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Performance-based Contracting for Roads in Chad

1. Country	Chad
2. Year when PBC was first launched	The first contract execution started in June 2001.
3. What government organization promoted/initiated a PBC approach in the country?	Minister of Public Works and Director of Roads
4. What were the reasons for switching from the traditional unit price-based to performance-based contracts for road maintenance?	In 90s they switched from the force account to the private sector; but they were not satisfied with the results they were paying for and they decided to pay for the level of the service instead of inputs. Another reason was a financing issue, as the Ministry of Public Works and National Road Directorate saw that the donors would participate in financing this type of contract.
5. Name of the organization currently in charge of management of road maintenance	National Road Directorate
6. Supervision of the contractors is done by	International consulting firm from Cameroon, employing local staff
7. Sources of the current funding of PBC (in %)	External funding – 80% (WB) Central government funding – 20%
8. Unit cost per km per year	USD 5,700 per km per year (including rehabilitation, periodic and routine maintenance)
9. Typical contract cost (USD) and duration (years)	The contract cost was USD 22,800. The duration was 4 years.
10. Typical contract cost (USD) and duration (years) with the supervisor	The contract with the supervisor started a month-two earlier than that with the contractor, but it covered the same time period.
11. Dispute resolution mechanism	Adjudication (e.g., Dispute Review Expert): an international expert from France was involved
12. Procurement process	International Competitive Bidding
13. Degree of competition	Two international and one national contractor were selected during the prequalification. The local contractor lost because its contract price was 12% above the engineer’s estimate.The winning bid was 7% below the engineer’s estimate.
14. What contractor selection criteria were used during the bid evaluation and what weight did they have during the bidding evaluation	The contract price weight was 100%
15. Types of delivery services under lump sum payment	Rehabilitation and maintenance
16. Types of roads covered under PBC and their pavement type	440 km of national, all unpaved, fewer than 100 vehicles per day, but 60% of this traffic are usually heavy trucks. This section is an important strategic road, as it connects East and West of the country and main access centers.
17. Percentage of this type of road in the entire network under PBC	Total all-season roads: 2,600 km Under PBC: 440 km or around 17% as of 2005

Additional comments

Context
Due to poor results with traditional road maintenance contracts and insufficient mobilization of domestic funding for maintenance, Chad’s government decided to pilot a new type of contract, which would allow improving the road conditions at a lower price than the price of traditional method-based contracts.

Bidding process
In late 2000 a competitive international tender was launched to implement a four-year PBC to manage and maintain 441 kilometers of unpaved main roads, which represented 7% of the primary network. The contract covered sections previously passable only during the dry season. Three bidders were selected during the pre-qualification. The submitted bids were evaluated on the basis of a monthly lump-sum fee required. The winning bid price was 7% lower than the engineer’s estimate.

Implementation of the contract
The execution of the contract started in July 2001, three months after signing the contract. The contractor was given 22 months to bring a service quality up to the required levels. The contract was completed in June 2005.

The up-front payment was provided in the amount of 20% of the contract value, for which the contract had to provide a guarantee. The contractor provided a performance security of 10% of the contract value.

The contractor is paid a monthly fee - $480 per km - in case of compliance with performance indicators. The fee covers, among other things, a complete rehabilitation of the road at the project outset, management and maintenance of the road for four years, self-monitoring of compliance with the performance criteria, and provision of the basic services in road accidents.

Performance indicators and monitoring of compliance
A consulting firm from Cameroon was contracted out to perform the surveillance of the contract. Two monitoring mechanisms were designed to evaluate the contractor’s performance and compliance with the service criteria. The first one is the contractor’s self-monitoring with the consequent submission of a report with each monthly invoice to the client; and the second one is verification of the contractor’s reports by the consultant through monthly inspections. In case of non-compliance with any of the service criteria in any month, the monthly fee is reduced. If non-compliance occurs repeatedly, the contract can be suspended.

The service criteria against which the contractor’s performance was evaluated include:

passability (the road must be open),
average speed attainable,
user comfort, and
durability (a measure of the long-term sustainability of the road).

Results
Since the contractor met and in many cases exceeded the performance specification defined in the contract, the roads were returned in excellent condition. “Road users appreciate that the road is always in good conditions and not only after specific works were completed. Especially important is that they can use the road in the rainy season, which was impassable before” (Zietlow 2004).

The successful outcome regarding the road quality has led to a criticism that indicators may have been set too high.

Directions for future
According to some sources, Chad’s government planned to either extend or re-bid the contract for another 4 years after it expired in June 2005. Renewal would be based on a lower price, since the contractor has completed the initial rehabilitation requiring large up-front investments. In addition, the government is keen on letting another contract for 650 km of paved roads, which link key centres in Chad and Cameroon.

Sources:

1. Interview with A. Schliessler, Senior Transport Economist for the Transport Unit in the Africa Region and Task Team Leader of the Chad National Transport Support project. March 2005.
   
   
2. Hartwig, T., Mumssen, Y. and Schliessler, A. 2005. “Output-based Aid in Chad: Using Performance-based Contracts to Improve Roads.” Global Partnership on Output-based Aid. Note No 06.
   Washington, D.C.: World Bank. Courtesy of GPOBA.
   Also available at: http://www.gpoba.org/documents/Chad_Roads_OBApproaches.pdf
   
   
3. Zietlow, G. 2004. “Implementing Performance-based Road Management and Maintenance Contracts in Developing Countries – An Instrument of German Technical Cooperation.” November 2004.
   Eschborn, Germany. Courtesy of G. Zietlow.
   Also available at: http://www.zietlow.com/docs/PBMMC-GTZ.pdf

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