Transcript HIGHWAY CONCESSIONS AND WORLD BANK GUARANTEES

Transport Forum 2005
Options for Implementing
Performance-based Contracts
by
Cesar Queiroz,
Lead Highway Engineer, ECSIE
Washington, DC, March 7-11, 2005
Presentation Outline
• Importance of Road Infrastructure &
Maintenance
• Evolution of Civil Works Execution
• Advantages and Disadvantages of PBCs
• Bidding & Bid Evaluation
• Supervision & Quality Control
• Payment & Liquidated Damages
• Dispute Settlements
• Lessons Learned and WB Study on PBC
Economic Development and
Road Infrastructure
GNI ($/pop)
100000
logGNI = 1.39 logPRD
R squared: 0.76
98 countries
10000
1000
100
100
1,000
10,000
Paved Road Density (km/mil pop)
Source: Queiroz and Gautam 1992
100,000
Ruins of a bridge over the Danube River in Novi Sad,
Yugoslavia, targeted in a NATO strike in 1999
Importance of Timely
Maintenance
• Timely maintenance of $12 billion
could have saved $45 billion needed
for road reconstruction in Africa
• 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
Evolution in the Execution
of Civil Works
1. Force account (or direct labor)
2. A public sector monopoly (public
contractor)
3. Corporatized public sector
contractors
4. Private sector contractors
Separating Planning & Management
from Implementation of Road
Maintenance
• Avoid conflicting responsibilities
• Control costs and maintain
quality
• Introduce competition and reduce
costs, frequently 20% to 30%
Forms of Price based
Contracts
• Lump sum - payment based on a
single price for the total work
• Admeasure - payment based on
quantity of completed work and
tendered rates (bill of quantities)
• Performance - payment based on
performance (or results) achieved
Risk Allocation Between Client
& Contractor
• Lump sum, admeasure and
performance contracts: contractor
bears much of the risk
• Cost-reimbursable contracts:
client bears the main risk
• Currently most agencies favor
admeasure contracts
PBC Has Several Names
• Performance Specified
Maintenance Contract (PSMC)
• Performance Based Management
and Maintenance of Roads (PMMR)
• Output Based Service Contract
• Performance Based Road Asset
Management and Maintenance
Contract
PBC in Different Countries
• Long-term PSMC in AU, NZ, Canada (3-10
yrs)
• CREMA (Contrato de REcuperation y
MAntenimiento) in Argentina, etc.
• Warranty contracts in USA
• Asset Mgnt & Maint Contracts in VA, USA
• DBFO (up to 30 yr) in UK, Finland, Portugal
• Some are hybrid type contracts (i.e.,
quantity-based and performance-based)
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
Disadvantages 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
100
Allocation of Risks
Force
Account
Maintenance
Contracts
PBC
RISK
TO
PUBLIC
SECTOR
Concessions
Decreasing
Public Risks,
Increasing
Private Risks
0
RISK TO PRIVATE SECTOR
BOO
100
For PBC:
Contractors are Free to Decide
•
•
•
•
•
What to do
When to do
How to do
Where to do
To do physical works themselves,
or subcontract to others (some
restrictions may exist)
Prior to Bidding
• Definition of road sections or network to be
contracted out
• Inventory of the road assets and their
conditions
• Selection and definition of Key
Performance Indicators (KPI)
• Methods of KPI measurement
• Definition of likely maintenance & possible
rehabilitation
• Preliminary cost estimates
Bidding
• Prequalification highly recommended
• Hold pre-bid technical seminars with
potential bidders (detailed review of
concept and specifications)
• Adjustment of bidding documents
with the help of consultants
• WB Sample Bidding Document:
http://www.worldbank.org/transport/r
oads/c&m_docs/pmmr_final.doc
Evaluation Criteria of Bids
• Once technical expertise,
experience, staffing, quality
control/quality assurance,
management have been checked,
then…
• Bid price
Bid Evaluation /
Contract Amount
Activity
Management &
Maintenance:
Bid Evaluation basis
Network km x
Lumpsum per kmmonth x No. of months
Emergency Works: Assumed quantities x
unit prices
Rehabilitation
Works:
Lumpsum or quantities
x unit prices
TOTAL BID PRICE: SUM OF THE ABOVE
Supervision Arrangements
• Consultants (individual or firm)
• Road Agency staff (e.g., Argentina,
Estonia)
Quality Control/Assurance
•
•
•
•
Contractor’s self-control arrangements
Formal monthly inspections
Supervisors (formal/informal inspections)
Project Manager (formal/informal
inspections)
• Road users
Payments under PBC:
Activity
Management &
Maintenance
Emergency
Works
Rehabilitation
Works
Payment basis
Lumpsum per kmmonth
(Output-based)
Based on unit prices,
for works agreed case
by case
Lumpsum or quantities
x unit prices
Liquidated Damages
• Reduced payment
• Suspended payment
• Fines (different for each KPI and response
time: e.g., $440 per day per pothole)
Demerit Points System (Sweden, Serbia):
• Failure to fulfill administrative duties
• Failure to perform routine maintenance
• Failure to perform winter maintenance
Dispute Settlements
• Mutual consultation/direct
negotiation (site inspection, progress
meetings and collaborative
discussions of each party’s position)
• Arbitration (e.g., Dispute Review
Board)
• Adjudication (e.g., Dispute Review
Expert)
• Appeal to the Court
Advantages of Rehabilitation
Included in PBC
• An incentive for the contractors to
perform well to avoid increased
maintenance costs in future in order
to comply with performance
indicators defined in the contract
• Feasibility of PBC on roads in fair to
poor condition
Lessons Learned:
Planning of PBC
• Define clear and simple performance
standards and measures before
advertising bids
• Include only “maintainable” roads (unless
rehabilitation is included)
• Have consistent documents and
requirements
• Do not try to impose too many risks on the
contractor
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 consultants need to fully understand
their role (… control service level and assure
overall technical quality - - but no micro-control
and micro-management)
• Road Agency staff need to understand their
changed role (e.g., from performing quality control
to focusing on quality assurance)
• Arrange regular formal and informal
communication links with contractors, including
regular review sessions
Thank you!