Introducing Performance Based Maintenance Contracts to … · 2016. 7. 11. · 6.4 Design Standards ... 6.6.1 The Indonesian Road Management System ... Business risk processes NA

10 Indonesia: SRIP/PPIAF

Final

Introducing Performance Based

Maintenance Contracts to

Indonesia

Framework Document

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10 Indonesia: SRIP/PPIAF

Final

Introducing Performance Based

Maintenance Contracts to

Indonesia

Framework Document

This document has been prepared by Opus International Consultants Limited in association with MWH NZ

Limited for the benefit of The World Bank. No liability is accepted by these companies or any employee or

sub-consultant of these companies with respect to its use by any other person.

Prepared By

Opus International Consultants Limited

Ian Greenwood and Theuns Henning Asia Pacific Office Level 9, Majestic Centre 100 Willis Street, PO Box 12-343, Wellington

Reviewed By

Tony Porter Telephone: +644 4717731 Facsimile: +64 9 355 9585

Date: January 2006 Approved for

Reference: 1-37612.00 + indo/proj/684

Release By Dr Ian Greenwood (Project Manager) Status: Final

This document is the property of The World Bank and is protected under the copyright laws of the United States of America. Any unauthorised employment or reproduction, in full or part is forbidden.

© The World Bank 2006

Introducing Performance Based Maintenance Contracting to Indonesia

Framework Document

Opus International Consultants Ltd

in association with MWH NZ Ltd i January 2006

Contents

Executive Summary............................................................................................................................1

1 Introduction................................................................................................................................6

2 Methodology...............................................................................................................................7 2.1 Overview of Approach.......................................................................................................7 2.2 Consultation.......................................................................................................................7 2.3 Time Frame of Project.......................................................................................................8

3 Task A1: Industry Capacity.......................................................................................................9 3.1 Purpose of Reviewing Industry Capacity...........................................................................9 3.2 Contractor Capacity...........................................................................................................9

3.2.1 Interviews ...............................................................................................................9 3.2.2 Summary of Interview Outcomes...........................................................................9 3.2.3 Issues to Consider in Framework.........................................................................12 3.2.4 Tendering Short listing Criteria.............................................................................14

3.3 Consultant Capacity.........................................................................................................15 3.3.1 Interviews .............................................................................................................15 3.3.2 Summary of Capabilities......................................................................................15 3.3.3 Issues to Consider in Framework.........................................................................17 3.3.4 Tendering Short listing Criteria.............................................................................17

3.4 Government Department(s) Capacity ..............................................................................18 3.4.1 Overview..............................................................................................................18 3.4.2 Interviews .............................................................................................................18 3.4.3 Summary..............................................................................................................23 3.4.4 Issues to Consider in Framework.........................................................................23

3.5 Overall View of Industry Capacity....................................................................................24

4 Task A2: Assets to be Included..............................................................................................25 4.1 Introduction ......................................................................................................................25 4.2 Current Ownership ...........................................................................................................25 4.3 Discussions with MOC.....................................................................................................26 4.4 Utilities within the Road Reserve .....................................................................................26 4.5 Contractual Options .........................................................................................................27 4.6 Recommendation.............................................................................................................28

5 Task A3: Criteria for Pilot Sites ..............................................................................................30 5.1 General Criteria................................................................................................................30 5.2 Recommended Criteria....................................................................................................31 5.3 North Java Corridor Issues and Appropriateness as a Pilot Trial Site ............................31

5.3.1 Description of the North Java Corridor................................................................31


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in association with MWH NZ Ltd ii January 2006

5.3.2 Currently Proposed Works...................................................................................33 5.3.3 Asset data............................................................................................................37 5.3.4 Suitability Against Criteria ....................................................................................40

6 Discussion on Local Practices and Issues............................................................................41 6.1 Introduction ......................................................................................................................41 6.2 Funding for Multi Year Maintenance Projects ..................................................................42 6.3 Overloading......................................................................................................................42 6.4 Design Standards ............................................................................................................44

6.4.1 Alignment .............................................................................................................44 6.4.2 Cross Section ......................................................................................................44 6.4.3 Drainage...............................................................................................................47 6.4.4 Pavement and Maintenance Design.....................................................................47

6.5 Maintenance Practices.....................................................................................................48 6.6 Data Issues......................................................................................................................49

6.6.1 The Indonesian Road Management System........................................................49 6.6.2 The Inter-urban Road Management System........................................................50 6.6.3 PBC Data Requirements......................................................................................51

7 Task A6: Framework for Introducing PBC to Indonesia ......................................................53 7.1 Overview..........................................................................................................................53 7.2 Timeframe for Future Expansion .....................................................................................53 7.3 Policy Issues....................................................................................................................54

7.3.1 Underground services (utilities)............................................................................54 7.3.2 Limited Access Regulation...................................................................................54 7.3.3 Bond Requirements .............................................................................................54 7.3.4 Development of Cost Escalation Index................................................................55 7.3.5 Interest on Late Payment by Client ......................................................................55 7.3.6 Reporting Standard and System for Maintenance Data ......................................55 7.3.7 Management System for Roadside Furniture ......................................................56

7.4 Legislative Issues.............................................................................................................56 7.4.1 Financing Arrangements.......................................................................................56 7.4.2 Overloaded Vehicles............................................................................................56

7.5 Contractual Issues ...........................................................................................................57 7.5.1 Benchmarking Data Collection.............................................................................58 7.5.2 Relationships between Contract Parties ..............................................................58 7.5.3 Selecting PBC Consultant....................................................................................61 7.5.4 Role of the Phase II Consultant ...........................................................................61 7.5.5 Tendering Processes...........................................................................................61 7.5.6 Initial Betterments and Capacity Improvement Works .........................................64 7.5.7 Possible Exclusion of Pilot Trial Contractor from Future Trials ...........................64

7.6 Key Performance Measures (KPMs)...............................................................................64 7.7 Industry Training and Knowledge Transfer.......................................................................65 7.8 Specific Issues for Proposed North Java Corridor Pilot Site..........................................65 7.9 Recommendations for Remainder of Network ................................................................66


Framework Document


in association with MWH NZ Ltd iii January 2006

7.10 Timeframe for Implementation of Pilot PBMC ................................................................66

8 Conclusions .............................................................................................................................68 8.1 Industry Capacity .............................................................................................................68 8.2 Assets to be Included.......................................................................................................69 8.3 Pilot Site Criteria..............................................................................................................70 8.4 Local Practices and Issues ..............................................................................................71 8.5 Framework for Introduction of PBC to Indonesia ............................................................72

9 References...............................................................................................................................73

10 Appendices ..............................................................................................................................74 Appendix A: Participants at Workshops and Government Meetings.........................................75 Appendix B: Example of Private Industry Capacity Question List ->Summary of Large

Contractors Capability...............................................................................................................77 Appendix C: Example of Private Industry Capacity Question List ->Summary of Consultants

Capability ..................................................................................................................................80


Framework Document


in association with MWH NZ Ltd iv January 2006

Definition of Terms

Term Definition

ADB Asian Development Bank

Bappenas The national planning agency, responsible for integration of all aspects of government expenditure.

BB Benkelman Beam

Betterment Works Works that add to the load carrying capacity of the road, typically through the application of an overlay

or similar.

BMS Bridge Management System

Capacity Improvements Works that add traffic carrying capacity. Typically through the addition of traffic lanes (including

bypasses) or through intersection improvements.

DGH Directorate General of Highways

DGLC Directorate General of Land Communications, part of the MOC

DGRI Directorate General of Regional Infrastructure (equivalent to DGH)

E80 Equivalent 80kN axle load

EOI Expression of interest

FWD Falling Weight Deflectometer

GOI Government of Indonesia

HDM Highway Development and Management

(refer to http://www.piarc.org/en/projects/hdm4/ for details)

Input Based Contracts The contractor is paid for the inputs used. This could include hourly rates for labour and equipment, m3

rates for materials and the like.

IRMS Inter-urban Road Management System

KPM Key Performance Measure

MOC Ministry of Communications

MOF Ministry of Finance

Output Based Contracts The contractor is paid for the completion of activities (eg filling a pothole) at a fixed price irrespective of

the inputs required.

Ownership of Assets The agency responsible for the creation, maintenance and disposal of an asset. Legal ownership may

reside with different authority (i.e. the GOI)

Pavement Management

System

An integrated computerised system, which stores, manages and reports on asset inventory, condition

and use data. Advanced systems include a maintenance decision process.

PBC Performance Based Contracting. Contractors have to achieve performance requirements irrespective

of inputs required.

PBC Consultant The consulting firm engaged to manage the PBC and reports to the DGH

Periodic Maintenance The planned resurfacing or rehabilitation of a significant length of road to reinstate its original carrying

capacity.

Phase I Consultant Consultant that completed this phase of the project (Opus International Consultants Ltd in association

with MWH NZ Ltd)

Phase II Consultant Consultant engaged to progress the pilot trial (nominally up to the start of contract commencement)

Road side friction Road side activities (eg accessways, stalls, cyclists, pedestrians etc) which serve to reduce the traffic

capacity of the road

Routine Maintenance Those activities undertaken on a daily basis, such as drainage maintenance, vegetation control, pothole

repairs, and shoving repairs. These are typically reactive type works in response to a known fault.

SRIP Strategic Road Infrastructure Project

TOR Terms of Reference

URMS Urban Road Management System

WB World Bank


Framework Document


in association with MWH NZ Ltd 1 January 2006

Executive Summary

Opus International Consultants Ltd (Opus) in association with MWH NZ Ltd (MWH), were

contracted by The World Bank to undertake Phase 1 of a two phase project that aims to

implement a pilot trial of Performance Based Contracting (PBC) for the maintenance of a

portion of the Indonesian road network, and to lay the foundation for future expansion of the

PBC approach after the pilot trial.

Specific activities defined within the Terms of Reference (TOR) and included within Phase 1

are:

A1: Confirm contracting capacity

A2: Confirm assets to be included into the contract

A3: Confirm criteria for identification of pilot sites

A4: Workshop on the above

A5: Development of a framework document for the implementation of PBC to Indonesia

This report documents the results of the above processes1, with the overall conclusions of the

project being as follows.

Industry Capacity

The approach undertaken to complete the project relied heavily on consultation with local

governmental and industry participants. With respect to the capacity of the industry, Table 1

contains the summary findings, with a conclusion being that there was sufficient capacity once

proposed training was completed.

Table 1: Overview of Capacity

Activity Government Contractor Consultant Action / Comment

Staff resources � � � Resources are available, but

will require some training in new

approach

Physical resources NA � NA Contractors have (or could

readily get) the resources

needed

Maintenance management � Not system

based

Limited Training to be provided on

maintenance management

Maintenance activities � Limited to new

roads only

Limited Training to be provided on

maintenance activities

Long term contracts Limited to

construction

contracts

Limited to

construction

contracts

Limited to

construction

contracts

Previous long term contracts

are only of a construction type.

1 Note that no specific discussion on task A4 is presented, rather the results of feedback from workshops and

other non-specific meetings were included into the overall document.


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Quality assurance NA � � Generally ISO or equivalent

Pavement and surface

understanding � � � All parties understand

pavement and surfacing design

Multi-asset experience � � � Responsibilities to be qualified for PBC tender

Project management � � � Management of large contracts

is routine

IRMS experience � No Limited Will need training

Data collection and analysis � Analysis only � All parties have experience in

interpreting data.

Tender document

development � NA � External input will be required

for initial PBC tender

Partnering experience NA � � Both consultants and

contractors often work in

partnerships on large projects

Careful considerations should

be given towards required

partnerships for PBC

Business risk processes NA � � Part of standard operating

procedures

Legislative capacity � NA NA Longer term there will need to

be a clarification of the MOF

position with respect to multi

year maintenance contracts.

Also legislation surrounding

private companies operating

weigh bridges and associated

enforcement issues.

Assets to be Included

Consideration was given to the desirability for the inclusion of MOC assets into a PBC

contract. Table 2 contains the summary of the recommended assets that a PBC should

include. The inclusion of MOC assets (as indicated in italics in the table) still needs to be

accepted by the MOC.


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Table 2: Asset Inclusion in PBC Contract

Asset Include in PBC Contract

Pavements and surfacings Yes

Bridges Yes

(only routine maintenance of cleaning, rail repairs and

waterway maintenance, major periodic works excluded from

PBC)

Signs, signals and lighting Partial

(small signs included, large gantries and street lighting

excluded)

Minor structures and culverts Yes

Drainage Yes

Line marking Yes

Guideposts and mile posts Yes

Guardrails and barriers Yes

Cut and fill batters Yes

(will need to be a limitation as to the nature of works

included. Small slips and maintenance of drains on cut and

fills should be included, large scale failures should be

excluded)

Weigh Bridges Yes

Utilities influences Yes (contractor to approve backfill quality)

Pilot Site Criteria

A review was completed of the proposed (within the TOR) criteria for the identification of a

pilot trial site for PBC. These proposed criteria were then added to, with Table 3 containing

the final listing of criteria, along with a view on their relative importance.

Table 3: Site Selection Criteria

Criteria Importance

Maintaining of local competition High

Capacity of local industry Very High

The size of the contract that the local industry can handle High

Risks are not significantly higher than elsewhere on the network High

No significant events that may affect the future management of the road Very High

Knowledge of PBC concepts and desire to make PBC work by local DGH staff Very High

Operational asset understanding Very High


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Criteria Importance

Historical maintenance cost data Medium

Robust Asset Data Very High

Reliability of traffic loading forecasts. High

Availability of resources to all contractors. High

Value of initial betterment works High

Location of weigh bridges Very High

A review of the proposed pilot trial site between Semarang and Pekalongan confirmed the

appropriateness of the site as indicated in Table 4.

Table 4: Suitability of Proposed Pilot Trial Site

Criteria Site Passes Criterion

Maintaining of local competition Yes

Capacity of local industry Yes

The size of the contract that the local industry can handle Yes

Risks are not significantly higher than elsewhere on the network Yes

No significant events that may affect the future management of

the road

Yes

Knowledge of PBC concepts and desire to make PBC work by

local DGH staff

Yes

Operational asset understanding Yes

Historical maintenance cost data Marginal

(only summary results viewed)

Asset data including location referencing, inventory, condition and

pavement strength.

Marginal

Reliability of traffic loading forecasts Marginal

(depends on success in

managing overweight vehicles)

Availability of resources to all contractors Yes

Value of initial betterment works Yes (36*% )

Location of weigh bridges Marginal

(needs an additional weigh

bridge in the eastbound

direction)

* Based on data provided within SRIP funding estimate

Local Practices and Issues

Although not a specific task within the TOR, a review of local practices and issues identified

the following items (refer to Section 6 for details and discussion):

• Maintenance impacts from not currently having multi-year funding

• The issues and impacts surrounding overloaded vehicles

• Design standards in terms of alignment, cross sections, drainage and pavement design

• Maintenance practices


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• Data collection, validation and storage issues

Framework for Introduction of PBC to Indonesia

A framework for the introduction of PBC’s to Indonesia has been produced. Specific issues

addressed in the framework include:

• The timeframe for future expansion

• Policies to be developed or reviewed in terms of:

• Utility services

• Limited access regulations

• Bond requirements

• Cost escalation

• Interest for late payment by client

• Reporting standards for maintenance data

• Management systems for roadside furniture

• Legislative changes required including:

• Financial arrangements for multi-year maintenance contracts

• Control of overloaded vehicles

• Contractual issues, with reference to:

• Benchmark data collection

• Proposed contract organisational structure

• Selection of the PBC consultant

• Tendering processes

• Initial betterment and capacity improvement works

• Exclusion of successful contractor from future projects

• Key performance measures

• Industry training and knowledge transfer needs

• Specific issues for the proposed pilot trial site (none were identified)

• Recommendations for the remainder of the road network.


Framework Document



1 Introduction

Opus International Consultants Ltd (Opus) in association with MWH NZ Ltd (MWH), were

contracted by The World Bank to undertake Phase 1 of a two phase project that aims to

implement a pilot trial of Performance Based Contracting (PBC) for the maintenance of a

portion of the Indonesian road network, plus lay the foundation for future expansion of the

PBC approach after the pilot trial.

Specific activities defined within the Terms of Reference (TOR) and included within Phase 1

are:

A1: Confirm contracting capacity

A2: Confirm assets to be included into the contract

A3: Confirm criteria for identification of pilot sites

A4: Workshop on the above

A5: Development of a framework document for the implementation of PBC to Indonesia

Activities within Phase 2 include for the preparation of contract documentation and industry

training.

In addition to the above tasks, an additional workshop was run at the start of the project to

ensure an adequate level of understanding existed before undertaking the necessary

discussions.

This report covers each of the above Phase 1 activities. No specific section on task A4 or

the additional workshop is included, as the findings from the workshops held were included

into the discussion on the other tasks.

Use of terminology specific to Indonesia is made throughout the report, and readers are

advised to familiarise themselves with the definition of terms on page iv.


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2 Methodology

2.1 Overview of Approach

The approach utilised in conducting the project was to combine a team experienced in PBC

contracts in various countries, with a high level of consultation with relevant organisations in

Indonesia. This combined knowledge, was then used to produce the framework for the

implementation of PBC to Indonesia.

This chapter gives an overview of the scope of the consultation conducted, before presenting

the timeframe for this phase of the project.

2.2 Consultation

The completion of the project required significant levels of discussions with both

governmental and industry participants to understand the local “Indonesian flavour” that would

be required within any PBC contract. Such consultation has occurred in two primary ways:

• Workshops and large group meetings to discuss an array of issues

• Open workshops were held in Jakarta on 15th and 29th August. The first

introduced the project and PBC concepts, while the second was to present the

findings for tasks A1 – A3. A list of attendees is given in Appendix A.

• An informal workshop was held in Semarang on 19th August. This was with the

local DGH, MOC and Bappenas representatives, with a specific focus on the

proposed pilot trial site on the North Java Corridor. Seventeen people were in

attendance.

• A specific invitation workshop was held on 1st September to discuss the draft

report.

• In addition to the above workshops, one-on-one meetings to identify a particular

organisations view point were held with

• Four contracting companies (both government and privately owned);

• INKINDO (the consulting engineering association), including obtaining viewpoints

of six companies who had representatives at the meeting;

• Separate one-on-one meetings with local and international consultants;

• The Directorate of Highways (DGH), including the Project Management Unit,

IRMS team, and the Semarang district staff;

• The Ministry of Finance (two separate meetings covering different areas of

responsibility);

• The Department of Communications;

• Bappenas;

• The World Bank; and

• Mr Chris Parkman from Transit New Zealand, who was involved in the mission in

2004 that provided the basis for this project


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A site visit of the proposed pilot trial site on the North Java Corridor (from Pekalong to

Semarang) was undertaken. This site visit included travelling by road from Jakarta to observe

the range of road conditions. The team were joined by representatives of both the central

and local DGH department to point out items of interest along the journey.

The project team would like to thank all those involved for making themselves available for

meetings, and for sharing in the process in an open manner.

2.3 Time Frame of Project

The project timeframe is summarised in Table 5.

Table 5: Project Timeframe

Item Date

Contract signed by WB 1 June 2005

New Zealand based preliminary work June – mid August

Team arrived in Jakarta 12th August

Initial workshop 15th August

Industry consultation 15th August – 26th August

Proposed pilot trial site visit 20th August

Workshop on initial findings 29th August

Presentation of draft report 1st September

Dissemination of final draft report 20th September

Final report accepted TBC 2005


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3 Task A1: Industry Capacity

3.1 Purpose of Reviewing Industry Capacity

The main objectives for the interviews with government agencies, contractors and consultants

were to:

(i) establish the number of potential bidders for PBC type work;

(ii) establish a basis for prequalification of tenderers,

(iii) identify specific issues of risk which will require mitigation when developing the

contract documents, and;

(iv) determine the value of contract which will best fit local capacity

The outcomes of the interviews held are discussed in subsequent paragraphs, addressing the

contractors, consultants and government agencies in turn.

3.2 Contractor Capacity

3.2.1 Interviews

Contact with the contracting industry have been achieved through both open

workshops as discussed in Section 2.2 and one-one interview with some of the main

players in the contracting industry. The interviews were structured according to an

interview questionnaire (See Appendix B as an example).

The contractors in Indonesia consist of:

• major local contractors of which a majority is state owned;

• local privately owned contractors;

• foreign contractors

Two representatives of each of the local contracting groups mentioned above were

interviewed, with views sought from international consultants on the capability of the

foreign contractors working in Indonesia. It became apparent that the contracting

industry is a highly competitive market with tenders seldom tendered by fewer than 30

contractors.

3.2.2 Summary of Interview Outcomes

The completed questionnaire in Appendix B gives a summary of overall outcomes

from the contractors’ interviews2. It was evident that Indonesia is in a fortunate

2 Note that the interviews were conducted on the basis that no individual responses would be identified. This

was to encourage an open dialog.


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position of having a thriving contractor industry. Most companies are fairly large and

have handled multi-million dollar projects of which a large amount are in the building

industry. Most of the companies also have strong road and bridge building divisions,

and like the rest of the company divisions they have experienced significant growth

over the past five years. On the basis of this, it is not considered that contract value

is a limiting criterion for contract selection.

The road construction arms are strong and have a stable work income mostly centred

on government owned and globally funded projects. Most companies have reported

substantial workforce and equipment/plant numbers. What was evident was the high

number of temporary staff, which results from the uncertainty connected to an annual

budgeting and programming process associated with government projects. This issue

also seems to be one of the main interest points from the contractors towards the

PBC contract types that promise work committed for longer periods.

The experience of the contractors testifies to a wide range of experience with

exposure to most infrastructure related structures including roads, bridges, pipes,

dams, telecommunications and buildings. A large number of these projects involved a

multi-year construction duration, multi company and multi-discipline input.

Undoubtedly, there is sufficient experience and capability within the contracting

industry to handle a PBC type contract with longer-term involvement. It is also safely

assumed that the contracting industry would be able to absorb the larger risk sharing

principles associated with the PBC style contract.

It was however, established that the contracting industry lacks experience in routine

maintenance contracts and responsibilities. This results from large corps of routine

maintenance crews employed by the road departments (See Section 3.4). The only

exposure to these work activities would have resulted from the maintenance guarantee

period associated with large construction, rehabilitation and betterment projects.

According to these contracts the contractor is responsible for maintaining the road for

a maximum of two years following completion of the contract, with most contracts only

requiring a 3-6 month maintenance period. The only other group with experience in

routine maintenance is the toll roads consortiums, who employ routine maintenance

crews privately or use sub-contractors.

RECOMMENDATION: ANY PBC TYPE TENDER MUST ENSURE SUFFICIENT EXPERIENCE IS PROVIDED TO PERFORM

ROUTINE MAINTENANCE. FOR LARGER CONTRACTORS THIS MAY INCLUDE THE ADDITION OF A SUB CONSULTANT WITH

ROUTINE MAINTENANCE WORK EXPERIENCE IF THAT EXPERIENCE DOES NOT EXIST IN-HOUSE. FOR EXAMPLE, LARGE

CONTRACTORS MAY HAVE ALL THE STAFF AND EQUIPMENT FOR LARGE CONTRACTS BUT THAT DOES NOT NECESSARILY

INCLUDE SKILL AND EQUIPMENT ASSOCIATED WITH ROUTINE MAINTENANCE.

IT IS POSSIBLE THAT SOME CONTRACTORS WILL SEEK TO EMPLOY DGH STAFF DURING THE TENDER PROCESS TO GAIN

EXPERIENCE. SUCH A SITUATION WILL NEED TO BE COVERED WITHIN THE CONTRACT DOCUMENTATION TO ENSURE AN

UNFAIR ADVANTAGE IS NOT GAINED.

The large scale of projects undertaken by the contractors implies sufficient experience

in project management (including project management software application). This


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also suggests the required capability in task scheduling and work packaging for work

crews. It can therefore safely be assumed that contractors would be more than able

to schedule and plan routine maintenance work in a PBC type contract. There is

however the concern with regard to capabilities to identify and forecast work in a pro-

active manner.

RECOMMENDATION: PBC TENDERERS MUST DEMONSTRATE THAT THEY ARE CAPABLE OF ROUTINE MAINTENANCE WORK

FORECASTING AND THAT THEY POSSESS MINOR DESIGN CAPABILITIES. (E.G. “FAULTS->CAUSE->REMEDY” TYPE DESIGNS

IT IS SUGGESTED THAT IF THESE SKILLS DO NOT EXIST WITHIN THE CONTRACTING COMPANY, A SUB-CONSULTANT SHOULD

BE PART OF THE PBC TENDER.)

The above mentioned recommendation would also assist in addressing the apparent

lack of database and pavement management experience within the contracting

industry. The relevance and importance of the database and pavement management

system (PMS) is further discussed in Section 6.6)

In terms of in-house quality control and standards/specification monitoring, it is

believed that the construction companies are able to apply their in-house processes.

Most of the companies interviewed do possess some sort of quality accreditation

system such as ISO 9001. It is however also realised that the quality systems would

need more emphasis in the PBC contract styles. Where in the past it was up to the

contractor to prove quality to a project manager or consultant, the driver now is to

promote work quality from an “own profit” perspective. For example, it would be in the

interest of the contractor to ensure good workmanship in order to limit repeated visits

to the failure location.

Concern was raised about the application of escalation to the contract. In summary

the industry raised issues with regard to three aspects of escalation:

• The components of the escalation calculations do not reflect maintenance

activities

• The data fed into the calculations is not based on independent data (it is collected

by the GOI)

• The reporting of escalation values is generally 1 year in arrears3 and payment

often another 6-12 months after this, such that the contracting industry is left

carrying the cost difference between when the escalation was incurred and when

it was paid.

RECOMMENDATION: A REVIEW OF THE ESCALATION PROCESS IS UNDERTAKEN TO ENABLE ESCALATION TO BE PAID THAT

IS BOTH RELEVANT AND TIMELY. RISK ASSOCIATED WITH COSTS RISING ABOVE THE ESCALATION PAYMENTS SHOULD BE

HELD BY THE CONTRACTOR.

3 There was some discrepancy observed with respect to the timing of escalation values being available, with

evidence indicating the values are available two months in arrears. The above 1 year is reported as this was

the contractors view.


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With regard to performance bonds, it would appear that there is an advantage

currently existing to the GOI owned companies (often referred to as “Karya”

companies) in that they can obtain bonds at much lower cost as the banks perceive

them to be of a low risk. This enables them to tender for larger contracts than an

equivalent sized private firm, and also provides them with greater flexibility in the

management of their equipment. It was also noted that the currently accepted list of

bond providers was relatively narrow, and that some greater flexibility (such as

inclusion of insurance companies4) could enable private companies to compete on

larger contracts.

RECOMMENDATION: ALL TENDERING PARTIES ARE ON AN EQUAL FOOTING WITH REGARD TO SOURCES OF BONDS.

RECOMMENDATION: THE LIST OF ACCEPTABLE BOND PROVIDERS BE REVIEWED AND INCREASED (OR DECREASED) AS

APPROPRIATE.

RECOMMENDATION: A TWO STAGE BOND IS APPLIED. FIRST STAGE TO COVER THE INITIAL BETTERMENT WORKS, THE

SECOND STAGE FOR THE LONGER TERM MAINTENANCE PERIOD.

There was also some concern that in general there are no penalties for late payment

from the client5. This was seen as a concern, especially longer term should future

contracts be funded from the Indonesian budget rather than from loans.

RECOMMENDATION: AN INTEREST RATE ABOVE THE COST OF BORROWING FOR CONTRACTORS’ SHOULD BE INCLUDED

INTO THE CONTRACT TO COVER FOR LATE PAYMENT BY THE CLIENT.

3.2.3 Issues to Consider in Framework

There was a strong signal of excitement from the contracting industry to become

involved with PBC contracts. There were however four major concerns regarding

risks associated with:

1. Overloading from trucks;

2. Quality of workmanship on existing pavements considered under the PBC contract

area;

4 An alternate viewpoint was noted that claiming from insurance companies was all but impossible, hence

exclusion of insurance providers as acceptable bond providers. 5 The World Bank advised that most recent contracts do have provision for claim of interest if late payment

from the client. However the interest rate is set at 0%, so nullifies the impact.


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3. Cost escalation; and

4. Bond provisions.

The concerns regarding overloading is a real issue since it does happen and secondly

the contractors feel they would be powerless in managing or mitigating this risk. As an

example, during a site visit to the weigh bridge at Subah, it was observed that a typical

day included the weighing of 1700 vehicles of which only 650 were not overloaded

(38%). Of the overloaded vehicles the extent of overloading was (for prosecuted

vehicles6):

• 5% overloaded by 5-15% of the allowable weight;

• 30% by 15-30% of the allowable weight, and;

• 65% by more than 30% of the allowable weight.

Shortcomings identified for the current overweight control include:

• The penalties for overloading being relatively low (an average penalty at Subah

was in the order of Rp 20,000 (USD$2.00));

• Penalties not being relative to the scale of offence. For example - the fine for

15% overload being equal to that for a vehicle 30% overloaded;

• A single penalty being issued per offence. Therefore only one fine would be

issued if a truck is overloaded, regardless of the distance the truck is going to

cover and the number of weigh bridges passed; and

• Trucks being allowed to proceed with the intended trip, regardless of the

overweight carried.

The above limitations thus encourage the wrong behaviour of truck operators and it is

in their interest to overload as much as possible and travel as far as they possibly can

with the given payload.

It should be appreciated that the above mentioned limitations are mostly associated

with the legislation and associated enforecement, and in terms of the actual

performance of the weigh stations there were a number of positive observations:

• The staff from the Department of Communication were well disciplined, well

trained and skilful for performing their task;

• The weigh stations consist of modern, well maintained and fit for purpose

equipment;

• 100% of all passing vehicles are being weighed, plus according to staff the

weighing of vehicles is being undertaken for 24 hours; and

6 A small portion of vehicles would be prosecuted because any evidence of fines from an earlier weigh bridge

indemnifies further prosecutions


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• Good records are kept of the offences and the actual weights observed.

Further practices and developments on overloading are discussed in Section 3.4.

The workmanship and resulting performance of existing pavements is also one of the

main risk factor for contractors. This risk is acknowledged and will be addressed

through the PBC contract and these strategies are discussed in Section 7.5.

The industry raised a concern over the existing cost escalation practices, which will

need to be reviewed during the contract preparation period. The contractors perceive

this to be a risk to them. It is noted that this is an international issue, particularly in

recent years where the price of fuel and bitumen (both major inputs to a maintenance

contract) have been often running well ahead of the general inflation rates.

The provision of bonds for works is currently distorting the contracting market, with

GOI companies often not required to supply bonds. To encourage an equal

marketplace, all tendering parties will need to have equal requirements placed on them.

3.2.4 Tendering Short listing Criteria

During the initial stages of the PBC style contracts in Indonesia all tenders should be

required to go through a pre-tender qualifying round during which a short list of

companies will be selected for the full tender. The tender process is further discussed

in Section 7.5.5. The objectives of the pre-qualifying stage of the tender are to:

• ensure that only tenderers with the required technical skills and capacity proceed

through to the full tendering process;

• identify tenderers having staff and sub-contractors/consultants with relevant

experience for the PBC contract;

• ensuring that tendering companies have robust financial status in order to handle

the longer-term contract style and be able to manage the perceived risk on the

contract; and,

• minimise the industry wide costs associated with preparing tender documentation.

The criteria to be included to the pre-tender qualification would therefore include:

• company financial statement and insurance details (including bond details);

• track record and relevant experience;

• summary of staff with specific skills and experience relevant to roles identified for

the project;

• contractor’s ability to demonstrate adoption / implementation of innovative

practices;


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• details of intended partners and sub-contractor/consultants proposed for the

project; and

• ISO 9001 or 9002 certification.

3.3 Consultant Capacity

3.3.1 Interviews

A number of consultants from Indonesia have been interviewed, with the most notable

interaction being a meeting which was held with Inkindo (the association of consulting

engineers in Indonesia). During this meeting six consulting companies were present.

A number of one-to-one meetings were also held.

Interviews (either in person or via telephone) were also undertaken with four expatriate

consulting firms working in Indonesia to ascertain their capabilities and their

appreciation of the local industry.

3.3.2 Summary of Capabilities

Appendix C contains an overall summary of consultants’ capabilities in Indonesia. It

was observed that the consultants have very good skills, and with an alternative

contract mechanism they could offer more. For example it seems that there is a move

towards consultants starting to have more powers and delegation for their construction

supervision work.

An uncertainty was observed from consultants in terms of the specific responsibilities

and opportunities they will get from a change towards a PBC type contract

arrangement. The initial thoughts were that consultants would have a double function

in the PBC approach as illustrated in Figure 1 (note that an alternative structure is

presented in Figure 21). This structure would create double opportunities (albeit they

would be mutually exclusive, in that one company would not be able to fulfil both roles)

for the consulting industry to become involved with the PBC contracts.


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Figure 1: Assumed Roles of Consultants in PBC Concept

The consultants have most skills and relevant experience required for the respective

roles envisaged for the PBC contract type. There would however be an increased

demand on robust experience in quantitative forecasting of maintenance needs

(Consultant 2 role). These skills obviously coincide with enhanced skills in the area of

pavement management systems such as IRMS. In terms of involvement with

contractors it would be essential for the consultant to have a strong partnership

relationship with the contractor. This relationship would further be strengthened if

consultants are able to demonstrate their added value for the contractor rather than

having a monitoring role according to current engagements. This highlights a key

mindset difference which applies to PBC contracts.

The consultants will also have to adjust to having more accountability for design and

scheduling outcomes. This is going to be a significant responsibility shift for

consultants, which will have to be managed with care. It is likely that to be successful,

the local consultant and contracting industry will require some international specialists

in their consortiums.


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The main consideration for the PBC framework is to facilitate the enhanced

involvement of the consultant. Figure 1 illustrates the two distinct consultant roles

which will be involved with the PBC contracts. The Management Board proposed for

the PBC concept is further discussed in Section 7.5.2.

The proposed structure would therefore call for two appointed consultant roles. The

PBC consultant would be engaged as a specialist advisor to the Department.

Consultant 2 would be part of a partnership or sub-consultancy arrangement direct with

the contractor. Since consultant 2 is not tendering individually for the work, it is

important to strongly encourage the contractor to employ the required skills.

RECOMMENDATION: CONSULTANTS FORMING PART OF THE CONTRACTOR’S TEAM FOR THE PBC CONTRACT SHOULD BE

ENCOURAGED THROUGH SPECIFYING THE REQUIRED SKILLS IN THE TENDER DOCUMENT. CONSIDERATION SHOULD ALSO

BE GIVEN TOWARDS PROFESSIONALLY ACCREDITED SIGNING OFF OF DESIGNS SUBMITTED BY THE CONTRACTOR.

3.3.4 Tendering Short listing Criteria

The criteria used to rate the consultant’s capability for the two roles indicted in the

preceding section would be the same. The successful PBC Consultant would however

be excluded from any role in the contract consortium (Consultant 2). The capability

issues to be considered for the consultant include:

1. Professional registration;

2. Track record and relevant experience;

3. Summary of staff with specific skills and experience for:

• Geometric and pavement design

• Pavement investigation and maintenance planning;

• Pavement Management Systems;

• Construction and rehabilitation supervision;

• Reporting against performance criteria;

• Contract documentation development and tendering processes;

4. ISO 9001 certification.


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3.4 Government Department(s) Capacity

3.4.1 Overview

There are many different government departments involved in some way with the

delivery of road maintenance in Indonesia. Figure 2 provides an overview of how the

primary government departments come together to deliver road maintenance at

present. Each of the different departments were interviewed to determine their

specific view on both the current and proposed methods of delivering maintenance on

the nation’s road network.

Government of Indonesia (GOI)PBMC Institutional Arrangements

Directorate General of Highways

(DGH)

Ministry of Communications(MOC)

Directorate General of LandCommunications

(DGLC)

Ministry of Public Works(MPW)

Directorate of

Road Traffic andTransport

Directorate ofTransport Safety

Directorate ofPlanning

Project

ManagementUnit

(PMU)

Ministry of Finance(MOF)

DirectorateGeneral of

Treasury(DGT)

DirectorateGeneral ofBudgeting

Overloadedvehicles Accident

blackspots

Ministry ofPlanning

(Bappenas)

IRMS

Strategic RoadInfrastructure

Project(SRIP)

Roles and Responsibilities in Relation to PBC

Nationalplanning

coordination

Policy and

cashflow

Total budgetLoans

CostingsRoadsidefurniture

Directorate ofRoad andBridges

(by region)

Road assets

Directorate of

TechnicalAffairs

Figure 2: Government Ministries

3.4.2 Interviews

Interviews were undertaken with the following government departments to both

understand their view on PBC and to ascertain their capacity to implement such as

contract form. The outcomes of the interviews are as follows.


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Ministry of Finance (both Treasury and Planning departments)

Treasury

The MOF expressed concern over the impact of a 5 year contract on local

employment opportunities.

The approval of the Minister of Finance is required before a multiyear contract

can be signed (if funded through government funds). Before doing so, the

Minister would need to see the benefits of a multi-year maintenance contract

(hence the need for a trial). They have traditionally used multi-year contracts

from construction of large infrastructure projects, but have not undertaken any

multi-year maintenance projects.

RECOMMENDATION: SHOULD THE PILOT TRIAL BE SUCCESSFUL, THE MOF OBTAIN APPROVAL TO ALLOCATE UP TO A

CERTAIN PERCENTAGE OF THE ANNUAL ROAD FUNDS TO MULTI-YEAR CONTRACTS. THIS WOULD ENABLE CONTRACTORS

TO BID ON FUTURE PROJECTS WITH CERTAINTY OVER PAYMENT PROSPECTS.

The MOF see the benefits of the PBC approach in terms of both there being a

single point (company) to blame for defects, and the efficiency gains that

should result in either a higher level of service, or else a reduction in financial

needs.

The MOF believe that the tax payers are getting wiser and want better and

better roads.

Planning

An issue was raised with regard to the need for a clear definition between what

is rehabilitation and what is routine maintenance. Concern was raised by the

MOF with regard to what happens if a section of road in year 5 clearly needs

rehabilitated and is costing a lot in maintenance, should the contractor have to

maintain, or should it be rehabilitated. This will be addressed in the contract

documentation and associated KPMs.

Also there was a question as to what happens after the five year period, and

the framework document needs to cover that issue. In addition to this, there

was the question of how to change the standards every five years.

The risks around overweight vehicles were also raised by the MOF.

Ministry of Communications/Directorate General of Land Communications

Overloading


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With regard to the overloading issues, the MOC are currently involved in a pilot

trial of an initiative in Sumatra and Aceh. The results (refer to Figure 3)

indicate a real improvement in the overloading situation, and suggest that if

such a process were implemented elsewhere similar results could be achieved.

Source: DGLC (2005)

Figure 3: Overloading Enforcement Impact

Within the North Java Corridor area, the local DGLC staff have implemented

an initiative that gives further hope that the overloading issue can be

controlled. This local initiative, involves a staged approach to forcing vehicles

to turn around when overloaded. Currently the focus is on vehicles more than

60% overloaded, with a gradual decrease down to a 25% target by December

2006.

One area of weakness identified by the DGLC is in relation to the level of fines

applied. The current fines of nominally Rp20,000 (independent of level of

overloading) are not sufficient to change overloading habits. It is

recommended that legislation be passed that sets the minimum fine payable at

a level that dissuades drivers from carrying overweight loads.

Advice was received that there is a current proposal to implement the

overloading enforcement throughout Java over the next 5 years, and that it

would be appropriate to run the PBMC and the overloading projects in tandem.

Furthermore, it was advised that the best option would appear to be the

government retaining the weighing (and fining) tasks, with the PBMC

Contractor involved in monitoring the performance of the weigh station.


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There is also a move towards fining the owner of the vehicles rather than the

driver. In this way larger fines could be applied which would garner greater buy

in from industry. It was noted that a some weigh stations that only a small

percent of trucks were weighed and that record tampering and corruption was

occurring.

Safety

The DGLC are also responsible for road safety. Recent campaigns have

focussed on seat belt wearing, the use of appropriate motorcycle helmets and

the like. They are currently attempting to integrate data sourced from the

police, the insurance companies and hospital records.

The DGLC are involved in the identification and mitigation of accident black

spots. They also see the need for road safety audits to assist in lowering the

road toll.

It is noted that within the PBMC environment that the Contractor would

typically be required to undertake minor safety works at contractual unit rates.

Asset Ownership and Maintenance

With respect to the asset ownership and maintenance aspect of the DGLC

operations, an interview was not able to be arranged during the time the team

were in Jakarta despite various attempts. However a teleconference was held

on 7 December to complete this item of work (list of participants during

teleconference is contained in Appendix A. Comments raised during the

teleconference include:

• Real problem to have good roads all the time, need a consistence

maintenance base to start with

• Support for the proposal at all levels of government

• Happy to combine assets into a single maintenance contract where the

necessary skills exist. This may result in some assets being retained

by MOC, such as the load cells at the weigh stations.

RECOMMENDATION: FURTHER DISCUSSIONS ARE HELD WITH THE MOC/DGLC AND CONTRACTORS TO DETERMINE

WHAT ASSETS SHOULD BE INCLUDED INTO THE PBMC

Bappenas

Bappenas play a key role in the overall planning of the country’s infrastructure

needs and how the assets are maintained. Their role is one of how to plan

and build a system that is integrated across all investments.


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They perceive that there are issues for the MOF with regard to the

guaranteeing of financing of multi-year contracts, and overloading.

Some issues that Bappenas perceive include that each local government has

different regulations on vehicle sizes and the fines for overloading.

It is noted that while the proposed pilot trial site (refer to Section 5.3) is

enclosed within the Central Java region, it does span many road controlling

authorities at a local level.

Overall Bappenas advised that they support the PBC ideals, and in particular

have a focus on maintaining the existing assets before constructing new

assets. They recognise that with the longer contract term, the contractor can

invest in equipment and people.

Bappenas do not believe that the tender should be on a lowest price basis,

and they desire a quality aspect to evaluation of the bid.

RECOMMENDATION: THE PBC TENDER PROCESS MUST BE STRUCTURED IN A WAY THAT THE APPROPRIATE SKILLS AND

CAPACITY IS SECURED WHILES ENSURING THE MOST COST EFFECTIVE PRICE

DGH

The existing routine maintenance activities are undertaken by in house forces.

Accordingly the DGH have significant experience in the reactive correction of

faults on the road network. What is not clear is their experience in predicting

the future maintenance needs of the road network – although the IRMS project

does include HDM-III (and soon HDM-4), which should assist in this area.

The DGH are also responsible for the current identification and treatment

selection of periodic treatments. The resulting physical works are currently put

to tender on the open market, such that there would be little change under the

proposed PBC pilot trial.

IRMS Team (part of DGH)

The meeting with the IRMS team was undertaken to determine both the

capacity of the personnel involved in running the system, and the ability of the

system itself, to support a PBC. It is noted that at present the IRMS team

have ARRB TR assisting them in the operation and upgrading of the IRMS

system.

With regard to the IRMS system, one significant deficiency identified was that

of their not been an ability to store maintenance data. The project team

working on the IRMS update, noted that this was a recognised deficiency, but

no plans were in place to address it.


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RECOMMENDATION: THAT CONSIDERATION BE GIVEN TO IMPLEMENTING A MAINTENANCE COST MANAGEMENT SYSTEM –

EITHER AS A MODULE WITHIN IRMS OR AS A STANDALONE SYSTEM, SUCH THAT THE DGH IS WELL POSITIONED TO MAKE

LIFE CYCLE DECISIONS IN THE MANAGEMENT OF THE ROAD NETWORK.

The IRMS system is populated with data relating to roughness, visual

condition surveys, traffic counting. It has a robust location referencing system,

including the use of GPS/GIS to accurately manage the data.

Overall, the team managing the IRMS system appear to have good skills and

capabilities with respect to the system, while a strong input from the ARRB

team is also recognised.

Data (condition and traffic) is collected via annual surveys, with this work being

let to an external contract. There is some concern over the level of validation

of the data, and it is likely that the current data is not sufficiently robust to let a

PBC contract.

3.4.3 Summary

In summary it is considered that the government agencies have the capacity to

undertake a pilot trial of PBC, although there will need to be some training of staff to

enable them to adapt to their new roles and responsibilities.


The following are issues that will need to be considered within the framework

document:

• The current data within IRMS is unlikely to be completely suitable for

benchmarking the condition of the asset, or for contractors to tender with

confidence. Therefore additional data collection will be required.

• The longer term issue of the MOF not being able to enter into multiyear

maintenance contracts without direct Ministerial approval on a case by case

basis.

• How to handle the shared ownership of assets within the road corridor

between the DGH and the MOC. This is an issue for both the pilot trial and for

the longer term situation within the wider road network.

• Approach to controlling/reducing the overloading of vehicles.


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3.5 Overall View of Industry Capacity

Based on the previous discussions, Table 6 presents a summary of our findings of the

industry capacity in relation to the various activities that will be required to deliver a successful

PBC.

Table 6: Overview of Capacity


Staff resources � � � Resources are available, but will require

some training in new approach

Physical resources NA � NA Contractors have (or could readily get) the

resources needed

Maintenance management � Not system

based

Limited Training to be provided on maintenance

management

Maintenance activities � Limited to

new roads

only

Limited Training to be provided on maintenance

activities

Long term contracts Limited to

construction

contracts

Limited to

construction

contracts

Limited to

construction

contracts

Previous long term contracts are only of a

construction type.

Quality assurance NA � � Generally ISO or equivalent

Pavement and surface

understanding � � � All parties understand pavement and

surfacing design

Multi-asset experience � � � Responsibilities to be qualified for PBC tender

Project management � � � Management of large contracts is routine

IRMS experience � No Limited Will need training

Data collection and analysis � Analysis

only � All parties have experience in interpreting

data.

Tender document development � NA � External input will be required for initial PBC tender

Partnering experience NA � � Both consultants and contractors often

work in partnerships on large projects

Careful considerations should be given

towards required partnerships for PBC

Business risk processes NA � � Part of standard operating procedures

Legislative capacity � NA NA Longer term there will need to be a clarification of the MOF position with

respect to multi year maintenance

contracts. Also legislation surrounding

private companies operating weigh

bridges, with associated enforcement

issues.


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4 Task A2: Assets to be Included

4.1 Introduction

As a general rule, the more of the assets that can be included within the contract the better,

with an ideal situation being a single contractor covering all road assets7 within the road

corridor. This is based on three primary reasons:

• The efficiency of having a single contract covering the area. Efficiency gains are made in

both the administration and physical maintenance activities by having fewer contracts.

• The removal of finger pointing for non-performance, wherein one contractor blames the

other. This is often an issue where one activity (say vegetation mowing) can have an

impact on another (say litter collection).

• A greater sense of ownership8 by the contractor, which instils more pride and hence a

better experience by the road user.

However, the above needs to be tempered by considering items such as the capacity of the

industry to maintain the assets, and the legislative (or other) changes necessary to combine

assets currently owned and maintained through different government departments.

This task reviews the current ownership of the assets within the road corridor, before

examining different contractual mechanisms that could be used. It then produces a

recommendation on what assets should be included within the PBC contract.

4.2 Current Ownership

Within this report, the context of “ownership” means the agency that is responsible for the

creation, maintenance, and ultimately disposal of an asset. It is likely that all assets are

ultimately owned by the GOI.

As noted within the TOR, the current asset ownership is as defined in Table 79. It is noted

that for those assets owned (and maintained) by the MOC, when betterment or capacity

works are undertaken, the initial installation of the MOC assets is completed by the DGH

contractor. The MOC then take over the maintenance of the assets.

7 For this purpose, road assets include the pavement, drainage structures, signs, markings, street lighting,

guardrails, cut and fill batters, etc. It does not include utility services such as telecommunications, water

supply or the like. 8 While ownership will not pass to the contractor, the desire is to create within the contractor the same

responsibilities and pride that would come from ownership. 9 Within the TOR, the guardrails were assigned to the DGH, we have been advised by DGH that this should

be MOC.


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Table 7: Asset Ownership

Asset Current Owner/Maintainer

Pavements and surfacings DGH

Bridges DGH

Signs, signals and lighting MOC

Minor structures and culverts DGH

Drainage DGH

Line marking MOC

Guideposts and mile posts MOC

Guardrails and barriers MOC

Cut and fill batters DGH

Weigh Bridges MOC

As noted in Chapter 3, the industry has little experience in maintaining the assets, apart from

during an initial post construction maintenance period of up to 1 year. Therefore, there will

always be some risk that in moving to a new method of delivery experience will not currently

exist. This risk will need to be mitigated through the selection process of the contracting

consortium (refer to Section 3.2.4), training and knowledge transfer.

4.3 Discussions with MOC

Discussion was held with the asset section of the MOC/DGLC via telephone conference, with

them being in support of a single contract approach (refer to details in Section 3.4.2)

RECOMMENDATION: DGH AND MOC AGREE ON ASSETS TO BE INCLUDED INTO THE PBC AND THE IMPACT ON SOURCES

OF FUNDING, STANDARDS AND REPORTING FOR THE MOC ASSETS.

4.4 Utilities within the Road Reserve

Utilities (gas, power, telephone, water etc) located within the road reserve should not be

included within the contract. However, the PBC Contractor will be required to:

• Not damage or otherwise interfere with utility operator assets

• Work with utility operators to encourage installation in the best location with regard to

maintenance of the road asset

• Encourage quality reinstatement of the road asset after utility installation or

maintenance.


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Further discussion on utilities is made in Section 7.3.1.

4.5 Contractual Options

Various contractual options exist in terms of managing the full scope of assets noted within

Table 7. These include:

• One joint contract

Under this option the maintenance of all assets within the road corridor would be let as

a single contract to a single contractor (refer to Figure 4). This would necessitate the

MOC agreeing with the DGH taking responsibility10 for the MOC assets, and in return

the DGH agreeing to maintain them to a documented standard.

MOC

DGH

PBCContractor

Figure 4: Structure of One Joint Contract

A variation of this may be that the MOC agree to DGH taking responsibility for part of

the MOC assets (e.g. the line marking, guideposts and mile posts), with the MOC

retaining the signs, signals and lighting assets.

It was noted by the DGH that this is their preferred contract mechanism.

• Two contracts to one contractor

Under this scenario, the DGH and MOC would agree to let two independent contracts,

but with a single contractor winning both (refer to Figure 5). While this would be

slightly messier than the above approach in terms of the reporting mechanism and

management structure (both MOC and DGH would likely want representation), it would

still remove the split responsibility approach.

10

The MOC would still own the assets, but the DGH would be responsible for the maintenance of existing

assets. Such an agreement may be the provision of back-to-back performance standards for the MOC

assets.


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MOCDGH

PBC Contractor

Figure 5: One Contractor with Two Contracts

• Two separate contracts

This approach is akin to that currently in practice, where those responsible for the

DGH and MOC assets work independently of each other as indicated in Figure 6.

MOCDGH

PBCContractor

MOCContractor

Figure 6: Two Contracts to Two Contractors

RECOMMENDATION: IF MOC AGREE TO DGH MAINTAINING ALL OR PART OF THEIR ASSETS, THAT A SINGLE JOINT

CONTRACT APPROACH BE IMPLEMENTED.

4.6 Recommendation

With regard to the assets to be included, Table 8 contains the recommendation on asset

inclusion into the PBC contract. This is based on our discussions with industry and the DGH

about how the construction of new assets takes place.

Table 8: Asset Inclusion to PBC Contract

Asset Include in PBC Pilot Trial Contract

Pavements and surfacings Yes


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Bridges Yes

(only routine maintenance of cleaning, rail repairs and waterway

maintenance, major periodic works such as deck replacement are

excluded from PBC)

Signs, signals and lighting Partial

(small signs included, large gantries and street lighting excluded)

Minor structures and culverts Yes

Drainage Yes

Line marking Yes

Guideposts and mile posts Yes

Guardrails and barriers Yes

Cut and fill batters Yes

(will need to be a limitation as to the nature of works included. Small

slips and maintenance of drains on cut and fills should be included,

large scale failures should be excluded from the lump sum, but may still

be included in the contract)

Weigh Bridges Yes

Utilities influences Yes (contractor to approve backfill quality)

Minor Safety Works On a provisional sum basis

Minor Capital Works Up to a certain value

In addition, it is considered that the current split asset ownership within the road corridor

creates unnecessary duplication of efforts, with no (or little) perceived benefit. As a longer

term issue (outside of the PBC context), the continuation of the current asset ownership

should be reviewed.

RECOMMENDATION: AS A LONGER TERM STRATEGY, CONSIDERATION BE GIVEN TO MOVING THE MOC ASSETS NOTED IN

TABLE 7 INTO THE DIRECT OWNERSHIP (REFER TO SECTION 4.2) OF THE DGH, WITH THE MOC RETAINING THE PRIMARY

ROLES OF LAW ENFORCEMENT, SAFETY PROGRAMMES AND THE LIKE. NOTE THAT THIS IS NOT A PBC ISSUE, BUT RATHER

AN OBSERVATION ON WHAT MAY ASSIST IN THE OVERALL MANAGEMENT OF THE ROAD NETWORK.


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5 Task A3: Criteria for Pilot Sites

5.1 General Criteria

Within the TOR and associated documentation, the following criteria were identified for the

selection of pilot sites:

• Maintenance of local competition

• Capacity of local industry

• The size of the contract that the local industry can handle

• Risks needing to be not significantly higher than elsewhere on the network (including risks

from natural events)

• No significant events that may affect the future management of the road

From our observations and consultation, all the above are valid criteria for the selection of a

pilot trial site (and indeed for the longer term implementation of PBC across Indonesia).

However, we also consider that the following additional criteria are equally important and need

to be considered when selecting a site for PBC implementation:

• Knowledge of PBC concepts and desire by local DGH staff to make PBC work. For the

PBC to be successful, it requires equal commitment from all parties.

• Operational asset understanding. This is the understanding of how the asset is operating,

what the network specific concerns are etc.

• Historical maintenance cost data. This is to assist the contractor to price the contract

and to identify areas of high risk to be closely monitored. While not essential (as it is not

widely available in most countries) to the PBMC being successful, it does assist in

managing risks on the network.

• Asset data, including robust location referencing, inventory, condition and pavement

capacity.

• Reliability of traffic loading forecasts. Traffic loading is a significant risk which must be

fully understood before it can be allocated rationally between the contractor and the DGH.

• Availability of resources to all contractors. If one contractor owns the local quarries and

asphalt plant, then they could have a significant advantage.

• Value of initial betterment works should not exceed 50% of the total budget. Otherwise

the focus moves from maintenance to construction.

• Location of weigh bridges. The presence of such within the contract length (or

immediately adjacent to it) will assist in mitigating the risks of overloaded vehicles.


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5.2 Recommended Criteria

Based on the above, we have developed the following as a list of criteria against which sites

can be checked (refer to Table 9). We have included a nominal “importance” factor to

provide a level of ranking to the criteria. It needs to be recognised that there is unlikely to be

a perfect site, and therefore some criteria will not be met. However, we strongly advise that

those of a very high ranking be considered essential to the site selection.

Table 9: Site Selection Criteria

Criteria Importance

Maintaining of local competition High Capacity of local industry Very High The size of the contract that the loc

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