Recent Experience and Lessons Learned with the Use of Performance Based Contracts Cesar Queiroz...
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![Page 1: Recent Experience and Lessons Learned with the Use of Performance Based Contracts Cesar Queiroz Roads and Transport Infrastructure Consultant Transport.](https://reader035.fdocuments.in/reader035/viewer/2022062417/5514fbb2550346b0338b6407/html5/thumbnails/1.jpg)
Recent Experience and Lessons Learned with the Use of
Performance Based Contracts
Cesar QueirozRoads and Transport Infrastructure Consultant
Transport and Telecommunication InstituteRiga, Latvia, March 6-8, 2007
Regional Workshop on Public-PrivatePartnership in Transport
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Presentation Outline• Forms of price-based contracts
• Where have PBC approaches been used?
• What have been the results?
• What are the potential pitfalls?
• How do you avoid them?
• World Bank Resource Guide on PBC
• Lessons Learned
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Importance of Timely Maintenance
• It is estimated that $1 spent on timely maintenance can save more than $3 that would be required for road reconstruction
• A well maintained paved road should last for 10 to 15 years before resurfacing, but lack of maintenance can lead to severe deterioration in 5 years
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Forms of Price based Contracts
• Lump sum - payment based on a single price for the total work
• Admeasure - payment based on quantity of completed work and tendered rates (bill of quantities)
• Performance - payment based on performance (or results) achieved
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Performance Based Contracts Have Several Names
• Output and Performance Based RoadContracts (OPRC)
• Performance Based Contracts (PBC)• Performance Specified Maintenance
Contract (PSMC)• Performance Based Management and
Maintenance of Roads (PMMR)• Output Based Service Contract• Performance Based Road Asset
Management and Maintenance Contract
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PBC in Different Countries• Performance specified maintenance contract
in AU, NZ, Canada (3-10 years)
• CREMA (Contrato de REcuperacion y MAntenimiento) in Argentina, Brazil, Uruguay
• Warranty contracts in USA
• Asset Mgnt & Maint Contracts in VA, USA
• DBFO (up to 30 years) in UK, Finland, Portugal
• Some are hybrid type contracts (i.e., quantity-based and performance-based)
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Why PBC?• Reduced administration: less effort to
measure works
• Avoid frequent claims and contract amendments to increase quantities of activities
• Client focus: pay on the basis of user-related performance indicators
• More responsibility to contractors stimulates initiative and innovation
• Development of a new industry and creation of additional job opportunities
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Potential Pitfalls of PBC
• Longer tendering period• Perceived loss of control and
flexibility by road agencies• Uncertainty of long term relationship• Lack of some (or unclearly specified)
performance standards and level of service
• Possible unfair competition for smaller contractors
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Success Factors for PBC
• Training workshops
• Technical studies
• Prequalification of contractors
• Bidding process
• Supervision arrangements
• Facilitation during pilot contracts
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Training Workshops
• Target Audience: road agency, road users, contractors, consultants, donors
• Explain basic concepts
• Explain potential benefits
• Show examples from other countries
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Technical Studies
• Carried out by road agency / qualified consultants
• Select candidate roads• Carry out detailed technical evaluation• Determine adequate service levels to
be monitored through key indicators• Estimate likely costs (benchmark
costs)
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Prequalification of Contractors
• Analyze capacity of contractors
• Determine prequalification criteria
• Organize workshop for potential bidders
• Carry out prequalification process
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Bidding Process
• Prepare and launch bidding documents
• Organize pre-bid seminar for prequalified bidders
• Answer queries / issue addendum• Carry out bid evaluation• Award contracts
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Supervision Arrangements• Determine adequate supervision
arrangements: consultants (individual or firm); road agency staff (e.g., Argentina, Estonia)
• Prepare TOR and Supervision Manual• Train road agency staff and local
consultants• Coach supervisors during initial
period
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Payments under PBC Contracts: Mostly based on the service provided
• The contractor has to ensure that road users get a certain Level of Service
• Level of Service defined in terms of usability, road surface conditions, safety features, roadside assistance, etc.
• Specifications included in Contract describe Level of Service expected for each road
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Level of Service: Unpaved RoadsGeneral• Road open to traffic• Average traffic speedUser Comfort & Safety• Corrugation• Rut Depth• Other surface degradations• Useable road width• Cleanliness of surface• Drainage cleanliness, condition • Vegetation control
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Level of Service: Paved Roads• Roughness
• Potholes / Patching
• Cracking
• Cleanliness of surface
• Rutting / Ravelling
• Broken pavement edges
• Shoulder drop-off, condition
• Drainage cleanliness, condition
• Vegetation control
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Facilitation During Pilot Contracts• Select and hire Facilitator (e.g., Serbia’s
Twinning Arrangements with Sweden)
• Facilitator should be neutral and independent
• Facilitator to conduct training and coaching of staff of road agency, contractor, supervision consultant
• Systematic evaluation of results and experience --- Learning Process
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UNIT SALT AND AGREGATE CONSUMPTION (WINTER SEASON 2005/2006)
5.25
8.14
24.31
6.15
0
5
10
15
20
25
30
t/km
Pilot Project 5.25 6.15
Central Serbia 8.14 24.31
Unit Salt Consumption (t/km) Unit Aggregate Consumption (t/km)
UNIT COST OF WINTER MAINTENANCE (WINTER SEASON 2005/2006)
892.94
1,518.66
0
200
400
600
800
1,000
1,200
1,400
1,600
euro
/km
Pilot Project 892.94
Central Serbia 1,518.66
Unit Cost of Winter Maintenance (€/km)
Source:
Serbia: Routine and Winter Maintenance Pilot Project
Žarko Belić Belgrade October 3, 2006
PBC Savings in Serbia
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Reconciling the Interests of Three Actors
Road Agency
Contractor
Road Users
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Road Agency
• Objective: meet public demand for safe and smooth roads; reduce budget expenditures
• Alternatives: force account, admeasure, performance-based, concessions
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Road Users
• Acceptable level of service
• Safety
Contractor
• Risks and profit competitive with other investment alternatives
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World Bank Resource Guide for Performance-based Contracting• Sample Bidding Document• Sample TOR for preparation of PBC
projects and support to bidding process
• Sample TOR for Supervision• Sample TOR for Facilitator / Trainer• Sample Technical Specifications• WB Technical Note No. 27 on PBC• Actual Contracts• Resource People
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World Bank Resource Guide for Performance-based Contracting
Available on the WB website at:
http://www.worldbank.org/transport/roads/resource-guide/index.html
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Lessons Learned:Contracting
• Ensure solid and credible financing of contract during the entire contract period
• Use of small local contractors: Only after adequate preparation and training, and for contracts with very simple requirements (or as subcontractors)
• Build in a Dispute Resolution Mechanism
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Lessons Learned:Management of PBC
• Supervision consultant’s role: control service level and assure overall technical quality - - but no micro-control and micro-management
• Road agency staff changed role: from performing quality control to focusing on quality assurance (no longer counting cubic meters…)
• Arrange communication links with contractors, including regular review sessions
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Lessons Learned:Planning of PBC
• Define clear and simple performance standards and measures before advertising bids
• Include only “maintainable” roads (unless rehabilitation is envisaged)
• Have consistent documents and requirements
• Do not try to impose too many risks on the contractor
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Allocation of RisksAllocation of RisksForce Account
High
RISKTO
PUBLIC SECTOR
LowRISK TO PRIVATE SECTOR High
Maintenance Contracts
PBC
Concessions
Decreasing Public Risks,
Increasing Private Risks
BOO
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Thank you!
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Some Basic ReferencesWorld Bank (2006). “Resource Guide for Performance-based Contracting.” Washington, D.C. http://www.worldbank.org/transport/roads/resource-guide/index.html
World Bank (2005). “Performance-based Contracting For Preservation and Improvement of Road Assets.” Transport Note No. 27. Washington, D.C. http://www.worldbank.org/transport/roads/resource-guide/Docs-latest%20edition/PBC/trn_27_PBC_Eng_final_2005.pdf
World Bank (2005). “Sample Bidding Document: Output- and Performance-based Road Contract (OPRC).”http://www.worldbank.org/procure/
World Bank (2003). “Toolkit for Public-Private
Partnership in Highways.” Public-Private Infrastructure Advisory Facility (PPIAF) and World Bank. http://rru.worldbank.org/Documents/Toolkits/Highways/index.htm
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Cesar QueirozRoads and Transport
Infrastructure ConsultantWorld Bank, 1818 H Street NW
Washington DC 20433 USATel +1 202-473 8053
Mob +1 301-755 7591Email: [email protected]://www.worldbank.org/trans
porthttp://www.worldbank.org/
highways