Note on Capital Cost for VSH Alternative Routes
Base Capital Costs [Current Route: £13.6m]
1.
Base capital cost estimates at Quarter 3 2014 prices have been derived by
Mott MacDonald based upon the alignment drawn up in response to the VSH
objection as shown on Peter Adams’ Exhibit 16 and 18. These are:Option A
£44.7 million
Option B
£44.2 million
Development and Management Costs [Option A & B £4.5m] [Current Route £1.5m]
2.
Both options have had only cursory technical work undertaken on them and so
the first tasks would be engineering studies into the alignments, the
undertaking of ground and structural investigations, public consultation and
the preparation of a new Outline Business Case to secure funding approval
(Programme Entry status).
3.
Following the above work and after securing funding approval/Programme
Entry status, further more detailed design work would be required to prepare
robust designs suitable for the TWA process. In addition, following the
appropriate environmental and other surveys, an Environmental Impact
Assessment would need to be prepared. Utility diversions would also be
designed and costed in accordance with the relevant NRSWA processes.
4.
In addition to the above there would be significant costs incurred in seeking
the necessary approvals and permissions from Network Rail, both in relation
to the Navigation Street/Hill Street structures, but also (in the case of Option
B) for the crossing of the Monument Lane Tunnels, and also for electromagnetic compatibility issues where the 750V DC tramway OLE crosses the
Network Rail live railway.
5.
At this point, the legal process of preparing, submitting and gaining approval
could take place through the TWA process. This would incur considerable
legal and other professional costs, as in the current process, although with
more objectors.
Detailed Design [£3.2m] [Current Route £2.7m]
6.
Following approval of the TWA Order detailed design could take place and
procurement of a main works contractor. At the same time advanced utility
diversions would take place.
Land Acquisition [Current Route £0.8m]
7.
It is considered that both options would require land acquisition and/or incur
significant land compensation costs, the following is assumed:Option A
£2 million
Option B
£4 million
Programme/Project Management [£2.5m] [Current Route £1.5m]
8.
Over the whole project duration there would be a programme team in place,
and staff costs in Birmingham City Council would require reimbursement.
Construction Supervision [£2.9m] [Current Route £2.3m]
9.
During construction Centro would incur costs of site supervision and contract
management, and also incur costs for protection of Network Rail assets; these
would also require the appropriate legal agreements. Centro would also be
required to rent appropriate construction compounds within the city centre.
Utilities Diversions [£6.0 m] [Current Route £6.0m]
10.
Underground services need to be diverted where they clash with the tramway.
For both options we have assumed the same costs as for the current scheme,
which is very similar to the costs incurred on the street running length of the
BCCE currently under construction and for which
Compensation to Train Operating Companies [£5m] [Current Route - Nil]
11.
The disruptive effects of testing of the Navigation Street structures and their
replacement/strengthening will require lengthy and expensive possessions of
the western throat of New Street Station, with consequent significant costs for
even short possessions.
Commissioning [£1m] [Current Route £0.8m]
12.
Costs for operator and contractor in testing, commissioning and trial running
prior to system opening.
Programme
13.
The programme for both options has been based upon Centro’s own “live”
programme for the development and construction of the Birmingham Eastside
Extension. This project is at a similar stage of development as the VSH
options; a route has been established but little technical work has been
undertaken to develop the designs, and a new Transport & Works Act Order is
required.
14.
The programme adopted is therefore as follows:Design & Approvals period: 4 years 2015-2019
Utility Diversions 18 months
2018-2019
Main Construction: 3.5 years
2019-2022
Inflation Effects - [Option A £16.6m and Option B £17.0m] [Current Route £2.1m]
15.
The later costs are incurred, the more costs at today’s prices increase due to
the effects of inflation. All Metro Programme estimates (including the CSQ
project) are based on the assumption that design costs are increased at 3% to
3.5% per annum, and construction costs at 3.5% to 4% per annum. In the
current overheating construction environment in the UK these are considered
prudent assumptions.
16.
The above compound interest rates are added to the costs above depending
on when they fall.
Contingency - [Option A £14.3m and Option B £14.6m] [Current Route £2.8m]
17.
To account for unknowns (which are many at the early stages of a project
such as these) a 20% contingency has been added to the above costs.
Outturn Costs
18.
The above process leads to the derivation of a phased outturn cost for the
project.
Derivation of costs
19.
All costs used for the estimated costs are based upon actual costs incurred by
Centro in undertaking the current delivery programme.
Results
20.
The above process is illustrated in detail in the outturn cost estimates of
£102.7m for Option A and £104.8m for Option B. [Current Route £34.2m]
Navigation Street/ Hill Street Bridge Costs [Current Route - Nil]
21.
22.
The above costs include the following estimated costs for the Navigation
Street/Hill Street Bridges:Option A Structures
£11.97 million
Option B Structures
£9.45 million
A&B Compensation to train operators
£5 million
In his Proof of Evidence Mr Parsons submits the view that these complex
structures will only need comparatively minor works to accommodate the full
tram loading. Centro does not accept this in view of the reports from Network
Rail that indicate that elements of the structure are in poor condition and failed
their initial Brigeguard Assessment.
23.
However, Centro has undertaken a review of the costs outlined above to
assess what the costs would be if this optimistic view could be sustained
through what would be a lengthy assessment process with Network Rail’s
Asset Stewards. Therefore the costs have been revised by removing all the
costs outlined in paragraph 21 and substituting just £500,000 for the works
costs and, assuming that no closures outside normal rules of the route
possessions would be required across the busy western throat of New Street
Station, no compensation for train operators.
24.
Based upon these highly unlikely assumptions proving correct, and adjusting
contingency and the allowance for inflation accordingly, the revised capital
costs for the options are:£71.8m for Option A and
£79.1m for Option B.
25.
My colleague Mr Chadwick and his team have reviewed these revised costs
and used them as a basis for undertaking a revised BCR Assessment, which
shows that Option A would have a BCR of 1.5:1 and Option B 1.2:1.
26.
Therefore even if the bridge position adopted by VSH is found, after the
necessary lengthy testing and assessment process that would be required by
Network Rail, the alternative options would still fail to gain funding.
Commentary on Differences Between Current Project And Options
27.
Base Capital Costs – the base costs have been developed on the basis of
route lengths with costs based upon the actual contractual costs for BCCE. It
should be noted however that the CSQ length of construction is effectively
from the corner of Pinfold Street as the BCCE contract will construct the full
twin track alignment to the junction with Stephenson Street. However, for the
options, not only will that track be rendered redundant, but the option routes
track would need to be constructed from the western end of the Stephenson
Street stop platform, including excavation and reconstruction of the length just
under construction. Allowance has been made for the structures issues
outlined in paragraph 21above, together with retaining walls at the relevant
sections of options A and B.
28.
There are a number of other issues that must also be taken into account in
any detailed consideration of these routes, including the impacts on the
overhanging facade of New Street Station, interfaces with the egress from the
New Street Station car park, the interface with the Mailbox car park, Holliday
Street, access to the Dandara development and the Crowne Plaza Hotel, and
the complex signal junction required at the junction of Option B with Broad
Street and the access to Paradise Circus.
29.
Programme Management – the current project is of shorter duration and costs
are further reduced as core programme team costs have largely been funded
by BCCE project in the period 2012-2015.
30.
Development and Management – considerable pre- and post- TWA design
work undertaken on the CSQ route between 2000 and 2012 and these are
sunk costs, whereas all would have to be done again on options. The TWAO
design and the statutory process is for only a minor variation of the alignment,
not for the whole route length on longer routes with many objectors.
31.
Detailed design costs – these are presently very clearly defined for CSQ and
can be thoroughly quantified, also some work has been funded through BCCE
project (extended terminus design in Stephenson Street) in the period 20122014. A percentage approach has been taken for options as no information is
available at this stage.
32.
Land – only very small areas are required for CSQ.
33.
Construction Supervision – no Network Rail assets are affected by CSQ and
so the associated costs are less than for the options which cross the bridges
and two tunnels
34.
Utilities – as for CSQ
35.
Commissioning – slightly higher figure assumed for options due to increased
number of interfaces with highway and associated traffic signal junctions.
36.
Contingency – CSQ based on a Quantified Risk Assessment developed over
a number of years (=9% of costs).
37.
Inflation – reduced when compared to options as costs fall in earlier years
(and sunk costs are actual therefore inflation not applied) and contracts for
design etc are fixed within current framework contracts.