Sanjo City Comprehensive Private Sector Outsourcing Project

INDEX

• Smooth maintenance and management of social infrastructure is an urgent issue
• Participated as a consultant in the second phase of the JV project
• Providing various support as a member of the JV
• New Roles of Consultants in Infrastructure Maintenance Management

Smooth maintenance and management of social infrastructure is an urgent issue

Sanjo City is a city located almost in the center of Niigata Prefecture with a population of 91,000 (as of the end of November 2024). It is known for manufacturing, mainly metal processing. In the center of the city, there is the Igarashi River, a first-class river that flows from east to west, and in the west of the city, the Igarashi River merges with the Shinano River, which flows from the north. While the Igarashi River flows gently and meanders, it has also caused serious flood damage while bringing prosperity to the lives of the citizens. In particular, the 2004 "7.13 Flood" and the 2011 "7.29 Flood" caused severe damage, and the city has strengthened its efforts to maintain and manage social infrastructure such as rivers, bridges, and roads. However, as the infrastructure ages and the need for repairs and renewal increases year by year, there is a shortage of people and budgets to carry out the work. The city was feeling a growing sense of crisis.

"It is an issue common to many regional cities, but with civil engineering costs on the rise, there is no choice but to cut civil engineering costs. Not only are budgets being cut, but civil engineering staff, including those in operational positions, are also being cut. Furthermore, the construction engineers from the private sector who work on the construction projects are suffering from a chronic labor shortage. Since the early 2000s, we have been proposing ways to improve and streamline administrative management through public-PPP (PPP), including private finance initiatives (PFI) for the development of public facilities. It is extremely difficult to maintain social infrastructure in a healthy manner unless we actively incorporate private funding and know-how. It was in 2015 that we decided to use the national government's 'Pioneering PPP Subsidy Program' to consider a system for infrastructure maintenance and management that utilizes PPPs." (Inami)

This was the trigger for PACIFIC CONSULTANTS to provide support for infrastructure maintenance in Sanjo City. The two companies conducted repeated investigations and studies in 2015 and 2016, and Sanjo City began the two-year "Comprehensive Maintenance and Management Outsourcing Phase I Project" in April 2017.

Participated as a consultant in the second phase of the JV project

Sanjo City's comprehensive maintenance Executive Manager has undergone a lot of trial and error, but thanks to the sincere efforts of both the city and the commissioned JV, it has produced results and the decision has been made to continue it. The city inspected and evaluated the implementation status of the first phase of the project and considered improvements to the future commissioned content, and decided to proceed with the second phase of the project by expanding the scope of work, and publicly solicited contractors (JVs) through a proposal system. The JV that was in charge of the first phase raised its hand, and PACIFIC CONSULTANTS was the latest to join. If this comes to fruition, it will be the first case in Japan where a construction consultant will be involved in a JV that receives a comprehensive commission. Nakai, who joined the company in 2015 and immediately joined the project review team for comprehensive private commissioning, looks back on the process.

"Since we were involved in creating the framework for Phase I of the project, it was not our choice to participate in the project. However, after observing the project's progress from the outside for two years, we thought that if we joined the JV, we could make comprehensive private outsourcing even more effective."

Nakai continues, explaining why he thought so.

"There are two reasons. The first is that the technology and systems we possess are useful for enhancing the sophistication and efficiency of maintenance work. In particular, bridge inspection and repair work was to be added to Sanjo City's Phase II project. Bridge maintenance requires a higher level of specialized technology and know-how than road maintenance. Also, by introducing digital transformation, the inspection of other infrastructure, consideration of repair policies, and construction work can be made more efficient. This will lead to improved profits for each JV company and stabilize the comprehensive private outsourcing business. If we transfer our technology to each JV company, local companies will be able to take on that work in the future, which will lead to improved business performance."

Another reason for participating is "communication support."

"Municipal finances are tight, and the general outline of maintenance costs presented to the JV is quite strict. There will be times when the JV thinks, 'That's not enough,' but they are not good at showing, based on data, where and how the shortfall is, or how costs can be reduced. Furthermore, because the local government has long-standing relationships with the JV member companies, they tend to ask, 'I know it will be difficult, but can you please try to do something?' In such cases, if we, as consultants, intervene, we can show, based on data, that there are this many defects, and that repairs will cost this much, so that an annual budget of this much is needed. We also have ideas for new initiatives related to inspection and repair, including digital transformation, and can make specific proposals, such as, 'This will cost this much initially, but in the medium to long term, this will result in cost savings.'"

Inabo supplements.

"Even though the upper limit of the amount of work that a JV can decide to do has been increased from 500,000 yen to 1.3 million yen, what can be done within that amount is only a simple response. That may be fine if it is to reduce temporary complaints, but what is the point of it? If we are to protect the city's infrastructure in the long run, we need to propose that we dig up the root cause and fix it here and now. In fact, the local construction industry understands the need for this, but it is difficult to explain it and convince them. However, consultants can make proposals based on objective data. In particular, if the decision to implement the work is left to performance standards, as in Sanjo City, I think that consultants like us are necessary. Comprehensive private outsourcing is an initiative in which local companies that know the area well and can respond carefully play a leading role. However, construction consultants can also play an important role as supporters of technology, negotiations, and overall business management, which will improve the quality of JV work and lead to good results for both the public and private sectors."

Providing various support as a member of the JV

In the spring of 2019, the JV, which added PACIFIC CONSULTANTS to the mix, was awarded the second phase of comprehensive private outsourcing after a proposal process and immediately began various initiatives. Some initiatives have been started that could only be undertaken because PACIFIC CONSULTANTS was part of the JV. Nakai told us about one such initiative.

Installing the water cutter

"Bridge inspection work was added in the second phase, and when we went around, we found that there were many bridges in bad condition. Although the extent to which we could fix it with 1.3 million yen is limited, we had to ensure that the citizens were in a safe condition. So we decided to install a water-cutting material called a 'water cutter,' which we developed jointly with a manufacturer, on bridges that were old and had signs of water flowing underneath. This can prevent water from getting into damaged areas, so it can extend the bridges' lifespan. Since the comprehensive private outsourcing involves constant patrols, this kind of temporary measure is effective if it is combined with that. In fact, we installed the material on many bridges. In addition, our bridge specialist engineers served as lecturers on bridge inspection know-how and recruited people who wanted to learn the technology, and actively promoted technology transfer by inspecting the sites together."

Promote technology transfer regarding inspections

Matsuoka, who has been a member of the JV since shortly after joining the company, said that PACIFIC CONSULTANTS' participation in the JV has enabled more specialized consideration and overall management, not just in technical support but also in creating business plans within the JV and in discussions with the city.

"We participate in regular meetings between the city and the JV, and the city sometimes asks questions and makes requests about road patrols, such as, are all the roads being covered reliably? Can this kind of data be collected? I don't think that kind of detailed management can be done with traditional patrols, but because we are involved, we can make suggestions such as, "This is how we're covering the roads," or "This is how you can collect data." I think our presence is of great value to the JV in terms of supporting overall management, and I also think it's easier for the city to make requests."

"I think it helps the local government in a number of ways," Inakari adds.

"I think that having us act as an intermediary makes communication smoother. Also, by having a JV that includes consultants like us always nearby, you have a partner who will worry about infrastructure maintenance and management, pooling your wisdom together to tackle the issue, which I think gives you a sense of security."

New Roles of Consultants in Infrastructure Maintenance Management

Sanjo City's comprehensive private outsourcing continues to expand smoothly, with the third phase of the five-year contract set to begin in April 2024, and has become established as a new form of infrastructure maintenance management using PPP among local governments. Many local governments are visiting Sanjo City to inspect the project, and similar initiatives are set to spread nationwide in the future. Inako, who has been working as a consultant hoping to pave a new path in infrastructure maintenance management support, feels that he has finally taken a step up the ladder.

"With the construction of new infrastructure declining, I have spent the last 10 years thinking about where my next role as a consultant should be. I believe that we now need to use our accumulated technology and knowledge to not only build and develop new structures, but also to maintain and manage existing infrastructure together with local governments and protect towns. I think we can say that this is a shift in the role of consultants in addressing the issue of social infrastructure development."

Nakai, who has been working with Inaka through trial and error in the world of comprehensive private outsourcing since joining the company, is enthusiastic about the fact that this business has only just begun and there is still room for expansion.

"We have created a system that benefits the local community, and have always placed great importance on our own participation in it and working together to implement it. Maintenance relies heavily on local efforts, so my job is to find ways to support that. There is a movement to expand this initiative to a wider area, and I would like to be a part of that."

Matsuoka is the youngest member of the team, having been with the company for five years, but he speaks with enthusiasm:

"I learned a lot by interacting directly with the local JV members. I feel it's rewarding because the measures I propose are quickly put into action, the results are immediate, and people are often pleased. Infrastructure maintenance is work that protects people's lives and the country. This is becoming more and more important, so I want to continue contributing while continuing to grow as a person."

Finally, Inahika concludes with the following:

"Going forward, the theme will be wide-area collaboration, rather than just local governments acting alone. This will mean that financing will also become important. As a PFI project, which involves creating a special purpose company (SPC) to circulate funds, I think it will become necessary to add various innovations and consider business schemes. We have many years of experience in PFI projects. We also want to develop human resources who can work actively within SPCs. I think this will contribute to resolving the current issues facing local areas in terms of infrastructure maintenance and management, and will be useful for regional development."

PACIFIC CONSULTANTS, which has a strong track record in PPP/PFI, is now offering new solutions to the world of infrastructure maintenance and management.