introducing performance based maintenance contracts to...

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


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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


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




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.



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


based

Limited Training to be provided on maintenance

management

Maintenance activities � Limited to

new roads

only

Limited Training to be provided on maintenance

activities


construction

contracts

Limited to

construction

contracts

Limited to

construction

contracts

Previous long term contracts are only of a

construction type.



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


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



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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)


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


Drainage Yes

Line marking 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


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.


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 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

5.3 North Java Corridor Issues and Appropriateness as a Pilot Trial Site

5.3.1 Description of the North Java Corridor

The proposed pilot trial site within the North Java Corridor is a length of nominally

100km running east to west from Semerang to Pekalongan as indicated in Figure 7.

Towards the Semerang end of the route, the road passes through rolling (some steep)

country, while at the eastern end of the site the road is passing through flat rice field

areas.


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Source: DGH (2005)

Figure 7: North Java Corridor Proposed Pilot Trial Site


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Various urban areas exist along the length of the road. Within these urban areas there

is significant road side friction (refer to Figure 8), which is resulting in uneven utilisation

of the dual traffic lanes that exist for much of the length. Consequently, the loading

impact on each lane is not split 50/50, but in some cases would be approaching 100/0.

This is a significant issue for the design and maintenance of the road pavements,

which when combined with the aforementioned overloading will result in significantly

increased deterioration of the road asset.

RECOMMENDATION: PAVEMENT DESIGNS ARE BASED ON A REPRESENTATIVE SPLIT IN TRAFFIC LOADING ACROSS THE

LANES, AND NOT ON AN “AVERAGE” BASIS.

RECOMMENDATION: WHERE POSSIBLE, ENFORCEMENT IS UNDERTAKEN (AND IF REQUIRED LEGISLATIVE CHANGES

MADE) TO REDUCE THE IMPACT OF ROADSIDE ACTIVITIES ON THE OPERATION OF THE ROAD NETWORK. WE NOTE THAT

THIS WOULD ASSIST IN THE TRAFFIC CARRYING CAPACITY OF THE ROUTE AND IS NOT AN ISSUE FOR THE PBMC ITSELF.

Figure 8: Example of Side Friction within Urban Areas

5.3.2 Currently Proposed Works

While much of the route is in a fair to good condition, there are some lengths that

require rehabilitation to restore an acceptable ride quality. We are aware that within

the length, two major projects are proposed under the SRIP programme, with these

being:


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• A nominal 9.8km addition of two lanes (capacity improvement) between Batang

and Weleri (refer to Figure 9). This project has an estimated11 construction cost

of around Rp50Billion (US$5.6M) excluding relevant taxes.

• Betterment between Semarang and Kendal, a length of some 10.4km (refer to

Figure 10). This project has an estimated construction cost of around

Rp22Billion (US$2.4M) excluding relevant taxes.

• Grade separation at Semarang (cost estimate not provided by consultant as may

be constructed outside of PBMC contract)

• Routine maintenance of total 100km project length, with an estimate cost of

RP127Billion (US$14M) over the five year period excluding relevant taxes. All

betterment works along the project length during the 5 year period would be

completed by the PBC Contractor.

Based on the above values, the initial construction portion of the contract would

equate to 36% ([5.6+2.4]/[5.6+2.4+14]) of the total contract value.

11

Costs have been provided by the consultant managing the SRIP works. These have not been verified or

checked in any manner as part of this project.


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Source: DGH (2005)

Figure 9: Capacity Improvement Batang-Weleri


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Source: DGH (2005)

Figure 10: Betterment works between Semarang and Kendal


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5.3.3 Asset data

The asset data available for the pilot area include:

• Location referencing;

• Inventory data

• Condition including visual assessment and roughness

• Traffic data for 2002

• Strength data (FWD or BB)

The data seems to be robust but in terms of the data criteria as presented in Section

6.6.3 the following limitations were observed:

• The data were only collected for one direction and lane;

• The traffic data only consisted of hand counts and are fairly old (2002);

• No axle load information exists; and,

• The inventory data lack details regarding the surface age and pavement

composition.

Some of the information extracted from the data are presented in Figure 11 to Figure

13.

0

2000

4000

6000

8000

10000

12000

car bus light commercial heavy vehicles

Vehicle Type

Nu

mb

er

of

veh

icle

s

A0071 A0072 A008 A009

Figure 11: Distribution of Traffic for the Pilot Site (2002 data) as Observed at Four

Counting Stations


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Figure 11 illustrates the distribution of the various traffic classes on the pilot area. The

distribution of the traffic classes is within the expected ranges but a high volume of

tracks were observed for the A0071 counting station.

Figure 12 depicts the roughness distribution on the pilot network. It is observed from

the distribution that a large percentage of the network falls within a high roughness

range. Any roughness levels above 4 IRI results in excess user costs on the vehicles

and indicates the road is reaching intervention levels for heavy rehabilitation works. It

should be noted though that some of the extreme roughness values may be as a result

of some survey event items such as intersections and service covers and should be

removed from any roughness reporting on the PBC.

RECOMMENDATION: ANY ROUGHNESS REPORTING OF THE PBC SHOULD EXCLUDE SURVEY EVENT CODES SUCH AS

INTERSECTIONS AND SERVICE COVERS.

It is unlikely that a PBC focusing on routine maintenance will include average

roughness as a key performance measure for those portions of the network that the

PBC Contractor is not undertaking betterment or capacity works. For sections where

the PBC Contractor completes significant works, then average roughness would be an

appropriate KPM. The management (and removal) of spikes in roughness should be

applicable to all lengths of road throughout the course of the contract.

RECOMMENDATION: INITIAL CAPITAL WORK ON THE PBC SHOULD ADDRESS EXTREME ROUGHNESS AREAS SINCE IT

CANNOT BE ADDRESSED THROUGH ROUTINE MAINTENANCE.

RECOMMENDATION: THE PBC CONTRACTOR SHOULD BE RESPONSIBLE FOR ROUGHNESS OVER THE FULL PERIOD OF

THE CONTRACT FOR LENGTHS OF ROAD WHERE BETTERMENT OR CAPACITY WORKS ARE UNDERTAKEN.


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1.6 2.4 3.2 4.0 4.8 5.6 6.4 7.2 8.0

IRI (m/km)

0

50

100

150

200

250

300

350

Num

be

r of

Obs

erv

ati

on

s

Extreme high roughness values to be targeted in PBC

Figure 12: Distribution of Roughness Data for the Pilot Site

Figure 13 illustrates an example of a linear plot of roughness for a 40km length of the

PBC pilot area. This graph clearly illustrate that the roughness data can be useful in

identifying poor performing areas. It further illustrates the occurrence of isolated

roughness problem that could be as a result of some survey event codes or may be

localised failures.

0

2

4

6

8

10

12

14

16

0 5 10 15 20 25 30 35 40 45

Chainage (KM)

IRI

(m/k

m)

Figure 13: An example of a Longitudinal Plot of Roughness Values


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5.3.4 Suitability Against Criteria

Taking the criteria recommended in Section 5.2, the proposed pilot trial site has been

assessed in terms of the criteria in Table 9, with the results presented in Table 10.


Criteria Site Passes Criterion






the road

Yes


local DGH staff

Yes





pavement strength.

Marginal

(will require benchmark survey)





Value of initial betterment works Yes (36% )


(needs an additional in the

eastbound direction)

On the basis of the data presented in Table 10, it is concluded that the proposed site

is an acceptable site to run the PBC pilot trial on the basis that those criterion

indicated as marginal can be managed through the process.


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6 Discussion on Local Practices and Issues

6.1 Introduction

Problems associated with roads are fairly common around the world. In situations where

funding for routine maintenance is limited, the impact on road performance can be significant.

Some of the main causes of road deterioration are summarised in Table 11. Those factors

in the table that are applicable to the performance of roads in Indonesia and to the

implementation of PBC are discussed in this section.

Table 11: Deterioration Effects on Roads (SADC, 2003)

Parameter Related Issues

Poor Drainage

o water ingress to the pavement

o inadequate maintenance o drainage structures

o poor roadside drainage/flood water scour

o poor geometric design

Inadequate

Maintenance

o poor/lack of/ insufficient maintenance

o poor maintenance techniques

o integrity of seal/ delayed seal/unsealed cracks

Overloading

o unexpected heavy loads after design

o very high tyre contact pressure

o poor overloading control

Quality of

Construction

o inadequate/poor compaction

o poor workmanship/supervision/construction

standards

o inadequate use of appropriate plant

o poor mixing of materials/permeable pavements

Material quality

o inadequate classification of soils

o salt damage

o low quality surfacing

Environmental

Extremes

o Climatic

o erosion of shoulders and side slopes

Design

o inadequate pavement design/design standard

o poor shoulder design/lack of sealed shoulder

o flat terrain/ low embankment/inadequate

camber


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6.2 Funding for Multi Year Maintenance Projects

Routine maintenance is vital for the long-term performance of any road. If routine

maintenance is not performed, it could be costing the Indonesian economy much more than

realised. It is estimated that effective maintenance has benefits which are three times more

than the cost.

The secret of routine maintenance is not how much you do, but how regularly the maintenance

is undertaken. If maintenance is undertaken on a regular basis the effort required reduces

significantly. For example, keeping drainage operational and clean is not hard work, but if left

too late, major flood damage may result in significant damage to the road. Repairing the

flood damage then becomes a major undertaking with high costs.

The current Indonesian maintenance funding policy is severely hampered by an annual

budgeting process. As a result, routine maintenance funds are sometimes approved too late

and maintenance crews become unable to perform routine maintenance for certain times of

the year. This is one of the major benefits offered by the PBC contract model. With PBC

contracts, budgetary allowance is made for the full duration of the contract. Therefore, the

contractor knows that he will get money for say 5 years to perform the routine maintenance.

The current Indonesian legislation allows for multi-year projects. There is however a

reluctance on the part of the Department of Finance to commit to a long-term budgets for

PBC contracts. It should however be realised that:

• For the purpose of the PBC pilot, the funding will be sourced from the World Bank;

• Later, if the pilot proves the benefits of the PBC concept, the Minister of Finance may be

more convinced of the merits of allowing multi-year budgeting of PBC contracts;

• PBC contracts will for the foreseeable future be a small portion of the over-all network

expenditure and would therefore not hamper the flexibility of the Department of Finance to

make financial decisions for road maintenance funds.

6.3 Overloading

The impact of overloading cannot be under-estimated. During the site visit to the weigh

bridge at Subha12 it was found that overloading of 30% and more was not uncommon. It is

important to realise that a truck which is 30% overloaded causes 2.8 times more damage to

the pavement compared to the damage caused by a non-overloaded truck. This concept is

effectively illustrated in Figure 14.

12

This weigh bridge is located within the proposed pilot site area


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Figure 14: Three groups of vehicles with equal damaging effective (SADC, 2003)

Section 3.4 explains the current deficiencies commonly found in the area of overweight

control. There are also some good initiatives in progress in Indonesia by the MOC and

DGLC, which will have a positive impact on the overweight issues. The two examples are

discussed in Section 3.4

The objectives of overload control for the PBC contract areas are:

1. The contractor having responsibility for the PBC networks ultimately also having control of

the overweight management. The overweight management by private contractor cannot

however include any prosecution powers, necessitating the continued involvement of the

Department of Communication;

2. The weigh bridges being strategically placed in order to satisfactorily protect the PBC

network. For example, the current weigh station configuration on the Java corridor pilot is

limited to the extent that it mostly weighs traffic in one direction only;

3. An effective strategy existing for the prosecution of overloaded vehicles. The preferred

system is one which does not allow a vehicle to on-travel if overloaded and this is always

more effective than any other penalty system;

It is realised that some overload management strategies may not be implemented in the near

future and for that reason, an alternative risk mitigation approach for overloading may need to

be incorporated within the compensation mechanism of the PBC contract itself. Some

international PBC contracts recognise the current traffic loading in the tender document.


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Should that traffic loading be exceeded by a certain percentage, the contractor becomes

eligible for a certain level of additional compensation. In this way, those who can control the

overloading (nominally the government agencies) are responsible for paying the contractor an

additional amount to cover excessive overloading impacts on the network.

RECOMMENDATION: THE RECOMMENDED OVERLOADING RISK MITIGATION METHOD FOR THE INDONESIAN CONDITIONS IS

TO HAND OVER THE OVERLOADING MANAGEMENT TO THE CONTRACTOR RESPONSIBLE FOR THE PBC CONTRACT. THIS

WILL ONLY BE SUCCESFUL THOUGH IF ENFORCEMENT AND PENALTIES ARE APPROPRIATELY ALIGNED.

6.4 Design Standards

The design standard of a road is one of the main contributors towards the ultimate

performance of the road. It is a well known fact that what you do during construction can

influence the life of the road by up to 40%. This section discusses the relevance of the

current design standards and how these may influence the PBC style.

6.4.1 Alignment

In general the rural roads observed in Indonesia are constructed to a high geometrical

standard. This is certainly the case in the investigated pilot area (North Java

Corridor). For that reason, it is taken that the geometric design (alignment) would not

have any negative impact on the intended PBC Pilot trial.

6.4.2 Cross Section

It has been found that most highways in Indonesia are built to the appropriate design

cross section. This is especially so in flat areas going through the rice farming areas

where the roads are normally elevated high above the natural ground level. The one

general area where the cross section could be improved is shoulder width and related

surfacing and subsequent maintenance of shoulders.

It was often found that the shoulder is failing to give any lateral support to the

pavement thus promoting shear failures within the base or asphalt layers. Figure 15

shows a shoulder drop-off in an urban part of the North Java corridor. This pavement

would be prone to shoving of the asphalt. It is also a safety concern for any vehicle

that leaves the road at that point – in particular motorcycles. This is also a good

example where suitable regular maintenance can limit the potential for worsening

damage and higher overall maintenance cost.


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Figure 15: Photo of a Shoulder Drop-off

Unmaintained shoulders can prevent water from draining away from the pavement.

This causes the build-up of moisture under the pavement that can result in early failure

of the pavement. Figure 16 illustrates how poor shoulder maintenance result in the

trapping of water next to the pavement.

Figure 16: Photo showing water trapped on the shoulder

The best mechanism to protect the shoulder is to provide a sealed shoulder. The

provision of a sealed surface is also much safer compared to an unsealed shoulder,


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and in urban areas would provide capacity improvements by removing motorcyclists

from the primary carriageway lanes.

Figure 17 illustrates the difference between a sealed and an un-sealed shoulder. Note

that the seasonal moisture variation for an un-sealed surface (left hand side) extends

within the travelling wheel track. With a sealed shoulder the trafficked part of the

pavement is kept dry.

Figure 17: Comparing Moisture Zones under a Sealed and Unsealed

Shoulder (SADC, 2003)

It is recognised that it would be infeasible (for financial reasons) to seal all shoulders

of the PBC network. Critical parts of the network should have sealed shoulders. For

the remaining part of the network, all unsealed shoulders should be maintained to a

high standard which includes:

• Shoulders should always be kept well compacted;

• Shoulders must be to the same level as carriageway surface;

• Shoulders must have a continuous slope away from the carriageway to carry

water to the drainage system.

RECOMMENDATION: PRIOR TO LETTING A PBC CONTRACT ALL SHOULDERS SHOULD BE REVIEWED IN TERMS OF THEIR

FUNCTIONALITY AND CONDITION. SEALING OF SHOULDERS IN CRITICAL AREAS SHOULD BECOME PART OF THE INITIAL

CAPITAL COMPONENT OF THE CONTRACT.


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6.4.3 Drainage

The importance of drainage in the long-term performance of pavements cannot be

over-emphasised. As with the shoulders, all drainage structures should be reviewed

prior to letting of the PBC contract within an area.

The drainage on the North Java corridor seems to be adequate but more care can be

taken in hilly areas where scouring could occur.

6.4.4 Pavement and Maintenance Design

The Indonesian pavement and rehabilitation design methods follow a typical overlay

thickness requirement approach (original AASHO method) as being calculated from

DCP, or Benkelman Beam strength tests. These methods are proven to be robust but

care must be taken to design for actual traffic loads rather than a theoretical load

calculated from an assumed load per heavy vehicle and equal vehicles per lane.

Designing for real loads would for instance give preference to stiffer pavement types

such as concrete pavements or bitumen stabilised base coarse. For example, Table

12 calculates the design traffic for pavements with normal loading versus that of 30%

overloaded traffic. As a result of the different design traffic, one would adopt a

different pavement design as illustrated in Figure 18.

Table 12: Design Traffic for Normal Loads and 30% Overloaded

Heavy Vehicles

Normal Load Overloaded (30%)

Growth 10% 10%

Design Period 10 years 10 years

Heavies 5000 5000

Damage factor (F) 1 3.55

Average daily E80 5000 17750

Design lane factor 0.7 0.7

Design lane E80 per day 3500 12425

Growth Rate factor (10 years)

6398 6398

E80 total 22,393,000 79,495,150


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40 mm AC

120 mm Black

Base

400 Cement

Treated

Gravel

75 mm AC

180 mm Black Base

450 Cement

Treated

Gravel

40 mm AC

120 mm Black

Base

400 Cement

Treated

Gravel

75 mm AC

180 mm Black Base

450 Cement

Treated

Gravel

Figure 18: Required Pavement Design for Normal Traffic (Left hand Picture)

versus 30% Overloaded Pavements (Right hand Picture)

The additional pavement thickness required by the overloaded design traffic amounts

to 35mm AC + 60mm bitumen stabilised base course and 50mm additional cement

treated gravel material. The cost increase to the pavement is estimated at 30%

higher. There would also be a significant increase in additional routine maintenance

cost to the pavement as a result of the overloading. For example, pavements are

prone to increased shallow shear failure under overloaded conditions.

What the above indicates, is that if included in the design and construction phase, the

cost to cater for overloaded vehicles is around 1:1, whereas if left of maintenance

funds for an under-designed pavement, the costs will be around 1:2.5.

6.5 Maintenance Practices

Currently routine maintenance is undertaken as a departmental responsibility. The only

routine maintenance conducted by the private industry includes work undertaken by Toll Road

owners and as part of a construction guarantee period following new construction or

betterment type projects.

From discussions with the MOF and DGH, it is evident that routine maintenance is under-

funded in Indonesia. Under the current financial pressures with regard to oil prices the future

picture for increased routine maintenance funding does not look promising either. Currently, it

is estimated that routine maintenance is funded by anything between 20% of need for local

roads to approximately 50% for national highways. Finding mechanisms that will assist in

making routine maintenance more effective will always be a challenge and it is hoped that the

PBC concept will achieve that.

The aim is that the PBC approach will achieve the following objectives related to routine

maintenance and funding thereof:


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• The more effective achievement of appropriate levels of routine maintenance. Therefore

the long-term performance of the road should be greatly enhanced;

• Ensuring a longer-term commitment for routine maintenance funding. This could be a

useful policy mechanism to protect critical parts of the route network of Indonesia;

• Active demonstration of the benefits of robust routine maintenance schemes which

hopefully will result in more positive funding policies towards routine maintenance for the

remaining part of the Indonesia road network in the future.

The last comment related to routine maintenance is the fragmented approach towards

different asset types within the road reserve. This aspect has been discussed in Section 4.

In terms of the actual outcome of routine maintenance it should be appreciated that more

effective outcomes can be expected with the adoption of a more integrated approach as

suggested.

6.6 Data Issues

6.6.1 The Indonesian Road Management System

Indonesia is in a very fortunate position to have common approach to road

management systems for roads including:

• Inter-urban Road Management System (IRMS) - This system is predominantly

used by DGH for the management of highways;

• Inter-urban Bridge Management System - This system is predominantly used by

DGH for the management of bridges on highways;

• Kabupaten Road Management System (KRMS) - The road management system

for local roads;

• Urban Road Management System (URMS) - This is used for the management of

urban roads;

Table 13: Classification of road and road management

systems (DGH, 2000)

Road System

Road Status

Primary Secondary

National

Provincial

IRMS

IBMS

Kabupaten KRMS

Ktamadya

URMS


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In terms of this report, the focus is on the IRMS and the appropriateness of its data

for adoption in the PBC contract style.

6.6.2 The Inter-urban Road Management System

The IRMS system will not be discussed in detail in this report since for the PBC

contract only the database component is of interest. It is however important to realise

that the full system consists of the following components:

• Database warehouse;

• Network analysis module, which includes HDM models;

• Programming module; and,

• Reporting module that include some statistical functionalities.

The structure of the database is illustrated in Figure 19. The figure illustrates a

comprehensive set of data items. For most databases there is always room for

improvement related to the data comprehensiveness and quality, and this is the

situation with the IRMS.

Database Warehouse

Inter-Urban Road Management System (IRMS)

Tra

ffic

Data

Con

diti

on D

ata

Inve

nto

ry D

ata

Locatio

nR

efe

ren

cing

Geospatial PositioningSystem (GPS)

Linear ReferencingSystem

Auto SectioningModule

Pavement

Information

Surface

Information

Road Condition

Data (ManualSurveys)

Roughness Data

(ROMDASSurveys)

Traffic Survey Data

(Manual Counts)

Pavement

Strength Data(FWD, BB, CBR)

Figure 19: Structure of the IRMS Database

One significant deficiency identified was the inability to store maintenance data within

the IRMS. The project team working on the IRMS updates noted that this was a

recognised deficiency, but no plans were in place to address it. While few road

controlling agencies have historically collected maintenance cost data, it is


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increasingly recognised as good practice to do so as it enables for life cycle cost

techniques to be employed on the network.

RECOMMENDATION: FUTURE DEVELOPMENT OF THE IRMS SHOULD ALLOW FOR INCLUDING A ROUTINE MAINTENANCE

DATA STORING CAPABILITY

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

surveys and traffic count information. It has a robust location referencing system,

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

There are some significant deficiencies in the processes involved in the maintenance

of the data itself. These include:

• Betterment works not being included in the IRMS – this is currently under

development;

• Disconnection between the planning and implementation divisions within the

DGRI;

• Surveys for only one lane on each carriageway. The impact of overloaded trucks

often results in one lane being substantially worse than the other, such that the

results may not be representative of the total network.

These various issues will need to be addressed in the fullness of time, to enable not

only the future roll-out of PBC, but also for to allow improved management of the

remaining road network.

6.6.3 PBC Data Requirements

Despite the fairly high standard of data within the IRMS, one has to appreciate that the

data standard required for PBC contract types is normally somewhat higher. The

reality is that with better data provided at tender stage, risks are more effectively

managed thus resulting in more realistic tender prices and a reduced potential for

claims.

RECOMMENDATION: THE PBC TENDER SHOULD BE ISSUED WITH A COMPREHENSIVE BENCHMARK SURVEY OF THE PBC

ROUTE. THIS SURVEY MUST INCLUDE STRENGTH AND CONDITION DATA. CERTAIN CONDITION ITEMS MUST BE SURVEYED

ON AN ANNUAL BASIS WITH A FULL BENCHMARK SURVEY TO BE REPEATED JUST PRIOR TO THE COMPLETION OF THE

CONTRACT.

The data collection requirements for the PBC contract are depicted in Table 14.


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Table 14: Recommended Data Collection Requirements for PBC

Data Item Full Benchmark

Survey (Prior and

After Contract

Completion)

Annual Surveys Minimum Data Quality

Inventory Data Updating

(RNI) � � Manual Surveys

Visual Condition Data

(RCS) � � Wind Shield Surveys

Roughness � � Bump Integrator Data

Rutting � � Laser or sound waves

Strength Data � Falling Weight Deflectometer,

Benkleman Beam,

Deflectograph etc

Traffic Data � � Automatic Classified Counts

Using Induction Loops

Axle Loads � � Weight Bridges

RECOMMENDATION: WHERE NECESSARY THE IRMS SHOULD BE ENHANCED IN ORDER TO HANDLE THE RECOMMENDED

CHANGES TO THE DATA COLLECTION PROCESS.


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7 Task A6: Framework for Introducing PBC to Indonesia

7.1 Overview

From our consultation and observations, there are three key items to be addressed to enable

performance based contracting to be successfully implemented in Indonesia. These are:

• Concerns about overweight vehicles

• Concerns about the quality of the existing road construction

• The ability of the MOF to enter into a multi-year maintenance contract

All other issues can be considered somewhat secondary to the above three items. This

chapter presents the overall framework recommended to be implemented to enable the

successful implementation of performance based contracting in Indonesia.

7.2 Timeframe for Future Expansion

It is considered that the MOF is unlikely to approve funding of a multi-year maintenance

contract (PBC or otherwise) until they can be convinced of the merits. This therefore means

that future implementations will have to wait until either the initial pilot trial is substantially

completed (likely to be at least 3-4 years into the five year period), or alternatively subsequent

contracts will be funded outside the Indonesian Rupiah budget (i.e. through loans from

agencies such as the World Bank). In any case, it is recommended that the MOF and DGH

pre-agree the success factors for the pilot trial, such that there is a clear measure and implicit

agreement to expand the procurement method should the success factors be met.

It is recommended that even if funding were available, any subsequent contracts should not

take place for at least 2 years. During this time the following activities should take place:

• Identification of future sites for PBC, using the criteria in Table 9

• Review how the key performance measures specified in the PBC are working in practice

• Collection of quality inventory and condition data on target sites

• Collection of maintenance data (location and cost) at a detailed level. This includes

enhancement of the IRMS system to store maintenance cost data, or alternatively the

implementation of a simple maintenance cost system.

• Further work to reduce the occurrence and severity of overweight vehicles on the network

It is recommended that when ready to implement further PBC’s, several (2 or 3) contracts be

let at once, with a condition being that contractors are not able to win more than one contract

(refer to Section 7.5.7). This is to ensure that in the early stages of expansion of PBC that a

number of contractors gain experience to enable a sustainable and competitive PBC

marketplace to be established.


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7.3 Policy Issues

7.3.1 Underground services (utilities)

Utility operators13 generally have a right to install their assets within the road reserve.

While installations that run parallel to the carriageway, and installed outside of the

drainage system generally have minimal (if any) impact on the maintenance of the

road system, utilities that run under the carriageway can have a major impact.

It is understood that at present, there is no control over the quality of reinstatement of

service trenches, and that these trenches can often fail prematurely (relative to the

surrounding pavement) resulting in both a lesser ride quality for motorists and

additional maintenance costs to the road agency.

In order to provide the PBC Contractor with some level of influence over the quality of

reinstatement (as well as the timing of works for traffic control purposes), it would be

desirable for it to become policy that before any road opening can occur that:

• The PBC Contractor has the right to manage (within reasonable limits) the timing

of the opening to coordinate with other activities in the area. Alternatively,

advanced notice should be required from utility operators such that the PBC

Contractor can coordinate his activities.

• The PBC Contractor has the right to inspect the opening and test existing

pavement materials in order to improve asset knowledge

• The PBC Contractor has the right to enforce reasonable standards of

reinstatement, or the utility operator assumes maintenance responsibilities.

If the above cannot be obtained, then it is appropriate that the risk of failing trenches

be shared between the DGH and the PBC Contractor.

7.3.2 Limited Access Regulation

To assist in the control of side friction, which serves to both reduce the traffic capacity

of the road and in turn increases the loading on the other lanes, a policy with regard to

the prevention of access to the road network should be developed.

Such a policy may require legislative changes to enable for the removal of illegal

roadside activities.

7.3.3 Bond Requirements

A review of the policy with regard to both the magnitude of bonds, and the providers

from which they are accepted is required (refer to Section 3.2). It is likely that the

current bond provisions for construction works will not be suitable for the PBC

maintenance contract, wherein the 5 years of maintenance activities are equivalent a

performance bond.

13

Telephone, gas, water, power etc are all deemed to be utility operators.


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The bond amount at any time should be sufficient to cover:

• Any outstanding initial capital works

• Any maintenance activities to get the asset up to the required performance

standards

• The agency costs of re-tendering the contract in the event of the contractor

defaulting or the contract being terminated for non-performance

7.3.4 Development of Cost Escalation Index

While Badan Pusat Statistik (Central Statistic Board) produces a cost escalation

index, some issues have been raised surrounding its’ appropriateness for use within a

PBC environment (refer to Section 3.2). As part of the documentation process it will

be necessary to either confirm the appropriateness of the existing index or to develop

a new index which:

• Reflects the inputs to the contract (particularly the longer term maintenance

component); and

• Can be produced in a timely manner

Without the above, the industry will have significant reservations about the long term

financial soundness of the contract, which will impact on the ability to obtain bonds for

tendering purposes. It is noted that this is an international issue, particularly in recent

years with the high costs of fuel and bitumen, both of which are major contributors to

the contractors’ costs in maintenance contracts.

7.3.5 Interest on Late Payment by Client

As noted within Section 3.2, the current standard is to not have any penalty interest

paid to the contractor when the client is late in payment. This policy needs to change

to provide the contractor with surety of payment, with a suggestion that the interest

rate be reviewed throughout the contract period to be set at a value 2% above the

contractors’ rate of borrowing.

7.3.6 Reporting Standard and System for Maintenance Data

As a national system for the storage of maintenance data does not currently exist, it

will be necessary to develop a standard that prescribes the format of data that the

contractors will be required to supply during the course of the PBMC. Typically

information that is required would include:

• Location of fault (route position, lane etc)

• Nature of fault (shear failure, edge break etc)

• Nature of repair (mill and fill, digout etc)

• Date of repair


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Within a PBMC environment, the collection of cost data is not appropriate, as the

contractor is being assessed on outcomes and not inputs. However the collection of

defect information (such as that bulleted above) would be a desirable component to a

PBMC.

It is noted that internationally few road controlling agencies currently collect

maintenance data. However it is not possible to undertake quality life cycle economic

analysis of investment decisions without this information. Should this policy be

implemented, then appropriate resources within the DGH will need to be allocated to

manage the system.

7.3.7 Management System for Roadside Furniture

It is currently unclear as to the method the MOC use to manage their asset base of

roadside furniture. In the event that the MOC agree to their assets being included into

the PBC contract, then a policy on data provision will need to be developed if not in

existence.

7.4 Legislative Issues

The following are legislative changes that are necessary to enable for a long term expansion

of PBC’s within Indonesia.

7.4.1 Financing Arrangements

There will need to be a change in legislation enabling the MOF and ultimately the DGH

to commit to financing a mulit-year road maintenance contract. Ultimately we believe

that it would be appropriate for legislation to be passed enabling a certain percentage

of the annual road budget (or some similar measure) to be committed up to five years

in advance.

7.4.2 Overloaded Vehicles

As discussed previously, the control of overloaded vehicles is required to provide

some certainty to both the DGH and PBC Contractor over their respective risks.

Depending on the ultimate decision on the best way to implement the overloading

monitoring and controls, legislation may be required to enable private companies

(such as the PBC Contractor) to mitigate the overloading risk to their satisfaction.

The options considered are listed below. It is noted that regardless of how the

weighing operations are undertaken, real progress will only be made in combating

overloaded vehicles when rigid enforcement practices are in place across a wide

geographic area (greater than just the North Java Corridor). The options considered

are:

• The government retains all weighing and fining powers, with the contractor given

access to all records to ensure compliance with agreed standards. This


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approach would best align with the proposed extension of the current pilot

projects to the Java province.

• The contractor is provided with the power to keep heavy vehicles off the PBC

network. This strategy needs to include assistance and support from local police/

department of communication to turn overloaded vehicles around or to keep at

weigh station until the load is lightened/off loaded14. Under this scenario it is the

contractor who has the vested interest in reducing the occurrence of overloaded

vehicles;

• The contractor is only provided the operational responsibility for the weigh

station. The PBC tender is based on compensation based on the initial traffic

and over weight information. For additional overloading on the network the

contractor is additionally compensated based on a risk sharing principle. Under

this scenario, the contractor only has a vested interest to measure the overloaded

vehicles, reducing the occurrence of such is in the interest of the DGH.

The recommended approach for the pilot area is the first option, with the GOI to

actively progress the implementation of overloading controls across Java in parallel to

the PBMC pilot trial. However, there are some practicalities associated with this

strategy including:

(i) The location of the weigh stations should be strategically placed in order to

ensure sufficient coverage of the PBMC network;

(ii) The weigh station equipment must always be in satisfactory working order which

will include frequent calibration procedures;

(iii) All loading data must be stored and integrated with the remaining PBMC asset

data;

(iv) Fines must be of a size that acts as a disincentive to overloading. For a

moderate level of overloading (say 20%) fines should in the order of one days

revenue for the driver.

It is possible that a combination of weigh-in-motion (WIM) and weigh bridges could be

used to reduce the overall cost of controlling overloaded vehicles, with the WIM used

as a filter to identify those vehicles that require weighing.

Regardless of the approach taken, there will need to be a comprehensive weighing

programme implemented to establish the benchmark overloading, and associated risk

allocation.

7.5 Contractual Issues

The following are issues that need to be addressed within the contract documents.

14

A policy of requiring off loading of the overweight component may have the following impacts on the

operation of the weigh station: travel delays to those not overloaded, additional space required to undertake

the off loading, some goods being dumped and not collected. For this reason, it is considered preferable to

turn vehicles around, rather than allow for off loading.


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7.5.1 Benchmarking Data Collection

The collection of a comprehensive set of data is necessary to:

• establish a benchmark of the current condition

• develop/confirm key performance measures

• reduce the risks to contractors and enable equitable risk sharing

The benchmark survey will need to collect as a minimum the data items as listed in

Table 15. Note that the table also includes data collection requirements for the annual

surveys, which will be used in the performance monitoring of the contractor.

Table 15: Recommended Data Collection for BPC Benchmark and Annual Surveys

Data Item Full Benchmark

Survey (Prior and

After Contract

Completion)

Annual Surveys Minimum Data Quality

Inventory Data

Updating (RNI) � � Manual Surveys

Visual Condition Data

(RCS) � � Wind Shield Surveys

Roughness � � Bump Integrator Data

Rutting � � Laser or sound waves

Strength Data � FWD, BB or Deflectograph

Traffic Data � � Classified Counts Using Induction

Loops

Axle Loads � � Weight Bridges

7.5.2 Relationships between Contract Parties

A number of contractual arrangements are possible, however that shown in Figure 1

and expanded in Figure 20 is recommended in order to provide the maximum chance

of the PBC succeeding.


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Highway Department

Asset Owner

Roles include:- Defining key performance measures

- Payment of approved claims

PBC Consultant

Roles pre contract award include:- Initial Designs (Capacity and Rehabili tation)

- Tender Development- Tender Evaluation Assistance

- Selection of data collection company

Roles post contract award include:- Performance Monitoring

- Payment Recommendations- Design Approvals

- Approval of supplied data from Data Collectioncompany

Contractor / Consultant Consortium

Roles include:

-Design reviews-Construction of initial works

-Maintenance of the contract scope-Reporting against al l contractual performance measures

Reporting and Contractual

Reporting and payment claims

Contractual

PBC ManagementBoard

2 Representatives of Asset Owner

2 Representatives of ContractorWorld Bank Representative (observer)

Roles include:

-Approval of payments-Approval of contract variations

-Resolution of disputes between PBCConsultant and Contractor

Advisory

Advisory

Advisory

DataCollection

Roles include:-Benchmark surveys

-Annual (or otherwise)condition surveys

Figure 20: Recommended Contractual Relations with a Management Board

To ensure that all dealings are in accordance with the contract, it is recommended that

for the duration of the pilot trial contract, the World Bank (or their nominated

representative15) retain a role with the Management Board. We are aware that such a

role is likely to be outside of the scope of World Bank staff inputs, and have therefore

suggested that such a role should be that of an observer. In this role the Bank staff

member (or representative) could keep in touch with progress and activities of the

PBMC, but would not have any voting (or other) powers on the board.

The management board should give final approval for all payments and monitoring of

condition, and accordingly this should help ensure the integrity of the process.

Also of note with regard to the proposed relationships is that payment requests (and

associated reporting on financial performance) are generated by the contractor,

verified by the PBC consultant, and then approved by the management board. In this

structure, the PBC consultant takes on an administrative role, but does not have

contractual power to authorise payments or change contractual conditions.

It is noted that there is some reservation within the World Bank with regard to the

management board approach, hence we have also documented an alternative

15

It is considered that the consultant responsible for Phase II of the project to introduce PBC to Indonesia

would be an appropriate candidate for such a position, as they would have full knowledge of the contract and

tendering process.


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structure (a traditional client -> consultant -> contractor hierarchy) that does not have a

management board (refer to Figure 21).

Highway DepartmentAsset Owner

Roles include:- Defining key performance measures

- Payment of approved claims-Signing contract variations

PBC Consultant

Local Consultant with Expert Advisor (appointed by World Bank)

Roles pre contract award include:- Initial Designs (Capacity and Rehabilitation)- Tender Development- Tender Evaluation Assistance- Selection of data collection company

Roles post contract award include:- Performance Monitoring- Approval of claims- Negotiation of contract variations- Design Approvals- Approval of supplied data from Data Collection company

Contractor / Consultant Consortium

Roles include:-Design reviews-Construction of initial works-Maintenance of the contract scope-Reporting against all contractual performance measures

Reporting and Contractual

Reporting and payment claims

Contractual

Data

Collection

Roles include:-Benchmark surveys-Annual (or otherwise)condition surveys

Figure 21: Recommended Contractual Relations without a Management Board

The primary advantages of the management board option are:

• It enables for a close involvement in the process by DGH and local World Bank

staff to observe how the process is working, thereby learning first hand

• It provides a direct line of communication between all parties, such that the views

of each can be discussed in an open forum

• It lessens the chances of the PBC Consultant being pressured as they do not

have the power to make payments or change contract conditions on their own

• It enables the local consulting industry (the PBC Consultant) to develop

independent of the World Bank expert

• It provides a mechanism for the World Bank to have an input, without involvement

in day-to-day activities, such that they can learn from the experience and apply

the learnings in other contracts

• Provides a mechanism to modify the contract to the mutual benefit of all parties –

it is a pilot trial, so such modifications could be expected


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• Issues can be aired at an early stage and managed appropriately

• Provides a backbone to the partnering concept required for these contracts to

work

• Help drive the necessary culture change in each of the organisations.

Management board members should be senior staff from each organisation, and not

those involved in the operational delivery of the contract. Operational staff may attend

at times to advise the board, but they have no voting rights.

It is recommended that for the pilot trial that an organisational structure involving a

management board (akin to Figure 20) be utilised. Longer term, once all parties are

comfortable with the way the PBMC operates, introduction of a structure without a

management board could be considered.

7.5.3 Selecting PBC Consultant

We consider that the PBC consultant should be engaged early in the next phase of the

contract – namely to assist in document development, development of key

performance measures and the like. In this way, the PBC consultant will be able to

assimilate the ideals of the contract and more importantly will have buy-in to the

contract that they will be required to supervise.

The key roles for the PBC Consultant are identified in Figure 20, with a requirement

for skills across all the core roles. The PBC Consultant will necessarily have

experience in PBC contracts (likely to be through an expatriate supplier16), and should

be a credible player in the Indonesian industry.

7.5.4 Role of the Phase II Consultant

Realising the significant changes in attitudes required to make the PBMC work, it is

considered that there will be a significant role to play for the Phase II Consultant in the

early part of the contract (say first 6 -12 months), before phasing out over the

remainder of the contract period.

Depending upon the skills and experience of the selected PBC Consultant, the Phase

II Consultant could be included into the pilot trial in either a contractual manner (active

role), or alternatively as a facilitator available to all parties to assist in the achievement

of the contract success factors (a passive role).

7.5.5 Tendering Processes

As discussed in Section 3.2.4 a two stage tender process is recommended as

illustrated in Figure 22.

16

This is based on the assumption that the World Bank representative would be on the Management Board.

If there is no management board, then it would make sense that the consultant for Phase II (contract

documentation) of this project would fulfil the role of the PBC specialist.


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Tender

Advertised

All contractors

submit Expression

of Interest

Contractors’

capabilitiesassessed

Short listed

contractors submitfull tender

Tender

evaluation

SuccessfulTenderer

Figure 22: Two Stage Tendering Process Recommended for PBC

Implementation in Indonesia

The two stage tender approach will ensure only capable tenderers’ are considered for

the final tender stage. Furthermore, it will limit tendering cost for those tenderers’ who

do not have a real chance of submitting a successful tender. Specific

recommendations for the two tender stages are as follows:

Expression of Interest (EOI):

This is the first stage of the tender process, with the following points of interest:

• A total of not more than five17 tenders will be qualified for the next round of

tendering. It is anticipated that this number can be reduced to three when

sufficient experience in PBC exist within Indonesia. However, for the initial

stages it is important to provide experience to a wider tendering group;

• The expression of interest submitted is judged on the merits of capabilities, track

record and relevant experience. No pricing or methodology is considered at this

stage;

17

The cost of tendering for a PBMC is not insignificant to both the contracting industry and to the government

departments. By keeping the number of contractors down to five (or thereabouts) the cost burden is not

excessive. A greater number of contracting parties could be incorporated if desired.


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• The Request for Tender (RFT) for the EOI should be simple with strong

guidelines in terms of contents. For example a template type approach could

simplify the evaluation of tenders significantly;

• Notwithstanding the above point, the RFT should also secure sufficient

information in the EOI in order to make a comprehensive and fair assessment of

which companies to shortlist. Based on the assessment it will be necessary to

differentiate between the top five and the remaining tenderers;

• Depending on the pre-qualifying issues, the basis of tendering for the private and

government owned contractors should be the same. If this appears to be an

issue (refer to Section 7.3.3), the RFT may reserve a number of state owned

versus privately owned companies within the top five selected tenders;

Full Tender Stage:

This is the second stage of the tender process and has the following points of interest:

• The full tender stage will need to commence with site inspection of the full PBC

network. Typically this would involve a bus trip and have 4-5 representatives of

each short listed company. During this site visit the aim would be to achieve a

maximum knowledge transfer in terms of

• Extent of the contract area;

• Location and details of initial betterment and capacity improvement project;

• Typical expected problems/high risk areas of the network;

• Location and functioning of weigh bridge stations;

• The tender selection should not be a lowest price conforming evaluation. The full

tender should be focused on rating the tenders according to track record, relevant

experience, technical skills, methodology and price. As track record and relevant

experience will already have been evaluated in the short listing stage, these two

aspects would be assigned a lower weighting (perhaps 10% in total) as they are

unlikely to provide significant differentiation. It should be appreciated that getting

the right contractor on site is equally important to having a cost effective price for

the works;

• A two envelope assessment method is essential, where the price envelope is only

opened on completion of scoring on the technical considerations. The price

envelopes should be securely stored until required;

• During the full tendering period there should be opportunity for individual inter-

active tendering meetings (possibly three in total);

• There should also be a post-closing presentation from the contractors, with room

for the tender evaluation team to raise questions in relation to the submitted

material;

The Tender Evaluation Team should comprise of representatives from:

• DGH


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• MOC (depending on extent of assets included in PBC)

• PBC consultant

• International Tender Expert with PBMC tender experience.

7.5.6 Initial Betterments and Capacity Improvement Works

Given that some of the road network is in a poor condition, an initial injection of capital

to raise the standard of the assets to an acceptable level is considered appropriate.

In addition to betterment type works, it is appropriate to include capacity improvement

works into the contract such that a multi-year maintenance period is included.

However, in order to maintain the focus on the maintenance activities, it is essential

that the construction type activities (capacity improvements and betterments) do not

dominate the value of the contract. To this end, an upper limit of 50% of the total

contract price should be assigned to construction type activities.

It would also be appropriate to include into the contract betterment works that are to

be completed up to 12 months before the end of the contract period. In this way,

there would be an implicit 12 month maintenance period on any works completed.

7.5.7 Possible Exclusion of Pilot Trial Contractor from Future Trials

In order to prevent the situation wherein the contractor who wins the initial pilot

becomes dominant (through having the only experience), the contract documentation

for the pilot trial should include wording to the effect that “The DGH reserves the right

(at their sole discretion) to exclude the successful contractor from other PBC

contracts during the term of the contract”.

Similarly, it would be prudent that in future implementations, where more than one

contract is let in a year, a condition of only being able to win one package should be

imposed. This condition would be revisited once a number of contractors have had a

chance to gain experience in the PBC arena and a stable situation exists with open

competition.

7.6 Key Performance Measures (KPMs)

The development of KPMs will be required early in the contract document development

process. The actual KPM development should be based on the condition data obtained from

the Benchmark survey as discussed in Section 7.5.1. The objectives of the KPMs would be

to:

• drive the appropriate work behaviour of the contractor in such a manner that it achieve the

network objectives as defined by DGH;

• be simple yet practical in order for the contractor to understand what is required and

secondly to be easily measurable without being subjective; and,

• be aligned with the work categories under the routine maintenance lump sum.


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The implementation of the KPMs may be introduced according to a staged approach. For

example, one would not alter the actual KPM threshold but may give the contractor some time

to achieve it. Typically, there may be an issue on the network which will require significant

work (say shoulder maintenance). For a KPM such as minimum shoulder drop one may

typically specify no shoulder drop to be more than 50mm but the contract can be given 2-3

years before a 100% compliance is be expected.

Secondly the KPM enforcement should be undertaken from an incentive attitude rather than a

penalty approach. Bonus clauses are sometimes more effective than penalty clauses since it

encourage over-performance rather than just meeting the minimum required.

As a last resort the contract should include a penalty system based on minor and major non-

compliance that not only result in financial penalties but could ultimate lead to the termination

of the contract.

7.7 Industry Training and Knowledge Transfer

Industry training is likely to be required to ensure both the competitive nature of the tendering

process and for the ultimate success of the pilot trial. While the World Bank 3-day training

course on PBC as produced by Carl Bro will cover the issues around the PBC itself, it is

considered that specific training will be required on the following aspects:

• The IRMS system - While the consulting industry has some experience with the IRMS

system, it is considered that specific training should be made available to those

shortlisted during the tender period.

• Maintenance Practices/Site Supervision - It is considered that there is currently limited

knowledge amongst contracts of the cause-effect relationship with regard to maintenance

faults. Accordingly a training course covering some of the basic ideas, with appropriate

treatments, could be undertaken early within the tender period. This would need to be a

field based course (preferably on the pilot site area) to discuss various observed faults,

their likely causes and remedies. This would also be a good opportunity to identify what

is acceptable in terms of the contract KPMs.

• DGH Staff Secondment - It is recommended that as part of the partnering approach to

the PBC contract, that the DGH agree to second one (maybe more) staff to the

successful tenderer for a period of 6 months to assist with the transfer of asset and

maintenance knowledge to the contractor.

• Site Visit During Tender Process - As noted in Section 7.5.5, a site visit with the short

listed tenderers’ should take place. Such a site visit forms an important role in the

knowledge transfer process.

7.8 Specific Issues for Proposed North Java Corridor Pilot Site

Based on our site visit and discussions to date, we do not perceive that the proposed pilot

trial site has any specific issues that require addressing in addition to those listed in the rest

of this framework.


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7.9 Recommendations for Remainder of Network

The following recommendations are made in relation to the maintenance of the remainder of

the road network:

• Collection of maintenance cost and quantity data

• Improvement of maintenance practices (and funding) to enable for a matching of the PBC

KPMs on the remainder of the road network.

• Policing (with associated penalties) of overloaded vehicles, with an aim to reduce the

incidence of overweight practices

• Design and construction of roads for the actual loads experienced, (including lane

differential where data indicates this to be an issue) and not merely the theoretical legal

load limits

• Consideration of transferring ownership of MOC road assets (signs, signals, lights etc) to

the DGH for maintenance

• Consider outsourcing of routine maintenance contracts on an “input” or “output” basis to

give industry more maintenance contracting experience

7.10 Timeframe for Implementation of Pilot PBMC

Based on our observations and knowledge gained during the time in Indonesia, and the desire

by the DGH to have the pilot trial commence on 1st January 2007, Figure 23 contains our

suggested timeframe of events.

The basis of our approach is to give sufficient training to all interested parties to enable for an

effective expression of interest stage. Then once the shortlist of contractors is arrived at,

provide additional specific training to these selected parties. It is noted that the timeframe is

reasonably tight and has little room for slippage.


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Figure 23: Proposed Timeframe for Implementation of Pilot PBMC


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8 Conclusions




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

PBC approach after the pilot trial. The primary conclusions of the project are as follows.

8.1 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 16

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

proposed training was completed.



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


based


maintenance management

Maintenance activities � Limited to

new roads

only


maintenance activities


construction

contracts

Limited to

construction

contracts

Limited to

construction

contracts

Previous long term contracts

are only of a construction type.



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


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


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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.

8.2 Assets to be Included

Consideration was had over the desirability for the inclusion of MOC assets into a PBC

contract. Table 17 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.

Table 17: Asset Inclusion to PBC Contract



Bridges Yes

(only routine maintenance of cleaning, rail repairs and

waterway maintenance, major periodic works excluded from

PBC)


(small signs included, large gantries and street lighting

excluded)


Drainage Yes

Line marking Yes



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(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


8.3 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 18 containing

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


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

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 19.


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Criteria Site Passes Criteria






the road

Yes


local DGH staff

Yes





pavement strength.

Marginal





Value of initial betterment works Yes

(36% based on SRIP

programme)


(needs an additional in the

eastbound direction)

8.4 Local Practices and Issues

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

the following items:

• 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

• Data collection, validation and storage issues


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8.5 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.


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9 References

DGH (2000) Indonesia Road Management Systems. Unpublished Information Sheets. Directorate

General of Highway.

DGH (2005). AWP 2 Project Location Map. Sub Project Semerang-Pekalongan (PBC). Directorate

General of Highway.

DGLC (2005). Technical Assistance on Road Traffic Safety and Vehicle Weight and Dimension

Enforcement for Sumatera Region Roads Project. Draft Long Term Plan for VWDE.

Departemen Perhubungan.

SADC (2003). South African Transport and Communications Commission Guideline: Low Volume

Sealed Roads. Southern African Development Community (SADC). SADC House,

Gaborone, Botswana.

World Bank (2002). Sample Bidding Documents for Procurement of Performance-based

Management and Maintenance of Roads (PMMR) February 2002. Washington DC

World Bank (2005). Sample Bidding Document Procurement of Works and Services

under Output- and Performance-based Road Contracts September 2005. Washington DC


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10 Appendices


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Appendix A: Participants at Workshops and Government Meetings

The following table contains a list of those who participated at the workshops or who those

from government agencies that were met with. It does not include meetings conducted on a

confidential basis with industry.

Name Organisation

Mr Abdurachman Pt Waskita Karya

Mr Agita Widjajanto Directorate General Highway

Mr Ahmad Yani MOC DGLC

Mr Anhar Kramadisastra INKINDO (Association of Consulting Engineers)

Mr Atyanto Busono Directorate General Highway

Mr Bambang Nugrohu Jasa Marga

Mr Bambang Prihartono Chief Sub Directorate of Road, Bappenas

Mr Barata MOC DGLC

Mr Chairul Thaher Director of Roads and Bridges Eastern Region

Mr Danis H Sumadialaga Directorate General Highway

Mr Deded Syamsudin Directorate General Highway

Mr Eko Delianto INKINDO (Association of Consulting Engineers)

Mr Firman Dharmawan World Bank

Mr Fitri Harto Chief Subdit of PHLN II, Directorate Treasury, MOF

Mr Frankie Tayu Director of Technical Affairs

Mr Gde Purnama WSP

Mr Hatta Latief DGH Project Management Unit

Mr Hendrawan MOC DGLC

Mr Herman Darmansyah DGH Project Management Unit EIRTP

Mr Herman Suroyo DGH Semarang

Mr Hotma Simanjuntak MOC DGLC

Mr Hugh Brown ARRB TR

Mr Iwan Zawski Directorate General Highway

Mr Kamal Tanjung Pt Waskita Karya

Mr Kiming Marsono Pt Waskita Karya

Mr Lebiyartono DGH SRIP

Mr Machfuddz Madjid Secretary Directorate General of Highway

Mr Mardiansya PMU EIRTP

Mr Maxwel Takasana Badan Pembinaan Konstruksi and SDM

Mr Mesra Eza World Bank

Mr Mohammad Irian BPJT

Mr Mubarak Nahdi Executive Director, AKI

Mr Palgunadi Directorate General Highway

Mr Parluhutan Hutahaean Ministry of Finance

Mr Purnarahman Director of Roads and Bridges Western Region

Mr Purnomo Directorate General Highway

Mr Rahmat Agus Directorate General Highway

Mr Reza Abidin INKINDO (Association of Consulting Engineers)

Mr Ridwan Darma Pt Waskita Karya and AKI

Mr Rizal Rivai World Bank

Mr Robert Scouller World Bank

Mr Setyabudi Chief Subdit of PA IA, Directorate APK, MOF


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Name Organisation

Mr Sigit Widhyharto Directorate of Planning

Mr Soedarsono Pt Hutama Karya

Mr Sutono Directorate General Highway

Mr Taufik Widjoyono Directorate General Highway

Mr Yayan Suryana Directorate General Highway

Mrs Sri Apriatini Soekardi Director of Planning

Mrs Tia Astuti Jasa Marga

Ms Beni Fariati HMR Directorate General Highway

Ms Dian Puslitbag Jalan dan Jembatan

In addition the following were present during a teleconference on 7th December 2005.

· Mr. Budi Harimawan PMU SRIP Directorate General of Highways Ministry of Public Works · Mr. David Foster Consultant DHV Ministry of Communications · Mr. Iskandar Abubakar Director General of Land Communications Ministry of Communications · Mr. Sugihardjo Chief Division Directorate of Road Traffic and Transportation Ministry of Communications · Mr. Hotma Chief Division Directorate of Road Traffic and Transportation Ministry of Communications · Mr. Rudy Directorate of Road Traffic and Transportation Ministry of Communications · Mr. A. Wahyudi BAPPENAS · Mr. Dail BAPPENAS


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Appendix B: Example of Private Industry Capacity Question List ->Summary of Large

Contractors Capability

Implementation of Performance Based Contracts in Indonesia

Interview Questions for Contractor and Consultants

Demographics

Company Name Local Large Construction Companies in Indonesia

Company Type and owner State owned or private

Contact Person N/A

Address N/A

Contact Numbers N/A

email

Company Make-up

Number of staff

A wide range of staff numbers were found but it well exceeded

1000 staff members with the majority working in the building

sections.

A large number of temporary staff are commonly used for larger

contracts within a specific demographical area.

Number of offices Offices are spread across most parts of Indonesia

Contractors

Typical Plant Numbers

A large number and variety of plant was reported but were

mostly focused for larger construction type projects.

Typical Contract Experience (Completed in Past 3-5 years)

Average Size Contract

Contract sizes vary significantly with the majority of multi-million

dollar projects in bridge contraction and large route development

projects.

Majority

Contract/Appointment

Types and Client Name

(Value)

The government projects forms a major part of the contracts and

varies from:

o Large grade separated intersection;

o Major bridge structures

o Major route roads that included an one-year

maintenance period;

o Large rehabilitation and betterment projects

Specialist Skills Involved

with above

contracts/appointments

Construction and project management


Framework Document



Contractual Arrangements/

relationships

Mostly traditional contractual arrangements of:

o Client

o Consultant

o Contractor

Two different models were found:

Asset Type Experience

o buildings;

o bridges;

o roads;

o pipelines;

o telecommunication;

o tunnels;

o dams;

o irrigation and flood control, and;

o power supply

Special standards and

Policies

o ISO 9002, 9001, 18001

o Government required standards and specification

Maintenance Quality

Assurance

Mostly included a one-year guarantee with all construction and

rehabilitation projects.

Asset Management and Maintenance Planning


behaviour understanding

(Faults->cause->remedy)

All construction and rehabilitation works is internally reviewed

prior to construction. Limited experience for routine maintenance

works since it is normally performed by Government

departments

Contractor

Maintenance tasks break-

Limited experience, except within the toll road consortiums.

Client(Owner)

Consultant(Design & Quality)

Contractor(Execution)

Client

(Owner)

Consultant

(Design & Quality)

Contractor

(Execution)


Framework Document



up and task teams

Routine / Maintenance

planning mechanisms

None currently exists

Project management

experience (size and

duration)

Wide experience including multi-million dollar projects.

PMS and systems

experience

Limited except for project management applications

Data collection and

analysis experience

Only laboratory type data collection and analysis

Additional Items for consideration

Partnering experience Good experience with sub-contractors and consultants

Business Risks Process

and experience

Good experience given a highly competitive market. Limited

experience in longer-term and performance related projects.

Escalation Issue around the appropriateness of the standard escalation

index in terms of the input data, the weightings and timeliness.

Bonds Private contractors often have issue obtaining bonds, while

government owned contractors have bond waivers.


Framework Document



Appendix C: Example of Private Industry Capacity Question List ->Summary of Consultants

Capability

Implementation of Performance Based Contracts in Indonesia

Interview Questions for Contractor and Consultants

Demographics

Company Name Local Consultants Companies in Indonesia

Company Type and owner Mostly Privately Owned

Contact Person N/A

Address N/A

Contact Numbers N/A

email

Company Make-up

Number of staff Vary anything from around 15 to 105. With temporary staff this

number can increase to as high as 450

Number of offices Typically between 1 to 5

Typical Contract Experience (Completed in Past 3-5 years)

Appointments Appointments vary from direct appointment for smaller projects

to tendering mechanisms for larger projects.

Majority

Contract/Appointment

Types and Client Name

(Value)

Periodic Maintenance:

o Design

o Site Supervision

Limited experience with routine maintenance as these are

normally departmental responsibilities

World Bank / ADB Projects

o New route design (geometric) and contract

development;

o Pavement and Periodic Maintenance design

o Site Supervision

Specialist Skills Involved

with above

contracts/appointments

Geometric design

Pavement analysis and design

Contract Development

Site Supervision

Contractual Arrangements/

relationships

See Contractors Appendix B


Framework Document



Asset Type Experience All asset types within road reserve

Special standards and

Policies

o Tender document development

o ICP -> International Competitive Bidding

o LCP->Local Competitive Bidding

Maintenance Quality

Assurance

No monitoring except for contractors one year maintenance

guarantee period

Asset Management and Maintenance Planning


behaviour understanding

(Faults->cause->remedy)

Have been involve in pavement and condition surveys including:

o road condition

o inventory

o surveying

Some capability also exists in pavement tests

Routine / Maintenance

planning mechanisms

limited

Project management

experience (size and

duration)

Supervision role, limited project planning responsibility

PMS and systems

experience

IRMS experience does exist. For major projects the consultant

is responsible in delivering an updated IRMS dataset

Data collection and

analysis experience

Some- do own surveys for design purposes.

Additional Items for consideration

Partnering experience Most consultants have been involved in design-built type projects

where they are part of a larger delivery team.

Business Risks Process

and experience

Limited

Perception of PBC Generally positive, especially given longer term commitment