Traditionally, TBMS for tunnelling projects are procured by the successful contractor. Occasionally projects are procured with a TBM and precast segments already readily available and contractors are left with no other option than to accept whatever the client has ordered for them to work with.
When clients develop projects where tunnels are involved, usually extensive evaluations are taking place by client organisations, and/or by consultants to select the appropriate tunnelling methods. Upon many other factors, i.e. surface structures, settlement restrictions, site access and length of tunnel, the right selection is also and importantly dependent on the geo-hydrological conditions along the tunnel alignment. Using the principle of the geotechnical baseline report (GBR) is one good and fair approach for clients and contractors, which when applied appropriately, clearly defines parameters and risk allocation.
Once an excavation by TBM is chosen as the method of choice, the discussion starts on how to specify the appropriate TBM and TBM operations. A range from prescriptive to performance based is available. For the purpose of this paper all kinds of hard rock and soft ground boring machines are considered as being TBMs. TBMs are capital intensive investments. However, in relation to the overall cost for a tunnelling project, the costs of TBM and segments are subordinate. The magnitude is dependent on the size and complexity of the project.
Technology and experience with TBM tunnelling advances steadily. Clients, often single project tunnel builders, are typically not at the forefront of latest developments and therefore ask for advice from experienced consultants and sometimes from TBM manufacturers.
Depending on their experience and strategy, consultants will offer to their client’s procurement methods that they consider most suitable and in compliance with the specific country procurement law. Specifically in regard to TBM selection these can include the following scenarios:
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By GlobalData– Client describes the geology and associated parameters (i.e. GBR) – contractor is left to choose the right tunnelling machine;
– Client describes geology and associated parameters (i.e. GBR) and specifies the type of TBM to be used – contractor to negotiate with TBM manufacturers exact configuration;
– Client describes geology and associated parameters (i.e. GBR) and defines the exact type and configuration of TBM – contractor to choose from pre-selected TBMs and negotiates last details and price with TBM supplier;
– Client chooses and purchases the TBM, contractor is given the TBM to operate;
– Client chooses and purchases the TBM; ownership of the TBM is transferred to the contractor once awarded the contract;
– Client involves pre-qualified contractors in an interactive process to find the most appropriate TBM, contractor to order TBM that partially Gerhard J. Urschitz Gerhard is CEO of Austria-based contractor Strabag’s Canadian wing or greatly reflects his understanding and input provided;
– Client involves pre-qualified contractors in an interactive process to find the most appropriate TBM and purchases the TBM in advance of contractor selection, contractor is given the TBM to operate;
– Client involves pre-qualified contractors in an interactive process to find the most appropriate TBM and purchases the TBM in advance of contractor selection, ownership of the TBM is transferred to the contractor once awarded the contract.
In all cases clients are the combination of project owners and their associated and specialised consultants. It shall also be mentioned that in all cases TBM manufacturers/suppliers are involved more or less extensively in the process to advise clients, consultants and contractors. In some cases, TBM manufacturers also have been prequalified before entering the process.
Clients are left with the decision on how to proceed.
This paper specifically concentrates on options, where clients decide to get involved in the procurement of TBMs ahead of contractor selection and award.
Case Histories
With one exception in 1972, where one transit project in Australia started with the direct procurement of a TBM, it can generally be stated that the client procurement process started in the late 1980s, with a variety of projects, including mining, water, rail, nuclear waste and subways.
While the references of Table 1, right, are the result of an international review of publications, project reports and questionnaires it cannot be concluded that the list is comprehensive.
What can be seen from the project summary is that the majority of projects are rail/subway/metro projects (nine out of 17), and the major TBM type used for owner procurement is the EPBM (30 out of 43), which relates to more difficult soft ground conditions.
It seems that transit authorities, mining companies and wastewater companies with usually a network of tunnels to be built are amongst the potential applicants of the owner procurement method for TBMs. Only few single project entities.
One special case, which is not mentioned in the table and that does not completely fit into the categorisation, is the City of Edmonton. The City purchased eight EBPMs and decided to operate them by themselves. In this case the City is owner and contractor in one entity.
Geographically it is interesting to note that some nine out of 17 projects / clients (53 per cent) are based in North America, followed by China with a share of 23 per cent. None of the projects are located in Europe.
Stakeholders in the Process
In the owner procured TBM process the following are the major stakeholders:
– Client
– Consultant
– Contractor
– TBM Manufacturer
Each of the stakeholders has certain priorities that need to be considered during the decision making process.
Clients
Clients have the task to implement a project or a network of projects. Their priority is to carry out the projects within schedule and budget. Specifically tunnelling projects are associated with risks due to unanticipated ground conditions.
Priorities for clients in regard to TBM procurement are:
– Potential acceleration of the project implementation once financing has been secured and the construction contract can be awarded
– Stay within schedule and budget
– Minimise risk during implementation (by specifying as much as necessary)
– Create a competitive bid environment (maximise qualified number of contractors)
– Increase certainty during tunnelling (high quality TBM by ‘over’-specifying the TBM)
– Build-up of experience (in cases of system or multiple implementations)
– Try to get the best machine available for the expected project conditions
Consultants
Consultants have the task to advise clients in regard to procurement strategy and design projects technically. Their priorities include:
– Extended involvement in advising clients and managing projects during design and implementation Build-up of TBM experience
– Using experiences from previous projects
Contractors
– Contractors are typically the entities that get involved after all strategic decisions have been taken. They are ‘confronted’ with project and procurement documents developed by clients and their consultants. Contractors’ priorities include:
– Provide a competitive and best offer (by minimising knowledge transfer and maintaining a competitive edge)
– Utilise and build-up on experience gained from previous projects and thereby maintain the competitive advantage
– Utilise inventory as appropriate (TBM, trailing gear, conveyor belt system, rolling stock, supply lines, rails, etc.)
– Want to know (specify) or be involved in the TBM selection (open vs. double shield; EPB vs. slurry)
– Be in charge of TBM configuration and operations
– Receive contract based on qualification and experience
TBM Manufacturers
TBM manufacturers are to provide appropriate machines for anticipated projects. They are active worldwide. Due to the specialised technology there are only a very limited number of TBM manufacturers available. Sometimes they are involved in early discussions with clients and or consultants, where they try to sell their technology.
Often the influence of this early involvement is reflected in tender documents by including specific features which are unique to one of the manufacturers (e.g. movable cutterhead, specific grouting concept).
They are on the forefront of developing new tunnelling technologies with their in-house resources as well as in cooperation with contractors by specifying particular features.
Depending on the geographic location of the project the following factors need to be considered:
– Cost of labor
– Availability of experienced labor
– Time for delivery of spare parts
The level of mechanisation depends on above factors, the higher the cost of labour the more effort has to be put into the TBM design and configuration to limit the scale of labour on the TBM (e.g. optimised logistics concept, automatic anchor drill unit).
Another feature that has an impact on the TBM and trailing gear layout is the mode of muck removal.
Client-procured TBMs
When considering the specific circumstances of each project, there might be situations where it can be beneficial for clients to apply the advance procurement process. Before analysing such circumstances, a general view is provided outlining specific pros and cons for each of the major stakeholders in the process. A summary of pros and cons is provided in Table 2.
Clients
Decision making processes specifically within public entities (e.g. transportation authorities) usually follow a long path. From the project idea to implementation it often takes decades until all pieces of the puzzle are in place to finally start construction. A main reason for delays and uncertainty is the funding of these very capital intensive projects. Once the funding is secured the projects ideally should start immediately and be finished in the shortest time possible to make the infrastructure available to the public. This reason, the earlier start when the TBM is already readily available, is found to be the major argument for the client procurement process. It does, however, only hold true when the advance works have been completed to an extent that tunnelling can start within a short period of time. Often projects require the construction of access points, e.g. shafts, portals and assembly caverns. before the TBM can finally be assembled. With a lead time of 10 to 12 months until the TBM would be on site when using the ‘traditional contractor procurement this benefit of early TBM start can be diminished when the advance works are not completed in time.
It also has been seen that the advanced TBM procurement option has been used as political measure. Once one or even more TBMs have been ordered (and paid for) the motivation to continue a project is higher than otherwise. Experience, however, shows that politics are sometimes not impressed with such facts, especially after elections, which result in new governments, and still question, stall or cancel the process. The Shepard and Eglinton Line advance TBM procurement in the early 1990s is such a case where it was decided to cancel or substantially defer the project after the decision of early TBM procurement had taken place.
Another major advantage has been seen by some public transport agencies (e.g. Singapore Metro) where it is expected that 10 TBMs of similar configuration will be utilised to implement the Downtown Line. Combined with the above statement of an accelerated implementation the argument of bulk procurement has been used. When various contractors would purchase 10 TBMs separately the price for the Authority would most likely be higher.
In order to get involved in such detailed negotiations with TBM manufacturers, client organisations need to be prepared to mobilise accordingly and have sufficient experienced staff available. This staff would of course be supported by consultants that provide the specific advice, but clients usually do not like to be dependent on external experience only.
For clients with only one tunnel project this approach has therefore to be questioned. It only is worth the effort when a series of tunnel projects are planned to be implemented within a certain period of time. Pressure to cut cost on public entities counters this approach though.
Once the client staff has gained the experience, it can define the TBM and all its features that it finds most appropriate for the project. Clients have to be aware that when following this trail risks are taken over that are usually allocated to contractors. Clients have to be aware that it is ‘their’ machine and that all costs associated with any type of changed conditions, poor performance and resulting standstills and delays have to be compensated for. This statement extends also into wear and tear costs, when kept within the client risk portfolio. Various forms of risk sharing and ownership transfer have been seen already, including transfer of risk back to the contractors e.g. contractor involvement in TBM selection process, TBM ownership transfer to contractor once construction contract has been awarded, or transfer of performance risk to the contractor. The risk budget allocated in the contract price by the contractor will depend on the fairness of the contract and on the allocation of risk. For example, it shall be mentioned that contractors will price the risk when confronted with TBM ownership or performance risk where no or limited input was provided.
Another reason to use the advance procurement of the TBM is the risk management by clients in difficult ground conditions. There have been projects that failed due to the selection of the wrong type of TBM or the wrongly equipped TBM. This problem can be overcome by specifying exactly what the contractor has to use, or to pre-purchase the TBM. Clients have to be aware that while actively managing this risk by ‘interfering’ with the process, they are taking on the risk themselves. The question remains who has more experience and who is in the better situation to handle this risk.
One interesting argument for the owner TBM procurement is the statement that clients can expect more competition for their projects when the costs for the TBM (and segments) have been taken out of the scope, thereby reducing the contract amount. It is expected that more contractors would qualify or even apply for qualification, when already provided with a TBM and segments. This might partially be true when considering limited bonding capacity of contractors, but has to be questioned generally. A client should look for financially sound and experienced contractors rather than trying to maximise the pool of interested parties and thereby running into the risk of default situations during construction. Defaults can come from financial difficulties, when projects run into technical/ contractual problems but also from technical problems when less experienced contractors are given a TBM to excavate a tunnel that experiences technical challenges. It sounds more like a compromise where a potentially lower price is traded off for less experience and financial strength. In order to compensate for such problems TBMs are likely to be overspecified (and therefore more expensive than need be) to cater for all eventualities.
Private clients (e.g. mining companies) have a different interest in the TBM procurement process. They usually want to stay in charge of the technical development of the machines and therefore often get involved intensively in research and developments of new machines or features. They are looking for contractors to install ‘their’ machines and operate them.
Consultants
Consultants can be seen as the group that gains most out of this process without taking on substantial risk. Extensive involvement to advise clients in early phases, build-up of experience to be able to provide the highly specialised services, preparation of all specifications and documents for both procurement processes (TBM and construction), detailed design services for the segments (which would otherwise be carried out by the contractor), and increased involvement during construction to verify/justify their early decisions and configurations can be seen as their benefits.
A very high level of expertise and experience is required to be able to provide these services. Naturally, only few consultants will be able to cover all the tasks, resulting in a situation where competition for the consulting services is very limited or these services have to be outsourced.
Contractors
Contractors are faced with an unusual situation when being involved in a project where the TBM and segments are provided and their input in the decisions has not been given or is very limited. It can be seen that contractors are reduced to ‘operators for pre-purchased TBMs’ and projects and specifically clients cannot gain from their experience.
In addition to the arguments mentioned already above, difficulties can arise out of the interface and relationship between client/TBM manufacturer/contractor, where often no direct contact between contractor and TBM manufacturer is allowed. Contractually this situation is understandable, but in the sense of partnering, team work and cooperation it is very detrimental to the cooperation of the parties. Assembly and start-up of the owner procured TBM by the contractor involves risks as well, specifically when not guided by the manufacturer. It is a difference whether assembling and starting up once own TBM or the client owned TBM.
Tunnelling contractors have a vast experience with all different types of tunneling methods and have builtup in-house knowledge (technical departments), whose task it is to look at every project and optimise the TBM, trailing gear, segment production and site installation. Their job in the advance procurement situation is reduced to supervise the assembly of the prepurchased TBM. Any modification to the TBM and trailing gear is usually challenging due to the ownership of the TBM by the client, and due to the inherent risk transfer. Even a change from rail bound mucking to conveyor belt mucking is usually not possible, or requires a substantial effort.
Contractors like to be in charge of the tunnel production including logistics and operation of the various activities on the TBM. Optimisations resulting from experience gained elsewhere cannot be utilised. This includes potential mechanisations of activities (e.g. rock bolt drilling, or grouting) to reduce manpower on the machine.
To also mention positive aspects in the vie of the contractor, the reduced advance financing requirements, no obligation to re-use or sell the TBM after use or the more ‘leaned-back’ attitude can be mentioned. Eventually, the TBM has to work as specified and the contractor is such situation would still put all the effort in to make it work.
TBM manufacturer
TBM manufacturers get involved very early in the selection and specification process when the TBM is procured in advance. On one hand their substantial input is required to specify the appropriate machine and features, on the other hand they want to make sure that their machine is the one to be used.
Negotiating with client organisations might be different than negotiating with experienced contractors. While clients want to make sure that the TBM will work under any circumstance and will therefore be receptive to additional features, contactors will optimise the use of ‘bells and whistles’ to stay competitive. Clients will intuitively specify and order a higher quality TBM with a conservatively rated power, maximum torque and thrust and include duplicate elements to minimise or even eliminate downtime.
One of the disadvantages mentioned by manufacturers was that performance bonds are usually required from clients, what manufacturers are not used to provide. This puts an additional financial burden on these organisations.
TBM manufacturers usually have performance criteria to fulfill as part of their contractual obligations towards the client. These performance criteria (e.g. minimum penetration rate) are usually not part of the requirements put towards the contractor.
Reasons and criteria
Based on the findings above, criteria shall be developed to outline situations where it is beneficial to use the client procured TBM process. Due to the many and substantial disadvantages as shown it can be clearly stated that this procurement process cannot and shall not be used on any standard project.
Reasons for a potential successful implementation of this process can be:
– Accelerate construction schedule
– Bulk procurement of multiple similarly specified TBMs
– TBM configuration according to client specification
– Risk management or risk sharing
There are criteria associated with these reasons which have to be considered. One main criterion is that client organisations have to be prepared to seriously build-up inhouse expertise and not only rely on consultants’ opinions. There has to be a clear understanding of technology, specification, processes and alternatives available in order to guide the team to the desired outcome. Also, clients have to be aware and prepared for taking the risks involved. Transferring the risks back to the contractor is detrimental to the process. Another general criterion is that the geological/geotechnical and hydrological conditions have to be well known in advance. Only once these conditions are as clear as possible, can TBM selection can follow.
Conclusion
When seen from a distance it appears that the client TBM procurement method will benefit the clients greatly due to early selection and a more timely process. The client gets what it wants.
Once the client starts with the procurement, considerable risk is taken on, which is usually a contractor risk. Clients have to be aware that they take on the full responsibility on the capabilities of the TBM and on any additional costs due to changed ground conditions if the TBM cannot cope.
Rather than taking away responsibilities from contractors by prepurchasing the TBM including segments, clients shall put more effort into prequalifying both financially and technically capable contractors, especially on demanding projects. Very few circumstances remain where the client procurement process eventually provides a benefit to the project. Mainly the schedule gain, but also bulk procurement benefits for networks of projects.
Geographically the client TBM procurement method seems to appear mainly in North America and parts of Asia. One could argue that there are specific circumstances that would motivate clients to separate the TBM procurement from the contractors. These circumstances could include lack of ‘trust’ in anticipated experience of local contractors, and the opinion of consultants. It is interesting that to date there are no cases of client procurement found in Europe
