A Model in a Sustainable Perspective of a Build-Operate- Transfer in the Transportation Sector

Transcription

1 5 th International Vilnius Conference EURO Mini Conference Knowledge-Based Technologies and OR Methodologies for Strategic Decisions of Sustainable Development (KORSD-2009) September 30 October 3, 2009, Vilnius, LITHUANIA ISBN M. Grasserbauer, L. Sakalauskas, E. K. Zavadskas (Eds.): KORSD-2009 Selected papers. Vilnius, 2009, pp Institute of Mathematics and Informatics, 2009 Vilnius Gediminas Technical University, 2009 A Model in a Sustainable Perspective of a Build-Operate- Transfer in the Transportation Sector Giampaolo Centrone 1, Maria Pia Fanti 2, Gabriella Stecco 1, Walter Ukovich 1 1 Dipartimento di Elettrotecnica, Elettronica ed Informatica, Università degli Studi di Trieste - Italy 2 Dipartimento di Elettrotecnica ed Elettronica, Politecnico di Bari - Italy 1 {giampaolo.centrone, gstecco, ukovich}@units.it; 2 fanti@de .poliba.it Abstract: Economic globalization favors the increase of geographic mobility involving the expansion of transportation systems, in particular the motorway network, that is coupled with the rise in land prices and the increase of air and noise pollution. As a consequence, it is essential that there exists a complete motorway network with sufficient capacity, but adequately managed and maintained and with the right ratio of technological innovations for the good progress of the sustainable national economy. In this scenario, sustainability requires management approaches, as the Build-Operate-Transfer (BOT) formula, to improve policy coherence, to increase the role of knowledge in the formulation and implementation of policies, and to devise better communication between civil society and business. The BOT formula adds to the old system of concessions, providing new possibilities for reducing or eliminating the direct financial burden which states would otherwise bear. In this paper, for the management of a motorway we formulate a Sustainable Balanced Scorecard (BSC) customized in a motorway environment. To do this, and in particular to build up the BSC perspectives, we develop a methodology for achieving continuous improvement of the services provided to the users using the Deming Cycle. Keywords: Balanced Scorecard, Key Performance Indicators, Build-Operate-Transfer, motorway, customer satisfaction. 1 Introduction In last two decades, the search for a new way to promote and finance infrastructure projects led to encourage private sector involvement in the provision of public infrastructure. This involvement may take several forms, ranging from service contracts to concession arrangements, where a public authority entrusts a private sector party with the long-term implementation of a project, usually involving large-scale and complex construction and operation. Therefore the public sector has come under increasing pressure to improve performance and demonstrate greater transparency and accountability (Brown et al., 2003). This pressure has resulted in public sector organizations facing shifts in ways of operating. Various corporate change strategies have been adopted by different public sector agencies, many of these cloning managerial practices 181

2 G. Centrone, M. Pia Fanti, G. Stecco, W. Ukovich from the private sector. In order to estimate the corporate efficiency and to evaluate environmental and social performance, in the next Sections we propose a performance measurement system in a business approach that creates long-term shareholder value by exploiting opportunities and managing risks deriving from economic, environmental and social developments. In this context, resuming the Balanced Scorecard (BSC) model for the specific sector of motorway concessionaires (Centrone et al., 2008), we develop, taking into account the Deming Cycle (Walton, 1988), a customized BSC with a number of measures strictly limited to those that are really important to a motorway company. In addition, according to the Total Quality requirements, the new BSC is enhanced with a user satisfaction index which may be estimated from customer surveys. 2 Sustainable mobility and build-operate-transfer In this Section we briefly present the lines of policy in Europe to develop a sustainable transport. There is evidence that mobility is an intermediate good: minimize mobility subject to a desired level of personal, production and consumption exchanges to be assured. But there is also evidence that mobility is a final good: maximize mobility subject to a desired level of congestion, emissions, safety, and energy. The key issue remains the reconciliation of mobility and sustainability. In the Transport White Paper and in keeping with the sustainable development strategy adopted by the European Council in Gothenburg in June 2001 (European Commission Transport, 2001) the Commission proposed 60 measures aimed at developing a European transport system capable of shifting the balance between modes of transport, revitalizing the railways, promoting transport by sea and inland waterways and controlling the growth in air transport. Single transport market is to be built and maintained along three lines of policy: technical interoperability, market access liberalization, and physical network interconnection. Moreover, road transport is mostly responsible for congestion (mainly in urban and metropolitan areas), air pollution, transport casualties, and transport energy consumption. It is generally recognized (Akintoye et al., 2003) that a Public-Private-Partnership (PPP) program offers a longer, sustainable approach to improving social infrastructure, enhancing the value of public assets and making better use of taxpayer s money. In the European countries, the public authorities of the member states often have recourse to PPP arrangements to undertake infrastructure projects, in particular in sectors such as transport, public health, education, and national security. PPPs generally take the form of a long-term (e.g. 30 years) agreement between public and private entities. At the end of the concession the project is transferred back to the state or the public body. A partnership involves two or more actors, at least one is public and another is from private business sector, such as in the context of a Build-Operate-Transfer (BOT) project (Kumaraswamy and Zhang, 2001) and joint venture company (Eckel and Vining, 1985). BOT is a type of project financing, where a private entity receives a concession from the private or public sector to finance, design, construct, and operate a facility stated in the concession contract. This enables the project proponent to recover its investment, operating and maintenance expenses in the project. The BOT formula adds to the old system of concessions, providing new possibilities (Grimsey and Lewis, 2002) for reducing or eliminating the direct financial burden which states would otherwise bear. The objective is to transfer as much borrowing risk as possible to the private sector promoter and the project itself. Consequently, the public stakeholder needs to have detailed economic analyses of risk reduction projects and to evaluate also if the project is economically unviable or non-sustainable. On the other hand, the management of the companies using the BOT formula to build up the projects needs new managerial instruments to monitoring the development in a sustainable perspective. 182

3 A MODEL IN A SUSTAINABLE PERSPECTIVE OF A BUILD-OPERATE 3 Developing a customized balanced scorecard and customer satisfaction in the motorway system performance assessment A performance measurement system is a tool for implementing strategic planning and achieving continuous improvement at all levels of an organization (Atkinson et al., 1997). As strategies are a set of hypotheses of causes and effects, the relevant goals and indicators should be linked to each other revealing systematically this architecture of relationships of cause and effect. Cornerstone for a model of sustainable management is the goal setting in terms of a vision/mission statement whereas the revision of the goals is a continuous process. The goals of a BOT find their expression in two factors: the definition of success and the company s mission, whereas success is usually defined in terms of money, i.e. profit. The problem of how to measure the elements of success separately can be solved with instruments like the BSC, an approach to strategic management system (not only a measurement system) developed in the early 1990's (Kaplan and Norton, 1992). BSC is a tool created in order to link strategic goals in four dimensions to the financial bottom line and enable organizations to clarify their vision and strategy and translate them into actions, providing feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results. The BSC analyses the expected future contribution to financial performance of such intangible assets (e.g. a firm's knowledge base, its ability to enthuse customers, or excellent control of process quality). But is the traditional BSC concept effective enough to contribute to corporate sustainability? According to Evans and Jack, (Evans and Jack, 2003) only 77% of the Baldrige National Quality Award Criteria is covered by the Kaplan/Norton approach, consequently the need for customized BSCs. Then, we conceived a customize BSC taking into account the performance measurements related to specific parameters (i.e. for the motorway environment system conditions and preservation, safety, accessibility, and traffic conditions-mobility). This aspect also refers to the aspect Twenty is plenty, a recommendation of the founders of the BSC to integrate a maximum number of twenty indicators into the instrument. With this background, in the next steps we present a methodological approach to determine the customized BSC. It is essential that the customer perspective within the customized BSC include objectives of the development of sustainable markets and communication policy. Also it must include a user satisfaction index which may be estimated from customer surveys. As far as the market development is concerned, potential groups of customers and users could be informed about the advantages of the socially and/or ecologically friendly products and services. For a BOT, customer satisfaction is dependent on how system development projects evolve to build operational product systems and services that satisfy the perceived and actual customer need and associated system and service requirements. Consequently, the excellent construction of a motorway, or any other relevant project, is not sufficient by its own for achieving a successful operation and the public recognition. Customer satisfaction is directly dependent on product quality (related to confidence and evidence about quality) and confidence in quality (related to people competence, process risks, development, and assurance process). But customer satisfaction is also dependent on other factors connected to business and technical criteria for success: the business need (related to usability, information technology, operation, strategy, and need for change) and the system requirements (related to system specification and constraints, process criteria, quality and risk levels, requirements management, and user and product requirements). In order to plan and evaluate the provided services we use the cycle of Deming which proposed that business processes should be analyzed and measured to identify sources of variations that cause products to deviate from customer requirements. This continuous process, commonly known as the PDCA cycle (Plan, Do, Check, Act) assures a continuous feedback loop so that 183

4 G. Centrone, M. Pia Fanti, G. Stecco, W. Ukovich managers can identify and change the parts of the process that need improvements. In detail the analyzed aspect concerning the recognition of the motorways users, their main trips characteristics and their socio-economic needs. Consequently, users are involved in all mail processes as the planning of new services or adjusting existent services according to the new developed conditions, the provision and the support of these services, and their recognition and evaluation of the perceived benefits. Table 1. Customized BSC proposed FINANCIAL PERSPECTIVE To be an efficient BOT with effective business processes and resource management systems: percentage invoices paid within contract terms or, if none, within xx days efficiency of the administration remaining within the BOT s delegated budget INTERNAL PROCESSES PERSPECTIVE Improving Safety to allow for expected year to year fluctuations in casualty levels: estimating proportion of the network likely to require maintenance in the next year reduction in number of people killed/seriously injured on trunk roads reduction in the slight casualty rate per 100 m vehicle km reduction in road workers killed per 100 km Making journeys more reliable through better network management and information: percentage of lanes available in peak hours achievement of Grantor Scheme milestones operational index of Traffic Control Centre Respecting the Environment: improving air quality of sites in air quality management areas achieving biodiversity action plan introducing planting schemes to enhance the landscape treating lane kms of concrete road surface with lower noise surfacing treating pollution risk water outfall sites CUSTOMER PERSPECTIVE To deliver a high quality service to all customers by: average annual score (i.e. more than 6 on a scale 1 10) on Road User Satisfaction Surveys meet all annual Road Users' Charter targets with at least yy being validated as met by quality auditors the Service Standards for Grantor met (i.e. number of accidents less than zz or paying tolls with no queue) LEARNING and GROWTH PERSPECTIVE Teamwork: ensuring more effective delivery through better working relationships with an average score on the partnership satisfaction survey Improvement: implementing best practices and innovative solutions to improve service now and in the future ensuring system can meet the requirements of the Grantor Scheme Diversity: job satisfaction measured by a staff survey number of interim and final reports against performance and development plans completed within published timeframe We present as results of the application of this methodology in a sustainable motorway environment the vision, the mission and the customized BSC, with its key performance indicators. Vision/Aim: Safe Roads, Reliable Journeys, Informed Travelers. Mission/Objectives: 184

5 A MODEL IN A SUSTAINABLE PERSPECTIVE OF A BUILD-OPERATE to deliver a high quality service to all our customers by improving road safety, making journeys more reliable through better network management and information, respecting the environment; to ensure more effective delivery through better working relationships; to implement best practice and innovative solutions to improve service now and in the future; to be a good employer; to be an efficient BOT with effective business processes and resource management systems; to implement a Customer Service oriented to put customers first; to have a balanced approach to planning and managing performance; to improve the way for planning and managing the performance. In Table 1 it is showed the customized BSC that we developed with the key indicators to achieve the objectives and related targets above presented. 4 Conclusions During the last few decades there has been a shift in transport planning objectives from economic efficiency toward strategic policy goals, such as cohesion or environmental issues, intimately linked with the sustainable transport" paradigm. As ethics is not a substitute for a fundamentally sound business strategy, it is important to provide value-added tools for companies to help them manage all aspects of sustainable and socially responsible business practices most of all in the road and motorway environment. As a consequence, the sector of transport needs methodologies capable of addressing strategic effects of transport infrastructure plans, which are not usually covered by traditional assessment methodologies. The proposed methodology constitutes a strategic approach, based on the BSC model for a BOT in the specific sector of motorway concessionaires to estimate its corporate efficiency and to evaluate environmental and social performance. We analyzed the key features and principles of sustainable development by examining emerging needs, available capitals, and productivity capacities of motorway environment. We developed a performance measurement program based on outcome measures related the activities a concessionaire undertakes to its strategic goals. The proposed performance measurement system includes the common performance measurements in a number of measures limited to those that are really important to a motorway company. In addition, a user satisfaction index is reported which may be estimated from customer surveys. The BSC proposed can really be useful to estimate corporate efficiency and evaluate environmental and social performance in a motorway company. References Akintoye, A.; Beck, M., and Hardcastle, C Public-private partnerships: managing risks and opportunities. Wiley-Blackwell Publishing. Atkinson, A. A.; Waterhouse, J. H., and Wells, R. B A Stakeholder Approach to Strategic Performance Measurement, Sloan Management Review 38(3): Brown, K.; Waterhouse, J., and Flynn, C Change management practices: Is a hybrid model a better alternative for public sector agencies? International Journal of Public Sector Management 16(3): Centrone, G.; Coslovich, L.; Pesenti, R., and Ukovich, W Social responsibility and sustainability in motorway corporate governance, International Journal of Environment and Sustainable Development 7(1):

6 G. Centrone, M. Pia Fanti, G. Stecco, W. Ukovich Eckel, C., and Vining, A Elements of a Theory of Mixed Enterprise, Scottish Journal of Political Economy 32(1): European Commission Transport White paper European transport policy for 2010: time to decide. European Council in Gothenburg. Evans, J. R., and Jack, E. P Validating key results linkages in the Baldrige performance excellence model, Quality Management Journal 10(2): Grimsey, D., and Lewis, M. K Are public private partnerships value for money? Evaluating alternative approaches and comparing academic and practitioner views, Accounting Forum 29(4): Kaplan, R. S., and Norton, D. P The balanced scorecard-measures that drive performance, Harvard Business Review (January-February): Kumaraswamy, M. and Zhang, X Governmental role in BOT-led infrastructure development, International Journal of Project Management 19(4): Walton, M The Deming Management Method. Perigee Book. 186