Contract

2012

Utpal Deka

5/14/2012

Urban Transport Toolkit on Contracting

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Section : 1 BACKGROUND ........................................................................................ 1

SECTION : 2 PROJECT PREPARATION .......................................................................... 4

2.1 PLANS AND PROJECTS/PROGRAMMES ......................................................................4

2.2 COMPREHENSIVE MOBILITY PLAN .............................................................................5

Section : 3 THE PROJECT LIFE CYCLE.......................................................................... 6

3.1 INTRODUCTION ........................................................................................................6

3.2 POLICY AND PROGRAMMING ....................................................................................6

3.3 PROJECT IDENTIFICATION ..........................................................................................7

3.4 PROJECT SCOPING .....................................................................................................9

3.5 PROJECT FORMULATION ......................................................................................... 10

3.6 PUBLIC CONSULTATION DURING PROJECT PREPARATION ........................................ 10

3.7 PROJECT APPRAISAL ................................................................................................ 10

3.8 PROJECT FINANCING ............................................................................................... 12

3.9 PROJECT IMPLEMENTATION .................................................................................... 12

3.10 MONITORING & EVALUATION ................................................................................. 12

SECTION : 4 PROJECT ORGANIZATION: STRUCTURES AND TEAMS ..............................14

4.1 EFFECTIVE PROJECT TEAM AND RESOURCE ALLOCATION .......................................... 14 4.1.1 Organise Project Structure ....................................................................................................... 14 4.1.2 Project Resource and Project Team Size .................................................................................. 15 4.1.3 Effective Project Team and Resource Allocation ...................................................................... 15 4.1.4 Building Successful Project Teams ............................................................................................ 15 4.1.5 Project Team ............................................................................................................................. 17

4.2 MANAGING COSTS .................................................................................................. 17 4.2.1 The cost control aspect ............................................................................................................. 18 4.2.2 The total cost approach ............................................................................................................ 19

4.3 MANAGING TIME .................................................................................................... 20 4.3.1 Six Time Management Tips for Project Managers .................................................................... 21

4.4 MANAGEMENT & LEADERSHIP IN PROJECTS ............................................................ 22 4.4.1 Project Manager Leadership Skills ............................................................................................ 23 4.4.2 Develop Effective Leadership Skills .......................................................................................... 23 4.4.3 Effective Leadership Behaviours ............................................................................................... 25 4.4.4 Ineffective or Negative Behaviours .......................................................................................... 25 4.4.5 Leadership Skills and Leadership Behaviours ........................................................................... 26

4.5 PROBLEM SOLVING & DECISION MAKING IN PROJECT MANAGEMENT ...................... 27 4.5.1 Identify risks.............................................................................................................................. 27 4.5.2 Follow a process ....................................................................................................................... 28 4.5.3 Communicate ........................................................................................................................... 28 4.5.4 Allocate Resources .................................................................................................................... 28 4.5.5 Expert insight ............................................................................................................................ 28

4.6 PROJECT MANAGEMENT SETUP .............................................................................. 29 4.6.1 Steering Committee, SUTP ....................................................................................................... 29 4.6.2 National Project Director (NPD) ............................................................................................... 29 4.6.3 National Project Management Unit .......................................................................................... 29 4.6.4 State Level Nodal Agency (SLNA) .............................................................................................. 30 4.6.5 Implementing Agency (IA) ........................................................................................................ 30 4.6.6 Project Implementation Unit (PIU) ........................................................................................... 30 4.6.7 Staffing of PMU and PIU ........................................................................................................... 30 4.6.8 Training of PIU Staff .................................................................................................................. 31

SECTION : 5 ENVIRONMENT & SOCIAL MANAGEMENT FRAMEWORK ........................32

5.1 INTRODUCTION ...................................................................................................... 32

5.2 APPLICATION OF THE ESMF ..................................................................................... 32

5.3 APPLICABLE POLICIES .............................................................................................. 34

5.4 POTENTIAL IMPACT AND MANAGEMENT MEASURES ............................................... 34

5.5 INVOLUNTARY RESETTLEMENT ................................................................................ 34

5.6 PHASING OF PROJECTS ............................................................................................ 35

5.7 PARTICIPATION / CONSULTATION DURING PROJECT PREPARATION AND IMPLEMENTATION ................................................................................................. 35

5.8 MONITORING AND REPORTING ............................................................................... 36

5.9 GRIEVANCE REDRESSEL MECHANISM....................................................................... 36

5.10 CAPACITY BUILDING AND TRAINING ........................................................................ 37

SECTION : 6 PUBLIC PRIVATE PARTNERSHIPS IN URBAN TRANSPORT DELIVERY .........39

6.1 THE CHARACTERISTICS THAT MAKE PPPS DIFFERENT ............................................... 39 6.1.1 What is public-private partnership in Urban Transport projects? ............................................ 39 6.1.2 What advantages PPPs may provide? ...................................................................................... 40 6.1.3 Should lack of government budget be the main factor in considering a PPP? ......................... 40 6.1.4 Why PPPs are attractive to governments? ............................................................................... 40 6.1.5 How a PPP project is different from a conventional project? .................................................. 41 6.1.6 Are there any limitations of PPPs? ........................................................................................... 41

6.2 MODELS OF PPP ...................................................................................................... 42 6.2.1 Supply and management contracts .......................................................................................... 45 6.2.2 Turnkey ..................................................................................................................................... 45 6.2.3 Affermage/Lease ...................................................................................................................... 46 6.2.4 Concessions .............................................................................................................................. 47 6.2.5 Private Finance Initiative (PFI) .................................................................................................. 48 6.2.6 Which model to select? ............................................................................................................ 49

6.3 UNDERSTANDING THE BASIC STRUCTURE OF A PPP ARRANGEMENT ........................ 50

6.4 PRINCIPLES GOVERNING IMPLEMENTATION OF PUBLIC PRIVATE PARTNERSHIPS IN INDIA ..................................................................................................................... 52

6.5 THE PPP PROCESS IN INDIA - “NATIONAL PUBLIC PRIVATE PARTNERSHIP POLICY – 2011 (DRAFT) ......................................................................................................... 53

6.5.1 Phase 1: PPP identification ....................................................................................................... 53 6.5.2 Phase 2: Development Stage .................................................................................................... 55 6.5.3 Phase 3: Procurement Stage ..................................................................................................... 57 6.5.4 Phase 4: PPP contract management and monitoring stage ..................................................... 58 6.5.5 Management Information Systems .......................................................................................... 59

6.5.6 Post Project Award Negotiations .............................................................................................. 59

SECTION : 7 PROCUREMENT MANAGEMENT .............................................................61

7.1 INTRODUCTION ...................................................................................................... 61

7.2 PROCUREMENT PLAN .............................................................................................. 61

7.3 TYPE OF CONTRACTS ............................................................................................... 61 7.3.1 FIRM FIXED-PRICE CONTRACTS ................................................................................................. 62 7.3.2 FIXED-UNIT-PRICE CONTRACTS ................................................................................................. 62 7.3.3 COMBINED FIRM-FIXED/UNIT-PRICE ........................................................................................ 63 7.3.4 FIXED-PRICE WITH PRICE ADJUSTMENT ................................................................................... 63 7.3.5 TIME-AND-MATERIALS CONTRACTS ......................................................................................... 64 7.3.6 COST-REIMBURSEMENT CONTRACTS ....................................................................................... 64 7.3.7 INCENTIVE CONTRACTS ............................................................................................................ 65 7.3.8 INDEFINITE DELIVERY TASKCONTRACTS ................................................................................... 65

7.4 STANDARD BIDDING DOCUMENT AND RFP .............................................................. 65

7.5 PROCUREMENT OF GOODS AND WORKS ................................................................. 66 7.5.1 Methods of Procurement : International Competitive Bidding (ICB) ....................................... 66 7.5.2 Methods of Procurement : National Competitive Bidding (NCB) ............................................. 67 7.5.3 Methods of Procurement : Shopping ....................................................................................... 68 7.5.4 Methods of Procurement : Direct Contracting ......................................................................... 69 7.5.5 Review of Procurement ............................................................................................................ 69 7.5.6 Important points to be observed in Procurement Process ...................................................... 70

7.6 PROCUREMENT OF CONSULTANTS .......................................................................... 74 7.5.1 Methods of Procurement ......................................................................................................... 74 7.5.2 Quality and Cost-Based Selection ............................................................................................. 75 7.5.3 Other Methods for selection of Consultants ............................................................................ 77 7.5.4 Review of the Procurement Process ......................................................................................... 79 7.5.5 Types of Consulting Contracts .................................................................................................. 80

7.7 STANDARD PROCUREMENT PROCEDURE - PPP ........................................................ 81 7.7.1 PPP Project Types ..................................................................................................................... 81 7.7.2 PROJECT PROCUREMENT PLANNING........................................................................................ 81 7.7.3 EXPRESSION OF INTEREST ........................................................................................................ 82 7.7.4 REQUEST FOR QUALIFICATION ................................................................................................. 83 7.7.5 REQUEST FOR TECHNICAL PROPOSAL ...................................................................................... 84 7.7.6 REQUEST FOR PROPOSAL ......................................................................................................... 85 7.7.7 POST AWARD PROJECT AND CONTRACT MANAGEMENT ........................................................ 86

8 MONITORING AND EVALUATION FRAMEWORK ............................................87

8.1 PERFORMANCE INDICATORS ................................................................................... 87

8.2 M&E OF PROJECT IMPLEMENTATION ...................................................................... 87

8.3 M&E OF PROJECT OUTCOMES ................................................................................. 88

8.4 DATA COLLECTION AND REPORTING ........................................................................ 89

8.5 PUBLIC PARTICIPATION IN M&E .............................................................................. 89

8.6 REPORTING BY THE PMU ......................................................................................... 89

8.7 MONITORING AND REPORTING OF ESMF ................................................................. 90

Urban Transport Implementation Toolkit

Section : 1 BACKGROUND

1. Government of India has initiated the Sustainable Urban Transport Project (SUTP) with support from Global Environment Facility (GEF), World Bank and UNDP. The primary objective of SUTP is to facilitate urban transport infrastructure in a sustainable environment and under the ambit of National Urban Transport Policy (NUTP).

2. The project is to be implemented over a four-year period starting from 2010. Primary Stakeholders in this program are Ministry of Urban Development (MoUD), Ministry of Environment and Forest (MoEF), UNDP and World Bank. MoUD is the nodal agency for this program implementation. The SUTP objective is to be achieved through implementation of the following three components -

- National Capacity Development in Urban Transport

- Preparation & implementation of green transport demonstration projects in participating cities

- To provide project implementation & management support

3. The purpose of the Module on “Contracting” shall be a self contained block of instructions leading stakeholders to a performance objective. The objective in this case being creating awareness and understanding of various issues related to implementation of Urban Transport projects in India, for the purposes of building capacity in the field of sustainable urban transport arenas.

4. Implementation of an Urban Transport project is the step where all the proper planned activities are put into action. Usually project implementation process involves preparing, deployment, maintaining and use of the final product of the project. Project managers and sometimes project team members are committed to controlling and monitoring project implementation process. Project team helps run project evaluation process which precedes project implementation process. Project evaluation process includes performing a complete analysis of stakeholder needs and requirements and results in forming the definition of one or more projects to be implemented.

5. The project life cycle of urban transport projects begins from project conceptualization, transport planning to contract management including monitoring and evaluation of project that includes important phases such as preparation of feasibility report and Detailed Project Report (DPR) including financial structuring and assessing financial and economic viability of project, Implementation Options and Models, Bid Process Management, Project Documentation, Contract and Project Management. The details of Transport Planning would be covered in a separate module. It is essential for policy makers, city managers and city engineers to be

Urban Mass Transit Company Limited 1


aware of various concepts, tools and techniques for effective implementation of projects.

6. A project is assessed based on parameters of technical, economical and financial, social and environment feasibility in the feasibility report. While, in DPR detailed design, technical and economical/financial structure for the project are documented that sets as a base for planning and implementing the project. Thus the section on preparation of Feasibility Reports and DPRs would focus on steps involved in preparation of these reports including giving a detailed outline on the contents of these reports.

7. One of the key attribute for successful project implementation is the selection of right implementation model. Strengthening of Institutional capacities and coordination and corporation between central, state and local level Institution shall provide a robust Institutional framework that is required for successful implementation of urban transport projects. Creation of Special Purpose Vehicles (SPV) acts as leverage for successful implementation of project and resource management. This module will also focus on the details of various options for project implementation including selection of PPP model and include the enabling Institutional Frameworks (Role of private sector, state and local government, lending institutes) and creation of Special Purpose Vehicles (SPVs) (including manpower and project documentation) including reform measures at State and Local Level. The different types of contract structure for PPP would be identified for Rail and Road based transit system and road infrastructure, details of which would be given in the Financing module.

8. The purpose of procurement and contract management is to provide basic information and direction regarding procuring commodities or services for urban transport project and to recommend strategies for managing the resulting contract. The procurement strategy defines the method by which the selected contractor’s performance will be managed. Bid Process Management includes documentation of RFQ’s/RFP’s, evaluation and award and these details would be covered in the section on procurement and contract management.

9. Urban Transport Project Implementation process may be effective if some very important factors are kept in mind that are critical in a project management system.

10. The Project Implementation Process: Project implementation process entails creation of a customizable framework that helps project managers to set up and manage project implementation stages. Customization of project implementation process framework lets leverage the use of management standards, policies and procedures and ensures that management expectations of the authorities and plans for project implementation stages are properly outlined and applied. When project implementation process is structured, customized and organized into consistent



project implementation steps, all conditions required for creation of a responsive project management environment are met, and project manager can start implementing a project. If there are several projects to be implemented, project implementation steps should be adjusted with all projects involved to start common project implementation process. If project implementation steps are not adjusted and not coordinated, several project implementation processes will be launched simultaneously.



SECTION : 2 PROJECT PREPARATION

2.1 PLANS AND PROJECTS/PROGRAMMES 11. Urban Transport projects are an important way in which the Urban Development

Department and/or the Urban Local Bodies (ULBs) achieves development goals. Therefore, any project which is identified, and subsequently approved for funding, must in some way contribute to the stated development goals.

12. It is often hard to link a project proposal specifically to NUTP priority as the priority may be written in broad terms. Many Urban Development Departments / ULBs generally develops sector plans or sector policy documents and corporate plans. These must be consistent with the NUTP priorities.

13. It is important that any programme/project is identified on the basis of these established national and sectoral policies and strategies. Table 2.1 illustrates the process of project identification within this framework.

14. Table 2.1 simplifies the linkages. It is important to note that there should be feedback from the experience of implementing projects (project evaluation) and this experience should then lead to adjustments to sector policy at state level and in some cases to national policy.



15. It is also important to note that clearly defined Urban Transport sectoral policies

and strategies are essential components for the identification of better and more relevant projects. A clear link between a project proposal and sectoral and national policy also makes the screening and appraisal of projects easier and more robust. It is often very difficult to justify a project in the absence of an overall sectoral or sub-sectoral plan.

16. The success of a project depends on a number of factors. Of critical importance to success is good project planning. It also depends on the project stakeholders having a good understanding of the project cycle and how a project comes to be implemented.

2.2 COMPREHENSIVE MOBILITY PLAN 17. It is important to prepare long-term strategic plans focused on mobility of people as

a basis for developing cost-effective and equitable urban transport measures with an appropriate and consistent methodology, in line with the National Urban Transport Policy (NUTP). Accordingly, the Ministry of Urban Development (MoUD) encourages cities to prepare “Comprehensive Mobility Plans” (CMPs) as part of long-term urban transport strategy providing for a sustainable improvement of people’s mobility in metropolitan regions. Thus CMP is a key document providing rational for urban transport proposal.



Section : 3 THE PROJECT LIFE CYCLE

3.1 INTRODUCTION 18. Project preparation includes a sequence of activities starting with project selection and followed by project scoping, proposal preparation, its appraisal and approval, preparation of detailed project report and its final appraisal and approval. The procedures adopted for each activity are briefly explained in this section.

19. Projects are different from recurrent activities. Projects have a certain set of activities to be carried out in a particular time frame. A project is designed to achieve specific development objectives, or put another way; projects are designed to change a situation, or to lead to improvements in people’s lives. Because a project is often a complex and interlocking set of activities, a good project requires a lot of planning and preparation before it is implemented and it requires monitoring to ensure that activities are being undertaken in a way that is achieving the development objectives of the project. To illustrate the complex nature of projects, it is usual to talk about a “project cycle”. The stages of the Project Cycle are as follows:

Policy and programming

Project Identification

Project Formulation

Project Appraisal

Project Financing

Project Implementation

Project monitoring and

evaluation

3.2 POLICY AND PROGRAMMING 20. This stage involves review of the existing national and state level policy on

Development of urban transport in the country. It has got the following focus areas:

National urban transport policy and its objectives for development of sustainable urban transport facilities

State level policies for Development of urban Transport projects

Donor agency programmes for supporting urban transport projects

National level programmes for urban transport projects



3.3 PROJECT IDENTIFICATION 21. The aim of the project identification stage is to identify project ideas that are

consistent with priorities identified in the policy and programming stage.

22. Project ideas may come from a number of sources. Most importantly from stakeholder departments, but also from ULBs, NGOs or from donors. The planner’s responsibility is to consult extensively with line ministries on project ideas and advise on the priorities for the forthcoming development budget. From the policy and programming stage, planners should also have a good knowledge of the likely project ideas that will be forthcoming.

23. There are a number of tools available for project identification which aim to ensure that project ideas are relevant to the problem which is to be solved. These tools, part of the logical framework, are problem analysis, objective setting and strategy analysis. For larger projects these tools can be used in a stakeholder workshop to ensure that project ideas are sound.

24. Illustrative List of Urban Transport Projects which are generally considered essential for sustainable development of the City include:

Improvement of Public Transport

- Promotion of Bus Rapid Transit Systems

- Improvements to and reform of existing bus services

- Enhancement of public transport (landscaping, safety, comfort, design, image)

- Fare and modal integration

- Traffic signal priority

Land-use and transport planning coordination

- Comprehensive corridor development integrating various modes of transport

- Urban upgrading and re-developments in conjunction with development of public transport systems

- Recuperation of urban centers (historic, symbolic) while promoting accessibility

Adequate Operation and Maintenance of Transport Fleet

- Driving practices and training of operators

- Fleet maintenance practices and outsourcing

- Vehicle emissions monitoring

Non-motorized transport development

- Provision and improvement of cycling networks and facilities, and



pedestrian facilities

Travel Demand Management

- Traffic Calming

- Congestion pricing

- Traffic cells

- Parking policies

- Advanced Public Transport Systems or Intelligent Transport Systems

- Rationalization of travel behavior

Freight Rationalization

- Freight transfer centers

- Fleet standards

- Rules on truck circulation

25. Selection and preparation of demonstration projects are to conform to the requirements of National Policy Guidelines, such as JNNURM guidelines, which state that the City Development Plan (CDP) and the Comprehensive Mobility Plan (CMP) are the basis for the selection and approval of project components.

26. A CDP is both a perspective and a vision for the future development of a city. It presents the current stage of the city’s development and the prospective directions of change. It identifies the thrust areas, suggests alternative strategies and interventions for bringing about the change and provides a framework and vision within which projects need to be identified and implemented. It also establishes a logical and consistent framework for evaluation of investment decisions.

27. CMP focuses on resolving mobility issues rather than development of vehicle intense transport systems. It offers new opportunities for synergizing the socio-economic, mobility and infrastructure aspects in a city with a focus towards moving people rather than vehicles to achieve a higher degree of sustainability.

28. At a minimum, planners should be familiar with the concepts to enable them to quickly screen project ideas and provide advice as to which project ideas should be fully formulated and that project profile forms should be completed.

Comprehensive Mobility Plan

A CMP presents a long-term vision of desirable mobility patterns (people and goods) for a city and provides strategy and policy measures to achieve this vision. It should follow the NUTP, which emphasizes the importance of pedestrian facilities, non-motorized transport measures and public transport systems, including buses and sustainable mass rapid transit systems.



The ultimate objective of a CMP is to provide a long-term strategy for the desirable mobility pattern of a city’s populace. To achieve this objective, the following are the main objectives:

To provide a long-term vision(s) and goals for desirable urban development in each city;

To illustrate a basic plan for urban development and include a list of proposed urban land use and transport measures to be implemented within a time span of 20 years or more; and

To ensure that the most appropriate, sustainable and cost-effective implementation program is undertaken in the urban transport sector.

CMP

Statement of Vision and Goals to

Improve Mobility of People and

Goods

Implementation Program

List of Proposed Urban Land

Use/TransporMeasures

A CMP focuses on improvement and promotion of public transport, NMVs and pedestrians as important city transport modes:

A CMP provides a platform for integrating land use and transport planning:

A CMP develops an urban transport strategy that is in line with the National Urban Transport Policy (NUTP):

3.4 PROJECT SCOPING 29. Demonstration projects are to address infrastructure requirements as well as its

operations and maintenance during the project life cycle. Extent of the project should focus not only on what can be designed and implemented within the project term, but also give attention to the operation and longer-term sustainability of each demonstration project.



3.5 PROJECT FORMULATION 30. The objective of this stage is to

formulate feasibility study/detailed project report for the projects identified in the Comprehensive Mobility Plan.

31. The aim of the project formulation stage is to fully develop the project proposal and complete all parts of the project profile form

32. This is primarily the responsibility of the executing agency to prepare the feasibility study /detailed project report for the projects identified.

33. Once a project has been identified in the CMP, further work on project formulation may be required by the EA.

34. It should be noted that the duration of the formulation stage may vary greatly for different types of project and will be influenced by the availability/accessibility of required information and the capacity of the project sponsors. Smaller, less complex or very urgent projects may be formulated in a few weeks or months. Large scale, complex investments which are not critically urgent, may take many months or even years to complete the process.

3.6 PUBLIC CONSULTATION DURING PROJECT PREPARATION 35. Proposals should be prepared through a consultative or participatory process

involving stakeholders and the community. Public participation should be generated with stakeholders through the use of various methods, such as in-depth interviews, public meetings, workshops, focus group discussions etc. Consultations shall also be held with vulnerable groups.

3.7 PROJECT APPRAISAL 36. Once projects have been formulated, it is the job to appraise the project. That is, decide if the project should be:

Recommended for funding; or

Components of a Detailed Project Report

City Profile

Existing Transportation system in the City

Existing travel characteristics in the city

Comprehensive mobility plan strategy

Transport improvement plan

Detailed design

Environment and social impact assessment

Project Cost estimation

Project financial and economic analysis

Project Implementation arrangement



That further work is required of a minor nature that can be completed quickly

and then be considered for funding; or

that project requires further work and should be considered for funding in a future year; or,

due to the complex nature of the project, a feasibility needs to be undertaken; or that the project should be rejected.

37. The key criteria for a positive appraisal are that the project is:

Relevant:

o consistent with the policy and programming framework;

o within the institutional capacity of the project sponsor to implement

o addressing key problems of the sector or stakeholders, and takes account of key crosscutting issues such as gender and the environment);

o complements or is consistent with other ongoing and planned projects, programmes or recurrent activities

Feasible:

o Strategy adopted by the project is realistic and within government policy (e.g. does not conflict with a private sector driven growth strategy)

o The “hierarchy of objectives” make sense and are logical (Project Objective, purpose, results and activities);

o Cost estimates are sound

o Assumptions made by the project are justified (the planner may have to identify these underlying assumptions during appraisal)

o The project implementing agency has the management, coordination and financing arrangements to implement the project (including availability of complementary recurrent funds if required);

Sustainable

o There is adequate ownership of the project by project beneficiaries

o Policy will remain supportive after the project has ended

o Technology is appropriate



o Environmental concerns have been addressed

o The implementing agency is able to provide follow-up once the project has ended

o That any financial or economic analysis is reliable (e.g. a cost benefit analysis)

38. Professional judgment must be applied in determining whether or not all appraisal criteria are relevant/ applicable to the particular project or programme in question.

3.8 PROJECT FINANCING 39. This stage of the project cycle involves securing finance for the project, either through the Government budget, or through aid donor funds, or through private sector investors under a suitable Public Private Partnership (PPP) format.

40. Once new projects have been approved, discussions are held with donors to secure their commitments to fund the projects. At a later stage, projects that have not secured donor funds are forwarded for financing in the budget.

3.9 PROJECT IMPLEMENTATION 41. Implementation begins once donor or government funds or private sector investment under a suitable PPP concession have been secured for the project. Implementation is the responsibility of the implementing agency, which in most cases is the Urban Development Department or the ULBs.

42. If the project is funded through the government budget, then normal financial procedures apply for accessing the funds and for accounting for funds spent. If the project is donor funded, then donor procedures must be adhered to during project implementation. In case the project is commercially sustainable and it is amenable to develop under a suitable PPP framework, the private Concessionaire shall be responsible for implementation of the project under the pre-defined specifications and level of services desired to be achieved by the Implementing Agency / Government.

43. Planners should assist project implementers to resolve any implementation problems and draw them to the attention of senior management.

3.10 MONITORING & EVALUATION 44. The aim of monitoring is to ensure that the project activities are achieving the project purpose and that any unforeseen difficulties in implementation are addressed as quickly as possible.



45. The aim of evaluation of projects once they have been completed is to ensure that the project purpose was achieved and that lessons learnt during project implementation are carried forward into future project design.

46. A key component of monitoring and evaluation is the preparation of an annual monitoring report. This should give details of the progress in implementing all projects and the implementation problems that need to be addressed.



SECTION : 4 PROJECT ORGANIZATION: STRUCTURES AND TEAMS

4.1 EFFECTIVE PROJECT TEAM AND RESOURCE ALLOCATION 47. Effective project teams for managing Urban Transport Project Delovery are made by combining skills, experience, motivation, teamwork and sense of urgency into a clear project structure and set of accountabilities.

48. Forming a project team should be a deliberate act where people are considered in terms of the skills and experience they bring and their motivation to participate and contribute to the project as an active member of the team. In addition, they must be committed to the project objectives and have a clear sense of urgency and accountability to get things done as and when needed.

4.1.1 Organise Project Structure

49. Building a project team is a combination of selecting individuals and assigning them to project roles within an overall project structure. A project manager must ensure that:

Project roles and responsibilities must be clearly defined, preferably with no overlap of accountabilities. Only one person should be accountable for one thing or multiple things, although any number of people may contribute towards it. Two or more people should never be accountable for the same thing as this leads to confusion and potential problems;

Roles must be organised into a project structure with clear lines of accountabilities and if appropriate who reports to whom or who are the leaders with sub teams within the overall project structure;

Individuals must be assigned to the roles, with the ideal being 100% resource allocation. As the level of resource committed to the project falls the project manager must compensate for the time-splitting and therefore reduced level of productivity due to task switching or, worse, conflicting priorities. Usually, one individual is assigned to one role but it is possible for one role to be performed by multiple people;

A clear and current project organogram is created of the project team. It must be updated if the project team changes;

Extended or external project team relationships should be drawn in relation to the project team as a single entity and includes other entities such as vendors or



third-party suppliers. In essence this is drawing the lines of communication between the project team and all stakeholders and is useful as an aid to transparency.

4.1.2 Project Resource and Project Team Size

50. It is generally recommended that the core project team should be kept as small as possible - preferably fewer than 20 members, according to Steven R. Meier in Building and Managing an Effective Project Team.

51. It is well known that as the number of project resources increases so does the communication complexity. Large teams may be necessary so again the project manager should ensure that detailed project planning compensates for the increased need for communication and coordination between the team members.

4.1.3 Effective Project Team and Resource Allocation

52. Effective project teams are based on the right people being organised into a good project structure. Project resource allocation can contribute towards success by having dedicated project team members that are not matrix managed or split between multiple projects or responsibilities. If practical realities mean that resource allocation is less than 100% then the project manager must compensate for this as part of the detailed planning and time allocation.

4.1.4 Building Successful Project Teams

53. Building and developing a performing project team often goes through group development stages: forming, storming, norming and performing. Project managers must use models like this to help achieve a high performance project team.

Forming:

54. The project manager must first form the project team either at the project initiation stage or more likely over a period of time leading up to the start of the project. Sometimes this can extend throughout the project's life as a project resource is engaged and released during specific stages such as testing. This forming stage is characterised by:



Introduction of new team members meeting other team members for the first

time;

People starting to understand in more detail the project objectives and challenges and their role but unsure of how well they will work with other team members or their ability to get the job the done;

Understanding team relationships and people's authority (position, expertise, personality...)

Project manager often directs or tells people what to do at this stage as the project team orients itself

Storming:

55. After the initial optimism and polite engagement of meeting people for the first time comes the storming stage where people are getting to work together and potentially finding issues:

Ideas compete for attention or implementation

Disagreement on goals, expectations, roles or responsibilities

People clash over how to do things, the right way to perform tasks or processes and standards to be used

Individuals may display their real levels of motivation, ability to interact with others or get their job done

Project manager must lead by example and put out these fires using a variety of techniques appropriate to each situation.

56. This stage often results in slow project progress

Norming:

57. Project team rules, acceptable behaviour, role accountabilities and responsibilities are finalised, processes and standards to be used are established. This norming stage is:

Team starts to become productive and working well together to achieve project objectives

People are listening to each other and building on collective ideas. Meetings are more positive in tone and focused on outcomes and helping each other to get the job done

Project manager should use a facilitation and participative style to build on nascent teamwork.



Performing:

58. Project teams are working well together and getting things done. The performing stage is:

Highly productive with people able to discuss issues and find collective solutions

People are able to rely on others to do their part to get the job and help others when needed

Project team cohesion, optimism and morale is high and with a sense of team identity

Team is task and people oriented

Project manager can use a delegating style and focus on factors external to the project team and more on the project objectives, risks and its impact

Adjourning:

59. The project comes to a natural conclusion, the project team disperses and in the adjourning stage it is important to:

Celebrate project success

Team has a sense of closure about the project and meeting its objectives

People feel able to move on to next challenge

Project manager must formally close the project

4.1.5 Project Team

60. Whilst each stage is not always distinct it is important for the project manager to recognise the team's group development stage and act accordingly. Handling this progression well will lead to a high performance team increasing the chance of a successful project.

61. Regardless of how well you manage the schedule and the resources, there is one more critical element - managing the budget.

4.2 MANAGING COSTS 62. Cost management is not a separate function of project management. While it is true that some people specialize in the cost aspects of project management, possibly holding the titles such as ‘cost and planning engineer’ or even the more specialized ‘cost engineer’; their roles are apart of a far wider framework of project cost control, which must involve many working throughout the project organization.



63. Cost management means far more than the control of expenditure. It also includes the control of revenue, making sure that all possible and justifiable management involves ensuring not only that the amount of money spent and received are in accordance with budgets, but also that the timing of each transaction is appropriate.

4.2.1 The cost control aspect

64. Many things can happen during the life of a project to alter the expected rate and magnitude of expenditure. The direction of change is usually upwards. Some of the reasons may be unavoidable or unforeseen but, in many cases, the fault will lie somewhere within the project organization. The principal purpose of cost control is to ensure that no preventable wastage of money or unauthorized increase in costs is allowed to happen. A common misconception is to confuse cost reporting with cost control. Accurate and timely cost reporting is essential but, by itself, cost reporting is for cost control. By the time overspending is reported, the damage has been done. Cost control must be exercised before or when the costs are being committed.

65. In some cases budgets are the only cost consideration. There is no profit to be safeguarded, simply the need to keep spending within the amounts previously authorized. Where there is a profit objective, it must be remembered that profits are fragile and easily destroyed by overspending.

66. A checklist of cost management factors

Cost awareness by those responsible for design and engineering, preferably involving a ‘total cost’ approach.

Cost awareness by all other project participants throughout the life of the project.

A project work breakdown which yields work packages of manageable size.

A code of accounts system which can be aligned with the work breakdown structure.

Cost budgets divided so that each work package is given its own share of the total budget.

A cost accounting system that can collect and analyse costs as they are being incurred, and allocate them with minimum delay to their relevant cost codes.

A practicable work schedule

Effective management of well-motivated staff, to ensure that progress meets or beats the work schedule



A method for comparing expenditure with that planned for the work actually

done

Effective supervision and quality control activities, with the aim of getting things right for the first time.

Proper drafting of specifications and contracts.

Investigation of all significant suppliers and subcontractors new to the contractor’s experience.

Effective use of competitive tendering for all purchases and subcontractors to ensure the lowest costs commensurate with quality and to avoid committing costs that would exceed budgets.

Avoidance, where possible, of unbudgeted dayworks on construction contracts.

Strict control of payments to suppliers and subcontractors, to ensure that all invoices and claims for progress payments are neither overpaid nor paid too soon.

Occasional internal security audits to prevent losses through theft or fraud.

Effective and regular cost/progress reports highlighting potential schedule or budget overruns in time for corrective action to be taken.

4.2.2 The total cost approach

67. The total cost approach is a way of regarding costs holistically, solving logistical problems or otherwise planning to achieve the lowest overall cost. This approach can be used in a wide variety of situations.

68. In the context of project management, total cost considerations mean that managers in the project organization work together, each considering unselfishly how the work contribution is likely to affect the costs incurred by other sections. One example is where a suggested change in design difficulties and costs might save considerable time and money in the resulting production or construction methods. The total cost approach can therefore mean increasing the planned expenditure in one section in order to generate greater savings in the rest of the project.

69. Budgets: The initial project budgets should be derived from the cost estimates used when the tender or project proposal was prepared. If the target profits are to be achieved, the final version of these cost estimates must become the authorized levels of expenditure. The project work breakdown structure should then allow these estimates to be allocated as budgets for all sections of the project.



70. Budget Timing: It is not only the top budget limits that are important, but also the rate at which expenditure is scheduled to take place.

71. Budget breakdown: The total budget should spread over the project work breakdown structure so that there is a specified budget for each work package. The relationship between the work breakdown structure and the project cost coding system is very important. For true measurement and control, each budget element must correspond to an identifiable and measurable work package, and each budget element and its associated work package must share a control unique cost code.

72. In summary, it is important to come up with measures to establish a project budgeting and cost recording system as a preliminary step towards implementing effective cost management. The next step is then to decide how to make use of cost measurements, and how to analyse and compare these with the work schedules and budgets in order to effect cost control.

4.3 MANAGING TIME 73. Time management is a critically important skill for any successful project manager. Project Managers who succeed in meeting their project schedule have a good chance of staying within their project budget. The most common cause of blown project budgets is lack of schedule management. Fortunately there is a lot of software on the market today to help you manage your project schedule or timeline.

Tasks: Duration, resources, dependencies

Schedule: Tasks, predecessors, successors

Critical Path: Changeable, often multiple, float

74. Any project can be broken down into a number of tasks that have to be performed. To prepare the project schedule, the project manager has to figure out what the tasks are, how long they will take, what resources they require, and in what order they should be done. Each of these elements has a direct bearing on the schedule. If you omit a task, the project won't be completed. If you underestimate the length of time or the amount of resources required for the task, you may miss your schedule. The schedule can also be blown if you make a mistake in the sequencing of the tasks.

75. Build the project schedule by listing, in order, all the tasks that need to be completed. Assign a duration to each task. Allocate the required resources. Determine predecessors (what tasks must be completed before) and successors (tasks that can't start until after) each task. It's pretty simple and straightforward. For instance, think of a project called "Getting Dressed in the Morning". The task "put on shirt" may have a longer duration if it is a buttoned dress shirt than if it's a pullover. It doesn't matter



which order you complete the tasks "put on right shoe" and "put on left shoe", but it is important to complete the "put on pants" task before starting the "put on shoes" task. The difficulty in managing a project schedule is that there are seldom enough resources and enough time to complete the tasks sequentially. Therefore, tasks have to be overlapped so several happen at the same time. Project management software greatly simplifies the task of creating and managing the project schedule by handling the iterations in the schedule logic for you.

76. When all tasks have been listed, resourced, and sequenced, you will see that some tasks have a little flexibility in their required start and finish date. This is called float. Other tasks have no flexibility, zero float. A line through all the tasks with zero float is called the critical path. All tasks on this path, and there can be multiple, parallel paths, must be completed on time if the project is to be completed on time. The Project Manager's key time management task is to manage the critical path.

77. Be aware, that items can be added to or removed from the critical path as circumstances change during the execution of the project. Installation of security cameras may not be on the critical path, but if the shipment is delayed, it may become part of the critical path. Conversely, pouring the concrete foundation may be on the critical path, but if the project manager obtains an addition crew and the pour is completed early it could come off the critical path (or reduce the length of the critical path).

4.3.1 Six Time Management Tips for Project Managers

78. To be a successful project manager you must be able to manage your time well. The best project managers ensure they are productive for most of their time and avoid time-wasters at all costs. Here are some tips that can help you manage your time more effectively.

79. Create the Plan: What does this have to do with time management? If everyone knows what they are doing and have a plan with regular milestones to focus on, you as project manager will spend a lot less time dealing with issues brought about through a lack of clarity.

80. Remember the 80/20 Rule: The 80/20 rule (or the Pareto Principle) is the idea that by doing 20% of the work you can produce 80% of the benefit of doing the whole job. The value of this for a project manager is that it reminds you to focus on the 20 per cent of activities that matter. Of the activities you do during your project, only 20 per cent are important. Those 20 per cent produce 80 per cent of your results. Identify and focus on those activities.



81. Not Just Status Updates: It's best to avoid team meetings where you go round the room asking each person to give a status update. These meetings have little value and waste time. Instead, spend that time focusing on risks, issues and opportunities. Use the team to brainstorm solutions and create ideas. Team meetings should have an agreed agenda that you stick to. If you schedule an hour for the meeting, make sure it lasts for an hour and no longer. Take big issues off-line if they are likely to cause a meeting overrun. Don't make everyone sit through lengthy technical discussions that don't involve them. Setup a working group to focus on the issues and report to the team at a future meeting.

82. Stop Micro Managing: Avoid delving into the detail of the work. You've selected the right team for the job. Let them get on with what they are best at, while you concentrate on steering the project to a successful conclusion.

83. Don't do the Work: Many project managers make the mistake of getting involved in "doing the work." Avoid this at all costs. Managing projects is a full-time job and taking your eye off the ball (even for a short period) can lead to problems. It may be tempting to carryout a few tasks when a deadline is looming, but leave this to others while you get on with managing the project.

84. Create a To-do List: E-mail fixation is a modern-day problem that can distract you from doing the tasks you need or plan to. Creating a daily todo list keeps you focused on achieving your objectives. Scratching tasks from your list creates a real sense of achievement and drives further activity.

85. Summary: Time management is a basic skill for project managers. If you can't manage your own time, how can you expect to manage your team’s? Ask each day what you did to move the project forward. Plan your next day, what will you do to ensure your project continues along the straight and narrow. Plan your time, manage your resources with a light touch and communicate effectively. With a little time management, project success should come easier.

4.4 MANAGEMENT & LEADERSHIP IN PROJECTS 86. The leadership development level of a project manager is important to a successful project. Effective leadership skills must be used as needed over the project lifecycle. Project managers are responsible for project delivery and consequently are uniquely placed to make a positive or negative impact. Whilst understanding project management methodologies, tools and techniques is important, the critical test is being able to apply them in practice. This is where leadership skills and behaviours become critical -- as the project manager leads the project team to meet the objectives.



4.4.1 Project Manager Leadership Skills

87. The project manager must continuously develop effective leadership skills and employ them as needed during the project cycle. The visible expression of leadership skills for the project team and stakeholders is via leadership behaviours. These leadership behaviours are used as needed when building the project team as well as during the project lifecycle.

88. The project manager must develop their leadership skills and use leadership styles and behaviours as needed during the course of a project. Leadership is very much about getting things done through others and leaders must use a wide array of tools and techniques to fit the situation and the desired outcome. It is the same for project managers to deliver a successful project.

4.4.2 Develop Effective Leadership Skills

89. Managers must develop effective leadership skills to lead teams and achieve set objectives. Understand basic leadership styles and action-centred leadership for results. Many business leaders, consultants, practitioners and academics have written about leadership and being a good leader and that wealth of material is both a boon and bane. On the one hand information is readily available. On the other hand there are so many different definitions and interpretations that it can easily become confusing. Since there is more than one way to be a good leader developing leadership skills is about selecting ideas that are personally effective.

90. Action-Centred Leadership: Action-Centred Leadership provides a simple and straightforward approach that focuses on task, team and individual. These are usually represented as three overlapping circles of competence. The leader uses each circle as needed according to circumstance:

Achieving the Task

Managing the Team

Managing Individuals

Achieving the Task: Identify vision, purpose, direction and objectives

Develop the plan and individual tasks to achieve the objectives including deliverables, measures and schedule

Establish roles, accountabilities and success criteria or measures

Identify and allocate resources, people, systems and tools to fulfil the plan

Set quality standards and reporting methods

Control and maintain activities, monitor and manage risks and issues



Review and reassess the plan as needed

Managing the Team Agree on standards of conduct, behaviour and methods of working

Set expectations and objectives for performance, delegation and team working

Understand and work through team development

Anticipate and resolve team issues and disagreements

Assess and change as necessary the skills, experience and personality blend of the team

Identify team development and training needs

Provide feedback on team performance, coordination and collaboration

Ensure effective internal and external communication

Managing Individuals Understand individual strengths and weaknesses, hopes and fears

Assess, assist and support individuals, coach and develop them

Agree, set and track individual performance and development objectives

Give recognition and/or reward when appropriate

91. Complement Action-Centred Leadership by Using Leadership Styles: Leadership styles are effectively different ways to interact with individuals and teams to get the job done. A good leader will use these like a toolkit, using the right tool at the right time:

Autocratic -- tell people what to do, needs to be used sparingly and in the right circumstances

Bureaucratic -- follow rules, using established procedures and processes

Charismatic -- persuade and charm people, lead by motivating people's enthusiasm and drive

Democratic -- invite contributions to decision making and then make final decision

Laissez-Faire -- leave people to get on with it using a very light touch to monitor progress

People-Oriented -- focused on organising, supporting and developing people and managing relationships

Servant -- meeting the needs of the team, solving their problems or removing barriers

Task-Oriented -- focus on plan, tasks, roles and getting the job done



Transactional -- people are paid to do the work to a set standard

Transformational -- inspire people with shared vision

4.4.3 Effective Leadership Behaviours

92. Leadership skills must be complemented by positive leadership behaviours. Anyone can show effective leadership behaviours but they are essential skills for good leaders.

93. Different leadership studies highlight the importance of effective leadership behaviours for managers at every level in an organisation. In short, there are commonalities that emerge from this research time and again, which characterise positive behaviours and negative behaviours. Whilst there may be significant differences at the detailed level there seems to be a broad consensus of positive leadership behaviours:

Conducts regular, effective meetings to set objectives, allocate tasks and review performance

Effective project planning and management

Identifying the right person for the right role

Appropriate delegation of responsibility whilst retaining accountability

Consults and includes others in decision-making

Shows an interest in others and responding to their needs whether that is for more information, guidance, support, personal development, positive feedback or reward and recognition

Takes ownership and shows commitment for solving problems or difficult/sensitive issues

Leads by example, showing a contagious passion and enthusiasm, engaging and motivating others

Direct, clear, open style of communication

Considers impact before action

4.4.4 Ineffective or Negative Behaviours

94. Similarly, there is a broad consensus on ineffective or negative leadership behaviours:

Does not demonstrate accountability, commitment or ownership to objectives, tasks or problems



Does not communicate clearly or well

Does not manage, support or develop others very well

Does not provide timely positive feedback as appropriate

Does not recognise or reward contribution

Avoids conflict or difficult problems

Acts before considering impact

Allows poor performance to continue or low quality deliverables to be produced

Becomes emotional, irrational or temperamental

Fails to agree objectives and clarify expectations

Inadequate preparation or planning

Willingness to not mention or conceal important facts about a situation

Focuses on negatives and tends to reduce morale and motivation of others

Is not open to new or alternative ideas

4.4.5 Leadership Skills and Leadership Behaviours

95. A good leader will develop their leadership skills and work to demonstrate many positive leadership behaviours and to eliminate all of the negative leadership behaviours. These positive behaviours must be demonstrated at all times in all situations so that it is simply how the good leader operates. Leadership development is a continuous process of personal development.

96. The following project phases are indicated with leadership styles and behaviours as a starting point for the project manager to consider for their approach with the stakeholders.

97. Project Initiation and Scope: Whilst the business case is being developed the project manager is often asked to explore what is possible and to define a high level plan with an indication of project costs. This is very much about making a contribution by meeting others' needs and removing their barriers -- servant leadership.

98. Project Planning: Take ownership and a task orientation towards project planning. Engage key stakeholders in a democratic, participative style to develop effective plans with accurate estimates. Identify the right people for the right role. Bureaucratically establish the project control mechanisms and the standards for the project team. Delegate as needed key components of the project such as:

Business change management

Test cycle



Training

Infrastructure deployment

99. Requirements and Analysis: Manage effective meetings and focus on people-orientation to ensure that awareness, engagement and positive support is built with a wider set of stakeholders. Consult with others as needed for decision-making using autocratic or democratic approaches as needed. Understand the impact of changes and lead by example with a clear view of the transformation required and engage people with that vision.

100. Build, Test, Delivery and Closure: Focus on task-orientation and leaving the project team to get things done. Use a laissez-faire approach but stay in touch and support people as needed. Ensure that multiple tasks, priorities and risks are effectively managed and clearly communicated. Take a bureaucratic approach to preparation for testing, deployment and closure, doing each stage properly -- producing the appropriate deliverables at the desired level of quality.

4.5 PROBLEM SOLVING & DECISION MAKING IN PROJECT MANAGEMENT

101. Decision-making is an integral part of project management. Every key person in any organization faces situations on a daily basis where a decision will help resolve problems. Every problem has multiple solutions but the trick is to decide which is the right or the best solution to choose.

102. Project managers play a pivotal role in the success of a project implementation. Their decisions dictate the flow of the project, as well as the role each team member will play at different intervals. Various project management practices can help these leaders determine potential obstacles before a project launch. Making decisions in advance reduces the amount of time spent on unexpected problems, keeping a project on deadline and within budget.

103. There are few basic steps that can be followed to simplify a situation. It is necessary to first identify the problem and then work on it. If a situation has several related problems it is necessary to prioritize it so that the most hankering issue can be immediately addressed and solved. It is essential to be aware of all the options that are available before making any decision. Finally, effective implementation of the decision taken is what makes the decision-maker a true leader.

4.5.1 Identify risks

104. One of the most important things a project manager can do is to identify risks associated with a project before work begins. Mapping out several outcomes that could



potentially impede progress ensures that decisions can be made quickly should the project veer off course. Risk management planning includes identifying potential risks, determining their possible impact, devising a response to the risk and continually reviewing new risks until the project is completed.

4.5.2 Follow a process

105. Project managers should never make decisions based on gut instinct, which tends to be biased based on past experience. Rather, they should follow a decision analysis process that ensures decisions remain consistent among similar projects and all business situations are deeply analyzed and assessed before work begins. Decisions should also be continually evaluated and refined through the course of the project as needed.

4.5.3 Communicate

106. Project management often involves presiding over work teams that don't typically collaborate and may not even reside in the same country. At the start of each project, the project manager must determine how frequently, and via what medium, team members will be expected to communicate with one another. Effective and efficient communication will ensure that all team members are aware of decisions as soon as they are made, leaving no room for uncertainty in terms of individual responsibilities and goals.

4.5.4 Allocate Resources

107. Cost versus benefit analysis is a popular project management method used to determine the worthiness of an investment in the project. It involves calculating the money required to make a particular change, like increasing staff or adding another component to a product. Those costs are then compared to the potential benefits of making that change, which can include improving product performance or possible longevity. Once the return on investment is determined, the project manager can decide whether or not to make the investment.

4.5.5 Expert insight

108. The three most important things a project manager needs to know are: when a decision is required, how quickly the decision needs to be made, and that he or she must accept responsibility for all decisions, regardless of the outcome. Project managers should seek the opinion of key stakeholders often and make sure to consider as many options as possible before making a final project decision.



4.6 PROJECT MANAGEMENT SETUP 109. This section briefly outlines the project management setup established at the national and city level to implement the demonstration projects under SUTP and discusses the tasks and staffing requirements of these establishments.

4.6.1 Steering Committee, SUTP

110. A Project Steering Committee under the chairmanship of the Secretary, MoUD, GoI has been constituted and consists of members from MoEF, DEA, MoUD. Representatives from the World Bank and UNDP may be invited to meetings as and when required. The Steering Committee would guide and oversee the work to be taken up under the project.

4.6.2 National Project Director (NPD)

111. The Ministry of Urban Development (MoUD) is the nodal ministry for implementing the SUTP on behalf of the Government of India. A National Project Director (NPD) designated by the MoUD would be the executive head of the SUTP.

4.6.3 National Project Management Unit

112. The NPD would be assisted by a National Project Management Unit, which will provide technical support for implementing and monitoring the project. The PMU will provide technical assistance to NPD in planning, preparation, procurement, execution,



monitoring, evaluation, fund management and reporting required as part of the overall project management responsibility.

4.6.4 State Level Nodal Agency (SLNA)

113. With regards to JNNURM supported project components, the State Level Nodal Agency (SLNA), will be responsible for reviewing the project proposal and funding request for all the cities selected under this project (except Jalandhar, as it is not a JNNURM city) and forward it to the MoUD, which will then put it up to the Central Sanctioning and Monitoring Committee (CSMC). Once endorsed by CSMC, the request for release of fund will then be sent to MoF which would directly transfer the funds to SLNA, which then in turn passes it on to the IA.

4.6.5 Implementing Agency (IA)

114. Projects approved by the Steering Committee shall be implemented by the concerned Implementing Agency in each city. The IAs shall be the approving authority for all executive decisions concerning the project at the city level.

4.6.6 Project Implementation Unit (PIU)

115. Each IA shall constitute a Project Implementation Unit (PIU) to manage and monitor the day to day work programs and schedules in the various components and subcomponents of project.

4.6.7 Staffing of PMU and PIU

116. For the effective functioning of the PMU and PIU, appropriate technical staff needs to be appointed by the MoUD and the IAs. With regard to the various aspects which need to be considered during project implementation, the required staffing pattern of the PMU and PIU shall be as mentioned in the following sections.

Staffing of PMU

• Project Manager, PMU • Transportation • Finance • Procurement • Environment • Social • Information Technology • Training • Institutional Development



117. Some of these professionals could either be appointed in the PMU directly or could be outsourced as a Project Management Consultant Service.

Staffing of PIU

118. The PIU shall consist of a team of professionals with specialization in the following areas:

• Project Manager, PIU • Finance • Procurement • Environment (as required) • Social (as required) • Transport

119. The Project Manager PIU shall be an appointee of the IA and shall represent the IA. Other professionals could either be appointed by the IA directly or outsourced through a Project Management Consultant service.

4.6.8 Training of PIU Staff

120. To facilitate the training of PIU staff that may need training to familiarize themselves with the procedures and methods required as part of this project, the PMU shall arrange need based training programs as and when required for each area of specialization.



SECTION : 5 ENVIRONMENT & SOCIAL MANAGEMENT FRAMEWORK

5.1 INTRODUCTION 121. This section addresses in brief the Environmental and Social Management Framework (ESMF) that need to be taken into account while implementing any urban transportation projects. Key objectives of ESMF encompasses:

• Provide a framework for the integration of social and environmental aspects at all stages of project planning, design, execution and operation.

• Ensuring positive social and environmental impacts and avoiding/minimizing any potential adverse impacts.

122. The environmental and social safeguards policies need to be applied to all projects for achieving environmental sustainability. Adoption of this framework shall ensure that the projects meet the national and state level environmental and social safeguards and are also consistent with the applicable safeguards policies and provisions of international development agencies such as the World Bank, Asian Development Bank etc..

5.2 APPLICATION OF THE ESMF 123. It is essential that the ESMF need to be applied to all stages of a Urban Transport project as illustrated in Figure 5.1 below. Projects triggering significant environmental / social impacts, i.e. projects with potential to trigger impacts on environmental sensitive areas, or large scale resettlement activities need careful attention so that the mitigating measures are achievable.



Figure 5.1: Environmental and Social Management Framework (ESMF)



5.3 APPLICABLE POLICIES 124. National Resettlement and Rehabilitation Policy, 2007 and the Land Acquisition Act 1894 (as amended in 1984) are the applicable legislations at the centre and these would be applicable for all components of the project. While at the state level, respective state governments need to formulate their own resettlement policy for various multilaterally funded projects being undertaken in the states.

5.4 POTENTIAL IMPACT AND MANAGEMENT MEASURES 125. The environmental impacts need to be identified at the project preparation stage and will need to be further elaborated and potential for occurrence has to be ascertained during further stages of project design and implementation. The management measures for various identified impacts need to be worked out and to be elaborated at the DPR stage of such projects.

5.5 INVOLUNTARY RESETTLEMENT 126. Urban Transport infrastructure and facilities have to be planned so as to have least adverse impact on the community. If a particular location is suitable for all factors except for limited resettlement, necessary safeguards as per the resettlement framework shall to be adopted. Resettlement impacts due to these interventions would be managed through appropriate compensation and rehabilitation measures as per the entitlements of the PAP. All R&R activities should be completed before the construction activity starts, on any project.

127. Cultural Property Resources: Cultural properties within the right-of-way whose structure is likely to get affected should be relocated to suitable locations, as desired by the community before construction starts in the particular section of the project area. Local community need to be contacted and discuss relocation aspects, siting as well as their maintenance. All necessary and adequate care shall be taken to minimize impact on cultural properties (which includes cultural sites and remains, places of worship including temples, mosques, churches and shrines, etc., graveyards, monuments and any other important structures as identified during project preparation and all properties/sites/remains notified under the Ancient Sites and Remains Act). No work shall spill over to these properties, premises and precincts.

128. Civil works that involve earth excavation are likely to involve “Chance Find” of archaeological properties and remains. It should be ensured that required care is taken from the crew to not damage these relics or remains that are found eg. an idol, ancient implements, fossils etc. The local authority needs to be notified and work will progress only after the directions issued by such authority have been implemented.



129. Indigenous Peoples (IP): “Indigenous Peoples” are members of distinct indigenous cultural group, collective attachment to geographically distinct habitats or ancestral territories, customary cultural, economic, social or political institutions that are separate from those of dominant society and culture and have an indigenous language different from the official language of the country or the region. Under Article 342 of the Indian Constitution, the following characteristics define indigenous peoples [Scheduled Tribes (STs)], (i) tribes’ primitive traits; (ii) distinctive culture; (iii) shyness with the public at large; (iv) geographical isolation; and (v) social and economic backwardness before notifying them as an ST. IPs have a social and cultural identity distinct from the ‘mainstream’ society that makes them vulnerable to being overlooked or marginalized in the development processes.

130. All sub-projects are being implemented in the urban areas which consist of SC / ST population. However, these population groups have got absorbed into the mainstream population and do not have distinct practices and customs that qualify them to be classified as indigenous population. Hence, no specific management measures as IPDP is required. However impacts on these groups would be addressed through the entitlement framework specified for the project inline with the ESMF requirements.

5.6 PHASING OF PROJECTS 131. Projects that have minimal or no environmental and social impacts may thus be considered for implementation on priority while projects that require more rigorous environmental or social assessments should be taken up for implementation only after fully addressing the E&S issues.

132. At the stage of detailed project preparation, any significant environmental and social issues that may arise should be addressed and mitigated through an EMP / RAP. The environmental and social management measures should be included as part of the specifications and included as a work item in the bidding documents to ensure implementation.

5.7 PARTICIPATION / CONSULTATION DURING PROJECT PREPARATION AND IMPLEMENTATION

133. The ESMF recommends conduct of project preparation and implementation activities to be community inclusive. The Community participation shall be undertaken at the following stages:

• Selection Stage - to sensitize the community about the project and their role; • Preparation Stage - for disseminating information pertaining to the project, work

schedule and th procedures involved; finalisation of project components with identification of impacts, entitled persons mitigation measures; and Grievance Redressal; and



• Implementation Stage - for addressing temporary impacts during construction

and monitoring for transparency in the project implementation

5.8 MONITORING AND REPORTING 134. Implementing agency in each of the states where there is a single project and the corresponding agency for each project in case of multiple projects will be responsible for monitoring and reporting at project level to the state level implementing agency or the Project Implementation Unit. The PIU would in turn report to the PMU at the centre.

135. An officer in PIU shall be designated as the Environment & Social Safeguards officer to ensure compliance of the project activities with the World Bank safeguards as well as oversee implementation of environment and social provisions as per the ESMF, EMP and RAP where applicable. The objectives of Monitoring and Evaluation include:

• Project management and timely completion; • Successful completion of Environmental management, R&R activities identified

in the EMP and R&R plan as per the implementation schedule; • Compliance with the Environmental policy, R&R policy and entitlement

framework.

136. The safeguards officer shall play a key role in reporting the progress of implementation as well as compliance to the PIU, PMU and the World Bank. Reporting system recommended in the ESMF needs to be adopted with due modifications specific to the project. The aspects to be monitored are presented below:

• For R&R activities: - Notification of Land Acquisition, Land Value Assessment, Census Survey Notification, Socio-economic profile, Relocation plan for common property resources & cultural property and Grievance Redressal

• For EA activities: - Air Quality at Sensitive Receptors, Noise Levels at Sensitive Receptors, Surface Water Quality Rivers in the vicinity of project areas, Benefits and Survival Rate of Plantation

5.9 GRIEVANCE REDRESSEL MECHANISM 137. Grievance redressal mechanism is an important aspect in projects involving land acquisition. The redressal of grievance is important to avoid unnecessary legal delays and cost overrun of the project. Also, this is a forum for people to express their dissatisfaction over compensation and R&R provisions.

138. A Rehabilitation and Resettlement Committee shall be constituted within the PIU to monitor and review the progress of implementation of the scheme or plan of rehabilitation and resettlement of the affected families and to carry out post implementation social audits wherever resettlement activities are to be undertaken. The committee shall be formed including the following members:

• Municipal Commissioner as the Chairman



• Social officer of the PIU; • Environment and social officer in PMU; • A representative of a voluntary organization; • Representative/s of the affected community(or communities)

139. The functions of the Rehabilitation and Resettlement Committee are:

• to publicize within the District the list of affected persons and the functioning of the grievance redressal procedure established hereby;

• to evaluate grievances from affected persons concerning the application to them of the Entitlement Policy

• to recommend to the Social Officer, PIU as the case may be, solutions to such grievances from affected persons;

• to communicate the decisions to the Claimants; • to hear appeals from persons, households or groups who, not being affected

persons, believe that they are qualified to be recognized as affected persons, to recommend to the PIU whether such persons should be recognized as affected persons, and to communicate the decision of the PIU in that regard to the Claimants;

• To ensure that all notices, forms, and other documentation required by Claimants are made available Local language.

5.10 CAPACITY BUILDING AND TRAINING 140. The Environmental and Social Officers involved in the project need to be provided the basic training required for environmental awareness followed by specific aspects of Urban Sector Projects along with Environmental implications in the project. Specific modules customized for the available skill set would need to be devised after assessing the capabilities of the members of the Training Programme and the requirements of the project. The entire training would cover basic principles of environmental assessment and management; mitigation plans and programmes, implementation techniques, monitoring methods and tools. Specific issues of Urban Environmental Management would need to be undertaken in separate sessions. Typical modules that would be present for the training sessions would include:

• Sensitization of the project implementing agencies on environment and social aspects

• Introduction to Environment, Social and Resettlement Aspects

• Environment, social and resettlement Considerations in Urban Development Projects

• Review of EIA/IEE/EMP & SIA/RAP/LAP and Integration into Design

• Improved co-ordination within Nodal Departments

• Role during construction



• Monitoring & Reporting System

• Target groups for training would be the environment and social officers of PMU and PIU for all the sessions and engineers / planners / managers for orientation sessions. The training sessions should be followed with site visits to have a ‘hands on’ approach to the program. Suggested modules for the training sessions the mode of training and duration is presented in the ESMF.



SECTION : 6 PUBLIC PRIVATE PARTNERSHIPS IN URBAN TRANSPORT DELIVERY

141. This Section describes the basic understanding of public-private partnerships (PPP) in infrastructure with a focus on:

The characteristics that make PPPs different from conventional public sector projects;

Models in public-private partnerships; and The basic structure of a PPP model.

142. The public officials, involved in PPP project planning and development, implementation and contract management, need to have clear understanding of these basics.

6.1 THE CHARACTERISTICS THAT MAKE PPPS DIFFERENT

6.1.1 What is public-private partnership in Urban Transport projects?

143. Governments in most developing countries face the challenge to meet the growing demand for new and better urban transport and infrastructure services. As available funding from the traditional sources and capacity in the public sector to implement many projects at one time remain limited, governments have found that partnership with the private sector is an attractive alternative to increase and improve the supply of infrastructure services.

144. The partners in a PPP, usually through a legally binding contract or some other mechanism, agree to share responsibilities related to implementation and/or operation and management of a urban transport project. This collaboration or partnership is built on the expertise of each partner that meets clearly defined public needs through the appropriate allocation of:

Resources Risks Responsibilities, and Rewards

145. It is important to emphasize here that a PPP is not a solution option to a urban transport & infrastructure service problem but it is a viable project implementation mechanism for a preferred solution option.



6.1.2 What advantages PPPs may provide?

146. Governments worldwide have increasingly turned to the private sector to provide infrastructure services in transport, energy and power, communication and water sectors that were once delivered by the public sector. There are several reasons for the growing collaboration with the private sector in developing and providing infrastructure services, which include:

Increased efficiency in project delivery, and operation and management; Availability of additional resources to meet the growing needs of investment in

the sector; and Access to advanced technology (both hardware and software).

147. Properly executed planning and development of a project also allows better screening of options, and helps in deciding appropriate project structure and choice of technology considering cost over the whole life cycle of the project.

6.1.3 Should lack of government budget be the main factor in considering a PPP?

148. Often, lack of government funding has been the main reason for considering a PPP option for a project. However, lack of government funding may not be the main reason for deciding a PPP option for the implementation of a urban transport project. There are additional costs for PPP projects – usually the cost of borrowing money is higher for the private sector than for the public sector and there are administrative costs for the management of PPP contractual regimes. Transaction costs of PPP projects can also be substantial. PPP projects may also impose many explicit and implicit liabilities on the government.

149. An urban transport project may not be considered for being implemented as a PPP project unless efficiency gains from improved project delivery, operation and management, and access to advanced technology can offset the above-mentioned additional costs. In fact, many countries have established value for money as the main criterion in judging the merits of a PPP option for a project.

6.1.4 Why PPPs are attractive to governments?

150. PPPs have become attractive to governments as an off-budget mechanism for infrastructure development as:

They can enhance the supply of much-needed urban transport infrastructure services.

They may not require any immediate cash spending. They provide relief from the burden of the costs of design and construction.



They allow transfer of many project risks to the private sector. They promise better project design, choice of technology, construction,

operation and service delivery.

6.1.5 How a PPP project is different from a conventional project?

151. There are significant differences between a conventional construction procurement project and a PPP project that need to be clearly understood. The main differences include:

PPP projects are different from conventional construction projects in terms of project development, implementation, and management. The administrative and approval processes in the case of PPP projects are also different.

A PPP project is viable essentially when a robust business model can be developed.

The focus of a PPP project should not be on delivering a particular class/type of assets but on delivering specified services at defined quantity and levels.

The risk allocation between the partners is at the heart of any PPP contract design and is more complex than that of a conventional construction project. Both partners should clearly understand the various risks involved and agree to an allocation of risks between them.

A PPP contract generally has a much longer tenure than a construction contract. Managing the relationship between the private company and the implementing agency over the contract tenure is vital for the success of a PPP project.

6.1.6 Are there any limitations of PPPs?

152. There are many important economic, social, political, legal, and administrative aspects, which need to be carefully assessed before approvals of PPPs are considered by the government. PPPs have various limitations which should also be taken into account while they are being considered. The major limitations include:

Not all projects are feasible (for various reasons: political, legal, commercial viability, etc.).

The private sector may not take interest in a project due to perceived high risks or may lack technical, financial or managerial capacity to implement the project.

A PPP project may be more costly unless additional costs (due to higher transaction and financing costs) can be off-set through efficiency gains.

Change in operation and management control of an infrastructure asset through a PPP may not be sufficient to improve its economic performance unless other necessary conditions are met. These conditions may include appropriate sector and market reform, and change in operational and management practices of infrastructure operation.

Often, the success of PPPs depends on regulatory efficiency.



153. There can be underlying fiscal costs and contingent liabilities of PPPs on the government that may arise in the medium- and -long-term. These underlying fiscal costs and contingent liabilities on the government should be given due consideration when a PPP project is considered.

6.2 MODELS OF PPP 154. A wide spectrum of PPP models has emerged. These models vary mainly by:

Ownership of capital assets; Responsibility for investment; Assumption of risks; and Duration of contract.

155. The PPP models can be classified into five broad categories in order of generally (but not always) increased involvement and assumption of risks by the private sector. The five broad categories are:

Supply and management contracts Turnkey contracts Affermage/Lease Concessions Private Finance Initiative (PFI) and Private ownership.

156. The basic features of these five categories of PPP models are shown in Figure-6.1.

IMPORTANT CHARACTERISTICS OF PPP PROJECTS Promise of better project structure and design. Allows better screening of projects. A bad project is a bad project no

matter whether it is implemented by the public or the private sector. Better choice of technology based on life-cycle costing. Better service delivery, especially if performance based payment is

considered. Better chances of completion on time and within the budget.

- Risk of default. - Project risks can easily turn into government risks. - Various liabilities on government (direct and indirect). - A long-term contract management system needs to be in place. - An administrative mechanism and special skills in the

government are required to develop and implement PPP projects.



157. Each of these five categories has many variants. A categorization of the PPP/PSP models together with their main characteristics is shown in Table 6.1. While the spectrum of models shown in the table are possible as individual options, combinations are also possible such as, a lease or (partial) privatization contract for existing facilities which incorporates provisions for expansion through Build-Operate Transfer. In fact, many PPP projects of recent times are of combination type.

Table 6.1 : Classification of PPP Models

Broad Category Main Variants Ownership of

Capital Assets Responsibility of Investment

Assumption of Risks

Duration of Contracts

(Years)

Supply & Management Contract

Outsourcing Public Public Public 1-3 Maintenance Management Public Public/ Private Private/Public 3-5

Operational Management Public Public Public 3-5

Turnkey Public Public Private/Public 1-3

Affermage / Lease

Affermage Public Public Private/Public 5-20

Lease* Public Public Private/Public 5-20

Concessions Franchise Public / Private Private/Public Private/Public 3-10

BOT** Public / Private Private/Public Private/Public 15-33

Private ownership of assets and PFI type

BOO/DBFO Private Private Private Indefinite

PFI*** Private / Public Private Private/Public 10-20

Divestiture Private Private Private Indefinite

* Build-Lease-Transfer (BLT) is a variant. ** Build-Operate-Transfer (BOT) has many other variants such as Build-Transfer-Operate (BTO),

Build-OwnOperate-Transfer (BOOT) and Build-Rehabilitate-Operate-Transfer (BROT). *** The Private Finance Initiative (PFI) model has many other names. In some cases, asset

ownership may be transferred to, or retained by the public sector.



Box: PPP Models supported by Government of India

User-Fee Based BOT models - Medium to large scale PPPs have been awarded mainly in the energy and transport sub-sectors (roads, ports and airports). Although there are variations in approaches, over the years the PPP model has been veering towards competitively bid concessions where costs are recovered mainly through user charges (in some cases partly through VGF from the government).

Annuity Based BOT models – In sectors/projects not amenable for sizeable cost recovery through user charges, owing to socio-political-affordability considerations, such as in rural, urban, health and education sectors, the government harnesses private sector efficiencies through contracts based on availability/performance payments. Implementing “annuity model” will require necessary framework conditions, such as payment guarantee mechanism by means of making available multi-year budgetary support, a dedicated fund, letter of credit etc. Government may consider setting-up a separate window of assistance for encouraging annuity-based PPP projects. A variant of this approach could be to make a larger upfront payment (say 40% of project cost) during the construction period.

Performance Based Management/ Maintenance contracts – In an environment of constrained economic resources, PPP that improves efficiency will be all the more relevant. PPP models such as performance based management/maintenance contracts are encouraged. Sectors amenable for such models include water supply, sanitation, solid waste management, road maintenance etc.

Modified Design-Build (Turnkey) Contracts: In traditional Design-Build (DB) contract, private contractor is engaged for a fixed-fee payment on completion. The primary benefits of DB contracts include time and cost savings, efficient risk-sharing and improved quality. Government may consider a “Turnkey DB” approach with the payments linked to achievement of tangible intermediate construction milestones (instead of lump-sum payment on completion) and short period maintenance / repair responsibilities. Penalties/incentives for delays/early completion and performance guarantee (warranty) from private partner may also be incorporated. Subsequently, as the market sentiment turns around these projects could be offered to private sector through operation-maintenance- tolling concessions.



The main features of each of the broad categories of the PPP models are discussed next.

6.2.1 Supply and management contracts

158. A management contract is a contractual arrangement for the management of a part or whole of a public enterprise (for example, a specialized Bus Rapid Transit Services in a City) by the private sector. Management contracts allow private sector skills to be brought into service design and delivery, operational control, labour management and equipment procurement. However, the public sector retains the ownership of facility and equipment. The private sector is assigned specified responsibilities concerning a service and is generally not asked to assume commercial risk.

159. The private contractor is paid a fee to manage and operate services. Normally, the payment of such fees is performance-based. Usually, the contract period is short, typically three to five years. But the period may be longer for large and complex operational facilities such as a port or an airport.

160. The main pros and cons of this model include the following:

Pros: Can be implemented in a short time. Least complex of all PPP models. In some countries, politically and socially more acceptable for certain projects

(such as water projects and strategic projects like ports and airports). Cons: Efficiency gains may be limited and little incentive for the private sector to

invest. Almost all risks are borne by the public sector. Applicable mainly to existing infrastructure assets.

6.2.2 Turnkey

161. Turnkey is a traditional public sector procurement model for urban transport and infrastructure facilities. Generally, a private contractor is selected through a bidding process. The private contractor designs and builds a facility for a fixed fee, rate or total cost, which is one of the key criteria in selecting the winning bid. The contractor assumes risks involved in the design and construction phases. The scale of investment by the private sector is generally low and for a short-term. Typically, in this type of arrangement, there is no strong incentive for early completion of the project. This type of private sector participation is also known as Design-Build.




Pros: Well understood traditional model. Contract agreement is not complex. Generally, contract enforcement is not a major issue.

Cons: The private sector has no strong incentive for early completion. All risks except those in the construction and installation phases are borne by

the public sector. Low private investment for a limited period. Only limited innovation may be possible.

6.2.3 Affermage/Lease

163. In this category of arrangement, the operator (the leaseholder) is responsible for operating and maintaining the infrastructure facility (that already exists) and services, but generally the operator is not required to make any large investment. However, often this model is applied in combination with other models such as build-rehabilitate-operate-transfer. In such a case, the contract period is generally much longer and the private sector is required to make significant investment.

164. The arrangements in an affermage and a lease are very similar. The difference between them is technical. Under a lease, the operator retains revenue collected from customers/users of the facility and makes a specified lease fee payment to the contracting authority. Under an affermage, the operator and the contracting authority share revenue from customers/users.

165. In the affermage/lease types of arrangements, the operator takes lease of both infrastructure and equipment from the government for an agreed period of time. Generally, the government undertakes the responsibility for investment and thus bears investment risks. The operational risks are transferred to the operator.

166. However, as part of the lease, some assets also may be transferred on a permanent basis for a period which extends over the economic life of assets. Fixed facilities and land are leased out for a longer period than for mobile assets. Land to be developed by the leaseholder is usually transferred for a period of 15-33 years.


Pros: Can be implemented in a short time. Significant private investment possible under longer term agreements.



In some countries, legally and politically more acceptable for strategic projects

like ports and airports. Cons: Has little incentive for the private sector to invest, particularly if the lease period

is short. Almost all risks are borne by the public sector. Generally used for existing infrastructure assets. Considerable regulatory oversight may be required.

6.2.4 Concessions

168. In this form of PPP, the government defines and grants specific rights to an entity (usually a private company) to build and operate a facility for a fixed period of time. The government may retain the ultimate ownership of the facility and/or right to supply the services. In concessions, payments can take place both ways: concessionaire pays to government for the concession rights and the government may pay the concessionaire, which it provides under the agreement to meet certain specific conditions. Usually, such payments by the government may be necessary to make projects commercially viable and/or reduce the level of commercial risk taken by the private sector, particularly in a developing or untested PPP market. Typical concession periods range between 5 to 33 years.


Pros: Private sector bears a significant share of the risks. High level of private investment. Potential for efficiency gains in all phases of project development and

implementation and technological innovation is high. Cons: Highly complex to implement and administer. Difficult to implement in an untested PPP market. May have underlying fiscal costs to the government. Negotiation between parties and finally making a project deal may require long

time. May require close regulatory oversight. Contingent liabilities on government in the medium and long term.

170. In a Build-Operate-Transfer or BOT type of concession (and its other variants namely, Build-Transfer-Operate (BTO), Build-Rehabilitate-Operate-Transfer (BROT), Build-Lease-Transfer (BLT) type of arrangement), the concessionaire makes investments and operates the facility for a fixed period of time after which the



ownership reverts back to the public sector. In a BOT modal, operational and investment risks can be substantially transferred to the concessionaire.

171. In a BOT model, the government has, however, explicit and implicit contingent liabilities that may arise due to loan guarantees and sub-ordinate loans provided, and default of a sub-sovereign government and public or private entity on nonguaranteed loans. By retaining ultimate ownership, the government controls the policy and can allocate risks to parties that are best suited to assume or remove them. BOT projects may also require direct government support to make them commercially viable.

172. The concessionaire’s revenue in a BOT project comes from managing and marketing of the user facilities (for example, toll revenue in a toll road project) and renting of commercial space where possible. Concessions for BOT projects can be structured on either maximum revenue share for a fixed concession period or minimum concession period for a fixed revenue share, a combination of both, or only minimum concession period.

6.2.5 Private Finance Initiative (PFI)

173. In the private finance initiative model, the private sector remains responsible for the design, construction and operation of an infrastructure facility. In some cases, the public sector may relinquish the right of ownership of assets to the private sector. In this model, the public sector purchases infrastructure services from the private sector through a long-term agreement. PFI projects, therefore, bear direct financial obligations to the government in any event. In addition, explicit and implicit contingent liabilities may also arise due to loan guarantees provided to the lenders and default of a public or private entity on non-guaranteed loans.

174. A PFI project can be structured on minimum payment by the government over a fixed contract tenure, or minimum contract tenure for a fixed annual payment, or a combination of both payment and tenure.

175. In the PFI model, asset ownership at the end of the contract period is generally transferred to the public sector. Setting up of a Special Purpose Vehicle (SPV) may not be always necessary (see discussion on SPV in the following section). A PFI contract may be awarded to an existing company. For the purpose of financing, the lenders may, however, require the establishment of an SPV. The PFI model also has many variants.

176. In a PFI project, as the same entity builds and operates the services, and is paid for the successful supply of services at a pre-defined standard, the SPV /private company has no incentive to reduce the quality or quantity of services. This form of



contractual agreement reduces the risks of cost overruns during the design and construction phases or of choosing an inefficient technology, since the operator’s future earnings depend on controlling the costs. The public sector’s main advantages lie in the relief from bearing the costs of design and construction, the transfer of certain risks to the private sector and the promise of better project design, construction and operation.

177. The main pros and cons of this model are summarized below:

Pros: Private sector may bear a significant share of the risks. High level of private investment. Potential for efficiency gains and innovation is high. Attractive to private investors in an untested or developing PPP market. Most suitable for social sector infrastructure projects (schools, dormitories,

hospitals, community facilities, etc.). Cons: Complex to implement and manage the contractual regimes. Government has direct financial liability. Negotiation between parties may require long time. Regulatory efficiency is very important. Contingent liabilities on the government in the medium and long term.

6.2.6 Which model to select?

178. The answer to this question needs careful assessment of many things. Each model has its own pros and cons and can be suitable for achieving the major objectives of private-private partnership to a varying degree. Special characteristics of some sectors and their technological development, legal and regulatory regimes, and public and political perception about the services in a sector can also be important factors in deciding the suitability of a particular model of PPP.

179. There is no single PPP model that can satisfy all conditions concerning a project’s locational setting and its technical and financial features. The most suitable model should be selected taking into account the country’s political, legal and socio-cultural circumstances, maturity of the country’s PPP market and the financial and technical features of the projects and sectors concerned.

180. As an example, for a new project, a BOT type of model may be quite suitable in a matured PPP market while a PFI or BOO type of models may be more appropriate in a developing/untested market.



6.3 UNDERSTANDING THE BASIC STRUCTURE OF A PPP

ARRANGEMENT

181. A typical PPP structure can be quite complex involving contractual arrangements between a number of parties, including the government, project sponsor, project operator, financiers, suppliers, contractors, engineers, third parties (such as an escrow agent), and customers. The creation of a separate commercial venture called a Special Purpose/Project Vehicle (SPV) is a key feature of most PPPs. The SPV is a legal entity that undertakes a project and negotiates contract agreements with other parties including the government. An SPV is also the preferred mode of PPP project implementation in limited or non-recourse situations, where the lenders rely on the project’s cash flow and security over its assets as the only means to repay debts.

182. Figure 6.2 shows a simplified PPP structure. The actual structure of a PPP, however, depends on the type of partnership model and can be quite complex involving contractual arrangements between a number of parties including the government, project sponsor, project operator, financiers, suppliers, contractors, engineers, third parties (for example, an escrow agent), and customers.

183. An SPV is usually set up by the private concessionaire/sponsor(s), who in exchange for shares representing ownership in the SPV contribute the long-term equity capital, and agree to lead the project. The SPV may not always be directly owned by the sponsors. They may use a holding company for this purpose. An important characteristic of an SPV as a company is that it cannot undertake any business that is not part of the project. An SPV as a separate legal entity protects the interests of both the lenders and the investors. The formation of an SPV has also many other advantages. A



project may be too large and complicated to be undertaken by one single investor considering its investment size, An important characteristic of an SPV as a company is that it cannot undertake any business that is not part of the project. An SPV as a separate legal entity protects the interests of both the lenders and the investors. The formation of an SPV has also many other advantages. A project may be too large and complicated to be undertaken by one single investor considering its investment size, management and operational skills required and risks involved. In such a case, the SPV mechanism allows joining hands with other investors who could invest, bring in technical and management capacity and share risks, as necessary.

184. The government may also contribute to the long-term equity capital of the SPV in exchange of shares. In such a case, the SPV is established as a joint venture company between the public and private sectors and the government acquires equal rights and equivalent interests to the assets within the SPV as other private sector shareholders.

185. Sometimes, governments want to ensure a continued interest (with or without controlling authority) in the management and operations of infrastructure assets such as a port or an airport particularly those which have strategic importance, or in assets that require significant financial contribution from the government. In such a case, a joint venture may be established. A joint venture is an operating company owned by a government entity and a private company (or multiple companies including foreign companies if permitted by law), or a consortium of private companies.

186. Often, an SPV is formed as a joint venture between an experienced construction company and a service operations company capable of operating and maintaining the project.

187. Other than its strategic, financial and economic interest, the government may also like to directly participate in a PPP project. The main reasons for such direct involvement may include:

To hold interest in strategic assets; To address political sensitivity and fulfil social obligations; To ensure commercial viability of the project; To provide greater confidence to lenders; and To have better insight to protect public interest.

188. Direct government involvement in a PPP project is usually guided by the legal and regulatory regime of the country and the government policy on PPPs.



6.4 PRINCIPLES GOVERNING IMPLEMENTATION OF PUBLIC

PRIVATE PARTNERSHIPS IN INDIA

189. As discussed earlier, for broad based and sustainable growth, the Government recognizes the need to engage with the private sector in diverse sectors through PPP frameworks. The overarching objectives of such partnerships are:

Harness private sector efficiencies in asset creation, maintenance and service delivery;

Provide focus on life cycle approach for development of a project, involving asset creation and maintenance over its life cycle;

Create opportunities to bring in innovation and technological improvements; and,

Enable affordable and improved services to the users in a responsible and sustainable manner.

190. The PPP in Infrastructure Sector including Urban Transport in India is being developed keeping in mind the following broad principles:

Provide a fair and transparent framework to facilitate and encourage PPP mode of implementation for provision of public assets and/or related services.

Ensure that the projects are planned, prioritized and managed to benefit the users and maximize stakeholders’ economic returns.

Adopt an efficient, equitable, consistent, transparent and competitive process for selection of private partners, and ensure efficient governance over the project life cycle.

Protect the interests of end users, project affected persons, private and public sector entities and other stakeholders.

Encourage efficient delivery of public services by engaging proficient and innovative practices with the utilization of best available skills, knowledge & resources in the private sector.

Achieve increased efficiency in the deployment of investments by setting out enabling frameworks for greater private sector participation in building future public assets and ensuring their long-term maintenance.

Provide requisite provision in budgets for contingent liabilities for the sponsoring government, in various forms, such as, liabilities towards lenders in case of contract termination or minimum revenue guarantees.

191. Recognising the imperatives to accelerate the delivery of efficient Public Private Partnerships to achieve the overall development goals, the Government would develop programmes, guidelines and practices based on the broad principles enumerated above and, if deemed necessary, introduce changes to legislation and business rules to optimally deliver public services. A few critical interventions envisaged in the “National Public Private Partnership Policy – 2011 (Draft)” formulated by the Department of Economic Affairs, Ministry of Finance, Government of India are:



192. Preferred PPP implementation models: The Government will formalise PPPs as the preferred implementation models, where adequate examples and a strong track record exist. Thus, wherever applicable, the Government will state the specific PPP model which will be used as an implementation priority. This will provide adequate clarity to Government entities and encourage them to adopt the identified PPP model as a priority.

193. Enhancing transparency in PPP projects: Ensuring transparency in Government processes is the topmost priority of the Government; PPP projects processes need to be transparent to retain the trust of the stakeholders. The Government has notified strong procedures that are to be adopted in the procurement of a PPP project. These ensure that a level playing platform is provided to all the bidders interested in the project.

194. PPP rules: While structuring PPP projects, Government officers are required to exercise their judgment and take decisions that balance the interests of diverse stakeholders, including the interests of the Government. In order to guide the officers, the Government will publish defined set of PPP rules, including identification and procurement processes, critical clauses of a contract such as dispute resolution and arbitration, events of force-majeure and termination, monitoring of projects and management of contracts that will empower Government officers in project structuring and decision making.

195. Auctioning: In instances where PPP projects provide an implicit usage/ownership or exclusivity right over underlying natural resources, a process of market based price discovery of such natural resources would be the paramount consideration in PPP bidding and award. Alternatively, wherever the resources are provided for a specific use, such as use of land for a transport project, alternative exploitation of the land will be prohibited and this would be a non-negotiable position.

196. Enabling smooth implementation of projects: In instances where one PPP project depends on another and the two projects are not taken up as one integrated package, the public authority shall facilitate and ensure completion of each project for benefit of the other.

6.5 THE PPP PROCESS IN INDIA - “NATIONAL PUBLIC PRIVATE PARTNERSHIP POLICY – 2011 (DRAFT)

197. To make the decisions needed to plan, develop, and execute successful PPPs, the process can be broadly divided into four phases, viz., identification stage, development stage, procurement stage and contract management and monitoring stage.

6.5.1 Phase 1: PPP identification 198. Phase 1: PPP identification, covers activities such as strategic planning, project pre- feasibility analysis, Value for Money analysis, PPP suitability checks, and internal



clearances to proceed with PPP development. Some of the critical drivers are discussed below.

199. PPP Plan to generate a steady pipeline of PPP projects: To make efficient use of existing assets and harness new investments for greater efficiency, the Government shall set out, over a period, a long term vision and plan document for each sector which defines the role of public and private participation.

200. Pre-feasibility analysis would be undertaken by the project proponents to assess broad viability of every project envisioned to be procured on a PPP mode. Identification of the key risk factors for the project shall also be undertaken to establish the likely cost and revenue streams of the projects.

201. Value for Money Drivers: Value for Money assessment plays a central role in decision around investment prioritization and in the selection and presentation of the choice of procurement approach. This is particularly relevant to annuity based payment schemes, where a framework is needed to assess whether or not it is the appropriate procurement route given the alternative of more traditional procurement approaches.

Value for Money (VfM) analysis shall be undertaken to support key decisions. At

the outset, VfM analysis shall be undertaken to establish whether to develop a project as a PPP project. Subsequently, the VfM analysis should be undertaken to affirm whether to award a PPP contract on the basis of the bids received. A VfM analysis is most eminent upon structuring a PPP by comparing a shadow bid resulting from the financial analysis with a public sector comparator (or costs in case of conventional procurement).

VfM analysis should be conducted for every project in order to ascertain whether the Project being procured as a PPP is in a way offers good Value for Money to the public sector. VfM analysis would be conducted even if no fiscal support is required, as the costs may be recovered through user charges (as there is an obligation to ensure that charges users pay are fair and reasonable).

VfM assessment would be based on the efficiency savings that can be realized by utilizing the private sector managerial skills, integration and synergy between the design, build and service operation, optimal risk allocation, whole of life costing, innovation, focus on outputs and a robust competitive process to elicit the best bids.

It is recognized that information availability is a constraint in the formulation of VfM analysis and also that sectors have different characteristics that influence the VfM outcomes. The public sector entities, either directly or through agencies such as PPP Cells, would set in place mechanisms for creation of a database which would facilitate this exercise.

202. Conformance with State and Sector Legislation: Before structuring a PPP project, an assessment would be carried out to ascertain whether private participation in the delivery of a public service is permissible under the extant legislations. If the same



is not allowed but it is deemed prudent to adopt a PPP framework, suitable modifications/amendments would be made to the legislations.

203. Adherence to Processes: In addition to the above, a project would be deemed suitable for PPP, only if risks could be allocated in such a manner that maximizes the stakeholder benefits and the implementing agency commits to adhere to the process of development, procurement and post award governance of the project. If a project is found not suitable after the PPP suitability assessment, the implementing agency would consider alternative methods of taking up the project including EPC contracts, corporate sponsor, community participation, etc.

6.5.2 Phase 2: Development Stage

204. Phase 2: Development Stage covers project preparation (including technical feasibility and financial viability analysis), project structuring, preparation of contractual documents and obtaining of project clearances and approval. During this stage, activities would be undertaken with the following objectives:

Articulate the scope of the project, implementing agency’s requirements and set forth roles/ responsibilities of the parties;

Establish that the revenue model is robust and sustainable over the project life; Ensure that the underlying risks are defined and appropriately allocated

between the contracting parties; Ensure that the contractual arrangements and documentation accurately reflect

the scope of the project, roles and obligations of parties, performance standards, monitoring arrangements, penal provisions, reporting requirements, dispute resolution mechanism and termination arrangements as well as & and effective post award governance mechanisms;

Ascertain that contractual arrangements are permissible under the policy, legal and regulatory regime; and

Establish stakeholder buy-in and commitment is ensured throughout the process;

205. As part of the project development activities, implementing agencies would undertake studies and investigations relating to technical, market analysis, financial, legal aspects, with the assistance from advisors/consultants wherever required. The output of the project development activities, to the extent feasible, would be made available to the potential bidders during bid process. Some of the core activities critical at this stage are discussed below.

206. Economic, Financial and Affordability Assessment

To structure the projects optimally, the implementing agency would evaluate the project from an economic perspective (to ascertain whether the project is warranted – public need), then whether the project generates positive value to the private sector (financial viability), and finally ascertain whether defined viable PPP is better than conventional procurement or which of the defined



viable PPPs is most attractive (VfM analysis). All these analyses would be based on the same valuation methodology – calculation of net present value where future benefits (revenues), and costs (capital, O & M), are discounted to reflect the current value.

Economic analysis would form a key input for decisions regarding the (public) need for a project, and would encompass, in addition to the cash flows and items that have financial impact, other external costs and benefits to the stakeholders, regardless of whether they have any financial impact. The future economic benefits and costs will be assessed and discounted using a discount rate that reflects the systematic risk of the projects.

Financial analysis would assess whether the project generates sufficient revenues for the capital providers to generate an acceptable rate of return. The future financial benefits and costs (in terms of cash flows) are discounted, using a discount rate reflecting the cost of capital, and which also takes into account the systematic risk of the project.

Affordability analysis, with respect to both the implementing agency (viz., committed and contingent liabilities, such as land acquisition costs, rehabilitation and resettlement costs, annuity payments, management fees, etc.) and the likely users (tariffs, user charges, etc) would be a critical determinant in addition to the VfM analysis, on whether to take up the project on the PPP mode. It is also an effective tool to establish the reasonableness of assumptions underlying the financial analysis.

Bankability assessment would also be carried out to assess the debt service capabilities of the proposed project structure. A Debt Service Coverage Ratio (DSCR) (a ratio of cash flow available for debt servicing divided by the amount of debt service) is a key measure to assess the credit worthiness of a project . In case the analysis suggest that the project is not bankable, the implementing agency might consider developing credit enhancement mechanisms, such as viability gap funding, capital grant or maintenance grant, alternative revenues structures, including shadow user fees, etc. Such credit enhancement structures would be facilitated through institutional and contractual provisions.

Existing loans, guarantees, other statutory and contractual liabilities and contingent liabilities affect the fiscal resources of the project proponents and would be considered while structuring PPP contracts.

207. Value for Money Analysis: A similar (as adopted for economic and financial analysis) methodology would be utilized for quantitative assessment of Value for Money. The future benefits and costs of applying PPP in comparison with conventional



procurement are assessed and discounted using a discount rate reflecting the systematic risk of the project.

208. Management of Risks

The Government, through the implementing agencies, shall identify different types and degree of risks during the project life cycle, and configure appropriate mitigation measures. The objective would be to optimally allocate the project risks, rather than maximize their transfer to the private sector. The attempt would be to allocate risks, taking into account the legitimate concerns of the stakeholders, to the entity that is best suited to manage the same.

In the normal course, the public sector would not retain the risk that the private sector has better ability to bear. However, risks that the public sector is more competent to mitigate/bear in the normal course of its business, such as ensuring availability of unencumbered land for the project or obtaining mandatory clearances of regulatory authorities prior to commencement of the project, would be retained by the public sector. iii. The allocation of risk shall be enshrined in the contract document and under normal circumstances shall not be subject to modification after the award of the project. Contractual documentation would provide adequate protection to lenders against non-commercial risks related to force majeure, regulatory changes, contract termination etc. The contract would also prescribe the key performance indicators and output parameters to ensure that the delivery of services adheres with the aspired levels.

To ensure that the projects conform to the guiding principles of PPPs, the Government has notified the Guidelines for Formulation, Appraisal and Approval of Central Sector PPP Projects. The procedure enshrined in these guidelines shall continue to be observed for all central sector projects. States are encouraged to put in place a similar mechanism.

Government, where required, would set out mechanisms for periodic review and

reallocation of the risks that could not be transferred for the entire contractual period.

6.5.3 Phase 3: Procurement Stage 209. Phase 3: Procurement stage would cover procurement and project award. Transparent, accountable, non-discriminatory, competitive and timely procurement processes would be followed so as to encourage maximum participation by private sector and to imbibe public confidence in the procedure. The PPP rules notified by the Government would define the norms and procedures for procuring PPP projects.

210. The bid documents used for procurement of private sector entities may comprise one or more of expressions of interest, request for qualifications, and request for proposals. Technical proposals would be invited, depending on the complexity of a project, to assess the ability of the private entity of their appreciation of the desired outcomes. Financial proposals would ideally be in the form of a single objective parameter.



211. The Government has prescribed the bid process and the model bidding documents (viz., model Request for Qualification and model Request for Proposal) for PPP projects in infrastructure sector, through notifications issued from time to time. The implementing agencies shall observe the prescribed process or take necessary approvals of the competent authority on the process, relevant to their sector, proposed to be undertaken prior to commencement of the bid process.

212. A web based market places, including e-tendering and auction would be promoted based on the project requirements to promote wider participation and transparency in the process.

213. Draft contract agreement, containing provisions on the roles and obligations of the parties, performance standards and monitoring arrangements, reporting requirements, penalty conditions, force majeure conditions, dispute resolution mechanism and termination arrangements, shall be provided to the prospective bidders as part of the bid documents.

214. Timelines to be followed during the procurement process would be indicated by the procurement entity in the bidding documents. In order to minimize delays, the procurement entity would endeavor to obtain all necessary approvals for a project from the agencies concerned in a timely manner.

215. Procuring entities would, on best efforts basis, facilitate all necessary clearances for speedy implementation of a PPP project.

6.5.4 Phase 4: PPP contract management and monitoring stage 216. Phase 4: PPP contract management and monitoring stage, covers project implementation and monitoring over the life of the PPP project. Contract management is not a passive box ticking/reporting exercise: it is an active process that involves a wide range of skills. Projects are not static, conditions change and the capability of the public authority at the interface with the private sector party is therefore crucial. The contract manager needs to be empowered to take action responsively and effectively only escalating up the chain issues that cannot be managed at the project interface. This calls for effective and efficient governance processes and people with the right mix of skills (or at time access to skills) including project management, commercial expertise and negotiation skills;

217. The Government and the implementing agencies shall endeavor to ensure timely and smooth implementation of the project. The implementing agency shall put in place a suitable contract administration framework for monitoring project performance milestones over the contract period.

218. The project implementing agency shall establish appropriate mechanisms for project monitoring such as Project Monitoring Unit (PMU) and inter-department committees that would oversee project implementation, facilitate coordination between departments and render assistance during events of dispute resolution or arbitration. The contract management teams identified would be well prepared and resourced in



advance of the contract management stage. In particular, those charged with managing the contract would have a close knowledge and understanding of the relevant terms of the contract, especially, where relevant, the performance criteria and payment mechanisms;

219. The dispute resolution mechanism would be in accordance with contract conditions and applicable legislation. The implementing agency shall endeavor to speedily resolve and dispose disputes during the contract period through appropriate mechanisms including mediation processes.

220. The Government recognizes that appropriate capacity is critical to effectively undertake project monitoring and, therefore, appropriate human resources and management systems would be established for the above.

6.5.5 Management Information Systems 221. In order to continuously monitor the performance of the PPP projects over the project life cycle, the Government would establish the MIS for PPP projects. The evaluation of the PPP projects would also be tabulated and summarized so as to utilize the same for improving the quality of service delivery levels and sustainability of PPPs in the future. The database of the projects would not only contain information on the ongoing projects but also set out frameworks for monitoring them during various stages of the project cycle. The database would be so developed so as to generate information for undertaking VfM analysis. PPP Cells would be responsible to set up MIS systems and disseminate information to Government agencies from time to time so as to effectuate suitable policy changes based on the previous experience of managing PPP projects.

6.5.6 Post Project Award Negotiations 222. It is acknowledged that including conditions in a PPP contract that allow a party negotiate post award and execution is not advisable, and to the extent possible, the contract must cover all possible aspects that would required subsequent adjustments. Hence, modifications in the contractual terms should be rare events and subject to the following principles:

The implementing agency must justify that risk sharing at allocation stage has

significantly changed due to rare circumstances beyond the control of the parties.

Any such post award negotiations would be undertaken in the spirit of adhering

to the VfM analysis established during the project development process. The implementing agency would obtain prior approval of the sector regulator (if

any), the appraising entity and the authority granting approval to the investment decision in the project before effecting any change in the contract.

All negotiations shall be undertaken in a transparent manner aimed at

generating awareness among the stake holders about the original bid and



contractual conditions, the proposed changes and justifications, thereof. The transparency herein would include mandatory disclosure by both parties.

All such negotiations and contractual modifications would be subject to audit,

including stage audit, by the authorities.



SECTION : 7 PROCUREMENT MANAGEMENT

7.1 INTRODUCTION 223. Procurement is a critical element in project implementation and unless carried out efficiently and promptly, the full benefits of the project cannot be realized. Poor procurement leads to project delays, cost overruns, complaints by bidders, and affects creditability of the associated institutions.

224. To enable uniform and effective procurement, this section provides general guidelines to all concerned. The responsibility for the execution of the project and for the awards and administration of the Contracts under the project rests with the Implementing Agency i.e. in most of the cases for Urban Transport Projects is through the PIU. The general guidelines pertain to procurement, Implementing Agency [IA] shall be responsible for procurement of goods, works and services in accordance with the provisions of the Terms and Conditions of donor agencies like WB, ADB, JBIC etc. Generally for all procurements using GEF/WB funds under the project, would be carried out as per the "Guidelines, Procurement under IBRD Loans and IDA Credits, May 2004, revised October 2006" including latest modifications if any and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers, May 2004, revised October 2006" as also the latest modifications if any (together termed as “The Procurement Guidelines”).

225. In the event of any inconsistency/lack of clarity, IAs would be required to contact Bank for clarifications. The provisions of “The Procurement Guidelines” shall prevail upon the provisions of the manual.

7.2 PROCUREMENT PLAN 226. A Procurement Plan (PP) shall include estimated cost of each project package, the method of procurement/selection, the prior review requirements and other bidding details. Procurement Plan shall be prepared by implementing agency and the same is finalized in consultation with the donor/funding agencies.

7.3 TYPE OF CONTRACTS 227. A number of contract types based on compensation arrangement are available globally to provide needed flexibility in acquiring the large variety of materials, services, and construction required by City Transport Authorities.

228. The contract types are grouped by pricing arrangement into the two broad categories of fixed-price contracts and cost-reimbursement contracts. These two



types vary according to (1) the degree of responsibility and risk assumed by the contractor for the costs of performance, and (2) the amount and nature of the profit incentive offered to the contractor for achieving or exceeding specified standards or goals.

229. The specific contract types range from firm-fixed-price to cost-plus-award-fee. Negotiated contracts may be of any type or combination of types that will promote the City Transport Authority's interest.

7.3.1 FIRM FIXED-PRICE CONTRACTS

230. A firm-fixed-price (lump sum) contract provides for a price that is not subject to adjustment on the basis of the contractor's cost experience in performing the contract. This is generally the preferred form of contract for City Transport Authorities use. It places maximum risk and full responsibility for all costs and resulting profit or loss on the contractor. It provides maximum incentive for the contractor to control costs and perform effectively and, since the contractor's cost experience is not a factor in determining compensation, it imposes a minimum administrative burden upon the contracting parties.

231. A firm-fixed-price contract is suitable for acquiring commercial products, construction, or services on the basis of reasonably definite, detailed specifications when the Procurement Officer can establish fair and reasonable prices at the outset, such as when- (1) There is adequate price competition; (2) There are reasonable price comparisons with prior purchases of the same or similar goods or services made on a competitive basis or supported by valid cost or pricing data or; (3) Performance uncertainties can be identified and reasonable estimates of their cost impact can be made, and the contractor is willing to accept a firm-fixed-price representing assumption of the risks involved.

7.3.2 FIXED-UNIT-PRICE CONTRACTS 232. The provisions of this type of contract provide for the upward or downward revision of the contract price based upon actual quantities of work performed; however, the contract must include an overall Not-to Exceed amount. Estimated quantities are used in the solicitation to provide a competitive basis for determining the successful contractor. Contractors provide fixed-unit prices for each item. During contract performance, the contractor is paid for quantities of work actually performed at the unit prices offered.

233. Unit-price contracts are used where (1) quantities cannot be determined in advance within limitations that would permit a lump-sum offer without a substantial



contingency, (2) quantities can change significantly during performance, or (3) offerors would have to expend unusual effort in making quantity take-offs.

234. Contracts with unit pricing will include a variation in estimated quantity provision which provides for negotiated adjustments to the unit price of any item for which the actual quantity varies by 15 percent or more from the estimated contract quantity. The total amount of money paid to the contractor for each work item remains indeterminable until completion of the contract.

235. Administratively, the procurer must provide an adequate field force to verify actual quantities of work performed. If the nature of the "units" to be measured is such that the method of measurement is unclear, then the contract must include language that specifies the method of measurement.

7.3.3 COMBINED FIRM-FIXED/UNIT-PRICE 236. A variant of the firm-fixed-price (lump sum) contract is the combination firm-fixed-unit-price contract. This type of contract should be used when it is not possible to determine the quantities required with reasonable accuracy prior to performance. The significant characteristic of this type of contract is that firm-fixed (lump-sum) prices are established for identifiable quantities of work and fixed-unit prices are established for only that portion of the work for which quantities are unknown or for which they cannot be reasonably forecast.

237. If there are undefined areas of work which need to be included in the contract, a specific allowance established by the Airports Authority shall be included in the Section III, Schedule. The contract must always include an overall not-to- exceed amount. Price evaluation for this type of contract is performed by multiplying the fixed-unit prices by the estimated quantities and adding the extended price to the lump sum portion of the offer.

238. The actual final contract price, i.e., the total amount ultimately paid to the successful offeror, is not the proposed price. Payment for the unit-price portion of the contract is made by multiplying the fixed-unit price by the actual quantities required to perform the work. A variation in estimated quantity provision will be included in lump-sum/unit-price contracts. Such a provision provides for an equitable adjustment of the fixed-unit prices to be made where the actual quantity varies by more than 15 percent above or below the estimated quantity stated in the contract.

7.3.4 FIXED-PRICE WITH PRICE ADJUSTMENT 239. The provisions for this type of contract provide for the upward or downward revision of the contract price upon the occurrence of certain contingencies that are specifically defined in the contract. These contingencies must be beyond the control of



the contractor, e.g. industry-wide factors. Use of this type of contract is appropriate when serious doubt exists as to the stability of the market or labor conditions that will exist during an extended period of contract performance. It may also be appropriate when contingencies that would otherwise be included in the contract price can be identified and covered separately by a price adjustment provision. However, the contract must include an overall not-to-exceed amount. Close pricing is obtained by minimizing contingencies through price adjustment provisions; this shifts a portion of the pricing risk to the procurer. In return for the price adjustment provisions, the contractor is expected to eliminate from the price those contingency factors covered by the price adjustment.

7.3.5 TIME-AND-MATERIALS CONTRACTS 240. The time-and-materials contract provides for the procurement of goods and services on the basis of direct labor hours at specified hourly rates and materials at cost including, when appropriate, material handling charges. The charge for direct labor at specified fixed hourly rates includes wages, overhead, general and administrative expenses, and profit. The materials handling charge will include only costs clearly excluded from the labor hour rate.

241. This type of contract shall include a ceiling price for each element and for the overall total that the contractor exceeds at its own risk. Although this type of contract provides for the payment of a fixed rate per unit of time, it is clear that unless the rate is insufficient to cover the contractor's costs, the total amount of profit under the contract increases proportionately as the number of hours increase. Therefore, this type of contract is used only after a determination that no other type of contract will suitably serve. It is used when it is not possible at the time of placing the contract to estimate the extent or duration of the work or to anticipate costs with any substantial accuracy.

7.3.6 COST-REIMBURSEMENT CONTRACTS 242. This generic category of contracts provides for payment to the contractor of allocable and allowable costs. In addition to costs, most cost-reimbursement contracts also provide for the payment of a fee (profit) to the contractor in addition to costs. Cost-reimbursement contracts establish an estimate of total cost for the purpose of obligating funds and establishing a cost ceiling which the contractor may not exceed (except at the contractor's own expense) without the prior approval or subsequent ratification of the Contracting Officer.

243. Cost-reimbursement type contracts are suitable for use when the nature and complexity of the procurement are such that the costs of performance cannot be estimated with the accuracy necessary for a fixed-price contract. Since the actual costs of performance are the basis for payment to the contractor, it is essential that prior to contract award, the Contracting Officer verify that the contractor's cost accounting



system is adequate for the determination of the reimbursable costs. As this type of contract gives a minimum incentive for efficient performance, provision must be made for appropriate surveillance by City Transport Authority’s personnel to provide reasonable assurance that wasteful methods are not being used. Such contracts are used only after a finding that such method of contracting is likely to be less costly than other methods, and it is impractical to secure the necessary goods or services without the use of this type of contract.

7.3.7 INCENTIVE CONTRACTS 244. Incentive contracts are designed to harness the profit motive to stimulate the contractor to perform at a lower cost, to produce a better product or service, or to cut down lead time in delivery dates. It is a goal when utilizing incentive contracts to impact the contractor's management decisions throughout the performance of the contract. Care must be taken to ensure that the contract is so structured that any contract options are fair from both the contractor and the City Transport Authority's point of view. The incentive contracts can be categorized in two ways: those in which the contractor's additional profit or losses are determined on an objective basis or those contracts in which the contractor's profit or loss is determined in a subjective manner.

7.3.8 INDEFINITE DELIVERY TASKCONTRACTS 245. The basic purpose of a Task Contract is to provide an in-place contractual arrangement with a competitively selected Contractor that is ready, willing and able to undertake a number of jobs, or individual tasks, of the nature described in the contract statement of work. The scope of the task contract may be broad but not unlimited. Work beyond the scope or over an authorized price may not be performed under the task contract.

7.4 STANDARD BIDDING DOCUMENT AND RFP 246. Procurement of Works, Goods or Services other than consulting services shall be made using Bank’s Standard Bidding Documents (SBD) and as agreed with the Bank. All consulting services shall be procured following Standard Request for proposal (RFP). The Standard documents have been shared with the cities and may be downloaded from the website http://worldbank.org/procure. For National Competitive Bidding (NCB), the model bidding documents agreed with the GOI TaskForce (shared with cities – Document W-2) will be used for bidding incorporating latest guidelines on fraud & corruption.



7.5 PROCUREMENT OF GOODS AND WORKS 247. In India generally, the procurement methods stipulated by World Bank is commonly used for procurement of Goods and Works with minor modifications on case to case basis. In this section, it is attempted to highlight the basic fundamentals and the processes adopted in World Bank Guidelines on procurement of Goods and Works.

7.5.1 Methods of Procurement : International Competitive Bidding (ICB)

248. The ICB (the most preferred method) is to be to be adopted in situation where the following conditions holds true:

• For project packages costing more than the equivalent of US $200,000 (Goods)/US $ 10,000,000(Works), US $500,000 (IT Systems) or as provided in the loan agreement; and

• Irrespective of value, where supplies need import and entail payment in foreign currency.

249. The steps for undertaking these types of procurement are:

• Publication of General Procurement Notice followed by specific Invitation for Bid (IFB) in United Nations' Development Business (UNDB) online and dg Market publication;

• Transmission of IFB to those who have expressed interest in response to the General Procurement Notice;

• Publication of IFB in at least one widely circulated national daily news paper at least 45 days prior to the deadlines for submission of bids.

• Use of standard bidding document; • Sale of bidding document to start only after publication of IFB in UNDB and

national newspapers; and • Bidding period 45 to 90 days from date of start of sale of bidding documents. • Issue of Bidding Documents; • Submission of Bids; • Public opening of bids;-- Bids to be opened at the venue, time and date (as

published/notified) by a committee nominated by the competent authority in the presence of Bidders or their authorized agents. All prices and other commercial terms are read out during the opening.

• Evaluation using standard bid evaluation forms prepared by the world bank in accordance with the provisions of the bank guidelines;

• Selection of lowest evaluated responsive bid - based on post qualification; • Contract Award; • Award to be published in UNDB online/web; and • Debriefing of bidders • Contract Performance;



7.5.2 Methods of Procurement : National Competitive Bidding (NCB)

250. NCB is also competitive bidding advertised nationally for procuring Goods or Works. However, foreign bidders are not to be precluded from participation, and Domestic preference will not be applicable.

To be adopted where: • For packages costing less than US $200,000* (Goods)/US $ 10,000,000

(Works)/US$ 500,000(IT Systems); • Works are scattered geographically or spread over time; • Works are labour intensive; • The Goods and Works are available at prices below international market and the

advantages of ICB are clearly outweighed by the administrative or financial burden involved.

Requirement:

251. NCB procedures will be in accordance with the requirement of Paragraph 3.3 and 3.4 of the World Bank procurement guidelines and with the following additional conditions:

• Only the model bidding documents for NCB agreed with the GOI Task Force (and as amended from time to time) shall be used for bidding;

• Invitations to bid shall be advertised in at least one widely circulated national daily newspaper, at least 30 days prior to the deadline for the submission of bids;

• No special preference will be accorded to any bidder either for price or for other terms and conditions when competing with foreign bidders, state-owned enterprises, small-scale enterprises or enterprises from any given State;

• Except with the prior concurrence of the Bank, there shall be no negotiation of price with the bidders, not even with the lowest evaluated bidder;

• Extension of bid validity shall not be allowed without the prior concurrence of the Bank (i) for the first request for extension, if it is longer than four weeks; and (ii) for all subsequent requests for extension irrespective of the period (such concurrence will be considered by the Bank only in cases of force majeure and circumstances beyond the control of the Purchaser/Employer);

• Re-bidding shall not be carried out without the prior concurrence of the Bank. The system of rejecting bids outside a pre-determined margin or “bracket” of prices shall not be used in the project;

• Rate contracts entered into by Directorate General of Supplies & Disposal, (DGS&D) will not be acceptable as a substitute for NCB procedures. Such contracts will be acceptable however, for procurement under Shopping procedures;

• Two or three envelope systems shall not be used (in which the bidders simultaneously submit Technical and Financial proposals that are opened at different times).



• Bank’s right to audit clause shall be included in the NCB document.

7.5.3 Methods of Procurement : Shopping

252. Shopping procedures shall be in accordance with the requirements of paragraph 3.5 of the World Bank procurement guidelines.

253. Shopping is a procurement method based on comparing price quotations obtained form several national/international suppliers (in case of goods and) or from several contractors (in case of civil works), with a minimum of three to assure ensure competitive prices. It is an appropriate method for procuring readily available off-the-shelf goods or standard specifications commodities of small value and is ordinarily available from more than one source. Limited Competitive Bidding/ Shopping shall be allowed for contracts maximum up to US $ 10,000 for goods.

254. The following considerations shall be kept in view while adopting this procedure:

• Approval of competent authority should be obtained for items of goods to be purchased along with specifications, estimated costs and agencies from which quotations should be invited.

• The requests for quotations shall contain the description, specifications, quantity of the goods, terms of delivery of goods as well as desired completion period.

• If the quotations are called for more than one item it should also be indicated whether the evaluation would be for each item separately or as a package of all items together.

• Quotations can also be obtained by e-mail or facsimile. The terms of the accepted offer shall be incorporated in a purchase order or brief contract.

• Rate Contracts finalized by the Directorate General of Supplies & Disposals (DGS&D) will be acceptable for any procurement under applicable shopping thresholds.

255. Following points should always be mentioned in the letter of inviting quotations.

• Give description, specifications and quantity. • Specify that the contract shall be for the full quantity of each item. • All duties, taxes and other levies payable on the raw material and components

shall be included in the total prices. • Sales tax/other applicable Taxes in connection with the sale shall be shown

separately. • The rates quoted by the bidder shall be fixed for the duration of the contract and

shall not be subject to adjustment on any account. • The Prices shall be quoted in Indian Rupees only. • Each bidder shall submit one quotation.



7.5.4 Methods of Procurement : Direct Contracting

• Goods which meet the requirements of paragraph 3.6 of the World Bank procurement guidelines may be procured following Direct Contracting procedures.

• Direct Contracting, proprietary items, such as spare parts, software, up to US $ 1,000 equivalent per contract meeting requirements stated in the Procurement Guidelines of the Bank and petty items costing up to US $ 200 per contract may be procured through Direct Contracting

• Summary of the Method of Procurement

Category Method of Procurement Threshold (US$ Equivalent)

Civil Works and Supply & Installation of Plants

ICB > 10 Million NCB Up to 10 Million Shopping NA Others : NA

Goods (also applicable for non-intellectual services and the services contracted on the basis of performance of measurable physical outputs)

ICB > US $ 200,000 NCB < US $ 200,000

Shopping < US$ 10,000 Others NA

IT Systems; ICB > US$ 500,000 NCB <US $ 500,000

7.5.5 Review of Procurement

256. Generally the Procurement Decisions shall be subject to Prior Review by the Bank as stated in Appendix 1 to the Procurement Guidelines. For Prior review by the Bank . The Project Management Unit (PMU) of the concerned Ministry shall carry out quality check on all procurement documents to be prepared by the IAs and then forward the same with its recommendations to the funding institutions. Bank. PMU shall be responsible for prior review of all procurement cases upto the threshold in the table below for which each IA shall forward the complete procurement documents to PMU.

Table 7. 1: Prior Review Threshold for Procurement of Goods and Works [to be finalized after receipt of details Procurement Method Prior Review

Threshold by the Bank Prior Review by PMU OF MOUD Remarks

ICB (Goods) All NIL NCB (Goods) > US $ 100,000 > US $ 50,000

and <US $ 100,000

ICB (Works) All NIL All ICB Contracts subject to prior review irrespective of value

NCB (Works) > US $ 500,000 > US $ 250,000 and <US $ 500,000



Procurement Method Prior Review

Threshold by the Bank Prior Review by PMU OF MOUD Remarks

Direct Contracting All NIL All contracts irrespective of

value IT System > US$ 100,000 > US $ 50,000

and <US $ 100,000

257. Prior Review: Prior Review will consist of review of:

- invitation for bids; - bidding documents; - minutes of pre-bid conference; and amendments to the bidding document - request for extension of bid validity for a period longer then 4 weeks, if it is a

first extension and for all subsequent extension irrespective of the period - bid evaluation report (suggested format included in the Procurement

Procedures brochures); and - final contract(s) with checklist (format of checklist included in the Procurement

Procedures brochure) for obtaining WBR number from the WB

258. Post Review by Bank (as per Para 5 of appendix-1 of procurement guidelines) of contracts other than prior review cases will consist of review of final concluded Contract(s) with checklist and supporting documents. For all other cases, PMU shall prior review. PIU shall maintain complete files of all documents to be available for yearly reviews by the Bank.

7.5.6 Important points to be observed in Procurement Process

259. General considerations are transparency, economy and efficiency, equal opportunity to all eligible bidders and encouraging development of domestic contracting and manufacturing industries.

Bidding Documents: • The Standard Bidding Documents/ Model bidding documents for procurement

of Works and Equipment (ICB/NCB respectively) shall be used. • Appropriate qualification & evaluation criteria shall be fixed. • Detailed design and engineering, including soil investigation, acquisition of land

for works and preparation of technical specification for equipment, shall be completed before invitation of bids.

• Schedule of rates (based on which estimates are prepared) should be updated regularly taking into account realistic data based on the construction methodology to be used, current market prices for materials and labour, and reasonable contractor’s profit.

• Bill of Quantities should have a separate schedule for those general items, which are not covered in analysis of rates adopted for estimation.



• Bidders may quote speculative/non-competitive prices for items with zero

quantity in BOQ, as this will not affect the bid evaluation. Hence no item with nil quantity should be included in BOQ.

• Bidding documents should generally avoid submission of samples along with bids by bidders as this requirement discourages competition and increases the bid prices. Alternatively bidders should be requested to confirm that their product meets with the required specifications and in support attach appropriate test certificates from recognized testing laboratories.

• No filtration in the sale of bidding document. It should be sold and made available by mail as well, to all whosoever pays the required fee and requests for it.

• Where Bidders are not pre-qualified, minimum post qualification criteria should be clearly specified in the bidding document and enforced.

• Contractors should be made responsible to provide all materials including Cement and Steel etc.

• Minimum bidding period for NCB -30 days and ICB -45 days (from the date of publication of IFB in press /UNDB or the date the documents are made ready for sale, whichever is later).

• Bidding documents should be made available for sale till a day prior to the last date of receipt of bids. The time for the public bid opening should be the same for the deadline for receipt of bids or promptly thereafter (to allow only sufficient time to take the bids to the place announced for public bid opening).

• Two or three envelop system will not be used.

Bid Security: • A fixed amount usually 2 to 5% for Goods and 1 to 3 % for Works [For small

value purchases and in some specific cases, where bid security is considered not essential, for example in vehicles it could be dispensed with] [a system of self declaration by bidders under which a winning bidder who does not sign the contract becomes ineligible for bidding for a specified period is provided in the new Guidelines as acceptable alternative]. Bid security should be valid for a period of 4 weeks beyond the validity period of the Bids.

Performance Security:

Works Goods

5% of contract price 5-10% of contract price

Retention Money:

Works Goods

5% of contract price Nil

(50% to be retained till completion

of the whole of the works and 50%

to be retained till the end of



defects liability period)

• Bank guarantees submitted by bidders/contractors/suppliers should be

unconditional and be in the specified formats. Bid and performance securities of Joint Ventures should be in the name of all partners in the Joint Venture submitting the bid.

Publicity of Bid Notices ICB NCB

- UNDB online and dg Market publication --

- Copies to bidders who have Copies to bidders who

expressed interest in response have expressed interest.

to the General Procurement Notice.

- Publicity in the national press Publicity in the national press

having a wide circulation in all having a wide circulation

parts of the Country in the country.

- For large, specialized or important --

contracts, publicity in well known

technical magazines, newspapers and

trade publications of wide international

circulation.

Receipt and Opening of Bids

260. Bidders could submit their bids either by post or in person on any day during the bidding period. Bids should be received only at one place and should be kept in safe custody till the stipulated time of opening.

261. All bids received should be opened and read out at the time of bid opening which should be immediately after the dead line for submission of bids. No bid should be rejected at bid opening except for late bids, which shall be returned unopened to the Bidder. Minutes of bid opening must be prepared and signed by the bid opening committee and by the representatives of the bidders. A copy of bid opening statement for all prior review cases shall be forwarded to the Bank.

Bid Evaluation and Award of Contract • Evaluation of bids should be made strictly in terms of the provisions and criteria

disclosed in the bidding document. Evaluation report should be drafted on the standard bid evaluation forms prescribed by the Bank.

• Single bids should also be considered for award if it is determined that publicity was adequate, bid specifications/conditions were not restrictive or unclear and bid prices are considered reasonable.



• Award should be in favour of the lowest evaluated responsive bidder, who is

determined to be qualified to perform the contract satisfactorily. • No preference to any bidder or class of bidders, either for price or for other

terms and conditions. • Evaluation and award decision of bids including the World Bank’s review should

be completed within the initial period of bid validity. An extension of bid validity, if justified by exceptional circumstances shall be requested in writing from all bidders (of valid bids only) before the expiration date. The extension shall be for the minimum period required to complete evaluation, obtain necessary approvals and award of contract. In the case of fixed price contracts the bid validity period may be extended a second time only if the bidding documents or the request for extension shall provide for appropriate adjustment of the bid price to reflect changes in the cost of inputs for the contract over the period of extension. Such an increase in the bid price shall not be taken into account in the bid evaluation. In the case of prior review contracts, WB’s prior approval will be required for (i) a first extension of the bid validity period if the period of extension exceeds 4 weeks; and (ii) any subsequent extension of bid validity period.

• If there is undue delay in awarding the contract, the Bank may consider declaring the same as mis-procurement.

• For works valued Rupees ten million and above the construction method(s)/program and quality control details submitted by the bidders should be examined for acceptability before finalizing award recommendation; this should be attached to the contract agreement for facilitating monitoring during implementation.

• The system of rejecting bids outside a predetermined margin or bracket of prices will not be used. Rejection of all bids on this account, irrespective of value, should be referred to the Bank for review and issue of no objection [Rejection is permitted only if the lowest bid is much higher than available budget resources].

• In the case of rejection of bids due to submission of collusive (unreasonably high) prices, bidders must be requested to furnish breakdown of unit rates providing justification for higher bid prices. If this justification, after review, is determined rational, contract should be awarded to the lowest evaluated responsive bidder. If not, these bidders must be declared as ineligible in the rebid for that contract.

• Except with the prior concurrence of the Bank, there shall be no negotiation of price with the bidders, even with the lowest evaluated bidder;

• In the case of civil works splitting in award of contracts shall not be carried out. When two or more bidders quote the prices which indicate evidence of collusion, an investigation should be made to determine any evidence of collusion, following which:

I. if collusion is determined, the parties involved should be disqualified and the award should then be made to the next lowest evaluated and qualified bidder; and



II. if no evidence of collusion can be confirmed, then fresh bids should

be invited after receiving the concurrence of the W.B. • Under ICB/NCB bids should not be invited on the basis of bidders quoting a

percentage premium or discount over the estimated cost of the employer. • During execution of contracts, all material modification or waiver of the terms

and conditions of contract or material extension of stipulated time or change order which would increase the contract cost by over 15% should be reported to the Bank in the prescribed format and the same shall be subject to prior review by the Bank in case of contracts subject to prior review by the Bank.

• Repeat order system is not acceptable. • In all contracts for works (civil as well as supply / erection), the adjudicator /

technical expert or Dispute Review Board should be in position / constituted immediately on signing of the Contract Agreement.

262. Results of award should be published in Development Business and Gateway for ICB/LIB and Direct Contracting and unsuccessful bidders, who seek, should be debriefed.

7.6 PROCUREMENT OF CONSULTANTS 263. In India generally, the procurement methods stipulated by World Bank is commonly used for procurement of Consultants with minor modifications on case to case basis. In this section, it is attempted to highlight the basic fundamentals and the processes adopted in World Bank Guidelines on procurement of Consultants.

7.5.1 Methods of Procurement

264. The hiring of consultants will be undertaken through competition among qualified short-listed firms in which the selection is based both on the quality of the proposal and on the cost of the services to be provided (Quality and cost-Based Selection [QCBS]). However, there are some cases when QCBS is not the most appropriate method of selection.

265. The other acceptable selection procedures in addition to QCBS are as under:

• Quality Based Selection (QBS) • Fixed Budget Selection (FBS) • Least Cost Selection (LCS) • Selection based on Consultant’s Qualification (CQS) • Single Source Selection (SSS) • Selection of individual consultants



7.5.2 Quality and Cost-Based Selection

Steps for hiring under QCBS method • preparation of the Terms of Reference (TOR); • preparation of cost estimate and the budget; • advertising; • preparation of the shortlist of consultants; • preparation and issue of the Request for Proposal (RFP); • receipt of proposals; • evaluation of technical proposals : consideration of quality; • evaluation of financial proposal; • final evaluation of quality and cost incorporating the weightage assigned to

quality of the proposal and the cost as quoted ; and • negotiations and award of the contract to the selected firm. • publication of award in web and debriefing of unsuccessful consultants.

a) The Terms of Reference should include: • Background • A precise statement of objectives; • An out line of the tasks to be carried out; • A schedule for completion of tasks; • The support/inputs provided by the client; • The final outputs that will be required of the Consultant; • Composition of Review Committee (not more than three members) to monitor

the Consultant’s works and procedures for; and • Mid term review and Progress Reports required from Consultant; • Outlining of training needs if any; • Review of the final draft report, • List of key positions whose CV and experience would be evaluated.

b) Cost estimate and the budget

266. The Cost Estimates or Budget should be based on the PIU’s assessment of the resources needed to carry out the assignment; staff time, logistical support, and physical inputs (for example, vehicles and laboratory equipment). Costs shall be divided in to two broad categories; (a) fee or remuneration and (b) reimbursable and further divided into foreign and local costs.

c) Advertisement

267. PIU to prepare and submit to the Bank a Draft general procurement notice for advertisement in UNDB & dg market. Contracts expected to cost more then US $200,000 shall be advertised in UNDB online and dg market and National/ International newspapers and technical magazines.



(General Procurement Notice was issued on -----------)

d) Short listing

268. PIUs are responsible for preparation of the shortlist and shall give first consideration to those firms expressing interest, which possess the relevant qualifications. The shortlists shall comprise of at least six firms with a wide geographic spread as per Guidelines for Selection of Consultants. The shortlist can comprise of entirely national consultants if the value of assignment is less than US$#. However, if foreign firms have expressed interest, they shall not be excluded from consideration. [In these cases payment can be in the country of the PIU].

e) Request for Proposals (RFPs)

The RFP shall include: • a Letter of Invitation (LOI); • Information to Consultants; • the TOR; and • the proposed contract

269. PIUs shall use the appropriate standard RFPs issued by the Bank.with changes in Datasheet, Fin forms and –see annexure 5.3.

f) Evaluation:

270. Evaluation of technical proposals shall be done first before opening the Financial Proposal. The Evaluation criteria shall be as specified in the information to the consultants. The Technical Evaluation report shall be completed in the format prescribed by the Bank. For all prior review cases the Technical evaluation report shall be forwarded to PMU OF MOUD for “no objection” of the Bank. On receipt of no objection, the Financial proposal shall be opened publicly followed by their evaluation. Thereafter the combined Technical and Financial evaluation shall be done for final selection of the consultant and the selected firm shall be invited for negotiation.

271. The factors given in Table 7. 2 are generally taken into account for evaluation:

Table 7. 2: Technical Evaluation Factors Evaluation Factors Points

Quality (Each should have a sub-criteria not exceeding three)

Experience 0 to 10 Methodology 20 to 50 Key Personnel * 30 to 60 Transfer of Knowledge 0-10 Nationals in key staff 0-10

Price (cost) Exclusive of taxes Combined Quality 75

Cost 25

* The individuals shall be rated in the following three sub-criteria, as relevant to the task



• General qualifications: General education and training, length of experience,

positions held, time with the consulting firm as staff, experience in developing countries and so forth;

• Adequacy for the assignment: Education, training, and experience in the specific sector, field, subject, and so forth, relevant to the particular assignment; and

• Experience in the region: Knowledge of the local language, culture, administrative system, government organization, and so forth.

g) Negotiations

272. Negotiations shall include discussions of the TOR, the methodology, staffing, PIUs inputs, and special conditions of contract.

273. The selected firm should not be allowed to substitute key staff, unless both parties agree that undue delay in the selection process makes such substitution unavoidable or that such changes are critical to meet the objectives of the assignment. Financial negotiations shall include clarification of the consultants' tax liability in the PIU's own country (if any), and how this tax liability has been or would be reflected in the contract.

i) Publication of Award

274. The award should be published in UNDB/online and in dg/Market as indicated above.

j) Debriefing

275. Consultants desirous of knowing why they were not selected should be debriefed.

7.5.3 Other Methods for selection of Consultants

276. Methods of selection, other than QCBS are to be used in the following circumstances:

a) Quality-Based Selection (QBS)

277. For complex or highly specialized assignments or those, which invite innovations, high downstream impact etc., selection based on the quality of the proposal (Quality-Based Selection [QBS]), would be more appropriate. RFP may request submission of technical proposal only or both technical and financial proposals in separate envelopes. RFP shall provide either the estimated budget or the estimated number of key staff time as indicative only. The financial proposal and the contract shall then be negotiated.

b) Fixed Budget selection (FBS)

278. This method is appropriate only when the assignment is simple and can be precisely defined. RFP shall indicate the available budget and request the consultants to



provide their best technical and financial proposals. Consultant who submitted the highest ranked technical proposal shall be invited to negotiate.

c) Selection based on Consultant’s qualifications (CQS)

279. This method is used for very small assignments for which the need for preparing and evaluating competitive proposals is not justified. In such cases, the employer shall prepare the TOR, request for EOI and consultant’s experience and competence relevant to the assignment, establish a short list, and select the firm with the most appropriate qualifications and references. The selected firm shall be asked to submit a combined technical- financial proposal and then be invited for negotiating the contract.

d) Single Source Selection (SSS)

280. This method should be discouraged, it is appropriate only if it presents a clear advantage over competition:

a) for tasks that represent a natural continuation of previous work carried out by the firm;

b) where a rapid selection is essential (emergency operation) c) for very small assignments; or d) When only one firm is qualified or has experience of exceptional worth for the

assignment.

281. These cases should be identified and agreed between the Borrower and the Bank and should be specified in the Legal Agreement.

282. Selection of Individual Consultants is resorted to when teams of personnel are not required or no additional outside (home office) professional support is required.

Selection Methods and Thresholds for Consultancy Services are summarised as under:

Category Method of Procurement Threshold (US$ Equivalent)

All types of selection QCBS All values

Routine nature like Audits LCS All values ( with prior clearance of the Bank)

Small assignments CQS <US$100,000

Simple assignments which can be precisely defined and where budget is fixed

FBS All values ( with prior clearance of the Bank)



7.5.4 Review of the Procurement Process

283. The review of the complete procurement process for hiring of consultants is a necessity and will be carried out by the PMU OF MOUD/World Bank and the PIU will be responsible for obtaining their “No Objection” at various stages of procurement.

A) Prior Review

284. Procurement Decisions shall be subject to Prior Review by the Bank as stated in Appendix 1 to the Procurement Guidelines. For Prior review by the Bank PMU OF MOUD will carry out quality check on all procurement documents to be prepared by the IAs and then forward the same with its recommendations to the Bank for prior review. PMU OF MOUD shall be responsible for prior review of all procurement cases upto the threshold in the table below for which the IA shall forward the complete procurement documents to PMU OF MOUD. Prior review is generally necessary in the following conditions but each Project will be dealt with as per provisions in the Procurement Plan and Legal Agreement:

Selection Method Prior Review Threshold by

Bank

Prior Review by PMU OF MOUD Remarks

Competitive Methods (Firms)

> US $ 100,000 > US $ 50,000 and <US $ 100,000

Single Source (Firms) All NIL All single source contracts shall be subject to prior review by the Bank irrespective of value

Individual Consultants > US $ 20,000 > US $ 10,000 and <US $ 20,000

285. Prior review shall be carried out by the Bank at following stages during the process of procurement:

• Terms of Reference and cost estimates; • Short List; • RFP documents containing Letter of Invitation, Information to Consultants and

Conditions of Contract; • Evaluation report of the technical proposals; • Report after financial / combined evaluation and recommendation of the

winning firm (for information only); • Initialed Negotiated draft contact; and



• Final Contract (to be accompanied by Checklist) for obtaining WBR number from

the WB..

B) Post Review

286. All cases of procurement which do not come under the ambit of Prior Review shall be post reviewed by the Bank.

287. Post review covers the final contract along with appendices and copy of evaluation note/award recommendations, which should be submitted along with the Checklist. However, Terms of Reference and Consultants contracts for assignments of critical nature, as decided by the Bank at the time of reviewing the procurement plans and signing the loan agreement, will be reviewed by the Bank in all cases, regardless of value.

7.5.5 Types of Consulting Contracts

A) Lump Sum

288. Lump Sum contracts are used for assignments in which the content and the duration of the work is clearly defined. Payment is made upon delivery of outputs. The main advantage of this type of contract is that it is easy to administer. Examples of Lump Sum contracts include:

• Feasibility Studies • Environmental Studies • Detailed design of a standard structure

B) Time Based

289. Time Based contracts are used for assignments in which it is difficult to define the scope and the duration of the service to be performed. Payment is based upon agreed hourly, daily, or monthly rate, plus reimbursable expenses using actual expenses or agreed-upon unit prices. This type of contract provides for a maximum total payable amount that includes a contingency amount for unforeseen work and duration, price adjustments etc. Examples of Time Based Contracts include:

• Complex Studies • Supervision of construction • Training assignments • Advisory services



7.7 STANDARD PROCUREMENT PROCEDURE - PPP

7.7.1 PPP Project Types

290. “Type I PPP Projects” shall mean all projects proposed to be implemented on a PPP basis, which are sponsored by the Government of India or an agency of the Government of India or a statutory authority or other entities under control of Government of India or its agencies, Central Public Sector Undertaking and other entities under their administrative control

291. “Type II PPP Projects” means all projects proposed to be implemented on a PPP basis, not under the administrative jurisdiction of Government of India, for which:

(a) a capital grant of Rs. 50,000,000 (Rupees fifty crore) or more, or 20% (twenty percent) or more of the project value, whichever is lower, is sought or provided from Government of India; and

(b) assistance is sought as Viability Gap Funding, in conformity with the “Guidelines for Financial Support to Public Private Partnerships in Infrastructure” issued by Department of Economic Affairs, Ministry of Finance vide OM No. I/4/2005- PPP dated January 23, 2006, as amended from time to time.

7.7.2 PROJECT PROCUREMENT PLANNING

292. The Contracting Authority shall form a Tender Evaluation Committee for evaluation of Responses received as part of the Tender Proceedings.

293. The membership of the Tender Evaluation Committee shall consist of:

(a) The head of the Contracting Authority or nominated representative, who shall serve as the chairman of the committee;

(b) Representative of Ministry of Finance, or equivalent department in case of Type II PPP Projects;

(c) Secretary of the line ministry or nominated representative;

(d) Head of PPP Cell of the line ministry or nominated representative;

(e) Other members as considered necessary; and

(f) Invitees, as deemed necessary by the chairman.

294. Each member of Tender Evaluation Committee shall declare that they have no conflict of interest in the PPP Project. In case any member of the Tender Evaluation Committee has any conflict, then such member shall forthwith, without any delay disclose details of such conflict.



295. The Contracting Authority shall appoint an Independent Monitor to oversee and ensure the transparency in the Tender Proceedings and public budget allocation processes.

296. Developing the procurement plan: The Project Officer shall develop the procurement plan to undertake the procurement process.

297. The procurement plan shall:

(a) define each stage of the procurement process in accordance with the procurement method selected.

(b) lay down the schedule of the procurement process. The Contracting Authority shall comply with the schedule;

298. The Contracting Authority shall bring any deviations there from to the notice of the PPPAC for Type I PPP Projects and relevant Approving Authority for Type II PPP Projects.

7.7.3 EXPRESSION OF INTEREST

299. The Contracting Authority may adopt a multi-stage, open, competitive tendering involving a Request for Expressions of Interest, followed by a two or three-stage process, as the case may be, in PPP Projects where the Contracting Authority is unsure of the likely interest from private entities in the PPP Project, or where it is keen to seek suggestions from private entities on how best to design the project scope or other parameters of the PPP Project.

300. The Expression of Interest shall not be used to either shortlist or disqualify Bidders and any entity which have not submitted EOIs shall also be allowed to participate in the RFQ Stage as per terms and conditions that may be specified thereof.

301. Preparation of the Request for EOI (REOI): The Project Officer shall prepare the REOI. 2. The REOI shall contain:

(a) the description of the PPP Project

(b) the request for expressions of interest.

(c) a closing date for seeking clarifications.

302. The REOI shall specify sufficient time to the interested parties to consider the REOI, form a team if they decide to express interest as a consortium, respond with any questions or requests for clarification, and to prepare and submit their EOIs.

303. The Contracting Authority shall seek registration of Applicants prior to the issue of the REOI. In the case of electronic issuance of the REOI, an online form shall be provided where as in the case of issue of a hardcopy, an application letter seeking



specific details will be sought. Applicants shall be asked to provide details including but not limited to the following:

(a) Name of the organisation;

(b) Contact person with designation;

(c) Address;

(d) Telephone and fax numbers; and

(e) E-mail address.

7.7.4 REQUEST FOR QUALIFICATION

304. Request for Qualification Stage shall be undertaken to:

(a) make public the information on the PPP Project and the services/infrastructure that the Contracting Authority seeks to obtain;

(b) communicate the proposed timeframes and the qualification criteria;

(c) ascertain the level of interest in the PPP Project and provide an avenue through which Respondents can comment on the proposed PPP Project; and

(d) allow the Contracting Authority to qualify Applicants for the RFP Stage who are most capable of meeting project objectives over the project term.

305. The Project Officer shall prepare the RFQ. The Project Officer shall ensure that:

(a) the RFQ contains sufficient information to allow potential Respondents to form a view on whether they have sufficient capabilities and identify potential partners for the PPP Project; and

(b) the information requested from the Applicants is such that the Contracting Authority can qualify the Applicants.

306. Contents of RFQ: The Project Officer shall adopt the Model Request for Qualification for PPP Projects in infrastructure dated May 18, 2009 issued by PF-II Section, Department of Expenditure, Ministry of Finance, as amended from time to time. The Contracting Authority shall deviate from the model documents referred in this sub-Rule only for the purpose of making the model documents suitable for a particular sector or PPP Project. All such deviations from the model tender documents shall be with the approval of PPPAC for Type I PPP Projects and relevant Approving Authority for Type II PPP Projects. The RFQ document shall contain the following:

(a) a description of the PPP Project, the estimated project cost and the project structure. This section shall also have the description and schedule of the Tender Proceedings;



(b) the conditions of eligibility of Applicants, the information sought from

Applicants for qualification and the form and procedure of the Application;

(c) a description of the parameters and method of evaluating qualification of Applicants, the objective of the evaluation should be to identify Qualified Applicants that have the requisite capability to take up the PPP Project; and

(d) the criteria or conditions, if any, for the disqualification of Applicants, such as, Conflict of Interest, national security and other relevant considerations.

7.7.5 REQUEST FOR TECHNICAL PROPOSAL

307. Applicability of Request for Technical Proposal (RTP) : An intermediate RTP Stage may be adopted prior to the RFP Stage.

308. Preparation of the RTP document: The Project Office shall prepare the RTP. The RTP shall provide sufficient time to the Qualified Applicants to request any clarifications, and to prepare and submit Technical Proposals.

309. The RTP shall specify the minimum technical requirements, which will be formulated based on the Feasibility Study. The Minimum Technical Requirement (MTR) shall be a description of what is sought to be achieved, but not the means by which it is to be achieved. The MTR shall necessarily include the following:

(a) description of the scope of the PPP Project; which shall mean the physical facilities that need to be constructed, the capacity of each such facility or its component and related aspects;

(b) output specifications; which shall mean the description of the target users, levels of service, quality standards and performance parameters;

(c) construction requirements; which shall mean the design codes or standards that the facility must comply to, including for management of social and environmental impacts;

(d) operation requirements; which shall mean the standards to be followed for operations of the facility and provision of service including standards for safety, security, labour relations, quality, monitoring, reporting and dissemination. This would also include required service levels to be offered to customers including waiting times, standards for grievance redressal;

(e) maintenance requirements; which shall mean the maintenance standards and schedule for compliance; and

(f) testing and performance monitoring requirements; which shall specify the tests that would be carried out for performance monitoring and the key performance indicators that would be monitored.

310. The RTP shall require the Qualified Applicants to submit responses on the technical solution, business solution and financial plan for implementing the PPP Project. The Contracting Authority shall define and document the specific requirements for Technical Proposal for each PPP Project in the RTP.



7.7.6 REQUEST FOR PROPOSAL

311. The Project Officer shall prepare the RFP and the Draft Concession Agreement. The RFP shall formally solicit binding Final Offer from Bidders.

312. The Project Officer shall adopt the Model Request for Proposal for PPP Projects dated November 30, 2007 issued by PF-II Section, Department of Expenditure, Ministry of Finance, as amended from time to time. The Contracting Authority shall deviate from the model documents referred in this sub-Rule only for the purpose of making the model documents suitable for a particular sector or PPP Project. All such deviations from the model tender documents shall be with the approval of PPPAC for Type I PPP Projects and relevant Approving Authority for Type II PPP Projects.

313. The Request for Proposal shall necessarily have the following components:

(a) Feasibility Report/ Project Information Memorandum: This component of the RFP is directed towards providing such information to Bidders that is adequate for them to evaluate the PPP Project and estimate their Final Offer. Such information would include, but would not be limited to:

(i) Project objectives and rationale;

(ii) Site details;

(iii) Role of the Appropriate Government, key agency and stakeholders;

(iv) Project scope in accordance with Rule 80: and

(v) Output specifications;

(b) Instruction to Bidders: This component of the RFP is directed towards defining the process of Bid submission and evaluation. This section shall include all procedures, terms and conditions which should be followed by the Bidders for submission of their Bids and which would be followed by the Contracting Authority in accepting and evaluating the Bids;

(c) The draft Concession Agreement which shall govern the contractual relations between the Concessionaire and Contracting Authority. The draft Concession Agreement shall contain rights and obligations of both the parties, definition of the subject matter of the agreement, payment terms, performance obligations, defaults and their consequences, events of termination and other ancillary clauses. The provisions of the draft Concession Agreement shall necessarily cover:

(i) Recitals- identifying the parties to the contract, offer and acceptance;

(ii) Definitions- defining the key terms of the contract to ensure uniformity of usage and interpretation throughout the document;

(iii) Scope of the PPP Project;



7.7.7 POST AWARD PROJECT AND CONTRACT MANAGEMENT

314. Contract Management Team: The Contracting Authority shall constitute a Contract Management Team (CMT) headed by a contract management director and assisted by a team with financial, technical and legal capabilities.

315. The CMT shall be constituted on or prior to the date of issue of the LOA to the Preferred Bidder.

316. The Project Officer shall provide all documents and communications including the procurement report in relation to the PPP Project to the CMT.

317. The Project Officer shall be a member of the CMT at least, until the execution of the Concession Agreement.



8 MONITORING AND EVALUATION FRAMEWORK

318. Monitoring and Evaluation (M&E) of projects provides funding agencies, implementing agencies, governments and civil society with a means for learning from past experience which in turn would enable better performance, improve quality, plan and allocate resources in a cost effective manner and get better results.

319. Monitoring could be defined as: “A continuing function that uses systematic collection of data on specified indicators to provide management and the main stakeholders of an ongoing development intervention with indications of the extent of progress and achievement of objectives and progress in the use of allocated funds”

320. Evaluation could be defined as: “The systematic and objective assessment of an on-going or completed project, program or policy, its design, implementation and results. The aim is to determine the relevance and fulfilment of objectives, development efficiency, effectiveness, impact and sustainability. An evaluation should provide information that is credible and useful, enabling the incorporation of lessons learned into the decision–making process of both recipients and donors”.

321. M&E is required for two purposes. The first is for the M&E of project implementation while the second is for the M&E of project outcomes. In either case, M&E has to be done using a set of performance indicators.

8.1 PERFORMANCE INDICATORS 322. Performance indicators are measures of inputs, processes, outputs, outcomes, and impacts for projects and programs. When supported with sound data collection—perhaps involving formal surveys—analysis and reporting, indicators enable project managers to track progress, demonstrate results, and take corrective action to improve service delivery. Involvement of key stakeholders in defining indicators is important because they are then more likely to understand and use indicators for management decision-making.

8.2 M&E OF PROJECT IMPLEMENTATION 323. During implementation, each PIU shall monitor and evaluate progress and results against a work plan and results framework. The PIU team members should meet at least once every month to review the progress in implementing the detailed work plan developed at the commencement of the project/program. The specific aims of these meetings would be to monitor timelines and expenditures in the completion and delivery of scheduled activities and outputs respectively, and highlight exceptions. At



these meetings Managers of ongoing contracts awarded to implement various components, should submit a report on all relevant aspects, including:

• Proportion of scheduled activities that were commenced and completed on time.

• Proportion of scheduled expenditure incurred for the activities undertaken

• Details of activities that were started or finished late

• Problems that were experienced or are anticipated and proposed remedial actions

• Major activities planned for the next month.

324. Each PIU shall send a monthly progress report to the PMU summarizing the above aspects. In addition, it shall prepare a composite quarterly report on project implementation, and submit it to the PMU within 3 weeks form the end of the quarter covered.

8.3 M&E OF PROJECT OUTCOMES 325. A simplified results framework for this project which sets out the expected linkages between project/program interventions, and the Project’s/Program’s Development Objective (PDO) has been given PID Volume 3. This framework delineates outcome and output indicators for each PDO and associated intermediate outcomes. PIUs shall use the identified indicators to monitor and evaluate the project outcomes. To avoid collecting redundant, or, an excessive volume of under utilized data, indicators should:

• Correspond to the PDO/intermediate outcome/output

• Be credible

• Be derived from reliable data that is currently or can be easily collected

• Be straightforward.

326. Each indicator should have a baseline and target values. A baseline value represents the value of the indicator prior to implementation of a project/program. All PIUs should establish the baseline values prior to project implementation. Target values as expected in the PDO shall be the basis for monitoring, evaluating and reporting performance over time through the collection of time series data. The PIU should periodically review targets for reasonableness, and where necessary revise them in consultation with the PMU.

327. Baseline and time series data can be collected through a variety of methods including mining existing data repositories, rapid appraisal methods, surveys, expert panels, key informant interviews, extraction from other data sources, ad hoc studies etc. Each method has its advantages and disadvantages with respect to data quality and collection cost. Formal data collection methods (e.g., large-scale random sample surveys) typically deliver excellent quality data, but, the cost of data collection is high.



Informal methods (e.g. key informant interviews) typically produce low quality data but also cost much less.

8.4 DATA COLLECTION AND REPORTING 328. Each PIU shall identify appropriate indicators for monitoring and evaluation of the project implementation. It can also procure the services of a competent agency through appropriate procurement process to monitor and evaluate the outcomes of the project, if required. It would be necessary for the PIU to provide the terms of reference for such services. This would specify how, where and when baseline and time series data is to be collected, collated, analyzed and presented.

8.5 PUBLIC PARTICIPATION IN M&E 329. The PIU should prepare quarterly reports which narrate the activities completed, and outputs and outcomes delivered by the program highlighting successes; constraints; and whether planned targets were achieved or otherwise. This should be presented on a component-by-component basis. The reports are to be submitted to the PMU within 3 weeks from the end of the quarter covered. In addition to its own findings, the PIU could also rely on external evaluators to mitigate any risks associated with not meeting the PDO. Such independent evaluators could advise on such aspects as:

• Whether the project’s/program’s essential elements are in place

• Whether the PDO and other targets are likely to be met

• The impacts of any unexpected developments that have taken place since project initiation

• Impact on project/program beneficiaries and whether positive impacts can be sustained

• Steps to be taken to enhance the project/program benefits as implementation progresses.

330. The PIU should establish a Management Information System (MIS) - preferably a computerized system - which can be used to store baseline and time series data, and generate reports. Such reports should be available for public access on a website created for this project and feedback received should also be published.

8.6 REPORTING BY THE PMU 331. The PMU will prepare composite quarterly project reports to describe the physical progress in all project cities, as well as outputs and outcomes delivered by the program highlighting successes; constraints; and whether planned targets were achieved or otherwise. These project reports will be sent to the World Bank not later than 45 days after the end of the quarter covered by such report.



8.7 MONITORING AND REPORTING OF ESMF 332. Implementing agency in each of the states where there is a single project and the corresponding agency for each project in case of multiple projects will be responsible for monitoring and reporting at project level to the state level implementing agency or the Project Implementation Unit. The PIU would in turn report to the PMU at the centre.

333. An officer in PIU shall be designated as the Environment & Social Safeguards officer to ensure compliance of the project activities with the World Bank safeguards as well as oversee implementation of environment and social provisions as per the ESMF, EMP and RAP where applicable. The objectives of Monitoring and Evaluation include:

• Successful completion of Environmental management, R&R activities identified in the EMP and R&R plan as per the implementation schedule; and

• Compliance with the Environmental policy, R&R policy and entitlement framework.

334. The safeguards officer shall play a key role in reporting the progress of implementation as well as compliance to the PIU, PMU and the World Bank. Reporting system recommended in the ESMF needs to be adopted with due modifications specific to the project. The aspects to be monitored are presented below:

• For R&R activities: - Notification of Land Acquisition, Land Value Assessment, Census Survey Notification, Socio-economic profile, Relocation plan for common property resources & cultural property and Grievance Redressal

335. For EA activities: - Air Quality at Sensitive Receptors, Noise Levels at Sensitive Receptors, Surface Water Quality Rivers in the vicinity of project areas, Benefits and Survival Rate of Plantation.



Urban Mass Transit Company Limited xci

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