Contracting in Urban Transport

1. Contracting in Urban Transport

2. Structure of Presentation • Objectives of Module • Case Example • Preparation of Feasibility Report (FR) and Detailed Project Report (DPR) • Procurement Process • Contracting Options and Case Studies • Procurement Strategies • Preparation of RFQ/RFP • Bid Process Management • Contract Management

3. Objective of Module The Contracting module is developed with an objective to make the users mainly understand the following • Components of project life cycle • Preparation of Feasibility Report and DPR, and their appraisal • Preparation of Terms of Reference (TORs) and Request for Proposals(RFP) • Procurement and contracting strategy for urban transport projects • Preparation of bid documents , contract documents and Agreements • Project implementation options and models • Preparation of various types of procurement documents and contract documents • Bid process, evaluation and award of contracts • Supervise/ monitor/ manage projects

4. Case Example

5. Background • In a Standing Committee Meeting of an urban local body held on 25th January 2012, based on advise of a city engineer, a decision was taken to develop 2 urban roads. • The City Engineer is advised to implement the project immediately and accordingly a Notice Inviting Tender (NIT) is to be issued by him on 30th January 2012 • What are the issues in this entire process ?

6. Problems and Issues • The Standing Committee took a decision on implementation of the project without conducting a Feasibility Study/ DPR and neither advised the City Engineer to get a DPR/ Feasibility Study conducted • The Project Implementation Options were not deliberated upon. The project could be implemented on a PPP basis or through funding support from other Government agencies • If the city does not have internal resources/ capacity to conceptualize/ structure the project, external assistance from advisors/ consultants should have been taken before issuing the NIT.

7. Notice Inviting Tender • Given below is a tender notice that appeared in the newspapers. Read the tender notice and list out all the lacunae that you find Government of ………………/ Government of ……………..Urban Development Trust …………………………Municipality Tender Notice No:8/ ____________/__________/12-13 Dated:30-1-2012 The Municipal Commissioner,………………… Municipality, invitees sealed tenders from interested bidders for “Providing Street lighting in the unserved areas in Package-A: Road No ……to……. Of Sector …… and Package-B: Road No ……to……. Of Sector ……” Estimated Contract value of work is (a) Rs 255.55 lakhs (b) Rs 154.85 lakhs. Last Date for receipt of tenders including EMD is before 3.00Pm on (a) 21-01-2013 (b) 21-01-2013. Documents can be purchased from the Municipal Commissioner , …………….Municipality Ph.No……………..,Fax No…………..by remitting a D.D. or Municipal Challan for Rs 22,000/- before 5.00pm on (a) 16-01-2013 (b) 16-01-2013. Other details regarding eligibility etc. are in the tender documents. Sd/- (City Engineer,……….)

8. Lacunae in the NIT Following are the lacunae for the above Tender Notice • Eligible/Qualification of bidders not mentioned • Bidders are eligible to apply for individual packages or not • Eligibility in terms of joint venture and consortium details not mentioned • EMD amount not mentioned • Pre-bid meeting and contact person to be contacted • Application sale start dates • Qualification Criteria in terms of technical and finance • Is the Cost of tender document of Rs 22,000/- is for Package (A) or both packages

9. Project Life Cycle

10. Project Life Cycle

11. Preparation of Feasibility Report & DPR

12. Defining Feasibility Report and DPR • Introduction and Objective of Study • Project Need and Justification, Project Area Characteristics • Existing Situation and Anticipated Demand • Options Considered and Comparison of Feasible Options - Preliminary technical & financial assessment • Conclusions and Recommendations- Gives a GO/No GO • Introduction and other elements same as Pre-feasibility Report • Definition, Scope and, Purpose • Technical Specifications- Scope, Features of the project, location, broad alignment • Examination of the Critical Risks and Problems of the Project • Broad estimation of Financial and Economic returns from the project • Evaluation and Conclusion- Gives Recommendations - is the project technical and financially feasible and does it warrant a DPR to be made • Introduction and other elements same as Feasibility Report • Existing Situation - Traffic and Transportation Characteristics - Issues and Policy • Project Details - Detailed Design and drawings of Project components - Technical Specification – Detailed Project Cost and BoQ • Social and Environmental Impacts • Project Implementation Framework - Project Institutional Framework • Project Financial Structuring and Phasing - Project O&M Framework and Planning • Project Financing - Financial Viability & Sustainability - • Project Benefits Assessment (Social Cost-Benefit Assessment) - Risk Management Framework • Conclusion - Detailed Design Drawing and Technical Specification ; Cost and Revenue Estimates Pre-Feasibility Report Feasibility Report Detailed Project Report

13. How to select a Consultant for Preparing DPR? Procedures and steps for hiring consultants • Preparation of cost estimate and budget • Preparation and issue of: • Request for Proposal (RFP); • Letter of Invitation (LOI) • Information to Consultants (ITC) • Proposed Contract • Receipt of proposals • Evaluation of technical proposals: consideration of quality • Evaluation of financial proposal • Final evaluation of quality and cost • Negotiations and award of the contract to the selected firm

14. Selection of Consultants • Selection of Consultants • The hiring of consultants should be undertaken through competition among qualified short-listed firms • Selection should be based on technical proposal and on the cost of the services to be provided (Quality & Cost Based Selection [QCBS]). • Other acceptable selection procedures in addition to QCBS are as under : • Quality Based Selection (QBS) • Fixed Budget Selection (FBS) • Least Cost Selection (LCS) • Single Source Selection (SSS) • Selection of individual consultants

15. Terms of Reference for engaging a Consultant • A precise statement of objectives • Define Scope of work • An outline 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 to monitor the Consultant’s works • Procedures for – Mid-term review and Progress Reports required from Consultant • Experience Profile of the Consultant • List of key positions - CV and experience would be evaluated

16. How to appraise the DPR? • Project Appraisal is an important step for accessing grants (financial). • The Local Agencies should make sure that the DPR should fulfill guidelines and parameters laid out under the schemes of the funding agencies. • The DPR appraisal criteria include the following: • Technical • Financial • Social and Environmental • Institutional

17. Checklist for Appraisal of DPR – JnNURM Technical Appraisal • Objectives/Project Details & Need for the project • Compliance with National Urban Transport Policy • Whether CDP/ CMP is prepared, appraised and approved • Is PPP envisaged or not • Land Required under Project and Status of Land Acquisition. • Timelines for implementation • Whether Project technical feasibility study has conducted surveys for explaining existing conditions • List anticipated hindrances in project implementation and measures for solutions • Assessment of the existing user demand and forecast the same • A detailed design of physical infrastructure, bill of quantities and cost estimates. • An evaluation plan & a detailed list of monitoring and evaluation indicators for the project outcomes

18. General Appraisal Criteria - JnNURM Financial & Economic Appraisal • Phasing and Estimated (Amount/Share) cost of the Project, O & M Cost and Financial Sustainability • ULB/Parastatal share (financial); Funding Pattern – for Capital cost and to meet O&M expenditure • Project proposals shall present the cost-benefit analysis incorporating a life-cycle cost analysis • Technical feasibility and selection of a least life-cycle cost should be based on financial and economic viability parameters • For ULB/parastatal agency-sponsored projects, DSCR (incl. sinking & revolving fund), should be at 1. • The cost- benefit analysis for individual projects of Rs.50crores or more shall demonstrate a positive Net Present Value (NPV) and an ERR equal to or above the appropriate opportunity cost of capital. • For projects undertaken by Special Purpose Vehicle (SPV) on a Public-Private Partnership (PPP): • Internal Rate of Return (IRR) greater than the cost of capital raised for the project. • Proposal shall demonstrate financial viability based on a targeted IRR of at least 200 basis points above cost of capital. DSCR should not be less than 1.25. • Project should provide an Economic Rate of Return (ERR) greater than the cost of capital and the proposed minimum

19. General Appraisal Criteria - JnNURM Social & Environment Appraisal Social and Environment • Whether proper identification of environmentally and socially sensitive areas has been carried out. • Whether Environmental Assessment Study outcomes and Social Assessment Study clearly listed • Incorporation of suggestion on mitigation measures to minimize the negative impacts • Whether all concerned authorities issued clearance, ed. Environmental. NHAI and others Institutional • Assessment of existing required Institutional framework of the implementation and further monitoring of project • Identification of areas for capacity building and strengthen of institution Institutional

20. Procurement Process

21. Procurement Process

22. Procurement As per the Procurement Bill 2012 of Indian Government, ‘‘procurement’’ or “public procurement” means the acquisition of works, goods or services by a procuring entity, and includes all stages of the process of acquisition, by purchase, lease, licence or otherwise, of works, goods or services, beginning with the process for determining the need for such acquisition and ending with completion and expiry of the procurement contract or framework agreement, but does not include any acquisition without consideration, and “procure” or “procured” shall be construed accordingly.

23. Procurement As per the Procurement Bill 2012: • Bill apply to Ministry or Department of the central Government, any Central Public Sector Undertaking (50%), or authority or society or trust or autonomous body (by whatever name called) established or constituted under an Act of Parliament or a body owned or controlled by the Central Government. • Bill shall not apply to procurements, which are less than INR 50 lakhs, emergency procurements made for disaster management, and procurement for the purpose of national security. States Government should follow their own acts and regulations for procurement of good and services

24. When do you start thinking about procurement? Source: CRISIL Risk and Infrastructure Solutions Limited.

25. Contracting Options

26. Public Private Partnerships (PPP) vs. Engineering Procurement Construction (EPC) Contracts Source: http://ecurrentaffairs.in/blog/special-article-on-epc-mode-vs-ppp-mode-for-national-highways/

27. Project Implementation Options

28. Contracting-Urban Rail Transit System

29. Contracting- Bus System

30. Contracting- Bus Depots and Terminals

31. Contracting- Multi-level Parking Projects

32. Risk Structuring/ Mitigation

33. Key Risks in project financing of Urban Transport • Before Project Construction • Land Acquisition • Permits and clearances • R &R • Financial Closure • During Construction • Unforeseen physical challenges (soil type etc) • Unfactored Inflation /forex/ interest rate changes • Inadequate Design • Technology choice • Utilities shifting • Force Majeure • After Construction (Operation Stage) • Ridership/Demand • Tariff / Political • Operations and Maintenance • Force Majeure Commissioning Risk Construction Risk Demand Risk Design Risk Environmental Risk Financial Risk Force Majeure Risk Indst. Relations Risk Latent Defect Risk Operating Risk Performance Risk Change in Law Risk Residual Value Risk Technology Risk Upgrade Risk

34. Matrix of Risks Distribution-Typical Road Project on PPP Mode

35. Risk Structuring / Mitigation • Risk can be structured/ mitigated in 5 ways: • controlled or shared, as in a contract; • switched from one party/support to another by means of a trigger • financed, such as through standby loans; • deemed reduced, per study results; or • avoided altogether.

36. Case Studies

37. Hyderabad Metro • Concessionaire : L&T • Cumulative Length: 71.16 km • Project Cost: Rs 12132 Cr. • Govt. Grant: Rs 1458 Cr. • Concession Period: 35 years (with extension for 25 years) • Govt. owns “Golden Share” in SPV- one representative on Board with affirmative powers • Real Estate Development at: • 3 Depots : Total cumulative area- 11.61 Lakhs sqm. • 25 Stations: Total cumulative area- 5.57 Lakhs sqm. • Automatic Annual Fare Revision linked with WPI • Revenue Share with Govt: (Ceiling 10%)

38. Modalities of Implementation of Gurgaon Metro • Shareholders in Concessionaire Company: • IL&FS Rail- 48% • ITNL- 26% • DLF- 26% • Based on DBFO model • Total Concession Period: 99 years • Schedule and fare integrated with DMRC

39. Bus Terminus Developed on PPP

40. Case Study – Ahmedabad, BRTS • SPV contracts and monitors • Buses procured by operator and operating on gross cost + incentives basis • Minimum guaranteed kms committed by SPV • SPV has financial as well as manpower support from MC • Fare revision linked with change in fuel price & WPI, periodic revision on 1st April of every year • Cost/km revision wrt change in fuel & WPI • Incentives/penalties linked with pre-defined performance parameters • Change in schedule, fleet size at the discretion of SPV • System sustainability: breaking even

41. Case Study – Ahmedabad, BRTS • PPP Responsibility Matrix for BRTS Components

42. Case Study – Ahmedabad, BRTSIntelligent Transit Management System (ITMS) - Integrated Overview Source : Janmarg, Ahmedabad

43. Case Study – Ahmedabad, BRTSIntelligent Transit Management System (ITMS) - Conceptual Overview of AJLITMS

44. Case Study – Ahmedabad, BRTSITMS Contract • Scope of the Service Provider • Integrated contract comprising the installation, commissioning, operations and maintenance of the following • Passenger Information System (PIS ) • Automatic Fare Collection System (AVLS) • Automatic Vehicle Operating system (AFCS) • Financial Management System (FMS) • Decision Support Systems (DSS) • Fare Collection at the Bus Stations • Operations of the Central Control room including • Fleet and System Monitoring • MIS and Reporting • Integration with Depot Operations • Provision of • Maintenance of A Disaster Recovery Centre

45. Case Study – Ahmedabad, BRTSITMS Contract • Contract Design • Purchase of Hardware and Software on outright purchase basis • Monthly payments for Operations and Maintenance of Hardware and Software (payment per bus, bus station and for CCC) • Monthly payments for Fare Collection Operations at Bus Stations and other Manpower needs for CCC • Monthly contracts for 72 months • Challenges in terms of deciding whether to adopt BOT method • The first bid issued followed a mix of Supply cum Maintenance on BOT. • Second bid issued follows a pure Supply and Maintenance removing BOT part • Qualification of Bidders • Technical Experience in AFCS, PIS or AVLS for Lead Member • Presence in Information Technology Industry • Criteria for Size (Financial Turnover),

46. Procurement Strategies

47. Procurement Strategies There are various methods of procurement, some of them are: • International Competitive Bidding • National Competitive Bidding • Limited International Competitive Bidding • Shopping • Direct Contracting • Procurement from Specialized Agencies • Procurement in Loans to Financial Intermediaries' • Performance based Procurement • Procurement under Disaster and Emergency Assistance

48. International Competitive Bidding (ICB) Appropriate method of procurement for large contracts & for specialized technical inputs ICB is in most cases employed when the contract value is beyond a threshold value It is the accepted mode of procurement as per most of the multi-lateral agencies and for contracts such as concessions, BOT, BOOT etc National Competitive Bidding (NCB) • NCB is efficient and economical way of procurement which, by their nature or scope, are unlikely to attract foreign competition. • NCB may be the preferred method of procurement where: • The contract values are small • Works are scattered geographically or spread over time, and labour intensive • The goods or works are available locally at prices below the international market.

49. Limited International Competitive Bidding (LIB) • Direct invitation without any open advertisement • It is suitable where there is only a limited number of suppliers • Amount of contract is not large enough to attract foreign suppliers and contractors • Under LIB, borrowers seek bids from list of potential suppliers broad enough to assure competitive prices Shopping (International/National) • Based on comparing price quotations obtained from several suppliers; usually at least 3 • It is an appropriate method when: • The procurements is of readily available off-the-shelf goods or standard specification commodities • The procurement is of small value • International shopping shall solicit quotations from at least 3 suppliers from 2 different countries. While, National shopping may be used where the desired goods are ordinarily available from more than one source in the country

50. Direct Contracting • Direct contracting without competition (single source) may be an appropriate method under the following circumstances: • There is an existing contract which might be extended for related goods and services • The equipment compatible with existing assets of the procurer is available only from a single supplier • The contractor responsible for a process design requires the purchase of critical items from a particular supplier as a condition of a performance guarantee. • In exceptional cases, such as in response to natural disasters.