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Risk Allocation in
Mega-Projects in Denmark2

Risk Allocation in
Mega-Projects in Denmark

Leif Vincentsen
Kim Smedegaard Andersen
Sund & Bælt Holding A/S, Denmark

Working Group Paper
2018

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Cite as: Vincentsen, L. and K. Smedegaard Andersen (2018),
Mega-Projects in Denmark", Working Group Paper, OECD Publishing, Paris.

"Risk

AllocationinRISK ALLOCATION IN MEGA PROJECTS IN DENMARK | WORKING GROUP PAPER | ITF

Foreword
Transport infrastructure is a major enabler of economic development. In the drive to refurbish or build
more, governments worldwide have turned to the private capital market to help finance it. The primarynarrative behind this push is that there huge stocks of private capital available, while public financing
capabilities are said to be limited and insufficient.
The almost exclusive vehicle of private investment in transport (and social) infrastructure are
Public-Private Partnerships (PPPs). In the context of PPPs, two important aspects have received little
attention.
First, sufficient attention has not been given to the role of suppliers. The focus of, governments andIntergovernmental Organisations has been on resolving the challenges to private investment from theviewpoint of investors; a key part is reducing uncertainty they face and enabling them to price risk more
efficiently (establishing infrastructure as an asset class).
Yet looking at the investors only gives an incomplete view of the total cost of the risk transferred fromthe public to the private sphere. In PPPs investors transfer some of the major risks they are not
comfortable bearing (e.g. construction risk) to design, construction, maintenance, and operations
contractors.
As investors, suppliers too face uncertainties and can’t price risk efficiently. In such a case, the base costof the initial investment (and of subsequent services) will be much higher than they could be, and notjust the cost of their financing.
Uncertainty arises from the difficulties to accurately estimate the cost of construction, maintenance,
operations, and financing. But it also stems from “unknown unknowns” (the so called Knightian
uncertainty), for instance changes in weather patterns or paradigmatic technological shifts the timing
and impact of which are unclear but will influence what infrastructure is needed and where.
So what can policy makers do to reduce the cost of inefficient risk pricing of suppliers? Where does thisput PPPs? How can public decision makers reconcile long-term uncertainty with private investment ininfrastructure? Who should bear long-term uncertainty in projects, the public or the private sector?
These were some of the guiding questions for a Working Group of 33 international experts convened by
the International Transport Forum (ITF) In September 2016. The group, which assembled renowned
practitioners and academics from areas including private infrastructure finance, incentive regulation, civilengineering, project management and transport policy, examined how to address the problem of
uncertainty in contracts with a view to mobilise more private investment in transport infrastructure. As
uncertainty matters for all contracts, not only those in the context of private investment in (transport)
infrastructure, the Working Group’s findings are relevant for public procurement in general.
The synthesis report of the Working Group was published in June 2018. The report is complemented by aseries of 19 topical papers that provide a more in-depth analysis of the issues. A full list of all Working
Group papers is available in Appendix 1.

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Table of contents
Executive summary ................................................................................................................................ 5
Introduction ........................................................................................................................................... 7
The fixed links..................................................................................................................................... 7
The Storebælt fixed link ......................................................................................................................... 8
The procurement stage ..................................................................................................................... 9Construction stage ........................................................................................................................... 13Øresund fixed link ................................................................................................................................ 17
Procurement stage .......................................................................................................................... 18
Construction stage ........................................................................................................................... 22
Observations .................................................................................................................................... 24
Fehmarnbelt fixed link.......................................................................................................................... 26
Procurement stage .......................................................................................................................... 27
References ........................................................................................................................................... 31
Appendix 1. Research questions and outputs ...................................................................................... 32

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Executive summary
What we did
This paper looks at three high-profile infrastructure mega-projects in Denmark: the Storebælt andØresund fixed links and the planned Fehmarnbelt fixed link. It specifically describes the evolution of theapproach to risk allocation in procurement and construction taken by Sund & Baelt Holding A/S for thecivil engineering parts of these projects. Risk allocation is a decisive factor in any major construction
project. Clear and rational risk allocation is an important driver of value for money. It is well understoodthat a risk should be carried by the party best suited to mitigate and/or manage the particular risk.
However, practical implementation of this rule is not by any means a simple exercise.

What we foundRisk analysis is an essential step on the road to effective risk allocation. Risks must be understood inorder to allocate them correctly. The owner’s fundamental choices affect the outcome the most. The
politically driven decision to construct a bored tunnel on Storebælt rather than an immersed tube
tunnel, notwithstanding the findings of the risk and other assessments, proved to be hugely significant.
No matter how robust or well-founded the risk allocation is after that, there is no escaping thefundamentals of the risk that you have taken on.
Using design and build contracts can bring great benefits. The interplay between design and methodrisks and opportunities can be well managed by the contractors to everyone’s benefit. Where risks are to
be transferred, it is vital that in the procurement stage the bidders have the best information possible toassess and manage the risk. Here, the contractor's fundamental choices at the tender stage will affectthe outcome the most.
Risk allocation should be stated clearly and unambiguously in the contract documents. Time taken to
prepare for procurement is time well spent. The benefits of using performance requirements in contract
documents can be seen. But this must be appreciated as an art and not a science; sometimes there is no
black-and-white answer. The owner must walk the line between functional requirement andspecification. As always, it is important to know what your interest is and have a mature attitude to risk.
Environmental risk, for example, is unable to be truly transferred, and the owner should takeresponsibility where they need to.
Competitive dialogue, as provided for in the procurement regulations, can be a useful part of the risk
allocation process, building a common understanding and providing a forum for constructive give-andtake, but it is time consuming and requires the right skills from both the owner and contractor.

What we recommend
Determine which party is best able to prevent and mitigate a risk through analysis, not a premade
template
Take time before procurement to analyse and understand risks, to make the best choices and develop
the most effective risk allocation. This involves preparing good quality documents and allowing sufficient
time for the procurement processes. Risk-related information should be shared early in the tender
process by establishing a joint risk register.

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Work with the bidders in complex schemes to better understand risk
Consult the market as appropriate, for example through structured market engagement preprocurement or as part of the procurement process (e.g. under the competitive dialogue procedure).
Build a common understanding of risk and optimise risk allocation.
Mind your interests in risk allocation and don’t get caught up in micromanagement
Maintain a clear view of what your interests are and have a mature attitude to risk. Where appropriate,use input rather than output specifications if this will better manage whole-project risk. The role of theowner is to lead the process not manage it in detail. Exercise control by strategic intervention.
Remain in close contact, and vigilant, even once risks have been allocated.
Do not be lulled into a false sense of security. It is true that risk assessment and risk management havebecome more sophisticated over the life of Sund and Bælt’s projects and contractors have become
hugely skilled in managing the risks that are allocated to them. ISO standards have established a common
language and a level of quality and IT systems allow risks to be monitored and tracked in collaborative
online environments. However, never forget that in the real world, in order to avoid a hazard, you arereliant upon the people on site. And simple errors like a hatch being left open can have serious
consequences. Always be vigilant and communicate, communicate, communicate.

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Introduction
Sund and Bælt has been responsible for three high-profile mega-projects for combined road and rail
traffic in the last 30 years: the operational Storebælt and Øresund fixed links and the planned
Fehmarnbelt fixed link.
This paper describes the evolution of Sund and Bælt’s approach to risk allocation in the procurement andconstruction of the civil engineering parts of its infrastructure.
Figure 1. The locations of the Storebælt, Øresund and Fehmarnbelt fixed links

The fixed links
The Storebælt fixed link connects Denmark’s largest island, Zealand, where the capital Copenhagen islocated, to the second largest island, Funen. It crosses the Storebælt strait, the widest and deepest of thethree straits that connect the Baltic Sea to the North Sea. Before its construction, Denmark was divided
into two regions, east and west (Funen having been connected since 1935 to mainland Jutland in thewest by the Lillebælt bridge). The fixed link has become a vital part of Denmark’s transport infrastructureand economy, creating opportunities for businesses and individuals.
The Øresund fixed link connects Denmark and southern Sweden across the Øresund strait. It opened toroad and rail traffic in 2000 and is an important part of Denmark and Sweden’s transport infrastructure.
It provides connectivity between the Copenhagen area and southern Sweden and was a game-changer inthe creation and growth of the Øresund economic region.
The Fehmarnbelt fixed link will be a road and rail tunnel between Lolland in Denmark and Femern inGermany. It will create opportunities for businesses, commuters and tourists and will be the backbone ofa new European economic region. It will increase flexibility and accessibility, reducing travel time by train© OECD/ITF 2018

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between Hamburg and Copenhagen to 2.5 hours from 4.5 hours today. Travel time by road will also be
reduced.
Table 1. Facts about the Storebælt, Øresund and Fehmarnbelt fixed links
Storebælt

ØresundFehmarnbelt

Length

18 km

16 km

18 km

Principal elementsof coast-to-coastlink

West (low) bridge carrying roadand rail traffic

Road and rail tunnel in the west
section

Road and rail tunnel

Road and railway on the islandof Sprogø in the middle of thestraitRoad and rail on the artificial
island of Peberholm

East (high) bridge carrying roadtraffic

Two-deck road and rail bridgein the east section

East tunnel carrying rail traffic
Political approval

1987

1991

2008

Construction start

1988/89

1995

Planned for 2020

Open to traffic

1997/98

2000

Planned for 2028

Debt at opening(2017 prices)

EUR 6.8 billion

EUR 3.4 billion

Estimated EUR 7.4 billion

Estimated
repayment period

34 years

33 years

36 years

The Storebælt fixed link
In June 1987‚ the Danish parliament passed the Construction Act for a fixed link across the Storebælt.
This was the culmination of a debate lasting decades about the link. An important feature of the act wasthat the link was to be built in two stages such that the railway would open three years before the road.
This arose from a political wish to give public transport a head start over car traffic. The railway wasplanned to open in 1993 and the road in 1996.
The act described the fixed link in four different sections. The west section of the link would comprise alow-level bridge carrying both rail and road across the western channel between Funen and the island of
Sprogø. In the central section, rail and road would run on the island of Sprogø. The east section for rail
would comprise either a bored or an immersed tube tunnel across the eastern channel between Sprogøand Zealand, and the east section for road would run either on a high-level bridge (with various
structural solutions being authorised) or in an immersed tube tunnel.
Thus, the form of the structure of the west section was not defined. In the east section, the act identified
a number of alternatives for the infrastructure, based on the feasibility and option studies that had at

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that time been carried out. The preferred alternative would be selected based on further investigations(including risk assessments) and on the bids received in the later procurement processes.
Also in 1987, the owner organisation (which was later incorporated into Sund and Bælt) was establishedand was made responsible for the design, procurement, construction and operation of the fixed link. The
owner organisation was owned by the Danish state.

The procurement stage
For procurement, the fixed link was divided into a number of tender packages:West Bridge for road and rail.

East Tunnel for rail (either bored or immersed tube tunnel).

East Bridge for road. As noted above, the act also provided for an immersed tube tunnel option
for the east section, but this was not taken forward to procurement. Further investigations,
including in the light of prices received for the immersed tube tunnel alternative for the east
tunnel, meant this option was rejected. For procurement, the East Bridge was further divided
into four sub-packages.

The common features of the procurement processes are described below.
Joint-venture consulting engineers produced the tender documents and for-tender design. Design was
carried out on the basis of earlier concept design and option-study stages that had, among other things,
informed the drafting of the Construction Act.
The tender documents consisted of the contract conditions, technical requirements, tender drawings
and bills of quantities, together with instructions to tenderers for submitting bids.
The tender documents reflected the findings of the owner’s risk assessments. In the course of preparing
the for-tender design, the owner carried out construction risk assessments. The owner also carried out
operational risk assessments, which focused on events that might lead to traffic disruption or fatal
accidents to users. The results and, in particular, any mitigation measures were incorporated into thefor-tender design and tender documents.
The owner’s Design Basis was included in the tender documents in order that bidders understand therequirements and better prepare their bids. The Design Basis identified the owner’s most fundamental
functional requirements, the cross section, alignment, codes and standards, etc. However, it was not
simply a technical document; it also reflected the owner’s risk assessments and the future importance ofthe fixed link in Denmark’s transport infrastructure and economy. It set out the basis for safe and robust
design with a reasonable redundancy and factor of safety against extreme loading and events. These
included ship impacts, ice loading, loss of durability and accidental loads from rail and road. It was basedon a range of studies covering geology, hydrogeology, tunnelling methods, durability, loading, railway
operations and safety.
All contracts were procured by inviting tenders from pre-qualified joint-venture contractors.
Bidders were required to submit bids for each of the owner alternatives that were identified in eachpackage. This resulted in a large number of bids being required.
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requirements). This approach was taken to get the most benefit from the contractor’s expertise and inrecognition that methods are as much a driver of cost and quality as design.
Design risk was to be retained by the owner.
The tender documents did not include detailed design drawings and specifications but rather higher level
general arrangements and functional requirements. Detailed for-construction design and drawings
would be issued to the contractor during the contract.
Work would be remeasured using the priced bills of quantities in the bid. Thus, given the level of detail ofthe tender documents, there was relatively low cost certainty.
The owner made geotechnical data available in the tender documents based on geotechnicalinvestigation along the link’s alignment (from 25 years of geotechnical investigations and tests in thearea of the fixed link). Furthermore, the owner supplemented this with additional investigations andtests (in situ and in the laboratory) performed by specialists with experience of the prevailing difficult
ground conditions. All data was made available in a 3D-geomodel. A general description of the soil
conditions was included as an appendix to the Design Basis. The information also incorporated
interpretative reports made by the owner’s consulting engineers. The eventual contractors would
supplement this information with their own investigations as necessary.
The owner retained the risk of geotechnical conditions that that could not reasonably be foreseen by anexperienced contractor on the basis of the available data. The large volume of descriptions and data thatwere provided at tender were to be used as the reference for determining whether actual conditions
could have been foreseen.
The owner evaluated the bids on a quality/price basis. Quality criteria included robustness of the
management systems and construction methods.
Risk-based adjustments were made to the bid price for the purposes of evaluation to reflect
qualifications and reservations in the bids. These adjustments were discussed with bidders at thecontract negotiation stage. The Design Basis, and in particular the risk assessments and studies behind it,
were useful in assessing the contractor alternatives and variants.
In parallel with the tender assessment, the owner carried out a quantitative risk assessment of theirretained risks for each of their alternatives. During the tender assessment, these assessments wererefreshed to reflect particular aspects of the bidder’s proposals. Where bidders submitted alternatives
and variants, new risk assessments were carried out.
Contracts were based on general and specific conditions forming an appendix to the Danish General
Conditions for Construction Work (i.e. based on a standard type of Danish contract).
The contractor was responsible for executing the works in accordance with the contract, irrespective ofwhether the contractor used methods proposed in the tender or other methods. The contractor was
responsible for all quality management and quality assurance regardless of whether the owner carriedout any supervision, inspection or audit.
Particular features of each of the procurement processes and their outcomes are described below.
West rail and road bridge

In November 1987, the owner appointed a consulting-engineer joint venture to prepare for-tender
designs and tender documents for three west bridge alternatives. The alternatives were identified in an
earlier concept design and option-study stage. The three alternatives were a concrete bridge, a steel

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bridge and a concrete/steel composite bridge. Two foundation (caisson) alternatives were also identified.
Tender documents for each alternative were subdivided into three packages: substructure,prefabrication of superstructure and transport and erection of superstructure.
In April 1988, tender documents were issued to five pre-qualified bidder joint ventures.
Bids were received from all five bidders in November 1988.
Each bidder submitted five separate bids for the owner-identified alternatives.



The bidders collectively submitted a further seven alternative structural arrangements.

The bidders also submitted seven variants to the various alternatives.

Collectively, 40 bids were received.

On the basis of the tender assessment and the assessment of retained risks, a bidder alternative wasselected as the most economically advantageous bid.
The contract was signed in June 1989. The contract took account of various contract negotiations,
including a revised alignment and bridge length (optimised with respect to embankment lengths andcompensation dredging) and adjustments that had to be made to the bidder alternative. The design ship
collision loads were also revised based on the findings of a risk assessment.
Importantly, the contract also reallocated design risk – the contractor became responsible for the design.
This was a natural outcome of the bidder’s alternative being accepted. Detailed for-construction designand drawings would be prepared by the contractor. The owner’s consulting engineer would be
responsible for reviewing the contractor’s design and execution documents against owner requirements.
Also, again, as a natural outcome of accepting the bidder alternative, the contract was on a lump sum
basis rather than the traditional remeasured basis.
East rail tunnel

In July 1987, the owner appointed two consulting-engineer joint ventures to prepare for-tender designs
and tender documents for the east tunnel alternatives, a bored tunnel (comprising two bored railway
tubes with cross passages) and an immersed tube tunnel in either steel or concrete.
In early 1988, tender documents were issued to four pre-qualified bidder joint ventures.
The geotechnical information was supplemented by a special study on the probability of finding rocks
during tunnel boring.
The tender documents reflected the following specific findings of the owner’s risk assessments:


Choice of tunnel boring machine (TBM) type. Based on its assessment of the geology and risk ofdelay, earth-pressure-balanced tunnel boring machines were required.



Number of TBMs. Based on its programme risk assessment, four TBMs were required. This would
allow two TBMs to work on each individual bore from each end, improving progress andproviding some redundancy against problems with individual machines.



Geotechnical risk. The owner retained the risk of geotechnical conditions that could notreasonably be foreseen by an experienced contractor on the basis of the available data.

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The contractor would be responsible for all aspects of TBM performance (rate of drive, erectionof tunnel lining, etc.). Relief would only be given in the event of owner’s geotechnical risk
occurring.

Bids were received from all four bidders in July 1988.
Each bidder submitted a base bid for the bored tunnel. The bidders also collectively submitted six
variants that included the use of only two TBMs (with a resulting longer construction period), a different
type of TBM and changes to the tunnel lining and distance between the tunnel bores.
The four bidders also submitted bids for the concrete and steel immersed-tube tunnel alternatives. For
each of these alternatives, the bidders were required to provide three bids relating to different
arrangements of an artificial peninsula at the tunnel ends (changing the tunnel length). Bidders
submitted variants covering different ballasting arrangements, joint details and dredging methods.
For the bored tunnel, the variants for the use of only two TBMs were rejected on the basis of theowner’s risk assessment (risk of delay) despite the lower bid price. The variant for the different type of
TBM was rejected on the basis of a risk assessment as to its ability to withstand the ground conditions.
Other variants covering the tunnel lining were evaluated and accepted. In order to inform the choice ofthe durability solution, the owner had required bidders to choose between using an epoxy-coatedreinforcement or coating the inner and outer surfaces of the tunnel linings. A coated reinforcement waschosen by all bidders on the basis of the risk of damaging the surface coating during handling.
For the immersed tunnel, the steel solution was found to be the most advantageous. The bidder variant
for joint detail was acceptable.
Contract negotiations were held with the bidders to clarify aspects of the bids and discuss thequalifications, reservations and the risk adjustment.
The owner carried out a quantitative risk assessment of its retained risks for each of the alternatives. This
showed that the contingency required for the bored tunnel alternative was 65% higher than for the
immersed tube tunnel.
Notwithstanding the findings of the tender assessment, risk assessments and likely higher outturn cost, a
political decision was taken to adopt the bored tunnel alternative. This was in order to avoid the
excavation on the seabed required for the immersed tunnel. Therefore, the most economicallyadvantageous bored tunnel bid was selected.
The contract was signed in November 1988.
East Bridge

In spring 1989, the owner appointed a consulting-engineering joint venture to prepare for-tender
designs and tender documents for the east bridge. An earlier concept design and option-study stage had
identified cable-stayed and suspension bridge solutions as viable. During early tender design, asuspension bridge was identified as the preferred alternative for the main span. Thus, unlike the othertenders only one alternative was tendered. However, within this alternative there were construction
alternatives for specific parts of the structure: the pylons could be either steel or concrete; anchors
blocks could be precast or cast in situ; and cable erection method could vary. For the approach spans,steel or concrete alternatives were tendered.
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suspension bridge pylons and substructure

approach bridge superstructure (steel or concrete)approach bridge piers and substructure (supporting either steel or concrete).

In June 1990, tender documents were issued to eight pre-qualified bidder joint ventures.
Bids were received from all eight bidders in December 1990.
The eight bidders collectively submitted a total of 32 bids. This included five bids for the suspension
bridge superstructure and five bids for the substructure. The remaining bids covered the approach
bridge alternatives. The bidders submitted alternative structural arrangements (span lengths and form of
construction). The bidders also submitted variants to the various alternatives (prefabricating piers, using
higher strength steel to reduce weight, etc.).
On the basis of the tender assessment and assessment of retained risks, the steel alternative for theapproach bridge superstructure was selected. The bidder alternative/variant to increase the span lengthand use high strength steel was found to be the most economically advantageous, and the contract wasawarded on that basis. The same bidder won the contract for the suspension bridge superstructure. The
contracts for the suspension bridge pylons and substructure, and approach bridge piers and substructure
were awarded to another bidder.
The contracts were signed in October 1991. Design risk was retained by the owner despite the fact abidder alternative for the approach bridges had been selected. The bidder had offered to takeresponsibility for detailed design, but this was not preferred because of the interface to substructuresfrom another contractor. It was considered that the owner’s consulting engineer could implement thebidder alternative. The contracts were traditional remeasured contracts rather than lump sums.

Construction stage
This section describes risk-specific aspects of the construction stage. During construction, the ownercontinued to carry out construction risk assessment, building on the pre-tender construction risk
assessments but now able to address the contractor’s chosen methods and programme.
West rail and road bridge

The contractor’s chosen method involved prefabrication of bridge caissons, pillars and deck girders in apurpose-built waterfront production facility at Lindholm near the western end of the West Bridgealignment. This was found to bring great benefit in reducing risk because construction was carried out incontrolled conditions rather than in the strait.
On the other hand, construction was fundamentally dependent on the heavy-lift crane Svanen, which
was used to transport and place all of the caissons, pillars and deck beams. As part of the construction
risk assessment, hazards were identified, including failure of lifting gear, collision with the load-out jetty
and collision with third-party vessels. Risks were assessed and mitigation measures were introduced asnecessary, and the risk assessment informed the review and the comment on the contractor’s method
statements. When Svanen was transported across the then existing ferry route, special measures wereintroduced for communications.

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Figure 2. The West Bridge across the Storebælt

East rail tunnel

Driving a bored tunnel in the prevailing ground conditions proved to be even more difficult than had
been assessed in the various risk assessments. The impact of this difficulty was compounded by events
caused by human failure. These difficulties and events are described below. What is also described is
how the owner responded. Recovering from these events required the owner and the contractor to be
active and flexible and to not simply sit back and allow the mechanisms of the signed contract to run
their course. Despite these actions the project was significantly delayed.
The specialist manufacturer of the TBMs proved unable to meet the challenging programme. In trying to
manufacture four large machines at the same time, quality control suffered. While these were
manufacturer risks, the main contractor and indeed the owner placed staff at the manufacturing facilities
to better monitor the work. The owner also renegotiated some aspects of the programme. While thisallowed for some extension of time (removing the threat of damages), it also required some of thealready incurred delay to be recovered by accelerating the pace of work in return for increased payment.
In the event, delivery to site was still delayed.
After only a very short period in operation, the first TBM was found to have a serious defect. Filings andshavings from the welding and fabrication processes had contaminated the hydraulic systems. The
pumps and equipment were stripped from all four machines and returned to the manufacturer for
cleaning. This further delayed the work.
After a short period of running-in and driving the machines in the actual ground conditions, and against
the backdrop of the manufacturer delays, the owner and contractor negotiated a change to the risk
sharing with respect to ground conditions and TBM progress. As noted previously, the contractor was
responsible for TBM progress and the owner bore the risk of unforeseen ground conditions. In the newagreement, rates of progress were defined, but the owner shared the risk if progress was slowed by

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more than 10% (as a result of the difficult ground). In addition, an element of risk sharing was introduced
around the replacement of cutter heads. This new agreement reflected the real-world reality that driving
the tunnel was proving to be more difficult than expected and that sitting back and arguing about theforeseeability or unforeseeability of ground conditions or the TBM problems would not recover thesituation.
In October 1991 the tunnel bores on the western side both flooded. The flood occurred when the
excavated face at the front of one of the TBMs failed, a hydraulic connection to the sea above wasformed (i.e. a void opened up and the sea floor collapsed in) and water flooded in. Maintenance wasbeing carried out on the screw conveyor, and the bulkhead door and manlock had been left open incontravention to the written procedures. Later investigation suggested that a false sense of security had
crept in because in the early advances of the TBM the excavated face had been stable.
Against the backdrop of the now significant delays, the owner and the contractor developed Project
Moses in response to the problems in driving the tunnel in difficult ground conditions. Tunnelling in thetills was difficult in pressures above 2bar. In addition, the frequent replacement of the cutter heads had
to be carried out in compressed-air working, and this would be impossible as the pressure increased. The
project involved the large-scale dewatering of the seabed along the alignment of the tunnel to reduce
the pore water pressure. It was conceived after observing that during dewatering of the ramp area on
Sprogø, the groundwater level was lowered over a considerable distance. The project involved theowner, contractor and geotechnical specialists working together to trial and then implement the fullscale dewatering.
In June 1994 a fire broke out in one of the TBMs; the most likely cause was a burst hydraulic hose andburning hydraulic oil. The fire activated a gas-alarm that tripped the main power supply, but
unfortunately the sprinkler and foam systems were not connected to the emergency power supply. The
TBM was evacuated. The fire department was unable to access and extinguish the fire, and it was notpossible to reach the front of the TBM until 36 hours later. A length of installed tunnel-lining was foundto be severely damaged. The fire delayed tunnel construction by 9 months.
In the aftermath of the fire, a HAZOP (Hazards and Operability) study was carried out on all working
procedures, with a focus on personnel safety. The study was carried out by a working group including theowner, contractor, consulting engineers, safety officers and a number of safety specialists.
The tunnel construction was ultimately completed approximately three years late.
East Bridge

Construction involved prefabrication of bridge caissons in purpose-built production facilities at
Kalundborg and Halsskov near the East Bridge alignment. The construction risk assessment showed thisto bring benefit in reducing risk because construction was carried out in controlled conditions rather
than in the strait. On the other hand, transport by sea was found to bring its own hazards.
A specific construction risk assessment for marine traffic was carried out. Risks were assessed andmitigation measures were introduced as necessary; the risk assessment informed the review and thecomment on the contractor’s method statements. The owner introduced a vessel traffic system in thestrait, including two guard ships.

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Figure 3. The East Bridge across the Storebælt

Observations

The following observations can be made. Bidders were required to submit a large number of bids. This
placed a considerable burden on the bidders and very likely affected the quality of their bids, including
their assessment of the risks. On the other hand, it allowed the owner to market-test their alternatives to
identify the most economically advantageous, including as regards risk. However, it would have perhaps
been better to have spent more time sifting through the alternatives before procurement. The greater
time taken to study the East Bridge before procurement can be seen to have been beneficial here.
A relatively short time was allowed for bidding. To take the East Bridge as an example, six months toprepare multiple bids is a challenge; doing so in a joint-venture bid group is a greater challenge.
The tender documents did not include detailed design drawings and specifications, and the contracts
were to be remeasured against the priced bill of quantities. There is nothing inherently wrong with thisapproach, however, a mature attitude to risk and contingency is needed because cost certainty is low.
That said, providing more detail to achieve greater cost certainty would have required more preprocurement time, and the short period between political approval (1987) and construction (1988) is
worth noting.
The owner was flexible in their approach in pursuit of best value where they needed to be. The allocationof design risk for the West Bridge was changed where analysis showed it offered value for money.
Where they needed to be, the owner was rigid in their approach. For the East Tunnel, the preprocurement studies and risk assessments meant that the owner held-firm and rejected the variants fornumber and type of TBM.
Parts of the fixed link were broken into more packages than would be the norm today. It is very unlikelythat an owner would divide a suspension bridge into separate packages for superstructure and16© OECD/ITF 2018

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substructure. Indeed, this approach was not used for Øresund, and Fehmarnbelt also uses large onecontractor packages.
The decision to choose a bored tunnel for the East Tunnel is worth noting. The findings of the risk
assessments, including the quantitative risk assessment of owner-retained risks, was overturned by thepolitical/environmental consideration to avoid dredging a trench for an immersed tunnel. The boredtunnel proved to be much harder to construct than had been thought. Incidents of human error caused
other catastrophic events. And the outturn owner’s costs were considerably above what had been
estimated in the risk assessment. It is interesting to reflect on whether the same decision would be madeif the estimates had been nearer the outturn.
The construction stage demonstrates the potential benefits of prefabrication as compared to in-situ
construction. For the bridge structures, prefabrication on land was used as much as possible. This
provided better and safer working conditions and secured higher quality, especially for the concrete,
where high durability was required and strict temperature and moisture control was necessary during
hardening. However, transport by sea was found to bring its own hazards, which needed to be managed.
While the East Tunnel was by no means a success story, the owner and the contractor could feel somepride on how they responded to the problems. Recovering from these events required the parties to be
active, flexible and capable of solving problems. Sitting back and expecting the mechanisms in thecontract to solve the problem was not an option. It is a credit to the positive approach of the parties thatissues were ultimately settled amicably and without recourse to the courts.

Øresund fixed link
In March 1991, Denmark and Sweden signed a treaty for the establishment of a fixed link across theØresund strait. That same year the Danish parliament ratified the treaty in a public works act andestablished Sund & Bælt Holding A/S. The treaty defined the overall requirements for the fixed link,including alignment, design speeds and environmental constraints. It also defined the principal civilengineering elements of the link:reclaimed (artificial) peninsula at Kastrup on the Danish side

immersed tube tunnel under the Drogden channel

reclaimed (artificial) island Peberholm to the south of the island of Saltholmbridge between Peberholm and Sweden crossing the Flinte channel (comprising a west approach
bridge, a high bridge and an east approach bridge).

A tunnel was selected for the crossing between Kastrup and Peberholm because the alignment of thelink is under the flight path to Copenhagen Airport and tall bridge pylons were not acceptable. An
immersed tube tunnel was selected rather than a bored tunnel because of the diverse and difficult
tunnelling conditions in the Drogden channel. The relatively shallow depth of the channel also lends itself
to an immersed tube tunnel. It is worth noting that by the time of this decision the problems with thebored tunnel on Storebælt were starting to become evident.

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Figure 4. The Øresund bridge and island, with the tunnel portal in the foregroundIn 1992, Øresundskonsortiet was established to oversee the coast-to-coast section of the link.
Øresundskonsortiet is 50% owned by Sund & Bælt Holding A/S and 50% owned by a Swedish statecompany.

Procurement stage
For procurement the civil engineering elements were divided into the following packages:dredging and Reclamation (D&R), covering the tunnel trench, artificial island, navigation channel
realignment, peninsula at Kastup and environmental compensation dredging



immersed Tube Tunnel and approaches at Kastrup and on Peberholm, including the mechanicaland electrical systems in the tunnelhigh Bridge, a cable-stayed bridge over the Flinte channeleast and west approach bridges

Later contracts covered coast-to-coast works (railway, communication systems, supervisory control anddata acquisition [SCADA], and traffic control).
Here some differences with Storebælt can be noted. The works were divided into fewer packages. For
example, on Storebælt the East Bridge had been divided into separate packages for superstructure andsubstructure, even though they were awarded to the same bidder. The West Bridge procurement
similarly involved multiple packages. The owner was keen to not have too many contracts with multiple
interfaces and for the contracts to be attractive to large international contractors.

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Also, the owner set out with a much clearer idea of the preferred solution, making their strategic
decisions pre-procurement. The bidders were not required to bid for multiple alternatives. The greater
time that was taken between political approval and procurement and construction is worth noting.
Figure 5. Illustrative cross section of an immersed tube tunnel

The owner decided to divide the works into packages based on discipline rather than, say, geography.
There was a debate on packaging the tunnel trench. Normally, the tunnel contractor would dredge thetrench. And though there would typically not be a separate large-scale dredging contract for navigation
channels, compensation dredging and the like, in this case the owner had an additional option. They
decided to package the trench in the D&R contract despite the fact it created a potentially tricky
interface with the tunnel contractor.
This kept all of the dredging and reclamation work in one contract, bringing large-scale economies. It also
allowed the very onerous environmental constraints on dredging to be the focus of one contractor (see“Handling spill” below). The D&R contractor thus became responsible for delivering the prepared site to
the tunnel contractor, and the tunnel contractor could focus on the concrete structure of the immersed
tunnel. The tunnel contractor also placed in the trench the gravel bed that the concrete elements lay on.
The owner recognised that it lay in the middle of this interface and managed it accordingly.
The owner spent a lot of time considering the best approach to the procurement and contract strategy.
They knew that the decisions they made would determine the success of the project.
The procurement processes were as follows:

Though the owner exercised strong oversight with their own technically and commerciallyexperienced staff, the joint-venture consulting engineer produced the tender documents.



The tender documents consisted of instructions to tenderers, the contract agreement, thegeneral conditions of the contract, the scope of works, the reference conditions, the quality-© OECD/ITF 2018

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system requirements, the design requirements, the construction requirements, theadministrative procedures and the illustrative design.
Design risk would be transferred to the contractor. This was a fundamental change fromStorebælt and a core belief of the owner in their strategy for the project (this is discussed in
more detail below).



Geotechnical risk was dealt with by using the reference conditions (bands and thresholds), withan associated compensation mechanism rather than being based on the traditional, and often
contentious, foreseeability test. This was a change from Storebælt and is discussed in moredetail below. Geotechnical information was made available.



The tender documents did not include detailed design drawings and specifications but rather
design requirements (including definition drawings) and an illustrative design. Detailed forconstruction design and drawings were the contractor’s responsibility.



Bids were invited from pre-qualified joint-venture contractors. A pre-bid conference was heldwith a site visit. Bidders were able to ask questions during the tender period. Bids were received
and opened by an opening committee.

The owner evaluated the bids on a quality/price basis. Quality criteria covered the technicalaspects and the management system proposals. In addition to the “raw” price, the financial
assessment considered payment profiles and currency split. Any qualifications in the bids wereassessed.

The preferred bidder and most economically advantageous bid were identified. Meetings were
held with the bidder to clarify any ambiguities and remove any qualifications in the bid.

The tender process was thus fairly conventional and not that dissimilar from Storebælt. What differed
was the contract strategy behind the process. The founding principles of this new thinking on contract
strategy are described below.
Design and build

Use of design and build contracting was fundamental to the owner’s approach. The logic was to assign
responsibility according to where competence lay and to integrate design and construction. Bespoke
general conditions of contract were, however, developed in areas, and these incorporated FIDIC(International Federation of Consulting Engineers) provisions.
A key requirement of a design and build contract is to define the scope of what the contractor shalldesign and construct. A detailed unambiguous scope of works is essential. Given the multi-contract
delivery of the fixed link, there were many interfaces between contractors. As regards scope, these
represent potential disputes as to the boundary of each party’s responsibility. The scope of works
includes detailed interface descriptions of what was to be constructed and the timing.
A foundation of the contract strategy was that the contractor self-certify its design and construction
work. The owner’s quality system requirements defined the standards for the management system.
Functional requirements rather than specification-type requirements (i.e. based on output not input)
were used. The requirements that were produced by the technical teams were continually scrutinisedand challenged.
The definition drawings defined only the fixed requirements for the design, with all other details being
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the owner’s red lines but not unnecessarily constrict the contractor. So, for example, these defined therailway alignment but allowed the road alignment to be varied to reflect the contractor’s tunnel element
design, since tube wall thickness would be a factor in fixing the distance between rail and roadalignments. The definition drawings also similarly defined the island outline, which was the outcome ofextensive study of water flow in the strait, and height of the revetment, based on the owner’s flood risk
assessment. However, it left the design of the revetment to be engineered by the contractor.
In order to obtain approvals from the various authorities and to produce programmes and costestimates, the owner had prepared an illustrative design. This was made available to bidders because it
would assist them in preparing quality bids in the time available. Bidders could adopt elements of theillustrative design but importantly then took responsibility under their general design responsibility.
A new approach to geotechnical risk was taken using reference conditions. Rather than rely on the
traditional foreseeability test for defining the boundary of geotechnical risk, the owner used a moreobjective method for defining the boundaries of each party’s risk. The intention was that this would
eliminate a regular source of dispute on construction projects. Various geotechnical parameters were
defined and values were stated as the boundary between the contractor’s and owner’s risk. Because thebidders would rightly price this risk, the parameters and boundaries were carefully considered. The
parameters used were those which would have most impact on the contractor’s activities and which
could be objectively measured. In setting the values, the aim was to choose a value that had a 90%
chance of not being exceeded. Extensive geotechnical investigation was carried out, and one of thesuccessful initiatives from Storebælt – the use of a geomodel – was again adopted.
Risk of adverse weather conditions and sea ice, which can have an impact on marine construction
operations, were similarly dealt with using reference conditions.
As far as possible, bids were on a lump sum basis, and interim payments were made against payment
milestones rather than being remeasured; this is a natural outcome of the design and build approach.
The bidders were able to define the majority of the payment milestones and amounts based on theirconstruction sequence. The owner defined some milestones and amounts (e.g. milestones for quality
system documents and for completion milestones). Payments were indexed against a basket of indices.
Payments could be split into different currencies, reflecting the international nature of the contractor
joint ventures (exchange rate risk thus being an owner risk).
In the D&R contract, however, the majority of the dredging work was paid on a remeasured basis rather
than using lump sum milestones simply because of the limitations of the accuracy of the seabed level
survey (and the possibility that seabed levels could change). The bidders would have been unable toprice volume risk accurately or would have priced it too high.
Handling spill

One of the most important aspects of the strategy of the D&R contract was how to deal with spill. This issediment that is released into the water during dredging and can form a large plume, with a detrimental
effect on marine biology. The project’s onerous environmental permits limited spill to 5% of the dredging
volume, much lower than the industry norm at that time (typically 25%).
The owner carried out a market engagement exercise during the preparation of the tender documents.
In consultation with dredging industry representatives, the owner concluded that meeting the spill limit
was achievable but would require much more powerful dredgers than would otherwise be required tomeet the dredging rate. This is because large, powerful dredgers can excavate in a single pass what
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spill allowance was broken down by time of year and area. The contract required the contractor to put inplace a sophisticated real-time monitoring system, which fed back to the dredging operations such that
dredgers would be moved between areas as spill limits per period were reached.
Restrictions on work sequencing were placed; reclamation was to be carried out within enclosed basins(fill could not be deposited in open water). This required the island revetments to be built before any fill
was deposited. Thus, significant lengths of revetment needed to be built – 12km in the first year – before
dredging of the tunnel trench could begin

Construction stage
The contractor’s chosen methods involved extensive prefabrication, reducing in-situ construction. The
bridge contractor prefabricated its foundation caissons and bridge piers at a purpose-built casting yard in
Sweden near the site. The bridge deck (trusses) were fabricated in Spain, shipped by barge to the siteand lifted into position. This was found to bring great benefit in reducing risk and improving quality
because construction was carried out in controlled conditions rather than in the strait.

An immersed tube tunnel is by nature prefabricated and transported rather than constructed insitu. In this case, the owner’s choice paved the way for successful construction.
The contractors innovated in their methods, taking full advantage of the freedom they werebeing given and the opportunity to optimise and integrate design and method. The tunnel
contractor produced all of the elements in a factory in Copenhagen’s north harbour rather thanin dry docks or within temporary dewatered cofferdams. This was the first time this method wasused. Rebar was assembled and concrete poured within enclosed, controlled conditions. The
elements were then slid into a basin for float-up, tow-out and immersion. The factory process
was continually optimised such that production rates improved significantly over the course of
the contract.
The D&R contractor similarly innovated, developing a method of constructing the revetments inopen water from platforms and barges, using sophisticated survey and placing techniques tocontrol alignment.
In the later stages, as the production rate improvements of the tunnel and bridge prefabrication
methods became apparent, the owner assessed the programme. There was high confidence thelink would be completed on schedule. The owner introduced a bonus scheme to help securesuch completion. This was a side-agreement, and no changes to the contract or its risk
allocation were made.

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Figure 6. The dredger “Chicago” at work on the Øresund project

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Observations
The fixed link opened in July 2000. There were no outstanding disputes and the contractors were very
positive about the owner’s approach. There are of course many factors that contribute to a project being
delivered successfully. For Øresund, the following were some of the most significant.

Figure 8. Production site for Øresund tunnel elements

The owner had clear objectives for what they wanted, but they were content for the detail to be filled
out by those with greater competence. The philosophy was to assign responsibility according to wherecompetence lay. The role of the owner is to lead the process not manage it in detail. The management
philosophy was management through objectives, delegation and proactivity. Not only did the owner see
this through internally, but they also did so with respect to their contractors. What’s more, they
maintained a clear view of their interest, which lay mainly in the finished product and meeting set
functional requirements. They did not need to dictate how to get there. They exercised control throughstrategic intervention: review of design, systems and programmes and by audit.
The tender and contract documents were clear, and a lot of effort was made to produce high-quality
documents.
The owner set out with a much clearer idea of the solution they wanted. This made it easier to produce
high-quality documents.
The bidders were not required to bid for multiple alternatives and were better able to produce highquality bids. The owner later reflected on the fact it had appointed the right contractors, and thiscontributed hugely to the success of the project.
The owner was clear that risk and ability to control that risk should go hand in hand. Risks which cannot
be controlled or reasonably priced should be retained.

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The mature approach to geotechnical risk and use of reference conditions proved beneficial. Given themassive scale of the geotechnical operations, a new approach was needed. Taking a pragmatic view thatthe owner provides the ground and the soils and therefore owns all geotechnical risk proved to be farsighted. A contract can only ring-fence some of that risk to be taken and allowed for by the contractor.
The boundary of that ring-fence should be objectively defined rather than being subjectively based onforeseeability. Because the boundary parameters were selected carefully and gave a realistic picture of
the conditions, the concept signalled the owner’s willingness to assume responsibility for the prevailingconditions. The owner chose values that could reasonably be locked into the contractor's price. And thebidders thus bid on the same basis. The owner also provided extensive geotechnical information suchthat the bidders could understand the prevailing conditions.
Using design and build proved to be one of the cornerstones of the project’s success. A view endorsed by
all of the contractors. At its simplest level it reduces construction cost and time by releasing thecontractor from unnecessary constraints. It also removes the owner from an often tricky interface
between designer and contractor. However, it also means the contractor must more fully understand theworks.
Integrating design and construction creates opportunities to optimise that would not be available if
design was complete before the contractor is appointed. The contractor can optimise not just costs but
also speed, durability and quality and safety of construction. The owner gets better value for money.
The immersed tube tunnel demonstrates the appropriateness of design and build. The factory method
depended on the design being customised to suit the method, while at the same time the method wasdeveloped with design optimisation in mind. The profound and detailed integration of design andmethod was particularly relevant due to the complex process of casting (large single pours), floating,transport, immersion and jointing that an element must undergo before it is in its final state. The
methods at these stages drive the design as much as the owner’s functional requirements for thepermanent works. A consultant engineer working for the owner could never have arrived at the designthat lay behind this method. A contractor on a traditional contract could never have proposed thismethod without an extensive redesign. The contractor seized the opportunity and delivered.
However, it is not enough to choose design and build – the strategy must then be executed. The ownermust have extensive knowledge and experience, more so than for a traditional contract.
Design and build imposes a discipline to identify the overall objectives and to express them as aperformance specification. Nevertheless, the owner must walk the line between functional requirement
and specification. While many will argue the difference is clear, often it is a matter of choosing where to
draw the line. As always the important thing is to know what your interest is and have a mature attitude
to risk. To take an example, with regard to spill, the owner stipulated reclamation was to be carried out
within enclosed basins, and fill could not be deposited in open water. This required the island
revetments to be built before any fill was deposited, thus restricting the contractor’s methodology. A
functional requirement on paper would have meant simply placing the spill limit on the contractor andleaving them to decide. The owner understood that environmental risk could not simply be transferred inthat way and took responsibility where they needed to.

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Fehmarnbelt fixed link
In September 2008, the Danish and German Ministers for Transport signed the state treaty on theestablishment of a fixed link across the Fehmarnbelt between the Danish island of Lolland and theGerman island of Fehmarn. In Denmark, the Danish parliament ratified the treaty through a planning act
in April 2009. In Germany, the Bundestag and Bundesrat ratified the treaty in June and July 2009.
On the basis of the planning act, the Danish minister of transport appointed Sund and Bælt’s whollyowned subsidiary, Femern A/S, to be responsible for, among other things, the planning, feasibility studies
and preparatory work for the construction of the coast-to-coast link.
From 2009, Femern A/S carried out a range of studies in the Fehmarnbelt and in Denmark and Germany,
including studies of the land and marine environment, soil conditions and navigational safety issues.
Various bridge and tunnel solutions for the fixed link were also studied. In November 2010, based upon
the results of these studies, Femern A/S recommended an immersed tube tunnel as the preferredtechnical solution. The recommendation was accepted by the Danish cross-party political group thatoversees the project (the Forligskredsen) in February 2011.
The immersed tunnel solution was taken forward for plan approval (permission) in Denmark andGermany. In October 2012, Femern A/S launched the procurement processes for four main civil works
contracts. In April 2015, the Danish parliament passed the required construction act. The act authorises
Femern A/S to construct and operate a fixed link across the Fehmarnbelt, together with the necessary
landworks. The act contains the environmental approval for the project in Denmark, based on the EIA. It
also authorises Femern A/S to finance the fixed link through loans.
In March 2016, the Forligskredsen gave Femern A/S the mandate to appoint the preferred bidders forthe main civil works contracts, with the aim of then entering into conditional contracts (i.e. signed
contracts but with construction postponed until the German plan approval is in place). In May 2016,
Femern A/S signed such conditional contracts with the contractors.
As of the date of this paper, Femern A/S is awaiting the plan approval in Germany, which will allow
construction of the coast-to-coast link to begin.
Figure 9. Cross section through the Fehmarnbelt tunnel

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Procurement stage
For procurement, the civil engineering elements are divided into the following packages:dredging and reclamation, covering the tunnel trench and reclaimed areas on Lollandportals and ramps



immersed tube tunnel north, covering the 9km length of tunnel from the Danish side

immersed tube tunnel south, covering the 9km length of tunnel from the German side.

Other contracts cover coast-to-coast works (mechanical, electrical and control systems, and railway
systems).
The similarity with Øresund is evident. The works were divided into a few large packages. The owner wasagain keen to not have too many contracts with multiple interfaces and for the contracts to be attractive
to large international contractors. The owner did, though, choose to split the immersed tunnel contract
into two. The reason was that the Fehmarn tunnel will be more than four times longer than the Øresund
tunnel, and there was uncertainty as to whether a single contractor would have the capacity to take on asingle package. In the event, both contracts were won by the same joint venture.
Again, the owner set out with a clear idea of the preferred solution; they made their strategic decisions
pre-procurement. The bidders are not required to bid for multiple alternatives.
The owner once again opted to divide the works into packages based on discipline rather than, say,geography. So the same contractor is responsible for portals and ramps in both Denmark and Germany.
And the tunnel trench is the responsibility of the dredging and reclamation contractor rather than thetunnel contractor.
The mechanical and electrical systems are being procured as a separate package rather than being
included in the tunnel contract (and bridge contract) as they were on Øresund. This is more in line withthe discipline-based packaging that the owner prefers. Given the length of the tunnel, the equipment
and maintenance package is a major contract in its own right and can attract large international
contractors.
The procurement process on Femernbælt has some similarities to Øresund:A joint-venture consulting engineer has produced the tender documents, though the owner
exercises strong oversight with its own technically and commercially-experienced staff.

The tender documents consist of instructions to tenderers, a contract agreement, the generalconditions of contract, the scope of works, the reference conditions, the quality (management)
system requirements, the design requirements (including definition drawings), the materials andconstruction requirements and the illustrative design. Bespoke general conditions of contract
were developed, however, in certain areas, and these incorporated FIDIC provisions. A detailed
unambiguous scope of works is provided, and it covers interfaces in detail.

Design risk is transferred to the contractor.



The illustrative design is based on the concept and “for-approvals” design prepared by the ownerin the course of developing the project. As the bidders have a steep learning curve, from having
no knowledge to submitting binding bids, providing an illustrative design makes the procurement
process more efficient. The illustrative design helps bidders navigate and understand the written
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this does not affect the allocation of design risk, which remains solely the contractor’s
responsibility.


Geotechnical risk is dealt with by using reference conditions with an associated compensation
mechanism. Geotechnical information was made available.



Risk of adverse weather conditions and sea ice are dealt with using reference conditions.



Bids are invited from pre-qualified joint-venture contractors. Pre-bid conferences are held with asite visit. Bidders are able to ask questions during the tender period.

The owner evaluates the bids on a quality/price basis. Quality criteria cover the technical and the
management system proposals. In addition to the “raw” price, the financial assessment takes into account payment profiles. Any qualifications in the bids are assessed.

The preferred bidder and most economically advantageous bid are identified. Meetings are heldwith the bidder to clarify any ambiguities and remove any qualifications in the bid.



The contractor will self-certify its design and construction work.

Functional requirements rather than specification-type requirements are used.

As far as possible, bids are on a lump-sum basis, and interim payments are made against
payment milestones rather than being remeasured.



Spill is an important driving feature of the dredging and reclamation contract.

There were also some important differences, however. The procurement periods are much longer thaneither on Storebælt or Øresund. This reflects the increasing complexity of the procurement regulations
and the risk of challenge. The owner needs a much more structured approach to procurement.
A multi-stage procurement process is used. Bidders prepare a technical bid, which is scrutinised by theowner (effectively being evaluated using the bid-evaluation criteria). The owner provides feedback, andthe bidders then prepare a priced bid, which is similarly scrutinised.
The procurement process uses the competitive dialogue procedure as provided for in the Danish (andEU) procurement regulations. Under this, the owner and bidders have the opportunity to discuss theowner’s requirements and the commercial aspects in a dialogue stage. The dialogue stage extends fromthe issue of the invitation to tender to a point determined by the owner, when the dialogue is closed anda call for final tender is issued.
The dialogue encompasses the technical bid and priced-bid stages and also a series of dialogue meetings
around those bids. The aim of the dialogue is to identify and define the means best suited to satisfying
the owners's needs. The owner runs a targeted dialogue, discussing only matters that may have a valuefor-money implication. The owner’s dialogue topics included: cost, risk, value, conditions of contract,technical requirements, programme and owner milestones, and interfaces.
Stage 3 included an intensive focus on cost, risk and value. Here, the owner took full advantage of theflexibility and close engagement allowed for by the competitive dialogue procedure within a still live
competitive procurement environment. Under other procurement procedures, such intensive focus
would be with the preferred bidder only. The owner was able to explore changes in risk allocation (andtechnical changes) on an equal, transparent basis with all bidders. The changes were targeted and the
dialogue was kept narrow – with up to five bidders the right balance must be struck between creativity
and control. The owner acknowledges the burden on the bidders in such an intensive exercise.

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Table 2. The procurement timetable for the civil contracts is below.
Procurement timetable
Industry day
Introductory meeting
Issue of the Stage 1 invitation documents (technical bids)
Pre-bid conferences and site visit
Stage 2, technical bids deadline
Dialogue, phase 1
Issue of the Stage 2 invitation documents (technical and priced
bids)
Stage 2, technical and priced bid deadline
Dialogue, phase 2
Issue of the Stage 3 invitation documents (technical and priced
bids)
Stage 3, “Indicative bid” deadline (analogous to a “best andfinal offer” stage), technical and priced bid
Close of dialogue and invitation to submit binding bids
“Adjusted bid” (final and binding)Signing of civil works contracts

Date
March 2012
August 2013
September 2013
November 2013
April 2014
May – Sept. 2014
October 2014
December 2014
January – March 2015
April 2015
May 2015
August 2015
September 2015
May 2016

Unsuccessful bidders are paid bid cost compensation. Here, the owner acknowledges that bid costs are
significant on contracts of this scale and complexity. And the duration of and depth of engagement in the
procurement process only adds to these costs. The compensation does not cover the whole bid costs,
but the amounts are chosen to be meaningful. If bid cost is a factor for a bidder when deciding whether
to pursue the opportunity, the compensation may tip the balance in favour of participating. This should
help maximise competition for the owner.
Another difference is worth noting. As discussed previously, on Øresund the method for producing
immersed tunnel elements was a contractor innovation. The owner focused on its functional
requirements for the works and gave the contractor the freedom to decide how to deliver. On Fehmern,
the owner has mandated the use of an Øresund-style production facility (on a much bigger scale, withmore production lines). Here, the owner has strayed into an area which theoretically it would prefer not
to.
There are various reasons for this departure from the owner’s general approach to design and build
contracting. First, it is certain this is the most efficient way to produce the elements. The large numberthat are needed mean the investment in the production facility is worthwhile. Indeed, this was proven in
dialogue when no bidders pushed back on this requirement. Second, this method produces the standardof quality the owner wants. Third, and perhaps most notably, the owner needed to make decisions on
production method as part of the environmental impact assessment for the project. The level of detailrequired by the rules around such an assessment meant the owner selected the area in Denmark near
the site (Rødby) as the location for producing the elements and also selected the method.
The above shows the sophisticated owner needs to be flexible in their approach and be prepared tochange their position and, more importantly, then manage the risk this brings.
Another change is that the dredging and reclamation contract includes an incentive mechanism to help
reduce the owner’s costs at the interface between the dredging and tunnel contractors. The dredging
contractor dredges the tunnel trench; the tunnel contractor lays a gravel bed, places the element andthen backfills the sides of the trench. The owner carries the risk on the gravel bed and backfill volume© OECD/ITF 2018

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because the tunnel contractor cannot control this. The mechanism incentivises the dredging contractor
to minimise the gravel bed and backfill volumes.
An incentive mechanism is also included on spill volume. This is a simple financial incentive mechanism
to provide some gain to balance the contractual “pain” if the limits are exceeded. Regardless of the fact
the contractor must be below the spill limit, the owner recognises that environmental risk like this isnever fully transferred and added leverage on the contractor may be useful.
It is also worth noting the principle of self-certification has been taken to another level, influenced by the
introduction of Eurocodes. Different parts of the structures are classified under “consequence classes”,
and the design of parts in the highest classification is subject to independent verification from a third
party. These parts include the main structure of the tunnel elements and the steel bulkheads that must
temporarily resist large hydrostatic forces. To be clear, this check is not carried out by the owner’s
technical adviser. It is carried out by a third-party technical adviser employed by the contractor, who is
independent from the contractor’s main design consultant.
Observations

For the Femernbælt fixed link, the owner has been able to apply many of the principles that contributed
to the success of the Øresund project.
However, they have not been able to remain complacent and have had to adapt to the new procurement
regulation regime and to the ever-more stringent environmental requirements. In short, they have madesure their choices are appropriate to this project’s risks and opportunities.
Figure 10. Visualisation of the Fehmarnbaelt tunnel portal on the island of Lolland

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References
Storebælt (1998), “East Bridge”, The Storebælt Publications, Copenhagen (ISBN 87-89366-91-3)
http://quickpaper.rosendahls.dk/sundblt/sundblt002/#/1/.
Storebælt (1997a), “East Tunnel”, The Storebælt Publications, Copenhagen (ISBN 87-89366-87-5),
http://quickpaper.rosendahls.dk/sundblt/sundblt003/#/1/.
Storebælt (1997b), “West Bridge”, The StorebæltPublications, Copenhagen (ISBN 87-89366-89-1),
http://quickpaper.rosendahls.dk/sundblt/sundblt006/#/1/.
Gimsing, N. J., ed. (2000), The Bridge, Øresund Technical Publications, Copenhagen (ISBN 87-90020-545).
Gimsing, N. J. and C. Iversen, eds. (2001a), The Tunnel, Øresund Technical Publications, Copenhagen(ISBN 87-90020-56-1).
Gimsing, N. J. and C. Iversen, eds. (2001b), Dredging and Reclamation, The Øresund TechnicalPublications, Copenhagen (ISBN 87-90020-58-8).

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Appendix 1. Research questions and outputs
Introduction: Getting the basics right
What are the economic characteristics ofinfrastructure? What is infrastructure and what areoperations? What are the models of private
participation in infrastructure and through whichsignificant private investment actually takes place?

Makovšek, D. (2018), “What is Private
Investment in Transport Infrastructureand Why is it Difficult?”, Working
Group Paper, International Transport
Forum, Paris (forthcoming).

Can private investment improve productive efficiency?
Improve project selection? Close the infrastructure
funding gap? Have other positive effects when it isprivate?

Makovšek, D. (2018), “The Role ofPrivate Investment in Transport
Infrastructure”, Working Group Paper,
International Transport Forum, Paris(forthcoming).

What have the private investment trends in transport Mistura, F. (2018), “Quantifying
infrastructure been over the last 20 years? How much Private and Foreign Investment inof that was foreign private investment?
Transport Infrastructure”, Working
Group Paper, International Transport
Forum, Paris (forthcoming).
Defining the challenge: How uncertainty in contracts matters
How does uncertainty affect risk pricing? Beyond
investors, do suppliers in PPPs also have issues withrisk pricing? How does its transfer to the private
sector affect competition? What does uncertainty
mean for the public vs. private cost of financing?

Makovšek, D. and Moszoro, M. (2018),“Risk pricing inefficiency in public–
private partnerships”, Transport
Reviews, 38(3), 298-321.

Is uncertainty also an issue in long-term
services/operations contracts?

Beck et al. (2018), “Uncertainty inLong-term Service Contracts:
Franchising Rail Transport
Operations”, Working Group Paper,
International Transport Forum, Paris(forthcoming).

What is the competition for large transport
infrastructure projects in the EU Market? Is there adifference between traditional procurement and
PPPs?

Roumboutsos, A. (2018),” Competition
for Infrastructure Projects: Traditional
Procurement and PPPs in Europe”,
Working Group Paper, International
Transport Forum, Paris (forthcoming).

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Addressing uncertainty for suppliers: the construction phase as example
Adversarial vs. collaborative procurement – iscollaborative contracting the future?

Eriksson et al. (2018), “Collaborative
Infrastructure Procurement in Sweden
and the Netherlands”, Working Group
Paper, International Transport Forum,
Paris (forthcoming).

What lessons in dealing with risk and uncertainty
were learnt in Danish mega projects from Storebaelt
to Femernbaelt?

Vincentsen, L. and Andersson, K. S.
(2018), “Risk Allocation in MegaProjects in Denmark”, Working Group
Paper, International Transport Forum,
Paris (forthcoming).

What can governments do in the short run to reduce
inefficient pricing of risk by construction contractors?

Kennedy et al. (2018), “Risk Pricing in
Infrastructure Delivery: Making
Procurement Less Costly”, Working
Group Paper, International Transport
Forum, Paris (forthcoming).

Addressing uncertainty in long-term contracts in the absence of continuous pressure for
efficiency
What is the public sector organisational Holm, K.V. and Nielsen, T.H. (2018),
counterfactual on which private investment should “The Danish State Guarantee Modelseek to improve?
for Infrastructure Investment”,
Working Group Paper, International
Transport Forum, Paris (forthcoming).
Partial fixes to the Private-Public Partnership approach
How would an organisational structure consisting of
PPPs come close to a network-wide management
approach? What benefits would it yield?

Vasallo, J. (2018), “Public-Private
Partnerships in Transport: Unbundling
Prices from User Charges”, Working
Group Paper, International Transport
Forum, Paris (forthcoming).

Should the public or the private side bear the cost of
long-term uncertainty? How could we design a PPP
contract to avoid hold-up due to incomplete
contracts?

Engel et al., (2018), “Dealing with the
Obsolescence of Transport
Infrastructure in Public-Private
Partnerships”, Working Group Paper,
International Transport Forum, Paris(forthcoming).

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Long-term strategic approach
How do the PPP and regulated utility model (RAB)
compare in terms of efficiency incentives?

Makovšek, D. and D. Veryard (2016),“The Regulatory Asset Base andProject Finance Models”, International
Transport Forum Discussion Papers,
No. 2016/01, Paris.

What basic considerations underlie the choice
between a PPP and RAB approach?

Hasselgren, B. (2018), “Risk allocationin Public-Private Partnerships and theRegulatory Asset Base Model”,
Working Group Paper, International
Transport Forum, Paris (forthcoming).

Which are the preconditions a country would need to Alchin, S. (2018), “A Corporatised
take to establish a RAB model on a motorway
Delivery Model for the Australian Road
network? Is user-charging a must?
Network”, Working Group Paper,
International Transport Forum, Paris(forthcoming).
From the investors’ point of view, does a RAB need to
be fully reliant on user-charging?

Francis, R. and Elliot, D. (2018),“Infrastructure Funding: Does it
Matter Where the Money Comes
From?”, Working Group Paper,
International Transport Forum, Paris(forthcoming).

Incentive regulation can also yield perverse
incentives. Can the capex bias be managed?

Smith et al. (2018), “Capex Bias andAdverse Incentives in Incentive
Regulation: Issues and Solutions”,
Working Group Paper, International
Transport Forum, Paris (forthcoming).

Does it make sense to pursue hybrid solutions
between PPP and RAB?

Zhivov, N. (2018), “The Thames
Tideway Tunnel: A Hybrid Approach to
Infrastructure Delivery”, Working
Group Paper, International Transport
Forum, Paris (forthcoming).

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Uncertainty and private investment mobilisation in transport infrastructure
What lessons can we draw from recent attempts tomobilise private investment in infrastructure in theaftermath of the global financial crisis?

Makovšek, D. (2018), “Mobilising
Private Investment in Infrastructure:
Investment De-Risking andUncertainty”, Working Group Paper,
International Transport Forum, Paris(forthcoming).

Synthesis

ITF (2018), Private Investment inTransport Infrastructure: Dealing with
Uncertainty in Contracts, Research
Report, International Transport Forum,
Paris© OECD/ITF 2018

35

CPB

CPB

CPB

Private Investment inTransport Infrastructure
Dealing with Uncertainty
in Contracts

The Role of Private
Investment in Transport
Infrastructure

Risk Pricing in
Infrastructure Delivery:
Making Procurement Less
CostlyCorporate Partnership
Board

Risk Allocation in
Mega-Projects in Denmark

Corporate Partnership
Board

4

2

This paper uses three DanishSwedish-German transport
infrastructure mega-projects - theStorebælt, Øresund and Femern Belt
links - as a case study to examine
risk allocation between owners
and contractors. It highlights theevolution of the approach to risk
allocation over time and how the
projects deal with uncertainty.
The paper is part of a series of
19 papers and a synthesis report
produced by the International
Transport Forum’s Working Groupon Private Investment in Transport
Infrastructure.

6

CPB

CPB

CPB

Dealing with the
Obsolescence of Transport
Infrastructure in PublicPrivate Partnerships

Risk Allocation in
Mega-Projects in Denmark

Risk allocation in PublicPrivate Partnerships andthe Regulatory Asset Base
Model

Corporate Partnership
Board

Corporate Partnership
Board

8

Corporate Partnership
Board

10

12

CPB

CPB

CPB

The Thames Tideway
Tunnel: A Hybrid Approach
to Infrastructure Delivery

The Danish State Guarantee
Model for Infrastructure
Investment

Infrastructure Funding:
Does it Matter Where theMoney Comes From?

Corporate Partnership
Board

Corporate Partnership
Board

Corporate Partnership
Board

16

14

18

CPB

CPB

CPB

Public-Private Partnerships
in Transport: Unbundling
Prices from User Charges

A Corporatised Delivery
Model for the AustralianRoad Network

Collaborative Infrastructure
Procurement in Sweden and
the Netherlands

Corporate Partnership
Board

Corporate Partnership
Board

Corporate Partnership
Board

22

20

24

CPB

CPB

CPB

Competition for
Infrastructure Projects:
Traditional Procurement
and PPPs in Europe

Capex Bias and Adverse
Incentives in Incentive
Regulation: Issues andSolutions

Uncertainty in Long-term
Service Contracts:
Franchising Rail Transport
Operations

Corporate Partnership
Board

Corporate Partnership
Board

Corporate Partnership
Board

28

26

30

CPB

CPB

CPB

Quantifying Private andForeign Investment inTransport Infrastructure

What is Private Investment
in Transport Infrastructureand Why is it Difficult?

Mobilising Private
Investment in Infrastructure:
Investment De-Risking
and Uncertainty

Corporate Partnership
Board

Corporate Partnership
Board

32

1

Corporate Partnership
Board

Corporate Partnership
Board

34

36