Performance Based Contracting in

Sri Lanka

Mr. R.M. Gamini on behalf of

Mr. R.W.R. Pemasiri

Secretary

Ministry of Highways, Ports and Shipping

Asian Development Bank Transport Forum

16 September 2014

This Presentation Will Cover:

Main drivers for testing PBRC’s in Sri Lanka

Capacity building of domestic contractors.

Main benefits obtained after the first pilot(s).

Role of the ADB and recommendations in the

future.

Do’s / don’ts and lessons learnt

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Main Drivers for Testing PBRC’s in

Sri Lanka

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Significant and on-going investment into the Sri

Lanka road transportation sector is occurring, but..

Supporting administration systems and resource

needs are lagging behind

There is the need for more efficient and effective

road management processes that can:

Improve the asset knowledge

Better demonstrate value for money outcomes

Increase focus on customer’s (communities / road users) needs

and satisfaction

Transfer responsibility and some risks to the contractor, to

stimulate innovation and cost-effective delivery of output.

Main Drivers for Testing PBRC’s in

Sri Lanka

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Incentives are required to address historical problems:

Less than optimum pavement asset lifecycles

Traditional design/construction approaches often fail to

adequately consider long term maintenance issues

Variability in service and investment levels within/between

road classifications.

Budget overruns through measure and value contract

variations

Variable annual funding not aligned with maintenance needs

Capacity Building of Domestic

Contractors.

Industry surveys and discussions on PBRC’s in Sri

Lanka have identified:

There is adequate capacity and interest in the market

place for private industry to undertake PBRC’s.

However….

There is limited understanding of performance based

concepts

Concern over the potential transfer of risks associated

with these long term contacts e.g. emergency works or

overloading of pavements.

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Capacity Building of Domestic

Contractors.

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Several Pilot PBRC’s have been undertaken to

increase awareness and build capacity e.g.

Northern Road Connectivity Project.

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Northern Road Connectivity Project:

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Northern Road Connectivity Project:

NRCP Phase 1

NRCP Phase 2

No of Km 175 128

Loan Amount

(US$m)

130 98

PBM 3yrs 5yrs

Condition of

Contract

MDB 2006 MDB 2010

Capacity Building of Domestic

Contractors.

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Introductory discussions held with local

contracting industry to introduce the concepts

Workshop on PBRC’s organized for RDA

personnel in March 2014 (ADB Support)

Further contractor workshops planned prior to

next round of PBRC contract bids.

Main Benefits Obtained After the

First Pilot(s).

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Northern Road Connectivity Project identified several

benefits:

Term of contracts has increased as confidence has grown

(from 3 years to 5 years now being implemented)

Improved understanding of pricing by contracting industry

under PBRC’s (especially maintenance inputs)

Better understanding of contract management

requirements (both contract relationship and service level

compliance).

Role of ADB and Recommendations

in the Future

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ADB support during implementation.

Support and advice to the RDA for future contract

development.

Development and implementation of latest generation

of PBRCs is underway.

Three Performance based contracts spanning several provinces

totalling 230 km of National Roads under preparation

A further 160 km in further packages likely to follow.

12 Do’s / Don’ts

Do’s

Do raise awareness and align contract requirements

with industry capability to manage

Do encourage and support employer asset, data

management processes, and system development

Do engage and retain experienced management

personnel (Employer and Contractor)

Do incorporate experience and learning over time

(contract evolution).

13 Do’s / Don’ts

Don’ts

Do not transfer too much risk to the contractor

Do not implement on networks likely to undergo

significant change during the contract, where the

change cannot be easily quantified or priced in the

lump sum

Do not interfere unnecessarily with the contractor’s

activities, (but do carefully monitor and manage).

Thank You

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