Serving just 125,000 people, the U.K.'s Halton Borough Council (HBC) might seem an unlikely sponsor for a $900-million privately financed highway bridge. But construction is underway, with barge-mounted rigs installing cofferdams in the mudflats of the River Mersey for the cable-stayed Mersey Gateway crossing.
To get here, the authority, 20 kilometers upstream of Liverpool, overcame government reluctance and the banking crisis. It deployed innovative financing tools and a novel tolling strategy to reduce revenue risk to itself and the public- private partnership contractor.
After eight years and risking millions of dollars from its small budget, HBC last March signed a design-build-finance-operate contract with the Merseylink Joint Venture (MJV), which comprises Australia's Macquarie Capital Group Ltd., Germany's Bilfinger Project Investments Europe Ltd. and Spain's FCC Construction S.A.
Merseylink signed a design-build contract for the bridge and approach roads to a JV of locally based Kier Infrastructure and Overseas Ltd., South Korea's Samsung C&T Corp. and FCC. Paris-based SANEF S.A. is MJV's tolling sub.
When completed in late 2017, the six-lane concrete structure will cross the 1-km-wide river between Widnes and Runcorn on four cable-stayed spans. It will supplement the overused, 54-year-old Silver Jubilee steel-arch bridge. Merseylink will operate and maintain it for 26.5 years, earning annual fees based on key traffic speeds and with no revenue risk. After construction, SANEF will operate the free-flow tolling system for HBC.
Initial, mid-1990s lobbying for the project largely "fell on deaf ears," says Rob Polhill, HBC's political leader. "But we wouldn't take no for an answer."
One reason for the tepid official response might be that small sponsors are "always perceived to be challenged by taking on a project of this scale. The potential abortive costs were very high," says Steve Nicholson, HBC's project director as of 2005. With a team of up to 20 staff, HBC employed the design firm Ramboll U.K. Ltd. and legal and financial advisers DLA Piper and KPMG.
From the start, "we wanted to provide the contractor with room for innovation," says Nicholson. Exposed to huge daily interest charges on its project debt, the contractor needed time certainty, he adds.
But Nicholson found the process for securing planning approvals too prescriptive. In 2010, "we came out with an approval centered on outline designs … we weren't very comfortable," he says.
When a change of government in 2010 led to a temporary moratorium on major projects, Nicholson grabbed the chance to ease constraints attached to the planning approvals. As a result, "bidders could develop their solution that gave them maximum confidence," he says.
HBC launched the procurement in late 2011. The next spring, it invited three of six vying teams to take part in a "competitive dialogue" form of negotiations. Bidders developed proposals based on HBC's detailed objectives and constraints, maximum annual payments and illustrative designs for a steel structure. Regular meetings between bidders and HBC "stress-tested" the developing proposals, says Nicholson.
"At the end of that process, there was mutual confidence that what we had was deliverable," he says. One bidder retained a steelwork design; the others opted for concrete designs.
In December 2012, HBC called for draft bids to avoid having to rule anyone out for technicalities. Final offers arrived four months later. Merseylink emerged as the preferred bidder in June 2013, with a price significantly lower than the next bid.