Pilot Program for Provincial

Road Improvement and

Maintenance (PRIM)
Report on Lessons Learned
INDONESIA INFRASTRUCTURE INITIATIVE

Pilot Program for

Provincial Road
Improvement and
Maintenance (PRIM)
Report on Lessons Learned

CONSULTANT REPORT

NOVEMBER 2014
INDONESIA INFRASTRUCTURE INITIATIVE

This document has been published by the Indonesia Infrastructure Initiative (IndII), an
Australian Government funded project designed to promote economic growth in
Indonesia by enhancing the relevance, quality and quantum of infrastructure
investment.

The views expressed in this report do not necessarily reflect the views of the Australia
Indonesia Partnership or the Australian Government. Please direct any comments or
questions to the IndII Director, tel. +62 (21) 7278-0538, fax +62 (21) 7278-0539.
Website: www.indii.co.id.

ACKNOWLEDGEMENTS

This report has been prepared by the PIUC consulting team, who were engaged under
the Indonesia Infrastructure Initiative (IndII), funded by AusAID, to implement the
Program Implementation Unit Consultant (PIUC) services under the Provincial Road
Improvement and Maintenance Program (PRIM).

The support provided by IndII, AusAID and the Public Works Agency of NTB is gratefully
acknowledged. Any errors of fact or interpretation are solely those of the PIUC,
consisting of Ramboll Denmark A/S in association with MMM Group, Canada and PT.
Guteg Harindo, Indonesia.

The PIUC Team

Mataram, 28 November 2014

© IndII 2014

All original intellectual property contained within this document is the property of the Indonesia
Infrastructure Initiative (IndII). It can be used freely without attribution by consultants and IndII partners in
preparing IndII documents, reports designs and plans; it can also be used freely by other agencies or
organisations, provided attribution is given.

Every attempt has been made to ensure that referenced documents within this publication have been
correctly attributed. However, IndII would value being advised of any corrections required, or advice
concerning source documents and/ or updated data.
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TABLE OF CONTENTS
INTRODUCTION ..........................................................................................................5
EXECUTIVE SUMMARY ................................................................................................6
CHAPTER 1: BIDDING PROCEDURES ............................................................................7
1.1 TIME FOR PREPARATION OF BIDS ..........................................................7
1.2 TIME FOR EXPLANATION OF BIDDING DOCUMENTS ...................................7
1.3 SIMPLIFICATION OF BIDS .....................................................................7
1.4 SIMPLIFICATION OF TECHNICAL EVALUATION ...........................................8
1.5 TECHNICAL EVALUATION OF EQUIPMENT AND MANPOWER ........................8
CHAPTER 2: CONTRACT PROCEDURES .........................................................................9
2.1 FACILITATION OF UNDERSTANDING OF BIDDING DOCUMENTS .....................9
2.2 CLARIFICATION OF SUPERVISORY PARTIES ...............................................9
2.3 USE OF FIDIC CONDITIONS OF CONTRACT .............................................10
2.4 SUPERVISING CONSULTANT’S TERMS OF REFERENCE ................................ 10
2.5 PRICE ADJUSTMENT PROVISIONS ARE INEQUITABLE ................................. 12
CHAPTER 3: TECHNICAL SPECIFICATIONS ..................................................................13
3.1 ROAD SAFETY .................................................................................13
3.2 RESTRICTIONS ON HOLDING TREATMENTS .............................................13
3.3 CONFLICTED PROVISIONS FOR POTHOLE PATCHING ................................. 14
3.4 CONFLICTED PROVISIONS FOR CRACK SEALING ....................................... 14
3.5 UNREALISTIC PROVISIONS FOR SHOULDER REPAIRS ................................. 15
3.6 REFORM OF PAYMENT FOR ROUTINE MAINTENANCE ............................... 16
3.7 LABORATORY EQUIPMENT .................................................................16
3.8 ENVIRONMENTAL MANAGEMENT AND MONITORING .............................. 16
CHAPTER 4: OWNER’S ESTIMATES ............................................................................18
4.1 ERRORS IN COST ESTIMATES FOR ROUTINE MAINTENANCE ....................... 18
4.2 REFERENCES TO MISSING DATA/FILES/FOLDERS ..................................... 18
4.3 REFERENCES TO EXTERNAL QUANTITY DATA ..........................................19
4.4 MANUAL COPY AND PASTE ................................................................19
4.5 ERRONEOUS CALCULATION OF MAJOR PAY ITEMS................................... 20
4.6 REFERENCES TO OUTDATED SPECIFICATIONS ..........................................20
4.7 INEFFICIENCY IN DENOMINATION OF PAYMENTS ..................................... 20
CHAPTER 5: MAKING CONTRACTS ATTRACTIVE.........................................................22
5.1 RELATIVE SIZE OF PRIM PROGRAM .....................................................22
5.2 CONTRADICTIONS IN MULTI-YEAR CONTRACTS....................................... 22

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 5.3 CONTRACTORS’ INTERESTS AND COMPETENCE ........................................ 23
5.4 SWAKELOLA COMPETENCE AND PRODUCTIVITY ...................................... 23
5.5 PUNITIVE CONTRACT CLAUSES ............................................................24
CHAPTER 6: CONCLUSIONS AND RECOMMENDATIONS .............................................25
6.1 SUMMARY OF LESSONS LEARNED ........................................................25
6.2 SUMMARY OF FURTHER ACTIONS PROPOSED .........................................27

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ACRONYMS
ACAP Anti-Corruption Action Plan
AIPD Australian Indonesian Partnership for Decentralization
AIIG Australia Indonesia Infrastructure Grant
AMP Asphalt Mixing Plant
AUD Australian Dollars
AusAID Australian Agency for International Development
Bapedalda Badan Pengendalian Dampak Lingkungan Daerah – Regional
Environmental Agency
Bappeda Badan Perencanaan Pembangunan Nasional – National Development
Agency
BM Bina Marga
BMW Backlog and Minor Works
CCO Contract Change Order
DisHubKomInfo Dinas Perhubungan, Komunikasi dan Informasi – Provincial Agency for
Transport, Communications and Information
DRP Data Referencing Point
DGH Directorate General of Highways
DPU Dinas Pekerjaan Umum – Public Works Agency
EINRIP Eastern Indonesia National Roads Improvement Project
HPS Harga Perkiraan Sendiri – Owner’s Estimate
HRS Hot Rolled Sheet (Lapis Tipis Aspal Beton = Lataston = HRS)
HRS-Base Hot Rolled Sheet for Base Course (HRS Pondasi)
HRS-WC Hot Rolled Sheet for Wearing Course (HRS Lapis Aus)
IndII Indonesia Infrastructure Initiative
IRI International Roughness Index
IRMS Indonesian Road Management System
LKPP Lembaga Kebijakan Pengadaan Barang/Jasa Pemerintah – Institute for
Procurement Policy for Goods and Services by Government
MCA Multiple Criteria Analysis
NTB Province of West Nusa Tenggara
OE Owner’s Estimate (Harga Perkiraan Sendiri, HPS)

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 PCM Pre-Construction Meeting (Rapat Persiapan Pelaksanaan Kontrak) held
within 7 days of the issue of Notice to Proceed (see SPMK)
PDD Program Design Document
PIU Project Implementation Unit – agencies of the NTB Provincial
Government led by Bappeda
PIUC Project Implementation Unit Consultant
PPK Pejabat Pembuat Komitmen – Official Responsible for the Works
PMC Project Monitoring Consultant
PMM Project Management Manual
PPB Planning, Programming and Budgeting
PRIM Provincial Road Improvement and Maintenance Program
PRMS Provincial Road Management System
Pusbin KPK Pusat Pembinaan Kompetensi dan Pelatihan Konstruksi (Centre for
Competency and Construction Training)
Pusdiklat Pusat Pendidikan dan Pelatihan (Training Centre, Secretariat of
Ministry of Public Works)
RCC Reference Contract Cost
RKKPL Rencana Kerja Pengelolaan dan Pemantauan Lingkungan –
Environmental Management and Monitoring Work Plan
RTTF Road Traffic and Transport Forum
RUC Reference Unit Cost
SDI Surface Distress Index
SC Supervision Consultant
SCM Show Cause Meeting under Art. 42.2 (Rapat Pembuktian, SSKK ps 42.2)
SOP Standard Operating Procedure
SPMK Surat Perintah Mulai Kerja – Notice to Proceed, issued within 14 days
of the Date of Contract
SPPL Surat Pernyataan Pengelolaan dan Pemantauan Lingkungan –
Statement of Readiness to Manage & Monitor Environmental Impacts
Stage 1 PRIM program in NTB from July 2013 to June 2015
Stage 2 PRIM program in NTB from July 2015 to 2018 (subject to approvals)
TNA Training Needs Assessment
TOR Terms of Reference
TT Technical Team for PRIM, in DGH
ULP Unit Layanan Pengadaan - Procurement Unit of Provincial Government

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INTRODUCTION
The purpose of this report is to describe lessons learned by PIUC on PRIM and the
issues and processes related to particular problems which arose during the services.

Many of the 30 Lessons in this report identify solutions that were applied in PRIM
Contract Packages P3 onwards (PRIM packages P1 and P2 were prepared by other
parties). Therefore the lessons are neither theoretical nor academic.

Many Lessons were related to Contract Preparations, oriented towards obtaining

better road safety and road maintenance through clearer and fairer working
arrangements. Lessons for routine maintenance by Swakelola and implementation of
PRIM Road Contract Packages have also been included. The points of reference for
these lessons included existing government procedures that PRIM was designed to
work through and strengthen 1.

As well as specific Lessons, the text also includes several matters for Further Action,
namely Lessons where data was not available to demonstrate conclusions, as well as
issues where alternative solutions could not be found to government regulations.

1
Program Design Document (PDD, 28082013) Para. 1.5, page 3: “To help ensure sustainability
[PRIM] would work through, and in the process strengthen, existing government procedures ...”

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 EXECUTIVE SUMMARY
Chapter 1 describes improvements made in bidding procedures, in particular major
simplification in technical evaluation of bids. Such simplification created concerns that
DPU would be exposed to additional risk, and this concern was addressed by PIUC.

Chapter 2 concerns clarifications made to the conditions of contract, explaining why

FIDIC standard conditions could not be applied under PRIM. The national supervision
consultants present a major challenge of re-education or generational change.

Chapter 3 describes reform of the DGH General Specifications to accommodate PRIM

works, particularly for road safety and road maintenance. Many conflicting incentives
are apparent in road maintenance at present. The lump sum payment for routine
maintenance was discarded in favour of an output-based measure.

Chapter 4 discusses a number of errors in the Costs Estimating Model used for
Engineer’s and Owner’s Estimates, particularly for routine maintenance.
Disqualification of bids higher than the Owner’s Estimate is highlighted as a rule which
should be abolished, likely leading to deception and lower quality works.

Chapter 5 explores issues that have apparently made PRIM contracts unattractive to
Contractors in NTB, both issues external to PRIM and embedded in PRIM. Comparison
with achievements under Swakelola is made, where productivity and competence are
still an issue in parts of NTB.
Chapter 6 presents conclusions and recommendations from the Lessons Learned and
proposes further Actions as outlined in this Report.

It is hoped that this document will assist concerned parties to apply the Lessons
Learned to strengthen government procedures, not only for PRIM but for all road
safety activities and road maintenance works funded by APBN and APBD.

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CHAPTER 1: Bidding Procedures

Bidding procedures include the process of announcement and evaluation of bids.
Lessons related to contract provisions and technical specifications which are also part
of the bidding documents are described in Chapters 2 and 3 below.

1.1 TIME FOR PREPARATION OF BIDS

Issue: Time allowed for preparation of bids under P1 and P2 was restricted to 6 days,
perhaps in order to meet the deadline to award contracts in 2013.

Impact: Several non-confirming bids were received, possibly due to lack of time.

Solution: At IndII initiative the bidding period was increased to at least 21 days.

Lesson 1: Setting short time deadlines for bidding can reduce the quality of bids.

1.2 TIME FOR EXPLANATION OF BIDDING DOCUMENTS

Issue: Time allowed for explanation of Bidding Documents under P1 and P2 was limited
to one 3 hour session online, and for other packages was restricted to a 4 day period.

Impact: No substantive questions were received from Bidders.

Solution: At PIUC initiative the period of explanation was increased to 21 days, namely
from advertisement until 7 days before the date of opening of bids. PIUC’s further
proposal to re-introduce Pre-Bid Meetings was considered to contradict the spirit of e-
procurement whereby firms in any location can bid. Although details are unavailable,
most firms bidding for works in NTB appear to have been domiciled in NTB or Bali.

Lesson 2: Better information on PRIM needs to be provided with bidding documents.

1.3 SIMPLIFICATION OF BIDS

Issue: Data required to be submitted with bids for P1 and P2 included technical
analysis and unit price analysis of all work items, schedules of equipment mobilisation,
and schedules for use of labour, materials and equipment detailed for each work item.

Impact: Large volumes of data had to be prepared and evaluated, creating the
possibility that insignificant errors could result in disqualification.

Solution: PIUC/DPU proposed elimination of the above-mentioned data to ULP, and

ULP agreed except for unit price analysis of major work items (the largest 80% of cost
generally comprising 30% of work items, which may be required for variations).

Lesson 3: The bidding documents for P1 and P2 had excessive Bidder qualification data
requirements.

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 1.4 SIMPLIFICATION OF TECHNICAL EVALUATION

Issue: Evaluation of bids for P1 and P2 involved a pass/fail evaluation based on

threshold scores for Working Method, Firm’s Experience, Manpower Qualifications and
Equipment Age and Ownership. That such a system could be manipulated was
demonstrated when PIUC and DPU revised the threshold scores unawares to ULP for
the first tender of P3, and ULP then revised its evaluation to come up with the same
result and disqualified the same firm in a second evaluation of the same bids.

Impact: Winning bids could be decided by an essentially subjective process.

Solution: PIUC and DPU agreed with ULP to replace subjective technical evaluation by
an objective procedure, abolishing thresholds and reducing the criteria to just one item
– time for completion, including 7 days tolerance. This was confirmed as acceptable to
IndII and PMC for small scale works, and also to independent experts in a procurement
workshop arranged by IndII.

Lesson 4: The bidding documents for P1 and P2 contained excessive and essentially
subjective technical evaluation criteria.

1.5 TECHNICAL EVALUATION OF EQUIPMENT AND MANPOWER

Issue: As noted in 1.4, reform of technical evaluation of bids included elimination of

scoring of Bidders’ equipment and manpower. However DPU was concerned that this
step would expose DPU to the risk of inadequate equipment and manpower.

Impact: Bidders who do not have access to suitable equipment and manpower should
logically not be awarded contracts.

Solution: Deletion of the equipment and manpower criteria from technical evaluation
(refer 1.4) is not intended to downplay the importance of resources, but to simplify
evaluation. Bidders who meet the qualification criteria (experience etc) will certainly
have access to common types of equipment and manpower to carry out small scale
works, so even if ULP was assigned a Technical Team capable of evaluating equipment
and resources, it would be unwarranted, lengthening the process. To alleviate DPU’s
concerns, PIUC proposed that before signing a contract, DPU itself should check the
equipment and interview the key staff of the winning bidder. This procedure was
inserted into the Bidding Documents.

Lesson 5: A final check of the winning Bidder’s equipment and key manpower before
DPU signs a contract will provide DPU with confidence that elimination of technical
evaluation of equipment and manpower does not increase DPU’s risk.

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CHAPTER 2: Contract Procedures

Contract procedures include the standard contract documents. Lessons related to
technical specifications which are also part of the bidding and contract documents are
described in Chapter 3 below.

2.1 FACILITATION OF UNDERSTANDING OF BIDDING DOCUMENTS

Issue: Special Conditions of Contract shall be read in conjunction with related General
Conditions. Documents for P1 and P2 did not cross-reference the Special Conditions.

Impact: Difficulty in understanding of Contract documents may lead to ignorance of

their contents by parties to the Contract, and overlooking of important provisions.

Solution: In the bidding documents from P3 onwards, each Special Condition is cross-
referenced to the related General Condition.

Lesson 6: The bidding documents for P1 and P2 did not cross-reference Special
Conditions of Contract, thereby creating difficulty in understanding.

2.2 CLARIFICATION OF SUPERVISORY PARTIES

Issue: Bidding and Contract Documents for P1 and P2 referred to a Supervisor of the
Works, to a Technical Director and to a Director of the Works, all with tasks related to
supervision of the Contract. In previous contracts, the Director of the Works was
understood to be the Employer, and required the Employer’s powers to act.

Impact: The authority of the Supervisor is weakened by confusing nomenclature.

Solution: In a Special Condition of Contract in bidding documents from P3 onwards,

the Supervisor of the Works, the Technical Director and the Director of the Works are
identified as one and the same party, namely the Supervisor of the Works. The next
Lesson discusses the use of the FIDIC term “The Engineer”.

Lesson 7: The bidding documents for P1 and P2 contained three different titles for the
Supervisor of the Works, which can readily be harmonized and clarified.

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 2.3 USE OF FIDIC CONDITIONS OF CONTRACT

Issue: The Program Design Document anticipated that FIDIC conditions of contract
would be adopted for the pilot program 2, but also recognized that “FIDIC documents
may also need to be adjusted” 3.

Presidential Regulation No. 54 of 2010/No. 70 of 2012 is the legal basis for all
government procurement in Indonesia, and therefore the FIDIC model document could
not be adopted for PRIM. Neither was it possible to adjust FIDIC documents for use in
Indonesia, although FIDIC documents are based on international best practice for
contract management of civil works.

The terms “The Engineer” or “Engineer’s Representative” are used in FIDIC to refer to
the “Supervisor of the Works” .

Impact: FIDIC conditions of contract cannot be adopted for government procurement

in Indonesia, so some of the fairness and risk-sharing elements of FIDIC are lacking. The
impact of unbalanced risk-sharing is generally a higher cost of works.

Solution: The term “Supervisor of the Works” has been adopted in English (“Pengawas
Pekerjaan” in Indonesian) rather than adopt the FIDIC term “Engineer” in order to
avoid misunderstanding of FIDIC conditions of contract. The next Lesson discusses the
improvements made in the Supervisor’s terms of reference.

Lesson 8: Until FIDIC conditions of contract are adopted in full for Government
contracts in Indonesia, less than equitable risk-sharing between Contractor and Owner
will remain.

2.4 SUPERVISING CONSULTANT’S TERMS OF REFERENCE

Issue: Terms of Reference previously in use for road works required the Supervising
Consultant to “Assist the Responsible Official for Road Supervision in carrying out his
duties and responsibilities to control the implementation of works in order to be
completed in accordance with designs, specifications and contractual requirements
and within the stated time” and “Assist the Responsible Official for Implementation in
understanding the legal obligations in the contract documents, particularly the
obligations and tasks of the Contractor”. In other words, it recognizes separate
authority over the Supervision Services Contract and over the Works Contract.

Specific tasks of the Supervisor were rather general: “Make recommendations on

contract variations…”, “Carry out careful checking of all measurement and calculations
of works volumes…”, “Report to the Responsible Official for Implementation all
problems in relation to the implementation of works including delays in achieving

2
PDD (28082013) para 3.5.2, page 28
3
PDD (28082013) para 4.6, page 43

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physical targets, and action required to overcome them…”, “Conduct continuous

monitoring and checking of quality and works volume, and sign Monthly Certificates ..
”, “Check the calculations on As Built Drawings…”, “Assist the Responsible Official for
Implementation to prepare monthly reports …”, and “Assist the Responsible Official for
Implementation in Provisional and Final Hand Over, in particular in preparing lists of
defects and deviations that require correction.”

Impact: It was considered by IndII that the standard terms of reference was too
general, and one of the reasons why the quality of supervision was poor.

Solution: The terms of reference for road works were completely revised to detail all
tasks related to the Supervisor’s role in the Works Contract. PIUC prepared a new
terms of reference which spelled out the Supervising Consultant role in administration
of the Works Contract, arranging all tasks into three groups, the first two cross-
referenced to clauses in the Contract for Works:
1. Act as the Authorised Representative of the Responsible Official for
Implementation for matters delegated to the Supervisor under the Contract
with the Contractor;
2. Give written inputs and recommendations to the Responsible Official for
Implementation for actions which are the authority of the said official; and
3. Take additional actions to ensure the proper supervision of the works.

The first set of TOR tasks included 12 items, the second set 13 items, and the third set
included 19 items.

Detailed procedures for project administration, amounting to 38 formats, were

considered too complicated for the current PRIM phase, and only one was included in
the terms of reference, namely a standard format for monthly reports.

Lesson 9: a) The previous terms of reference for supervision of road works was rather
general, and did not clearly specify the supervisor’s obligations under the related
Works Contract. b) Separation of authority over the Supervision Contract and the
related Works Contract is embedded in the current Procurement Regulations.

Further Action: Experience with the terms of reference so far has been
inconclusive. Supervision performance on P1 and P2 has been inadequate primarily
due to poor staff quality, so action has been taken by PIUC and DPU from P3
onwards to remove incompetent supervision staff before work starts. It appears
that national supervision consultants in NTB are unfamiliar with contractual
language (i.e. semi-literate), and the detailed terms of reference has been rarely
referred to. In the case of P1, the Site Englneer refuses to follow the standard
format for monthly reports, so it is debatable whether prescribing additional
standard formats for all the normal features of project administration would be
effective. In this environment, training in the form of mentoring by PIUC is not a
sufficient remedy, and good supervision requires a re-education program or a new
generation of engineers, ideally in conjunction with introduction of FIDIC
conditions of contract, with compatible terms of reference for supervision.

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 2.5 PRICE ADJUSTMENT PROVISIONS ARE INEQUITABLE

Issue: Under Presidential Regulation No. 54 of 2010/No. 70 of 2012, price adjustment

is permitted for contracts over one year, the base price index pertaining to month 12.

For example, if prices increase after month 1 and remain constant until the end of an
18 month contract (which is possible in the case of fuel prices), the Contractor would
be entitled to no compensation at all. Such a provision is obviously inequitable.

Previous experience with price adjustment in DGH is that it is very onerous to

calculate, subject to long delays, and very difficult to obtain extra funds.

Impact: Bidders know they cannot expect fair compensation for price increases, so
they provide for the risk of price increases in the bid price (or arrange for low quality
work). Greater risk means higher bid prices (or reduced quality under a regime of
disqualification for bidding over the Owner’s Estimate – see Section 4).

Solution: From P3 onwards, PIUC deleted price adjustment and introduced

compensation for changes in regulations, so that price rises for certain materials can
be compensated based on the price index at the time of bidding. A simple formula was
provided to calculate the impact of price increases on the Contract Amount.

Lesson 10: Price adjustment provisions are unfair and may lead to higher prices or
lower quality of works. A partial solution for some material prices has been found in
the form of compensation for changes in regulations.

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CHAPTER 3: Technical Specifications

Lessons relating to technical specifications were developed from application of the
General Specifications for Road Works issued by Directorate General of Highways
dated 2010 (edition 2). PRIM focuses on road safety and road maintenance.

3.1 ROAD SAFETY

Issue: Serious violations of safe practices are observable on every road project in NTB.
Safety of road users, vehicular and pedestrian, and also of workers, is neglected and
PRIM has raised the issue as a major priority. The General Specifications has a Section
1.8 on “Management and Traffic Safety” but is paid as a Lump Sum, 25% after
provision of unspecified equipment and in monthly instalments of the remaining 75%
thereafter, based on “acceptable progress” which is not defined.

Impact: The general language and lump sum payment in the General Specification,
together with inadequate education and enforcement, has led to widespread neglect
of this serious issue.

Solution: IndII added a Technical Guide to Road Safety Work Zones, Multi-message
Signs, and a Guide for Traffic Controllers beginning with Packages P1 and P2, and PIUC
has inserted the 8 new pay items from P1 and P2 into a Special Specification (replacing
the Lump Sum for Management and Traffic Safety). Design data on location of road
safety furniture is placed in a new Section on Information Available.

Lesson 11: The General Specifications are deficient in guidance on road safety, and in
payment provisions. PRIM has improved the specifications, but much effort will be
needed to overcome the habits of contractors who tend to ignore basic safety
practices, not only for road users but for their own staff.

3.2 RESTRICTIONS ON HOLDING TREATMENTS

Issue: Lengths of road in bad surface condition, generally unsealed, require a minimum
holding treatment to keep them passable until upgrading is warranted. The current
General Specification does not include a regrading operation. Road grade preparation
under Division 3 of the General Specification (Earthworks) is not permitted to be used
in the same contract with addition of aggregate under Division 8 (Minor Works),
purportedly to prevent quantities of aggregate measured by loose volume being
hidden under new pavement materials.

Secondly, Division 8 of the General Specification (Minor Works) provides a maximum of

50 cubic metres of aggregate per kilometre in such areas. For a 5 metre wide
pavement, this represents an average thickness of 1 cm, again to prevent excessive use
under new pavements.

Impact: Maintenance of road surfaces in bad condition is not provided for.

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 Solution: PIUC has written a Special Specification to relax the restriction on combining
pay items from Division 3 and Division 8 outside major works areas. It is also required
to document the materials used in such works, measured as loose volume. Time and
date, location and identity of trucks used for material transport, supported by photos,
is now required.

Secondly, PIUC provided a Special Specification to relax the limit to 150 cubic metres of
aggregate per km for use with regrading of localised failures, which was applied in
Bidding Documents from Package P3 onwards.

Lesson 12: The General Specification is deficient in not providing operations to support
holding treatments (minimum backlog works) on roads in bad condition. Special
Specifications have now been provided to define such works.

3.3 CONFLICTED PROVISIONS FOR POTHOLE PATCHING

Issue: Division 8 of the General Specification (Minor Works) provides for payment of
quantities of pothole patching only for holes which exceed 40 cm x 40 cm, up to a total
volume of 10 cubic metres per km. Smaller holes are classified as routine maintenance
under Division 10, paid as a Lump Sum. The upper limit is intended to prevent repair of
severely damaged roads which should actually be reconstructed.

Impact: It has been observed that Contractors in NTB tend to excavate greater than 40
cm x 40 cm around all potholes, so the limit has unintentionally created a conflict of
interest and potential double payment for pothole patching (as the Lump Sum
payment is not reduced in consequence).

The 10 cu.m. limit may represent only 1% of the pavement area, and enforcement
strictly would prevent the repair of the backlog of potholes, because reconstruction is
not a possible option for the majority of such roads.

Solution: PIUC wrote a Special Specification to remove the upper limit to pothole
patching volume in Division 8, adopted from P3 onwards. Secondly, after observing
Contractor behaviour, PIUC considers that all pothole repair should be paid by quantity
of work done, and revised the Special Specification to remove the 40 cm x 40 cm
minimum size, beginning with Packages P10 and P12.

Lesson 13: The General Specification provides conflicted and unrealistic rules for
pothole patching. All pothole patching should be paid by quantity, not as lump sum.
Special Specifications are now provided for this purpose.

3.4 CONFLICTED PROVISIONS FOR CRACK SEALING

Issue: Division 8 of the General Specification (Minor Works) provides for payment of
quantities of crack sealing only between 10% and 30% of pavement area for each 100
metre length, up to a maximum of 40 square metres. Less than 10% is classified as

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routine maintenance under Division 10, paid as a Lump Sum. The 30% limit is intended
to prevent sealing of cracks on pavements which should be reconstructed.

Impact: It has been observed that Contractors in NTB tend to seal greater than 10% of
areas, not just the cracks, so the limit has unintentionally created a conflict of interest
and potential double payment for crack sealing (as the Lump Sum payment is not
reduced in consequence). The 30% limit per 100m is unrealistic, because
reconstruction is not a realistic option for very short lengths.

Solution: PIUC wrote a Special Specification to remove the upper limit to crack sealing
area in Division 8, adopted from P3 onwards. Secondly, after observing Contractor
behavior, PIUC considers that all crack sealing should be paid by quantity of work done,
and revised the Special Specification to remove the 10% minimum area, beginning with
Packages P10 and P12.

Lesson 14: The General Specification provides conflicted and unrealistic rules for crack
sealing. All crack sealing should be paid by quantity, not as a lump sum. Special
Specifications are now provided for this purpose. Second, the specifications should
clarify the purpose of the task as sealing of cracks, not just cracked areas.

3.5 UNREALISTIC PROVISIONS FOR SHOULDER REPAIRS

Issue: Division 8 of the General Specification (Minor Works) provides for payment of
quantities of shoulder repairs (re-gravelling or re-forming) up to 50 meters (one side)
in each kilometer of road. Greater than that limit is paid under either Division 4
(Aggregate Class S) or Division 3 (Excavation). The limit is intended to avoid minor
shoulder repairs being paid on the same segments as shoulder construction related to
pavement works. Division 10 also provides for routine shoulder maintenance paid as a
lump sum.

Impact: Divisions 3 and 4 are intended for new shoulder construction, Division 8 should
be used for minor works. The limit of 50 metres/km (one side) would prevent much of
the shoulder repairs which have been neglected for so long (backlog works). IndII
considered that if the limit was removed to allow extensive shoulder repairs, an audit
finding would be made of overlap with routine shoulder maintenance.

Solution: PIUC wrote a Special Specification to remove the limit to shoulder repairs in
Division 8 paid by quantity, adopted from P3 onwards. In addition, to avoid audit
findings of overlap with routine shoulder maintenance paid by lump sum, the cost
estimate for routine shoulder maintenance was transferred to the cost item for routine
maintenance of drainage and verges.

Lesson 15: The General Specification includes an unrealistic limit to shoulder repairs
which contradicts the objective of backlog maintenance under PRIM. A Special
Specification now facilitates shoulder repairs, and arrangements made to avoid overlap
with routine shoulder maintenance.

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 3.6 REFORM OF PAYMENT FOR ROUTINE MAINTENANCE

Issue: Lump sum payment for routine maintenance items is noted above. It is specified
per km of road and paid 37.5% in three monthly instalments, the remaining 62.5% is
paid in equal instalments for the remainder of the contract. PIUC has observed that
Contractors regard the lump sum as a right or income item, not an obligation/cost with
an expectation of output. Further, it seems that works supervisors are powerless to
change this mindset, and DPU also seems greatly challenged to influence the situation.

Impact: Payment for Routine Maintenance by a lump sum item does not achieve value
for money.

Solution: Paying for work by quantity (3.2 to 3.4 above) will reduce the cost of routine
maintenance and therefore the amount lost through the lump sum payment system,
but that may not be enough to change the entitlement mindset. Therefore, for
Packages P10 and P12 PIUC revised the unit of payment to focus on output. The new
unit is kilometre-month, and the unit rate is the total cost divided by the total length
and by the number of months of routine maintenance. The monthly payment shall be
supported by inspection of each kilometre of road and a check that it fulfulls the
performance criteria for each of four sub-items of routine maintenance (pavement,
drainage+shoulders, road furniture and bridges).

Lesson 16: The lump sum payment system for routine maintenance has encouraged an
entitlement mindset that must be reformed. A Special Specification was provided to
revise the unit of measurement and payment in order to focus on output and
performance. This is being trialed in PRIM Packages P10 and P12.

3.7 LABORATORY EQUIPMENT

Issue: The General Specification contains a standard list of laboratory equipment that
the Contractor must provide. The list does not take account of the size or complexity of
the works.

Impact: For backlog and minor works under PRIM, the standard list of laboratory
equipment is excessive.

Solution: PIUC has modified the list in a Special Specification, defining different sets of
equipment for different sizes of contract.

Lesson 17: The standard list of laboratory equipment is unsuitable for many PRIM
contracts. A Special Specification has been prepared for use in future PRIM contracts.

3.8 ENVIRONMENTAL MANAGEMENT AND MONITORING

Issue: The General Specification contains a format for environmental management that
does not relate to the specified types of potential environmental damage.

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Impact: The format attached to the General Specifications is inconsistent with current
environmental regulations, which would result in non-compliance with regulations.

Solution: PIUC has modified the format to become a suitable format for Contractor
and Supervisor to prepare at the start of the works, to enable DPU to fulfill the legal
requirement for a Statement of Environmental Management Capability (SPPL)
appropriate to small scale works. This has been applied from Package P3 onwards.

Lesson 18: The General Specification environmental format is incompatible with

current regulations. A Special Specification has been developed and adopted.

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 CHAPTER 4: Owner’s Estimates
Owner’s Estimates are the critical reference for contract price evaluation, as bids over
the Owner’s Estimate are disqualified (PerPres 54/2010, Article 66 (5) b.). PIUC
investigated the cost estimating model in circulation in NTB Province in 2012-2013
(abbreviated as AHS) used for Engineer’s Estimates and the closely-related Owner’s
Estimates, and introduced revisions to the AHS model. The errors discovered and the
revisions introduced constitute a primary source of the following Lessons Learned.

Further Action: Disqualification of bids higher than the Owner’s Estimate should be
abolished. Disqualification would only be reasonable if collusion is rife among
bidders AND if Owner’s Estimates accurately reflect best construction practices
and realistic future prices AND if budgets are completely inflexible AND if the
Contractor cannot disguise losses in poor quality work (see Lesson 1.5). None of
those are reasonable assumptions, so flexibility is required is order to give credit to
Bidders’ experience and knowledge, and in order to expect good quality work.
Disqualification is an incentive to conformity and deception. What is not realized is
that such a rule makes the Owner partly responsible for subsequent construction
failure.

4.1 ERRORS IN COST ESTIMATES FOR ROUTINE MAINTENANCE

Issue: Several sources of error were identified:

1) Routine maintenance of every package includes only 1 m2 of Right Of Way
Cleaning and 1 m2 of Grass Cutting, regardless of the length of road to be
maintained;
2) Labour input for 1 km of routine maintenance is the same as for 100 km;
3) Equipment cost component is also unrelated to length of road maintained;
4) Only the materials cost component is dependent on the length of road.

Impact: Routine Maintenance cost estimates bear no relation to reality, and should not
be used as part of a sensible Engineer’s Estimate or Owner’s Estimate.

Solution: In the AHS files used for Engineer’s and Owner’s Estimates for P3 onwards,
the routine maintenance component has been completely revised.

Lesson 19: The current costing model is completely unsuitable for estimating the cost
of routine maintenance.

4.2 REFERENCES TO MISSING DATA/FILES/FOLDERS

Issue: A total of 680 references in the original AHS file refer to data in an unknown file
in a missing folder, namely C:\PROJECK SILVA 2012\[MASTER OE DANA SILVA 2012 (wil-
2).xlsx. The missing links occur in sourcing equipment prices into the model. This
creates unpredictable calculation errors.

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Impact: The file Tanjung-Bayan.xlsx dated 25 November 2013 was one of the original
files used in preparing P1. Before removal of the 680 errors, the Total Cost Estimate
was Rp 7,753,275,000. After removal of 481 errors in worksheet 5-Alat(1) and 199
errors in worksheet 5-Alat (2), the Total Cost Estimate changed to Rp 7,726,727,600.
The impact was small in this case because most equipment prices in the missing file
were also used in AHS (in worksheet 4-Basic Price). If new equipment prices were
entered into the model, a completely different outcome should be obtained, but these
errors would cause the model to ignore the new price data.

Solution: In the AHS files used for Engineer’s and Owner’s Estimates for P3 onwards, all
680 references were revised to refer to the respective data in AHS itself.

Lesson 20: The costing model should be stand-alone. The current model is defective in
using hidden external data while apparently using the data in the model itself.

4.3 REFERENCES TO EXTERNAL QUANTITY DATA

Issue: A similar issue as 4.2 applies to quantity data in the original AHS file. A separate
file and folder C:\[KUAN.xlsx]KUANTITAS! is referred to for each quantity item in
worksheet BOQ.

Impact: If the external file C:\[KUAN.xlsx] is accidentally lost, deleted or transferred

away from the AHS file, the links will be lost and the costing model will not function at
all.

Solution: In the AHS files used for Engineer’s and Owner’s Estimates for P3 onwards, all
quantity data is entered directly into the AHS file.

Lesson 21: The current model is defective in keeping quantity data in a separate
external file.

4.4 MANUAL COPY AND PASTE

Issue: In the original AHS file, worksheet BOQ (3) tables and headings are manually
copied from tables and headings between worksheets.

Impact: Differences between various tables and headings may arise unless changes in
the original table are copied diligently to all other respective tables.

Solution: In the AHS files used for Engineer’s and Owner’s Estimates for P3 onwards, all
derivative tables and headings use spreadsheet formulae to refer to the source table or
heading.

Lesson 22: The current costing model is defective in manually copying tables and
headings, and not using very basic functions to ensure a robust spreadsheet.

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 4.5 ERRONEOUS CALCULATION OF MAJOR PAY ITEMS

Issue: In the original AHS file, worksheet MAJOR contains #REF! errors, so none of the
formulae can be calculated. In any case, major pay items should be calculated for a
contract package, not for each link within that package.

Impact: Major Pay Items cannot be identified as intended.

Solution: In the AHS files used for Engineer’s and Owner’s Estimates for P3 onwards,
worksheets % and MAJOR have been deleted in entirety. Major Pay Items are derived
as an output of a spreadsheet which combines seveal link estimates into one cost
estimate for a contract package.

Lesson 23: The current costing model incorrectly identifies Major Pay Items.

4.6 REFERENCES TO OUTDATED SPECIFICATIONS

Issue: The latest DGH General Specification is Edition 2 of 2010. The original AHS file
uses pay item names and codes from a previous version of the General Specification.

Impact: Errors in pay item names or numbers may cause confusion in supervision when
interpreting the specifications.

Solution: In the AHS files used for Engineer’s and Owner’s Estimates for P3 onwards, all
pay items were revised in line with the latest General Specification or the Special
Specifications applicable for each package.

Lesson 24: The costing model should use the same pay items as specified in the
General Specification and the Special Specifications.

4.7 INEFFICIENCY IN DENOMINATION OF PAYMENTS

Issue: The Standard Bidding Documents from LKPP and the original AHS file use two
decimal places for all Rupiah amounts, even for Stamp Duty (Rp. 6.000,00) while
Indonesia’s Monetary Authority itself simplifies the amount to Rp. 6000. Bidders are
not provided with guidance on rounding or simplification of amounts.

Impact: An error in the second decimal place is at most 0.00000000005 times a

contract amount of Rp. 1 billion, a very small road works contract. Computers can
easily compute decimal places, but human resources are involved in checking and
transcriptions. Spurious accuracy is an incalculable waste of resources, considering
there are generally over 30 pay items and monthly calculations for each contract.

Solution: PIUC has introduced two requirements in the Special Conditions of Contract:
the unit of payment is specified as “Rupiah without decimals” and “Each unit rate shall
be specified in hundreds of Rupiah.” As a result, when quantities to two decimal places

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are multiplied by unit rates in hundreds, Contract Amounts and Payment Amounts will
not contain decimals.

Lesson 25: The habit of using two decimal places is a waste of human resources. A
Special Condition of Contract has been provided to simplify contract amounts without
introducing errors. This is being trialled in PRIM packages P10 and P12.

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November 2014
 CHAPTER 5: Making Contracts Attractive
PRIM contracts were apparently unattractive to Contractors in NTB, as evidenced by
few bidders on the Backlog and Minor Works packages and very slow works progress
on larger-sized contracts in comparison with progress on contracts funded from other
sources. This chapter offers Lessons related to this issue.

5.1 RELATIVE SIZE OF PRIM PROGRAM

Issue: PRIM constitutes a limited amount by

number and a minor amount by value of the
Provincial Road Works awarded in NTB in 2014
(see pie chart).

Impact: PRIM has had a very limited positive

impact on Contractors’ behavior.

Solution: None available. It was beyond the

scope of parties involved in PRIM, including
DPU, to influence the size or impact of external
programs operating on Provincial Roads in NTB.

Lesson 26: Expectations for change through the medium of PRIM should be tempered
by consideration of other programs operating on Provincial Roads in a Province.

5.2 CONTRADICTIONS IN MULTI-YEAR CONTRACTS

Issue: NTB failed to provide sufficient funds for 2014 construction works, resulting in
the fact that some Contractors will only receive payment in 2015 for work done in
2014, without compensation. On the other hand, National funded works are fully
funded in single year contracts.

Impact: The National funded projects are more attractive as funds are available in
2014, and timely payments are received. Deliberate delays in PRIM Works can thus be
expected by Contractors who have both types of contracts.

Solution: No solutions were available. DPU made strong representations to the

Provincial Finance Agency to support PRIM in 2014 but other activities had priority.

Lesson 27: Multi-Year programs can be counterproductive in attracting Contractors’

interest if not fully supported by timely funding. In any case, early completion favors
single-year programs when a Contractor wins both single- and multi-year contracts.

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5.3 CONTRACTORS’ INTERESTS AND COMPETENCE

Issue: Most Contractors are used to doing Rehabilitation (Reconstruction) and Periodic
Maintenance (Overlay) only. Contractors prefer to do Reconstruction and Overlay as it
is normally done on a short stretch of road where staff, equipment and materials are
easy to manage. Backlog and Minor Works (BMW) and Routine Maintenance (RM) are
more extensive in location, more labor intensive, and Contractors appear to be
unfamiliar with such works.

Impact: The BMW and RM components of contracts have tended to be neglected or

postponed. Contractors have underestimated the logistics involved in routine
maintenance, and some have seriously under-bid that item.

Solution: PRIM has provided experience with various combinations of work types and
contract sizes to address the key roadwork needs. See also Further Actions below.

Lesson 28: Most Contractors’ interests and competence are in Equipment-intensive

work. Labour-intensive work requires different management skills.

5.4 SWAKELOLA COMPETENCE AND PRODUCTIVITY

Issue: An output-focused model of swakelola payments was introduced by PIUC in

2013, paying for time-based services with defined output, despite some resistance
from two of the three Swakelola Balai. It has transpired that those two Balai have also
been slowest to adapt to the technical requirements of routine maintenance. They
have shown that they have the manpower on the ground, but lack competence in both
technical and management areas.

Impact: Routine maintenance by Swakelola has been slow to improve in two of the
three Balai, but is progressing well in Balai Sumbawa.

Solution: PRIM has exposed the challenges of turning the well-established Swakelola
organisation in NTB into a productive routine maintenance work force. See also
Further Actions below.

Lesson 29: Swakelola competence and productivity is very low, although they do have
the manpower forces on the ground and can procure simple equipment. With better
management they can achieve reasonable results on routine maintenance.

Further Action: Separate contracts for equipment-dependent maintenance

activities (such as shoulder grading) could better match Contractors’ strengths than
contracts mixed with labor intensive activities. The Swakelola field organization
needs more intensive training and identification of competent candidates for field
managers. The next step, involving community-based groups for routine
maintenance, will require additional organization and training.

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November 2014
 5.5 PUNITIVE CONTRACT CLAUSES

Issue: One feature of PRIM was to combine all works on a link into one contract, for
efficiency and in order to address the historical partial approach to road repair.

Impact: Combining Routine Maintenance on long lengths as well as Rehabilitation and

Periodic Maintenance on short lengths in one contract has created the risk that
Routine Maintenance would be neglected.

Solution: In order to encourage/enforce implementation of Routine Maintenance work

included in the Contracts, Contractors were subject to withholding of payments for
Rehabilitation and Periodic Maintenance if the Routine Maintenance was not
performed satisfactorily, beginning with Packages P1 and P2. This ‘solution by
sanctions’ may have made the contracts less attractive to Contractors.

Lesson 30: Bonuses rather than sanctions should be used to encourage good
performance. Bonuses are not currently permitted in Government financing, so there
is an urgent need to explore more innovative financing arrangements.

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CHAPTER 6: Conclusions and Recommendations

This chapter brings together the findings of this Report.

6.1 SUMMARY OF LESSONS LEARNED

1. Setting short time deadlines for bidding can reduce the quality of bids.
2. Better information on PRIM needs to be provided with bidding documents.
3. The bidding documents for P1 and P2 had excessive Bidder qualification data
requirements.
4. The bidding documents for P1 and P2 contained excessive and essentially
subjective technical evaluation criteria.
5. A final check of the winning Bidder’s equipment and key manpower before DPU
signs a contract will provide DPU with confidence that elimination of technical
evaluation of equipment and manpower does not increase DPU’s risk.
6. The bidding documents for P1 and P2 did not cross-reference Special Conditions of
Contract, thereby creating difficulty in understanding.
7. The bidding documents for P1 and P2 contained three different titles for the
Supervisor of the Works, which can readily be harmonised and clarified.
8. Until FIDIC conditions of contract are adopted in full for Government contracts in
Indonesia, less than equitable risk-sharing between Contractor and Owner will
remain.
9. a) The previous terms of reference for supervision of road works was rather
general, and did not clearly specify the supervisor’s obligations under the related
Works Contract; b) Separation of authority over the Supervision Contract and the
related Works Contract is embedded in the current Procurement Regulations.
10. Price adjustment provisions are unfair and may lead to higher prices or lower
quality of works. A partial solution for some material prices has been found in the
form of compensation for changes in regulations.
11. The General Specifications are deficient in guidance on road safety, and in payment
provisions. PRIM has improved the specifications, but much effort will be needed
to overcome the habits of contractors who tend to ignore basic safety practices,
not only for road users but for their own staff.
12. The General Specification is deficient in not providing operations to support
holding treatments (minimum backlog works) on roads in bad condition. Special
Specifications have now been provided to define such works.
13. The General Specification provides conflicting and unrealistic rules for pothole
patching. All pothole patching should be paid by quantity, not as lump sum (see
Box below). Special Specifications are now provided for this purpose.

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November 2014
 14. The General Specification provides conflicted and unrealistic rules for crack sealing.
All crack sealing should be paid by quantity, not as a lump sum (see Box below).
Special Specifications are now provided for this purpose. Second, the specifications
should clarify the purpose of the task as sealing of cracks, not just cracked areas.

All Routine Maintenance (RM) Works should be itemized and corresponding

Methods of Measurement and Payment should be developed. Detailed Contracts
for RM have already been developed in many countries outside of Indonesia. So
there is thus no need to start from scratch in Indonesia.
15. The General Specification includes an unrealistic limit to shoulder repairs which
contradicts the objective of backlog maintenance under PRIM. A Special
Specification now facilitates shoulder repairs, and arrangements made to avoid
overlap with routine shoulder maintenance.
16. The lump sum payment system for routine maintenance has encouraged an
entitlement mind-set that must be reformed. A Special Specification was provided
to revise the unit of measurement and payment in order to focus on output and
performance. This is being trialled in PRIM packages P10 and P12.
17. The standard list of laboratory equipment is unsuitable for many PRIM contracts. A
Special Specification has been prepared for use in future PRIM contracts.
18. The General Specification environmental format is incompatible with current
regulations. A Special Specification has been developed and adopted.
19. The current costing model is completely unsuitable for estimating the cost of
routine maintenance.
20. The costing model should be stand-alone. The current model is defective in using
hidden external data while apparently using the data in the model itself.
21. The current model is defective in keeping quantity data in a separate external file.
22. The current costing model is defective in manually copying tables and headings,
and not using very basic functions to ensure a robust spreadsheet.
23. The current costing model incorrectly identifies Major Pay Items.
24. The costing model should use the same pay items as specified in the General
Specification and the Special Specifications.
25. The habit of using two decimal places is a waste of human resources. A Special
Condition of Contract has been provided to simplify contract amounts without
introducing errors. This is being trialled in PRIM packages P10 and P12.
26. Expectations for change through the medium of PRIM should be tempered by
consideration of other programs operating on Provincial Roads in a Province.
27. Multi-Year programs can be counterproductive in attracting Contractors’ interest if
not fully supported by timely funding. In any case, early completion favours single-
year programs when a Contractor wins both single- and multi-year contracts.
28. Most Contractors’ interests and competence is in Equipment-intensive work.
Labour-intensive work requires different management skills.

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29. Swakelola competence and productivity is very low, although they do have the
manpower forces on the ground and can procure simple equipment. With better
management they can achieve reasonable results on routine maintenance.
30. Bonuses rather than sanctions should be used to encourage good performance.
Bonuses are not currently permitted in Government financing, so there is an
urgent need to explore more innovative financing arrangements.

6.2 SUMMARY OF FURTHER ACTIONS PROPOSED

1. Supervision performance on P1 and P2 has been inadequate primarily due to poor

staff quality. In this environment, training in the form of mentoring by PIUC is not a
sufficient remedy, and good supervision requires a re-education program or a new
generation of engineers, ideally in conjunction with introduction of FIDIC
conditions of contract, with compatible terms of reference for supervision.
2. Disqualification of bids higher than the Owner’s Estimate should be abolished.
Disqualification is an incentive to conformity and deception. What is not realised is
that such a rule makes the Owner partly responsible for subsequent construction
failure.
3. Separate contracts for equipment-dependent maintenance activities (such as
shoulder grading) could better match Contractors’ strengths than contracts mixed
with labour intensive activities. The Swakelola field organisation needs more
intensive training and identification of competent candidates for field managers.
The next step, involving community-based groups for routine maintenance, will
require additional organisation and training.
4. As stated in the Program Design Document, “To help ensure sustainability [PRIM]
would work through, and in the process strengthen, existing government
procedures ….”. The above Lessons show many examples of shortcomings in
existing government procedures related to road maintenance and road safety.
PIUC was constrained in taking the next step, namely to strengthen government
procedures, which requires action by the National Government. It is hoped that
this document will assist concerned parties to apply the Lessons to strengthen
government procedures, not only for PRIM but for all road safety activities and
road maintenance works funded by APBN and APBD.

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