LOCAL AUTHORITY MAJOR SCHEMES BEST AND FINAL FUNDING BID SEPTEMBER 2011

Transcription

1 LOCAL AUTHORITY MAJOR SCHEMES BEST AND FINAL FUNDING BID SEPTEMBER 2011 Scheme Name Supertram Additional Vehicles (SAV) Local Authority SYPTE SCHEME COST SUMMARY ( m) Scheme As Previously Configured (from section 1.4) LA contribution 4.8m 6m Third Party Contribution - - DfT Funding Contribution 14.6m 12.3m Total 19.4m 18.3m Revised Scheme (from section 4.4) CONTACT DETAILS FOR FURTHER ENQUIRIES Lead Contact: Helen Plummer Position: Project Manager Tel: Helen.plummer@sypte.co.uk Alternative Contact: Peter Elliott Position: Principal Programme Delivery Manager Tel: Peter.elliott@sypte.co.uk NOTE: Bids should be received by the Department by Noon on 9 th September 2011.

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3 SECTION 1: THE SCHEME AS PREVIOUSLY CONFIGURED i.e. BEFORE 10 JUNE 2010 This section should EITHER describe the scheme as approved at Programme Entry OR as submitted in a business case bid for Programme Entry OR on the latest design on which the last QMR submitted to the Department was based. Note: this information should be consistent with what was included in previous EoI with any differences explained. Date of Programme Entry or PE Bid or last QMR Submission (where applicable) Estimated total scheme cost (inclusive of eligible preparatory costs) DfT contribution MSBC submission for Programme Entry, October m 14.6m Local Authority Contribution 4.8m (excluding the costs of any Part 1 Claims that you may have included at this time) Third party contribution Brief description of the scheme as previously configured This should clearly state the scope of the scheme and describe all of its key components. As defined in the MSBC submitted for Programme Entry, the scope of this project includes: 1. Purchase of four new tram vehicles compatible with existing network. (The new trams will have a passenger capacity similar to existing vehicles). Cost of new vehicles includes commissioning and capital spares necessary to maintain vehicles in service. 2. Modifications to depot to accommodate new type of vehicle. 3. Modifications to tram stops to accommodate new vehicles. 4. Fees and other costs associated with works. A map of network is attached within Section One of the Supporting Information Document. This shows that the network serves many of the region s important regeneration and employment locations (e.g. the City Centre and Don Valley). Key housing areas, both existing (e.g. around Hillsborough) and housing growth areas (e.g. around Mosborough in south Sheffield). It serves key areas of local economic importance such as Crystal Peaks and Hillsborough as well as important leisure and retail sites (e.g. Meadowhall Centertainment and the Arena). It also serves the University area and is a key feeder to the Heavy Rail network. The map also shows how the network is operated with the Blue, Yellow and Purple routes. The provision of four new vehicles will be able to improve the service on the blue and yellow routes of the network from a tram every 10 minutes to a tram every eight minutes during the period of most frequent service, which currently extends from approximately 7.30am to 8pm on weekdays. (As the blue and yellow routes both use the City centre and Hillsborough arm of the network this equates to an improvement of a tram every five minutes to a tram every four minutes over this core city centre section).

4 The system has seen approximately 4% per annum patronage growth in the years up to More recently this rate of growth has declined in the current economic climate but overall growth was still positive in 2010 and demand is forecast to increase further in Sheffield due to the planned city centre regeneration. Current levels of crowding are a barrier to accommodating this growth with knock-on impacts for highway usage and ability to meet economic growth and carbon reduction targets in the areas served. The current overcrowding of the system is also acting as a barrier to other initiatives that would help contribute to modal shift and hence carbon, decongestion and accidents benefits. For example, Stagecoach operate some (commercial) bus feeder services to the network but are not planning any more as the trams already operate at full capacity at certain times of the day. There are also opportunities for extensions to Park and Ride facilities that could be enabled. Present day overcrowding on the tram network presents both an accessibility and economic problem to the continued vitality and attractiveness of central Sheffield, as well as a passenger amenity and service quality issue. Existing vehicles are already unpleasantly overcrowded during the peaks and leave passengers behind at stops and make alighting difficult. A recent survey shows that 3.3% of all network patronage in the AM peak hour is forecast to wait for the next vehicle in order to able to board, which rises to 4.65% of all passengers in the PM peak. Without intervention this results in additional delays of up to 10 minutes for existing passengers, a higher generalised cost of travel and an inability to fulfil choice in terms of employment and accessibility to wider public services. By 2021, nearly 8% of all passengers in the peaks are forecast to experience such difficulties without more vehicles. Research shows that the service has a level of suppressed demand. Interviews with non users have revealed that some car users would go by tram if it were not for the crowding they have experienced. There is also evidence that the annual cycle of peak in the autumn is a result of new users (people changing jobs and students) increases crowding which then leads to a decline as people find alternative modes that better suit their needs. In addition to this, the survey undertaken in July 2009 shows that throughout the peak period intermediate stops were not being used as well as in the inter-peak due to the level of crowding. For further details please refer to the Report of Survey July 2009 within Section Three of the Supporting Information Document. The Supertram network as a modern public transport system is an important part of Sheffield s image. Its high levels of reliability are important to its users, (particularly in bad weather) and it maintains high levels of user satisfaction. Overall Supertram is an important asset to Sheffield and this project aims to build on this. 1.2 What are/were the primary objectives of the scheme? Please limit this to the primary objectives (ideally no more than 3) the problems to which this scheme is the solution. If the primary objectives have changed please explain why. Do not include secondary objectives i.e. things to which the scheme will contribute. The main objectives of the project are: 1. Provide capacity for economic growth in Sheffield City Centre and the Lower Don Valley in a sustainable way.

5 2. Encourage mode shift from car to public transport to free up capacity on existing highways (and capture associated accident benefits). 3. Reduce carbon emissions - (a person travelling 1km by tram uses up to 50% less energy than travelling 1km by car) Since the MSBC was submitted, the Sheffield City Region (SCR) Transport Strategy for 2011/26 and the Local Enterprise Partnership s (LEP) priorities for the region have been developed. The LEP s proposition, approved by the Government in November 2010, confirms that Sheffield City Centre and the Lower Don Valley are key regeneration sites for the region. The project sponsors believe that the project is compatible with the SCR transport strategy, consistent with the LEP proposals and that building on the success of an existing asset is a cost effective and environmentally beneficial way of transporting people to jobs within these areas. For further details on how SAV s objectives relate to regional and national policy and a map showing how Supertram links to the LEP s regeneration plans, please refer to Section One of the Supporting Information Document. 1.3 Please describe the process by which this scheme came to be the preferred option for meeting those objectives including reasons why alternatives were not progressed. This may simply be an extract from what has already been described in previous Major Scheme Business Cases. However please take the opportunity to expand on that previous material as necessary. This project started when work on the Tram extension project to Rotherham and the Hallamshire hospital in Sheffield was terminated. The extension project included some provision for the general growth in patronage as well as the demand generated by the extensions. The objectives of the SAV project were clear from the start, however in addition to the objectives the sponsors had to consider the scale of the proposed additional capacity. At one extreme we could have bought one or two trams to deal with growth in demand over the very short term but purchasing trams in very small numbers is expensive due to the high level of fixed costs in any order for vehicles. In addition to this there would be issues of maintenance with a fleet made up of a large number of different types of vehicles as future years growth was dealt with. Therefore dealing with growth in demand in small steps is not efficient. At the other extreme we could have purchased a number of vehicles to cope with the forecast demand over the life of the vehicles (e.g. 30years) While this would have a lower cost per vehicle it would have a much higher overall cost. In addition to this a large number of vehicles would need work on the network and the highways to cope with a higher frequency service and at the depot to accommodate the vehicles. SYPTE also retained an aspiration to extend the network at some point in the future and it was not clear how this would interact with a much larger fleet on the existing network. Therefore it was decided to set the scale of the project to match the following criteria; 1) The order needed to be of a size that would be of interest to potential suppliers and have a reasonable unit cost; 2) The number of trams ordered would have to fit within the capacity of the existing network, highway and depot without incurring any significant costs,(i.e. it should not trigger any of the step changes in cost that would occur as the fleet expands); 3) It should be aligned with the next large event on the tramway, refranchising and any lifecycle works that may be needed then; 4) It should not interfere with any possible extension or other proposals as far as this

6 could be determined at this stage; 5) It should be affordable in light of the then current knowledge of available funding. This was the starting point for the work that led to a bid to the RFA and the more detailed work carried out as part of the preparation of the business case. In October 2009 SYPTE submitted the MSBC to the DfT. This included a section on Option Developments. The option selection was carried out in the context of the current over crowding and future growth within the wider corridor, particularly the planned development sites. The following sets out the outcome from this work. The process has followed the approach advocated by the DfT in the WebTAG Unit currently available in draft for consultation, which describes a number of logical and auditable steps towards defining the Preferred Scheme: Understand the current and future context; Establish the need for intervention; Identify clear objectives and define the geographic scope; Generate options for a range of modes, approaches and scale of intervention; Undertake initial sift against objectives, viability and acceptability; Develop and assess options. The first three steps have involved extensive consultation with stakeholders who remain integral to the scheme. Throughout the scheme development process the Project Team has considered a range of options, evaluated against the scheme objectives, and in response to the findings of the surveys, focus groups and public & stakeholder consultation. Option development considered operational aspects, vehicle types, infrastructure and the customer offer. The following options were considered prior to the MSBC submission stage: a summary of the reasons for their rejection is also given; Operating longer trams at the same frequency, Very high infrastructure costs for alterations for work to stops and on the highway in addition to the cost of modifying the vehicles without a reduction in wait times; Using ticketing to discourage peak time travel, Stagecoach have concerns about managing a very complicated ticketing system and pricing people off the trams at peak times on to other modes does not meet the objectives of this project; Enhancements to the bus network, the current bus network in the peak periods is provided commercially to meet the demand the operators believe is there. Most tram users would rather go by tram or car than bus. Therefore any ongoing revenue subsidy to enhance the bus network was not seen as good value for money compared to the preferred option and not sustainable. Additional doors, technically difficult and produced very few benefits. Alterations to the timetable, the simple nature of the systems timetable is one of the reasons for its popularity but there are options that could have increased capacity to an extent sufficiently to warrant any changes. These included turning services short to increase capacity over the central part of the system and looking at the purple route. Existing places to turn services short beyond the points where the network is crowded meant either an increase in the dwell time or running a service with uneven headways which is not efficient use of the asset and does not resolve overall wait times. While the purple route is not used to capacity at the Herdings and Leighton Road stops for the

7 rest of its route it does provide additional capacity over the central part of the system. Abandoning the Herdings spur is also not acceptable for political reasons. Targeted marketing to address the problem, this will be carried out in parallel but is not sufficient on its own Two tram option; this was the low cost option in the MSBC. Options Presented within the MSBC As presented in the MSBC submitted to the DfT in October 2009, the SAV business case considered three options: Do nothing a do nothing scenario where use of the Supertram Network increases in line with the then current TEMPRO growth forecasts. A low cost option where two additional vehicles are purchased to alleviate the overcrowding on the yellow route only. Preferred option where four additional vehicles are purchased in order to provide the capacity to allow for sustainable growth in Sheffield, increasing the service frequency on the Blue and Yellow routes from every 10 to every 8 minutes. The low cost option presented in the MSBC was scrutinised at the expression of interest stage. The following section outlines the key conclusions that were drawn. Expression of Interest The option development work undertaken for the Expression of Interest determined that a low cost option of two trams was poor value for money for the following reasons; i) A smaller order of vehicles will have a higher unit cost per vehicle. The fixed costs associated with the implementation also decrease the VfM of the project. ii) iii) iv) The project will produce fewer benefits (including carbon reduction). This, with the increased unit costs, greatly reduces the BCR. Two additional vehicles only provide relief to capacity issues on a short term basis, as tested with TEMPRO 6.2. The existing depot maintenance facilities can cope with the introduction of a new type of vehicle with relatively minor modifications (included in the overall cost plan). When the two additional vehicles reach capacity (in the relatively short term) the introduction of a 3 rd type of vehicle would be more difficult, costly and operationally less efficient, (i.e. dealing with the growth in demand in smaller steps is much less efficient). This could preclude expansion in the future. v) The smaller the order the less the willingness of manufacturers to set up the production line, increasing the risk of not been able to find a contractor willing to tender. Taking into account the above, this scheme is considered to be low value for money. As part of the option development process for this BAFB a three trams option was also progressed. A significant amount of work was undertaken to establish an informed view as to whether a sound business case for three rather than four vehicles was achievable. Following this investigative process SYPTE concluded that 4 vehicles was still the preferred scheme. For

8 full details of the three tram option, please refer to section 2.2 of the BAFB. For full details of the above process please refer to Section One of the Supporting Information Document. 1.4 What was the last total estimated cost of the scheme as previously configured including where changed since the award of Programme Entry? Please provide the latest cost of the scheme with a summary and where, appropriate, an explanation of the key changes from the previous cost breakdown. Please use this section to identify any cost savings that you have already made since the award of Programme Entry. Figures should be outturn costs. Please adjust to exclude the costs of any Part 1 Claims that you may have included at this time. m Pre 201 1/ / / / / / 16 Total % LA contribution 145,025 2,119,095 2,176, , ,026,721 25% Third Party contribution DfT funding requested 6,357,285 6,528,931 1,976,409 17,600 14,952,737 75% TOTAL 145,025 8,476,379 8,705,242 2,635,211 17,600 19,979, % The costs shown in the above table are those included in section 1.5 of the Expression of Interest submitted in January 2011 for the MSBC scheme. These are based on the October 2009 MSBC submission but updated to reflect changes to the original programme as a result of the Comprehensive Spending Review. The totals above include preparatory costs that, with the change to current programme forecast entry date, are now not eligible for funding as they have been incurred by SYPTE by SYPTE in 2011/12.

9 1.5 Please describe any developments (such as housing) linked with the scheme as described above and explain any changes impacting on these developments (e.g. policy changes such as housing allocations, changes to redevelopment plans)? This should explain any links that the planned scheme had to major developments and provide details of changes to these plans such as through changes in policy relating to housing, changes to developer plans etc Sheffield is a Core City with a population of over 500,000. It retains a significant and competitive productive sector, two major universities and a thriving commercial sector which has contributed to a period of sustained high growth over the last decade. The city is combining the renewal of the commercial centre with massive redevelopment of its historical eastern manufacturing quarter. Sheffield s mixture of metropolitan working, leisure and commerce is stretching out along the Lower Don Valley on sustainable brownfield sites. Figure 1.1 Supertram & Sheffield s key Employment Sites The Supertram is the flagship public transport service providing access to all three of the key employment areas. Failure to invest in additional capacity and improved levels of service on these routes could significantly compromise the ability of the City Centre and the Upper and Lower Don valleys to provide the level of employment which is needed. The proposed additional vehicles will therefore play an important part in facilitating the key regeneration areas for both Sheffield and the LEP. The City Centre itself is the major focus of economic regeneration in the city, being led by a City Centre Masterplan. The development in Don Valley will complement its role, and major opportunities for offices will be promoted close to public transport interchanges, such as those at Meadowhall and Hillsborough.

10 Throughout, transport investment is recognised as critical to the delivery of the Local Development Framework. This is never more so than in the case of office provision, where proximity to the Supertram network is seen as particularly important. As indicated, the existing Supertram network already serves the main employment areas in Sheffield and also has connections to areas where planned development is planned to have a major impact on the economic success of the City. In addition, the scheme has the potential to support some of the ambitions of the Local Enterprise Zone as it is central to providing sustainable access to these sites. The entire Supertram catchment area currently encompasses an estimated 98,000 jobs and 72,000 dwellings relating to 173,000 people (2001 Census, Yorkshire and Humber). Future growth within the Supertram catchment area during the LDF plan period is anticipated to deliver approximately 50,000 new jobs and 17,000 homes (41,000 new residents). Supertram will therefore serve approximately half of the total new development identified in the LDF allocations. The figure below shows the catchment of the Supertram and the associated development sites for residential and employment uses.

11 Figure 1.2 Supertram & Sheffield s New Housing Development Sites

12 In addition to the economic aspirations, the existing Supertram network provides access to many of the vulnerable communities in Sheffield and is an important link for enabling people to access employment. As can be been in Figure 1.3, many of the communities along the route are within the bottom third of the Index of Multiple Deprivation (IMD).

13 Figure 1.3 Supertram & Current Employment & Deprivation

14 When looking at unemployment rates it is clear to see that Supertram connects areas with historically high levels of unemployment to the employment sites. Figure 1.3 shows the route in relation to areas of unemployment. There are particularly high levels of unemployment in areas to the South of Sheffield which will benefit from this scheme along with communities located between Sheffield and Meadowhall.

15 Figure 1.4 Supertram & Unemployment Rates

16 Furthermore, the service provides access to communities where there is a low level of car ownership, therefore a high reliance of public transport to access opportunities. Figure 1.4 shows that the Supertram serves a significant proportion of the areas where between 50% and 75% of the households do not have access to a car. It is also important to note that the south western suburbs of Sheffield have higher car ownership than average. Market research undertaken in 2011, showed that car users are more likely to switch to a light rail mode over bus as their perception of the tram is that it is a quicker and more reliable mode of public transport. This has implications for the performance of the transport network, if those people choose to drive to work. The location of a Park and Ride site at the terminus of the route in Halfway has strategic importance in attractive car drivers to use public transport to access the city centre. Providing capacity to encourage people to Park and Ride will improve the operation of the wider network and help to ensure there is capacity serve both those who choose to travel by Supertram and those who rely on the service. For full details please refer to Section One of the Supporting Information Document.

17 SECTION 2: REVISED SCHEME PROPOSAL This section should describe the changes you are proposing to make for the purposes of your Best and Final Funding Bid. 2.1 Are you proposing any changes of scope from the scheme as described in Section 1? If yes, please describe in detail the changes you are proposing. Please also attach explanatory maps, diagrams etc. as appropriate. No changes to the scope of the project, as described in section 1, are proposed, the main alternative considered and the reasons for not adopting it are given in section 2.2 As noted in section 1.3 some measures to help address the problem are being undertaken in parallel with this bid. 2.2 What, if any, additional changes of scope have you ruled out for the purposes of your Best and Final Funding Bid? Please give reasons. As part of the option development process a three trams option was also considered. A significant amount of work was undertaken to establish an informed view as to whether a sound business case for three rather than four vehicles was achievable. This included; dialogue with the supply market, risk workshops & simulations as well as cost reviews and developing a webtag compliant value for money case. 1. The project risks, costs, benefits and future growth rates have been discussed with the project partners at great length. Taking into account the above, the following is a summary of the reasons why the three tram option is not SYPTE s preferred option; The three tram option is higher risk when expressed as a percentage of total cost; Cost savings of only up to 2m overall may be achieved and this would be dependent on the interest shown by suppliers; The smaller the order the less likely the manufacturers are to bid, increasing the risk of not been able to find a contractor willing to tender. It presents a less attractive service to the public, and hence a lower rate of forecast demand growth based on the more limited change in headways provided by the scheme; Four trams match the growth forecasts to the end of the franchise. The existing depot maintenance facilities can cope with the introduction of a new type of vehicle with relatively minor modifications (included in the overall cost plan). The introduction of a 3 rd type of vehicle (for instance when the three tram option had reached full capacity) would be more difficult and costly and operationally less efficient, (i.e. dealing with the growth in demand in smaller steps is much less efficient). This could preclude expansion in the future; It is significantly lower value for money than the preferred scheme. For full details on the three tram business case please refer to Section One of the Supporting Information Document. 2.3 Whether or not you are proposing a change of scope, please identify any savings that have been made to the total cost of the scheme, for example through value engineering. Please provide details with a summary and explanation of the further savings beyond those already

18 identified at 2.1 above or, if no scope changes are proposed, with reference to the cost breakdown provided in the latest cost estimate at 1.4 above. A significant amount of work has been undertaken in order to seek cost savings, reduce risk and improve deliverability of the scheme. The activities undertaken are as follows; 1. Testing price assumptions with the supply market, 2. The depot modifications review, 3. A review of the inflation indices, 4. A complete risk review. The cost plan has been updated to take this work into account, a summary of the savings are shown in the table below. Depot Modifications & others (1) Cost at MSBC Cost at BAFB Saving 648, ,255 54,888 Inflation (2) 1,869,876 1,105, ,025 Quantified Risk 1,070, , ,220 Assessment (3) Total Saving 1,339,733 (1.) The depot cost review was undertaken with Stagecoach and enabled cost savings to be made to the original estimate. This was a direct result of the information gained from the market intelligence exercise and a further design review by Stagecoach. (2.) In order to provide an accurate estimation of future inflation, different rates have been provided to cover; a. The trams and capital spares only contract b. The UK works As there is a higher chance that the Trams contract will be located in Europe, the EU zone inflation forecast of 2.7% has been used. This is slightly above official forecasts but is considered prudent. For the remaining works within the UK, e.g. platform modifications, we use our forecast for the UK RPI rate of 3.5% p.a. (3.) A complete risk review took place that took into account the outcome of the market testing exercise and the risk of inflation varying from the forecasts. Please refer to Section Four of the Supporting Information Document for a copy of the updated QRA. The project has undertaken a thorough value engineering process and has therefore been pared down as far as possible whilst still meeting the technical requirements of the system and meets the projects objectives. However there is potential for larger savings by combining this project with the Tram/Train project, although SAV independently represents a very high value for money scheme. This option is however outside the scope of this

19 BAFB, details of this are given in section 6.1. For full details on the Financial Case please refer to Section Two of the Supporting Information Document. In addition to the above, the Project Team has recently undertaken a process to engage with the supply market. An OJEU notice was issued in May to formally enable SYPTE to contact the supply market. The response to this was higher than expected. All suppliers were sent a copy of SAV s cost plan, programme and a questionnaire. The Project Manager, met with a large amount of the respondents. Overall, The level of interest and respondents ability to meet our requirements within our constraints was better than was forecast at the start of the process. The project team are therefore confident that a competitive procurement exercise can be undertaken and that the result will be within the parameters of the EOI submitted to DfT in January. The implications of the exercise for the BAFB were: (i) (ii) (iii) The programme should not be altered. Whilst several areas had fluctuated; e.g. demand for work was down, inflation in Europe was less than forecast, the pound is stronger than before, the net change in price over the last two years is zero, i.e. the price in pounds per unit is the same in 2009 as in Despite some respondents belief that significant savings can be made this should not be reflected in a BAFB, as this would tie us in to a very small number of suppliers, who may or may not be able to deliver on price and/or quality. (iv) Any reductions in our BAFB compared to the EOI are: a) small for elements relating to cost b) slightly larger for the elements relating to risk and inflation The details of this are being worked on and will be reported to the August Management Board meeting and the SAV Project Board. (v) (vi) The exercise adds weight to the argument that we should bid for four vehicles but this is only part of the overall evidence towards the final decision. The exercise also adds weight to the exclusion of leasing and similar in our bid. Full details of this exercise are given in Section Two of the Supporting Information Document. Whilst taking into account the cost savings made on the project, SYPTE has retained its level of local contribution at 6m so that the full extent of savings can be attributed to the DfT s requested contribution. In addition to the above the option of leasing rather than direct purchase was investigated further. This showed that the overall cost of leasing is greater than purchase.

20 The figures below are based on information as presented by Lombard to SYPTE 29 th July It is understood that these rates would be revised, in line with the market, closer to the time of purchase. Effective Interest Rates NPV per 1m A 10 year PWLB loan 3.00% - A 10 year fully amortising lease 3.98% 1,023, A 10 year lease with 50% residual 4.00% 1,033, Lombard produced discounted cash flows which indicate that the better option is still outright purchase. For more details of this and of the process and outcome above please refer to Section Two of the Supporting Information Document. 2.4 Please provide separate details of any further changes you are proposing to the scheme from that submitted in January No further changes to the project are being proposed. 2.5 What is your latest assessment of the cost, feasibility and value for money of any alternatives to the proposed scheme? This should include any previous options subsequently discarded and / or those proposed by third parties. Please explain why this / these options have not been progressed. Please detail any elements that have been included in your proposed scheme. Please make reference to any material differences with the preferred scheme in costs or benefits such as carbon impacts. As outlined in section 1.3 the main alternative considered for the BAFB was the purchase of three trams instead of four. Cost: Three Additional Tram Option BAFB Costs Prices Expenditure Costs Tender Actions 78,900 12,000,000 Trams & Spares 1,908,000 13,908,000 Quantified Risk Assessment 480,801 Others 582,081 Supervision/Approvals 330,000 Sub Total 15,379,782 Inflation (Trams Only 2.7%) 761,171 Inflation (UK works only 5%) 92,824 Total at Outturn 16,233,777

21 Value for Money: Value for Money of each of the schemes has been reassessed using the updated modelling and appraisal tools, in line with updated BAFB and WebTAG guidance. The results below support our preference for four vehicles. Not only is the total benefit some 4.3m higher but also, the model forecasts a significant element of induced patronage (in addition to modelled mode switchers) resulting from frequency improvements, which one fewer vehicle would very substantially reduce. The additional frequency benefits generated by the fourth vehicle also generate additional revenue, which is forecast to more than offset the additional operating costs. Without this impact produced by the fourth vehicle, the expected surplus of revenue over operating cost on which the viability of the scheme depends is put at risk. Below is a summary of the appraisal findings for the Central Growth case, however full details can be found in the Economic Case, Section Three of the Supporting Information Document. 3 Additional Trams 4 Additional Trams Core Scenario Central TEMPRO Growth Central TEMPRO Growth Carbon 1,111,505 1,184,882 Time - non users 23,454,547 25,002,934 Time - existing users 5,917,041 7,587,598 Time - new users 1,281,908 1,265,627 VOC costs - new users 4,446,042 4,736,261 Additional Bus Operator Revenue -3,591,624-3,828,730 Accident Benefits 391, ,784 Wider Impacts 3,509,954 3,859,242 Indirect tax Change -1,960,747-2,088,737 Physical Fitness Benefits 1,719,080 2,435,364 Total (PVB) 36,279,617 40,572,224 Local funding 4,088,097 4,404,026 National Govt funding 8,412,349 9,068,326 Additional Tram operating costs 14,091,159 18,788,212 Additional Tram revenue -17,749,304-24,988,346 Indirect tax Change 0 0 Total (PVC) 8,842,301 7,272,218 BCR Additional Crowding Benefits- PDFH London Values Additional Crowding Benefits- PDFH Regional Values Total Revised PVB Range BCR- Incorporating Crowding Benefits 1,744,169 2,058,343 4,157,191 4,905,837 38,023,786 to 40,436,808 42,630,567 to 45,478, to to 6.25

22 In addition to the above, the incremental BCR (i.e. the additional benefits associated with the 4th vehicle, when set against marginal investment costs) is 7.03, which is higher than either of the individual scheme BCR s. Feasibility: As with the two tram option the main reasons for not progressing the three vehicle option are: The existing depot maintenance facilities can cope with the introduction of a new type of vehicle with relatively minor modifications (included in the overall cost plan). However, the introduction of a 3 rd type of vehicle (for instance when the three tram option had reached full capacity) would be more difficult, more costly and operationally less efficient, (i.e. dealing with the growth in demand in smaller steps is much less efficient). Three trams are therefore also likely to preclude expansion in the future; The Four tram scheme produces the most benefits and has the highest BCR. The incremental BCR of 7 demonstrates the additional value brought to the network by the fourth vehicle. The four vehicle scheme provides capacity for future growth for a large part of the remaining life of the existing franchise. The problems for growth beyond this remain but as this is further into the future; other opportunities may arise, such as the possibility of combining with Route extensions or fleet renewal. In addition to this, the Stagecoach agreement does not cover the three tram option and the ITA has not approved a local contribution of 6m for three vehicles. Please refer to Section 1.3 & 2.2 of the BAFB and Section One of the Supporting Information Document for full details of the option development process. As detailed in section 2.2 of the BAFB form, the three tram option has been fully investigated as an alternative to the preferred scheme, utilising the same updated model and wider appraisal conducted for the four tram option. This includes comparative testing of both the four and three tram options in each of the high and low growth scenarios, along with different elasticity and mode choice variables.

23 SECTION 3: IMPACT OF CHANGES PROPOSED AND DELIVERY OF THE SCHEME This section should describe the impact of the changes you are proposing in Section 2 above compared to the previously configured scheme as described in Section What impact, if any, would the proposed changes have upon achievement of your primary objectives? This should refer to the scheme as identified in section 2.1 The minor changes proposed will have no impact on our ability to achieve the objectives of the project. 3.2 Please provide a short description of your assessment of the value for money of the revised scheme including your estimate of the Benefit Cost Ratio. This should cover both monetised and non-monetised costs and benefits and should briefly explain the reasons for significant changes since your most recent Business Case submitted to the Department. The full assessment, as set out in the Value For Money guidance should be provided as an Appendix. Valuation of any dependent development should be reported here, separately from the central value for money evidence and supporting evidence, and a full description of the approach taken should be included in the Appendix. The revised BCR for the four additional vehicles scheme is 5.58, compared to 2.9 at the MSBC stage (5.86 to 6.25 when incorporating crowding benefits). There are a number of key reasons as to the change in the BCR when compared to the Programme Entry submission in These factors include: Reduction in scheme capital costs of 18%, Reduction in scheme operating costs of 14%; Reduction in optimism bias to 30%, rather than 40%; Additional tram revenues are included within the PVC as the tram system is franchised so changes in cost and revenue ultimately falls on SYPTE; The change in private sector bus revenues has now been separated out from public sector impacts (higher tram revenues), with the loss of private sector bus revenues appearing as a disbenefit within the PVB rather than impacting on PVC; Off-Peak annualisation is now incorporated; Wider Impacts are now incorporated; Net safety benefits are now incorporated. A number of updates have also have also led, in isolation, to reductions in the level of BCR that would otherwise have resulted from the above changes. These include: Use of TEMPRO v6.2 growth for streams of future year demands, revenues and all associated user and non-user benefits; Use of latest WebTAG Unit 3.5.6, with similar impacts on VOT s across all applicable sub objectives; Use of observed growth rather than previous TEMPRO v5.4; and Inclusion of RPI+1% p.a inflation in operating costs. However, the overall impact on the BCR of all these changes is an overall positive for the business case. This has particularly been achieved through the control of costs; a more refined understanding of risk and operational unit costs verified by the operator; optimisation of the scheme itself undertaken through the MSBC, EOI and BAFB processes; and the wide range of positive benefits the scheme provides to each of the wider appraisal sub-objectives.

24 4 Additional Trams- Central TEMPRO Core Scenario Growth Carbon 1,184,882 Time - non users 25,002,934 Time - existing users 7,587,598 Time - new users 1,265,627 VOC costs - new users 4,736,261 Additional Bus Operator Revenue -3,828,730 Accident Benefits 417,784 Wider Impacts 3,859,242 Indirect tax Change -2,088,737 Physical Fitness Benefits 2,435,364 Total (PVB) 40,572,224 Local funding 4,404,026 National Govt funding 9,068,326 Additional Tram operating costs 18,788,212 Additional Tram revenue -24,988,346 Indirect tax Change 0 Total (PVC) 7,272,218 BCR 5.58 Additional Crowding Benefits- PDFH London Values 2,058,343 Additional Crowding Benefits- PDFH Regional Values Total Revised PVB Range 4,905,837 42,630,567 to 45,478,061 BCR- Incorporating Crowding Benefits 5.86 to 6.25 With each of these required updates in place, and in comparison to DfT Value for Money guidance, it may be seen that the Core SAV scheme based upon 4 additional trams achieves high value for money, with a central BCR of With crowding benefits included this increases to 5.86 with the lower estimate, and 6.25 if higher values are utilised. This represents significantly greater value for money than the high VfM category with BCR threshold of greater than 2. In line with guidance in WebTAG unit , low and high demand tests have been undertaken for each option. The resultant BCR s range between 4.19 and 8.36 for the 4 additional trams without crowding, and between 4.47 and 8.73 with crowding benefits assumed. In all cases the scheme therefore demonstrates a value for money assessment which is significantly greater than the high VfM category associated with a BCR of greater than 2. Further combined sensitivity tests with respect to both elasticity values and mode choice forecasts show that the BCR for the scheme remains at high value for money, even with a 20%

25 lower elasticity and 20% mode choice transfer reduction in terms of forecast benefits and revenues. Incorporating crowding benefits the 4 additional tram scenario has a BCR of between 3.05 and 3.36 in this scenario, and the three vehicle scenario a BCR of between 2.65 and 2.98, depending on the crowding valuations utilised. Indeed, high value for money is still achieved, if these lower elasticity and mode choice forecasts applied, together with the low growth forecasts from NTEM v6.2. The BCR ranges between 2.59 to 2.95 for the four additional tram scenario. As a result, these tests show that the business case for the SAV scheme is sufficiently robust to travel demand changes and potential uncertainties in the future, as well as the key methodological input regarding the implied elasticity, and is thus considered a highly suitable scheme for funding. Given the high value for money obtained, the strong case for delivery, low levels of associated operating risk, together with a 32.5% level of local contribution, the scheme is commended to DfT for funding. For full details of the value for money case, please refer to the separate Value for Money note. In addition, the following documents can be found in Section Three of the Supporting Information Document; Technical Note 01, released on 1st July 2011, which detailed the methodology and rationale behind the approach adopted for the appraisal and Value for Money (VfM) assessment of the scheme. Technical Note 03, released on 4 th August which detailed the additional enhancements and updates being made to the model in order to be consistent with latest WebTAG and BAFB guidance. Technical Note 04, released on 3rd August which detailed the SDI analysis undertaken for the scheme in relation to updated BAFB and WebTAG guidance; Latest SRTM3 model documentation comprising the LMVR, Demand Model Report and Forecasting Report, as referenced within Technical Note 01; and WSP Report of Survey for the Supertram Additional vehicles scheme, as previously submitted to DfT at Programme Entry. 3.3 What impact, if any, would the proposed changes have on the statutory orders or permissions required or the timetable for obtaining these? For example would fresh planning consent need to be sought? The project has no requirements for statutory approvals or Traffic regulation orders and therefore no public enquiry or similar is required. 3.4 What are the procurement arrangements for the revised scheme and what, if any, changes have been made from the arrangements or timetable proposed for the original scheme? For example would any retendering be required? Have you supplied details of your procurement strategy and arrangements to the Department? No changes have been made to the procurement arrangements to the scheme since the MSBC submission in October For full details of SAV s procurement strategy please refer to Section Five, of the Supporting Information Document. A summary is presented below. In June and July 2011 a market testing exercise was undertaken to engage the supply market (full details of the outcome of this can be found in Section Two, of the Supporting Information Document). This has given the PTE the confidence that a technical solution is available and affordable, and that there is the appetite from the market to deliver this. It also showed that as there is no single technical solution available as any supplier would

26 have to provide specific solutions to the technical challenges that the system presents, this will probably be achieved by modifying an existing tram design. Therefore the tendering process will need to evaluate different ways of achieving a similar result. The criteria for selection will therefore take into account; the cost of the vehicles, any modifications required to the existing infrastructure and whole life costs. The choice of procedure chosen to procure the vehicles, under the Public Regulations 2006, is a Competitive dialogue. This is deemed to be most appropriate and best practice for the following reasons; SYPTE will be awarding a "particularly complex contract"; as defined in the context of the first sentence of recital 31 of the underlying directive (2004/18/EC) ("Directive") which states that: "Contracting authorities which carry out particularly complex projects may, without this being due to any fault on their part, find it objectively impossible to define the means of satisfying their needs or of assessing what the market can offer in the way of technical solutions and/or financial/legal solutions." SYPTE consider that the open or restricted procedure will not allow for the most efficient contract to be awarded. SYPTE are unable to fully define the technical means capable of satisfying its needs or objectives upfront; and Specify the most efficient legal or financial make-up of the project upfront as this will depend on the market offer. SYPTE has considered the most appropriate form of contract and concluded that, in the context of the purchase of a small number of additional trams to operate on an existing system, the chosen form of contract will need to have the following characteristics: it will need to transfer design, construction, transportation, delivery and commissioning risk (there will be a mechanism for testing the cost of risk transference and those who are best placed to manage types of risks will be key to the process), it will need to transfer risk of compatibility with existing system as far as possible, the contract terms will need to be relatively simple and to have been tried and tested recently in the market, Will need to include a fixed cost for design and construction. Given the recent successful procurement which closed in July 2009 of additional trams for the Blackpool & Fleetwood Tramway, it is proposed to use a form of contract similar to this as the starting point for South Yorkshire. Under the contract, the vehicle supplier will be obliged to: design, manufacture, test, supply, commission and deliver the trams so as to ensure delivery at the depot and commissioning in accordance with the agreed programme; work up the detailed design of the trams in accordance with the agreed review procedure and so as to ensure compatibility with the existing system; obtain all consents and other approvals required in relation to the trams in accordance with the specified programme; provide training to SYSL's drivers and maintenance staff (together with operating and

27 maintenance manuals); remedy defects in any trams to the extent that such defects are covered by the warranty regime; and provide spare parts and special tools. 3.5 Please describe the internal / external expertise & skills that will be assigned to the project to allow for its effective delivery. This should detail who / what roles will have overall responsibility for the project and what other skills will be available. SYPTE has delivered several large and complicated projects and a large number of smaller schemes in the recent past. The project will be managed by the staff drawn from the Projects Team in the SYPTE. Members of this team are able to draw on the recent experience gained as a result of their successful delivery of other large scale projects such as Barnsley Interchange and A638 Quality Bus Corridor major schemes, Doncaster Frenchgate PFI and Sheffield Station Rail Passenger Partnership. The PTE also retains some of the team that implemented the original Supertram project. All of the skills and experience gained as a result of this are available to assist with the delivery of this project. Stagecoach has a detailed knowledge of the operational and maintenance requirements of the tram system and will be supporting the delivery of the project from a technical and operational point of view. The project will be managed in line with the Office of Government Commerce (OGC) PRINCE2 project management methodology (and its terminology). For details of the project structure and roles and responsibilities for the Senior Responsible owner, Project Board and Project Team please refer to section 3.6 of the BAFB form which provides an overview of the project governance. Outlined below is a list of the Project s internal and external resources who will contribute towards delivery of SAV. The Senior Responsible Owner (SRO) for this project is David Brown, Director General of SYPTE. Mr Brown is a member of the SYPTE s Management Board and Executive Board and has overall responsibility for delivery of the project. The Executive is Peter Elliott, Programme Delivery Manager (SYPTE) he will provide the interface between the SRO(and therefore Management Board and Executive Board) ensuring delivery of the desired objectives as identified in the Business Case as well as overseeing links to other projects. The Project Manager is Helen Plummer. Helen, a qualified PRINCE2 Practitioner, leads and manages the project team, and is responsible for delivering the project on a day-to-day basis. Technical and operational input - Paul Seddon, Rolling Stock Maintenance Technical Engineer, Eddie Birkitt, Operations Manager and Dr Robert Carroll, Fixed Equipment Maintenance Technical Engineer, Stagecoach Supertram (operators of the network). Duties: To lead on the Design and build period, Design supervision/approvals, Construction supervision and commissioning, supported by Railway Systems Consultants, as detailed below. Legal and Commercial Issues - Steve Davenport, Legal Services Manager (SYPTE). Duties: To lead on the Preparation of Procurement Strategy, Preparation of tender documentation and contract, Changes to the Stagecoach Concession, General Legal