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Performance-based Contracting for Roads in Serbia and Montenegro

1. Country	Serbia and Montenegro
2. Year when the first performance-based contract was awarded	Two pilot contracts of the hybrid type were let in August 2004
3. What government organization promoted/initiated a PBC approach in the country?	Road Directorate of the Republic of Serbia (RDRS), later renamed as Public Roads of Serbia
4. Supervision of the contractors is done by	Local consulting firm
5. What were the reasons for recruiting an external consultant instead of using the RSRD’s staff to supervise contractors executing PBCs?	Due to the shortage of human resources at the RDRS and low salaries of government employees, the RDRS decided to outsource supervising services to a local consulting company. Due to a low salary, no one at the Directorate would be willing to perform additional duties of a supervisor
6. Sources of the current funding of PBC (in %)	External funding (World Bank) – 91% Central government funding (RDRS) – 9%
7. Cost (USD), size of the network under contract (km) and contract duration (years)	~ 3,615 Euro per km per year The network sizes are 660km and 517km. The contract duration is 3 years, with a two-year extension option, if the contractor performs well and is interested in continuing
8. Dispute resolution mechanism	Negotiations between the contractor, client (RDRS) and supervising consultant
9. Procurement process applied	International Competitive Bidding
10. Was prequalification used?	Yes
11. Degree of competition	1 international contractor, 5 domestic (including 3 local) contractors
12. Payment schedule for the contractors	The payment is made in every 28 days in the full amount for lump sump work items if the contractor meets the specifications set in the contract. The contractor received advance payment in the amount of 10% of the entire contract price, which is deducted in equal installments every month over the next 3 years.
13. Types of services delivered under lump sum payment	Specific routine maintenance activities for roads and bridges; and winter maintenance. A list of these is in the Annex.
14. Types of roads covered under PBC and their pavement type and traffic load	Regional roads
15. Percentage of the entire network of this type of road under PBC	8% of the regional road network

Additional comments

1. The RDRS, contractors, and supervisors recognize partnership as a key success factor in the implementation of PBCs. The parties involved in the administration, implementation and supervision of PBCs have weekly meetings to discuss their concerns and issues, since these are pilot contracts and none of the parties have specific experience in PBC. The RDRS is daily available for the contractor to discuss any emerging problems over the phone or via correspondence, if the supervisor cannot handle or resolve them. Representatives of the contracting companies are satisfied with the way the RDRS has established communication between all parties concerned.

2. Main challenges that the client and contractors face in Serbia and Montenegro have to do with personnel qualifications and experience required for smooth functioning of the PB approach. Specifically:

a. The Road Directorate is short on qualified staff. The RDRS provided some training to its staff before starting the preparation of bidding documents for two pilot PBCs, but this has proved insufficient. A Swedish consultant, commissioned to write sample bidding documents and assist in bid evaluation, had to step in and explain a lot of issues related to the performance-based procurement to both the RDRS and contractors. In retrospect, more comprehensive training should have been provided and the RDRS should have asked consultants to provide on-going advisory services in PBC to clarify many issues arising between the Road Directorate and bidders/contractors. Qualified staff are still in short supply, nor has it been easy to recruit staff for training. This last is due to inherited behavior and attitude of the civil servants who have difficulties to change and adjust (on a relatively short notice and at low pay) their procedures to fit the new contractual approach.

b. Local construction industry lacks staff with requisite qualifications for contract administration. The contractor, an international company, hired many locals to both execute physical works and administer contracts. This worked with regard to technical skills, but not so well when it came to administrative skills. The staff of the self-control unit tried to glean their responsibilities from the tender documents, but this proved to be too difficult for them, leading to too many questions asked of supervision consultants. The contractor’s project manager tried himself to deliver on-the-spot training in administrative aspects of PBCs to local employees, but this did not work. Evidently, training has to be done by training professionals.

c. Contractors themselves needed training in administration of the PBC approach. It became clear that contractors did not fully understand the monitoring and evaluation methods used by supervision consultants especially for those work items paid on a lump sum basis. A workshop on these subjects was very much warranted.

Annex

Types of services delivered under lump sum payment

A. Road Routine Maintenance

Maintenance of the Road Reserve
Mowing of grass and shrub
Cutting and grubbing of bushes and trees

Maintenance of the Drainage System
Maintenance of unlined side drains
Cleaning of masonry and concrete channels
Maintenance of circular culverts
Maintenance of box culverts
Maintenance of subsurface drainage systems
Cleaning of chutes

Maintenance of Unstable Slopes
Removal of rockfalls secured by wire wash
Maintenance of retaining and facing walls

Maintenance of Road Profile Elements
Repair of uneven shoulders
Cleaning of benching and gutters
Filing in curb joints

Maintenance of Pavement
Routine cleaning of pavement
Fixing of unstable stone cubes of paving stones

All other items are paid on a unit rate basis.

Maintenance of Traffic Signs and Road Furniture
Cleaning and small repairs of vertical traffic signs and toad furniture
Small repairs of flexible guardrails

Winter Road Maintenance
Snow clearance by road category
Skid control by road category
Preparing of winter service, requested additional inspections and measurement during winter maintenance
Procurement, installation and service of Road Weather Information System with 3 stations and training of operators

B. Bridge Routine Maintenance

Routine inspection of the bridges

Removal of the waste and vegetation
Cleaning of the bridges
Removing of vegetation in the bridge zone
Maintenance of water flow clearance

Maintenance of the drainage system
Maintenance of the bridge superstructure drainage system
Maintenance of the fixings for drainage on bridge superstructure

Maintenance of the expansion joints
Fixing of the expansion joints
Maintenance of the protective curtains around bearings

Other items are paid on a unit rate basis.

Sources:

1. Interviews with the RDRS staff, contractors and supervisors, February 2005.
   
   
2. RDRS. 2004. “Bidding Documents for the Serbian Road Maintenance Pilot Project: Routine and Winter Maintenance of Main and Regional Roads in Macva District.” Belgrade. Courtesy of the Road Directorate of the Republic of Serbia.

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