ADBTF14_C1 PNG Experience on Long Term Performance Based Maintenance Contract

8/11/2019 ADBTF14_C1 PNG Experience on Long Term Performance Based Maintenance Contract

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Content

BackgroundMain drivers of PBRCs in PNG

Capacity building of domesticcontractors

Main benefits after 1stpilot projects

Role of ADB in 1stpilot project &future recommendations


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Papua New Guinea (PNG)


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Road transport in PNG Past

Implementation Challenges

National Road Authority (NRA)

Long-Term Performance

Based Maintenance (LPTBM) -Present Future


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PNG joined ADB1971 1st project1972, Road Improvement

PNG independent - 16 September 1975

Road conditions deteriorating fast 1st road maintenance project in 1999

(27 years from 1972)

Traditional contracting (input-based)

35% in good conditions


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Lack of funding

Underdeveloped local contracting

Dept. of Works (DOW) Capacity

People & Market capability issue

Long delay vs cost increase


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Kina (PGK), million % total expenditure

0%

5%

10%

15%

20%

0

250

500

750

1,000

1974 79 84 89 94 99 04 09 14

Land transport expenditure (PGK), lhs

Land transport expenditure (% total), rhsrhs

Contracting Hiatus1995 - PTBDissolved

1975 -Independent


8/21Source: http://devpolicy.org/road-management-in-papua-new-guinea-part-1-the-maintenance-challenge-20140903/


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DOW budget appropriation and disbursements (2008-2014)

0

0.25

0.5

0.75

1

1.25

0

400

800

1,200

1,600

2,000

08 09 10 11 12 13e 14p

Recurrent Budget appropriation (Kina, million), lhs

Capital Budget appropriation (Kina, million), lhs

% Recurrent Budget disbursed, rhs

% Capital Budget disbursed, rhs

Source: National Budget Documents (various years), ADB calculations.


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NRA established by an Act 2003

Road Fund was also established

Main objectivesRaise Revenue thru RUC

Plan, program and manage theroad network

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Main Drivers of Testing PBRCs


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2,500km transferred by Works Dept. to NRAPBRC models

Traditional input-based (Hybrid) Contracts

(2009-2011- 6 Contracts)Trial PBRC 5 Years Duration - ADB MFF

Programs 3 Contracts

Service Level Contracts for 3 years -19Contracts

10 Years PBRCin 2015 (ADB MFF Tranche 1)11



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Contractor Development

8 small to medium contractors throughout PNG

New Players developed under PBRC

Contracts all under $5m

Paid monthly on LOS on fixed lump sum

Variable outcomes

Local economic conditions (rates,

populations density) Contractor/People (Public Relations) issues

Contractor submitting irregular claims

o

Less amount of work done 14

Capacity Building of Domestic Contractors


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Source: ADB survey, 20143.

0

1

2

3

4

5

6

Largest Contract Size Completed in the last 5 Years

>$7 mil

$5 - 7 mil

$3 - 5 milFirms

Contract size (PGK)


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Population = > 7.3 million Population 15% urban, 85%

rural/remote Circa 3% tertiary education

Vocational trainingidem

Land ownership 97%customary


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Examples of benefits

Assets Management System

improved

PBRCs developed

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Main Benefits after 1st Pilot Projects


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Dos & Donts from 1st Pilot Projects

Dos

Pilot Trials

Initial Expert

Support/Advisors

Contractor

Capacity

Development

Donts

Avoid Short Sections.

Go for networks

Avoid roads with

high maintenance

needs

Avoid Contractors

without good

reputation

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Piloting LTPBM through MFF - T1&2

Upgrade & maintain in one contract10

years (2 ongoing)

Bigger package = bigger & more bidders

Contractors preference good news!

Sustainability? Increase private sectorparticipation


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Improve LTPBM in MFF - T3&4

Design, Build/upgrade & Maintenance

(DBM) contract 10-15 years. Restructure project design with private

sector inputs

Longer road sections Network

Big contractors build local capacity


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Future focus Capacity Development

Increase Revenue

Maintain a Network on a PBRC

basis

Improve Procurement & Other

Govt Agency Issues Involve more private sector

participation