Framework for Performance Based Expressway Maintenance in ...documents.worldbank.org/curated/en/... · key performance indicators for expressway maintenance companies that will promote

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.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Framework for Performance Based ExpresswayMaintenance in China

June 2006

1

INDEXExecutive Summary

1 Introduction.................................................................................................................... 4

2 Methodology ................................................................................................................... 82.1 Overview of Approach............................................................................................. 82.2 Consultation............................................................................................................ 82.3 Adopted Approach................................................................................................... 92.3.1 Task A1: Confirm industry capacity in Hubei and Jiangxi Provinces......... 92.3.2 Task A2: Confirm assets to be included in contracts .................................... 92.3.3 Task A3: Confirm criteria for identifying pilot sites..................................... 92.3.4 Task A4: Identify relevant local practices and issues................................... 92.3.5 Task A6 Establish framework for introducing OPRC to China ................. 10

2.4 Time Frame of Project.......................................................................................... 10

3 Task A1: Industry Capacity..........................................................................................113.1 Overview of current practice of Expressway Management................................113.2 Interviews.............................................................................................................. 173.2.1 Purpose & Targets......................................................................................... 173.2.2 Operators ....................................................................................................... 173.2.3 Contractors .................................................................................................... 223.2.4 Consultants.................................................................................................... 24

3.3 Issues to Consider for the Framework of OPRCs............................................... 253.3.1 ....................................................................................... 253.3.2 Decision support systems.............................................................................. 263.3.3 .................................................................................... 263.3.4 Consultant's Capacity ................................................................................... 27

3.4 Conclusions ........................................................................................................... 27

4 Task A2: Assets to be included.................................................................................... 304.1 Current Ownership .............................................................................................. 304.2 Issues to Consider for the Framework................................................................ 31


June 2006

2

4.3 Recommendations assets to be included.......................................................... 32

5 Task A3: Criteria for pilot sites................................................................................... 335.1 General criteria..................................................................................................... 335.2 Other aspects found during the investigation.................................................... 335.3 Recommended criteria.......................................................................................... 365.4 Recommendation for Pilot Trial Sites ................................................................. 37

6 Task A4: Discussion on Local Practice and Issues .................................................... 396.1 Introduction .......................................................................................................... 396.2 Funding of multi-year projects by the provincial government.......................... 406.3 Overloading........................................................................................................... 406.4 Design Standards ................................................................................................. 416.5 Maintenance Practices ......................................................................................... 416.6 Road condition data.............................................................................................. 426.7 Other issues and summary.................................................................................. 42

7 Task A6: Framework for Introducing OPRC Contract to China .............................. 447.1 Implementation of OPRC..................................................................................... 447.2 Technical matters ................................................................................................. 457.3 Administrative matters........................................................................................ 467.4 Assistance from the World Bank ......................................................................... 46

8 Workshop held on 6th of June, 2006............................................................................ 488.1 Presentations at the workshop............................................................................ 488.2 Discussion with key players................................................................................. 488.3 Discussion with Chutian Expressway Company................................................ 49

9 Current Pavement Condition...................................................................................... 51

10China .................................................................................................................................... 5210.1 Risk Allocation ...................................................................................................... 5310.1.1 Inflation.......................................................................................................... 55


June 2006

3

10.1.2 Traffic Volume Increase ................................................................................ 5610.1.3 Overloaded vehicles....................................................................................... 5710.1.4 Emergency Works.......................................................................................... 5910.1.5 Future Development Work ........................................................................... 5910.1.6 Working together........................................................................................... 60

10.2 Assets to be included............................................................................................ 6010.3 Required Performance Criteria and Specification for their Monitoring .......... 6110.3.1 Long term performance measures................................................................ 6110.3.2 Short term operational measures................................................................. 62

10.4 Basis of Payments................................................................................................. 6910.5 Specifications ........................................................................................................ 6910.6 Tender Evaluation Procedure.............................................................................. 71

11 Task B2: Advice on Preparation of Bidding Package ................................................ 7411.1 Section ITB 7 Clarification of Bidding Document, Site Visit, Pre-BidMeeting............................................................................................................................. 7511.2 Section Bidding Forms: Technical Proposal ............................................... 76

APPENDIX Study Team


June 2006

4

Definition of Terms

Term DefinitionAADT Annual Average Daily TrafficADB Asian Development BankBMS Bridge Management SystemCBMS Chinese BMSCIECC China International Engineering Consulting CorporationCPMS Chinese PMSHPCD Hubei Province Communication DepartmentJPCD Jiangxi Province Communication DepartmentKPI Key Performance IndicatorLCC Life Cycle CostLOS Level of ServiceMIRI Mitsubishi Research Institute, Inc.MOC Ministry of Communication of ChinaMWH MWH NZ Ltd.OPRC Output- and Performance-Based ContractingOpus Opus International Consultants LtdPMS Pavement Management SystemTOR Terms of Reference


June 2006

1

Executive Summary

Output- and Performance-based contracting (OPRC) has been successfully implementedby many road agencies around the world, in order to improve the effectiveness andefficiency of road maintenance practices. While some highway agencies in China haveimplemented maintenance by contract, they have not as yet implemented performancebased maintenance contracting.

Performance based contracting is a significant shift away from more traditionalapproaches to road maintenance. Performance based maintenance contracts haveclearly specified objectives which are expressed in terms of level of service or keyperformance indicators.

Expressways have been constructed at the initiative and strong support of the nationaland provincial governments. The national expressway network is determined by theMinistry of Communication (MOC) of China, and construction and management areentrusted to the provincial governments. The construction and maintenancestandards are prescribed by MOC to ensure national uniformity. The management ofthe expressways rests with each province. Provinces are managing the expresswaysindependently, including setting the toll rate. The management of expressways isunder the supervision of the provincial government. When commercialization wasintroduced, some provinces shifted the management to a provincial managing company.

The current situation in China is not very different from the situation observed othercountries before the introduction of OPRCs. The general concern about theintroduction 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 timeexplaining the benefits of OPRC at both company and personal level.Some of the critical issues in China are summarized below, together with someopportunities.

Strength, Weakness and OpportunitiesStrength Weakness Opportunities

Sound engineeringknowledge of pavementengineering issues isavailable

Limited experience in assetmanagement and life cyclecosting in particular

Training in LCC and assetmanagement needed

Competent maintainingorganizations work onexpressways under variousorganizational structures

Targets and operationalrequirements seem to bemainly engineering ones;direct or even indirectfinancial motivation seemsto be lacking

Create and foster financialkey performance indicatorsfor expresswaymaintenance companiesthat will promote greateroperational efficiency

Expressway maintenancecompanies operate in a wellregulated and controlledenvironment, so their

The decision makingcapacity and experience ofthe companies is limited.

Decision support systemsneed to be introduced at thesame time when companiesare encouraged to make


June 2006

2

future is predictable andclear.

decisions.

The operating scope of thecompanies is clearlydefined.

The scope of theexpressway companies isgenerally limited to executewell defined technicaltasks; theses do not includelong term planning ortaking risks

Develop skills ininfrastructure assetmanagement andadministration

Maintenance standards areset by MOC. Thesestandards are useful forKPMs i.e. as long termtargets

Maintenance standards arecomplex and are difficult torelate directly to pavementcondition.

zed

Short term maintenancestandards with generalvalidity need to bedeveloped with local inputand relevance.

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 togrow together with the spread of the new contracting formAt least two pilot OPRCs be created to foster competition and spreadknowledge and experience as widely as possibleThe first OPRCs be limited to routine maintenance activities with the longterm activities remaining under the current controlling agencies (hybridcontracts)The duration of the initial OPRCs is limited to 3-5 yearsBefore commencing the OPRCs the current contract conditions should bereviewed, in particular the risk allocation (rise and fall) and conflictresolution clauses.The CPMS and CBMS systems should be made widely available tointerested consultants, construction and maintenance companies as well asto expressway companies.The suitability of the CPMS and CBMS for governing OPRC should bereviewed and ascertained. Relevant key performance indicators and levelof service need to be developed and calibrated, in such a manner that areconsistency with relevant MOC requirements is ensured.Extensive training and dissemination of information is recommended toensure informed approach and attitude to OPRCAppropriate data depositories need to be developed and maintainedcontaining pertinent data, such as work quantities, locations, costs etc.

Maintenance of newly constructed expressways is still in its infancy due to therelatively young age of the network. Maintenance demand will grow at a fast rate asthe network ages. To meet this rapidly growing demand, it is recommended that theWorld Bank provides assistance to develop the infrastructure (i.e. the legal andtechnical framework) for effective road maintenance. This may include training insystems, contracting and technology.

The World Bank may also assist in transfer of technology and experience by providing


June 2006

3

suitably qualified consultants for training.Training should cover the following subjects:

ContractingDevelopment of level of serviceDeveloping asset management plans

Direct involvement of consultants as advisors on management boards would also be aneffective method of assistance.


June 2006

4

1 Introduction

Output- and Performance-based contracting (OPRC) has been successfully implementedby many road agencies around the world, in order to improve the effectiveness andefficiency of road maintenance practices. While some highway agencies in China haveimplemented maintenance by contract, they have not as yet implemented performancebased maintenance contracting.

The World Bank has secured Japanese Consultant Trust Funds to hire a JapaneseConsultant to develop a framework for performance based maintenance contracts forexpressways in China. The World Bank will use this framework on its future projectsto pilot test or implement OPRC.

< OVERVIEW OF OPRC >

Output- and Performance-based contracting is a significant shift away from moretraditional approaches to road maintenance. Performance based maintenancecontracts have clearly specified objectives which are expressed in terms of level ofservice or key performance indicators.

Output focused delivery has been commonly used in many countries. Output orientedmaintenance delivery, - such as schedule of rate type contracts - improves efficiencycompared with input focused maintenance. The contract is based on a schedule of unitprices and estimates of quantities. Payments are based on the executed works. Bypaying the contractor according to the agreed rates, the contractor has an incentive tobe efficient, but his objectives may not necessarily be aligned with those of the client.

ctive to minimize whole of life costs is not sharedwith the contractor who is merely being paid for repairing the defects as they occurthe contractor is not required to think about how to minimize their recurrence.

Outcome focused delivery is encapsulated in OPRC contracts. The contractor mustinspect, plan, design, organize and deliver road maintenance services such that allassets are in a condition which is fit for purpose and in accordance with specified assetcondition standards for a fixed lump sum price. For example, rather than being


June 2006

5

provided with a schedule of resurfacing lengths and locations over the term of thecontract, the contractor agrees to maintain a network at a defined level of roughness,rutting (or whatever other indicators the client considers important) for the contractduration.

Nevertheless, in some cases, the agency may choose to include some specific works inthe contract. For example, if some significant rehabilitation work is required to bringthe road to an acceptable or desired standard, specific work items may be required tocomplete before performance based standards apply. However, in summary, the

by:Requiring the contractor to ensure the road network meets agreed performancecriteria;Allowing the contractor to decide what work and when to do, thus promotinginnovation;Making the contractor to have a vested interest in the quality of his ownworkp,thus promoting quality workmanship.Giving the contractor responsibility for all assets in the road corridor, so thatthe agency has one single point of contact. This clearly assigns responsibilityto the contractor without any ambiguity or conflict of interest.

Various countries have adopted OPRC style contracts, and each has spent significanttime aligning the generic principles with their specific local issues. However, thefollowing key success factors have become apparent as experience develops, and willneed to be considered in any move to OPRC by China:

Contracts should aim to be comprehensive in their coverage of the differentassets (e.g. signs, pavements, culverts etc), for the reasons stated above;Contracts should be sufficiently long for the contractor to be exposed to theconsequences of its actions. A longer period fosters sense of ownership andinnovation. In Australia and New Zealand, 10 year terms have been adopted.Elsewhere, terms have been reduced (e.g. Colombia 4 years) to fit localcircumstances, but experience still suggests that longer terms would bepreferable;Good cooperation and partnership between the client and contractor is


June 2006

6

required, as performance requirements might still be evolving and developingas experience is gained;A rigorous review of performance standards for all the assets is required, toensure they are achievable and meet client objectives. Successfulspecifications are transparent and clearly articulated. Where it becomes toodifficult to specify outcomes / standards, the contract might revert to outputbased 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 ensurethat tenderers are aware of their obligations under the contract;Risks must be clearly identified and equitably shared. Conflict resolutionprocesses and mechanisms must be in place to resolve any conflict at the lowestpossible level.A capable contracting industry must be available, and be ready to take on theresponsibilities of long term asset management;The volume of contract must be sufficiently attractive and offer significantgains (profit and savings) for both parties.Agencies must change from doing maintenance to managing contractmaintenance without interfering technical or other decisions made by thecontractor.Compliance monitoring must be agreed upon beforehand and strictly adheredto.

It would be prudent to approach the implementation of OPRC in China in gradualmanner.

Establish an appropriate framework for introducing OPRCsEnsure that appropriate legal, institutional and policy requirements are inplacePrepare bidding documentsPilot test on one or more sections of roadRevise approach based on the results of the pilot testing before expansiveintroduction of OPRCs.


June 2006

7

Mitsubishi Research Institute, Inc. (MIRI) was contracted by the World Bank toundertake a two phase project. The objective of the project is to investigate theviability of Performance Based Maintenance Contracts in China.To perform the study, MIRI was supported by MWH NZ Ltd. (MWH), OpusInternational Consultants Ltd (Opus), and China International Engineering ConsultingCorporation(CIECC) as sub-contractors.

Specific activities defined within the Terms of Reference (TOR) are:

Phase I - Ascertain the viability of OPRC in ChinaTask A1 Confirm industry capacity in Hubei and Jiangxi ProvincesTask A2 Confirm assets to be included in contractsTask A3 Confirm criteria for identifying pilot sitesTask A4 Identify relevant local practices and issuesTask A5 Conduct workshopTask A6 Establish framework for introducing OPRC to China

Phase II Prepare suitable contract documentation for China

document to ChinaTask B2 Advice on preparation of bidding package

In addition to the above tasks, an additional workshop was run at the start of theproject to ensure an adequate level of understanding existed before understanding thenecessary discussions.


June 2006

8

2 Methodology

2.1 Overview of ApproachThe approach utilised in conducting the project was to combine a teamexperienced in OPRC contracts in various countries, particularly in Asiancountries, such as Indonesia. This combined knowledge was then used toproduce the framework for the implementation of OPRC to China.

This chapter gives an overview of the scope of the consultation conducted.

2.2 ConsultationThe completion of the project required detailed discussions with both governmentand industry participants to obtain thorough understanding of local conditionsthat have an impact on any OPRC contract. Such consultation was conducted intwo ways:

Workshops and large group meetings to discuss an array of issuesAn open workshop was held in Wuhan on 28th March. It introduced theproject and OPRC concepts.After the introductory workshop, small group meetings were held in Hubeiand Jangxi with the Study Team.The 2nd open workshop and group meetings were held in Wuhan on 6th ofJune to present and discuss the summary of the interim report.During the 2nd workshop the applicability of the sample bidding documentis presented.

Site visitsSite visits of the potential pilot trial sites in Hubei and Jiangxi wereundertaken. These site visits included traveling by road from Wuhan toNanchan.The study team visited the proposed pilot trial company in Hubei - theHubei Chutian Expressway Co. Ltd. after the 2nd work shop to discussfurther details.


June 2006

9

The Study Team would like to thank all those involved for participating andcontributing 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 ProvincesThe 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 andheld discussions with authorities and industry representatives on issues ofmaintenance and contracts.

2.3.2 Task A2: Confirm assets to be included in contractsThe selection of assets to be included into the expressway OPRC will take intoconsideration local circumstances and critical stakeholders. Ideally, if the assetowners agree and the private sector has the necessary skills, the resulting OPRC wouldspan 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 sitesAs noted in the terms of reference, there are numerous criteria that should be applied inidentifying pilot sites for the introduction of the OPRC. We paid particular attention tomaintaining local competition that is essential for the long term success of an outcomeoriented contract. The size of the contract must be consistent with the capabilities ofthe local industry to ensure long term viability and profitability.We received relevant information through discussions with authorities andmanagement firms.

2.3.4 Task A4: Identify relevant local practices and issuesLocal practices have a profound impact on contracting technical and managementpractices. Relevant practices that affect funding for multi-year projects will beexplored together with technical issues related to asset performance. These includedesign standards, data availability and suitability, traffic data and overloading in


June 2006

10

particular and last but not least local work and maintenance practices. The legalframework for the contract needs to be explored, including conflict resolution.

2.3.5 Task A6 Establish framework for introducing OPRC to ChinaFollowing completion of the previous stages of this contract, we developed theframework for introducing OPRC to expressways in China. The framework is based onan incremental approach that takes available capacities and experiences with alreadyfunctional OPRCs into account.

2.4 Time Frame of ProjectThe timeframe of the project is summarised in Table 2-1.

Table 2-1 Time Frame of Project

Item Date PlaceContract signed 22 March 2006Preliminary work MarchWork in China 27 March - 5 April Hubei, JiangxiInitial workshop 28 March City of Wuhan(Hubei)Work for Task A AprilInterim report 30 AprilInitial work for Task B MayWork in China 5 June - 9 April HubeiSecond workshop 6 June City of Wuhan(Hubei)Draft final report JuneFinal report 30 June


June 2006

11

3 Task A1: Industry Capacity

3.1 Overview of current practice of Expressway ManagementExpressways have been constructed at the initiative and strong support of thenational and provincial governments. The national expressway network isdetermined by the Ministry of Communication (MOC) of China, and constructionand management are entrusted to the provincial governments. The constructionand maintenance standards are prescribed by MOC to ensure national uniformity.The management of the expressways rests with each province. Provinces aremanaging the expressways independently, including setting the toll rate.The management of expressways is under the supervision of the provincialgovernment. When commercialization was introduced, some provinces shiftedthe 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 HubeiExpressway Group Ltd. was established to supervise the management of allmanagement companies. HPCD (Hubei Provincial CommunicationsDepartment) decided to change the management structure to direct governmentcontrol in 2006. The new organization is currently being established at the timeof this project. It is anticipated that the new organization, Hubei ExpresswayAdministrative Bureau will be functional by July 2006.

In Jiangxi Province, JPCD (Jiangxi Provincial Communications Department) andJiangxi Expressway Administrative Bureau are controlling the maintenance ofmost expressways. Jiangxi Province has 12 major expressways. Six of them aremaintained by expressway administrative divisions. The rest is operated by aprivatized 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 300km of new expressways planned to be opened every year. Jiangxi Province hasabout 1,580 km expressways at present, and the total length will be 4,650km by2020.


June 2006

12

Most expressways are relatively new. Maintenance is not a central issue atpresent, but it needs to be addressed in time.

The management and ownership structure of the expressways have a profoundimpact on the capabilities of the local industry. Therefore this should be takeninto consideration when discussing industry capabilities.Three forms of expressway management arrangements were identified in Hubeiand Jiangxi.Type 1: A provincial organization (direct management by the overseeing

authority)Type 2: An investor's company which bought the right of managementType 3: A joint-venture (provincial government and private sector) established

for the management of the expressway under the contract betweenprovince and private sector

Build, Operate and Transfer (BOT) has also been considered recently, but noexpressway operated under BOT arrangements at the time of our investigation.


June 2006

13

Table 3-1 Major Expressways in HubeiType 1 Type 1 Type 2 Type 3 Type 3

Name Jingzhu

Expressway

Hanshi

Expressway

Wuhuan

Expressway

Huanhuan

Expressway

Chutian

Expressway

Interval BeiJing

-Zhuhai

(in Hibei)

Wuhan

-Shiyan

Wuhan

-Huangshi

Huangshi

-Huangmei

Wuhan

-Jingzhou

-Yichang

Length 339km 401km 70km 143km 279.km

Management

Organization

Hubei Province

Jingzhu

Expressway

Administrative

Division

Hubei Province

Hanshi

Expressway

Administrative

Division

Wuhuan

Expressway

Co.Ltd.

Huanhuan

Expressway

Co.Ltd

Hubei

Chutian

Expressway

Co.Ltd

Table 3-2 Major Expressways in JiangxiType 1 Type 1 Type 1 Type 3

Name Jiujing

Expressway

JingJian

Expressway

Jiangan

Expressway

Ganyue

Expressway

Interval Juijiang

-Jingdezhen

Jinggangshan

-Jian

Jian

-Ganzhou-

Juijiang

-Jian

Length 134km 82km 127km 384km

Management

Organization

Jangxi Province

Juijing

Expressway

Administrative

Division

Jangxi Province

Taijing

Expressway

Administrative

Division

Jangxi Province

Ganzhou

Expressway

Administrative

Division

Ganyue

Expressway

Co. Ltd


June 2006

14

Map of Expressway in Hubei


June 2006

15

Map of Expressway in Jiangxi


June 2006

16


June 2006

17

3.2 Interviews

3.2.1 Purpose & TargetsThe main objects of the interviews with government agencies, expresswaycompanies, 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 thecontract document, and;estimate the value of contract which will best fit local capacity.

Regardless of the company structure, ultimately all expressways are controlled byPCD. The management structures were established a few years ago, at a timewhen outsourcing of maintenance was relatively new. Currently the numbers ofcontractors and consultants with sufficient experience and to do expresswaymaintenance work is limited. The Study Team interviewed a few expresswaymaintenance divisions, expressway companies, contractors and consultants asadvised by the Provincial Communication Departments in both provinces.

3.2.2 OperatorsThe 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 theHubei section of the expressway. This division manages 339km of expressway,most of which was financed with a World Bank loan. The division used to beHubei Jingzhu Expressway Management Co. Ltd. and was changed back to a


June 2006

18

provincial organization recently.The first section of the expressway was opened in Dec.2001, and the full lengthwas opened in September 2002. The expressway has only been operation for afew years since opening to the traffic.

This agency has about 950 staff in total, of which about 45 are engineers involvedin maintenance. A staff of five out of these engineers deal with planning anddesign of maintenance. The overwhelming majority of staff seems to be involvedin toll collection and administration. As an approximate comparison, a typicalroad maintenance organization in Australia has about 0.2-0.3 staff per km, whilstthe number of staff per km is 2-2.5 on the visited expressways. This comparisonmust be heavily qualified as the visited expressways have a high number of tollgates with manual toll collection booth, whilst the Australian networks are ofmixed roads without toll facilities. Also, smaller organizations tend to haverelatively larger overheads as large organizations.

All minor maintenance work is contracted through a competitive tenderingprocess. The maintenance works were divided into three contracts, namely twoexpressway sections and structures (bridges & culverts). Each contract is afive-year unit rate type contract. The first contract started in 2004.The agency has an Engineering & Technical Unit for maintenance managementand two maintenance branches for the supervision of the contractors.Maintenance Branch No 1 deals with maintenance of the northern part of theexpressway 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 thecontractor 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 inthe database in the Branch. Culverts and bridges are inspected visually everyquarter.Based on the daily patrols and evaluation, the Branch prepares a maintenanceplan and submits to the Engineering Unit of the agency.


June 2006

19

Besides the evaluation by the staff of the agency, the agency hires an independent- government owned - engineering organization as needed to evaluate thecondition of the pavement and bridges. (This organization is the only one in theProvince operating suitable condition survey equipment.)

3.2.2.2 Wuhuang Expressway Co. Ltd.

Wuhuang Expressway is the first expressway opened in Hubei. The total lengthof 70.3 km was opened in Feb.1991. The Expressway Bureau of HPCD managedthis expressway before the rights of tolling and operation was sold to a privateforeign company with a concession for 25 years in 1997. Under the concession,the actual management was assigned to the management division of theExpressway Bureau, presently Wuhuang Expressway Co. Ltd. Theforeign-owned concessionaire company took 75% of the revenue, and the rest waspaid to HPCD. The concessionaire sold the concession to a Chinese companyresiding in Shenzhen in Dec. 2005, but the structure of the operating companywas not changed. The income is split between the investor and the province, andthe 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 thecompany directly) Consequently, the management is under the direct control ofHPCD.

The average daily traffic is 19,000 vehicles (27,000 PCU, Passenger CarEquivalent Unit); the maximum daily volume record is 32,000 vehicles. Theannual toll revenue was 228 million RMB in 2004, and 270 million RMB in 2005and it about 300 million RMB is expected in 2006. Further rapid growth isexpected, which might be affected by the opening of adjacent expressway sections.The company has a staff of 400. The Engineering & Technical Unit, which has 5engineers, deals with the management of maintenance. This unit investigatesthe road condition and prepares also medium to long-term maintenance plans.Direct maintenance work is done by the maintenance center which has 10engineers and 10 workers.

The original pavement structure was concrete, which failed and had to be repairedand fully overlaid after 15 years of trafficking. The concrete pavement was


June 2006

20

covered with asphalt in 2003. The guarantee period of construction has justexpired. The current condition of the pavement is good, but rapid increase ofmaintenance needs is anticipated. The minor and the major repairs cost 2.0million RMB and 1.5 million RMB respectively in 2004. The maintenance costsgrew 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. Therepair of the structures is contracted out. Minor maintenance work is done byin-house workers.

The maintenance station conducts the regular road inspections, whilst the annualinspection is contracted to a consultant. The engineering department alsocollects condition data according to the MOC requirements. The collected datamust conform to the MOC requirements which coincide with those of the ChinesePMS (CPMS) developed by the Highway Research Institute. All expresswaycompanies are under obligation to collect and report condition according to thisstandard.

3.2.2.3 Hubei Chutian Expressway Co., Ltd.

The 279km long expressway was originally managed by the Expressway Bureau ofHPCD. 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 22years was sold on the market. 840 million RMB was collected from the ShanghaiStock Exchange, and from the money raised, the expressway company bought thetolling operation right to the remaining 100km (Jingzhou-Yichnag) in Sep. 2005.Currently HPCD owns 45 % of the shares, and MOC owns 23%. This expresswayearned as much as 513 million RMB, and 120 million RMB was used formaintenance in 2005.

The company is responsible to a board of directors. The only income source of thecompany is from the toll. The toll income i.e. a proportion of it is allocateddirectly to the managing company. In this structure the managing company hasvested interest in operational efficiency.


June 2006

21

The company has about 800 staff. Routine maintenance work is provided by themaintenance station that has three local depots. The maintenance station hasabout 40 staff of which five are engineers. Each depot has 7-8 technical workersand doing minor maintenance work. Major work is contracted out under unitprice contracts.

The Expressway Company currently considers issuing three schedule of rates typemaintenance 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. Thisdivision 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 pavementand to prepare annual maintenance plans that are submitted to JPCD throughthe division. They also make quarterly maintenance plans.Daily traffic is about 5,000 vehicles, and is growing at a rate of 17% pa. Thegrowth is driven by the growth of the economy and expressway-networkdevelopment. 30-40-% of traffic is trucks. Overloading is quite likely, but hasnot become a serious issue. However, it may become a significant issue when thetraffic increases following the opening further links in the expressway network in2006.

Routine maintenance work is conducted by in-house workforce, though large itemsare outsourced.Data is stored to meet MOC requirements. CPMS is used as a database facilitywithout utilizing its capability to prioritise work.

3.2.2.5 Ganyue Expressway

Ganyue Expressway Company was established as a provincial organization in1998 and shares were issued at the Shanghai Stock Exchange Market in May2000. 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 majorwork is contracted out.The total length of 388 km is divided into 3 maintenance sections. Each section


June 2006

22

has a maintenance company that is a subsidiary of Ganyue Expressway Co. Ltd.Their maintenance plans have been generated year by year. The company hasjust stated to make a long-term maintenance plan.

Ganyue Expressway is entrusted by JPCD to study PMS. Pavement conditiondata which have been stored by all expressway companies in Jiangxi are used totrial CPMS. The purpose of the study is to use data for future investment andmaintenance work.

3.2.3 ContractorsAs stated in the previous section, most minor maintenance work is done in-house.Major maintenance is contracted out when necessary. A few agencies andcompanies outsource minor maintenance work; all of the contracts are unit ratecontracts.

3.2.3.1 Hubei Jingzhu Expressway

Hubei Jingzhu Expressway issued three tenders for minor maintenance work ofpavement and bridges in October 2003. Pre-qualified companies could tender.(Class A classification is necessary for bridge maintenance and Class B1 forpavement maintenance). 28 companies in total submitted proposals for 3contracts.Zunan Road & Bridge Company, a Province (i.e. government)-owned constructioncompany in Xialgan won the tender for pavement maintenance of the northsection of the expressway. There were 12 competitors in the bidding for thecontract of this section, and according to the winner, about 4-5 companies werereal competitors with similar capabilities.The contractor is experienced in pavement construction, but had no experience incleaning, plants, and safety facilities. The contractor entrusted these works tosub-contractors.The contractor opened a maintenance depot near the maintenance branch ofexpressway agency. It has invested more than 10 million RMB in equipmentsince the contract started.The contractor has 22 staff for project management and administration, a staff of10 for technical management and 40 workers. During a peak period, 70-80


June 2006

23

additional workers join the maintenance work.The contractor does daily inspections whilst the expressway agency also inspectsthe works regularly. The contractor reports to the maintenance branch if somedefects are found and advise the amount of the repair. All maintenance workmust be approved and ordered by the maintenance branch.The contract fee in 2005 was about 30 million RMB. The increase of materialprices 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 OPRCmainly due to the perceived high risk. The contractor (this and the others) havenot been aware of any rise and fall formula to address risk associated with pricefluctuation.

3.2.3.2 Jiangxi Ganyue Expressway

Jiangxi Ganyue Expressway has three subsidiary companies which used to beprovincial organizations. The Study Team interviewed one of them that dealswith the maintenance of Nanchan-Zhangshu(103km).This company was originally established as a Jiangxi expressway administrativedivision for Nanchan-Jiujian. After the extension of the expressway in 2001 theoperation was shifted to private sector and the three administrative divisionsbecame 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 largemaintenance works that is outsourced through competitive tendering.The maintenance company has a unit-price-contract with Ganyue ExpresswayCo.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. Theyalso pointed out issues of concern regarding the introduction of OPRC in Jiangxi.


June 2006

24

Difficulty to estimate future maintenance cost.Culture that has been accustomed to unit-price-contractsConflict of interest between the participating companies i.e. betweenowner 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 ConsultantsThere are no consultants specialized in maintenance work, but many consultantshave experience in the design of new expressways in and around Hubei. InJiangxi, the Construction Design Institute, a formerly provincial organization, hasbeen privatized, and is in a monopoly position.The Study Team interviewed one major consulting company which is currentlyinvolved with expressway maintenance in Hubei.High Technical Transportation Engineering Consulting Co. Ltd. has contractswith expressway agencies and companies. One contact started in 2003 withJingzhu 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 maintenanceconsultants in and around Hubei. High Technical Transportation EngineeringConsulting Co. Ltd is a company owned by the province of Hubei. Each provincehas similar consultants and they all compete with each other.This consultant has access to special road condition survey equipment owned byHPCD. The consultant advises the expressway companies on the results of theannual survey and is involved in some design work. The consultant is aware ofPMS systems but has no practical experience with any of them.The consulting contract is renewed by annual tendering. The contract requiresthe consultant to inspect the condition of pavements and bridges. The consultantreports the result of the inspection. The consultant is also required to adviseabout the necessary maintenance and repair works.


June 2006

25

If the client (expressway agency/company) accepts the consultant s advice, theconsultant 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 forconstruction.The consultant submits a report to its client, and has no opportunity or reason tocontact the contractor. There is no meeting where the client, the contractor, andthe consultant discuss the performance/quality/necessity of maintenance.

3.3 Issues to Consider for the Framework of OPRCs

3.3.1 Operators CapacityCurrently all maintenance work is determined by the operatingagencies/companies. The contractors and the consultants may contribute to workselection, but this happens only rarely.Despite the different management and financing formats, all expressways arecontrolled by the relevant Provincial Communications Department.(HPCD/JPCD). The incentive to increase operational efficiency is limited wherethe 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 sharingarrangements or contractual arrangements addressing risk.Each operation unit has about five planning/design engineers and about 20-50maintenance staff, representing about less than 10 (ten) percent of the total staff.Considering these proportions, hardly any savings can be achieved by increasingthe efficiency of maintenance operations.The drivers for OPRCs need to be clearly identified and addressed, as thetraditional drivers, such as efficiency, reducing labour and material cost do notseem to drive most of the managing companies. Only those companies may besuitable for OPRC that are financially independent, i.e. can dispose profit as theywish. Once the real drivers are identified, the actual needs can be satisfied andaddressed.OPRCs need measurable key performance indicators and benchmarks not only forpavement and maintenance but also for management. Whilst the former onesare 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

26

3.3.2 Decision support systemsTechnical performance measures have been developed and prescribed by MOC.These measures condition indices are available for bridges and pavements andare to be reported at regular intervals. The performance indicators can beutilised in CPMS, but no expressway company visited by the project team uses thepredictive capabilities of CPMS.

Basic asset management concepts, such as life cycle costing and assetmanagement planning are not in practice. Appreciation of these systems andtheir 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 embarkingupon a new contracting system.

3.3.3 Contractors CapacityA few companies expressed interest in minor maintenance works such asrepairing potholes and cracks of the pavement. They are originally majorconstruction companies experienced in large projects and not in routinemaintenance activities.The construction companies are likely to be interested in maintenance contracting,due to the emerging need for maintenance work and subsiding new constructionwork.Major maintenance works are designed by in-house engineers or by consultantscontracted by the expressway companies.Contractors have experience with unit rate contracts only. Contractors are riskaverse and expressed concerns about price-related risks. Contracting conditionsand clauses were not investigated in details, but it became clear duringdiscussions that simple rise and fall formulae are unknown in practice.Even a contractor experienced in minor maintenance works expressed a great dealof 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

27

3.3.4 Consultant's CapacityThe capacity of consultants was found to be limited. Their experience is mainlyin engineering design and not asset management. Currently there is practicallyno demand for maintenance consultants hence no responding capabilities areavailable. The consultant sees little chance to be involved in OPRCs. However,they have some experience and basic understanding of PMS and BMS. Thegeneral attitude to consultants and expectations is that a consultant can onlyprovide technical/engineering design. In general, consultants are perceived notas useful experts but providing service in a very narrow field.

3.4 ConclusionsThe current situation in China is not very different from the situation observedother countries before the introduction of OPRCs.

The general concern about the introduction of a new contracting system reflects anatural human fear of any change. This can usually be overcome bydisseminating knowledge and at the same time explaining the benefits of OPRC atboth 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 engineeringknowledge of pavementengineering issues isavailable

Limited experience in assetmanagement and life cyclecosting in particular

Training in LCC and assetmanagement needed

Competent maintainingorganizations work onexpressways under variousorganizational structures

Targets and operationalrequirements seem to bemainly engineering ones;direct or even indirectfinancial motivation seemsto be lacking

Create and foster financialkey performance indicatorsfor expresswaymaintenance companiesthat will promote greateroperational efficiency

Expressway maintenancecompanies operate in a well

The decision makingcapacity and experience of

Decision support systemsneed to be introduced at the


June 2006

28

regulated and controlledenvironment, so theirfuture is predictable andclear.

the companies is limited. same time when companiesare encouraged to makedecisions.

The operating scope of thecompanies is clearlydefined.

The scope of theexpressway companies isgenerally limited to executewell defined technicaltasks; theses do not includelong term planning ortaking risks

Develop skills ininfrastructure assetmanagement andadministration

Maintenance standards areset by MOC. Thesestandards are useful forKPMs i.e. as long termtargets

Maintenance standards arecomplex and are difficult torelate directly to pavementcondition.

s not utilized

Short term maintenancestandards with generalvalidity need to bedeveloped with local inputand relevance.

The key issues identified:

The key drivers for OPRCs are savings due to increased efficiency and profit incentivethrough risk taking and good planning. The current level of observed productivity hasplenty of room for improvement. The potential savings must be identified andquantified. Savings are usually achieved by (a) reduced staffing level and (b) throughbetter utilization of asset life. The benefits of OPRC must be quantified by estimatingthe potential savings together with the likely impact on employment.

Contractor capacity for large scale OPRC implementation is not available. Contractorsare typically geared towards new work and not maintenance. The difference betweenthe two is substantial, as long term presence on the job forces the contractor to live withthe consequences of his work quality, i.e. enjoying the profits of good quality work andsuffering losses due to poor workmanship. This aspect is received with concern asneither the legal (contractual) nor the technical conditions are apparent.

Consultants similarly lack experience in maintenance planning.


June 2006

29

Company structures and operating environment varies. Only those companies arelikely 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

30

4 Task A2: Assets to be included

4.1 Current OwnershipWithin this report, the context of ownership refers to the agency or the companythat is responsible for the creation, maintenance, and ultimately disposal of anasset.

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 theexpressways. HPCD/JPCD is responsible for the creation and disposal of assets.However, ownership does not always coincide with management rights. Asmentioned in Task A1, three different types of expressway management structuresco-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), themanaging 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 theexpressway 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 inimproving the efficiency and reducing the costs of maintenance activities.


June 2006

31

Table 4-1 Asset OwnershipAssets Current Ownership(*) Current Maintainer

Pavements and surfacing Expressway AdministrativeDivision/Expressway Company

In-house/Contractor

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 MOCmust be kept regardless ofcompany structure and financing.

4.2 Issues to Consider for the FrameworkBased on the interviews with industry and expressway administrative divisions, itwas found that the industry has little experience in asset maintenance.Maintenance is largely limited to responsive actions with no indication of preventivemaintenance or whole of life considerations.

Shifting towards a different maintenance philosophy and structure brings along itsinherent risks that have to be addressed and mitigated. Knowledge transfer is thefirst and probably most important step in mitigating these risks.

One expressway company pointed out that there is no contractor capable doing allmaintenance work. Consequently, a consortium might be required to meet allrequirements.


June 2006

32

4.3 Recommendations assets to be includedBased on the discussions with construction and consulting companies, the followingtable summarizes the recommended assets to be included in to a OPRC.

Table 4-2 Asset Inclusion to OPRCAssets Include in OPRC Pilot Trial

Pavements and surfacing YesBridges Yes cleaning and minor work only

(Only routine maintenance of cleaning, andminor repairs.Major works such as deck replacement areexcluded)

Minor structures and culverts Yes cleaning and safety onlyDrainage YesCut and fill batters Yes

(Need to limit to small work.Large scale repair should be excluded fromthe lump-sum, but can be included in thecontract)

Weigh Bridges No(These are communication and electronicitems)

Lighting No(the type of work is apart from others)

Signs Yes but not electronic or traffic lights ormajor structures, such as gantries

Line marking YesMile posts YesGuardrails and barriers Yes

(Repairs by accidents should be excludedfrom the lump-sum, but can be included inthe contract)

Telecommunication facilities No(the type of work is apart from others)


June 2006

33

5 Task A3: Criteria for pilot sites

5.1 General criteriaThe following criteria were identified before embarking upon the meetings withcontractors and industry:

Maintaining Local competitionCapacity of local industrySize of contract that the local industry can handleRisks are not significantly higher than elsewhere in the networkNo significant events that may affect the future management of the roadKnowledge of OPRC concepts and desire to make OPRC work by contractorsOperational asset understandingHistorical maintenance costs dataRobust asset dataReliability of traffic loading forecastAvailability of resources to all contractorsPresence 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 berelevant and valid. However, the following qualifications and additional criteriashould be considered for the implementation of trial or long term OPRC contracts

The expressway company/division and the contractor must have direct and vestedinterest in implementing a OPRC. Our investigation indicated a number ofdifferent operating environments, not all of them conducive for a performance basedmaintenance contract. Consequently, those expressway companies that operate inan environment where there is no financial consequence of operational efficiency aredeemed not suitable for a OPRC.

Based on our discussions it became transparent that ultimately all significantinitiatives must be sanctioned by the government. Consequently, the political will


June 2006

34

is essential to the successful implementation of a OPRC. It should be noted thatthis point is far from being unique to China; political will has been essential in otherplaces, such as Australia and New Zealand.

The presence of a progressive contracting culture is highly desirable. Practicallyall contracts discussed during our meetings were schedule of rate type contracts, i.e.the owner maintained a high level, direct involvement in the scheduling, controllingand defining the deliverables. OPRCs require a different style of cooperationbetween contracting partners. This can be developed easier when an outcomebased contracting culture is already developed.

Addressing risk is of very high priority. Though studying contract details wasoutside the TOR of our work, it became obvious that risk sharing has very limitedscope and tradition in existing contracts. Risk sharing or alleviating measures,such as rise and fall formulae, were found unknown here, giving rise to concernsabout use and availability of other measures.

Local competition is of moderate concern, as there is a general shortage ofmanpower and resources. However, it is considered essential to maintain andfoster competition. By encouraging competition, more people and companies gainexperience and a larger pool of capable people is developed. Consequently it isproposed to initiate not one, but at least two OPRCs at the same time.

Capacity of local industry is generally lacking. Though 4-5 companies wereconsidered real competitors, this number is considered in a Province of 60 Millionpeople and with about 50,000 km road network. Where routine maintenance iscontracted out, the contractor is a specialized unit of a construction company (e.g. onHansi Expressway). All resources (human and equipment) are provided by theconstruction company. For a successful OPRC, both parties must benefit, i.e. themaintenance work must be profitable on its own wrights. For this, contractorsmust 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

35

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 goingthrough wet, swampy areas. Severe sub-grade related problems have beenexperienced on new expressways (e.g. Jingzhu expressway). These, and similarknown risks must be addressed in any contract.

Significant events that may affect the operation of the road in the future must betaken into account. Dramatic rise of traffic volume and opening of new sections aresuch 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 theexamination of the breadth of the data in detail. However, data collection isprescribed 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 apilot OPRC site.

Asset management system (PMS and BMS) are recommended by MOC and used onall expressways. However, only the database facilities are used. The forecastingand prioritizing capabilities of these systems are largely unknown and not used bythe visited companies.

OPRCs have inherent risks. The risk taking of a contractor must be awarded withproportionate benefits. Without appropriate compensation there is no incentive toaccept risk. This may require contracting forms and concepts such asperformance based contracts, risk management, rise and fall formula - so far notcommon practice in China.

The rhythm of the economy revolves around the five year plan. Performance basedmaintenance contracts usually cover longer periods to avoid the consumption of theasset. Crossing the barriers of a five year plan period must be considered or atleast to be taken into account.


June 2006

36

The expressways are considered reasonably homogeneous in terms of their age andcondition. Homogeneous networks offer limited opportunities for balancingdifferent risk levels associated with sections of various materials, ages and qualities.The fact that most expressways are new or recently rehabilitated, imply reducedrisk 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 forrenewal which in turn may place high financial burden on the maintainingagencies.

5.3 Recommended criteriaThe following table is a summery of the recommended criteria.

Table 5-1 Recommended Criteria for Pilot Sites

Criteria ImportanceMaintaining Local competition highCapacity of local industry mediumSize of contract that the local industry can handle mediumRisks are not significantly higher than elsewhere in thenetwork

High

No significant events that may affect the futuremanagement of the road

High

Knowledge of OPRC concepts and desire to make OPRCwork by contractors

High

Operational asset understanding HighHistorical maintenance costs data MediumRobust asset data HighReliability of traffic loading forecast HighAvailability of resources to all contractors HighPresence and location of weighbridges HighVested interest in operational efficiency Very highDeveloped contracting culture Very HighPolitical will and determination Very high


June 2006

37

5.4 Recommendation for Pilot Trial SitesThe pilot sites will ultimately be determined by HPCD/JPCD. The Study Team

interest is apparent, i.e. the Chutian Expressway in Hubei and the GanyueExpressway in Jiangxi.In comparison between Chutian Expressway and the Ganyue Expressway, theformer is preferred based on the fact that Hubei province has more experience withmaintenance contracts. Also, there are more contractors and competition in Hubeithan in Jiangxi. In addition, the length of the Chutian expressway allows thecreation of two OPRCs on similar conditions.Table 5-2 shows the the selectioncriteria.

Table 5-2 Meeting the selection criteria Chutian Expressway CompanyCriteria Importance

Maintaining Local competition Current tendering process requires at least 8tenders

Capacity of local industry n/aSize of contract that the localindustry can handle

80-150 km length suggested as a pilot

Risks are not significantlyhigher than elsewhere in thenetwork

Based on past history risks can be reliablyassessed

No significant events that mayaffect the future managementof the road

Future road openings are well known;

Knowledge of OPRC conceptsand desire to make OPRCwork by contractors

OPRC concepts are scantily known; however,desire to learn and try was expressed.Understanding contractual aspects of riskmanagement need to be broadened

Operational assetunderstanding

Operational assets are clearly understood.Pavement performance issues need to beclarified in detail.

Historical maintenance costsdata

Standard database is available


June 2006

38

Robust asset data Standard database is availableReliability of traffic loadingforecast

traffic monitoring and weigh measurement iscontinuous for charging purposes

Availability of expertise andE&M to all contractors

Currently only government owned resourcesare available

Presence and location ofweighbridges

yes

Vested interest in operationalefficiency

The shareholding company structure andownership makes the Chutian ExpresswayCompany directly interested in operationalefficiency and cost reduction

Developed contracting culture Developing appropriate contracts,particularly in the area of managing risk isessential

Political will anddetermination

Based on our discussions the political will islikely to be strong


June 2006

39

6 Task A4: Discussion on Local Practice and Issues

6.1 IntroductionRoutine maintenance work is essential to protect roads from deterioration.Inadequate maintenance, overloading, inappropriate construction, design, andenvironmental factors may lead rapid deterioration of the road asset, as shown inTable 6.1. Relevant local practices and issues in Hubei and Jiangxi provinces arediscussed in this section.

Table 6.1 Causes of Road Deteriorations

Items Causes of DeteriorationInadequateMaintenance

poor/lack of/ insufficient maintenancepoor maintenance techniquesintegrity of seal/ delayed seal/unsealed cracks, etc.

Overloading unexpected heavy loads after designvery high tire contact pressurepoor overloading control, etc.

Quality of Construction inadequate/poor compactionpoor workmanship/supervision/construction standardsinadequate use of appropriate plantpoor mixing of materials/permeable pavements, etc.

Material quality inadequate classification of soilssalt damage of aggregateslow quality surfacing, etc.

Environmental Factors climate (wind, snow, rain, freeze)earthquakeserosion of shoulders and side slope, etc.

Design inadequate pavement design/design standardpoor shoulder design/lack of sealed shoulderflat terrain/ low embankment/inadequate camber, etc.


June 2006

40

6.2 Funding of multi-year projects by the provincial governmentRoutine maintenance has to be carried out on regular basis in order to ensure thelong-term performance of any road. The routine maintenance work may alsoreduce the total cost of maintenance in the long-term period. It is estimated thateffective maintenance produces benefits three times more than its cost.The funding practice of the provincial government is different for variousexpressway companies; however, funding policy for Jingzhu expressway, for example,is based on multi-year maintenance contract. Jingzhu expressway is a principalexpressway which connects from Beijing and Zhuhai. Hubei provincialdepartments manage and control 339 km of the highway located within Hubeiprovince. The expressway is separated to 3 sections, and Jinzhu ExpresswayAdministrative Division has scheduled rate type maintenance contracts with localcontractors on each section. The maintenance contracts are for 5 years; therefore,multi-year funding is feasible.

6.3 OverloadingThe total road length in China has dramatically increased in the last 10 years asshown in Table 6.2.

Table 6.2 Expressway Constructions

Fiscal Year Total Length of Expressway(km

Total Length of Roadkm

2020 Long-term Plan 85,0002010 Estimation 65,000 2,300,000

2005 41,000 1,920,0002004 34,288 1,870,6612003 29,745 1,809,8282002 25,130 1,765,2222001 19,437 1,698,0122000 16,314 1,402,6981999 11,605 1,351,6911998 8,733 1,278,4741997 4,771 1,226,405


June 2006

41

1996 3,422 1,185,7891995 2,141 1,157,009

The traffic volumes are also increased, and overloading of the trucks are creatingconcerns regarding to the road surface and structure. The impact of overloadingshould not be underestimated. Some of the highways such as Jingzhu expresswayhave installed axle load monitoring systems on the toll station. The overloadedtrucks may affect road condition and damage the road. Load control must beintroduced for the purpose of protecting the roads from damages and maintainingthem in good conditions.

6.4 Design StandardsPavement and road design standards are vital to achieve satisfactory pavementperformance. Specifications for road construction and maintenance are preparedby the central government, and the provincial departments follow these standards.The standards cover road construction and maintenance works; however, due totheir overall applicability in the whole of China, they may not always reflect fullythe 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. Forthis reason, it may be sometimes difficult for provincial departments to follow thesame design standard arranged by the central government. Each provincialdepartment needs to review and adjust the design standard according to the localcircumstances and conditions.

6.5 Maintenance PracticesSince the focus has been on road construction in recent years, the road maintenancemarket is still developing and its size is still small. Therefore, from thecontractor s point of view, technical and engineering resources for maintenanceworks are considered insufficient, and from the government sector s point of view,experience with inspection, evaluation, and applied maintenance or remedial worksis limited. Maintenance is mostly reactive and does not necessarily follow a longterm plan. The contractors do not have capabilities in overall road managementincluding planning, design, inspection and evaluation, forecasting.


June 2006

42

6.6 Road condition dataThe provincial departments have PMS and BMS for pavement management andbridge management respectively. These systems include an asset register, i.e. theessential data such as dimension, structure, historical inspection results andremedial activities. Currently, provincial departments take records of the roadconditions using the installed PMS and BMS. These systems have not been yetfully calibrated, being in operation only for limited periods. Once the systems areverified and calibrated, the data will be used for road management such asarranging the future maintenance program and activities. The inspection data willcater not only for the present situations of road damages but also indicate necessaryactions to avoid the further deterioration and even collapse.The investigated expressway companies do not seem to have access to themanagement systems and consequently these remain distant and irrelevant to them.The role of maintaining expressway companies in asset management is currentlylimited to provide data and information. Apparently, CPMS is available free forgovernment but attracts a fee when used for commercial purposes. Consequentlythe take-up is slow and limited.

6.7 Other issues and summaryEconomic growth in China is driven by the east of the country, especially coastalareas like Shanghai and Zhuhai. In these areas, construction of expressways hasbeen completed, and now emphasis is shifting to maintenance. In other areas theconstruction activities still dominate.From the government sector s point of view, separation of construction andmaintenance contracts, and shortage of the budget for maintenance are emergingissues. Most of the maintenance contractors are relatively small, and they do haveeither sufficient human or technical resources in road maintenance. There is also apalpable concern that introduction of OPRC will introduce increased risks.Expressways are managed and controlled by the government through provincialagencies. The budget and subsequent maintenance activity is on yearly basis, andlong-term maintenance programs may be difficult to prepare and follow.Due to recent price fluctuations some of the local contractors expressed concernsabout the suitability of lump-sum contracts for long term road maintenance


June 2006

43

contracts. Risk associated with significant increase in the traffic volume and largefluctuation of material prices may hamper the introduction of OPRC.


June 2006

44

7 Task A6: Framework for Introducing OPRC Contract to China

7.1 Implementation of OPRCThe OPRC to be introduced must reflect local condition and circumstances. Theseinclude:

Limited risk sharing contractual arrangementsNear homogeneous roads in near new condition that make futureperformance predictions less important and shift the emphasis on the dayto day management.Winter operations need to be identified and their inherent risk addressedor excluded from the OPRCQuality of workmanship must be taken into account and qualityworkmanship be encouragedThe drivers for introducing OPRC have to be clearly identified andaddressedThe benefits of the OPRC have to be identified and shared by allparticipantsRisks associated with OPRC have to be shared fairlyRisk taking must be rewardedKnowledge of asset management and the relevant techniques must befostered, 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 togrow together with the new contracting formAt least two pilot OPRCs be created to foster competition and spreadknowledge and experience as widely as possibleThe first OPRCs be limited to routine maintenance activities with the longterm activities remaining under the current controlling agencies (hybridcontracts)The duration of these OPRCs is limited to 3-5 yearsBefore commencing the OPRCs the current contract conditions should bereviewed, in particular the risk allocation (rise and fall) and conflictresolution clauses.


June 2006

45

The CPMS and CBMS systems should be made widely available tointerested consultants, construction and maintenance companies as well asto expressway companies.The suitability of the CPMS and CBMS for governing OPRC should bereviewed and ascertained. Relevant key performance indicators and levelof service need to be developed and calibrated, in such a manner that areconsistency with relevant MOC requirements is ensured.Extensive training and dissemination of information is recommended toensure informed approach and attitude to OPRCAppropriate data depositories need to be developed and maintainedcontaining pertinent data, such as work quantities, locations, costs etc.

7.2 Technical mattersOPRC requires the contractors to carry out effective and efficient maintenanceworks according to their own technical knowledge and experience. Contractorshave to prepare maintenance programs, and execute the maintenance worksfollowing the programs. Therefore, PMS, BMS and related road maintenancemanagement systems should be made available.

It is critical that the level of service is defined properly. Admittedly, defining LOSis 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 basedmaintenance contracts the LOS is the deliverable through the contract. The factthat very few road agencies around the world have well defined LOS reflects somelack of accountability. The LOS can be defined through careful analysis of the roadcondition, traffic, desired condition, community demand and available funding. Arealistic LOS is the foundation of successful performance based contracting as wellas of efficient road maintenance, regardless of the method of delivery.

Training in asset management concepts, such as life cycle costing, long termplanning renewal and replacement planning is essential.

PMS and other related management systems facilitate budgeting and forecasting,


June 2006

46

these, however, have limited use without sufficient verification and calibration. Itis recommended that CPMS and CBMS or other suitable systems be implementedand calibrated. These systems have been developed over a long time in China andprovide a solid framework as a starting platform.

7.3 Administrative mattersCurrently all standards and specifications are prescribed by the central government.Some level of flexibility is required to accommodate local conditions in such amanner that risks can be addressed with appropriate measures.

Transfer of technology, knowledge and most likely staff is required from thegovernment to the private sector to meet the requirements of the Pars.As maintenance contracts are based on competitive tendering, the necessary legalframework and culture of tendering has to be established.

Pertinent governance issues need to be clarified and participants need to be trainedin their significance and adherence.

7.4 Assistance from the World BankMaintenance of newly constructed expressways is still in its infancy due to theyoung age of the network. Maintenance demand will grow at a fast rate as thenetwork ages. To meet this rapidly growing demand, it is recommended that theWorld Bank provides assistance to develop the infrastructure (i.e. the legal andtechnical framework) for effective road maintenance. This may include training insystems, contracting and technology.The World Bank may also assist in transfer of technology and experience byproviding suitably qualified consultants for training.Training should cover the following subjects:

ContractingDevelopment of level of serviceDeveloping asset management plans

Direct involvement of consultants as advisors on management boards would also bean effective method of assistance.


June 2006

47


June 2006

48

8 Workshop held on 6th of June, 2006

A workshop was held in Wuhan on 6th of June, 2006. The purpose of the workshopwas to

to summarize and recapture the key points of OPRCsto report back to the participants of the previous discussions including theresults and conclusions of the investigation to dateto obtain feedback and foster discussion on the recommendations.

The general workshop was followed up with a round table discussion the afternoonof the same day with the key stakeholders involved.

8.1 Presentations at the workshopThe presentations are attached to the report in detail, so here only the key pointsare mentioned.After recapturing the key concepts of OPRCs, the critical success factorsparticularly relevant for China were discussed in detail. A summary of these arelisted below:

Benefits must be sharedRisk taking must be rewardedObjectives must be clearly defined, in particularLevel of Service must be specifiedManagement responsibilities have to be clarified and allocatedTools and knowledge must be accessible to allSuitable financial environment is essentialHistorical data must be available

The findings and recommendations were presented as detailed in this report.

8.2 Discussion with key playersThe afternoon round table discussion provided a forum for all stakeholders andthe expressway companies in particular to ask questions and to express theirviews.In general, the OPRC was given a relatively positive though reserved reception.The questions reflected interest and a desire to develop a better understanding ofthe concept. Many questions also conveyed doubts about the suitability of the


June 2006

49

concept to the current contracting environment.The issue of insufficient contractor capacity and experience was repeatedly broughtup and discussed. It is widely believed that no suitable capability is availableoutside the expressway companies. This situation in China is actually not very

developed capability exist at the time of the introduction of performance basedmaintenance contracts. This parallel with other countries should be heeded andconfirms the proposed gradual introduction of OPRCs.

for training.The workshop and discussions confirmed that level of service and whole of lifecosting are relatively new and not widely known concepts. As without theseOPRCs cannot function successfully, the need for training in these areas was alsoidentified.Several questions were fielded about forecasting techniques and the reliability ofmodels.Preventive maintenance was discussed and the concept and practice of preventivemaintenance proved to be not known.Traffic control is the task of the police force in China. As traffic control is essentialfor the conduct of maintenance work, the specific requirements of policeinvolvement have to be considered in OPRCs. It might be necessary to createeither special provisions for this, or to propose special regulation to allow thecontactor the expressway company to provide temporary traffic control.Some practical questions were also raised, such as liability for serious defects anddamage caused by accidents.

8.3 Discussion with Chutian Expressway CompanyFollowing the workshop, separate meeting was held with the representatives of theChutian Expressway Company.The company is in the process of obtaining specialized testing and maintenanceequipment to carry out routine maintenance work.The level of service issues were discussed in detail. The proposed level of servicewas presented. The key points of the discussion:

The current roughness and rutting condition is not known, though tests


June 2006

50

were done on the recently overlaid main carriagewaysThe overlay consists of 140 mm asphalt overlay placed on a badly damaged240 mm plain concrete layer.MOC issued maintenance standards for expressways. A copy of this waspresented at the meeting. It was suggested that the level of service shouldbe consistent with the MOC requirements. The expressway company wasnot in the position to tell us the current values for the MOC maintenancestandards.The lack of contractor and consulting capacity and capability is seen as aserious impedimentThe winter operation includes snow clearing and ice control. Theseactivities are best left with the expressway company as represent higherlevel of uncertainties than other activities.


June 2006

51

9 Current Pavement Condition

Current pavement condition data offers some insight into the probable risk levelsassociated with maintenance work planning. Consistently good conditions wouldindicate a lower level of risk - and future work demand then highly variable datawith large scatter.The project team received roughness summary data for one expressway only. Thedata indicated consistent and very low level of roughness. The average roughnessfor 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 orrehabilitated expressways. Based on this information, the expresswaycharacterized by this data would represent a low level of risk.


June 2006

52

10 Task B1: Recommendations on adaptation of Bank s sample bidding documentin China

This task requires the review of the sample bidding provided by the Bank. Thesection 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 areconsidered for information only, as no factual data could be obtained on the currentconditions. These KPMs must also be consistent with the current MOCrequirements. As the review and translation of these was not part of the TOR, it isrecommended that the Bank facilitates the translation and review of the MOCrequirements. The proposed KPMs need to be reviewed in the light of the MOCrequirements.

Reviewing The Banks Sample Bidding Document for OPRC (September, 2005), wespecially focused and made comments on technical issues as we found relevant toChina. The comments are stated together with the related clauses or sections inthe bidding document.The project team recommends engaging a legal expert to review the compliance ofthe bid document with current laws of the country.


June 2006

53

10.1 Risk AllocationSection VII General Conditions (GC) in PART 3 - CONDITIONS OF CONTRACTAND CONTRACT FORMS of the Sample Bidding Documents specifies the way ofrisk allocation regarding Employer s Risks, Contractor s Risks, and others in theSection 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 areincluded regarding social and economic changes or growth of traffic volumes.

GC 33.1 indicates that all other risks are covered by the Contractors, which meansthat the Contractors should have larger risks than the Employer.

Also, in GC 36.1, necessary measures to unforeseen conditions are described. Oncethe Contractor faces difficulties except weather conditions, the Contractor shouldinform cost and time of removing them in writing to the Project Manager, and theContractor should carry out the works following the Project Manager s instruction.Additional cost and time incurred by the Contractor will be approved by the ProjectManager; however, this approval is limited for the difficulties due to the physical

GC 3333.1

and the remaining risks

GC32.1 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 orother hazardous properties of any explosive nuclear assembly or nuclearcomponent thereof;

(d) riot, commotion or disorder, unless solely restricted to employees of theContractor or of his Subcontractors and arising from the conduct of the Works andServices;

(e) loss or damage due to the use or occupation by the Employer of any unfinishedSection 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 contractorcould not reasonably have been expected to take precautions.


June 2006

54

conditions of the structures, and it is not applied for those due to the change oftraffic and economic situations.

Therefore, the following sentence should be added to the beginning of GC36;Contractor should inform himself and request and check relevant information, databefore signing the contract, and it is recommended that allocation of the followingrisks should be specified between the Employer and the Contractor.

GC 36. Unforeseen ConditionsThe Contractor should inform himself and request and check relevant information, databefore 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 artificialobstructions that could not have been reasonably foreseen prior to the date ofthe Contract Agreement by an experienced contractor on the basis of reasonableexamination of the data relating to the Road (including any data and testsprovided by the Employer), and on the basis of information that it could haveobtained from a visual inspection of the Site or other data readily available to itrelating to the Road, and if the Contractor determines that it will in consequenceof such conditions or obstructions incur additional cost and expense or requireadditional time to perform its obligations under the Contract that would not havebeen required if such physical conditions or artificial obstructions had not beenencountered, 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 toovercome 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, theProject Manager decide upon the actions to be taken to overcome the physicalconditions or artificial obstructions encountered. Following such consultations,the Project Manager shall instruct the Contractor, with a copy to the Employer, ofthe actions to be taken.

36.2 Any reasonable additional cost and expense incurred by the Contractor infollowing the instructions from the Project Manager to overcome such physicalconditions or artificial obstructions referred to in GC Sub-Clause 36.1 shall bepaid 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 Contractbecause of any such physical conditions or artificial obstructions referred to inGC Sub-Clause 36.1, the Time for Completion shall be extended in accordancewith GC Clause 64.


June 2006

55

10.1.1 InflationRisk associated with price increases as reflected in the CPI should be considered inthe contract.

Figure 10.1 GDP Growth and CPI in Asia


June 2006

56

Road maintenance contract usually last long time period, and therefore, it isrecommended that the contract price could be adjusted according to the fluctuationof economic growth and consumer price in the conditions of contract.Method of adjusting the price are two ways; one is agreed adjusting formulaspecified in advance, and the other is mutual agreement based on the discussionsbetween the Employer and the Contractor.

GC 48.1 shows the formula which adjust difference between the price at the time oftendering and that of payment.Way of price adjustment is shown in GC48, and Bc, ratio of adjusting the pricechange, should be agreed by mutual and detailed discussions between the Employerand the Contractor.All prices should be in the local currency (Yuan). We suggest to make this clause abit more flexible by allowing to use different adjustment factors for differentmaterials. E.g. bitumen price must have gone up much more than timber orcrushed rock!

10.1.2 Traffic Volume IncreaseThe total length of expressways in China has dramatically grown, and the traffic

GC 48. Price Adjustments48.1 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, afterdeducting for Advance Payment, shall be adjusted by applying the respectiveprice adjustment factor to the payment amounts due in each currency. Aseparate formula of the type indicated below applies to each Contract currency:

Pc = Ac + Bc Imc/Iocwhere: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 nonadjustableand 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 theindex 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, thecalculation shall be corrected and an adjustment made in the next paymentcertificate. The index value shall be deemed to take account of all changes incost due to fluctuations in costs.


June 2006

57

volumes have increased accordingly. The following graph shows the recentincrease in volume of cars in several Asian countries. The volume of cars in Chinahas also increased compared with the other countries.

The future traffic volumes have a profound impact on the level of service. If thetraffic volumes exceed the assumed volumes further maintenance works may benecessary to ensure the service level.

It is recommended that an additional clause should be provided to peg the trafficvolume to the agreed level of service. Also, additional clause which requires themeasures to the unforeseen traffic conditions and preventive maintenance worksshould be provided, since the remedial works for damaged structures would usuallyincur larger costs.

Figure 10.2 Volume of Cars in Asia

10.1.3 Overloaded vehiclesOverloaded vehicles (axle loads above the design limit) significantly affect pavementperformance. Axle load monitoring system needs to be installed and penalty rates


June 2006

58

or traffic control needs to be in place. Although the contract form does not specifywho 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 ParticularSpecifications may require a Traffic Management Plan which establishes theminimum requirement of temporary traffic control. It is recommended that theallocation of responsibility for traffic control should be specified in the contract; forexample, the Contractor should monitor the traffic volume and overweight cars, andthe Police should control and load the penalty to the offenders. This is particularlyrelevant to China, as all traffic control is vested in the Police.


June 2006

59

10.1.4 EmergencyWorksMeasures for emergencies are described in Section C: Execution of EmergencyWorks in GG. According to the clause, the Project Manager should instruct theContractor to carry out the works following the mutual agreement between theEmployer and the Contractor, and the Employer should have responsibilities forpaying the cost of emergency works to the Contractor.

The related clause does not require any amendment.

10.1.5 Future Development WorkTraffic volumes of the subject roads will become higher or lower than expected byother road constructions and developments on adjacent roads. Measures to thiskind 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

GC 29. Emergency Works29.1 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 shallalways require a Work Order issued by the Project Manager.

29.2 The execution of Emergency Works shall be requested by the Contractor basedon losses or damages occurred as a result of natural phenomena (such as strongstorms, flooding or earthquakes) with imponderable consequences, or on thepossibility of damages or losses occurring, or the safety of individuals, works,services or equipment being at risk as result of the natural phenomena. In orderto characterize the Emergency Works, the Contractor shall forward a TechnicalReport to the Project Manager requesting the execution of Emergency Worksand characterizing the situation. On the basis of the said report, and of his ownjudgment of the situation, the Project Manager may issue a Work Order to theContractor.

29.3 The Employer or even Government authorities may declare an EmergencySituation on the basis of local legislation. In those cases, the Project Managermay issue a Work Order for Emergency Works to the Contractor even without arequest by the Contractor.

29.4 If the Contractor is unable or unwilling to do such work immediately, theEmployer may do or cause such work to be done as the Employer maydetermine necessary in order to prevent damage to the Road. In such event theEmployer shall, as soon as practicable after the occurrence of any suchemergency, notify the Contractor in writing of such emergency, the work doneand the reasons therefore. If the work done or caused to be done by theEmployer is work that the Contractor was liable to do at its own expense underthe Contract, the reasonable costs incurred by the Employer in connectiontherewith shall be paid by the Contractor to the Employer. Otherwise, the costof such remedial work shall be borne by the Employer.


June 2006

60

and development, the Employer and the Contractor should discuss and agree in theactions following such changes.

10.1.6 Working togetherIn a performance based contract, detailed bill of quantities is not specified. Toavoid any dispute between the Employer and the Contractor minimum quantitiesmay be specified and agreed to.

In case a dispute occurs between the Employer and the Contractor, the maintenanceand other related works must not be stopped, or otherwise the costs of consequenceof such an action will have to be born by the parties.

One preventive measure is to set up a communication or management boardconsisting of responsible persons of both parties, and to solve the problems at theforum.

There are two ways of solving the dispute which is described in 6. Settlement ofDisputes in Section A, Contract Interpretation of GC; one is to establish DisputeReview Board consisting of each member of the Employer and the Contractor, andthe other is to ask Dispute Review Expert to solve the dispute.

In the performance based contract, details of the works are not described in thecontract document, descriptions of setting up such meeting board in the contractdocument is very effective to solve the problems before dispute and even enteringinto the Arbitration

10.2 Assets to be includedThe road asset to be included in the performance based contract is described in thefollowing table as per shown in Task A2.

Table 10.1 Assets Inclusion to OPRC

Assets Include in OPRC Pilot TrialPavements and surfacing Yes


June 2006

61

Bridges Yes cleaning and minor work only(Only routine maintenance of cleaning, andminor repairs.Major works such as deck replacement areexcluded)

Minor structures and culverts Yes cleaning and safety onlyDrainage YesCut and fill batters Yes

(Need to limit to small work.Large scale repair should be excluded fromthe lump-sum, but can be included in thecontract)

Weigh Bridges NO(These are communication and electronicitems)

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 YesMile posts YesGuardrails and barriers Yes

(Repairs due to accidents should be excludedfrom the lump-sum, but can be included inthe contract)

Telecommunication facilities No(the type of work is apart from others)

10.3 Required Performance Criteria and Specification for their MonitoringThe criteria should comprehensively cover all aspects of the contract. They shouldtake account for the fact that different sub-areas within the contract road mightrequire different benchmark values. They are Long term asset performancemeasures and Short term operational measures.

10.3.1 Long term performance measuresLong term performance measures indicate the criteria which ensure long-termperformance level of the road structures, and the criteria is shown in the table at2.4.2 Durability measures for paved roads in Sample Specifications for OPRC.The criteria covers road roughness and deflections, and these threshold values


June 2006

62

should be specified in accordance with the required service level at China.

Appropriate targets should be determined in accordance with the relevantExpressway Maintenance Quality Evaluation Standards issued by the MOC.Method of inspection and measurement is described in 2.4.5.1 Methodologies forDurability Measures at Specifications for OPRC.

10.3.2 Short term operational measuresShort term operational measures are described in 2.4.2 Road User Service andComfort Measures for Paved Roads. Service level of the road surface such asnumber and scale of pot holes, shape of patching, and flatness are indicated withtime allowed for taking actions of repairs.

Default value of each item is indicated as a reference, and appropriate value will bedetermined through the discussion with the government sectors of both provinces inChina.


June 2006

63

Maintenance Standards

The following maintenance standards are referred to in the Key Performance Measures (KPM). The classification below is an exampleonly and must be adjusted according to the local road classifications.

Maintenance standard definition

New Work New work construction or rehabilitation carried outClass 1 AADT (Annual Average Daily Traffic) > 10,000 orClass 2 AADT :2,000-10,000Class 3 AADT <2,000The 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 measuresItem Category /

Sub-networkConditiondefinition

Compliance Response time tocorrect

Test method Current condition& comments

Averageroughness

New workClass 1Class 2Class 3

Mean IRI = 1.8Mean IRI = 2.2Mean IRI = 2.6Mean IRI = 2.9

Mean IRI<= 1.8Mean IRI <= 2.2Mean IRI <= 2.6Mean IRI <= 2.9

60 days1 year1 year1 year

High Speed Laservehicle

TBA

Maximumroughness

New workClass 1Class 2

Maximumroughness in any1 km road or

IRI = 2.0IRI = 2.4IRI = 2.8

6 months1 year1 year


TBA


June 2006

64

Class 3 carriagewaylength

IRI = 3.3 1 year

Network rut depth New workClass 1Class 2Class 3

% wheelpathlength with a rutdepth >-20 mm

0%0%0%0%

7 days7 days7 days7 days


TBA

Maximum rutdepth


% wheelpathlength exceedingrut depth 10 mm

0%0%2%5%

2 month2 month6 month6 month


TBA

Mean deflection New workClass 1Class 2Class 3

Mean deflection <= 0.5 mm<=0.5 mm<= 0.6 mm<= 0.7 mm

1 year1 year1 year1 year

FWD orequivalent

Benkelman Beamat 100 m intervalin the slow lane ineach direction

To be confirmedby design

deflection andremainingstructural lifecalculation

Maximumdeflection


Maximumdeflection

<= 0.65 mm<=0.65 mm<= 0.75 mm<= 0.85 mm

2 month2 month6 month6 month

FWD orequivalent

Benkelman Beamat 100 m intervalin the slow lane ineach direction

To be confirmedby design

deflection andremainingstructural lifecalculation

Notes:


June 2006

65

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 /

Sub-network

Condition Compliance Response time to

correct

Test method

Potholes New workClass 1Class 2Class 3

Number of potholes inany 1.0 km length; themaximum diameter of apothole is 100 mm

051010

24 hours24 hours24 hours24 hours

Visual inspection

Patching


Patches (i) shall besquare or rectangular, (ii)

shall be level withsurrounding pavement,(iii) shall be made usingmaterials similar to thoseused for the surrounding

pavement.

Non-complyingpatches must berepaired within thespecified time frame

30 days30days30days60 days

Visual inspection

Total patched area all The total number of In case of 1 year Visual inspection


June 2006

66

patches must not exceed50% of the total area inany 100 m length

non-compliance thesection must betreated as a whole

Cracking New workClass 1Class 2Class 3

The per cent totalcracked area in any

100m length regardlessof crack width

0%1%2%3%

30 days fortemporary treatmentand investigation, 1

year for finaltreatment

Visual inspection

Dirt, debris and obstaclesmust be removed:within 8 hours if theypose a danger to trafficsafetyWithin 48 hours if theydo not pose any dangerto traffic safety.

Not more than 10items of detritus isvisible from the road

per km

8 hours

1 month

Cleanliness of thepavement surfaceand shoulders.


The road surface mustalways be clean and freeof soil, debris, trash andother objects.

Remove debris withspecified time frame

6 hours6 hours24 hours24 hours

Visual inspection

Raveling New workClass 1Class 2

No raveling of thesurface is allowed

Repair ravelingwithin the giventimeframe

7 days7 days28 days

Visual inspection


June 2006

67

Class 3 56 daysEdge break New work

Class 1Class 2Class 3

There shall not beloose pavementedges, or pieces ofpavement breakingoff at the edges.

Repair within thegiven time frame


Visual inspection

Edge drop off New workClass 1Class 2Class 3

Difference in height atedge of pavement shallnot be more than 25 mm.

No drop off largerthan 25 mm is

allowed, repair withinthe given time frame


Visual inspection

Paved shoulders New workClass 1Class 2Class 3

Must always besealed to avoid waterpenetrationwithout deformationsand erosions

free of potholes anderosions

repair within thegiven time frame


Visual inspection

Ditches and verticaldrains with lining


Must be clean and liningwithout any significantdamage of the lining.



Visual inspection

Ditches and verticaldrains without lining

New workClass 1

Must be clean and free ofobstacles.


15 days30 days

Visual inspection


June 2006

68

Class 2Class 3

90 days90 days

Collectors New workClass 1Class 2Class 3

Must be clean and free ofobstacles withoutstructural damage.



Visual inspection

Culverts New workClass 1Class 2Class 3

Must be clean and free ofobstacles withoutstructural damage.



Visual inspection

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

69

10.4 Basis of PaymentsMethod 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 progressMaintenance Work Lump SumMonthlyImprovement Bill of Quantities

Emergency Provisional Sum

The Employer is required to make down payments under clause 45.1 of GC. Thecontractor shall purchase materials and equipment, and pay for the mobilizationcosts.

The contractor should present a copy of invoices to the Project Manager as acertificate.Value of down payment should be deducted from the monthly payment according tothe work progress, and the Contractor is able to pay for various initial cost of theproject. Monthly payment is either based on acquired value, monthly rate, orquantities in accordance with kinds of works, and the payment value is determinedafter 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; andtherefore, it might be difficult to add the clause of bonus payment. However, itmight be possible to consider bonus payment if the Contractor finish improvementor rehabilitation works during shorter period of times.

10.5 SpecificationsThe sample specification was reviewed and modifications made based on theassumption that these measures are relevant to China. However, subsequent

Maintenance Quality Evaluation Standards in 2002. The measures contained inthis document are compulsory, therefore these should be implemented in theSpecifications. The above document needs to be translated and interpreted before


June 2006

70

implementing in the Specification. This task goes beyond the TOR of this projectand should be addressed separately.


June 2006

71

10.6 Tender Evaluation Procedure

In order to select the Contractor which present Best Value for Money, the Employershould evaluate not only the tender price but also the Contractor s performance andtechnical capabilities. The Contractor s performance and capability should beevaluated by their technical proposal including their past contract record, number ofeligible and qualified engineers, and the availability of equipment.Also, the Employer should evaluate the financial capability in order to prevent theContractor s default risk. It is recommended that the tender evaluation the belowshould follow procedure considering both price and capabilities.

Figure 10.3 Tender Evaluation Procedure

Invitation to the pre-qualified Tenderers

The First Tender (EOI)Technical ProposalFinancial Proposal (only for reference)

Tender ClarificationTechnical Proposal

Tender Pre-Evaluation

Notification to TenderersAcceptableNot Acceptable

The Second TenderRevised Technical ProposalFinancial Proposal

Determination of Successful Bidders

Multiple pre-qualifiedtenderers to be nominated

The 1st tender should focuson the Technical Proposalto assess the Tenderer stechnical capability.

Tender clarification shouldbe performed to clarifytechnical issues proposedby Tenderers.

Capable Tenderers areselected after tenderclarification, and are notifiedto proceed to the 2nd stage

The 2nd tender shouldevaluate technical andfinancial capabilities ofTenderers


June 2006

72


June 2006

73

Through the tender evaluation process, the contractor should be evaluated andselected in accordance with the following criteria. One of the most importantthings 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 engineeringmatters.

For example, the tender evaluation is conducted for the following criteria.

Financial Proposal (60%)Tender Price

Technical ProposalQuality procedures (10%)Past records of maintenance works (10%)Staff and Equipment (20%)


June 2006

74

11 Task B2: Advice on Preparation of Bidding Package

Before advising on the preparation of Bidding Package, it is important to review thecurrent nature of road maintenance contracts in China. Currently, themaintenance contracts are made on Bill of Quantities basis, and detailedspecification is provided by the Government. The government and the contractorhave no experience in OPRC contracts.

Therefore, a gradual introduction of OPRC is recommended. The followingactivities may be necessary to assist the introduction of OPRC:

Deepen the understandings ofOPRC

Demonstrate benefits and risks at specificexamplesProvide training in asset managementIntroduce and establish contractingpractices aimed at risk amelioration

Determine desired Level ofService

Analyse and ascertain current conditionand service practiceEstablish governmental and communityexpectationsAnalyse the financial consequences ofvarious service level to determine arealistic and sustainable LOS

Define past and future workrequirements

Compile records of past work quantitiesForecast work quantitiesSpecify work items and expectations

For all parties to gain experience and confidence in the process and to fostercooperation, it is suggested to set up a management board. The role of this boardshould include joint supervision and ongoing evaluation of the contract. The boardmay also disseminate learnings and experience at will.


June 2006

75

Table 11.1 Concept of the Management Board

Regarding the advice on bidding package, the Package consists of Part 1: BiddingProcedure, Part 2: Work Requirements, and Part 3: Conditions of Contract andContract Form. Since comments are made for the description of contract andspecification at Part 2 and Part 3 in 4.3; comments for Part 1: Bidding Procedure arefocused here.

Part 1 consists of Instruction to Bidders, Bid Data Sheet, Evaluation andQualification Criteria, Bidding Forms, and Eligible Countries. This composition isnot different from ordinal international tender document in other countries.Pre-qualification is not included in the Bidding Package, since this tender process isapplied 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 MeetingIn case of normal international tender process, Q&A for the tender documents areexchanged between the Employer and the Tenderers before tender close date, anddetails of the Q&A are opened to all of the Tenderers.

The Government

The Contractor

Training

Management BoardTry OPRC on pilot site referringthe sample bidding document, and

Check required service levelClarify maintenance activityImprove the sample document


June 2006

76

In this bidding package, pre-bid meeting is held to clarify ambiguous matters forboth parties, and this procedure is very effective to deepen mutual understandingsof the parties. Especially, since performance base contract do not specify thedetails of the work, misunderstandings for the contract document are easy tohappen. Any questions should be clarified at the tender process, and it will preventfrom 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 beforepre-bid meeting. Since any other questions will be possibly raised after the deadline or even at the pre-bid meeting, it is desirable to clarify any questions on the faceto face basis between the Employer and the Tenderers. Also, all the contents andthe results of Q&A should be opened to all Tenderers.

Furthermore, minutes of the meeting should be arranged by the Employer to beopened to the Tenderers.

11.2 Section Bidding Forms: Technical ProposalIn China, it might be possible for the Tenderers to have no experience with roadmaintenance work under performance based contract. Therefore, in Section III ofEvaluation and Qualification, the Employer is not able to evaluate the past workingrecord of the Tenderers.

Therefore, in the technical proposal, it is recommended that the Tenderers shouldsubmit the working policy which describes how to cope with inexperiencedperformance base contract from the financial and technical viewpoints through theirpast working experience. The Employer should evaluate such appealing point tocarry out the contract.

Further, the Tenderers should include information on the following:QA and QC systemsData collection and performance monitoring systemsRoad inspection frequency, equipment and methodologyKey personnel and their experience (nominate project manager and key staff)


June 2006

77

APEENDIX

Study TeamMORI 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.