Nordic transport infrastructure market – modelling and forecasting methods for asset management and business development Markku Riihimäki, Pekka Pajakkala and Pertti Lahdenperä

VTT TECHNICAL RESEARCH CENTRE OF FINLAND 2 Background Nordic civil engineering and construction markets are integrating towards a common market. Several companies have developed an internationalisation strategy which results in merges and acquisitions, networking with Nordic partners, or joint ventures for a project with other market actors. Some resources (labour, equipment) are common for the entire Nordic region while the contractors operate in numerous countries; market conditions in another Nordic country affect the contents and price of the tender in another country. Also more integrated delivery methods are gaining in popularity and projects are procured in larger than earlier entities which gives room for larger international players. Common markets with numerous potential implementers increases competition and ensures economical realisation of contraction activities. Along with the open borders and markets, a national market is tied to international markets in terms of volume and cost development: in the case of infrastructure this is likely to happen on the Nordic level in particular. Clients and companies should have a more and specific market information about forthcoming projects in the Nordic level. Transport infrastructure sector may receive, in a financial crisis, a lot of stimulus money for rebuilding (on the global level). It is important to understand market mechanisms in this situation. Infrastructure property of is a major asset of the society.

VTT TECHNICAL RESEARCH CENTRE OF FINLAND 3 Targets The aim of this study is to establish forecasting and modelling methods for the Nordic transport infrastructure markets as well as to anticipate new international business opportunities. In more detail the target is to create a reference model and the data collection system for the anticipation of market size by segments. “The Nordic level segmentation” is to be made by end products (roads, streets, railways), i.e. by recognising investments as well as periodic and daily maintenance as separate segments. Market segmentation will also be made by main regions in each country. to deepen market information to the work/labour segments (asphalt work, piling, bridge construction, etc.) at domestic market in Finland. to create a system that allows the anticipation of and reaction to market changes/fluctuation in civil engineering construction. Market information can be updated quite easily. to create a base of an Internet portal on future projects for (the owners to inform) companies. Nordic level market information about markets and its segments. search for new knowledge and business opportunities for various actors. to consider a long-term transport infrastructure needs, service capacity and repair debt as required by the development of the forecasting and disclosure system for the transport market

VTT TECHNICAL RESEARCH CENTRE OF FINLAND 4 Benefits and effectiveness Better, focused information on the market for the transport infrastructure sector actors, property owners (governments) and large companies as well as other project stakeholders. Critical information on changes in market volume and demand for the well-timed investment decisions by the public sector. Public investments aim to keep the market activities stable (quantities and prices). Appropriate scheduling of significant and large scale projects is a means to avoid cyclical peaks; it can also reduce costs significantly. The selection of different project delivery methods and work break down structures may also be affected by the market situation (degree of competition, time of entering in a contract). Critical information on changes in market volume and demand for the development of the planning and investment decisions by companies. Information needs: Corporate strategy, investments, expansion, anticipation of the growth, export opportunities, new business opportunities, strategic agility, networking, new business models and operative management, etc Open portal and market information on future projects covering the entire Nordic region. The improved monitoring and forecasting of industry trends and costs levels makes the governments’ control more effective in general. The interaction between the owner and companies increases both parties' knowledge of the market and contribute to recognition of new service needs and business possibilities. The impact of market activity/volume on the construction prices becomes transparent.

VTT TECHNICAL RESEARCH CENTRE OF FINLAND 5 Research project The study is co-operative effort between the Finnish Road Administration (Finnra) and companies, other Nordic road administration organizations and research institutions / universities / consultants. Multidisciplinary project requires knowledge on public economics, construction process, physical assets and modeling, as well as the skills of incorporating the results in asset and investment management and social control. A funding application is to be submitted to Tekes (Built Environment program) by VTT; this is not supposed to cover the costs in other Nordic countries although the development of the common information system is to be included in the budget According to the rules of Tekes the shares of financing are (budget to be fixed later) Tekes (the Finnish Funding Agency for Technology and Innovation)60 % Industry actors (including Finnra) 40 % Duration of the study is approximately 24 months

VTT TECHNICAL RESEARCH CENTRE OF FINLAND 6 Project parties and main results: – knowledge, models, system, reports … common market Nordic road administrations Finnish Road Administration Nordic road administrations CompaniesTekes VTT R&D partners Project GNA partnership Communication, data transmission National research projects R&D partners