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Contracting in Urban Transport. Structure of Presentation. Objectives of Module Case Example Preparation of Feasibility Report (FR) and Detailed Project Report (DPR) Procurement Process Contracting Options and Case Studies Procurement Strategies Preparation of RFQ/RFP

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Contracting in Urban Transport


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    1. Contracting in Urban Transport

    2. Structure of Presentation • Objectives of Module • Case Example • Preparation of Feasibility Report (FR) and Detailed Project Report (DPR) • Procurement Process • Contracting Options and Case Studies • Procurement Strategies • Preparation of RFQ/RFP • Bid Process Management • Contract Management

    3. Objective of Module The Contracting module is developed with an objective to make the users mainly understand the following • Components of project life cycle • Preparation of Feasibility Report and DPR, and their appraisal • Preparation of Terms of Reference (TORs) and Request for Proposals(RFP) • Procurement and contracting strategy for urban transport projects • Preparation of bid documents , contract documents and Agreements • Project implementation options and models • Preparation of various types of procurement documents and contract documents • Bid process, evaluation and award of contracts • Supervise/ monitor/ manage projects

    4. Case Example

    5. Background • In a Standing Committee Meeting of an urban local body held on 25th January 2012, based on advise of a city engineer, a decision was taken to develop 2 urban roads. • The City Engineer is advised to implement the project immediately and accordingly a Notice Inviting Tender (NIT) is to be issued by him on 30th January 2012 • What are the issues in this entire process ?

    6. Problems and Issues • The Standing Committee took a decision on implementation of the project without conducting a Feasibility Study/ DPR and neither advised the City Engineer to get a DPR/ Feasibility Study conducted • The Project Implementation Options were not deliberated upon. The project could be implemented on a PPP basis or through funding support from other Government agencies • If the city does not have internal resources/ capacity to conceptualize/ structure the project, external assistance from advisors/ consultants should have been taken before issuing the NIT.

    7. Notice Inviting Tender • Given below is a tender notice that appeared in the newspapers. Read the tender notice and list out all the lacunae that you find Government of ………………/ Government of ……………..Urban Development Trust …………………………Municipality Tender Notice No:8/ ____________/__________/12-13 Dated:30-1-2012 The Municipal Commissioner,………………… Municipality, invitees sealed tenders from interested bidders for “Providing Street lighting in the unserved areas in Package-A: Road No ……to……. Of Sector …… and Package-B: Road No ……to……. Of Sector ……” Estimated Contract value of work is (a) Rs 255.55 lakhs (b) Rs 154.85 lakhs. Last Date for receipt of tenders including EMD is before 3.00Pm on (a) 21-01-2013 (b) 21-01-2013. Documents can be purchased from the Municipal Commissioner , …………….Municipality Ph.No……………..,Fax No…………..by remitting a D.D. or Municipal Challan for Rs 22,000/- before 5.00pm on (a) 16-01-2013 (b) 16-01-2013. Other details regarding eligibility etc. are in the tender documents. Sd/- (City Engineer,……….)

    8. Lacunae in the NIT Following are the lacunae for the above Tender Notice • Eligible/Qualification of bidders not mentioned • Bidders are eligible to apply for individual packages or not • Eligibility in terms of joint venture and consortium details not mentioned • EMD amount not mentioned • Pre-bid meeting and contact person to be contacted • Application sale start dates • Qualification Criteria in terms of technical and finance • Is the Cost of tender document of Rs 22,000/- is for Package (A) or both packages

    9. Project Life Cycle

    10. Project Life Cycle

    11. How do we identify a Project? • Identification and prioritization of projects in conformity to State & National Policies & Guidelines: • National Urban Transport Policy, • Jawaharlal Nehru National Urban Renewal Mission • A comprehensive vision document of a city must identify a sustainable project: • Master plan • City development plan • Comprehensive traffic and transportation study • Comprehensive Mobility Plan • Project ideas may also come from: • ULBs, • Stakeholder departments • Donors or from • NGOs • Introduction Project Identification • Project Scoping • Project Planning & Preparation • Project Appraisal • Public Consultation • Project Structuring • Bid Process Management • Project Implementation • Monitoring and Evaluation

    12. Project Scoping • Project scope : Definition of what the project is supposed to accomplish in the allocated budget (time and money) to achieve the project objectives • A project scoping study gives the project manager the opportunity to look at and assess the project before it becomes formally "live". • Introduction Project Identification • Project Scoping • Project Planning & Preparation • Project Appraisal Time • Public Consultation Project Scope & Quality • Project Structuring • Bid Process Management • Project Implementation • Monitoring and Evaluation Budget Resource

    13. Project Scoping • A SMART analysis. Projects should be SMART i.e. Specific, Measurable, Achievable, Realistic, and Time-bound. • Project scoping does not check the feasibility of the project but establishes how it needs to be organized and managed: • what the project aims and objectives should be • what the risks, limitations, and possible difficulties are • how the project should be organized and tackled • vision of a long-term sustainability of the project • infrastructure requirements • capacity of operations and maintenance during the project life cycle • Introduction Project Identification • Project Scoping • Project Planning & Preparation • Project Appraisal • Public Consultation • Project Structuring • Bid Process Management • Project Implementation • Monitoring and Evaluation

    14. Project Planning & Preparation • Project formulation is a process of documenting the eligible facility, the eligible work, and the eligible cost for projects. • Formulation allows for the consolidation of similar work items into projects to expedite approval and funding and to facilitate project management • Project formulation includes: • Preliminary Project Report • Feasibility Analysis • Techno-Economic Analysis • Project Design and Network Analysis • Input Analysis • Financial Analysis • Cost-Benefit Analysis • Pre-Investment Analysis • Introduction Project Identification • Project Scoping • Project Planning & Preparation • Project Appraisal • Public Consultation • Project Structuring • Bid Process Management Preliminary Project Report Feasibility Report Detailed Project Report • Project Implementation • Monitoring and Evaluation

    15. Project Appraisal The key criteria for an appraisal of a project are: Relevant: • consistent with the policy and programming framework and other ongoing and planned projects • within the institutional capacity of the project sponsor to implement • addressing key problems of the sector or stakeholders Feasible: • Strategy is realistic and within government policy • Cost estimates are sound • Assumptions made by the project are justified • The project implementing agency has the management, coordination, and financing arrangements to implement the project Sustainable: • There is adequate ownership of the project by project beneficiaries • Technology is appropriate • Environmental concerns have been addressed • Financial or economic analysis is reliable (e.g. a cost-benefit analysis) • Introduction Project Identification • Project Scoping • Project Planning & Preparation • Project Appraisal • Public Consultation • Project Structuring • Bid Process Management • Project Implementation • Monitoring and Evaluation

    16. Public Consultation • At each stage, public/ stakeholders consultation is required to ensure the project is accepted by the end-users • Project details should be prepared through a consultative or participatory process involving stakeholders and the community. • Public participation should be generated with stakeholders through the use of various methods, such as in-depth interviews, public meetings, workshops, focus group discussions, etc. • Consultations should also be held with vulnerable groups. • Introduction Project Identification • Project Scoping • Project Planning & Preparation • Project Appraisal • Public Consultation • Project Structuring • Bid Process Management • Project Implementation • Monitoring and Evaluation

    17. Project Structuring- Beginning of Contracting process • This stage of the project cycle involves structuring of the project and securing financing for the same, either through: • the Government budget, • or through aid donor funds, • or through private sector investors under a suitable Public Private Partnership (PPP) format. • It is important the once a project has been approved, discussions should be held with donors to secure their commitments to fund the projects. • Introduction Project Identification • Project Scoping • Project Planning & Preparation • Project Appraisal • Public Consultation • Project Structuring • Bid Process Management • Project Implementation • Monitoring and Evaluation

    18. Project structuring Options Public Sector Private Sector Design Finance Construct O&M Ownership EPC Item Rate EPC Trunkey Service Contract Management Contract Lease Concession BOT/ BOO Divest Public Ownership Private Ownership Source: Sustainable Urban Transport Planning Toolkits for Public Private Partnership in Urban Transport, 2008,Ministry of Urban Development

    19. Issues in Project Implementation • What are the issues faced by you in your city for implementation of any project? • Scoping • Planning • Financing • Political environment • Public consultation- consensus • Project preparation • Selection of contractor • Contract monitoring

    20. Preparation of Feasibility Report & DPR

    21. Defining Feasibility Report and DPR • Introduction and Objective of Study • Project Need and Justification, Project Area Characteristics • Existing Situation and Anticipated Demand • Options Considered and Comparison of Feasible Options - Preliminary technical & financial assessment • Conclusions and Recommendations- Gives a GO/No GO • Introduction and other elements same as Pre-feasibility Report • Definition, Scope and, Purpose • Technical Specifications- Scope, Features of the project, location, broad alignment • Examination of the Critical Risks and Problems of the Project • Broad estimation of Financial and Economic returns from the project • Evaluation and Conclusion- Gives Recommendations - is the project technical and financially feasible and does it warrant a DPR to be made • Introduction and other elements same as Feasibility Report • Existing Situation - Traffic and Transportation Characteristics - Issues and Policy • Project Details - Detailed Design and drawings of Project components - Technical Specification – Detailed Project Cost and BoQ • Social and Environmental Impacts • Project Implementation Framework - Project Institutional Framework • Project Financial Structuring and Phasing - Project O&M Framework and Planning • Project Financing - Financial Viability & Sustainability - • Project Benefits Assessment (Social Cost-Benefit Assessment) - Risk Management Framework • Conclusion - Detailed Design Drawing and Technical Specification ; Cost and Revenue Estimates Pre-Feasibility Report Feasibility Report Detailed Project Report

    22. How to select a Consultant for Preparing DPR? Procedures and steps for hiring consultants • Preparation of cost estimate and budget • Preparation and issue of: • Request for Proposal (RFP); • Letter of Invitation (LOI) • Information to Consultants (ITC) • Proposed Contract • Receipt of proposals • Evaluation of technical proposals: consideration of quality • Evaluation of financial proposal • Final evaluation of quality and cost • Negotiations and award of the contract to the selected firm

    23. Selection of Consultants • Selection of Consultants • The hiring of consultants should be undertaken through competition among qualified short-listed firms • Selection should be based on technical proposal and on the cost of the services to be provided (Quality & Cost Based Selection [QCBS]). • Other acceptable selection procedures in addition to QCBS are as under : • Quality Based Selection (QBS) • Fixed Budget Selection (FBS) • Least Cost Selection (LCS) • Single Source Selection (SSS) • Selection of individual consultants

    24. Terms of Reference for engaging a Consultant • A precise statement of objectives • Define Scope of work • An outline of the tasks to be carried out • A schedule for completion of tasks • The support/ inputs provided by the client • The final outputs that will be required of the Consultant • Composition of Review Committee to monitor the Consultant’s works • Procedures for – Mid-term review and Progress Reports required from Consultant • Experience Profile of the Consultant • List of key positions - CV and experience would be evaluated

    25. How to appraise the DPR? • Project Appraisal is an important step for accessing grants (financial). • The Local Agencies should make sure that the DPR should fulfill guidelines and parameters laid out under the schemes of the funding agencies. • The DPR appraisal criteria include the following: • Technical • Financial • Social and Environmental • Institutional

    26. Checklist for Appraisal of DPR – JnNURM Technical Appraisal • Objectives/Project Details & Need for the project • Compliance with National Urban Transport Policy • Whether CDP/ CMP is prepared, appraised and approved • Is PPP envisaged or not • Land Required under Project and Status of Land Acquisition. • Timelines for implementation • Whether Project technical feasibility study has conducted surveys for explaining existing conditions • List anticipated hindrances in project implementation and measures for solutions • Assessment of the existing user demand and forecast the same • A detailed design of physical infrastructure, bill of quantities and cost estimates. • An evaluation plan & a detailed list of monitoring and evaluation indicators for the project outcomes

    27. General Appraisal Criteria - JnNURM Financial & Economic Appraisal • Phasing and Estimated (Amount/Share) cost of the Project, O & M Cost and Financial Sustainability • ULB/Parastatal share (financial); Funding Pattern – for Capital cost and to meet O&M expenditure • Project proposals shall present the cost-benefit analysis incorporating a life-cycle cost analysis • Technical feasibility and selection of a least life-cycle cost should be based on financial and economic viability parameters • For ULB/parastatal agency-sponsored projects, DSCR (incl. sinking & revolving fund), should be at 1. • The cost- benefit analysis for individual projects of Rs.50crores or more shall demonstrate a positive Net Present Value (NPV) and an ERR equal to or above the appropriate opportunity cost of capital. • For projects undertaken by Special Purpose Vehicle (SPV) on a Public-Private Partnership (PPP): • Internal Rate of Return (IRR) greater than the cost of capital raised for the project. • Proposal shall demonstrate financial viability based on a targeted IRR of at least 200 basis points above cost of capital. DSCR should not be less than 1.25. • Project should provide an Economic Rate of Return (ERR) greater than the cost of capital and the proposed minimum

    28. General Appraisal Criteria - JnNURM Social & Environment Appraisal Social and Environment • Whether proper identification of environmentally and socially sensitive areas has been carried out. • Whether Environmental Assessment Study outcomes and Social Assessment Study clearly listed • Incorporation of suggestion on mitigation measures to minimize the negative impacts • Whether all concerned authorities issued clearance, ed. Environmental. NHAI and others Institutional • Assessment of existing required Institutional framework of the implementation and further monitoring of project • Identification of areas for capacity building and strengthen of institution Institutional

    29. Table of Contents- FR/DPR • Group Activity

    30. Contents of a Feasibility Report • Introduction • Rationale and Scope • Definition, scope and, purpose and level of detail of the feasibility study • Technical Specifications • Financial and Economic plans of a project • Social and Environmental Impacts • Examination of the critical risks and problems of the project • Evaluation and conclusion

    31. Contents of a DPR • Project Background • Introduction - City Profile • Sector background context & broad project rationale • Project Definition, Concept and Scope • Existing Situation • Traffic and Transportation Characteristics in the City • Existing Issues and Policy • Project Details • Detailed Design of Project • Project Cost • Project Implementation Framework • Project Institutional Framework • Project Financial Structuring and Phasing • Project O&M framework and planning • Project Financing • Financial Viability & Sustainability • Project Benefits Assessment (Social Cost-Benefit Assessment) • Risk Management Framework • Conclusion

    32. Procurement Process

    33. Procurement Process

    34. Procurement As per the Procurement Bill 2012 of Indian Government, ‘‘procurement’’ or “public procurement” means the acquisition of works, goods or services by a procuring entity, and includes all stages of the process of acquisition, by purchase, lease, licence or otherwise, of works, goods or services, beginning with the process for determining the need for such acquisition and ending with completion and expiry of the procurement contract or framework agreement, but does not include any acquisition without consideration, and “procure” or “procured” shall be construed accordingly.

    35. Procurement As per the Procurement Bill 2012: • Bill apply to Ministry or Department of the central Government, any Central Public Sector Undertaking (50%), or authority or society or trust or autonomous body (by whatever name called) established or constituted under an Act of Parliament or a body owned or controlled by the Central Government. • Bill shall not apply to procurements, which are less than INR 50 lakhs, emergency procurements made for disaster management, and procurement for the purpose of national security. States Government should follow their own acts and regulations for procurement of good and services

    36. When do you start thinking about procurement? Source: CRISIL Risk and Infrastructure Solutions Limited.

    37. Contracting Options

    38. Contracting Options • EPC / Cash Contract Mode: State Undertaking / SPV intend to create / upgrade the facilities - • Design Parameters fixed by Administrative Department (AD) • Bids are called on BOQ / Item Rate Contract basis • Supervision with AD • Funds for development to be arranged by the AD

    39. Public Private Partnerships (PPP) vs. Engineering Procurement Construction (EPC) Contracts Source: http://ecurrentaffairs.in/blog/special-article-on-epc-mode-vs-ppp-mode-for-national-highways/

    40. Contracting Options • PPP Mode: developing facilities through offering the project to Private Sector Player (PSP), by giving it the right to earn revenues / user charges from the project, for a defined concession period • Management Contract (O & M)- • Contractual arrangement for the management of a part or whole public facility or service by the PSP. • Capital investment is typically not the primary focus in such arrangements • Revenue retained by the AD, the PSP gets a fixed fee for O & M

    41. Contracting Options • Lease Contracts • Asset is leased by AD to PSP • Involves building an asset, transferring it to the Govt and leasing it back • PSP delivers the service and collects user charges, intern may offer a fixed fee to the AD • Build Operate Transfer (BOT/ BOOT) Contracts • Design frozen by the AD • The bidding Parameter can be Concession Period / Annual Concession Fee / Upfront Premium / Revenue Share • Private partner has the responsibility for construction and operations • Ownership is with the private partner for the duration of the concession • For example, Ludhiana, Amritsar & Jalandhar Bus Stands

    42. Contracting Options • e. Design-Built-Finance-Operate-Transfer (DBFOT) • PSP responsible for designing, financing, construction, and operations • Bidding Parameter can be Concession Period / Annual Concession Fee / Upfront Premium / Revenue Share • Sub-leasing rights with the PSP for the concession period • Right to Escrow the revenue for raising the Finances. • Mohali Bus Stand, Himachal Bus Stands (Una, Hamirpur, Parwanoo) • Most Preferred mode of development – appropriate risks transferred to PSP

    43. Deciding mode of Contracting • Need for a particular infrastructure facility • Scale of development, and Greenfield /Brownfield development • Need for PSP considering the Value for Money (VFM) analysis • Balance between viability and welfare objectives • However, the most preferred mode of Development of Bus Terminus Projects for State Undertakings is DBOT mode as this distributes the risk among stakeholders.

    44. Project Implementation Options

    45. Contracting-Urban Rail Transit System

    46. Contracting- Bus System

    47. Contracting- Multi-level Parking Projects

    48. Contracting- Bus Depots and Terminals

    49. Need for PPP in Bus Terminals/ Depots • Constraints faced by STUs- Lack of Basic Passenger amenities like clean toilets, covered passenger concourse area, designated parking lots, robust PIS etc • Heavy O&M costs- for bus terminal buildings and related facilities • Lack of funds for up-gradation and provisioning for modern technologies and amenities

    50. Value through PPP • Creation of State-of-Art Infrastructure / Services for Users • Better design / segregation / safe design • Introduction of Best Management Practices for O & M • Self-Sustaining through optimum utilization of valuable land and available sources of Revenue from Bus Terminals • Additional source of revenue for state undertakings which can be utilized for CBS / Non-PPP able components / small depots