1. Roads and Transport Infrastructure Consultant
Regional Seminar on Performance-Based Management and Maintenance Contracts
Word Bank Resource Guide and Other Information on Performance-Based Contracts
César Queiroz, Ph.D.
Roads and Transport Infrastructure Consultant
Arusha, Tanzania
February 2008

2. Presentation Outline
World Bank Resource Guide for Performance-based Contracting
Additional resources
Toolkit for PPP in highways
From PBC to PPP
PBC and road management
RONET
PBC and the distribution of risks between the public and the private sectors

3. World Bank Resource Guide for Performance-based Contracting
Assists road agencies in developing countries to launch or enhance a PBC program to manage and maintain their road networks
Contains practical documentation to
identify a PBC approach to fit specific conditions in a given country
design bidding and contract documentation
develop an efficient PBC implementation strategy
Also useful for consultants and contractors
Produced under a partnership between the UK Department for International Development and the World Bank

4. World Bank Resource Guide for Performance-based Contracting
Sample Bidding Documents
Sample TOR for preparation of PBC projects and support to bidding process
Sample TOR for Supervision
Sample TOR for Facilitator / Trainer
Sample Technical Specifications
WB Technical Note No. 27 on PBC
Actual Contracts
Resource People

5. World Bank Websites on Performance-based Contracts
Resource Guide for Performance-based Contracting
Training Course for Performance-Based Management and Maintenance of Roads
Road Management Catalog

6. Gunter Zietlow’s Website on Performance-based Contracts
PBC Overview
Sample Terms of Reference for the Preparation and Procurement, Contract Supervision and Facilitation, and Training
Bidding and Contract Documents
Training Materials
Related Presentations
Available at:

7. Toolkit for PPP in Highways
The toolkit is structured under five headings and includes a library and interactive financial simulation model
Available at the World Bank’s web site:

8. From PBC to PPP…but PPPs are not new!
Toll road at Wadesmill in Hertfordshire, UK, established in 1663 by Act of Parliament
19th century concessions: toll roads, bridges, tunnels in US; railways in France; subway in London
Suez (1860) and Panama (1880) canals
Decline around 1930 (great depression)
Resurgence in the 1980s: collapse of the state-owned monopoly paradigm

9. Toolkit for Public-Private Partnership in Highways Financial Simulation Model Main Financial Indicators

10. Debt Service Cover Ratio (DSCR)
where
i = number of tranches, 1≤ i ≤3
n = current year
(Debt Service) i,n = (Principal) i,n + (Interest) i,n
CAFDS= Cash Available for Debt Service

11. Loan Life Cover Ratio (LLCR)
n = current year
CAFDS= Cash Available for Debt Service
Outstanding debtn end of period
The Net Present Value of the Cash Available for Debt Service from year n+1 to the end of the maturity is discounted at the debt interest rate
The financial tool provides the user with the minimum LLCR

12. Return on Equity (ROE) where:
Equity injectedi is the equity provided by the sponsors in year i
Dividendsi are the dividends distributed to shareholders in year i
ROE is calculated in real terms through deflated flow (equity - dividends)

13. Project Financial Internal Rate of Return (IRR)
i = year
OCFBF = Operating Cash Flow Before Financing

14. Project Net Present Value: Present Value of Taxes minus Subsidies (NPV)
where:
OCFBF = Operating Cash Flow Before Financing
t = weighted average of the three rates on the tranches of debt
The NPV is calculated for the first year of the construction period

15. Estimated Minimum Toll Rate to Attract Private Investment for a PPP Project
$/km
5,000 vpd
10,000 vpd
15,000 vpd
20,000 vpd
Construction cost, $ million/km

16. PBC, PPP and Road Management
Road condition is a key indicator of the roads agency efficiency
PBC and PPP have been used to improve the condition of road networks (also to expand)
A new tool can help road agencies and policy makers to assess the future condition of a road network as a function, inter alia, of funds available: RONET

17. Road Network Evaluation Tools (RONET) Version 1
Road Network Evaluation Tools (RONET) Version World Bank January 2008

18. RONET Developed for SSATP by the World Bank Helps decision makers:
Monitor network condition
Plan allocation of resources
Assess consequences of macro policies
Design Road Asset Managements Systems
Developed for Africa, but can be applied worldwide

19. RONET Output Asset value Roughness Network charts
Network monitoring indicators
Road works summary
Optimal work program
Input
Country data
Length of road network
Historical data
Standards
Cost of road works

20. Road Network Length Matrix
Total 5 x 5 x 5 x 5 = 625 road classes

21. Default RONET Traffic Categories

22. Default RONET Condition Categories
Very Good: requires only routine maintenance (RM)
Good: requires RM plus preventive maintenance or spot regravelling or repairs
Fair: requires RM plus periodic maintenance
Poor: requires RM plus strengthening or partial reconstruction
Very Poor: requires RM plus full reconstruction

23. Default RONET Condition Categories

24. Performance Assessment What are the Consequences of Applying Different Maintenance and Rehabilitation Standards?

25. RONET Distribution RONET is available for free internet download at:
RONET CD can be obtained by contacting:
Monique S. Desthuis-Francis
Technical issues:
Rodrigo Archondo-Callao

26. Decreasing Public Risks, Increasing Private Risks
Allocation of Risks
High
Force Account
Maintenance Contracts
PBC
RISK TO
PUBLIC SECTOR
Concessions
BOO
Decreasing Public Risks, Increasing Private Risks
Low
High
RISK TO PRIVATE SECTOR

28. Thank you!

29. Some Basic References
World Bank (2006). “Resource Guide for Performance-based Contracting.” Washington, D.C
World Bank (2005). “Performance-based Contracting For Preservation and Improvement of Road Assets.” Transport Note No. 27. Washington, D.C.
World Bank (2005). “Sample Bidding Document: Output- and Performance-based Road Contract (OPRC).”
World Bank (2003). “Toolkit for Public-Private Partnership in Highways.” Public-Private Infrastructure Advisory Facility (PPIAF) and World Bank.

30. WB PPP-related Sites
Toll Roads and Concessions
How to Hire Expert Advice on PPP
Labor Issues in Infrastructure Reform
Toolkit for PPP in Highways

31. World Bank Websites on Performance-based Contracts
Resource Guide for Performance-based Contracting
Training Course for Performance-Based Management and Maintenance of Roads
Road Management Catalog

32. Basic Assumptions to Estimate the Minimum Toll Rate to Attract Private Investors for a PPP Project
Concession term: 20 yrs
Construction Cost: $1M/km to $5M/km
Operation cost: $500,000/km/yr
Equity: 14%
Subsidies: 0
Interest rate: 5%/yr
Grace period: 4 yrs
Repayment period: 14 years
Discount rate: 10%
Initial traffic: 5,000 vpd to 20,000 vpd
Traffic growth: 3%
Inflation: 6%
Tax: 18%
IRR ≥ 12%
ROE ≥ 16%
LLCR ≥ 1.0
DSCR ≥ 1.0

33. Cesar Queiroz Roads and Transport Infrastructure Consultant World Bank, 1818 H Street NW Washington DC USA Tel Mob

34. Cesar Queiroz is an international consultant on roads and transport infrastructure, with main interest in public-private partnerships (PPP) in infrastructure, road management and development, performance-based contracts, port rehabilitation, improving governance, quality assurance and evaluation, research, teaching and training. Between 1986 and 2006, he held several positions with the World Bank in Washington, D.C., including principal highway engineer, lead highway engineer, and highway advisor. Prior to joining the World Bank, Cesar was the deputy director of the Brazilian Road Research Institute in Rio de Janeiro. He holds a Ph.D. in civil engineering from the University of Texas, USA, a M.Sc. in Production Engineering from the Federal University of Rio de Janeiro, and a B.Sc. in civil engineering from the Federal University of Juiz de Fora, Brazil. Cesar was awarded the Maua Medal for his contribution to transport development in Brazil, and is an elected member of the Russian Academy of Transport. He has published more than 130 papers and articles, including being a co-author of two World Bank main publications on PPP and performance-based contracts, respectively the “Toolkit for PPP in Highways” and the “Resource Guide for Performance-based Contracting.” He has participated actively in several international organizations, such as TRB, SHRP, OECD, PIARC, IRF.