Word Bank Resource Guide and Other Information on Performance-Based Contracts César Queiroz, Ph.D. Roads and Transport Infrastructure Consultant Arusha, Tanzania February 2008 Regional Seminar on Performance-Based Management and Maintenance Contracts
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Word Bank Resource Guide and Other Information on
Performance-Based Contracts
César Queiroz, Ph.D.Roads and Transport Infrastructure Consultant
Arusha, TanzaniaFebruary 2008
Regional Seminar on Performance-Based Management and Maintenance
Contracts
Presentation Outline• World Bank Resource Guide for
Performance-based Contracting• Additional resources• Toolkit for PPP in highways• From PBC to PPP• PBC and road management• RONET• PBC and the distribution of risks between
the public and the private sectors
World Bank Resource Guide for Performance-based Contracting
• Assists road agencies in developing countries to launch or enhance a PBC program to manage and maintain their road networks
• Contains practical documentation to– identify a PBC approach to fit specific conditions in a
given country– design bidding and contract documentation– develop an efficient PBC implementation strategy
• Also useful for consultants and contractors• Produced under a partnership between the UK
Department for International Development and the World Bank
World Bank Resource Guide for Performance-based Contracting• Sample Bidding Documents• Sample TOR for preparation of PBC
projects and support to bidding process
• Sample TOR for Supervision• Sample TOR for Facilitator / Trainer• Sample Technical Specifications• WB Technical Note No. 27 on PBC• Actual Contracts• Resource People
World Bank Websites on Performance-based Contracts
• Resource Guide for Performance-based Contracting http://www.worldbank.org/transport/roads/resource-guide/index.html
• Training Course for Performance-Based Management and Maintenance of Roads http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTTRANSPORT/EXTROADSHIGHWAYS/0,,contentMDK:20706624~pagePK:148956~piPK:216618~theSitePK:338661,00.html
• Road Management Catalog http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTTRANSPORT/EXTROADSHIGHWAYS/0,,contentMDK:20735996~pagePK:210058~piPK:210062~theSitePK:338661,00.html
Gunter Zietlow’s Website on Performance-based Contracts
• PBC Overview
• Sample Terms of Reference for the Preparation and Procurement, Contract Supervision and Facilitation, and Training
• Bidding and Contract Documents
• Training Materials
• Related Presentations• Available at: http://www.performance-based-
road-contracts.com/
Toolkit for PPP in Highways
The toolkit is structured under five headings and includes a library and interactive financial simulation model
Available at the World Bank’s web Available at the World Bank’s web site: www.worldbank.org/highwayssite: www.worldbank.org/highways
From PBC to PPP…but PPPs are not new!
• Toll road at Wadesmill in Hertfordshire, UK, established in 1663 by Act of Parliament
• 19th century concessions: toll roads, bridges, tunnels in US; railways in France; subway in London
• Suez (1860) and Panama (1880) canals
• Decline around 1930 (great depression)
• Resurgence in the 1980s: collapse of the state-owned monopoly paradigm
Toolkit for Public-Private Partnership in Highways
Financial Simulation ModelMain Financial Indicators
Debt Service Cover Ratio (DSCR)
3
1
,
)(
i
nn
neDebtServic
CAFDSADSCR
21
wherei = number of tranches, 1≤ i ≤3n = current year(Debt Service) i,n = (Principal) i,n + (Interest) i,n CAFDS= Cash Available for Debt Service
3
1
,
)(
i
nn
neDebtServic
CAFDSADSCR
3
1
,
)(
i
nn
neDebtServic
CAFDSADSCR
3
1
n Service)i,(Debt
)(
i
nn
CAFDSDSCR
Loan Life Cover Ratio (LLCR)
3
1
,
)(
i
nn
neDebtServic
CAFDSADSCR
21n = current yearCAFDS= Cash Available for Debt ServiceOutstanding debtn end of period The Net Present Value of the Cash Available for Debt Service from year n+1 to the end of the maturity is discounted at the debt interest rate The financial tool provides the user with the minimum LLCR
3
1
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)(
i
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CAFDSADSCR
3
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)(
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neDebtServic
CAFDSADSCR
period of end Debt gOutstandin
(CAFDS)ValuePresent Net
n
tranches three theofmaturity maximum
njn
nLLCR
Return on Equity (ROE)
3
1
,
)(
i
nn
neDebtServic
CAFDSADSCR
21
where:Equity injectedi is the equity provided by the sponsors in year iDividendsi are the dividends distributed to shareholders in year iROE is calculated in real terms through deflated flow (equity - dividends)
3
1
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)(
i
nn
neDebtServic
CAFDSADSCR
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)dividends- injected(Equity concession theof end
1i
iROE
Project Financial InternalRate of Return (IRR)
3
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21
i = year OCFBF = Operating Cash Flow Before Financing
3
1
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CAFDSADSCR
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onconstructi ofyear first i
ii
IRR
Project Net Present Value:Present Value of Taxes minus
Subsidies (NPV)
3
1
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)(
i
nn
neDebtServic
CAFDSADSCR
21
where:OCFBF = Operating Cash Flow Before Financingt = weighted average of the three rates on the tranches of debt The NPV is calculated for the first year of the construction period
3
1
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CAFDSADSCR studyofyeari
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concession of end
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Estimated Minimum Toll Rate to Attract Private Investment for a
PPP Project
0
0.1
0.2
0.3
0.4
0.5
1 2 3 4 5
$/km
Construction cost, $ million/km
20,000 vpd
15,000 vpd
10,000 vpd
5,000 vpd
PBC, PPP and Road Management
• Road condition is a key indicator of the roads agency efficiency
• PBC and PPP have been used to improve the condition of road networks (also to expand)
• A new tool can help road agencies and policy makers to assess the future condition of a road network as a function, inter alia, of funds available: RONET
Road Network Evaluation Tools (RONET)
Version 1.01
World BankJanuary 2008
RONET• Developed for SSATP by the World
Bank
• Helps decision makers:– Monitor network condition
– Plan allocation of resources
– Assess consequences of macro policies
– Design Road Asset Managements Systems
• Developed for Africa, but can be applied worldwide
RONET
Input
Country data
Length of road network
Historical data
Standards
Cost of road works
Output
Asset value
Roughness
Network charts
Network monitoring indicators
Road works summary
Optimal work program
Road Network Length MatrixMatrix of Road Classes: Overall Network Evaluation
Network Surface TypeType Concrete Asphalt S.T. Gravel EarthPrimarySecondaryTertiaryUnclassifiedUrban
Traffic Condition CategoryCategory Very Good Good Fair Poor Very PoorTraffic ITraffic IITraffic IIITraffic IVTraffic V
Total 5 x 5 x 5 x 5 = 625 road classes
Default RONET Traffic CategoriesAverage Annual Daily Traffic (AADT) Illustrative Standards
Surface Traffic Traffic Minimum Maximum Average Geometry Pavement
Type Category Level (veh/day) (veh/day) (veh/day) Standard Standard
Earth Traffic I T1 0 10 5 1-lane warranted Formation not warranted
Traffic II T2 10 30 20 1-lane warranted Formation warranted
Traffic III T3 30 100 65 2-lane warranted Gravel warranted
Traffic IV T4 100 300 200 2-lane warranted Gravel warranted
Traffic V T5 300 1,000 650 2-lane warranted Paved Surface warranted
Gravel Traffic I T2 10 30 20 1-lane warranted Formation warranted
Traffic II T3 30 100 65 2-lane warranted Gravel warranted
Traffic III T4 100 300 200 2-lane warranted Gravel warranted
Traffic IV T5 300 1,000 650 2-lane warranted Paved Surface warranted
Traffic V T6 1,000 3,000 2,000 2-lane warranted Paved Surface warranted
Paved Traffic I T4 100 300 200 2-lane warranted Gravel warranted
Traffic II T5 300 1,000 650 2-lane warranted Paved Surface warranted
Traffic III T6 1,000 3,000 2,000 2-lane warranted Paved Surface warranted
Traffic IV T7 3,000 10,000 6,500 2-lane warranted Paved Surface warranted
Traffic V T8 10,000 30,000 20,000 4-lane warranted Paved Surface warranted
- Standard given for illustration purposes. Proper standards are country specific.
- AADT of motorized 4-tires or more 2-way traffic
Default RONET Condition Categories• Very Good: requires only routine
maintenance (RM)• Good: requires RM plus preventive
maintenance or spot regravelling or repairs• Fair: requires RM plus periodic
maintenance • Poor: requires RM plus strengthening or
partial reconstruction • Very Poor: requires RM plus full
reconstruction
Default RONET Condition Categories
Capital Road Works Needed to Bring a Road to Very Good Condition
Condition
Category Bituminous Roads Gravel Roads Earth Roads
Very Good None None None
Good Preventive Treatment Spot Regravelling Spot Repairs
Fair Resurfacing Regravelling Heavy Grading
Poor Strengthening Partial Reconstruction Partial Reconstruction
Very Poor Full Reconstruction Full Reconstruction Full Reconstruction
Performance AssessmentWhat are the Consequences of
Applying Different Maintenance and Rehabilitation Standards?
Standards ConsequencesVery High Standard Road WorksHigh Standard Performance FinancialMedium Standard Assessment EconomicLow Standard ConditionVery Low Standard Asset ValueDo Minimum Road UsersDo Nothing Etc.Custom Standard
RoadNetwork
RONET Distribution• RONET is available for free internet
download at:http://www.worldbank.org/afr/ssatp
• RONET CD can be obtained by contacting:– Monique S. Desthuis-Francis
• Technical issues: – Rodrigo Archondo-Callao
Allocation of RisksAllocation of RisksForce Account
High
RISKTO
PUBLIC SECTOR
LowRISK TO PRIVATE SECTOR High
Maintenance Contracts
PBC
Concessions
Decreasing Public Risks,
Increasing Private Risks
BOO
Thank you!
Some Basic ReferencesWorld Bank (2006). “Resource Guide for Performance-based Contracting.” Washington, D.C. http://www.worldbank.org/transport/roads/resource-guide/index.html
World Bank (2005). “Performance-based Contracting For Preservation and Improvement of Road Assets.” Transport Note No. 27. Washington, D.C. http://www.worldbank.org/transport/roads/resource-guide/Docs-latest%20edition/PBC/trn_27_PBC_Eng_final_2005.pdf
World Bank (2005). “Sample Bidding Document: Output- and Performance-based Road Contract (OPRC).”http://www.worldbank.org/procure/
World Bank (2003). “Toolkit for Public-Private
Partnership in Highways.” Public-Private Infrastructure Advisory Facility (PPIAF) and World Bank. http://rru.worldbank.org/Documents/Toolkits/Highways/index.htm
WB PPP-related Sites• Toll Roads and Concessions
http://www.worldbank.org/transport/roads/toll_rds.htm
• How to Hire Expert Advice on PPP http://rru.worldbank.org/Toolkits/Documents/Advisors/Full_Toolkit.pdf
• Labor Issues in Infrastructure Reform www.ppiaf.org/Reports/LaborToolkit/toolkit.html
• Toolkit for PPP in Highways http://rru.worldbank.org/Toolkits/PartnershipsHighways/
World Bank Websites on Performance-based Contracts
• Resource Guide for Performance-based Contracting http://www.worldbank.org/transport/roads/resource-guide/index.html
• Training Course for Performance-Based Management and Maintenance of Roads http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTTRANSPORT/EXTROADSHIGHWAYS/0,,contentMDK:20706624~pagePK:148956~piPK:216618~theSitePK:338661,00.html
• Road Management Catalog http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTTRANSPORT/EXTROADSHIGHWAYS/0,,contentMDK:20735996~pagePK:210058~piPK:210062~theSitePK:338661,00.html
Basic Assumptions to Estimate the Minimum Toll Rate to Attract Private
Investors for a PPP Project
• Concession term: 20 yrs
• Construction Cost: $1M/km to $5M/km
• Operation cost: $500,000/km/yr
• Equity: 14%• Subsidies: 0• Interest rate: 5%/yr• Grace period: 4 yrs• Repayment period:
14 years• Discount rate: 10%
• Initial traffic: 5,000 vpd to 20,000 vpd
• Traffic growth: 3%• Inflation: 6%• Tax: 18%• IRR ≥ 12%• ROE ≥ 16%• LLCR ≥ 1.0• DSCR ≥ 1.0
Cesar QueirozRoads and Transport
Infrastructure ConsultantWorld Bank, 1818 H Street NW
Washington DC 20433 USATel +1 202-473 8053
Mob +1 301-755 7591Email: [email protected]://www.worldbank.org/trans
porthttp://www.worldbank.org/
highways
Cesar Queiroz is an international consultant on roads and transport infrastructure, with main interest in public-private partnerships (PPP) in infrastructure, road management and development, performance-based contracts, port rehabilitation, improving governance, quality assurance and evaluation, research, teaching and training. Between 1986 and 2006, he held several positions with the World Bank in Washington, D.C., including principal highway engineer, lead highway engineer, and highway advisor. Prior to joining the World Bank, Cesar was the deputy director of the Brazilian Road Research Institute in Rio de Janeiro. He holds a Ph.D. in civil engineering from the University of Texas, USA, a M.Sc. in Production Engineering from the Federal University of Rio de Janeiro, and a B.Sc. in civil engineering from the Federal University of Juiz de Fora, Brazil. Cesar was awarded the Maua Medal for his contribution to transport development in Brazil, and is an elected member of the Russian Academy of Transport. He has published more than 130 papers and articles, including being a co-author of two World Bank main publications on PPP and performance-based contracts, respectively the “Toolkit for PPP in Highways” and the “Resource Guide for Performance-based Contracting.” He has participated actively in several international organizations, such as TRB, SHRP, OECD, PIARC, IRF.
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