Framework for performance based expressway maintenance in China

Framework for Performance Based Expressway Maintenance in China June 2006 This document is prepared by Mitsubishi Research Institute, Inc. for the benefit of The World Bank and is the property of The World Bank.  Framework for Performance Based Expressway Maintenance in China INDEX Executive Summary 1 Introduction.................................................................................................................... 4 2 Methodology ................................................................................................................... 8 2.1 Overview of Approach............................................................................................. 8 2.2 Consultation............................................................................................................ 8 2.3 Adopted Approach................................................................................................... 9 2.3.1 Task A1: Confirm industry capacity in Hubei and Jiangxi Provinces......... 9 2.3.2 Task A2: Confirm assets to be included in contracts.................................... 9 2.3.3 Task A3: Confirm criteria for identifying pilot sites..................................... 9 2.3.4 Task A4: Identify relevant local practices and issues................................... 9 2.3.5 Task A6 Establish framework for introducing OPRC to China................. 10 2.4 Time Frame of Project.......................................................................................... 10 3 Task A1: Industry Capacity..........................................................................................11 3.1 Overview of current practice of Expressway Management................................11 3.2 Interviews.............................................................................................................. 17 3.2.1 Purpose & Targets......................................................................................... 17 3.2.2 Operators....................................................................................................... 17 3.2.3 Contractors .................................................................................................... 22 3.2.4 Consultants.................................................................................................... 24 3.3 Issues to Consider for the Framework of OPRCs............................................... 25 3.3.1 ....................................................................................... 25 3.3.2 Decision support systems.............................................................................. 26 3.3.3 .................................................................................... 26 3.3.4 Consultant's Capacity................................................................................... 27 3.4 Conclusions ........................................................................................................... 27 4 Task A2: Assets to be included.................................................................................... 30 4.1 Current Ownership .............................................................................................. 30 4.2 Issues to Consider for the Framework................................................................ 31 June 2006 1  Framework for Performance Based Expressway Maintenance in China 4.3 Recommendations assets to be included.......................................................... 32 5 Task A3: Criteria for pilot sites................................................................................... 33 5.1 General criteria..................................................................................................... 33 5.2 Other aspects found during the investigation.................................................... 33 5.3 Recommended criteria.......................................................................................... 36 5.4 Recommendation for Pilot Trial Sites................................................................. 37 6 Task A4: Discussion on Local Practice and Issues .................................................... 39 6.1 Introduction .......................................................................................................... 39 6.2 Funding of multi-year projects by the provincial government.......................... 40 6.3 Overloading........................................................................................................... 40 6.4 Design Standards ................................................................................................. 41 6.5 Maintenance Practices......................................................................................... 41 6.6 Road condition data.............................................................................................. 42 6.7 Other issues and summary.................................................................................. 42 7 Task A6: Framework for Introducing OPRC Contract to China .............................. 44 7.1 Implementation of OPRC..................................................................................... 44 7.2 Technical matters ................................................................................................. 45 7.3 Administrative matters........................................................................................ 46 7.4 Assistance from the World Bank......................................................................... 46 8 Workshop held on 6th of June, 2006............................................................................ 48 8.1 Presentations at the workshop............................................................................ 48 8.2 Discussion with key players................................................................................. 48 8.3 Discussion with Chutian Expressway Company................................................ 49 9 Current Pavement Condition...................................................................................... 51 10 China.................................................................................................................................... 52 10.1 Risk Allocation...................................................................................................... 53 10.1.1 Inflation.......................................................................................................... 55 June 2006 2  Framework for Performance Based Expressway Maintenance in China 10.1.2 Traffic Volume Increase ................................................................................ 56 10.1.3 Overloaded vehicles....................................................................................... 57 10.1.4 Emergency Works.......................................................................................... 59 10.1.5 Future Development Work ........................................................................... 59 10.1.6 Working together........................................................................................... 60 10.2 Assets to be included............................................................................................ 60 10.3 Required Performance Criteria and Specification for their Monitoring .......... 61 10.3.1 Long term performance measures................................................................ 61 10.3.2 Short term operational measures................................................................. 62 10.4 Basis of Payments................................................................................................. 69 10.5 Specifications........................................................................................................ 69 10.6 Tender Evaluation Procedure.............................................................................. 71 11 Task B2: Advice on Preparation of Bidding Package................................................ 74 11.1 Section ITB 7 Clarification of Bidding Document, Site Visit, Pre-Bid Meeting............................................................................................................................. 75 11.2 Section Bidding Forms: Technical Proposal ............................................... 76 APPENDIX Study Team June 2006 3  Framework for Performance Based Expressway Maintenance in China Definition of Terms Term Definition AADT Annual Average Daily Traffic ADB Asian Development Bank BMS Bridge Management System CBMS Chinese BMS CIECC China International Engineering Consulting Corporation CPMS Chinese PMS HPCD Hubei Province Communication Department JPCD Jiangxi Province Communication Department KPI Key Performance Indicator LCC Life Cycle Cost LOS Level of Service MIRI Mitsubishi Research Institute, Inc. MOC Ministry of Communication of China MWH MWH NZ Ltd. OPRC Output- and Performance-Based Contracting Opus Opus International Consultants Ltd PMS Pavement Management System TOR Terms of Reference June 2006 4  Framework for Performance Based Expressway Maintenance in China Executive Summary Output- and Performance-based contracting (OPRC) has been successfully implemented by many road agencies around the world, in order to improve the effectiveness and efficiency of road maintenance practices. While some highway agencies in China have implemented maintenance by contract, they have not as yet implemented performance based maintenance contracting. Performance based contracting is a significant shift away from more traditional approaches to road maintenance. Performance based maintenance contracts have clearly specified objectives which are expressed in terms of level of service or key performance indicators. Expressways have been constructed at the initiative and strong support of the national and provincial governments. The national expressway network is determined by the Ministry of Communication (MOC) of China, and construction and management are entrusted to the provincial governments. The construction and maintenance standards are prescribed by MOC to ensure national uniformity. The management of the expressways rests with each province. Provinces are managing the expressways independently, including setting the toll rate. The management of expressways is under the supervision of the provincial government. When commercialization was introduced, some provinces shifted the management to a provincial managing company. The current situation in China is not very different from the situation observed other countries before the introduction of OPRCs. The general concern about the introduction of a new contracting system reflects a natural human fear of any change. This can usually be overcome by disseminating knowledge and at the same time explaining the benefits of OPRC at both company and personal level. Some of the critical issues in China are summarized below, together with some opportunities. Strength, Weakness and Opportunities Strength Weakness Opportunities Sound engineering Limited experience in asset Training in LCC and asset knowledge of pavement management and life cycle management needed engineering issues is costing in particular available Competent maintaining Targets and operational Create and foster financial organizations work on requirements seem to be key performance indicators expressways under various mainly engineering ones; for expressway organizational structures direct or even indirect maintenance companies financial motivation seems that will promote greater to be lacking operational efficiency Expressway maintenance The decision making Decision support systems companies operate in a well capacity and experience of need to be introduced at the regulated and controlled the companies is limited. same time when companies environment, so their are encouraged to make June 2006 1  Framework for Performance Based Expressway Maintenance in China future is predictable and decisions. clear. The operating scope of the The scope of the Develop skills in companies is clearly expressway companies is infrastructure asset defined. generally limited to execute management and well defined technical administration tasks; theses do not include long term planning or taking risks Maintenance standards are Maintenance standards are Short term maintenance set by MOC. These complex and are difficult to standards with general standards are useful for relate directly to pavement validity need to be KPMs i.e. as long term condition. developed with local input targets and relevance. zed The OPRC to be introduced must reflect local condition and circumstances. Considering the results of the investigation, it is recommended that; OPRCs are introduced gradually to allow experience and knowledge to grow together with the spread of the new contracting form At least two pilot OPRCs be created to foster competition and spread knowledge and experience as widely as possible The first OPRCs be limited to routine maintenance activities with the long term activities remaining under the current controlling agencies (hybrid contracts) The duration of the initial OPRCs is limited to 3-5 years Before commencing the OPRCs the current contract conditions should be reviewed, in particular the risk allocation (rise and fall) and conflict resolution clauses. The CPMS and CBMS systems should be made widely available to interested consultants, construction and maintenance companies as well as to expressway companies. The suitability of the CPMS and CBMS for governing OPRC should be reviewed and ascertained. Relevant key performance indicators and level of service need to be developed and calibrated, in such a manner that are consistency with relevant MOC requirements is ensured. Extensive training and dissemination of information is recommended to ensure informed approach and attitude to OPRC Appropriate data depositories need to be developed and maintained containing pertinent data, such as work quantities, locations, costs etc. Maintenance of newly constructed expressways is still in its infancy due to the relatively young age of the network. Maintenance demand will grow at a fast rate as the network ages. To meet this rapidly growing demand, it is recommended that the World Bank provides assistance to develop the infrastructure (i.e. the legal and technical framework) for effective road maintenance. This may include training in systems, contracting and technology. The World Bank may also assist in transfer of technology and experience by providing June 2006 2  Framework for Performance Based Expressway Maintenance in China suitably qualified consultants for training. Training should cover the following subjects: Contracting Development of level of service Developing asset management plans Direct involvement of consultants as advisors on management boards would also be an effective method of assistance. June 2006 3  Framework for Performance Based Expressway Maintenance in China 1 Introduction Output- and Performance-based contracting (OPRC) has been successfully implemented by many road agencies around the world, in order to improve the effectiveness and efficiency of road maintenance practices. While some highway agencies in China have implemented maintenance by contract, they have not as yet implemented performance based maintenance contracting. The World Bank has secured Japanese Consultant Trust Funds to hire a Japanese Consultant to develop a framework for performance based maintenance contracts for expressways in China. The World Bank will use this framework on its future projects to pilot test or implement OPRC. < OVERVIEW OF OPRC > Output- and Performance-based contracting is a significant shift away from more traditional approaches to road maintenance. Performance based maintenance contracts have clearly specified objectives which are expressed in terms of level of service or key performance indicators. Output focused delivery has been commonly used in many countries. Output oriented maintenance delivery, - such as schedule of rate type contracts - improves efficiency compared with input focused maintenance. The contract is based on a schedule of unit prices and estimates of quantities. Payments are based on the executed works. By paying the contractor according to the agreed rates, the contractor has an incentive to be efficient, but his objectives may not necessarily be aligned with those of the client. ctive to minimize whole of life costs is not shared with the contractor who is merely being paid for repairing the defects as they occur the contractor is not required to think about how to minimize their recurrence. Outcome focused delivery is encapsulated in OPRC contracts. The contractor must inspect, plan, design, organize and deliver road maintenance services such that all assets are in a condition which is fit for purpose and in accordance with specified asset condition standards for a fixed lump sum price. For example, rather than being June 2006 4  Framework for Performance Based Expressway Maintenance in China provided with a schedule of resurfacing lengths and locations over the term of the contract, the contractor agrees to maintain a network at a defined level of roughness, rutting (or whatever other indicators the client considers important) for the contract duration. Nevertheless, in some cases, the agency may choose to include some specific works in the contract. For example, if some significant rehabilitation work is required to bring the road to an acceptable or desired standard, specific work items may be required to complete before performance based standards apply. However, in summary, the by: Requiring the contractor to ensure the road network meets agreed performance criteria; Allowing the contractor to decide what work and when to do, thus promoting innovation; Making the contractor to have a vested interest in the quality of his own workp, thus promoting quality workmanship. Giving the contractor responsibility for all assets in the road corridor, so that the agency has one single point of contact. This clearly assigns responsibility to the contractor without any ambiguity or conflict of interest. Various countries have adopted OPRC style contracts, and each has spent significant time aligning the generic principles with their specific local issues. However, the following key success factors have become apparent as experience develops, and will need to be considered in any move to OPRC by China: Contracts should aim to be comprehensive in their coverage of the different assets (e.g. signs, pavements, culverts etc), for the reasons stated above; Contracts should be sufficiently long for the contractor to be exposed to the consequences of its actions. A longer period fosters sense of ownership and innovation. In Australia and New Zealand, 10 year terms have been adopted. Elsewhere, terms have been reduced (e.g. Colombia 4 years) to fit local circumstances, but experience still suggests that longer terms would be preferable; Good cooperation and partnership between the client and contractor is June 2006 5  Framework for Performance Based Expressway Maintenance in China required, as performance requirements might still be evolving and developing as experience is gained; A rigorous review of performance standards for all the assets is required, to ensure they are achievable and meet client objectives. Successful specifications are transparent and clearly articulated. Where it becomes too difficult to specify outcomes / standards, the contract might revert to output based specifications, particularly when addressing work backlog; A thorough knowledge of all assets and their performance is required (quantified and objective) so that contractors can price the work; The procurement process must be transparent and comprehensive to ensure that tenderers are aware of their obligations under the contract; Risks must be clearly identified and equitably shared. Conflict resolution processes and mechanisms must be in place to resolve any conflict at the lowest possible level. A capable contracting industry must be available, and be ready to take on the responsibilities of long term asset management; The volume of contract must be sufficiently attractive and offer significant gains (profit and savings) for both parties. Agencies must change from doing maintenance to managing contract maintenance without interfering technical or other decisions made by the contractor. Compliance monitoring must be agreed upon beforehand and strictly adhered to. It would be prudent to approach the implementation of OPRC in China in gradual manner. Establish an appropriate framework for introducing OPRCs Ensure that appropriate legal, institutional and policy requirements are in place Prepare bidding documents Pilot test on one or more sections of road Revise approach based on the results of the pilot testing before expansive introduction of OPRCs. June 2006 6  Framework for Performance Based Expressway Maintenance in China Mitsubishi Research Institute, Inc. (MIRI) was contracted by the World Bank to undertake a two phase project. The objective of the project is to investigate the viability of Performance Based Maintenance Contracts in China. To perform the study, MIRI was supported by MWH NZ Ltd. (MWH), Opus International Consultants Ltd (Opus), and China International Engineering Consulting Corporation(CIECC) as sub-contractors. Specific activities defined within the Terms of Reference (TOR) are: Phase I - Ascertain the viability of OPRC in China Task A1 Confirm industry capacity in Hubei and Jiangxi Provinces Task A2 Confirm assets to be included in contracts Task A3 Confirm criteria for identifying pilot sites Task A4 Identify relevant local practices and issues Task A5 Conduct workshop Task A6 Establish framework for introducing OPRC to China Phase II Prepare suitable contract documentation for China document to China Task B2 Advice on preparation of bidding package In addition to the above tasks, an additional workshop was run at the start of the project to ensure an adequate level of understanding existed before understanding the necessary discussions. June 2006 7  Framework for Performance Based Expressway Maintenance in China 2 Methodology 2.1 Overview of Approach The approach utilised in conducting the project was to combine a team experienced in OPRC contracts in various countries, particularly in Asian countries, such as Indonesia. This combined knowledge was then used to produce the framework for the implementation of OPRC to China. This chapter gives an overview of the scope of the consultation conducted. 2.2 Consultation The completion of the project required detailed discussions with both government and industry participants to obtain thorough understanding of local conditions that have an impact on any OPRC contract. Such consultation was conducted in two ways: Workshops and large group meetings to discuss an array of issues An open workshop was held in Wuhan on 28th March. It introduced the project and OPRC concepts. After the introductory workshop, small group meetings were held in Hubei and Jangxi with the Study Team. The 2nd open workshop and group meetings were held in Wuhan on 6th of June to present and discuss the summary of the interim report. During the 2nd workshop the applicability of the sample bidding document is presented. Site visits Site visits of the potential pilot trial sites in Hubei and Jiangxi were undertaken. These site visits included traveling by road from Wuhan to Nanchan. The study team visited the proposed pilot trial company in Hubei - the Hubei Chutian Expressway Co. Ltd. after the 2nd work shop to discuss further details. June 2006 8  Framework for Performance Based Expressway Maintenance in China The Study Team would like to thank all those involved for participating and contributing to the meetings and for sharing information in an open manner. 2.3 Adopted Approach 2.3.1 Task A1: Confirm industry capacity in Hubei and Jiangxi Provinces The successful introduction of OPRC requires the right organisational structure on the that different skills are required for different variants of the OPRC delivery mechanism. To this end we surveyed the current circumstances for expressway maintenance and held discussions with authorities and industry representatives on issues of maintenance and contracts. 2.3.2 Task A2: Confirm assets to be included in contracts The selection of assets to be included into the expressway OPRC will take into consideration local circumstances and critical stakeholders. Ideally, if the asset owners agree and the private sector has the necessary skills, the resulting OPRC would span the full range of assets from boundary to boundary. We discussed the assets to be included with authorities and management. 2.3.3 Task A3: Confirm criteria for identifying pilot sites As noted in the terms of reference, there are numerous criteria that should be applied in identifying pilot sites for the introduction of the OPRC. We paid particular attention to maintaining local competition that is essential for the long term success of an outcome oriented contract. The size of the contract must be consistent with the capabilities of the local industry to ensure long term viability and profitability. We received relevant information through discussions with authorities and management firms. 2.3.4 Task A4: Identify relevant local practices and issues Local practices have a profound impact on contracting technical and management practices. Relevant practices that affect funding for multi-year projects will be explored together with technical issues related to asset performance. These include design standards, data availability and suitability, traffic data and overloading in June 2006 9  Framework for Performance Based Expressway Maintenance in China particular and last but not least local work and maintenance practices. The legal framework for the contract needs to be explored, including conflict resolution. 2.3.5 Task A6 Establish framework for introducing OPRC to China Following completion of the previous stages of this contract, we developed the framework for introducing OPRC to expressways in China. The framework is based on an incremental approach that takes available capacities and experiences with already functional OPRCs into account. 2.4 Time Frame of Project The timeframe of the project is summarised in Table 2-1. Table 2-1 Time Frame of Project Item Date Place Contract signed 22 March 2006 Preliminary work March Work in China 27 March - 5 April Hubei, Jiangxi Initial workshop 28 March City of Wuhan(Hubei) Work for Task A April Interim report 30 April Initial work for Task B May Work in China 5 June - 9 April Hubei Second workshop 6 June City of Wuhan(Hubei) Draft final report June Final report 30 June June 2006 10  Framework for Performance Based Expressway Maintenance in China 3 Task A1: Industry Capacity 3.1 Overview of current practice of Expressway Management Expressways have been constructed at the initiative and strong support of the national and provincial governments. The national expressway network is determined by the Ministry of Communication (MOC) of China, and construction and management are entrusted to the provincial governments. The construction and maintenance standards are prescribed by MOC to ensure national uniformity. The management of the expressways rests with each province. Provinces are managing the expressways independently, including setting the toll rate. The management of expressways is under the supervision of the provincial government. When commercialization was introduced, some provinces shifted the management to a provincial managing company. In Hubei Province the expressway management was corporatised in April 2000, and separate companies were established for sections of expressways. The Hubei Expressway Group Ltd. was established to supervise the management of all management companies. HPCD (Hubei Provincial Communications Department) decided to change the management structure to direct government control in 2006. The new organization is currently being established at the time of this project. It is anticipated that the new organization, Hubei Expressway Administrative Bureau will be functional by July 2006. In Jiangxi Province, JPCD (Jiangxi Provincial Communications Department) and Jiangxi Expressway Administrative Bureau are controlling the maintenance of most expressways. Jiangxi Province has 12 major expressways. Six of them are maintained by expressway administrative divisions. The rest is operated by a privatized JV- company. The total length of the expressways in Hubei Province is currently about 1,600km. By 2010 the total length of expressways will increase to 3,500km. More than 300 km of new expressways planned to be opened every year. Jiangxi Province has about 1,580 km expressways at present, and the total length will be 4,650km by 2020. June 2006 11  Framework for Performance Based Expressway Maintenance in China Most expressways are relatively new. Maintenance is not a central issue at present, but it needs to be addressed in time. The management and ownership structure of the expressways have a profound impact on the capabilities of the local industry. Therefore this should be taken into consideration when discussing industry capabilities. Three forms of expressway management arrangements were identified in Hubei and Jiangxi. Type 1: A provincial organization (direct management by the overseeing authority) Type 2: An investor's company which bought the right of management Type 3: A joint-venture (provincial government and private sector) established for the management of the expressway under the contract between province and private sector Build, Operate and Transfer (BOT) has also been considered recently, but no expressway operated under BOT arrangements at the time of our investigation. June 2006 12  Framework for Performance Based Expressway Maintenance in China Table 3-1 Major Expressways in Hubei Type 1 Type 1 Type 2 Type 3 Type 3 Name Jingzhu Hanshi Wuhuan Huanhuan Chutian Expressway Expressway Expressway Expressway Expressway Interval BeiJing Wuhan Wuhan Huangshi Wuhan -Zhuhai -Shiyan -Huangshi -Huangmei -Jingzhou (in Hibei) -Yichang Length 339km 401km 70km 143km 279.km Management Hubei Province Hubei Province Wuhuan Huanhuan Hubei Organization Jingzhu Hanshi Expressway Expressway Chutian Expressway Expressway Co.Ltd. Co.Ltd Expressway Administrative Administrative Co.Ltd Division Division Table 3-2 Major Expressways in Jiangxi Type 1 Type 1 Type 1 Type 3 Name Jiujing JingJian Jiangan Ganyue Expressway Expressway Expressway Expressway Interval Juijiang Jinggangshan Jian Juijiang -Jingdezhen -Jian -Ganzhou- -Jian Length 134km 82km 127km 384km Management Jangxi Province Jangxi Province Jangxi Province Ganyue Organization Juijing Taijing Ganzhou Expressway Expressway Expressway Expressway Co. Ltd Administrative Administrative Administrative Division Division Division June 2006 13  Framework for Performance Based Expressway Maintenance in China Map of Expressway in Hubei June 2006 14  Framework for Performance Based Expressway Maintenance in China Map of Expressway in Jiangxi June 2006 15  Framework for Performance Based Expressway Maintenance in China June 2006 16  Framework for Performance Based Expressway Maintenance in China 3.2 Interviews 3.2.1 Purpose & Targets The main objects of the interviews with government agencies, expressway companies, contractors and consultants were to: establish a basis for prequalification of tenderers; explore the capabilities of bidders for OPRC contracts; identify specific issues that will require risk mitigation when developing the contract document, and; estimate the value of contract which will best fit local capacity. Regardless of the company structure, ultimately all expressways are controlled by PCD. The management structures were established a few years ago, at a time when outsourcing of maintenance was relatively new. Currently the numbers of contractors and consultants with sufficient experience and to do expressway maintenance work is limited. The Study Team interviewed a few expressway maintenance divisions, expressway companies, contractors and consultants as advised by the Provincial Communication Departments in both provinces. 3.2.2 Operators The Study Team interviewed the following expressway organizations. 1) Hubei Jingzhu Expressway Administrative Division (Corporation under HPCD) 3) Chutian Expressway Co., Ltd. (JV) 4) Jiujing Expressway Administrative Division (Corporation under JPCD) 5) Ganyue Expressway Co. Ltd. (Privatized Company) 3.2.2.1 Hubei Jingzhu Expressway Administrative Division. Jingzhu Expressway is a trunk expressway connecting Beijing and Zhuhai. Hubei Jingzhu Expressway Administrative Division manages the Hubei section of the expressway. This division manages 339km of expressway, most of which was financed with a World Bank loan. The division used to be Hubei Jingzhu Expressway Management Co. Ltd. and was changed back to a June 2006 17  Framework for Performance Based Expressway Maintenance in China provincial organization recently. The first section of the expressway was opened in Dec.2001, and the full length was opened in September 2002. The expressway has only been operation for a few years since opening to the traffic. This agency has about 950 staff in total, of which about 45 are engineers involved in maintenance. A staff of five out of these engineers deal with planning and design of maintenance. The overwhelming majority of staff seems to be involved in toll collection and administration. As an approximate comparison, a typical road maintenance organization in Australia has about 0.2-0.3 staff per km, whilst the number of staff per km is 2-2.5 on the visited expressways. This comparison must be heavily qualified as the visited expressways have a high number of toll gates with manual toll collection booth, whilst the Australian networks are of mixed roads without toll facilities. Also, smaller organizations tend to have relatively larger overheads as large organizations. All minor maintenance work is contracted through a competitive tendering process. The maintenance works were divided into three contracts, namely two expressway sections and structures (bridges & culverts). Each contract is a five-year unit rate type contract. The first contract started in 2004. The agency has an Engineering & Technical Unit for maintenance management and two maintenance branches for the supervision of the contractors. Maintenance Branch No 1 deals with maintenance of the northern part of the expressway including pavement and bridges, and Branch No 2 deals with the rest. Branch No 1 supervises the pavement and bridge contractors for the north section, covering 178km of expressway. It has a staff of 15, 10 of which are engineers. Two vehicles complete the daily patrols. The branch issues orders to the contractor for repair works and audits the completed work. A detailed visual condition survey is conducted every quarter by walking. Condition of the expressways is recorded by a hand-held device. Data is stored in the database in the Branch. Culverts and bridges are inspected visually every quarter. Based on the daily patrols and evaluation, the Branch prepares a maintenance plan and submits to the Engineering Unit of the agency. June 2006 18  Framework for Performance Based Expressway Maintenance in China Besides the evaluation by the staff of the agency, the agency hires an independent - government owned - engineering organization as needed to evaluate the condition of the pavement and bridges. (This organization is the only one in the Province operating suitable condition survey equipment.) 3.2.2.2 Wuhuang Expressway Co. Ltd. Wuhuang Expressway is the first expressway opened in Hubei. The total length of 70.3 km was opened in Feb.1991. The Expressway Bureau of HPCD managed this expressway before the rights of tolling and operation was sold to a private foreign company with a concession for 25 years in 1997. Under the concession, the actual management was assigned to the management division of the Expressway Bureau, presently Wuhuang Expressway Co. Ltd. The foreign-owned concessionaire company took 75% of the revenue, and the rest was paid to HPCD. The concessionaire sold the concession to a Chinese company residing in Shenzhen in Dec. 2005, but the structure of the operating company was not changed. The income is split between the investor and the province, and the expressway company is operated as a fully funded provincial enterprise. (i.e. the income goes to general revenue and it is not linked to the operating costs of the company directly) Consequently, the management is under the direct control of HPCD. The average daily traffic is 19,000 vehicles (27,000 PCU, Passenger Car Equivalent Unit); the maximum daily volume record is 32,000 vehicles. The annual toll revenue was 228 million RMB in 2004, and 270 million RMB in 2005 and it about 300 million RMB is expected in 2006. Further rapid growth is expected, which might be affected by the opening of adjacent expressway sections. The company has a staff of 400. The Engineering & Technical Unit, which has 5 engineers, deals with the management of maintenance. This unit investigates the road condition and prepares also medium to long-term maintenance plans. Direct maintenance work is done by the maintenance center which has 10 engineers and 10 workers. The original pavement structure was concrete, which failed and had to be repaired and fully overlaid after 15 years of trafficking. The concrete pavement was June 2006 19  Framework for Performance Based Expressway Maintenance in China covered with asphalt in 2003. The guarantee period of construction has just expired. The current condition of the pavement is good, but rapid increase of maintenance needs is anticipated. The minor and the major repairs cost 2.0 million RMB and 1.5 million RMB respectively in 2004. The maintenance costs grew to 3.0 million RMB and 1.6 million RMB respectively in 2005. This expressway has 2 large bridges, about 200 culverts and no tunnels. The repair of the structures is contracted out. Minor maintenance work is done by in-house workers. The maintenance station conducts the regular road inspections, whilst the annual inspection is contracted to a consultant. The engineering department also collects condition data according to the MOC requirements. The collected data must conform to the MOC requirements which coincide with those of the Chinese PMS (CPMS) developed by the Highway Research Institute. All expressway companies are under obligation to collect and report condition according to this standard. 3.2.2.3 Hubei Chutian Expressway Co., Ltd. The 279km long expressway was originally managed by the Expressway Bureau of HPCD. In 2004, HPCD put the tolling and operation rights to the open to market. In Mar. 2004, the operating right of Wuhan-Jingzhou Expressway (179km) for 22 years was sold on the market. 840 million RMB was collected from the Shanghai Stock Exchange, and from the money raised, the expressway company bought the tolling operation right to the remaining 100km (Jingzhou-Yichnag) in Sep. 2005. Currently HPCD owns 45 % of the shares, and MOC owns 23%. This expressway earned as much as 513 million RMB, and 120 million RMB was used for maintenance in 2005. The company is responsible to a board of directors. The only income source of the company is from the toll. The toll income i.e. a proportion of it is allocated directly to the managing company. In this structure the managing company has vested interest in operational efficiency. June 2006 20  Framework for Performance Based Expressway Maintenance in China The company has about 800 staff. Routine maintenance work is provided by the maintenance station that has three local depots. The maintenance station has about 40 staff of which five are engineers. Each depot has 7-8 technical workers and doing minor maintenance work. Major work is contracted out under unit price contracts. The Expressway Company currently considers issuing three schedule of rates type maintenance contracts for 1-3 year periods. 3.2.2.4 Jiujing Expressway Administrative Division Jiujing Expressway was opened in Oct.2000 under the assistance of ADB. This division has a total staff of 400 in a maintenance center and a tunnel/bridge center. The maintenance center has a staff of 100. Their job is to maintain the pavement and to prepare annual maintenance plans that are submitted to JPCD through the division. They also make quarterly maintenance plans. Daily traffic is about 5,000 vehicles, and is growing at a rate of 17% pa. The growth is driven by the growth of the economy and expressway-network development. 30-40-% of traffic is trucks. Overloading is quite likely, but has not become a serious issue. However, it may become a significant issue when the traffic increases following the opening further links in the expressway network in 2006. Routine maintenance work is conducted by in-house workforce, though large items are outsourced. Data is stored to meet MOC requirements. CPMS is used as a database facility without utilizing its capability to prioritise work. 3.2.2.5 Ganyue Expressway Ganyue Expressway Company was established as a provincial organization in 1998 and shares were issued at the Shanghai Stock Exchange Market in May 2000. JPCD owns 60% of stocks. The toll revenue is retained by the company. The maintenance has been done by in-house work force since 2004, but major work is contracted out. The total length of 388 km is divided into 3 maintenance sections. Each section June 2006 21  Framework for Performance Based Expressway Maintenance in China has a maintenance company that is a subsidiary of Ganyue Expressway Co. Ltd. Their maintenance plans have been generated year by year. The company has just stated to make a long-term maintenance plan. Ganyue Expressway is entrusted by JPCD to study PMS. Pavement condition data which have been stored by all expressway companies in Jiangxi are used to trial CPMS. The purpose of the study is to use data for future investment and maintenance work. 3.2.3 Contractors As stated in the previous section, most minor maintenance work is done in-house. Major maintenance is contracted out when necessary. A few agencies and companies outsource minor maintenance work; all of the contracts are unit rate contracts. 3.2.3.1 Hubei Jingzhu Expressway Hubei Jingzhu Expressway issued three tenders for minor maintenance work of pavement and bridges in October 2003. Pre-qualified companies could tender. (Class A classification is necessary for bridge maintenance and Class B1 for pavement maintenance). 28 companies in total submitted proposals for 3 contracts. Zunan Road & Bridge Company, a Province (i.e. government)-owned construction company in Xialgan won the tender for pavement maintenance of the north section of the expressway. There were 12 competitors in the bidding for the contract of this section, and according to the winner, about 4-5 companies were real competitors with similar capabilities. The contractor is experienced in pavement construction, but had no experience in cleaning, plants, and safety facilities. The contractor entrusted these works to sub-contractors. The contractor opened a maintenance depot near the maintenance branch of expressway agency. It has invested more than 10 million RMB in equipment since the contract started. The contractor has 22 staff for project management and administration, a staff of 10 for technical management and 40 workers. During a peak period, 70-80 June 2006 22  Framework for Performance Based Expressway Maintenance in China additional workers join the maintenance work. The contractor does daily inspections whilst the expressway agency also inspects the works regularly. The contractor reports to the maintenance branch if some defects are found and advise the amount of the repair. All maintenance work must be approved and ordered by the maintenance branch. The contract fee in 2005 was about 30 million RMB. The increase of material prices is considered a substantial risk. The contractor must submit monthly reports to the maintenance branch. The performance is evaluated by the expressway agency. Quarterly resource allocation plans are also generated by the contractor. The contractor has quality management and safety management procedures. The contractor is not interested in OPRC, and doubts the effectiveness of OPRC mainly due to the perceived high risk. The contractor (this and the others) have not been aware of any rise and fall formula to address risk associated with price fluctuation. 3.2.3.2 Jiangxi Ganyue Expressway Jiangxi Ganyue Expressway has three subsidiary companies which used to be provincial organizations. The Study Team interviewed one of them that deals with the maintenance of Nanchan-Zhangshu(103km). This company was originally established as a Jiangxi expressway administrative division for Nanchan-Jiujian. After the extension of the expressway in 2001 the operation was shifted to private sector and the three administrative divisions became three maintenance companies. Their maintenance work is similar to that of an administrative division in Jiangxi. Consequently the maintenance work is done by in-house staff except large maintenance works that is outsourced through competitive tendering. The maintenance company has a unit-price-contract with Ganyue Expressway Co.Ltd. Because both the operating and maintenance companies are private enterprises, maintenance cost is a key factor for both companies. The staff we interviewed agreed that OPRC is a better contracting form. They also pointed out issues of concern regarding the introduction of OPRC in Jiangxi. June 2006 23  Framework for Performance Based Expressway Maintenance in China Difficulty to estimate future maintenance cost. Culture that has been accustomed to unit-price-contracts Conflict of interest between the participating companies i.e. between owner and contractor. Low technical level of the maintenance company (personnel and machines) Design and construction shortcomings affecting maintenance costs The maintenance company expressed interest in expanding its operating area , and has the certifications for tendering for maintenance of other expressways. Currently no such opportunities exist in Jiangxi. 3.2.4 Consultants There are no consultants specialized in maintenance work, but many consultants have experience in the design of new expressways in and around Hubei. In Jiangxi, the Construction Design Institute, a formerly provincial organization, has been privatized, and is in a monopoly position. The Study Team interviewed one major consulting company which is currently involved with expressway maintenance in Hubei. High Technical Transportation Engineering Consulting Co. Ltd. has contracts with expressway agencies and companies. One contact started in 2003 with Jingzhu Expressway. This consultant has about 60 staff including 42 engineers, of which 24 deal with construction and design. According to this consultant, there are about 4 competing maintenance consultants in and around Hubei. High Technical Transportation Engineering Consulting Co. Ltd is a company owned by the province of Hubei. Each province has similar consultants and they all compete with each other. This consultant has access to special road condition survey equipment owned by HPCD. The consultant advises the expressway companies on the results of the annual survey and is involved in some design work. The consultant is aware of PMS systems but has no practical experience with any of them. The consulting contract is renewed by annual tendering. The contract requires the consultant to inspect the condition of pavements and bridges. The consultant reports the result of the inspection. The consultant is also required to advise about the necessary maintenance and repair works. June 2006 24  Framework for Performance Based Expressway Maintenance in China If the client (expressway agency/company) accepts the consultants advice, the consultant has a chance to get a contract for the design of the maintenance work. The consulting work for inspection is small compared to the design work for construction. The consultant submits a report to its client, and has no opportunity or reason to contact the contractor. There is no meeting where the client, the contractor, and the consultant discuss the performance/quality/necessity of maintenance. 3.3 Issues to Consider for the Framework of OPRCs 3.3.1 Operators Capacity Currently all maintenance work is determined by the operating agencies/companies. The contractors and the consultants may contribute to work selection, but this happens only rarely. Despite the different management and financing formats, all expressways are controlled by the relevant Provincial Communications Department. (HPCD/JPCD). The incentive to increase operational efficiency is limited where the operating costs have little or no direct bearing on the finances of the company. Risk sharing has no history and no company has any experience with risk sharing arrangements or contractual arrangements addressing risk. Each operation unit has about five planning/design engineers and about 20-50 maintenance staff, representing about less than 10 (ten) percent of the total staff. Considering these proportions, hardly any savings can be achieved by increasing the efficiency of maintenance operations. The drivers for OPRCs need to be clearly identified and addressed, as the traditional drivers, such as efficiency, reducing labour and material cost do not seem to drive most of the managing companies. Only those companies may be suitable for OPRC that are financially independent, i.e. can dispose profit as they wish. Once the real drivers are identified, the actual needs can be satisfied and addressed. OPRCs need measurable key performance indicators and benchmarks not only for pavement and maintenance but also for management. Whilst the former ones are of technical nature, the latter ones are corporate or organizational measures. Without these latter ones the success of OPRCs cannot be measured or improved. June 2006 25  Framework for Performance Based Expressway Maintenance in China 3.3.2 Decision support systems Technical performance measures have been developed and prescribed by MOC. These measures condition indices are available for bridges and pavements and are to be reported at regular intervals. The performance indicators can be utilised in CPMS, but no expressway company visited by the project team uses the predictive capabilities of CPMS. Basic asset management concepts, such as life cycle costing and asset management planning are not in practice. Appreciation of these systems and their general use need to be fostered before embarking upon any form of OPRC. An extensive training across the whole industry, i.e. including the Provincial CD, contractors, consultants and managing companies is essential before embarking upon a new contracting system. 3.3.3 Contractors Capacity A few companies expressed interest in minor maintenance works such as repairing potholes and cracks of the pavement. They are originally major construction companies experienced in large projects and not in routine maintenance activities. The construction companies are likely to be interested in maintenance contracting, due to the emerging need for maintenance work and subsiding new construction work. Major maintenance works are designed by in-house engineers or by consultants contracted by the expressway companies. Contractors have experience with unit rate contracts only. Contractors are risk averse and expressed concerns about price-related risks. Contracting conditions and clauses were not investigated in details, but it became clear during discussions that simple rise and fall formulae are unknown in practice. Even a contractor experienced in minor maintenance works expressed a great deal of concern about OPRC due to the lack of technology and perceived high risks. No contractors have experience in long term planning and work forecasting. June 2006 26  Framework for Performance Based Expressway Maintenance in China 3.3.4 Consultant's Capacity The capacity of consultants was found to be limited. Their experience is mainly in engineering design and not asset management. Currently there is practically no demand for maintenance consultants hence no responding capabilities are available. The consultant sees little chance to be involved in OPRCs. However, they have some experience and basic understanding of PMS and BMS. The general attitude to consultants and expectations is that a consultant can only provide technical/engineering design. In general, consultants are perceived not as useful experts but providing service in a very narrow field. 3.4 Conclusions The current situation in China is not very different from the situation observed other countries before the introduction of OPRCs. The general concern about the introduction of a new contracting system reflects a natural human fear of any change. This can usually be overcome by disseminating knowledge and at the same time explaining the benefits of OPRC at both company and personal level. Some of the critical issues are summarized below, together with some opportunities. Table 3-3 Strength, Weakness and Opportunities Strength Weakness Opportunities Sound engineering Limited experience in asset Training in LCC and asset knowledge of pavement management and life cycle management needed engineering issues is costing in particular available Competent maintaining Targets and operational Create and foster financial organizations work on requirements seem to be key performance indicators expressways under various mainly engineering ones; for expressway organizational structures direct or even indirect maintenance companies financial motivation seems that will promote greater to be lacking operational efficiency Expressway maintenance The decision making Decision support systems companies operate in a well capacity and experience of need to be introduced at the June 2006 27  Framework for Performance Based Expressway Maintenance in China regulated and controlled the companies is limited. same time when companies environment, so their are encouraged to make future is predictable and decisions. clear. The operating scope of the The scope of the Develop skills in companies is clearly expressway companies is infrastructure asset defined. generally limited to execute management and well defined technical administration tasks; theses do not include long term planning or taking risks Maintenance standards are Maintenance standards are Short term maintenance set by MOC. These complex and are difficult to standards with general standards are useful for relate directly to pavement validity need to be KPMs i.e. as long term condition. developed with local input targets and relevance. s not utilized The key issues identified: The key drivers for OPRCs are savings due to increased efficiency and profit incentive through risk taking and good planning. The current level of observed productivity has plenty of room for improvement. The potential savings must be identified and quantified. Savings are usually achieved by (a) reduced staffing level and (b) through better utilization of asset life. The benefits of OPRC must be quantified by estimating the potential savings together with the likely impact on employment. Contractor capacity for large scale OPRC implementation is not available. Contractors are typically geared towards new work and not maintenance. The difference between the two is substantial, as long term presence on the job forces the contractor to live with the consequences of his work quality, i.e. enjoying the profits of good quality work and suffering losses due to poor workmanship. This aspect is received with concern as neither the legal (contractual) nor the technical conditions are apparent. Consultants similarly lack experience in maintenance planning. June 2006 28  Framework for Performance Based Expressway Maintenance in China Company structures and operating environment varies. Only those companies are likely to succeed in OPRC contracts that have the right drivers, i.e. profit driven. Performance data is available through centralized data banks, but maintenance cost, activity information required for sound forecasts is not available. June 2006 29  Framework for Performance Based Expressway Maintenance in China 4 Task A2: Assets to be included 4.1 Current Ownership Within this report, the context of ownership refers to the agency or the company that is responsible for the creation, maintenance, and ultimately disposal of an asset. All expressways in Hubei/Jiangxi are the properties of the Provincial Government, represented by HPCD/JPCD. In that sense, HPCD/JPCD is the owner of the expressways. HPCD/JPCD is responsible for the creation and disposal of assets. However, ownership does not always coincide with management rights. As mentioned in Task A1, three different types of expressway management structures co-exist. In all cases, maintenance work is managed by the expressway management units. The differences are in the means of financing these activities. In case of administrative division (Type1) and Investors' company (Type2), the managing units are financed from a budget and have no direct (i.e. financial) initiatives to increase productivity and efficiency of the maintenance activities. In case of Type 3 structure when the concession rights are owned or entrusted to the expressway company, the company is directly funded from the toll income. Profit - or a part of it remains in the company, which is now has a vested interest in improving the efficiency and reducing the costs of maintenance activities. June 2006 30  Framework for Performance Based Expressway Maintenance in China Table 4-1 Asset Ownership Assets Current Ownership(*) Current Maintainer Pavements and surfacing Expressway Administrative In-house/Contractor Division /Expressway Company Bridges --- ditto ---- --- ditto ---- Minor structures and culverts --- ditto ---- --- ditto ---- Drainage --- ditto ---- --- ditto ---- Cut and fill batters --- ditto ---- --- ditto ---- Weigh Bridges --- ditto ---- --- ditto ---- Lighting --- ditto ---- --- ditto ---- Signs --- ditto ---- --- ditto ---- Line marking --- ditto ---- --- ditto ---- Mile posts --- ditto ---- --- ditto ---- Guardrails and barriers --- ditto ---- --- ditto ---- Telecommunication facilities --- ditto ---- --- ditto ---- (*) Type1 and Type2 funded by annual budgets provided by HPCD Maintenance and construction standards set by the MOC must be kept regardless of company structure and financing. 4.2 Issues to Consider for the Framework Based on the interviews with industry and expressway administrative divisions, it was found that the industry has little experience in asset maintenance. Maintenance is largely limited to responsive actions with no indication of preventive maintenance or whole of life considerations. Shifting towards a different maintenance philosophy and structure brings along its inherent risks that have to be addressed and mitigated. Knowledge transfer is the first and probably most important step in mitigating these risks. One expressway company pointed out that there is no contractor capable doing all maintenance work. Consequently, a consortium might be required to meet all requirements. June 2006 31  Framework for Performance Based Expressway Maintenance in China 4.3 Recommendations assets to be included Based on the discussions with construction and consulting companies, the following table summarizes the recommended assets to be included in to a OPRC. Table 4-2 Asset Inclusion to OPRC Assets Include in OPRC Pilot Trial Pavements and surfacing Yes Bridges Yes cleaning and minor work only (Only routine maintenance of cleaning, and minor repairs. Major works such as deck replacement are excluded) Minor structures and culverts Yes cleaning and safety only Drainage Yes Cut and fill batters Yes (Need to limit to small work. Large scale repair should be excluded from the lump-sum, but can be included in the contract) Weigh Bridges No (These are communication and electronic items) Lighting No (the type of work is apart from others) Signs Yes but not electronic or traffic lights or major structures, such as gantries Line marking Yes Mile posts Yes Guardrails and barriers Yes (Repairs by accidents should be excluded from the lump-sum, but can be included in the contract) Telecommunication facilities No (the type of work is apart from others) June 2006 32  Framework for Performance Based Expressway Maintenance in China 5 Task A3: Criteria for pilot sites 5.1 General criteria The following criteria were identified before embarking upon the meetings with contractors and industry: Maintaining Local competition Capacity of local industry Size of contract that the local industry can handle Risks are not significantly higher than elsewhere in the network No significant events that may affect the future management of the road Knowledge of OPRC concepts and desire to make OPRC work by contractors Operational asset understanding Historical maintenance costs data Robust asset data Reliability of traffic loading forecast Availability of resources to all contractors Presence and location of weighbridges 5.2 Other aspects found during the investigation Based on our meetings and discussions most of the above criteria proved to be relevant and valid. However, the following qualifications and additional criteria should be considered for the implementation of trial or long term OPRC contracts The expressway company/division and the contractor must have direct and vested interest in implementing a OPRC. Our investigation indicated a number of different operating environments, not all of them conducive for a performance based maintenance contract. Consequently, those expressway companies that operate in an environment where there is no financial consequence of operational efficiency are deemed not suitable for a OPRC. Based on our discussions it became transparent that ultimately all significant initiatives must be sanctioned by the government. Consequently, the political will June 2006 33  Framework for Performance Based Expressway Maintenance in China is essential to the successful implementation of a OPRC. It should be noted that this point is far from being unique to China; political will has been essential in other places, such as Australia and New Zealand. The presence of a progressive contracting culture is highly desirable. Practically all contracts discussed during our meetings were schedule of rate type contracts, i.e. the owner maintained a high level, direct involvement in the scheduling, controlling and defining the deliverables. OPRCs require a different style of cooperation between contracting partners. This can be developed easier when an outcome based contracting culture is already developed. Addressing risk is of very high priority. Though studying contract details was outside the TOR of our work, it became obvious that risk sharing has very limited scope and tradition in existing contracts. Risk sharing or alleviating measures, such as rise and fall formulae, were found unknown here, giving rise to concerns about use and availability of other measures. Local competition is of moderate concern, as there is a general shortage of manpower and resources. However, it is considered essential to maintain and foster competition. By encouraging competition, more people and companies gain experience and a larger pool of capable people is developed. Consequently it is proposed to initiate not one, but at least two OPRCs at the same time. Capacity of local industry is generally lacking. Though 4-5 companies were considered real competitors, this number is considered in a Province of 60 Million people and with about 50,000 km road network. Where routine maintenance is contracted out, the contractor is a specialized unit of a construction company (e.g. on Hansi Expressway). All resources (human and equipment) are provided by the construction company. For a successful OPRC, both parties must benefit, i.e. the maintenance work must be profitable on its own wrights. For this, contractors must have access to appropriate equipment and technologies. To achieve this, financial or other assistance may be required. The size of the contract is of lesser extent dependent on industry capacity, as June 2006 34  Framework for Performance Based Expressway Maintenance in China industry is typically a state owned large corporation or at least in part of. Some of the expressways visited in Hubei/Jiangxi are built on low lying land going through wet, swampy areas. Severe sub-grade related problems have been experienced on new expressways (e.g. Jingzhu expressway). These, and similar known risks must be addressed in any contract. Significant events that may affect the operation of the road in the future must be taken into account. Dramatic rise of traffic volume and opening of new sections are such events known to happen in the past or in the near future. Operational asset data was reported to be available. The TOR did not include the examination of the breadth of the data in detail. However, data collection is prescribed by MOC and consequently may be assumed to be similar at all locations. Traffic loading is continuously monitored by traffic counters and weigh bridges. This is common practice on all expressways, so it is a lesser aspect when selecting a pilot OPRC site. Asset management system (PMS and BMS) are recommended by MOC and used on all expressways. However, only the database facilities are used. The forecasting and prioritizing capabilities of these systems are largely unknown and not used by the visited companies. OPRCs have inherent risks. The risk taking of a contractor must be awarded with proportionate benefits. Without appropriate compensation there is no incentive to accept risk. This may require contracting forms and concepts such as performance based contracts, risk management, rise and fall formula - so far not common practice in China. The rhythm of the economy revolves around the five year plan. Performance based maintenance contracts usually cover longer periods to avoid the consumption of the asset. Crossing the barriers of a five year plan period must be considered or at least to be taken into account. June 2006 35  Framework for Performance Based Expressway Maintenance in China The expressways are considered reasonably homogeneous in terms of their age and condition. Homogeneous networks offer limited opportunities for balancing different risk levels associated with sections of various materials, ages and qualities. The fact that most expressways are new or recently rehabilitated, imply reduced risk levels. A narrow distribution of properties also means that if a failure occurs, it may affect wider areas. This issue also foreshadows a cyclic high demand for renewal which in turn may place high financial burden on the maintaining agencies. 5.3 Recommended criteria The following table is a summery of the recommended criteria. Table 5-1 Recommended Criteria for Pilot Sites Criteria Importance Maintaining Local competition high Capacity of local industry medium Size of contract that the local industry can handle medium Risks are not significantly higher than elsewhere in the High network No significant events that may affect the future High management of the road Knowledge of OPRC concepts and desire to make OPRC High work by contractors Operational asset understanding High Historical maintenance costs data Medium Robust asset data High Reliability of traffic loading forecast High Availability of resources to all contractors High Presence and location of weighbridges High Vested interest in operational efficiency Very high Developed contracting culture Very High Political will and determination Very high June 2006 36  Framework for Performance Based Expressway Maintenance in China 5.4 Recommendation for Pilot Trial Sites The pilot sites will ultimately be determined by HPCD/JPCD. The Study Team interest is apparent, i.e. the Chutian Expressway in Hubei and the Ganyue Expressway in Jiangxi. In comparison between Chutian Expressway and the Ganyue Expressway, the former is preferred based on the fact that Hubei province has more experience with maintenance contracts. Also, there are more contractors and competition in Hubei than in Jiangxi. In addition, the length of the Chutian expressway allows the creation of two OPRCs on similar conditions. Table 5-2 shows the the selection criteria. Table 5-2 Meeting the selection criteria Chutian Expressway Company Criteria Importance Maintaining Local competition Current tendering process requires at least 8 tenders Capacity of local industry n/a Size of contract that the local 80-150 km length suggested as a pilot industry can handle Risks are not significantly Based on past history risks can be reliably higher than elsewhere in the assessed network No significant events that may Future road openings are well known; affect the future management of the road Knowledge of OPRC concepts OPRC concepts are scantily known; however, and desire to make OPRC desire to learn and try was expressed. work by contractors Understanding contractual aspects of risk management need to be broadened Operational asset Operational assets are clearly understood. understanding Pavement performance issues need to be clarified in detail. Historical maintenance costs Standard database is available data June 2006 37  Framework for Performance Based Expressway Maintenance in China Robust asset data Standard database is available Reliability of traffic loading traffic monitoring and weigh measurement is forecast continuous for charging purposes Availability of expertise and Currently only government owned resources E&M to all contractors are available Presence and location of yes weighbridges Vested interest in operational The shareholding company structure and efficiency ownership makes the Chutian Expressway Company directly interested in operational efficiency and cost reduction Developed contracting culture Developing appropriate contracts, particularly in the area of managing risk is essential Political will and Based on our discussions the political will is determination likely to be strong June 2006 38  Framework for Performance Based Expressway Maintenance in China 6 Task A4: Discussion on Local Practice and Issues 6.1 Introduction Routine maintenance work is essential to protect roads from deterioration. Inadequate maintenance, overloading, inappropriate construction, design, and environmental factors may lead rapid deterioration of the road asset, as shown in Table 6.1. Relevant local practices and issues in Hubei and Jiangxi provinces are discussed in this section. Table 6.1 Causes of Road Deteriorations Items Causes of Deterioration Inadequate poor/lack of/ insufficient maintenance Maintenance poor maintenance techniques integrity of seal/ delayed seal/unsealed cracks, etc. Overloading unexpected heavy loads after design very high tire contact pressure poor overloading control, etc. Quality of Construction inadequate/poor compaction poor workmanship/supervision/construction standards inadequate use of appropriate plant poor mixing of materials/permeable pavements, etc. Material quality inadequate classification of soils salt damage of aggregates low quality surfacing, etc. Environmental Factors climate (wind, snow, rain, freeze) earthquakes erosion of shoulders and side slope, etc. Design inadequate pavement design/design standard poor shoulder design/lack of sealed shoulder flat terrain/ low embankment/inadequate camber, etc. June 2006 39  Framework for Performance Based Expressway Maintenance in China 6.2 Funding of multi-year projects by the provincial government Routine maintenance has to be carried out on regular basis in order to ensure the long-term performance of any road. The routine maintenance work may also reduce the total cost of maintenance in the long-term period. It is estimated that effective maintenance produces benefits three times more than its cost. The funding practice of the provincial government is different for various expressway companies; however, funding policy for Jingzhu expressway, for example, is based on multi-year maintenance contract. Jingzhu expressway is a principal expressway which connects from Beijing and Zhuhai. Hubei provincial departments manage and control 339 km of the highway located within Hubei province. The expressway is separated to 3 sections, and Jinzhu Expressway Administrative Division has scheduled rate type maintenance contracts with local contractors on each section. The maintenance contracts are for 5 years; therefore, multi-year funding is feasible. 6.3 Overloading The total road length in China has dramatically increased in the last 10 years as shown in Table 6.2. Table 6.2 Expressway Constructions Fiscal Year Total Length of Expressway Total Length of Road (km km 2020 Long-term Plan 85,000 2010 Estimation 65,000 2,300,000 2005 41,000 1,920,000 2004 34,288 1,870,661 2003 29,745 1,809,828 2002 25,130 1,765,222 2001 19,437 1,698,012 2000 16,314 1,402,698 1999 11,605 1,351,691 1998 8,733 1,278,474 1997 4,771 1,226,405 June 2006 40  Framework for Performance Based Expressway Maintenance in China 1996 3,422 1,185,789 1995 2,141 1,157,009 The traffic volumes are also increased, and overloading of the trucks are creating concerns regarding to the road surface and structure. The impact of overloading should not be underestimated. Some of the highways such as Jingzhu expressway have installed axle load monitoring systems on the toll station. The overloaded trucks may affect road condition and damage the road. Load control must be introduced for the purpose of protecting the roads from damages and maintaining them in good conditions. 6.4 Design Standards Pavement and road design standards are vital to achieve satisfactory pavement performance. Specifications for road construction and maintenance are prepared by the central government, and the provincial departments follow these standards. The standards cover road construction and maintenance works; however, due to their overall applicability in the whole of China, they may not always reflect fully the local issues and conditions. The total road length in China is around 2 million km as shown in Table 6-2, traversing different geological, geographical, climate, and traffic conditions. For this reason, it may be sometimes difficult for provincial departments to follow the same design standard arranged by the central government. Each provincial department needs to review and adjust the design standard according to the local circumstances and conditions. 6.5 Maintenance Practices Since the focus has been on road construction in recent years, the road maintenance market is still developing and its size is still small. Therefore, from the contractor s point of view, technical and engineering resources for maintenance works are considered insufficient, and from the government sector s point of view, experience with inspection, evaluation, and applied maintenance or remedial works is limited. Maintenance is mostly reactive and does not necessarily follow a long term plan. The contractors do not have capabilities in overall road management including planning, design, inspection and evaluation, forecasting. June 2006 41  Framework for Performance Based Expressway Maintenance in China 6.6 Road condition data The provincial departments have PMS and BMS for pavement management and bridge management respectively. These systems include an asset register, i.e. the essential data such as dimension, structure, historical inspection results and remedial activities. Currently, provincial departments take records of the road conditions using the installed PMS and BMS. These systems have not been yet fully calibrated, being in operation only for limited periods. Once the systems are verified and calibrated, the data will be used for road management such as arranging the future maintenance program and activities. The inspection data will cater not only for the present situations of road damages but also indicate necessary actions to avoid the further deterioration and even collapse. The investigated expressway companies do not seem to have access to the management systems and consequently these remain distant and irrelevant to them. The role of maintaining expressway companies in asset management is currently limited to provide data and information. Apparently, CPMS is available free for government but attracts a fee when used for commercial purposes. Consequently the take-up is slow and limited. 6.7 Other issues and summary Economic growth in China is driven by the east of the country, especially coastal areas like Shanghai and Zhuhai. In these areas, construction of expressways has been completed, and now emphasis is shifting to maintenance. In other areas the construction activities still dominate. From the government sector s point of view, separation of construction and maintenance contracts, and shortage of the budget for maintenance are emerging issues. Most of the maintenance contractors are relatively small, and they do have either sufficient human or technical resources in road maintenance. There is also a palpable concern that introduction of OPRC will introduce increased risks. Expressways are managed and controlled by the government through provincial agencies. The budget and subsequent maintenance activity is on yearly basis, and long-term maintenance programs may be difficult to prepare and follow. Due to recent price fluctuations some of the local contractors expressed concerns about the suitability of lump-sum contracts for long term road maintenance June 2006 42  Framework for Performance Based Expressway Maintenance in China contracts. Risk associated with significant increase in the traffic volume and large fluctuation of material prices may hamper the introduction of OPRC. June 2006 43  Framework for Performance Based Expressway Maintenance in China 7 Task A6: Framework for Introducing OPRC Contract to China 7.1 Implementation of OPRC The OPRC to be introduced must reflect local condition and circumstances. These include: Limited risk sharing contractual arrangements Near homogeneous roads in near new condition that make future performance predictions less important and shift the emphasis on the day to day management. Winter operations need to be identified and their inherent risk addressed or excluded from the OPRC Quality of workmanship must be taken into account and quality workmanship be encouraged The drivers for introducing OPRC have to be clearly identified and addressed The benefits of the OPRC have to be identified and shared by all participants Risks associated with OPRC have to be shared fairly Risk taking must be rewarded Knowledge of asset management and the relevant techniques must be fostered, disseminated and their use encouraged by all key stake holders. Considering the results of the investigation, it is recommended that; OPRCs are introduced gradually to allow experience and knowledge to grow together with the new contracting form At least two pilot OPRCs be created to foster competition and spread knowledge and experience as widely as possible The first OPRCs be limited to routine maintenance activities with the long term activities remaining under the current controlling agencies (hybrid contracts) The duration of these OPRCs is limited to 3-5 years Before commencing the OPRCs the current contract conditions should be reviewed, in particular the risk allocation (rise and fall) and conflict resolution clauses. June 2006 44  Framework for Performance Based Expressway Maintenance in China The CPMS and CBMS systems should be made widely available to interested consultants, construction and maintenance companies as well as to expressway companies. The suitability of the CPMS and CBMS for governing OPRC should be reviewed and ascertained. Relevant key performance indicators and level of service need to be developed and calibrated, in such a manner that are consistency with relevant MOC requirements is ensured. Extensive training and dissemination of information is recommended to ensure informed approach and attitude to OPRC Appropriate data depositories need to be developed and maintained containing pertinent data, such as work quantities, locations, costs etc. 7.2 Technical matters OPRC requires the contractors to carry out effective and efficient maintenance works according to their own technical knowledge and experience. Contractors have to prepare maintenance programs, and execute the maintenance works following the programs. Therefore, PMS, BMS and related road maintenance management systems should be made available. It is critical that the level of service is defined properly. Admittedly, defining LOS is a difficult task even in countries where road maintenance is well advanced. level and condition the network is to be kept. In the context of performance based maintenance contracts the LOS is the deliverable through the contract. The fact that very few road agencies around the world have well defined LOS reflects some lack of accountability. The LOS can be defined through careful analysis of the road condition, traffic, desired condition, community demand and available funding. A realistic LOS is the foundation of successful performance based contracting as well as of efficient road maintenance, regardless of the method of delivery. Training in asset management concepts, such as life cycle costing, long term planning renewal and replacement planning is essential. PMS and other related management systems facilitate budgeting and forecasting, June 2006 45  Framework for Performance Based Expressway Maintenance in China these, however, have limited use without sufficient verification and calibration. It is recommended that CPMS and CBMS or other suitable systems be implemented and calibrated. These systems have been developed over a long time in China and provide a solid framework as a starting platform. 7.3 Administrative matters Currently all standards and specifications are prescribed by the central government. Some level of flexibility is required to accommodate local conditions in such a manner that risks can be addressed with appropriate measures. Transfer of technology, knowledge and most likely staff is required from the government to the private sector to meet the requirements of the Pars. As maintenance contracts are based on competitive tendering, the necessary legal framework and culture of tendering has to be established. Pertinent governance issues need to be clarified and participants need to be trained in their significance and adherence. 7.4 Assistance from the World Bank Maintenance of newly constructed expressways is still in its infancy due to the young age of the network. Maintenance demand will grow at a fast rate as the network ages. To meet this rapidly growing demand, it is recommended that the World Bank provides assistance to develop the infrastructure (i.e. the legal and technical framework) for effective road maintenance. This may include training in systems, contracting and technology. The World Bank may also assist in transfer of technology and experience by providing suitably qualified consultants for training. Training should cover the following subjects: Contracting Development of level of service Developing asset management plans Direct involvement of consultants as advisors on management boards would also be an effective method of assistance. June 2006 46  Framework for Performance Based Expressway Maintenance in China June 2006 47  Framework for Performance Based Expressway Maintenance in China 8 Workshop held on 6th of June, 2006 A workshop was held in Wuhan on 6th of June, 2006. The purpose of the workshop was to to summarize and recapture the key points of OPRCs to report back to the participants of the previous discussions including the results and conclusions of the investigation to date to obtain feedback and foster discussion on the recommendations. The general workshop was followed up with a round table discussion the afternoon of the same day with the key stakeholders involved. 8.1 Presentations at the workshop The presentations are attached to the report in detail, so here only the key points are mentioned. After recapturing the key concepts of OPRCs, the critical success factors particularly relevant for China were discussed in detail. A summary of these are listed below: Benefits must be shared Risk taking must be rewarded Objectives must be clearly defined, in particular Level of Service must be specified Management responsibilities have to be clarified and allocated Tools and knowledge must be accessible to all Suitable financial environment is essential Historical data must be available The findings and recommendations were presented as detailed in this report. 8.2 Discussion with key players The afternoon round table discussion provided a forum for all stakeholders and the expressway companies in particular to ask questions and to express their views. In general, the OPRC was given a relatively positive though reserved reception. The questions reflected interest and a desire to develop a better understanding of the concept. Many questions also conveyed doubts about the suitability of the June 2006 48  Framework for Performance Based Expressway Maintenance in China concept to the current contracting environment. The issue of insufficient contractor capacity and experience was repeatedly brought up and discussed. It is widely believed that no suitable capability is available outside the expressway companies. This situation in China is actually not very developed capability exist at the time of the introduction of performance based maintenance contracts. This parallel with other countries should be heeded and confirms the proposed gradual introduction of OPRCs. for training. The workshop and discussions confirmed that level of service and whole of life costing are relatively new and not widely known concepts. As without these OPRCs cannot function successfully, the need for training in these areas was also identified. Several questions were fielded about forecasting techniques and the reliability of models. Preventive maintenance was discussed and the concept and practice of preventive maintenance proved to be not known. Traffic control is the task of the police force in China. As traffic control is essential for the conduct of maintenance work, the specific requirements of police involvement have to be considered in OPRCs. It might be necessary to create either special provisions for this, or to propose special regulation to allow the contactor the expressway company to provide temporary traffic control. Some practical questions were also raised, such as liability for serious defects and damage caused by accidents. 8.3 Discussion with Chutian Expressway Company Following the workshop, separate meeting was held with the representatives of the Chutian Expressway Company. The company is in the process of obtaining specialized testing and maintenance equipment to carry out routine maintenance work. The level of service issues were discussed in detail. The proposed level of service was presented. The key points of the discussion: The current roughness and rutting condition is not known, though tests June 2006 49  Framework for Performance Based Expressway Maintenance in China were done on the recently overlaid main carriageways The overlay consists of 140 mm asphalt overlay placed on a badly damaged 240 mm plain concrete layer. MOC issued maintenance standards for expressways. A copy of this was presented at the meeting. It was suggested that the level of service should be consistent with the MOC requirements. The expressway company was not in the position to tell us the current values for the MOC maintenance standards. The lack of contractor and consulting capacity and capability is seen as a serious impediment The winter operation includes snow clearing and ice control. These activities are best left with the expressway company as represent higher level of uncertainties than other activities. June 2006 50  Framework for Performance Based Expressway Maintenance in China 9 Current Pavement Condition Current pavement condition data offers some insight into the probable risk levels associated with maintenance work planning. Consistently good conditions would indicate a lower level of risk - and future work demand then highly variable data with large scatter. The project team received roughness summary data for one expressway only. The data indicated consistent and very low level of roughness. The average roughness for a total of about 220 km expressway is 1.1 IRI with a standard deviation of 0.2 IRI. This level of roughness is considered exceptionally low, typical for well built new or rehabilitated expressways. Based on this information, the expressway characterized by this data would represent a low level of risk. June 2006 51  Framework for Performance Based Expressway Maintenance in China 10 Task B1: Recommendations on adaptation of Bank s sample bidding document in China This task requires the review of the sample bidding provided by the Bank. The section summarizes the recommendations of the project team. It should be noted, that the recommendations may not be consistent with current laws and regulations. The technical details of the short and long term key performance indicators are considered for information only, as no factual data could be obtained on the current conditions. These KPMs must also be consistent with the current MOC requirements. As the review and translation of these was not part of the TOR, it is recommended that the Bank facilitates the translation and review of the MOC requirements. The proposed KPMs need to be reviewed in the light of the MOC requirements. Reviewing The Banks Sample Bidding Document for OPRC (September, 2005), we specially focused and made comments on technical issues as we found relevant to China. The comments are stated together with the related clauses or sections in the bidding document. The project team recommends engaging a legal expert to review the compliance of the bid document with current laws of the country. June 2006 52  Framework for Performance Based Expressway Maintenance in China 10.1 Risk Allocation Section VII General Conditions (GC) in PART 3 - CONDITIONS OF CONTRACT AND CONTRACT FORMS of the Sample Bidding Documents specifies the way of risk allocation regarding Employer s Risks, Contractor s Risks, and others in the Section D: Allocation of Risks. The risks described there are mainly for the Employer s Risks of war, hostilities, rebellion, riot, and other risks which are kinds of Force Majuire. No risks are included regarding social and economic changes or growth of traffic volumes. GC 32.1 From the Start Date until the Defects Correction Certificate has been issued, the Works and Services included in this Contract: (a) war, hostilities (whether war be declared or not), invasion, act of foreign enemies; (b) rebellion, revolution, insurrection, military or usurped power, or civil war; (c) ionising radiations, contamination by radioactivity from any nuclear fuel, or any nuclear waste from the combustion of nuclear fuel, radioactive toxic explosive or other hazardous properties of any explosive nuclear assembly or nuclear component thereof; (d) riot, commotion or disorder, unless solely restricted to employees of the Contractor or of his Subcontractors and arising from the conduct of the Works and Services; (e) loss or damage due to the use or occupation by the Employer of any unfinished Section or part of the Works, except as may be provided for in the Contract; (f) any operation of the forces of nature against which an experienced contractor could not reasonably have been expected to take precautions. GC 33.1 indicates that all other risks are covered by the Contractors, which means that the Contractors should have larger risks than the Employer. GC 33 33.1 and the remaining risks Also, in GC 36.1, necessary measures to unforeseen conditions are described. Once the Contractor faces difficulties except weather conditions, the Contractor should inform cost and time of removing them in writing to the Project Manager, and the Contractor should carry out the works following the Project Manager s instruction. Additional cost and time incurred by the Contractor will be approved by the Project Manager; however, this approval is limited for the difficulties due to the physical June 2006 53  Framework for Performance Based Expressway Maintenance in China conditions of the structures, and it is not applied for those due to the change of traffic and economic situations. GC 36. Unforeseen Conditions The Contractor should inform himself and request and check relevant information, data before signing the contract. 36.1 If, during the execution of the Contract, the Contractor shall encounter on the Site any physical conditions (other than climatic conditions) or artificial obstructions that could not have been reasonably foreseen prior to the date of the Contract Agreement by an experienced contractor on the basis of reasonable examination of the data relating to the Road (including any data and tests provided by the Employer), and on the basis of information that it could have obtained from a visual inspection of the Site or other data readily available to it relating to the Road, and if the Contractor determines that it will in consequence of such conditions or obstructions incur additional cost and expense or require additional time to perform its obligations under the Contract that would not have been required if such physical conditions or artificial obstructions had not been encountered, the Contractor shall promptly, and before performing additional the Project Manager in writing of (a) the physical conditions or artificial obstructions on the Site that could not have been reasonably foreseen; (b) required, including the steps which the Contractor will or proposes to take to overcome such conditions or obstructions; (c) the extent of the anticipated delay; (d) the additional cost and expense that the Contractor is likely to incur. On receiving any notice from the Contractor under this GC Sub-Clause 36.1, the Project Manager decide upon the actions to be taken to overcome the physical conditions or artificial obstructions encountered. Following such consultations, the Project Manager shall instruct the Contractor, with a copy to the Employer, of the actions to be taken. 36.2 Any reasonable additional cost and expense incurred by the Contractor in following the instructions from the Project Manager to overcome such physical conditions or artificial obstructions referred to in GC Sub-Clause 36.1 shall be paid by the Employer to the Contractor as an addition to the Contract Price. 36.3 If the Contractor is delayed or impeded in the performance of the Contract because of any such physical conditions or artificial obstructions referred to in GC Sub-Clause 36.1, the Time for Completion shall be extended in accordance with GC Clause 64. Therefore, the following sentence should be added to the beginning of GC36; Contractor should inform himself and request and check relevant information, data before signing the contract, and it is recommended that allocation of the following risks should be specified between the Employer and the Contractor. June 2006 54  Framework for Performance Based Expressway Maintenance in China 10.1.1 Inflation Risk associated with price increases as reflected in the CPI should be considered in the contract. Figure 10.1 GDP Growth and CPI in Asia June 2006 55  Framework for Performance Based Expressway Maintenance in China Road maintenance contract usually last long time period, and therefore, it is recommended that the contract price could be adjusted according to the fluctuation of economic growth and consumer price in the conditions of contract. Method of adjusting the price are two ways; one is agreed adjusting formula specified in advance, and the other is mutual agreement based on the discussions between the Employer and the Contractor. GC 48.1 shows the formula which adjust difference between the price at the time of tendering and that of payment. Way of price adjustment is shown in GC48, and Bc, ratio of adjusting the price change, should be agreed by mutual and detailed discussions between the Employer and the Contractor. All prices should be in the local currency (Yuan). We suggest to make this clause a bit more flexible by allowing to use different adjustment factors for different materials. E.g. bitumen price must have gone up much more than timber or crushed rock! GC 48. Price Adjustments 48.1 Prices shall be adjusted for fluctuations in the cost of inputs only if provided for in the PC. If so provided, the amounts certified in each payment certificate, after deducting for Advance Payment, shall be adjusted by applying the respective price adjustment factor to the payment amounts due in each currency. A separate formula of the type indicated below applies to each Contract currency: Pc = Ac + Bc Imc/Ioc where: Pc is the adjustment factor for the portion of the Contract Price payable in a Ac and Bc are coefficients specified in the PC, representing the nonadjustable and adjustable portions, respectively, of the Contract Price payable in that Imc is the index prevailing at the end of the month being invoiced and Ioc is the index prevailing twenty-eight (28) days before Bid opening for inputs payable; 48.2 If the value of the index is changed after it has been used in a calculation, the calculation shall be corrected and an adjustment made in the next payment certificate. The index value shall be deemed to take account of all changes in cost due to fluctuations in costs. 10.1.2 Traffic Volume Increase The total length of expressways in China has dramatically grown, and the traffic June 2006 56  Framework for Performance Based Expressway Maintenance in China volumes have increased accordingly. The following graph shows the recent increase in volume of cars in several Asian countries. The volume of cars in China has also increased compared with the other countries. The future traffic volumes have a profound impact on the level of service. If the traffic volumes exceed the assumed volumes further maintenance works may be necessary to ensure the service level. It is recommended that an additional clause should be provided to peg the traffic volume to the agreed level of service. Also, additional clause which requires the measures to the unforeseen traffic conditions and preventive maintenance works should be provided, since the remedial works for damaged structures would usually incur larger costs. Figure 10.2 Volume of Cars in Asia 10.1.3 Overloaded vehicles Overloaded vehicles (axle loads above the design limit) significantly affect pavement performance. Axle load monitoring system needs to be installed and penalty rates June 2006 57  Framework for Performance Based Expressway Maintenance in China or traffic control needs to be in place. Although the contract form does not specify who control the traffic volume, the responsible person, i.e. police or the Employer, should be specified in the Contract. The clause 2.2.3.4 of ANNEX in the SAMPLE DOCUMENT shows that Particular Specifications may require a Traffic Management Plan which establishes the minimum requirement of temporary traffic control. It is recommended that the allocation of responsibility for traffic control should be specified in the contract; for example, the Contractor should monitor the traffic volume and overweight cars, and the Police should control and load the penalty to the offenders. This is particularly relevant to China, as all traffic control is vested in the Police. June 2006 58  Framework for Performance Based Expressway Maintenance in China 10.1.4 Emergency Works Measures for emergencies are described in Section C: Execution of Emergency Works in GG. According to the clause, the Project Manager should instruct the Contractor to carry out the works following the mutual agreement between the Employer and the Contractor, and the Employer should have responsibilities for paying the cost of emergency works to the Contractor. The related clause does not require any amendment. GC 29. Emergency Works 29.1 The need for execution of Emergency Works is jointly identified by the Employer and the Contractor and the starting of the execution of Emergency Works shall always require a Work Order issued by the Project Manager. 29.2 The execution of Emergency Works shall be requested by the Contractor based on losses or damages occurred as a result of natural phenomena (such as strong storms, flooding or earthquakes) with imponderable consequences, or on the possibility of damages or losses occurring, or the safety of individuals, works, services or equipment being at risk as result of the natural phenomena. In order to characterize the Emergency Works, the Contractor shall forward a Technical Report to the Project Manager requesting the execution of Emergency Works and characterizing the situation. On the basis of the said report, and of his own judgment of the situation, the Project Manager may issue a Work Order to the Contractor. 29.3 The Employer or even Government authorities may declare an Emergency Situation on the basis of local legislation. In those cases, the Project Manager may issue a Work Order for Emergency Works to the Contractor even without a request by the Contractor. 29.4 If the Contractor is unable or unwilling to do such work immediately, the Employer may do or cause such work to be done as the Employer may determine necessary in order to prevent damage to the Road. In such event the Employer shall, as soon as practicable after the occurrence of any such emergency, notify the Contractor in writing of such emergency, the work done and the reasons therefore. If the work done or caused to be done by the Employer is work that the Contractor was liable to do at its own expense under the Contract, the reasonable costs incurred by the Employer in connection therewith shall be paid by the Contractor to the Employer. Otherwise, the cost of such remedial work shall be borne by the Employer. 10.1.5 Future Development Work Traffic volumes of the subject roads will become higher or lower than expected by other road constructions and developments on adjacent roads. Measures to this kind of situation such as traffic volume change should be specified in the contract. For example, at the event of unforeseeable traffic situation due to other construction June 2006 59  Framework for Performance Based Expressway Maintenance in China and development, the Employer and the Contractor should discuss and agree in the actions following such changes. 10.1.6 Working together In a performance based contract, detailed bill of quantities is not specified. To avoid any dispute between the Employer and the Contractor minimum quantities may be specified and agreed to. In case a dispute occurs between the Employer and the Contractor, the maintenance and other related works must not be stopped, or otherwise the costs of consequence of such an action will have to be born by the parties. One preventive measure is to set up a communication or management board consisting of responsible persons of both parties, and to solve the problems at the forum. There are two ways of solving the dispute which is described in 6. Settlement of Disputes in Section A, Contract Interpretation of GC; one is to establish Dispute Review Board consisting of each member of the Employer and the Contractor, and the other is to ask Dispute Review Expert to solve the dispute. In the performance based contract, details of the works are not described in the contract document, descriptions of setting up such meeting board in the contract document is very effective to solve the problems before dispute and even entering into the Arbitration 10.2 Assets to be included The road asset to be included in the performance based contract is described in the following table as per shown in Task A2. Table 10.1 Assets Inclusion to OPRC Assets Include in OPRC Pilot Trial Pavements and surfacing Yes June 2006 60  Framework for Performance Based Expressway Maintenance in China Bridges Yes cleaning and minor work only (Only routine maintenance of cleaning, and minor repairs. Major works such as deck replacement are excluded) Minor structures and culverts Yes cleaning and safety only Drainage Yes Cut and fill batters Yes (Need to limit to small work. Large scale repair should be excluded from the lump-sum, but can be included in the contract) Weigh Bridges NO (These are communication and electronic items) Lighting No (the type of work is apart from others) Signs Yes but not electronic or traffic lights (Large gantries may be excluded) Line marking Yes Mile posts Yes Guardrails and barriers Yes (Repairs due to accidents should be excluded from the lump-sum, but can be included in the contract) Telecommunication facilities No (the type of work is apart from others) 10.3 Required Performance Criteria and Specification for their Monitoring The criteria should comprehensively cover all aspects of the contract. They should take account for the fact that different sub-areas within the contract road might require different benchmark values. They are Long term asset performance measures and Short term operational measures. 10.3.1 Long term performance measures Long term performance measures indicate the criteria which ensure long-term performance level of the road structures, and the criteria is shown in the table at 2.4.2 Durability measures for paved roads in Sample Specifications for OPRC. The criteria covers road roughness and deflections, and these threshold values June 2006 61  Framework for Performance Based Expressway Maintenance in China should be specified in accordance with the required service level at China. Appropriate targets should be determined in accordance with the relevant Expressway Maintenance Quality Evaluation Standards issued by the MOC. Method of inspection and measurement is described in 2.4.5.1 Methodologies for Durability Measures at Specifications for OPRC. 10.3.2 Short term operational measures Short term operational measures are described in 2.4.2 Road User Service and Comfort Measures for Paved Roads. Service level of the road surface such as number and scale of pot holes, shape of patching, and flatness are indicated with time allowed for taking actions of repairs. Default value of each item is indicated as a reference, and appropriate value will be determined through the discussion with the government sectors of both provinces in China. June 2006 62  Framework for Performance Based Expressway Maintenance in China Maintenance Standards The following maintenance standards are referred to in the Key Performance Measures (KPM). The classification below is an example only and must be adjusted according to the local road classifications. Maintenance standard definition New Work New work construction or rehabilitation carried out Class 1 AADT (Annual Average Daily Traffic) > 10,000 or Class 2 AADT :2,000-10,000 Class 3 AADT <2,000 The following KPMs are to be applied to each major asset identified separately. All suggested values need to be revised in the light of data gathered on the actual OPRC sections. Long term performance measures Item Category / Condition Compliance Response time to Test method Current condition Sub-network definition correct & comments Average New work Mean IRI = 1.8 Mean IRI<= 1.8 60 days High Speed Laser TBA roughness Class 1 Mean IRI = 2.2 Mean IRI <= 2.2 1 year vehicle Class 2 Mean IRI = 2.6 Mean IRI <= 2.6 1 year Class 3 Mean IRI = 2.9 Mean IRI <= 2.9 1 year Maximum New work Maximum IRI = 2.0 6 months High Speed Laser TBA roughness Class 1 roughness in any IRI = 2.4 1 year vehicle Class 2 1 km road or IRI = 2.8 1 year June 2006 63  Framework for Performance Based Expressway Maintenance in China Class 3 carriageway IRI = 3.3 1 year length Network rut depth New work % wheelpath 0% 7 days High Speed Laser TBA Class 1 length with a rut 0% 7 days vehicle Class 2 depth >-20 mm 0% 7 days Class 3 0% 7 days Maximum rut New work % wheelpath 0% 2 month High Speed Laser TBA depth Class 1 length exceeding 0% 2 month vehicle Class 2 rut depth 10 mm 2% 6 month Class 3 5% 6 month Mean deflection New work Mean deflection <= 0.5 mm 1 year FWD or To be confirmed Class 1 <=0.5 mm 1 year equivalent by design Class 2 <= 0.6 mm 1 year Benkelman Beam deflection and Class 3 <= 0.7 mm 1 year at 100 m interval remaining in the slow lane in structural life each direction calculation Maximum New work Maximum <= 0.65 mm 2 month FWD or To be confirmed deflection Class 1 deflection <=0.65 mm 2 month equivalent by design Class 2 <= 0.75 mm 6 month Benkelman Beam deflection and Class 3 <= 0.85 mm 6 month at 100 m interval remaining in the slow lane in structural life each direction calculation Notes: June 2006 64  Framework for Performance Based Expressway Maintenance in China 1. Key performance indicators (KPI) are given in terms of physical measures; however, MOC prescribes indexes for this purpose. Consequently, the KPMs need to be expressed in terms of indexes required by MOC 2. Current condition has to be confirmed on the basis of available data 3. Availability of recommended testing equipment is to be confirmed 4. Deflection targets are to be adjusted according to the anticipated design life, using current local pavement design principles and procedures. Short term performance measures Item Category / Condition Compliance Response time to Test method Sub-network correct Potholes New work Number of potholes in 0 24 hours Visual inspection Class 1 any 1.0 km length; the 5 24 hours Class 2 maximum diameter of a 10 24 hours Class 3 pothole is 100 mm 10 24 hours Patching Patches (i) shall be Non-complying Visual inspection square or rectangular, (ii) patches must be shall be level with repaired within the surrounding pavement, specified time frame New work (iii) shall be made using 30 days Class 1 materials similar to those 30days Class 2 used for the surrounding 30days Class 3 pavement. 60 days Total patched area all The total number of In case of 1 year Visual inspection June 2006 65  Framework for Performance Based Expressway Maintenance in China patches must not exceed non-compliance the 50% of the total area in section must be any 100 m length treated as a whole Cracking New work The per cent total 0% 30 days for Visual inspection Class 1 cracked area in any 1% temporary treatment Class 2 100m length regardless 2% and investigation, 1 Class 3 of crack width 3% year for final treatment Dirt, debris and obstacles Not more than 10 8 hours must be removed: items of detritus is within 8 hours if they visible from the road pose a danger to traffic per km safety 1 month Within 48 hours if they do not pose any danger to traffic safety. Cleanliness of the New work The road surface must Remove debris with 6 hours Visual inspection pavement surface Class 1 always be clean and free specified time frame 6 hours and shoulders. Class 2 of soil, debris, trash and 24 hours Class 3 other objects. 24 hours Raveling New work No raveling of the Repair raveling 7 days Visual inspection Class 1 surface is allowed within the given 7 days Class 2 timeframe 28 days June 2006 66  Framework for Performance Based Expressway Maintenance in China Class 3 56 days Edge break New work There shall not be Repair within the 7 days Visual inspection Class 1 loose pavement given time frame 7 days Class 2 edges, or pieces of 28 days Class 3 pavement breaking 56 days off at the edges. Edge drop off New work Difference in height at No drop off larger 7 days Visual inspection Class 1 edge of pavement shall than 25 mm is 7 days Class 2 not be more than 25 mm. allowed, repair within 28 days Class 3 the given time frame 56 days Paved shoulders New work Must always be repair within the 28 days Visual inspection Class 1 sealed to avoid water given time frame 28 days Class 2 penetration 56 days Class 3 without deformations 56 days and erosions free of potholes and erosions Ditches and vertical New work Must be clean and lining repair within the 15 days Visual inspection drains with lining Class 1 without any significant given time frame 30 days Class 2 damage of the lining. 90 days Class 3 90 days Ditches and vertical New work Must be clean and free of repair within the 15 days Visual inspection drains without lining Class 1 obstacles. given time frame 30 days June 2006 67  Framework for Performance Based Expressway Maintenance in China Class 2 90 days Class 3 90 days Collectors New work Must be clean and free of repair within the 15 days Visual inspection Class 1 obstacles without given time frame 30 days Class 2 structural damage. 90 days Class 3 90 days Culverts New work Must be clean and free of repair within the 15 days Visual inspection Class 1 obstacles without given time frame 30 days Class 2 structural damage. 90 days Class 3 90 days The Expressway Maintenance Quality Evaluation Standards contain pertinent data collection and evaluation methods. These should be taken into account in the short term performance standards. June 2006 68  Framework for Performance Based Expressway Maintenance in China 10.4 Basis of Payments Method of payment is different for various kinds of works as per GG 42. Table 10.2 Method of Payments for Maintenance Works Kinds of Works Method of Payment Rehabilitation Work Lump Sum paid according to working progress Maintenance Work Lump Sum Monthly Improvement Bill of Quantities Emergency Provisional Sum The Employer is required to make down payments under clause 45.1 of GC. The contractor shall purchase materials and equipment, and pay for the mobilization costs. The contractor should present a copy of invoices to the Project Manager as a certificate. Value of down payment should be deducted from the monthly payment according to the work progress, and the Contractor is able to pay for various initial cost of the project. Monthly payment is either based on acquired value, monthly rate, or quantities in accordance with kinds of works, and the payment value is determined after deducting the down payment, retention, unsatisfactory value of the works. No descriptions are made in the contract form regarding the payment of bonus. Satisfying the required level of service is mandatory for Maintenance works; and therefore, it might be difficult to add the clause of bonus payment. However, it might be possible to consider bonus payment if the Contractor finish improvement or rehabilitation works during shorter period of times. 10.5 Specifications The sample specification was reviewed and modifications made based on the assumption that these measures are relevant to China. However, subsequent Maintenance Quality Evaluation Standards in 2002. The measures contained in this document are compulsory, therefore these should be implemented in the Specifications. The above document needs to be translated and interpreted before June 2006 69  Framework for Performance Based Expressway Maintenance in China implementing in the Specification. This task goes beyond the TOR of this project and should be addressed separately. June 2006 70  Framework for Performance Based Expressway Maintenance in China 10.6 Tender Evaluation Procedure In order to select the Contractor which present Best Value for Money, the Employer should evaluate not only the tender price but also the Contractor s performance and technical capabilities. The Contractor s performance and capability should be evaluated by their technical proposal including their past contract record, number of eligible and qualified engineers, and the availability of equipment. Also, the Employer should evaluate the financial capability in order to prevent the Contractor s default risk. It is recommended that the tender evaluation the below should follow procedure considering both price and capabilities. Figure 10.3 Tender Evaluation Procedure Invitation to the pre-qualified Tenderers Multiple pre-qualified tenderers to be nominated The First Tender (EOI) The 1st tender should focus Technical Proposal on the Technical Proposal Financial Proposal (only for reference) to assess the Tenderer s technical capability. Tender Clarification Tender clarification should Technical Proposal be performed to clarify technical issues proposed by Tenderers. Tender Pre-Evaluation Capable Tenderers are selected after tender Notification to Tenderers clarification, and are notified Acceptable to proceed to the 2nd stage Not Acceptable The Second Tender The 2nd tender should Revised Technical Proposal evaluate technical and Financial Proposal financial capabilities of Tenderers Determination of Successful Bidders June 2006 71  Framework for Performance Based Expressway Maintenance in China June 2006 72  Framework for Performance Based Expressway Maintenance in China Through the tender evaluation process, the contractor should be evaluated and selected in accordance with the following criteria. One of the most important things is that the contractor should be selected not only by the price competitiveness, but also by their quality level including the capability of technical and engineering matters. For example, the tender evaluation is conducted for the following criteria. Financial Proposal (60%) Tender Price Technical Proposal Quality procedures (10%) Past records of maintenance works (10%) Staff and Equipment (20%) June 2006 73  Framework for Performance Based Expressway Maintenance in China 11 Task B2: Advice on Preparation of Bidding Package Before advising on the preparation of Bidding Package, it is important to review the current nature of road maintenance contracts in China. Currently, the maintenance contracts are made on Bill of Quantities basis, and detailed specification is provided by the Government. The government and the contractor have no experience in OPRC contracts. Therefore, a gradual introduction of OPRC is recommended. The following activities may be necessary to assist the introduction of OPRC: Deepen the understandings of Demonstrate benefits and risks at specific OPRC examples Provide training in asset management Introduce and establish contracting practices aimed at risk amelioration Determine desired Level of Analyse and ascertain current condition Service and service practice Establish governmental and community expectations Analyse the financial consequences of various service level to determine a realistic and sustainable LOS Define past and future work Compile records of past work quantities requirements Forecast work quantities Specify work items and expectations For all parties to gain experience and confidence in the process and to foster cooperation, it is suggested to set up a management board. The role of this board should include joint supervision and ongoing evaluation of the contract. The board may also disseminate learnings and experience at will. June 2006 74  Framework for Performance Based Expressway Maintenance in China Table 11.1 Concept of the Management Board The Government Management Board Try OPRC on pilot site referring Training the sample bidding document, and Check required service level Clarify maintenance activity Improve the sample document The Contractor Regarding the advice on bidding package, the Package consists of Part 1: Bidding Procedure, Part 2: Work Requirements, and Part 3: Conditions of Contract and Contract Form. Since comments are made for the description of contract and specification at Part 2 and Part 3 in 4.3; comments for Part 1: Bidding Procedure are focused here. Part 1 consists of Instruction to Bidders, Bid Data Sheet, Evaluation and Qualification Criteria, Bidding Forms, and Eligible Countries. This composition is not different from ordinal international tender document in other countries. Pre-qualification is not included in the Bidding Package, since this tender process is applied for the competition among the pre-qualified bidders. There should be two points to be commented for this Bidding Package. 11.1 Section ITB 7 Clarification of Bidding Document, Site Visit, Pre-Bid Meeting In case of normal international tender process, Q&A for the tender documents are exchanged between the Employer and the Tenderers before tender close date, and details of the Q&A are opened to all of the Tenderers. June 2006 75  Framework for Performance Based Expressway Maintenance in China In this bidding package, pre-bid meeting is held to clarify ambiguous matters for both parties, and this procedure is very effective to deepen mutual understandings of the parties. Especially, since performance base contract do not specify the details of the work, misunderstandings for the contract document are easy to happen. Any questions should be clarified at the tender process, and it will prevent from arising claim or dispute on the following stage. In this bidding package, questionnaires should be submitted to the Employer by the time of one week before pre-bid meeting. Since any other questions will be possibly raised after the dead line or even at the pre-bid meeting, it is desirable to clarify any questions on the face to face basis between the Employer and the Tenderers. Also, all the contents and the results of Q&A should be opened to all Tenderers. Furthermore, minutes of the meeting should be arranged by the Employer to be opened to the Tenderers. 11.2 Section Bidding Forms: Technical Proposal In China, it might be possible for the Tenderers to have no experience with road maintenance work under performance based contract. Therefore, in Section III of Evaluation and Qualification, the Employer is not able to evaluate the past working record of the Tenderers. Therefore, in the technical proposal, it is recommended that the Tenderers should submit the working policy which describes how to cope with inexperienced performance base contract from the financial and technical viewpoints through their past working experience. The Employer should evaluate such appealing point to carry out the contract. Further, the Tenderers should include information on the following: QA and QC systems Data collection and performance monitoring systems Road inspection frequency, equipment and methodology Key personnel and their experience (nominate project manager and key staff) June 2006 76  Framework for Performance Based Expressway Maintenance in China APEENDIX Study Team MORI Hiroshi Mitsubishi Research Institute, Inc. TAKESUE Naoki Mitsubishi Research Institute, Inc. Theuns HENNING MWH NZ Ltd. Peter KADARr MWH NZ Ltd. Ian GREENWOOD Opus International Consultants Ltd. Tony PORTER Opus International Consultants Ltd. SHE Xiangyun China International Engineering Consulting Corp. YANG Weiming China International Engineering Consulting Corp. June 2006 77