1. Visit of the Slovenian Railways March 14 th 2006 Content Maintenance contract and input versus output By Jan Swier, ProRail, The Netherlands, tel. +31 30 235 5315, email: jan.swier@prorail.nl © ProRail. All rights reserved

2. 2 100% outsourcing of Engineering 100% outsourcing of Maintenance & Renewal Development of rail infrastructure management integration, separation and split-off < 1990199019941998 NS Mw Fe Engineering 1000 NS If: Maintenance 4200 EpOd Is 5200 Discharge 600 Execution of maintenance (NS InfraService) 2800 Management of maintenance (NS RIB) 800 EpOd If 1500 3700 27000 Ep NS RIB 1000 2003 ProRail Strukton Volker Stevin BAM/NBM Holland Railconsult © ProRail. All rights reserved

3. 3 Scope of Maintenance & Renewal Small Scale Maintenance 250 mio Large Scale Maintenance 120 mio Renewal 200 mio Supervision 50 mio Middle Long Cyclic(> 1 years) Improvement (technical) Quality Realisation Life time Result: product Short cyclic (< 1 year) Maintain functionality Control RAMSHE Quality (degredation) Result: service Long cyclic (10-100 years) End Life time Resuylt: product

4. 4 STATIONS 1x Management agreement with NS Stations TELEMATICA 1x Framework contract 16x Sub-process contracts 1x Consortium of contractors RAILINFRA 39x Process contracts 3x Process contractors Many project contracts and contractors Small-scale maintenance is outsourced with three types of contracts Stations Track Level Crossings Bridges Energy supply Signalling Posts (Traffic Control) Telecom

5. 5 Tender form for maintenance & renewal Process contract Process:Work typeContract type:Contractor: (certified) Small Scale Maintenance Large Scale Maintenance Renewal Process work Project work Project plan Contractor Maintenance & Service Repair Contractor C1 P1 P2 P2.1 P2.2

6. 6 Same structure for project plans and process contracts Project Plan: General stipulations (UAV) Tender: (RAW/STABU) general ("the work") administrative (specific additions to UAV) techniques Process Contract: Conditions Contract description Specifications Explanation: Generic information that applies to all tenders or process contracts Specific (additional) information about the work in a particular tender or process contract Generic description of the standard requirements with which the work must comply Technical stipulations Type:Generic:Specific:Generic:

7. 7 Structure and content of the process contract ConditionsDescriptionsSpecifications General conditions (AVPI) Additions to the general conditions and specifications Content annex 1 Agreement Minutes and memorandum of information Content annex 2 & 3: *Bounderies + quantities *Quatities P1-projecten *Schedule train free periods *Failure priorities *Demanded RAMS quality *Status infra; zero measurement *Utilisation classification *Draft plan railway safety *Risks infra quality *Quality plan *Offer Content annex 4 & 5: *Technical specs: IHS *Regulations *Reference book failure management *Risk inventarisation *Bonus/Malus regulation *Performance measurings *Reports *Planning & Control cycle *Indexation *Strategic materials *Quality measurements *Units en work plan *Object tree *TESI-list

8. 8 Managing contractual risks (An adaptation of "A collaborative model for managing risks in construction projects") Collaborative model in an eight-step plan: 1.Collation of contractual information 2.Evaluation of the risks by the commissioning party 3.Agreement on the risks 4.Drafting a quality plan, done by the contractor 5.Selection and award 6.Drafting and acceptance of quality plans (whole or in parts), work plans and approval plans 7.Generation and submission of approval records and other quality documentation that is to be provided 8.Dealing with deviations

9. 9 Output management places strict requirements on quality assurance Quality assurance in maintenance and fault repair: The purpose:Using a controlled process to provide services that meet the requirements The means:- Demonstrating that the process is managed - Demonstrating that the requirements have been met

10. 10 Managing contractual risks (An adaptation of "A collaborative model for managing risks in construction projects") Basic assumptions: The contractor is responsible for keeping up the quality level: - decides how work is to be carried out - determines the quality of the production process The commissioning party can set down management precautions for high-risk items (approvals, inspections, work plans, etc.) The contractor defines the quality plan for controlling the processes The contractor demonstrates that: - the process is controlled - the product/service meets req’s The contractor reports deviations from the requirements or the quality plan and proposes ways of correcting/preventing them The commissioning party carries out checks on the process and the product

11. 11 MANUAL EXPLANATIONEXPLANATION CONDITIONS CONTRACT DESCRIPTION SPECIFICATIONS Output process contract: structure and how it fits together TEMPLATE CONTRACT FILLING IN FOR A CONTRACT FOR SEVERAL YEARS FILLING IN FOR A ONE-YEAR AGREEMENT

12. 12 CONDITIONS CONTRACT DESCRIPTION SPECIFICATIONS The Structure of the Process Contract Template Contract 80% Contract for several years 15% One-year agreement 5% Procescontract Indicative workload

13. 13 200020012002200320042005200620072008 Realisation long range contract Annual agreement Mutations 2002 More-/ Less work Long-range contract Annual agreement Mutations 2007 TENDER Relation long-range contract – annual agreement Mutations 2002 Annual agreement Mutations 2003 More-/ Less work Mutations 2003 Annual agreement Mutations 2004 More-/ Less work Mutations 2004 Annual agreement Mutations 2005 More-/ Less work Mutations 2005 Annual agreement Mutations 2006 More-/ Less work Mutations 2006

14. 14 Outsourcing: experiences and lessons learned Projects Smalle scale maintenance 1.Outsourcing of design/engineering knowledge gave no real problems in the Netherlands. 2.For succesful outsourcing there are several and experienced engineeringbureaus needed. 3.Form the beginning (some) experienced project managers, planners and controllers are needed. 4.Regulate the ownership of drawings, plans, calculations, rights, etc. during seperation. 5.System acceptance documentation of new rail infrastructure should be regulated during seperation 1.Descission makers had insufficient consciousness that outsourcing is a profession and needs a highly skilled organisation. 2.Outsourcing is a huge (culture) change. 3.The principal must have a clear vision from the beginning how he keeps in control. 4.The principal need to know his business; costs, quality, specifications, processes,….. 5.The principal needs from the beginning (some) experienced contract managers. 6.Information (management) is very important 7.For succesfull outsourcing there are several and experienced contractors needed 8.It is hard working to learn how to specify, measure & manage maintenance because the result is a service It is all about clarity in relationship, control and balanced risk allocation

15. 15 Synonims for two contract types Input * Effort * Activities * Resource-based * Neoclassic contracting * Traditional tendering * *Output *Result *Performance *Outcome-based *Relational contracting *Innovative tendering Mix

16. 16 Closer view at input- and outputcontracts According: “Uitbesteden van onderhoud”, SUTO, Herman van den Hoogen en Simon Sjamaar Aimed at a detailed description of the maintenance activities to execute a desciption of the performance to realise and the conditions within. INPUT CONTRACT OUTPUT CONTRACT Character Win/Loose. Conflict of interests: principle strives for a low price, contractor high. Win/Win. Striving together for improvements: principle and contractor “are both making profit” Spirit Internal controle Mutual challange Focus - More/Less work - Deliver protocol - Measuring results - Improvements Innovation HardlyExplicit Relation Despripancy of interest: detailed contract. The contractor delivers “hands” Mutual strive to improve. The contractor has expertise and delivers performance. Expertise Principe has detailed knowledge about the executions of activities. Principle has global knowledge about the execution but a lot about specifing, measuring and managing. Concern contractor Profiling as a work foreman Profiling as a comaker with added value and a continious work package Selection contractor Stress at price and timeStress at price-performance+ added value Approach Closedopen

17. 17 Top performance requirements for small scale maintenance 1.Maintain functionality with a certain quality (RAMSHES). 2.Demonstrable safe train ride. 3.Secure sustainability: contribute to realise lowest life cycle costs. RAMSHES = Reliability, Availability, Maintainability, Safety, Health, Environment, Sustainability

18. 18 Specification and control triangle OPC+ RAMSHE Sustainability Compound specs M&R specs Activities Levels to specify and manage Quality Measures Output Input Functionality and the RAMSHES Quality of it Managed by ProRail Managed by Maintenance Contractor Not explicitly specified and managed

19. 19 Specification and control triangle of a performance contract (OPC 2007) RAMSHE Sustainability Compound specs M&R specs Activities Levels to specify and manage Quality Measures Processes Output Input Functionality and the RAMSHES Quality of it Managed by ProRail Managed by Maintenance Contractor

20. 20 Advice 1.To outsource renewal projects is “easier” and less risky than small scale maintenance 2.Do not outsource maintenance if you don’t know how to stay in control of costs and performance. 3.Outsource step by step: plan, separate, split-off and outsource. 4.Outsourcing should not be a goal but a way to improve. 5.Outsourcing needs a cultural change and takes time. 6.The principle and contractor must be in control of input/ activities before an output M-contract is a realistic option. *The market will not give you anything for free. *Outsourcing is not a solution for your financial or managerial problems. *Tasks are outsourced, but the end-responsibility for the overall result not. © ProRail. All rights reserved Statements

21. 21 Thank you for your attention Any questions?

22. 22

23. 23 Measure Specify Measure Audit Evaluate & Improve Plan work Preparation of work Execute work Inspect Evaluate & Improve Report Tasks in relation to “eyes on” and “hands off” Input Output Proces

24. 24 Typical OPC-contract *Service contract; not calculated on results but on efforts *Separate accreditation scheme for maintenance and fault resolution *Integral maintenance contract for all technologies: electrical & civil engineering *Model OPC is standard; uniformity, unambiguity *Contracting guide with process worked out *Skeleton contract with a duration of 5 years, with annual meetings about changes *Prescribed inspections linked to specifications *Generic risk analysis process *Open budget as support for the offer *Specifications at four cohesive levels *Risk inventorisation of safety © ProRail. All rights reserved

25. 25 Structure & Content Maintenance Contract