Performance Indicators of Transport Infrastructure PPP Projects

1. Ministry of Economy of Poland and World Bank Seminar on Legal, Economic and Implementation Issues in PPP Projects Performance Indicators of Transport InfrastructurePPP Projects César Queiroz Roads and Transport Infrastructure Consultant Warsaw, Poland, June 17 and 18, 2008

2. Presentation Outline • Summary of performance-based contract (PBC) experience • An example from the US Virginia Department of Transportation: Performance criteria • Example of legal framework • Performance criteria for dredging works • From performance-based contracts (PBC) to concessions • Success factors for a PPP project

3. Summary of PBC Experience in the USA

4. PBC Experience • US State of Virginia http://www.virginiadot.org/projects/constSTAN-I81-overview.asp • US State of Florida http://www.dot.state.fl.us/statemaintenanceoffice/asset.htm • US State of Texas http://www.dot.state.tx.us • Other Countries Include: Estonia, Serbia, Australia, New Zealand, Canada, Sweden, Finland, Argentina, Brazil

5. An Example of Invitation for Bid with Expected Outcome and Tolerance • Virginia Department of Transportation, Invitation for Bid IFB# 156-RT, Issued on July 27, 2007 • Scope: Turnkey Asset Maintenance Services (TAMS) of I-81 and I-66 sections (about 320 km) • Mandatory Pre-bid Conference: August 20, 2007 • Technical Proposal Due Date: October 2, 2007 • Initial Contract Period: April 15, 2008 to April 14, 2013 • http://www.virginiadot.org/projects/constSTAN-I81-overview.asp • www.eva.state.va.us

6. The Bidding Process • Combined two-step sealed bid: Bidders are to furnish at the same time • an unpriced technical proposal in one sealed envelope • bid price in a second sealed envelope • The technical proposals will be opened and evaluated. Only the price envelopes for those technical proposals selected as acceptable will be opened • The award will be made to the lowest responsive and responsible bidder • “Acceptable” - a score of 75 points or higher

7. Technical Proposal Evaluation Criteria • Qualifications Scoring • Organizational Structure, History and Key Personnel 10 • Quality Management Plan 15 • Routine Maintenance Operations Plan 20 • Emergency Operations & Incident Management 20 • Customer Service, Timeliness Requirements & Tracking Plan 10 • Third Party Damage Scoring • Accounts Receivable Claims Process and Reporting 5 • Small Business Utilization • Use of Small Business 20

8. I-81 is one of the eight top truck routes in the U.S.

9. Corn poppies in the median of I-81 near Dixie Caverns

10. Performance Requirements • The Contractor performance is measured by achievement of Outcomes and Performance Targets as specified in the IFB (Attachment III) • Outcomes include both Asset Outcomes and Timeliness Requirements • Failure to meet any of the performance requirements may result in deductions from the Contractor’s payment

11. Example of Performance Criteria 1 • Asset: Vegetation • Outcome: Healthy Growing, Neat appearance, Acceptable coverage, Proper sight distance • Target: 90% • Tolerance and criteria: < 10% of mowable area to exceed 12” in height; All sight distances are clear; Neat / trimmed around guardrail, headwalls, paved ditches, signs; No cut less than 4” in height • Timeliness: Vegetation affecting sight distance presenting a safety hazard shall be removed within 24 hours of notification or discovery

12. Example of Performance Criteria 2 • Asset: Landscaping, Wildflowers, Beds, Bulb Beds, Ornamental Shrub Beds • Outcome: Neat, Attractive, Growing • Target: 90% • Tolerance and criteria: < 10% of bed contains weeds; <10% of bed not growing

13. Example of Performance Criteria 3 • Asset: Illegal signs / structures • Outcome: Right-of-way free of illegal signs or structures • Target: 100% • Tolerance and criteria: No illegal signs on the right-of-way; No illegal structures on the right-of-way • Timeliness Requirement: Removal of sign within 24 hours

14. Example of Performance Criteria 4 • Asset: Concrete Barriers • Outcome: Safe; Structurally sound • Target: 90% • Tolerance and criteria: Free of vegetation; < 10% joint material damaged or missing; Weep Holes > 90% free of obstruction • Timeliness Requirement: Damaged or misaligned barriers due to accidents/incidents shall be mitigated immediately upon notification or discovery or before accident scene is cleared; Repair to barriers shall be completed within 10 days of notification or discovery

15. Example of Performance Criteria 5 • Asset: Asphalt surface • Outcome: Safe, Durable, Smooth • Target: 95% • Tolerance and criteria: No potholes; Patches < 1/4” higher or lower than surrounding pavement; No pavement obstructions that present a safety hazard • Timeliness Requirement: Temporary repairs to potholes 6” x 6” x 1 ½” deep or larger shall be repaired immediately upon notification or discovery; All others within 2 days of notification or discovery; Permanent repairs to potholes/ pavement failures shall be completed within 30 days of notification or discovery during seasons when asphalt plants are operating or within 30 days of asphalt plants opening for the season; Pavement obstructions that present a safety hazard shall be mitigated immediately

16. Example of Performance Criteria 6 • Asset: Concrete surface • Outcome: Safe, Durable, Smooth • Target: 95% • Tolerance and criteria: No potholes; < 10% of surface area has cracks > 1/2” wide; < 25% surface area has spalling > 1” deep; < 25% of joint material missing; No grass growing in joint; No pavement obstructions that present a safety hazard • Timeliness Requirement: Temporary repairs to potholes 6” x 6” x 1 ½” deep or larger shall be repaired immediately upon notification. All others within 2 days; Permanent repairs to potholes/ pavement failures shall be completed within 30 days of notification; Pavement obstructions that present a safety hazard shall be mitigated immediately

17. Withholding for Nonperformance • The Department will assess a nonperformance withholding equal to 1% of the annual contract value for each point below a maintenance rating of 90 for each Asset Group (roadway & shoulders, roadside, traffic services, drainage, and bridge). • The Department will assess an additional nonperformance withholding equal to .50% of the cumulative amount for each point below 70 on any Asset item

18. IFB# 156-RT CONTRACTORS BID SHEET MONTHLY Bid price for Turnkey Asset Maintenance Services: $___________________ Total Lump Sum Bid Price (Monthly bid price X 60 months): $___________________ Firm Name _________________________ Print Name _________________________ Signature ___________________________ Date_______________________________

19. An Example of Legal Framework:Commonwealth of Virginia, USA • The Public-Private Transportation Act of 1995 is the legislative framework enabling the Commonwealth of Virginia to enter into agreements authorizing private entities to acquire, construct, improve, maintain, and/or operate qualifying transportation facilities • http://www.virginiadot.org/business/resources/PPTA-overview.pdf

20. Performance Based Contracts for Dredging – a Form of PPP • Also known as draught guarantee contracts • The contractor bears sedimentation risks over longer periods and is paid for services with monthly fixed amounts (or alternative financing such as toll – then a concession) • Most ports and waterways have carried out maintenance dredging by two types of contract: Dredging paid by volume, or Charter contracts • Before: directly by the government

21. Where to Apply Performance Based Contracts for Dredging? • Where a stable level of policy is to be expected • Where sedimentation can be evaluated within reasonable assumptions of risk • Where other risks are covered with reasonable contractual limits (for example, extreme weather conditions) • Sufficient volume to allow competitive bidding

22. Example of Performance Based Contract (PBC) for Dredging • BAHIA BLANCA , Argentina • A 5-year PBC for maintenance dredging • Phase 1: Capital dredging; Opening Volume preset at 1 million m3; when real opening volume is measured the contract value was adjusted accordingly • Phase 2: Maintenance dredging during remained of 5-year period • The bid price was comprised of 60 equal monthly payments, plus the initial dredging

23. From Performance Based Contract to Concession – An Example • PBC: The contractor bears sedimentation risks over longer periods and is paid for services with monthly fixed amounts • Concession: In addition to sedimentation risks, the contractor also bears demand risks, as payments are made by the users directly to the concessionaire

24. Example of Concession for Dredging • Hidrovia Waterway Concession, Argentina • Concession contract for 18 years: 1995 – 2013 • Rio Parana and Rio de la Plata from Santa Fe to the Atlantic Ocean • Mainly for oceangoing traffic, but also river barges use the waterway • 800 km of main waterway for Argentine exports (> 80% of export)

25. Hidrovia Waterway Concession • Risk of sedimentation and traffic born by the concessionaire • The works include: Capital dredging and installation of buoys in 1995-1996; Deepening works from 9.8 m 10.4 m navigation channel; 800 km maintenance dredging – about 22 million m3/year; Maintenance of the buoys and beacons; Toll system • Contract clause includes guaranteed depths and safety all year round, 24 hours per day

26. Hidrovia Waterway Concession • Tolls: paid by all commercial vessels per tonnage (NRT) and used stretch • Toll level is revised on regular basis with state to find equilibrium between costs and revenues • End costs for typical users: about 1 USD/ton of grain exported; 16 USD/TEU • Concessionaire: Jan De Nul Group (DJN)

27. Hidrovia Waterway Concession

28. Careful selection of the project Due consideration of economic, financial, social, and environment aspects Transparent, competitive selection of the concessionaire Realistic expectations, including deadlines A dedicated and well prepared team PPP agreement satisfactory to stakeholders, including a fair distribution of risks How can the goals of a complexPPP project be achieved?

30. Thank you!

31. Some Basic References World 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 (2006). “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

32. How to Find the Virginia DOT Invitation for Bid on the Internet? • Virginia Department of Transportation, Invitation for Bid IFB# 156-RT • www.eva.state.va.us • Vendors • eVA business opportunities • “Click here to view current and future eVA Business Opportunities” • Public Access to current and past Solicitations • https://vendor.epro.cgipdc.com/loginEngine/preLogin.jsp?guest_login=Public Access • In Keyword Search, type: 156-RT

33. World Bank Websites on Performance-based Contracts • Resource Guide for Performance-based Contracting http://www.worldbank.org/transport/roads/resource-guide/index.html • Training Course for Performance-Based Management and Maintenance of Roads http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTTRANSPORT/EXTROADSHIGHWAYS/0,,contentMDK:20706624~pagePK:148956~piPK:216618~theSitePK:338661,00.html • Road Management Catalog http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTTRANSPORT/EXTROADSHIGHWAYS/0,,contentMDK:20735996~pagePK:210058~piPK:210062~theSitePK:338661,00.html

34. Cesar QueirozRoads and Transport Infrastructure ConsultantWorld Bank, 1818 H Street NWWashington DC 20433 USATel +1 202-473 8053Mob +1 301-755 7591Email: cqueiroz@worldbank.orghttp://www.worldbank.org/transporthttp://www.worldbank.org/highways

35. Cesar Queiroz is an international consultant on roads and transport infrastructure, with main interest in public-private partnerships (PPP) in infrastructure, road management and development, performance-based contracts, port rehabilitation, improving governance, quality assurance and evaluation, research, teaching and training. Between 1986 and 2006, he held several positions with the World Bank in Washington, D.C., including principal highway engineer, lead highway engineer, and highway advisor. Prior to joining the World Bank, Cesar was the deputy director of the Brazilian Road Research Institute in Rio de Janeiro. He holds a Ph.D. in civil engineering from the University of Texas, USA, and a M.Sc. in Production Engineering from the Federal University of Rio de Janeiro. Cesar has published more than 130 papers and articles, and is a co-author of two World Bank main publications, the “Toolkit for PPP in Highways” and the “Resource Guide for Performance-based Contracting.” His recent countries of assignment include Russia, Brazil, Latvia, Lithuania, Poland, Ukraine, Philippines, Sweden.