Regional Seminar on Performance- Based Management and Maintenance Contracts Changes Required by Road Administrations and the Consulting and Contracting Industries César Queiroz, Ph.D. Roads and Transport Infrastructure Consultant Arusha, Tanzania February 2008
Presentation Outline Importance of timely maintenance Using the PBC approach What have been the results? What are the potential pitfalls? Changes to road administrations Changes to consultants Changes to contractors Changes to road users Distribution of risks between the public and the private sectors Lessons Learned
Importance of Timely Maintenance It is estimated that $1 spent on timely maintenance can save more than $3 that would be required for road reconstruction A well maintained paved road should last for 10 to 15 years before resurfacing, but lack of maintenance can lead to severe deterioration in 5 years
Why PBC? Reduced administration: less effort to measure works Avoid frequent claims and contract amendments to increase quantities of activities Client focus: pay on the basis of userrelated performance indicators More responsibility to contractors stimulates initiative and innovation Development of a new industry and creation of additional job opportunities
Potential Pitfalls of PBC Longer tendering period Perceived loss of control and flexibility by road agencies Uncertainty of long term relationship Lack of some (or unclearly specified) performance standards and level of service Possible unfair competition for smaller contractors
Success Factors for PBC Training workshops Technical studies Prequalification of contractors Bidding process Supervision arrangements Facilitation during pilot contracts
World Bank Sample Bidding Document Output- and Performance- based Road Contract (OPRC) http://www.worldbank.org/procure/
Payments under PBC Contracts: Mostly based on the service provided The contractor has to ensure that road users get a certain Level of Service Level of Service defined in terms of usability, road surface conditions, safety features, roadside assistance, etc. Specifications included in Contract describe Level of Service expected for each road If a Level of Service indicator is not complied with, an assessment in financial terms is deducted from the contractor s monthly invoices
Level of Service: Paved Roads Roughness Potholes / Patching Cracking Cleanliness of surface Rutting / Ravelling Broken pavement edges Shoulder drop-off, condition Drainage cleanliness, condition Vegetation control
Supervision Arrangements for Quality Assurance Determine adequate supervision arrangements: consultants (individual or firm); road agency staff (e.g., Argentina, Estonia) Prepare Terms of Reference (TOR) for supervision Train road agency staff and consultants Coach supervisors during initial period
An Example of Invitation for Bid with Expected Outcome and Tolerance Virginia Department of Transportation, Invitation for Bid IFB# 156-RT, Issued on July 27, 2007 Scope: Turnkey Asset Maintenance Services of I-81 and I-66 sections (about 320 km) Mandatory Pre-bid Conference: August 20, 2007 Technical Proposal Due Date: October 2, 2007 Initial Contract Period: April 15, 2008 to April 14, 2013 http://www.virginiadot.org/projects/conststan-i81- overview.asp www.eva.state.va.us
I-81 is one of the eight top truck routes in the U.S.
An Example of Legal Framework: Commonwealth of Virginia, USA The Public-Private Transportation Act of 1995 is the legislative framework enabling the Commonwealth of Virginia to enter into agreements authorizing private entities to acquire, construct, improve, maintain, and/or operate qualifying transportation facilities http://www.virginiadot.org/business/resour ces/ppta-overview.pdf
Attitudes Changes Required of Road Administrations Fear to loose control Fear to loose expertise From distrusting the contractor to a new partnership Fear to loose lucrative deals Road user orientation Procedures New tender procedures New monitoring procedures Training Implementation and monitoring of PMMR
Changes Required for Consultants Attitudes (depending on role in PMMR) Change from engineer to manager Procedures Life cycle management Pavement management systems Public relations management Training How to manage PMMR How to monitor PMMR
Changes Required of Contractors Attitudes Long-term business Innovation From maximizing to minimizing inputs Road user orientation Procedures Road, bridge and tunnel asset management Self control system Traffic and safety management Public relations management Training Own staff Subcontractors
Changes Required of Road Users From a passive to a more pro-active role (ownership) Control of road conditions (claims)
Build Ownership Dear ROAD USER This road is being managed and maintained with your tax money by GOOD ROADS Inc. JKKKKKMNN SDDFDERDK SAADSCC ZZZZZZZZ We welcome any comments or suggestions Tel/fax: 302 552 0098
Reconciling the Interests of Three Actors Road Agency Road Users Contractor
Road Agency Objective: meet public demand for safe and smooth roads; reduce budget expenditures Alternatives: force account, admeasure, performance-based contracts, concessions Appropriate use of consultants
Road Users Acceptable level of service Safety Contractor Risks and profit competitive with other investment alternatives
Changes are required, but they do not have to be radical Some countries have used the same form of bid and contract documents as for traditional contracts (e.g., Estonia, Serbia) Hybrid contracts can be successful (e.g., CREMA in Argentina and Brazil) But changes are often difficult
Lessons Learned: Contracting Ensure solid and credible financing of contract during the entire contract period Use of small local contractors: Only after adequate preparation and training, and for contracts with very simple requirements (or as subcontractors) Build in a Dispute Resolution Mechanism
Lessons Learned: Management of PBC Supervision consultant s role: control service level and assure overall technical quality - - but no micro-control and micromanagement Road agency staff changed role: from performing quality control to focusing on quality assurance (no longer counting cubic meters ) Arrange communication links with contractors, including regular review sessions
Lessons Learned: Planning of PBC Define clear and simple performance standards and measures before advertising bids Include only maintainable roads (unless rehabilitation is envisaged) Have consistent documents and requirements Do not try to impose too many risks on the contractor
Toolkit for PPP in Highways The toolkit is structured under five headings and includes a library and interactive financial simulation model Available at the World Bank s s web site: www.worldbank.org/highways
Forms of Contracts and the Distribution of Risks Option Works Demand Performance Force account Public Public Public Admeasure Pri/Pub Public Public PBC Private Public Private Concessions Private Pri/Pub Private
High Allocation of Risks Force Account Admeasure Maintenance Contracts RISK TO PUBLIC SECTOR Decreasing Public Risks, Increasing Private Risks PBC Concessions BOO Low RISK TO PRIVATE SECTOR High
Thank you!
Some Basic References World Bank (2006). Resource Guide for Performance-based Contracting. Washington, D.C. http://www.worldbank.org/transport/roads/resourceguide/index.html World Bank (2005). Performance-based Contracting For Preservation and Improvement of Road Assets. Transport Note No. 27. Washington, D.C. http://www.worldbank.org/transport/roads/resourceguide/docslatest%20edition/pbc/trn_27_pbc_eng_final_2005.pdf World Bank (2005). Sample Bidding Document: Output- and Performance-based Road Contract (OPRC). http://www.worldbank.org/procure/ World Bank (2003). Toolkit for Public-Private Partnership in Highways. Public-Private Infrastructure Advisory Facility (PPIAF) and World Bank. http://rru.worldbank.org/documents/toolkits/highways/index.ht m
WB PPP-related Sites Toll Roads and Concessions http://www.worldbank.org/transport/roads/toll_r ds.htm How to Hire Expert Advice on PPP http://rru.worldbank.org/toolkits/documents/ad visors/full_toolkit.pdf Labor Issues in Infrastructure Reform www.ppiaf.org/reports/labortoolkit/toolkit.html Toolkit for PPP in Highways http://rru.worldbank.org/toolkits/partnershipshighwa ys/
World Bank Websites on Performance-based Contracts Resource Guide for Performance-based Contracting http://www.worldbank.org/transport/roads/resourceguide/index.html Training Course for Performance-Based Management and Maintenance of Roads http://web.worldbank.org/wbsite/external/topics/e XTTRANSPORT/EXTROADSHIGHWAYS/0,,contentMDK: 20706624~pagePK:148956~piPK:216618~theSitePK:338 661,00.html Road Management Catalog http://web.worldbank.org/wbsite/external/topics/e XTTRANSPORT/EXTROADSHIGHWAYS/0,,contentMDK: 20735996~pagePK:210058~piPK:210062~theSitePK:338 661,00.html
Cesar Queiroz Roads and Transport Infrastructure Consultant World Bank, 1818 H Street NW Washington DC 20433 USA Tel +1 202-473 8053 Mob +1 301-755 7591 Email: cqueiroz@worldbank.org http://www.worldbank.org/transport http://www.worldbank.org/highways
Cesar Queiroz is an international consultant on roads and transport infrastructure, with main interest in publicprivate partnerships (PPP) in infrastructure, road management and development, performance-based contracts, port rehabilitation, improving governance, quality assurance and evaluation, research, teaching and training. Between 1986 and 2006, he held several positions with the World Bank in Washington, D.C., including principal highway engineer, lead highway engineer, and highway advisor. Prior to joining the World Bank, Cesar was the deputy director of the Brazilian Road Research Institute in Rio de Janeiro. He holds a Ph.D. in civil engineering from the University of Texas, USA, a M.Sc. in Production Engineering from the Federal University of Rio de Janeiro, and a B.Sc. in civil engineering from the Federal University of Juiz de Fora, Brazil. Cesar was awarded the Maua Medal for his contribution to transport development in Brazil, and is an elected member of the Russian Academy of Transport. He has published more than 130 papers and articles, including being a co-author of two World Bank main publications on PPP and performance-based contracts, respectively the Toolkit for PPP in Highways and the Resource Guide for Performance-based Contracting. He has participated actively in several international organizations, such as TRB, SHRP, OECD, PIARC, IRF.