Transport Minister Keith Brown today announced the intention to award a contract to construct the new M8 and make improvements to the M73 and M74, which will create hundreds of jobs and will see advanced works start immediately following the signing of an early works agreement.

This contract, with a net present value of £500 million and which includes operation and maintenance of the project roads over 30 years, will be the first roads infrastructure scheme and the largest contract to be awarded as part of the Scottish Government’s £2.5 billion Non-Profit Distributing (NPD) model. NPD helps to deliver economies of scale and efficiencies for the public purse.

In addition, construction costs are now £105 million below original estimates following a robust competitive dialogue with the preferred contractor, SRP (Scot Roads Partnership Project Ltd), bringing huge savings for the public purse.

Following a significant level of international investor interest, funding from the project will come from the European Investment Bank (EIB) and a group of investors managed by Allianz Global Investors, one of the world’s leading integrated financial services providers.

Mr Brown said:

“The M8 M73 M74 Motorway Improvements Project is breaking new ground, which is great news for Scotland and great news for the jobs market.

“It is the first UK roads project involving bond finance since the global financial crisis in 2008. It is also the largest NPD project to reach this stage and demonstrates confidence from the international investor community in the NPD model and that Scotland’s infrastructure is seen as a viable and desirable long-term investment.

"This project shows that this NPD procurement process has driven down costs - around £105 million in this case - and will continue to deliver long-term benefits for the taxpayer.

“It is also very good news for the Aberdeen Western Peripheral Route / Balmedie to Tipperty project, which is currently being tendered and is critical to ensuring continued economic growth in the north east.

“In order to deliver the project at the earliest opportunity, I am also pleased to announce that Transport Scotland has entered into a pre-start works agreement with the contractor. This will allow advance works to progress without delay with the contract expected to be signed during February.

“The motorway link between the country’s two largest cities is absolutely pivotal to Scotland’s sustainable economic growth and the improvements made by this project will drive significant economic benefits for businesses and improve road safety and accessibility for road users the length and breadth of the country.

“Completing the M74 directly supported 900 construction jobs – the large majority of which were filled by workers from the local area - and we expect this project will deliver similar benefits to the local economy.

“The project will also provide sustainable long-term employment opportunities throughout the 30 year operation and maintenance on these key routes.”

SRP funding for the project is being supported by the European Investment Bank. EIB Vice-President responsible for the UK and Ireland, Jonathan Taylor said:

“The European Investment Bank is committed to supporting crucial investment in essential infrastructure across Europe and we recognise the importance of the M8 scheme to upgrade Scotland’s core motorway links. This project will not only provide economic benefits during construction, but will also improve safety and reduce costs for business in the years ahead through improved travel times.

“We are committed to providing significant long-term financial support for the scheme.”

Following the mandatory standstill period, SRP’s construction contractor - a joint venture of Ferrovial Agroman and Lagan - will be responsible for completing the motorway network between Glasgow and Edinburgh by constructing a new M8 between Baillieston and Newhouse. The project also includes work to improve the Raith Interchange and widening key sections of the M8, M73 and M74.

Web updates will also be provided regularly once the project commences construction.

Notes to editors

In order to bring the 30 year revenue costs back to a common basis the price of the contract is expressed in terms of Net Present Value (NPV). NPV compares the value of the cost today to the value of that same cost in the future, taking inflation and returns into account.

The net present value of £500 million represents a construction cost of approximately £310 million; significantly below the pre tender estimate of £415 million, which reflects the robustness of the competitive dialogue process, challenging bidders to provide the optimal value-for-money solution. It also demonstrates the very strong competition for this contract and is indicative of the prevailing market conditions in the construction industry more generally.

For more information on the M8 M73 M74 Motorway Improvements Project, visit the Transport Scotland website

When complete, the project will shave up to 18 minutes off journeys at peak times for vehicles using busiest sections of the M8 each day. It is also expected to directly support hundreds of jobs, as well as many more in the supply chain.

A mandatory standstill period is now currently underway which allows unsuccessful bidders to challenge the procurement process.

Published 29 Jan 2014 Tags