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Full Business Case

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Why has the cost gone up from £165.2m to £207.3m?

Total construction costs are now estimated in the Final Business Case (FBC) to be £196m. This includes a significant risk allowance to take account of any foreseen and unforeseen risks to the project.Over and above the risk allowance included in the £196m, a further uplift for optimism bias has been added in accordance with government guidelines, taking the total project cost to £207.3m.

The initial estimate of £165m in the Outline Business Case did not include the uplift for optimism bias and reflected the information available at that point in time. It was always the case that the Council would market test the pricing before making any final decision. As well as market testing there have been other changes which are set out below.

As it is approximately 18 months since the updated Outline Business Case was finalised, inflation has been added to the cost plan.

Since the Outline Business Case was published, we have seen the collapse of Carillion leading to changes in the way risk is analysed and priced by contractors tendering for major infrastructure projects. This is reflected in the tendered prices received. There have also been significant changes made to the design based on feedback received from the community during consultation. This has led to changes in the construction costs to reflect the outcome of the consultation.

In order to ensure the team hit the ground running when construction commences, a period of Early Contractor Involvement (ECI) will commence, at the end of March. The team, contractors, designers and utility providers will co-locate for a period of six months to plan the delivery methodology and phasing in finer detail. This is considered best practice in the industry and is consistent with all other major projects in the UK. This additional six month period is reflected in the cost plan.

Finally, following feedback from the public and business community in Leith, the Council has devised a comprehensive package of support measures to help business throughout the works. This includes a business continuity grant fund to help alleviate short-term cash flow issues, logistics hubs, customer service officers, extra help to keep the area clean and attractive and technological solutions to help local business connect more easily with each other and their customers. The total value of this package is approximately £2.4m (including contractor contributions) and is included in the updated costings for the project. Details on how we intend to support business during the works will be communicated later this Spring.

Taking account of the above, the Council is confident that the project will be delivered within the updated project cost of £207.3m. The FBC outlines that the project is both affordable and deliverable. This has takes account of various economic, social and environmental factors, with the city set to benefit in all these areas following completion of the line to Newhaven via Leith.

How long will construction take?

The ECI process was completed in October 2019 and construction started on 18 November 2019 on Constitution Street. 

Construction will be split into distinct geographical areas with works lasting anything up 18 months per area. A number of work sites will be open at any one time

Once construction in a work area is complete the temporary traffic management will be removed and the street will be handed back for operational use. Any further work to complete an area will be done under localised traffic management with no need to close the entire area again

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When do you expect trams to be operational?

Passenger services are projected to begin in early 2023.

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Has the £20m extraordinary dividend been confirmed by Lothian Buses?

Yes, in principle. We will work with them to help ensure they can realise the dividend in accordance with the final business case.

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What input has Lothian Buses had to the final business case in terms of the impact on their business?

The Council has worked closely with Lothian Buses during the development of the final business case and continues to work with Lothian Buses closely in developing traffic management arrangements, including the implementation of bus priority measures to speed up journey times to minimise the impact on Lothian buses and its customers by keeping the city moving and placing the provision of public transport high on the agenda.

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How supportive are the residents of Leith and Newhaven to the tram?

Early in 2018, the Council commissioned Progressive Partnership – an independent polling company based in Edinburgh – to carry out an on-street survey on attitudes towards tram. The methodology used ensured that the 370 people who were interviewed were a fair reflection of the demographics of the local area.

The outcomes of the survey were very encouraging, especially considering that this research exercise was carried out ahead of the extensive public consultation and engagement with the local community.

When asked, unprompted, to suggest what form of transport improvements could be made to the street, the largest number said tram (37%), followed by an improved bus service (28%) and a further 23% who would like to see an improvement in cycling/walking infrastructure.

Respondents were also asked whether they believed that the tram would benefit the local area with 59% agreeing (41% strongly agreed) versus 30% who said it would not. Stripping out those who answered ‘neither agree nor disagree’, 66% agree that the area will benefit vs 34% who said it would not.

On how likely respondents were to use the tram, 56% said they were likely to use the service, with 25% of all respondents saying they would definitely use the service.

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How extensively did you consult with the local community and did their input have any effect on the project?

During our consultation exercise throughout 2018 with the community, we spoke to thousands of people at our many public information events. As well as this the Council hosted a number of community design workshops which were well attended by a cross section of stakeholders.

In doing so the Council have been able to produce an updated set of plans that better reflect the aspirations of the local community. In autumn 2018 the Council presented the updated plans to the public via a series of information events and an online consultation. The results were encouraging, with the majority of people agreeing that they were an improvement on the plans we published earlier in 2018.

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How did the community respond to the changes made to the design during the second round of consultation?

When asked “to what extent do you agree that the updated plans have given better consideration to active travel provision?”, 80.8% of those expressed a preference agreed.

On the updated designs for Elm Row, 76.3% who expressed a preference agreed that the new plans have created a better public space for all.

Access to and from side streets for motor vehicles was highlighted as a concern during the early stages of consultation. When asked if the new plans had improved access to and from side streets 80.5% who expresses a preference agreed.

The permeability of Leith Walk or, in simpler terms, the ability to cross the street easily and safely was improved upon following feedback received. This is demonstrated by 85.1% of all respondents who expressed a preference agreeing that permeability and crossing points had improved versus previous proposals.

The final question focused on a new location for the Balfour Street stop. In all, 86.1% who expressed a preference agreed that moving the stop 60m towards the city and introducing a signalised junction has remedied previous concerns.

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What Council services are being reduced to pay for Tram to Newhaven?

The tram project will not put additional pressure on existing Council services

The Trams to Newhaven project will be paid for through future tram fares and a £20m extraordinary dividend from Lothian Buses.

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What resources have been put in place to deliver the project now that it has been given the go ahead?

The cost plan allows for a project team reporting directly to the Council’s Senior Responsible Officer for the Trams to Newhaven project. This team will provide all required project, contract, commercial, risk, technical and communications management.

The contractors will also be mobilising project teams and working in collaboration with the Council’s project team throughout ECI, construction and handover.

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What is happening with the Hardie Inquiry?

The Council continues to support the Hardie Inquiry

The Council has adopted a robust and thorough process in developing the FBC and has incorporated a number of lessons learned from the first phase of tram, including:

The use of industry standard contracts to govern the project

Rigorous project governance with highly qualified key personnel with experience of delivering light rail projects in the UK and abroad. A number of the project team members successfully completed phase 1 of the trams after mediation

Setting up cross-industry networks with other cities including Manchester, Birmingham and Dublin to ensure best practice is being adopted at each stage of project development

Adopting traffic management plans that provide the contractor with expanded sites to ensure that works can continue in the event that problems are encountered during construction, as well as adopting a “one-dig approach”, ie:  only opening up roads once and completing all works prior to reinstatement - no double-dig

Carrying out robust quantitative risk analysis and ensuring substantialcontingency is set aside in the budget for unforeseen events

Ensuring robust measures are incorporated into the construction contracts to ensure build quality, with a strong client team present on site to monitor build quality

Carrying out comprehensive formal consultation with the market to road-test the overall delivery strategy for the project and encourage strong competition

Developing a Support for Business scheme to maintain the vibrancy, desirability and accessibility of the streets affected by the project during construction. Measures include logistics hubs, open for business campaign, on street customer service officers, business skills development and a business continuity fund

Ensuring all works are carried out in accordance with the Code of Construction Practice

Ensuring that the work underpinning the analysis set out in this report has been robustly scrutinised

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What are projected passenger numbers for the Trams to Newhaven project?

Expected passenger numbers for the first year of operation is 15.7m. This is almost double the projected number of passengers on the line if the Newhaven section is not completed

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What is optimism bias?

Optimism bias is a percentage added to an overall project cost in order to mitigate potential under-estimation of risk by a project team.

In line with government guidance the £207.3m project cost includes an uplift for optimism bias on top of the other risk allowances.

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