Coronavirus Complicates Already-Complex P3 Project in Norway
Constrained by social distancing due to the coronavirus, Norwegian officials are embarking on complicated long-distance negotiations with international companies for the country’s largest-ever highway contract—a public-private partnership to finance, design, build and operate the Rv. 555 for 25 years.
With prequalified bidders from Spain, Italy, France, South Korea and Switzerland, language and cultural differences will further complicate procurement of the $1-billion Rv. 555 highway between Storavatnet and Kolltveit west of Bergen.
The Norwegian Public Roads Administration (NPRA) late last month shortlisted three of four bidding teams for the 9-km project, which includes a new 954-m-long, four-lane suspension bridge with a 592-m main span, located close to an existing Sorta suspension bridge. Nearly 40 other structures and 11 km of tunnels are included.
A period of intense negotiations has begun, which will lead to commercial-bid submissions this December. Because of the coronavirus, meetings will be held remotely. “I’ve not done this before,” says NPRA’s project manager Arve Tjønn Rinde.
Nevertheless, NPRA has penciled in dates for clarification meetings with the three bidding teams this month and next. “Some of the meetings will last two days,” says Rinde. With close to 60 people taking part in each meeting, details on how to manage them and which digital platforms to use are yet to be agreed upon.
“Language, culture and digital barriers will have influence on the work in the dialogue meetings,” Rinde says. He says he will miss the face-to-face communication with negotiating partners, but online meetings can be an “effective way to do the work.”
The project manager’s optimism is not universally shared among the private financing community, according to Julia Kennedy, an adviser at the European Investment Bank’s P3 expertise center. “There is…uncertainty about the ability to close deals in the near future,” she warns in a blog.
“We’re hearing examples of projects that are valiantly going ahead with multiparty negotiation meetings as best they can over video conferencing…. The majority…are likely to face some kind of delay or change,” she writes.
However, in general, bidders are going be eager to ensure that “contracts are clear as to how the high risks and responsibilities of pandemics or other emergency situations like this are dealt with,” Kennedy says. “It’s certainly true that the topic of COVID-19 and pandemics are now being put firmly on the table for discussion before anyone would be prepared to sign the deal.”
On the Norwegian project, Rinde expects the coronavirus to feature in planned meetings. Bidders, for example, “will give us information on how they will do the project in a safe way. That’s something they will bid on,” he says.
Meetings with contactors and their advisers will continue after December’s bids and before a contract is awarded in July 2021. Rinde expects construction to last up to three years, but that will depend upon schedules set by the successful bidder.
Three teams made it to the shortlist, while a Chinese/Turkish group, which included China Communications Construction Co., was eliminated. The shortlist includes:
- Sotra link (FCC Construcción S.A., Webuild [formerly Salini Impregilo S.p.A.] SK Engineering & Construction Co. Ltd. and Macquarie Corporate Holdings Pty. Ltd.)
- ITIAS (ITINERA S.p.A., IHI Corporation and ASTM S.p.A.)
- Via Sotra (VINCI Concessions S.A.S., VINCI Highways S.A.S., Acciona Concesiones S.L. and Implenia Switzerland Ltd.).
The Rv. 555 project is one of three highway P3s allowed by the government in 2018. Having piloted Norwegian highway P3 procurement in 2003 on the Klett to Bårdshaug section of the E39, NPRA launched two more contracts within three years. These are the first P3s since then.
Of the three P3s allowed in 2018, Skanska Infrastructure Development won the first. The 25-km, $540-million Rv. 3/Rv. 25 link on the Oslo–Trondheim corridor is due for completion this year.
To help finance the deal, Skanska and an affiliated pension fund each invested half of the $12.7 million equity and subordinated debt. Skanska last December sold its half to another affiliated fund.
The third P3, estimated at roughly $700 million and still in planning, will include nearly 80 km of the E10/Rv. 85 route between Sortland, Harstad and Evenes in northern Norway.