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.
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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).
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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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