M. Abbekerk MSc

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 DBFM Contracts Secured by AMC
"An Analysis about the Applicability of Asset Management Control for Design, Build, Finance and Maintenance Contracts in the Infrastructural Sector."

In general, and thus also in the infrastructural sector, it can be stated that capital assets (e.g. a ship, an offshore platform, an aircraft, an infrastructural asset, etc.) are increasing in complexity, size and cost. Conversely the operational demands of capital assets are increasing as well. When, for example due to a failure, the asset is not available to fulfill its function, the (economical) consequences can be tremendous. This has stimulated the need for new forms of collaboration and better (management) tools to reduce cost and risk.
In the Dutch infrastructural sector at this moment a collaboration method where Design (D), Build (B), Finance (F) and Maintain (M) are integrated receive a lot of attention. With these so called DBFM contracts, the collaboration shapes when private parties organize themselves in a consortium, which is specially intended with the purpose to deliver a certain service for a long period to a government body. Dura Vermeer belongs among the key players of the Dutch constructing industry and it established in 2005 a new department (Dura Vermeer Asset Management) to provide an answer to these new forms of development on the infrastructural market. This young department is currently searching for the right method and techniques.
Stavenuiter finished in 2002 a research which investigated how cost effective management control of capital asset could be achieved. In this research he developed an approach called; Asset Management Control (AMC). He defined AMC as a Life Cycle management (LCM) approach to manage all the processes (specify, design, produce, maintain and dispose) needed to achieve a capital asset capable to meet the operational need in the most effective way. Although the approach was only tested in the maritime sector, Stavenuiter expects that the approach can be applied in general.
For the research two objectives are formulated:
  1. Contribute to the development of the Asset Management Control (AMC) theory by analyzing the applicability of AMC in another domain than the maritime domain. 
  2. Provide DVAM with insights about the applicability of AMC for a DBFM contract. The added value for DVAM is that they believe that the AMC approach has the potential to anticipate on the developments in the infrastructural sector. These developments clearly shows that customers are asking a different commitment of the infra contractor. This is visible by the introduction of new collaboration methods in this sector, were DBFM contracts take an important place.
From these objectives the following aim for this research is formulated:
What is the applicability of Asset Management Control for Design, Build, Finance and Maintenance contracts in the infrastructural sector?
The followed research strategy was qualitative from nature and consisted of a desk study and a field study to identify relevant analysis subjects. These analysis subjects are used as main focus point to research the applicability of AMC for DBFM contracts. A limited case study, which consisted of the Coentunnel, is used to test the findings of the research. The Coentunnel is an existing tunnel which is located in Amsterdam. The expansion of the capacity of this tunnel is put out for tender in a DBFM construction. The findings of the research are delivered in a SWOT (Strength, Weakness, Opportunities, Threat) analysis and recommendations on which issues the AMC approach can further be improved when implementing it for DBFM contracts.
The research revealed that the AMC approach can not be easily used for existing DBFM contracts. An important reason is that within the AMC approach the performance of the asset is measured in a different way than within the currently existing DBFM contracts. However for new DBFM contracts interesting possibilities and no insuperable problems were found. The overall benefit of using the AMC approach for a DBFM contract, it is definitely the structured, integrated and transparent work approach. The estimated and realized costs, the estimated and realized performance, the agreed performance, and the incentives system are all related to each other in one integrated system.
Important findings of the research are:
  • Using the LCM model and the performance indicators of the AMC approach for an incentives system of the DBFM contract. This way the incentive system is integrated in LCM program of the asset.
  • The LCM model can provide an important basis to perform a Life Cycle Cost Analysis (LCCA). A well-founded LCCA can positively contribute to some identified important risks for a DBFM contract like reliable predictions for maintenance costs.
  • When using the LCM model for managing a DBFM contract it will be almost inevitable to be transparent about the actual costs, which is definitely not common practice in the infrastructural sector. If not properly introduced, it is expected that cost transparently will lead to disturbed relations between the government and the consortium. The cost plus incentive system is presented to be a method to deal with this. An advantage of this paying mechanism is that risk of wrongly estimating the logistic support cost is divided between the government and the consortium. Further the government can grow and stay in their role as SMART buyer. 
  • It is not possible with the LCM model to spread the LCC over periodically payment amounts. A solution is to accept differences in height of the payment or to use the cost data of the LCM model as input data for a financial control application in which these payments can be calculated.
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