sector overview

Western Australia is home to approximately 2.6 million people of which 77% live in the metropolitan
area of Perth, the state capital, making Perth a densely populated area. Over the last decade,
Western Australia has faced challenges to the water environment due to:

Declining average rainfall

Increasing demand for water, driven by increasing population and growth in the resource and
agricultural sectors

Increasing pressure on water for the environment due to the drying climate

Total consumptive water use in WA in 2008 was 2,286 gigaliters, of which 65% was self-supplied,
mostly through bores, on-farm dams and waterway extractions. The largest water users are are
irrigated agriculture and the mining industries.
The annual water consumption increased by 3% on average from 2000 to 2008, well ahead of the
population growth. Instead, the significant growth driver has been the increase in agriculture and
mining operations in the state.
Over the last decade, the water security in Perth has improved, largely due to the construction of
major new water supplies. [Define water security]. The improvement in the water security is
noteworthy as it has happed in a period of increased demand from the industry.
Over the past decade, WA has made major advances in developing the strategic water policy and
planning frameworks. These are based on the realisation that water resources are limited and the
previous approach of building new dams to meet the expanding demand is no longer suitable.
Similarly, the need for an integrated approach to development and management of the water
resources is recognized.
Table 1 Source: Infrastructure Report Card 2010, Water

Infrastructure Type

WA
2010

WA
2005

National
2005

National
2001

Potable water

B-

B-

B-

Based on these new framework and policies, the long-term outlook for the water security is good.
However, there are concerns over whether WA has access to sufficient funding to realize the longterm benefits of the plan. PPP is one model to address these concerns.

5.1.2 Project overview

The Mundaring Water Treatment Plant PPP (MWTP) comprises the design, construction, operation,
maintenance and financing of a new 240,000 cubic meters a day raw water pump station and water
treatment plant for Western Australia. It is the first PPP in the water sector in Western Australia. The
plant provides a long-term, safe and secure supply of water into Western Australias wheat belt and
Goldfields regions.
The aim of the project was to provide treated water of a consistently high quality that is
microbiologically safe, aesthetically pleasing, non-corrosive to assets and achieves the required
disinfection performance, regardless of the water source used. Water for the plant is available from

DRAFT FOR DISCUSSION

three sources: the Mundaring Weir, the Lower Helena Dam and through augmentation from the
Integrated Water Supply Scheme
MWTP treats and pumps fresh water to Kalgoorlie, 600 km inland from Perth, replacing an existing
plant in Mundaring. The outdated technology of the existing plant reduced the quality of the water
delivered as chemicals, in particular chlorine, had to be added to the water before pumping it to
Kalgoorlie to counter contaminants in the water. While most of the chemicals were filtered out in
Kalgoorlie, the quality of the water reaching the end users suffered nonetheless.
The project cost amounted to AUD 300 million, with the contract spanning 35 years.
Water Corporation, the state-owned water utility company in Western Australia, awarded Helena
Water the PPP contract in 2011. The plant commissioning started in late 2013 and officially opened
21 March 2014.
The Helen Water consortium comprises ACCIONA Agua, United Utilities Australia, the Royal Bank of
Scotland and Brookfield Multiplex Engineering and Infrastructure. The design, construction
management and commissioning were the responsibility of Acciona and Trility. The two companies
also operate the plant under a 50-50 joint venture.
APP-Hyder joint venture was roped in to act as independent certifier and independent reviewer of the
WTP project.
Water Corporation was advised on the PPP by Corrs Chambers Westgarth, a law firm based in
Australia.
The project reached financial closure in July 2011. Approximately A$255m of the total funding
package of A$300m was provided by the Bank of Tokyo-Mitsubishi UFJ (BTMU), Banco Bilbao
Vizcaya Argentaria (BBVA), BNP Paribas and WestLB in the form of a seven-year syndicated loan.
The remaining amount was paid in the form of equity divided amongst Acciona Agua (25.05%), Trility
(25.05%) and Lloyds TSB's infrastructure fund Uberior Investments (49.9%). All equity and debt
providers were foreign.

5.1.3 Rationale for PPP

Water Corporation undertook in 2007 a study to identify the key drivers for the water industry in the
state. A key outcome was the need for stronger private sector participation, in particular enhancing
the service delivery through private asset ownership, with the aim to:

Provide for a key focus on profit maximization and competition to drive innovation and reduce
costs

Access private sector capital to facilitate cost efficient risk transfer away from the corporation

Access the best of private and public sector know-how across all project elements

As a consequence of the study, MWTP was identified as a project with the potential to benefit from
private sector ownership and seen as an opportunity to test the PPP delivery model in the WA water
sector. The aim was to achieve:

Improved water quality

Meeting current Australian Drinking Water Guidelines

Improved asset condition and capacity within the existing Goldfields and Agricultural Water
Supply (G&AWS) network

The rationale for PPP was underscored by Treasurer Troy Buswell confirmed the Mundaring PPP
would be a first for the Western Australian water industry:

DRAFT FOR DISCUSSION

"A public private partnership is the best model to deliver this vital infrastructure to the community. It
will drive value for money for water consumers by creating greater incentives for innovation and by
cost effective risk transfer to the private sector during the project life.

5.1.4 Value for Money

The Government of Western Australia undertook a value for money (VfM) assessment of the project
prior to the decision of tendering the project as a PPP. The initial VfM assessment showed traditional
procurement (i.e. competitive alliance) of the project would yield a lower cost by approximately [4]%.
However, Water Corporation viewed that through the competitive bidding process, the slight
disadvantage of the PPP model could be overcome, yielding a positive VfM proposition.
During the bid phase, the VfM calculations were revisited, reducing the cost of the traditional
procurement thus, in theory, further reducing the VfM proposition of the PPP.
The winning bid confirmed Water Corporations view and offered a VfM of approximately 8% over the
reduced traditional procurement estimate, despite the winning bid was based on a design

5.1.5 Risk allocation

The risk allocation in the project is molded on the Commercial Principles for Social Infrastructure,
Infrastructure Australias National PPP Guidelines. A significant number of risk factors are allocated to
the consortium. These include:

Site conditions

Compliance with conditions

Access and tenure thereafter

Design cost and fit for intended purpose, subject to limited Extension Events

Construction cost, timing and fit for intended purpose, subject to limited Extension Events

Delay or not fit for intended purpose no payment

Liquidated damages not used

Proponent required to provide security for performance during the D&C phase

Performance to the required standards

Cost of performance predetermined indexation

Exhaustive list of Relief Events and Compensable Relief Events

Damages to or loss of assets

Change in equity participation

Refinancing risk (both up and downside) (Shared)

Rights for Default, Step-in and Termination

Handover requirements asset components to have predefined residual life at the end of the
contract assumes forever asset

These are risks, which can be considered to normally be transferred to the consortium in a PPP. The

10

DRAFT FOR DISCUSSION

Government has retained risks which either the Government best can manage or which may lead to
high costs if transferred to the private consortium. These include:

Native title, artefacts, unexploded ordinance

Initial environmental approvals [EPBCA and EPA]

Appropriate zoning of land for sites

Initial site access and tenure [timing]

Limited inputs subject to price rebasing (e.g. power and insurance at years 12 and 3
respectively)

Uninsurable risks

Ultimately, the MWTP showed generated value for money of 8.2% over the traditional procurement
option, of which the efficient allocation of risk is a major contributor. By allocating a given risk to the
party best able to evaluate, mitigate and price it, the overall project cost is reduced.

5.1.6 Payment mechanism

The payment to the consortium is regulated by the payment mechanism. The Government can decide
the water production, which can be varied throughout the day. The Consortium is required to deliver
the required water of a specified quality. Failure to do so leads to deductions in the payment.
The payment mechanism comprise three elements of the project:

A fixed payment, meant to cover labour, power and debt service

A variable payment, meant to cover labour, power and chemicals

Payment related to upgrade of the pipeline

Abatements Incentivise Compliance - Project Scope & Technical Requirements

Abatements calibrated with consideration given to:

Consequences for Corporation of Failure

Proponent affordability including bankability

Proponent incentive to comply

Types of Abatements:

Fixed payment abatements - under production and recovery time (includes leakage)

Quality abatements (variable payments abated) - failure of control point

Ongoing abatements - ratchets

Non Compliance Reporting failure - adds 50% to fixed and quality abatements

Cap - Total Annual Service Charge

5.1.7 Technology
The plant is a 100% water recycling plant. The only water loss in the facility is via evaporation. To
meet the performance requirements above, the plant is based on the technology below:

Sludge treatment and separation

Chemical dosing and flocculation

Dissolved air floatation and filtration (DAFF)

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DRAFT FOR DISCUSSION

Biological Activated Carbon (BAC) filtration

Dissolved Organic Carbon (DOC) removal

UV and chloramination disinfection

5.1.8 Lessons learned

The successful close of the MWTP highlighted several key insights to benefit future PPP projects:

The prower consumption of a water treatment plant is significant. Therefore, the power
purchase arrangements can be a key differentiator between the bidding consortias

The guarantees the bidding consortia are willing to provide depends on the nature of the
business and guarantees offered by the Government. For a water treatment plant, guaranteeing
plant efficiency can be difficult when the volume of feedstock is variable or not guaranteed

A network asset such as a water treatment plant is heavily depending on the existing network in
place, through which the plant will receive feedstock and pump potable water. A team that
understands existing water systems is critical to achieving a successful bidding process for
each tenderer

During the tender phase, the bidding consortia benefitted from clear design and performance
parameters from the Government, allowing them to focus on key commercial issues of the
project

All parties benefited from a highly interactive RFP stage, where questions, clarifications and
suggestions could be exchanged between the private consortia and the Government

Water Corp has the asset on its balance sheet, thus increasing the debt of the Government, at
a time where WA has faced downgrading of the credit rating

From a pricing perspective, the contract does not allow Water Corp to charge extra for the
service. Therefore net profit is less under the arrangement for the Water Corp, leading to less
distributions back to WA

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DRAFT FOR DISCUSSION

5.2

Delfluent
In the late 1990s the region of Den Haag in the Netherlands was facing multiple challenges in the
water treatment sector:
The demand for water treatment (i.e. amount of waste water produced daily) exceeded the capacity
installed to treat it; and as Den Haag was expected to grow by 40,000 households over the coming
years, the excess demand would only increase
The EU was looking to implement harsher environmental standards for waste water treatment in
2006, which the current infrastructure would not be able to live up to
As a consequence, the region was looking to procure a new water treatment facility. The process,
however, incurred multiple obstacles
Identifying the best place for the new facility was subject to public resistance through the NIMBYfactor. Ultimately, determining the location took nearly five years
The initial proposal estimated the construction cost at around 765m. The cost of the project was
expected to nearly double the average annual household wastewater treatment bill, 135 in 2000 to
248 in 2005
The financial impact of the project on the households was deemed not acceptable and although the
project was redesigned to reduce the cost, only little savings were achieved.
Looking to PPP as a method of achieving the necessary cost reduction, the General Association of
the Delfland Water Board defined early in the process the savings needed a to be least 10.5% in total
NPV cost over 30 years compared to the public sector comparator.
Additional criteria for private bidders were experience, the quality of technology, and maintenance
costs.
The tender process began in 2000; five companies prequalified, three were invited to tender, and two
invited to negotiate.
In October 2002 Veolia Water (then Vivendi Water) won the contract for the first public private
partnership in the water industry in the Netherlands
At an NPV of approximately 410m, the Delfluent bid was 13.4% cheaper than the public sector
comparator (PSC) (measured in NPV).
The project was two-fold: To upgrade the existing wastewater treatment plant at Houtrust and build a
new plant at Hamaschpolder.
The winning consortium would operate both plants and the domestic and industrial sewage systems
for 30 years, serving 1.7m people.
Delfland Water Board will continue to bear final managerial responsibility for safeguarding the public
service and will continue to be held liable for it.
A provisional agreement with the consortium was reached in September 2002 while financial close
was reached in November 2003. The DBFO contract was signed in December 2003, and the
consortium took over management of the existing WWTP in December 2003
Construction of Harnaschpolder WWTP began in November 2003, and was scheduled be completed
by July 2008
The project included expansion of the existing plant at Houtrust from Jan 2005 to Nov 2008. By 2008
the two plants together has a capacity of nearly 1.2m m3/day, of which the new Harnaschpolder plant
will provide around 860,000 m3/day
Total revenues from the contract are expected to be 1.5bn or 50m a year

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DRAFT FOR DISCUSSION

The contract includes the existing WWTP and Hague region wastewater network.
The logic is that operations should be integrated, and managed by one organisation.
The contract runs for 30 years and covers foreseeable risks, as well as procedures for changing the
contract.
Treatment and maintenance standards are specified, as is the way the contractor must adapt to
stricter specifications, new standards and future investments. There are provisions for the case that
either party wishes to terminate the contract early. Details of the transfer of employees are also
covered.
Following the signing of the Delfluent PPP, the first in the Dutch water sector, in January 2004, the
European Investment Bank (EIB) drew up plans to lend 125m to the PPP venture. In May 2004
project financing of 362m was completed, including 132.5m from the EIB.
Delfluent consists of a project management and construction company, Delfluent BV, and
subcontractor operations and maintenance company, Delfluent Services BV. Delfluent is 40% owned
by Veolia and 40% by Evides; Delfluent Services is 50%-owned by Veolia Water, and 50% by Evides.
Evides was created in 2004 by the merger of Delta Water and Waterbedrijf Europoort, which
previously each held half the shares mentioned for Evides.
NPV includes inflation (and will be adjusted for the difference between estimated and actual); the real
interest rate is fixed. The fixed fee is the major part; there is also an adjustable fee for performance;
there could be penalties for quality problems, as defined in the contract.
The contract is between Delfland Water Board and the Veolia-led Delfluent consortium.
Challenges to Value for Money
The extended period of negotiation over location of the plant meant the EU 2006 deadline was close
at the time of tendering of the project
As a result, it was decided against pursuing newer technologies, which potentially could reduce the
cost, in favour of traditional technologies which could reliably be brought on stream in time to meet the
EU 2006 deadline
Cheaper bids with innovative technology were offered during the tendering process, but was deemed
to risky; if there were problems leading to delays in bringing the plant on stream, the EU deadline
might be missed
In addition, a switch to new technology at this stage would in itself have meant a further delay of 1.5
years as a new EIA (Environmental Impact Assessment) would be needed, taking the new technology
into account.
Following delays in finalising the PPP contract due to the need to write as comprehensive and welldesigned a contract as possible in this situation, Delfland has a licence from the Dutch government to
exceed EU guidelines on wastewater until 2008, when the new plant is expected to be complete.

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