Shani Wallis, TunnelTalk

Across Europe to North America; into Asia and down to South America; the Strabag name has a presence in the international tunnelling market, working on an impressive list of leading tunnelling projects. An interview with Gerhard Urschitz, a Director for the company's international tunnelling division, revealed the company's tunnelling activity strategy and provided an update on the largest projects in the company's tunnelling portfolio.

Although only a small percentage of the group's overall total annual turnover, the tunnelling expertise of Strabag has its name and team of specialists associated with some of the world's largest and most technically challenging projects. Its experience and track record covers the full spectrum of tunnelling expertise from major drill+blast projects to precise NATM/SCL/SEM excavation of tunnels and caverns, to TBM operations of all kinds including microtunnelling and soft ground and hard rock TBM tunnelling for water, metro and urban projects, and operation of the world's largest ever hard rock TBM.

Giant scale of the Niagara TBM tunnel drive

The list of projects stretches from that largest ever 14.4m diameter rock TBM drive for the Niagara water delivery tunnel project in Canada, to major TBM and drill+blast sections on the St Gotthard Baseline railway tunnel in Switzerland; test tunnels for the mighty Brenner Base railway tunnel through the Alps between Austria and Italy; design-built works for Budapest's new Metro Line 4; the introduction of underground alignments for the Delhi Metro in India; and continues with recent awards for the Rohtang road tunnel high in the Himalayan foothills in Jamu-Kashmir; large-scale excavation of an underground station cavern on the Stuttgart-21 highspeed railway project in Germany; and TBM excavation of the Koralm highspeed railway tunnel in its home country Austria.

"The strategy is to follow tunnelling projects at home and abroad that have a certain size and technological demand," explained Gerhard Urschitz, a Director of Strabag's International Tunnelling Division responsible for activities in North America and the UK. "We have an expertise of managing large and complex tunnelling contracts that involve the technological challenges and management risks that the industry is demanding increasingly of the construction sector. Even the market in developing countries like India, is raising the bar, and recognises that the expertise of contractors isessential for challenging projects, and that more is needed for a successful project than the lowest tender price."

Within the remit of Urschitz' Tunnelling Division falls the Niagara project in Canada and the company's CAD$290 million contract for 15km of sewer tunnels in Toronto, which is mobilising with the sinking of several working shafts. In the UK, Urschitz - who took up his post in the international tunnelling division provisionally in October 2011 and officially in January this year (2012) - admitted that attention to the market missed award of tunnelling and station cavern contracts for London's Crossrail project, but that the company is staying in touch with progress into construction of the long and complex Thames Tideway CSO tunnel for London, extension of the city's Underground Northern Line to Battersea, and the tunnelling stretches on Phase 1 of the proposed High Speed 2 (HS2) railway link from London to Birmingham and further north.

Breakthrough of the largest rock TBM ever at Niagara

In addition to his area of responsibility, colleagues Manfred Aschaber, Wolfgang Lehner, and Steffen Hering at the company's Züblin subsidiary, operatively manage Strabag's combined tunnelling activities in other areas of the world and through Austria, Western Europe, and Germany respectively. Together their portfolios account for about €800 million in annual turnover within the €2.5 billion annual earnings of the Special Divisions & Concessions sector and as part of the company's overall €14.3 billion annual turnover recorded for 2011. "This includes the revenues related to on-going projects for the specific year," explained Urschitz.

Speaking of Niagara, the company's largest tunnelling contract at present, Urschitz explained that work is progressing on the waterproofing, final lining and interface grouting of the 10km long drive, following breakthrough last year in March (2011) by the 14.4m diameter Robbins TBM that ended its tough four-year journey through geological and contractual trouble. "The final lining is now progressing at full pace and all is on track for a hand over of the project in 2013."

Urschitz again defended the company's technological approach and alternative method for building the huge water diversion tunnel at Niagara, despite the fact that it drove the project to major contract changes and extension of time and an increase in cost. "In an effort headed by our Project Managerat Niagara, Ernst Gschnitzer, we studied the project through the tender stage and, with our consultant ILF, believed that a precast concrete segmental liningwould not meet the project's demanding specifications. ILF and our subconsultant Amberg invested a great deal of research and development into the challenges and designed the post-tensionsed in-situ concrete lining system to deal with the high horizontal stresses that exist in the over-consolidated condition of the host geology and counter the internal hydrostatic pressure of the water delivery tunnel in operation. Records of the lining completed to date (9.3km of the invert and 6.3km of the arch by late-May 2012) prove that the system is working. The method has been used before but in tunnels of smaller diameter only, but observations of the lining operation at Niagara, both during installation and over time, show very little deformation due to the post-stressing process. The expert opinion is that segments would not have been able to withstand such forces and would have failed ultimately."

Speaking of the project's contractual issues, Urschtz explained that it was essential for the project to reach agreement with the client to continue the work to successful conclusion. The financial numbers involved and the consequences for the project were considerable. "The appointed DRB [Dispute Resolution or Review Board] progressed the issues as far as it could and we negotiated directly with the owner to reach the revised agreement."

Since then, the services of the DRB are said to have been discontinued and the project is being completed for delivery by the revised 2013 date and under the revised cost-reimbursable contract arrangement.

The Strabag Group of today owes its origins to the take over in 1998 of Strabag, Germany, by Ilbau of Austria. Subsequent acquisitions include subsidiaries Dywidag, Heilit+Woerner, and Züblin.

ILBAU		STRABAG
1835	Foundation of the family craftsman's business Anton Lerchbaumer, Austria	1895	Foundation of the Straβenwalzenbetrieb, Germany
1954	Foundation of Isola&Lerchbaumer(named ILBAU) in Spittal/Drau	1930	Introduction of the Strabag company name
1987	Foundation of Bau Holding AG as the holding of Ilbau	1965	Foundation of Strabag Austria in Linz
1998	BIBAG Bauindustrie Beteiligungs Aktiengesellschaft as majority owner of Bau Holding AG takes over the majority in Strabag AG, Cologne. Bau Holding AG, with the main operative company in the group, Ilbau, and Strabag AG, Cologne become sister companies.
2000	The Bauholding Strabag Group unifies its market presence under the uniform core brand Strabag. The brand Ilbau is discontinued.
2005	Strabag Group takes over major parts of the insolvent Walter-BauGroup of German, including Dywidag International GmbH, and Dywidag Holding GmbH that consists of Dywidag SF, Dywidag Bau GmbH, and Heilit+Woerner Bau GmbH. Operations of these companies, with some 3,100 employees, amounts to almost €1,000 million. Takeover of the majority shares of Ed. Züblin AG, Stuttgart, with more than 7,000 employees and an operating performance of about €1,500 million.
2006	Strabag SE becomes the new controlling company of the group, structured into three business fields of highway construction, building construction, construction engineering, plus their services. Besides Strabag, the main brands within the group, which achieves an annual result of more than €10 billion with more than 53,000 employees, are Dywidag, Heilit+Woerner, and Züblin.
2007	Strabag SE announced the entry of a third strategic core shareholder, Rasperia Trading Limited, a holding company owned by Russian industrialist Oleg Deripaska, increasing the company's nominal share capital by 25 million shares from 70 million to 95 million. In October, Strabag SE launched its IPO on the Vienna Stock Exchange. The shares were offered at €47 a piece, providing proceeds of €893 million from the IPO.
2008	A year of acquisitions, among them AdantiSpA (Italy), Kirchner Holding GmbH (Germany), F. Kirchhoff AG (Germany), and Deutsche Telekom Immobilien and Service GmbH (Germany). Output volume of the Group rises by €2 billion.
2010	STRABAG Group closed the financial year 2010 with an output volume of €12.8 billion, a net income after minorities of €175 million, and a record order backlog of €14.7 billion.

In the meantime, the TBM has been disassembled, reusable components salvaged and the huge 14m+ diameter cutterhead is to stand as a monument to the effort in the city of Niagara Falls.

Following entry into Canada with the Niagara project, Strabag has made the country a centre of activity, winning the York Region's Southeast Collector sewers contact in Toronto for which it will use four Caterpillar (previously Lovat) TBMs procured for the project by the owner. "The diameter of these tunnels is small, 3.6mo.d., but the geology across the 15km alignment is difficult. We have never worked with TBMs procured by the owner before but Canada has followed this practice on several projects and we will know the experience once we launch the machines and begin operation of the first one in July this year. The machines are owned by the client and we speak to the manufacturer through the client."

Contractual tools and methods
With activities in different parts of the world, Strabag has been exposed tovarious contract practices and facilities. "Each country has its own specific legal framework for procuring construction of large infrastructure projects," said Urschitz, "and many of these are useful for bringing the contracts to a successful conclusion."

Of GBRs (Geotechnical Baseline Reports) that are used extensively in North America, he said: "If they are handled and managed in the way intended, they are a good and fair tool for the owners as well as for the contractors. Sometimes they are skewed to cover each and every situation, which is not helpful for either party. The general idea is good as a risk management and risk sharing tool, also for the benefit of the project in that you don't have to include all kinds of risks in your price, not knowing if those risks will arise or not."

Following the experience on the Niagara project, Urschitz described the success of DRBs as being heavily dependent on the people involved on the panel and on the client's side, also on the details of the contract dispute at the time. "It can be productive and especially helpful in facilitating communication between the parties. But their decisions are not binding, which is a principle of the DRB guidelines, so they can be a considerable cost to the contract without getting much in return.

As long as the scope of the dispute is not too high, it can be productive. Beyond that, the contractor and the owner need to manage themselves to negotiate a solution."

In reference to procuring insurance for major construction projects, the Code of Practice for Risk Management of Tunnel Works in the UK, produced jointly by the BTS (British Tunnelling Society) and the ABI (Association of British Insurers), was recognised as a vital step in restoring the confidence of the insurance industry in underwriting tunnelling contracts after several high level tunnel failures and insurance pay outs. "By having this risk management tool on site, with clear procedures and so on, everybody is in the room so to speak.

All parties involved are discussing risks and recognising them early enough to be able to manage them rather than going into a project and dealing with the issues as they arise. Of course it is another administrative task in which you have to invest time and effort, and often it is the owners that still need some convincing of the benefit. Sometimes we as contractors are more in the boat than the clients in the use and the sense of the Code of Practice, even though it is the client's insurance programme. Clients who are not too experienced in tunnelling especially feel 'we have the insurance policy, why do we need to spend time and effort in risk assessment and its management'. The benefits need to be endorsed."

Starting twin TBM excavation of Koralm rail tunnel in Austria

Public Private Partnerships
As a major international construction company, Strabag has a large department that manages and develops concessions and PPP (public private partnership) projects. Currently it has 35 concessionor PPP projects either in operation or in construction."This number is divided equally between transportation and social buildings projects," explained Diana Neumüller-Klein, Manager of Group Communications, "but with by far the largest amount of equity, some €370 million, invested in transportation projects all around the world."

Urschitz was with the PPP development division of Strabag before coming to the tunnel construction division and explained that the company is actively pursuing these types of projectsin selected markets and that the company has its own division for operating and maintaining transportation projects through their PPP period.

In addressing the number of PPP and highway concessions that have failed in recent times, Urschitz explained that it depends on how the concessions are structured. "Some place all the traffic risk on the developer which in a competitive situation leads inevitably to over optimistic forecasts and when these are not reached the concession fails, goes bankrupt, and the project needs to be bailed out by the government authority. It is more appropriate if the concession is based on an availability criteria or a guaranteed minimum traffic load. In this way both the government authority and the PPP investors are protected. We operate good PPP toll road and highway concessions in Ireland, Poland, Croatia and Germany, and have also a successful 572MW PPP hydro project in Turkey, which is based on its solid source of revenue."

In Canada, the new contract is for 15km of sewer drives in Toronto

New business
Having established a base in Canada, the company is pursuing new contracts across the region, and none more imminently than the underground works for the new Eglinton Crosstown Line for the Toronto Metro. Strabag has prequalified for the project and is preparing a bid for the first of the line's three contract packages when bids are due to be called at the end of June (2012). This, however, might also be pushed back due to recent changes in the procurement strategy.

Funding to build the 19km line underground was available and the Mayor of Toronto was fully behind the entire underground alignment, but City councillors backed a proposal in April to change a 10km alignment to a less expensive above-ground construction. The first section remains underground and the TTC (Toronto Transport Commission) has procured four Caterpillar (Lovat) TBMs for excavation of the section's 6.75km of twin running tunnels.

"We have prequalified to be part of the bidding process of the new line and we are of course disappointed by the decision to redesign the line to mostly above ground as the underground alignment should be the method of choice in congested metropolitan areas like Toronto," said Urschitz. "There are so many advantages to building metro systems underground and the decision for Eglinton might yet change again. We stand ready to provide owners with top-quality underground facilities at a competitive price. The tunnelling industry globally is growing rapidly and the companies with the financial strength and the capability and resources to overcome demanding risks and challenges will keep the underground options viable and successful."

References

Niagara plan of attack - TunnelTalk, December 2006
Breakthrough ends troubled journey at Niagara - TunnelTalk, May 2011
Strabag to build Toronto wastewater tunnels - TunnelTalk, September 2011
Final finish for Gotthard Baseline excavation - TunnelTalk, March 2011
Brenner project takes a major leap forward - TunnelTalk, February 2011
Brenner Base Tunnel - Let the works begin! - TunnelTalk, April 2011
Budapest Metro standoff resolved - TunnelTalk, May 2009
Major tunnel and station awards on Stuttgart-21 - TunnelTalk, March 2012
Tunnelling starts for Austria's longest rail link - TunnelTalk, July 2011
Strabag selects Aker Wirth machines for Koralm - TunnelTalk, May 2011
Toronto axes 17km of tunnels - TunnelTalk, May 2012
Strabag court-win seals Italian highway deal - TunnelTalk, March 2012
Final award on Abu Dhabi STEP project to Züblin - TunnelTalk, January 2012
DRBs - knowing and playing by the rules - TunnelTalk, August 2008

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