2

Content
Background
Main drivers of PBRCs in PNG
Capacity building of domestic
contractors
Main benefits after 1
st
pilot projects
Role of ADB in 1
st
pilot project &
future recommendations



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Papua New Guinea (PNG)
 Road transport in PNG – Past
 Implementation Challenges
 National Road Authority (NRA)
 Long-Term Performance
Based Maintenance (LPTBM) -
Present Future
• PNG joined ADB – 1971
• 1st project – 1972, Road Improvement
• PNG independent - 16 September 1975
• Road conditions deteriorating fast
• 1st road maintenance project in 1999
(27 years from 1972)
• Traditional contracting (input-based)
• 35% in “good conditions”
• Lack of funding
• Underdeveloped local contracting
• Dept. of Works (DOW) Capacity
• People & Market capability issue
• Long delay vs cost increase
Kina (PGK), million
% total expenditure
0%
5%
10%
15%
20%
0
250
500
750
1,000
1974 79 84 89 94 99 04 09 14
Land transport expenditure (PGK), lhs
Land transport expenditure (% total), rhs
rhs
Contracting Hiatus
1995 - PTB
Dissolved
1975 -
Independent
Source: http://devpolicy.org/road-management-in-papua-new-guinea-part-1-the-maintenance-challenge-20140903/
DOW budget appropriation and disbursements (2008-2014)
0
0.25
0.5
0.75
1
1.25
0
400
800
1,200
1,600
2,000
08 09 10 11 12 13e 14p
Recurrent Budget appropriation (Kina, million), lhs
Capital Budget appropriation (Kina, million), lhs
% Recurrent Budget disbursed, rhs
% Capital Budget disbursed, rhs
Source: National Budget Documents (various years), ADB calculations.

NRA established by an Act 2003
Road Fund was also established
Main objectives
Raise Revenue thru RUC
Plan, program and manage the
road network






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Main Drivers of Testing PBRCs


 2,500km transferred by Works Dept. to NRA
PBRC models
Traditional input-based (Hybrid) Contracts
(2009-2011- 6 Contracts)
Trial PBRC – 5 Years Duration - ADB MFF
Programs – 3 Contracts
Service Level Contracts for 3 years -19
Contracts
10 Years PBRC in 2015 (ADB MFF Tranche 1)
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Main Drivers of Testing PBRCs
12
Main Drivers of Testing PBRCs

13
Main Drivers of Testing PBRCs

 Contractor Development
• 8 small to medium contractors throughout PNG
New Players developed under PBRC
Contracts all under $5m
Paid monthly on LOS on fixed lump sum
• Variable outcomes
 Local economic conditions (rates,
populations density)
 Contractor/People (Public Relations) issues
 Contractor submitting irregular claims
o Less amount of work done


14
Capacity Building of Domestic Contractors

Source: ADB survey, 20143.

0
1
2
3
4
5
6
Largest Contract Size Completed in the last 5 Years
>$7 mil
$5 - 7 mil
$3 - 5 mil

F
i
r
m
s

Contract size (PGK)
• Population = > 7.3 million
• Population 15% urban, 85%
rural/remote
• Circa 3%  tertiary education
• Vocational training – idem
• Land ownership  97%customary
Examples of benefits
Assets Management System
improved
PBRCs developed

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Main Benefits after 1st Pilot Projects

Dos & Don’ts from 1st Pilot Projects
 Do’s
Pilot Trials
Initial Expert
Support/Advisors
Contractor
Capacity
Development



Don’ts
 Avoid Short Sections.
Go for networks
 Avoid roads with
high maintenance
needs
 Avoid Contractors
without good
reputation


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• Piloting LTPBM through MFF - T1&2
• Upgrade & maintain in one contract – 10
years (2 ongoing)
• Bigger package = bigger & more bidders
• Contractors’ preference – good news!
• Sustainability? Increase private sector
participation
• Improve LTPBM in MFF - T3&4
• Design, Build/upgrade & Maintenance
(DBM) contract  10-15 years.
• Restructure project design with private
sector inputs
• Longer road sections  Network
• Big contractors build local capacity
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Future focus
 Capacity Development
 Increase Revenue
 Maintain a Network on a PBRC
basis
 Improve Procurement & Other
Gov’t Agency Issues
 Involve more private sector
participation