2

Content
Background
Main drivers of PBRCs in PNG
Capacity building of domestic
contractors
Main benefits after 1
st
pilot projects
Role of ADB in 1
st
pilot project &
future recommendations



3
Papua New Guinea (PNG)
Road transport in PNG Past
Implementation Challenges
National Road Authority (NRA)
Long-Term Performance
Based Maintenance (LPTBM) -
Present Future
PNG joined ADB 1971
1st project 1972, Road Improvement
PNG independent - 16 September 1975
Road conditions deteriorating fast
1st road maintenance project in 1999
(27 years from 1972)
Traditional contracting (input-based)
35% in good conditions
Lack of funding
Underdeveloped local contracting
Dept. of Works (DOW) Capacity
People & Market capability issue
Long delay vs cost increase
Kina (PGK), million
% total expenditure
0%
5%
10%
15%
20%
0
250
500
750
1,000
1974 79 84 89 94 99 04 09 14
Land transport expenditure (PGK), lhs
Land transport expenditure (% total), rhs
rhs
Contracting Hiatus
1995 - PTB
Dissolved
1975 -
Independent
Source: http://devpolicy.org/road-management-in-papua-new-guinea-part-1-the-maintenance-challenge-20140903/
DOW budget appropriation and disbursements (2008-2014)
0
0.25
0.5
0.75
1
1.25
0
400
800
1,200
1,600
2,000
08 09 10 11 12 13e 14p
Recurrent Budget appropriation (Kina, million), lhs
Capital Budget appropriation (Kina, million), lhs
% Recurrent Budget disbursed, rhs
% Capital Budget disbursed, rhs
Source: National Budget Documents (various years), ADB calculations.

NRA established by an Act 2003
Road Fund was also established
Main objectives
Raise Revenue thru RUC
Plan, program and manage the
road network






10
Main Drivers of Testing PBRCs


2,500km transferred by Works Dept. to NRA
PBRC models
Traditional input-based (Hybrid) Contracts
(2009-2011- 6 Contracts)
Trial PBRC 5 Years Duration - ADB MFF
Programs 3 Contracts
Service Level Contracts for 3 years -19
Contracts
10 Years PBRC in 2015 (ADB MFF Tranche 1)
11
Main Drivers of Testing PBRCs
12
Main Drivers of Testing PBRCs

13
Main Drivers of Testing PBRCs

Contractor Development
8 small to medium contractors throughout PNG
New Players developed under PBRC
Contracts all under $5m
Paid monthly on LOS on fixed lump sum
Variable outcomes
Local economic conditions (rates,
populations density)
Contractor/People (Public Relations) issues
Contractor submitting irregular claims
o Less amount of work done


14
Capacity Building of Domestic Contractors

Source: ADB survey, 20143.

0
1
2
3
4
5
6
Largest Contract Size Completed in the last 5 Years
>$7 mil
$5 - 7 mil
$3 - 5 mil

F
i
r
m
s

Contract size (PGK)
Population = > 7.3 million
Population 15% urban, 85%
rural/remote
Circa 3% tertiary education
Vocational training idem
Land ownership 97%customary
Examples of benefits
Assets Management System
improved
PBRCs developed

17
Main Benefits after 1st Pilot Projects

Dos & Donts from 1st Pilot Projects
Dos
Pilot Trials
Initial Expert
Support/Advisors
Contractor
Capacity
Development



Donts
Avoid Short Sections.
Go for networks
Avoid roads with
high maintenance
needs
Avoid Contractors
without good
reputation


18

Piloting LTPBM through MFF - T1&2
Upgrade & maintain in one contract 10
years (2 ongoing)
Bigger package = bigger & more bidders
Contractors preference good news!
Sustainability? Increase private sector
participation
Improve LTPBM in MFF - T3&4
Design, Build/upgrade & Maintenance
(DBM) contract 10-15 years.
Restructure project design with private
sector inputs
Longer road sections Network
Big contractors build local capacity
21
Future focus
Capacity Development
Increase Revenue
Maintain a Network on a PBRC
basis
Improve Procurement & Other
Govt Agency Issues
Involve more private sector
participation