QUEEN ALIA INTERNATIONAL AIRPORT EXPANSION

JORDAN

Queen Alia International Airport Expansion

Image: “Aerial view of the terminal after completion” by

KRISTIN HOOVER, courtesy of Foster and Partners-
Photographer Nigel Young / CC BY-NC-ND 3.0

OVERVIEW SUMMARY
Location The Queen Alia International Airport in Jordan was
Zizya (30 km south of Amman), Jordan expanded and renovated as part of efforts of the Jordanian
Government to improve tourism and promote Jordan as a
Sector
travel hub. The project encountered a range of challenges
Transport – Airports
relating to the initial design, as well as the challenges
Procuring Authority associated with the expansion of an operational airport.
Ministry of Transport – Project Management Unit The scope changes in the project required a renegotiation
of the PPP contract, resulting in a financial contribution
Project Company
from the Procuring Authority, which was complemented
Airport International Group
by higher than expected traffic volumes and associated
Project Company Obligations project revenue.
Built, Operate and Transfer
The project also highlights how a dedicated project team
Financial Close helps protect the project from ongoing political changes,
15 November 2007 and how continuity of knowledge is secured through
retention of key staff. The project is a good example to
Capital Value
highlight the importance of involving end users at an early
JOR 695 million
stage and the challenges in changing the workforce culture,
(USD $982 million – 2007 exchange rate)
from public to private service delivery.
Contract Duration
25 years SUMMARY LESSONS LEARNED
Key Events • Early involvement of stakeholders may avoid having to
Renegotiation, significant changes of scope undergo significant changes in scope, resulting in delays
and cost overruns.

• Setting up a dedicated project team may help to mitigate

risks from political and institutional changes.

GLOBAL INFRASTRUCTURE HUB | TURNER & TOWNSEND

APPENDIX A: CASE STUDIES

• Involving end users in the construction works can changes which were required starting two years after
streamline the progress of construction and facilitate financial close, and have resulted in a delay of over a year
a fast transition from one stage to another. and cost overruns of circa USD $260 million. The reasons
behind these changes could be summarised as: inadequate
• Flexibility and commitment of the Procuring Authority to
initial design, which was missing important elements,
deal with unforeseen circumstances can have a significant
and various change requests initiated by the Procuring
positive impact on the overall success of a project.
Authority. The resulting delays, coupled with the sooner than
• Early and robust transition planning will make transition forecasted increase in passenger numbers, led to a decision
phases more efficient. to accelerate stage two. It was also decided to complete
the expansion in one go, instead of gradually expanding it
PROJECT INCEPTION over the coming years. The overall cost overruns of circa
USD$260 million include the scope changes referred to under
Goals and Objectives of the Partnership the heading “Renegotiation” below and other cost overruns
Prior to this project, Queen Alia International Airport was which are not detailed in this case study due to sensitivities.
handling 5.5 million passengers a year, despite having
In total, close to 200 variations (i.e. smaller-scale changes)
a design capacity of only 3.5 million. It was ranked as one
were implemented which were initiated by the Project
of the worst airports to visit in the world, with outdated
Company, with the total cost borne by the Procuring
structures and poor customer experience. This situation
Authority approaching USD $10 million.
led the government to decide to upgrade the airport and
increase its capacity, with recognition from the outset The site itself presented challenges, as the old terminal
that customer experience was an important factor was small in size and had to be kept operational during
in the success of the project. construction, which eventually led to a change in the
approach to construction. The original plan was to operate
The Economic and Political Environment during Inception new gates, while construction of the terminal was still
Two years before financial close and one year before the going, allowing passengers to use the new gates once they
tender was announced, the Jordanian government adopted had been completed. Due to the updated design of the new
a comprehensive ten-year national agenda. It was an terminals, this was not possible, and the entire structure
ambitious plan to build the country’s economy through needed to be completed in one go. This would have
political and financial reforms, which included promoting meant passengers would have had to move through a live
partnerships between the public and private sectors and construction site, which presented an unacceptable safety
enabling the private sector to play a major role in the local and security risk. It was therefore decided to implement
economy. Development of physical infrastructure was a partial terminal opening, which added two years to the
a pillar of the agenda. construction programme.

The aim to facilitate partnerships between public and Once construction was complete, all parties were involved
private sectors combined with the physical infrastructure in the testing and commissioning of the assets with the
pillar facilitated the involvement of the private sector in independent certifier present. The hand-over process
driving the economy. The aviation sector was restructured was described by the Project Company as conventional,
by privatising the operation of airports and forming the Civil and there were no unexpected issues.
Aviation Regulatory Commission. As a result, the Queen
Alia International Airport PPP was planned and announced Transition from Construction to Operations
for tendering. Managing the transition from construction to operations was
an excellent example of successful transition management.
MANAGEMENT OF THE PPP CONTRACT Commencement of the operations phase was originally to
be initiated and completed overnight. However, in order to
Construction Phase
prepare for this transition, the Project Company formed the
Construction was planned in two stages. Stage one “Operational Readiness and Airport Transfer” (ORAT) team
included building the main terminal and its nine gates, two years prior to the services commencement.
followed by stage two, which was to complete the entire
footprint of the building with additional gates. In total, In these two years, meticulous planning was undertaken
the design of the airport included 25 gates. Only 17 gates and comprehensive training was provided by the Project
would have a passenger access bridge installed, with the Company, while the Procuring Authority was closely
rest put on hold until demand required their installation. involved in the planning of the process. Continuity and
transfer of knowledge was a key objective of the ORAT
There were many challenges faced during the construction team, and with the short transition window, there was
phase. These were primarily due to the multiple scope pressure to ensure all parties were familiar with the new
 QUEEN ALIA INTERNATIONAL AIRPORT EXPANSION

asset on the first day of operations. The two years of Quality Awards are also understood to be indicators
planning and training paid off, and there were no issues of performance. The KPI regime has clearly lined up the
faced during the transition. incentives of the two parties successfully, with the Project
Company encouraged to provide a high level of service
Operations Phase as a way of increasing its revenue.
While the operations phase of the project has not faced any
major difficulties so far, the biggest challenge for the Project Payment Mechanisms
Company was the transformation of the airport working The PPP contract between the Procuring Authority and the
culture from public sector to private sector service delivery. Project Company sets out the investment fees at 54% of
This required careful and soft introduction of changes, and the gross revenue earned, paid to the Procuring Authority
in general, the Project Company has been successful in on a quarterly basis. Additionally, the Procuring Authority
managing the transformation. It deals with a large range transferred the collection of the “departure tax” to the
of stakeholders, including multiple government agencies Project Company, which is then to be counted as part of
as well as airlines, ground handlers and retailers. One way the gross revenue to be shared. There was no payment
to consider the operation of an airport, to quote a Project mechanism during the construction phase.
Company’s representative, is that the operator has to act
The revenue and financial performance is calculated
like “a conductor of an orchestra”. Overall, the operations
through quarterly reports submitted by the Project
phase is considered to be successful by both the Procuring
Company. As of the time of the interview for this case
Authority and the Project Company.
study, the annual income for the Procuring Authority was
One notable incident occurred where an airline was late USD $120 million from direct tax and USD $130 million
in its payments to the Project Company, which was then in investment fees.
forced to notify the Procuring Authority that it would not be
able to meet its investment payments on time. The Project ROLE OF GOVERNMENT
Company felt this should have been taken into consideration
Government Support and Procuring Authority
when addressing the delay in payment of investment fees,
as it was a delay by the user. The Procuring Authority acted The government played an important role in the success of
positively in this regard to reach a conclusion in favour this project, and it was emphasised that the decisiveness and
of the Project Company. leadership of relevant government officials have contributed in
effective management of the project challenges. The Project
Performance Monitoring and KPIs Company felt that it is enabled to enjoy the freedom to operate
the airport in the way it considered most appropriate in order
The Procuring Authority did not contribute to the cost of
to manage its risk and to introduce its culture of efficiency and
the construction. The Project Company assumed the risk
transparency to the airport, whilst the Procuring Authority’s
for timely completion and was incentivised to complete
decision-making system was perceived as an enabler.
construction on time, as any delays would trigger agreed
damage payments. The Procuring Authority’s Project One example of support from the government was
Management Unit (PMU) was continuously involved in the that the civil defence fire code was updated in order
construction phase, with engineers making daily site visits to accommodate the project’s design. The designers
and inspections to monitor the progress on the ground. introduced innovative fire suppression systems, which
The Project Company was required to provide monthly at the time were not covered by the fire code. When the
reports showing the construction cash flow, progress, and adequacy of the system was proven, with reference
any issues faced. There was also an independent monitor to its use in other modern state-of-the art airports,
and certifier, paid for by both parties. the code was updated to allow the use of such systems.

The operational KPIs for the project were agreed prior

to financial close. The KPIs are mainly sourced from the RELATIONSHIP BETWEEN THE PROCURING
International Air Transport Association codes and manuals, AUTHORITY AND PROJECT COMPANY
and additional payments to the Procuring Authority Team Set-Up and Staffing
apply should the KPIs not be met. The Project Company
The Procuring Authority has created a dedicated team for
submits a quarterly report to the Procuring Authority
this project after financial close. The Project Management
which covers customer satisfaction, financial performance,
Unit (PMU) was formed to represent the Ministry of
and operational performance.
Transport (MOT) and manage concessions on its behalf.
The KPIs are primarily directed towards customer The team has 14 people working at any given time and
experience as a driver of improvements, however rankings is located in offices within the airport. The team has the
from international agencies such as the Airport Service relevant legal, financial and technical/engineering expertise.

GLOBAL INFRASTRUCTURE HUB | TURNER & TOWNSEND

APPENDIX A: CASE STUDIES

The Project Company’s staff count is significantly higher to airlines, security, customs, etc.) in the design process.
as they operate the airport themselves. However, there is Different end users from airlines to local authorities had
a technical team of 20 under the Chief Technical Officer specific needs which were not met by the original design,
who reports to the CEO. making the scope correction unavoidable.

The Procuring Authority was mainly responsible for Constraints of working in an operational airport
facilitating the relationship between the Jordanian The project was an expansion of an existing airport.
government and the Project Company. Its main concern The design overlapped with the existing operational assets,
was to ensure the interests of all parties are protected fairly, making it difficult to build while the airport was operational,
and most importantly, the successful delivery of the project. and the old structure was limited in space. Construction
This helped the Project Company to avoid managing a works therefore needed to be adapted to mitigate safety
number of government stakeholders, as the PMU would, and security risks. In most cases, the expansion was
in case of any issues, voice its concerns to the regulatory performed in stages, where a section would be completed
and permitting agencies and facilitate their resolution. and opened for use before moving to another one.

Training and Development Changes in the traffic profile (passengers and aircraft)
There was no training programme set for the Procuring The airport expansion was planned in two phases, with
Authority. All training was provided when needed under the the first phase to expand the airport to a capacity of nine
discretion of the head of the PMU. Additionally, the Project million passengers a year, and the second phase to expand
Company provided joint training for its staff and the PMU to a capacity of 12 million passengers a year. However, the
staff on the operation of the new facilities. forecast traffic volume growth and type of traffic forecasted
to use the airport proved to be too conservative. The airport
Communications was starting to be used as a hub, thus seeing larger wide-
The Project Company has more than one point of contact body aircrafts coming in which were not considered in the
with the government. In addition to communicating with original design. These developments in the traffic profile
the Procuring Authority, the Project Company also has to required the addition of gates and improvements to make
communicate with multiple ministries for permitting and the gates suitable for heavy jets.
compliance. This creates a complicated communication
system, which has to be carefully managed. Renegotiation
The Project Company initiated a renegotiation of the PPP
A particular challenge faced by the Project Company is that
contract three years after financial close to address various
since financial close, there have been 12 different Ministers
scope changes and the acceleration of the stage two
of Transport. This has been somewhat mitigated by the fact
development. As part of the renegotiation settlement, the
that the head of the PMU remained the same until recently,
parties agreed that the Procuring Authority is to contribute
which allowed for the development of a strong relationship
USD $50 million and the Project Company is to take USD $150
between the Procuring Authority and the Project Company.
million in additional debt. The contribution from the Procuring
While it was difficult to deal with frequent changes in
Authority was structured as 10 voluntary quarterly deductions
ministers, the decision to form the PMU has paid off by
from the annual investment fees. As for the loans, the lenders
isolating the project from many of the disruptive effects
decided to refinance the original debt by both increasing the
of the changes in the ministry.
amount of loan and changing the interest rate. The original
loan was already four years old and was priced on the basis
KEY EVENTS
of a different risk profile, thus a review of the rate and the
Scope Changes loan tenor was done to reflect the changed risk profile. It was
There were multiple scope changes within the variations therefore possible for the Project Company to take on the
which have been submitted through the life of the project additional debt and receive more attractive financing terms.
to date. The first scope change was initiated in 2009 This was also helped by the fact there was an increase in the
and the latest was initiated in 2014. The reasons expected revenue due to the early delivery of stage two.
for the changes can be grouped into three categories. The government contribution required the approval of the
Council of Ministers, which is the Ultimate Administrative
Inadequacies in the project design agreed at financial close
Body in the Jordanian government. The recommendation
When the project entered the construction phase, it was for the contribution was submitted by the PMU to a steering
discovered that some sections in the airport had not been committee formed for the project, which elevated the
considered in the original design. This can be attributed to request to the Council of Ministers.
not involving end users (in this case end users may refer
 QUEEN ALIA INTERNATIONAL AIRPORT EXPANSION

LESSONS LEARNED Flexibility and commitment of the Procuring Authority

to deal with unforeseen circumstances can have
Early involvement of stakeholders may avoid having to
a significant positive impact on the overall success
undergo significant changes in scope, resulting in delays
of a project.
and cost overruns.
The Procuring Authority was able to proactively manage
End users and other stakeholders should always be
changes and variations initiated on the project. While
involved in projects of this scale. When a PPP project is
some variations could have been avoided, the government
planned, the Procuring Authority and the Project Company
has shown the willingness to act as an enabler. When the
should identify the end users to understand their needs
Procuring Authority requested variations to accommodate
and activities. This is particularly important where there are
its needs, it was fully prepared to take up the costs
a range of stakeholders, which, in the case of an airport,
associated with them and facilitated the approval
include airlines and retailers, as well as passengers. This
from the government.
will avoid having to undergo significant changes in scope,
resulting in delays and cost overruns. Another notable incident occurred when an airline was
late in its payments to the Project Company, which was
Setting up a dedicated project team may help to mitigate then forced to notify the Procuring Authority that it would
risks from political and institutional changes. not be able to meet its investment payments on time.
The Jordanian Ministry of Transport (MOT) decided to form The Procuring Authority acted flexibly in this regard to
a dedicated project team for the Queen Alia International reach a workable conclusion with the Project Company.
Airport expansion. The benefits of this decision were most
evident when the MOT was undergoing unusually frequent Early and robust transition planning will make transition
changes in ministers. With the PMU being separate from phases more efficient.
the MOT and concentrated on the airport, the disruptive The parties understood the challenges of transition phases
effects of those frequent changes were avoided. The PMU from an early stage, and careful planning started two
staff remained the same, ensuring continuity of knowledge years before the transition from construction to operations.
and contract management. Additionally, most of the The effective transition management, as well as early
decision-making was within its remits, other than high-level planning and training, ensured good transfer of knowledge
strategic decisions which required escalation to the MOT. from the construction team to the operations team and
This limited the potential decision-making delays caused by helped overall readiness for service commencement,
the changes in the MOT. This example shows how setting which, in turn, enabled a timely and smooth
up a dedicated team to deliver and manage the project commencement of the services operation.
helps mitigate risks from political and institutional changes.

Involving end users in the construction works can

streamline the progress of construction and facilitate
a fast transition from one stage to another.
Expanding an operational airport presented a significant
challenge in the construction phase. The process was
carried out by delivering the expansion in small packages
around the original structure, with operations shifting
from one section to another by having contractors and
end users alternate between each stage. Involving end
users (represented through services such as customs,
security, airlines, etc.) in the construction works helped
them become ready when the time came to move their
operation to a different section of the airport. This process
streamlined the progress of construction and facilitated
quick transition from one stage to another.

GLOBAL INFRASTRUCTURE HUB | TURNER & TOWNSEND