THE SYDNEY CROSS TOWN TUNNEL
OPIM-5668 Project Risk and Price Management
Feb 18th, 2011
Sourabhdeep Singh Khanna
In 2k, Cheung Kong Infrastructure Coalition Limited (CKI) was facing a great opportunity to invest in a transport project in Australia. The group was especially interested in purchasing Australia due to the country's steady regulatory environment and monetary growth. This project shown a good chance for the firm to continue having its globalization technique and accomplish its global ambitions in transportation facilities project expense.
In September 2150, the Australian's Roads and Traffic Power (RTA) asked tenders to get the construction, auto financing and 30-year operation of the Sydney Get across City Tunnel (CCT). The primary objectives with the CCT project were to 1) relieve traffic jam in central Sydney, 2) improve the reliability of public transport and, 3) provide a safer environment and improved amenities to vehicles, cyclists and pedestrians. The CCT project made up two phases: The first one encompassed two east-west tunnels that will run between the eastern part of the Favorite Harbour and Kings Get across. Stage Two would benefit from the opportunities provided by reduced traffic congestion such as improvements to surface streets, including fresh bus and bicycle lanes and other improvements to pedestrian facilities.
CKI along with its key business partner, Bilfmger Berger Aktiengesellschaft (AG), decided to constitute the CrossCity Motorway Consortium (the CCM consortium) and posted its final proposal for the RTA in October 2001. Although Travel investments generate significant risks, CKl was confident the fact that project dangers could be mitigated through mindful planning and negotiation with all the Australian governing bodies.
Inside the hope to enjoy maximum returns, CM consortium's proposal included the following changes to the original task plan: 1) Increase the entire tunnel simply by 300 meters and, 2) the interesting depth at the far eastern tunnel by 30 yards. The changes would add US$135. 7 , 000, 000 to the task cost, although would boost the tunnel's daily capacity by an extra 17, 000 cars which in turn will allow the holding to make additional income of AU$10. 98 mil per year. The entire projected building cost might therefore become AU$680 , 000, 000.
The CCM holding project staff determined which the return on investment would come from the earnings generated by tolls billed during the term of the donation. In determining the prices strategy, the CCM range took into consideration the following considerations:
1 ) Differential costs scheme: Cost charges would depend on the scale the vehicle and the route that that it required. Passenger vehicles such as bikes, sedans, place wagons, taxis and vehicles towing trailers would pay out less money than Heavy cars 2 . Toll escalation structure: Tolls could be increased the following: 4% each year until the Q2 of 2012 and then 3% per annum till Q2 of 2018. Coming from mid-20I8, the maximum increases will be in line with inflation. 3. Both tunnels would be electronically tolled. Users had to buy an electronic pass or hold a toll account and have a legitimate electronic label Vehicles with out electronic tolling transponders may possibly pay bigger toll expenses 4. Vehicles providing public transportation were not needed to pay tolls.
The CCM range with the recommend of Hyder consulting, believed that the CCT would be employed by over 80, 000 cars per day simply by 2006 and also 100, 000 vehicles daily by 2016. On twenty seven February 2002, CCM won the agreement and started the construction with the Sydney Get across City Tunnel.
Statement with the Problem
The CCT opened for targeted traffic on twenty eight August 2006, but the results were not good by any means. A report provided by the CCM in February 2006 says...
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