RAP3 and the Private Sector

1. RAP3 and the Private Sector Presentation for RAP3 Consultant’s Forum Michael Green June 2014

2. RAP3 • RAP3 Implementation £31.5m– • Works with district and central GON and private sector (14 districts) • Employment for the poor maintaining, upgrading, constructing rural roads. (14 districts) • Savings, literacy, income training as in RAP2 (14 districts) • Sustainable agricultural, small businesses, economic infrastructure (8 districts) • Trail Bridge construction (8 districts) • Rural Employment Guarantee Programme Support £3.6m – • GON Karnali Employment Program (KEP) in Mid and Far West regions. • TA in pilot districts and at the national level. (2 districts) • Improving targeting, awareness, wage payment systems, registration, planning and monitoring, transparency, capacity and coordination with local government. • Lessons learned inform a National Employment Guarantee Scheme • Results, Evaluation and Policy support, £1.35m – • third party continuous monitoring (8 districts) • separate studies to capture lessons on specific issues • inform the design of futuredonor and government programmes.

3. Strategic SWOT Analysis – 2012 • Spending in LRN sector likely to continue to increase over next ten years and outstrip capacity of DDC and DOLIDAR to manage the sector. • Without a substantial improvement in management of the sector SWAp funding aspirations of GON will not be achieved. • Chronic weaknesses that need to be overcome • a) span of control -1:75 agencies vs SRN 1:1 agency • b) district level planning and implementation • c) M&E impact and progress reporting. • These issues will take a long time to solve in terms of GON capacity to manage LRN sector. • GON needs a shorter term strategy

4. LRN Outsourcing Strategy • Outsourcing to the private sector is probably the best short term option and will appeal to the donors as well. • DOLIDAR should therefore reposition its role as management agency of the sector by outsourcing planning, design, supervision and M&E to the private sector through area contracts. • Payment for this support could be through TA assistance linked to donor projects or paid out of the LRN works budget. • Negotiate with donors for this in design of next generation projects post 2013.

5. Current Span of Control

6. Area Based Outsourcing Approach 9 16 19 16 15 DDC’s supported by Area TA’s WB DFID ADB SDC ADB

7. Looking to the Future

8. RAP3 Districts

9. Budget and Components (GBP)

10. District Road Core Network • New Construction – (4) • Humla, Mugu, Bajura, Kalikot • Maintenance – (10) • Doti, Achham, Dailekh, Jumla • Dadeldhura, Parbat, Sindhupalchowk, Morang, Jhapa, Sankhuwasabha • SED (8) • Humla, Mugu, Bajura, Kalikot (RAP2 style) • Doti, Achham, Dailekh, Jumla • Capacity Building/Policy Harmonisation (14) • Doti, Achham, Dailekh, Jumla, Humla, Mugu, Bajura, Kalikot • Dadeldhura, Parbat, Sindhupalchowk, Morang, Jhapa, Sankhuwasabha

12. DRCN First Year Funding

13. Example of Outsourcing - UK • The UK Highways Agency's operations are split into six regions that are roughly based on the regions of England. • These regions are subdivided into 13 operational areas. These areas are managed and maintained by an Area Team and a contractor, known as a Managing Agent (MA) or Managing Agent Contractor (MAC). • These combine supervision consulting and contracting. In addition, there are a number of sections of road that are managed by DBFO contracts separate from the area teams.

14. Nepal LRN post 2013 • Translated to Nepal a Central TA supports DOLIDAR • DOLIDAR keeps its project managers in KTM as now with Area TA’s supporting DTOs in Districts as per RTI Pilot. • In addition, there will be a number of projects eg SDC Bridges that can be managed through contracts that are separate from the area teams. • Once established and working move towards SWAp funding agreements with donors. • This will probably include elements of World Bank’s Program for Results

15. Post 2013 New Generation Projects

16. SWAp Asset Management • RAP3 supports GON SWAp programme in 14 districts • LRN investment based on District Transport Master Plans (DTMP). • Identify minimum network to link VDC and District HQ- District Core Road Network (DRCN) • New GON policy puts maintenance first; upgrade to all-weather; new last. • DTMPs to guide short, medium and long term investment by donors and GON ready by Dec. • Annual investment based on ARAMP

17. RAP3 Modality • LRN Maintenance through DDF • LRN Upgrading – Start direct • New construction – Start direct • Income generation – Partners • Economic infrastructure – Linked to IG • Capacity Building – Annual Support Plans • Central GON, Districts DTOs and Private Sector

18. The key to delivery of the new generation of results based LRN contracts are private sector consultants and contractors. • Can they do it?

19. The End

20. ConsultantProcurement & Performance RAP3 Consultant’s Forum Bill Seal (Engineering Team Leader) 5th June 2014

21. Purpose & Context • An open and honest view of RAP3’s experiences with our Consultants so far, • Overview of the significant performance issues and deficiencies (generalisations), • Ambition: • Not to blame, ‘sling mud’ or squabble, • Expose the issues, discuss openly and agree on how we can improve (Consultant & Client).

22. Current Engagements • Stage-1 Design: 5 num (3 months) – Lump Sum • Improvement Design: 3 num (3 months) – Lump Sum • Construction Supervision & Stage-2 Design: 4 num (3 years) – Time Based • LRNAM Support: 10 num (2 years) – Time Based • Total: 22 ongoing assignments

23. Earlier Experiences • More than a decade of Consultant partnerships (RAP1 & RAP2) • Presumptions Summarised: • Company involvement low (‘body shops’) • Inadequate care (to project / client) • High staff turnover / dissatisfied staff / absenteeism • Long-vacant positions (following resignations) • Competency / skill issues

24. RAP3LRN Strategy • P4R (‘payment for results’) where possible • Lump Sum / Milestone contracts • Reward performance • Multi-year contracts with extensions linked to Consultant performance • Time-based contracts for supervision / support assignments due to complexity • Quality & Cost Based Selection (QCBS) • Nepal Road Sector Assessment Study • DDCs to outsource services • Support development of the Private Sector

25. Employment of Consultants • Why employ Consultants? • Flexibility for changes in work size and scope • Management of man-power resource • Technical back-stopping and expertise • Checking and quality assurance • Value for money • The Alternative? • Develop large in-house teams (RAP3)?

26. Service Procurement Challenges • How to ….. • engage competent firms? • ensure value for money (judging the appropriateness of financial bids / relationship of higher fees to better quality?) • encourage assignment of capable / appropriate staff? • retain staff – adequate expenditure on staff employment / facility packages? • Answer: not just to ‘pay higher fee rates’

27. RAP3’s Procurement Approach • Pre-qualification • Standing lists • Expression of Interests • Specific & targeted invitation (i.e. on district-wise basis not generic) • Pre-bid Briefing Meeting • QCBS • 80% technical / 20% financial

28. Improved ‘Request for Proposals’ (RFP) • Chapter limitations: • Standard methodology provided (LS contracts only) • Methodology – 7 pages max • Comments on ToR – 2 pages max, etc. • CVs: • Provide a summary sheet (abstract) • Need not be full-time employee (benefit for 6 months previous only) • Realistic ceilings on full-mark experience • Staff Provisions: • Allowances – to be the same or better than those of the Client • Payment of Allowances – will be treated as ‘reimbursable’ items • No ‘leave in lieu’ – Client will pay only for periods assigned i.e. rates to be inclusive (leave, overtime, bonuses etc.) • Ethics: • Strong emphasis • ‘Whistle blowing’ etc.

29. Engineer’s Price Estimates • RAP3 intentions: • To promote the payment of ‘good’ rates (better than before) • Support private sector initiatives • Approach: • Target adoption of ‘Society of Consulting Architectural & Engineering Firms’ (SCAEF) published schedule of ‘Monthly Billing Rates’ • Bench-marking to earlier RAP experiences to gauge VFM

30. SCAEF Schedule of Fee Rates • Current version is 2010 (not updated) • Quotes a multiplier (OH, fees etc.) of 2.61 • High at ‘top end’, low at ‘bottom end’ • Senior Eng: NRs 267,500 p.m. • IoW: NRs 85,600 p.m. • AutoCAD Operator: 35,000 p.m. • Applicable for staff with > 15 years exp. • 30% reduction 7 to 15 years • 60% reduction 3 to 7 years • Some necessary adjustments had to be applied • Benchmarking to RAP2: approx. 30-35% higher (like for like with inflation)

31. Technical Proposals • Very little original thought – even in ‘comments / suggestions’ • Copy and paste • CVs (the biggest scoring section) • poorly presented • summaries incorrect / overlooked, difficult to evaluate • nomination based on potential score not ability / suitability • authenticity of CV content?

32. Financial Proposals / Negotiations • Prices widely dispersed (85% - 175% of Estimate) • Patterns of bidding: • ‘Scatter’ vs. ‘Cluster’ (several clusters ~ 150%) • Significant suggestion of collusion / lack of competition • RAP3 negotiation approach: • Competition / near Estimate: no negotiation on fees (5 out of 14 packages) • Grossly high / uncompetitive: offered at Estimate (9 out of 14 packages) – all bidders accepted • Bidders in negotiated packages all formally agreed: • Rates still sufficient to meet ToR without reduced quality • Rates still sufficient to retain staff

33. Mobilisation / Implementation • Slow mobilisation (far longer than agreed) • Immediate staff changes / difficulties in finding matching replacements (RAP3 provisioned 5% fee reduction for 6 months) • Poor understanding of ‘Inception’ / ability to design / tune an approach (HQ input needed?) • Team organisation / logistics • Supplementary staff proposals (LRAMS) • Late and poor quality provision of resources (office facilities, transport etc.)

34. Performance Issues (Firms) • Late staff payment (pay-when-paid approach) – despite receiving an advance • ‘Pay-what-paid’ approach i.e. hints of unpaid leave, unpaid travel etc. • Professionalism – narrow consideration limited to profit / fees / cashflow, lacking professional duty on project delivery • Self-checking absent (reliance on Client) • Inadequate backstopping (HQ support) • Slow replacement of unavailable / resigned staff (to the detriment of project) • Arbitrary assignment of staff (Lump Sum Contracts) • Assign inappropriate staff (age, fitness, non-drivers, attitude, suitability, etc.) • Lack of responsibility (safety, project delivery / cost control) • Lack of pride?

35. Performance Issues (Staff) • Engineers or Technicians? • Technicians: apply technical procedure accurately, • Engineers:direct, solve, evaluate, Interpret, judgement, research, relevance, VFM, leadership, etc.) • Over-reliance on software (‘blind’ application) • Reliance on templates not understanding, inability to truly ‘design’ • Unquestioned faith in design drawings (however ridiculous) • Lacking professional / self development • Leave management / high absenteeism

36. Summary of Key Issues - 1

37. Summary of Key Issues - 2

38. ‘Step forward, or backward?’ THANK YOU

39. RAP Consultants ForumSome Engineering Do’s and Dont’s5th June 20147 TIMOTHY J.R STIFF Senior Technical Director (Management Services) IMC Worldwide Ltd, UK

40. Safety, Safety Safety Do enforce safety on the sites Hard Hats Wellington boots Gloves and Goggles (especially when breaking rock) Safety Harness when working on steep slopes Check that First Aid pack is available and restocked as necessary in good time

41. Planning of the Works Do Discuss, Plan and Agree how the works are to be carried out • Ensure that everyone in the RBG understand the method of working and emphasise the key safety and environmental issues • Re-Brief as often as required so that everybody is working to the same plan

42. Do check excavation and fill slopes for stability Do look for signs of slope movement Such as tension cracks upslope or down slope, loose rocks or stones loose soil etc and warn and take corrective action in good time

43. Do Ensure that only correctly made gabions are used in the works The Gabions need for properly constructed gabion boxes with tightly wired edges

44. Do take care to check the design and detailing of retaining walls Retaining walls are a large capital investment and need to be dsigned in strict accordance with the RAP procedure Cross Sections are required at a minimum of 10 metres along the length of the proposed wall and at least 10 metres past it on each side to ensure the wall geopmentry is appropriate

45. Gabion walls Do bed the gabions in alternate stretcher and header courses so that it can distribute any movement most effectively

46. Do provide adequate drainage to the base of the the retaining wall foundation and back of wall drainage on the wall itself

47. Do -Establish Semi permanent chainage markings Establish chainage markers where they can be seen and on permanent feature if possible. Re establish as necessary

48. Road Drainage • The consideration of the drainage of the road is critical in ensuring the long term stability of the asset. • Do consider where the water is going • Do Minimise drainage runs to prevent concentration of water at outfalls • Optimizing surface cross drainage is often more easily accomplished by site survey and analysis of an existing segment rather than during the preconstruction phase of road development, as concentration problems and opportunities for their reduction are then readily apparent. • Therefore do visit the road during, or straight after any rains to identify problems • Field inspection of cross drainage needs is especially enlightening during intense climatic events. • Analysis of a road segment from top to bottom allows dealing with concentrations as they develop ,preventing any single concentration from reaching problematical proportions.

49. Do pay close attention to cross Drainage Details • Do consider how the water can cross the road especially where large season streams are apparent • Use geotextile or bamboo mats under stone pitching where necessary to ensure that the raod formation does not soften and erode during each rainy season • Closely consider where the water will actually go taking account of the existing grades • Do use the Staged construction approach to fine tune any designs as necessary

50. Do look around to identify any potential problems • Familiarity breeds contempt and walking down the same section of road results in one not actually seeing what is there • Don’t take the same short cuts each site visit otherwise lengths of road could not be looked at for long periods • Do write down any issues identified (locating them accurately using the permanent chainage markers that should be visible) • Do identify any addition recommended work in good time with estimates of time and cost implications for discussion with the DTL/EO