Title: Monitoring Road Works Contracts and Unit Costs in Sub-Saharan Africa for Enhanced Governance
1Monitoring Road Works Contracts and Unit Costs
in Sub-Saharan Africa for Enhanced Governance
Tanzania Roads Fund Board
- Cesar Queiroz
- Consultant, former World Bank
- Highways Adviser
- Dar es Salaam, Tanzania
- July 2, 2012
Construction and Maintenance Unit Costs Workshop
2OUTLINE
- Building a new dataset of road works contracts of
Bank-financed projects in Sub-Saharan Africa - Analyzing trends and key indicators
- Examining red flags
- Explaining what drives road construction costs
issues addressed by project implementing agencies - Enhancing accountability and attaining a higher
degree of control of corruption in World
Bank-financed projects in the road sector - Conclusions
3A SPECIALIZED DATABASE
- 109 completed and on-going road and bridge works
contracts - 76 supervision consultancy contracts for relevant
road works - Signed between 1999 and 2007
- From 22 projects financed by the World Bank
- Range of works contracts From US595,518 to
- US58,436,429
- For 13 countries in Sub-Saharan Africa
- Congo
- Democratic Republic of Congo
- Ethiopia
- Ghana
- Kenya
- Malawi
- Mauritania
- Mozambique
- Madagascar
- Nigeria
- Tanzania
- Uganda
- Zambia
4DATABASE SET OF COST INDICATORS
- Road Works Unit Costs
- in 2007 US
- Road Works Costs
- for 7-m wide, 2-lane road equivalent
- in 2007 US/km
Rehabilitation/Reconstruction Upgrade to Paved Periodic Maintenance Regravel Inter-Urban Urban Rural Access EngineersEstimate Contract Price Actual Cost
Asphalt Concrete (/m3) Portland Cement Concrete (/m3) Base Gravel, Crushed stone, Bituminous (/m3) Subbase Gravel, Crushed Stone (/m3) Earthworks Soft, Hard (/m3) Surface treatment Single, Double (/m2)
5DATABASE SET OF BIDDING INDICATORS
- Contracts with Pre-qualification
- Contracts without Pre-qualification
- Number of applicants for pre-qualification
- Number of pre-qualified firms
- Number of firms buying bidding documents
- Number of bidders
- Number of bidders accepted for detailed
examination
- Number of firms buying bidding documents
- Number of bidders
- Number of bidders accepted for detailed
examination
- Bid Amounts
- Name and Nationalities of All Bidders
6DATABASE SET OF OTHER INDICATORS
- DATES
- Bid Opening Date
- Contract Signing Date
- Contract Completion Date
- Delays in Completion of Work
- SUPERVISION CONSULTANCY
- Names and Nationalities of Supervision
Consultants - Supervision Contract Amount
- Actual Supervision Contract Amount
7KEY STATISTICAL TRENDS
- The road sector contracting of Bank-financed
operations is characterized by a limited number
of firms dominating large-scale works - The market is split between African firms and
mainly Chinese and European contractors - The largest contracts are generally awarded to
international contractors, in particular Chinese
- Percentage of Contracts by Geographical Group
- Share of Contract Totals by Geographical Group
-
8KEY TRENDS BIDDING PATTERNCONTRACTS WITH
PRE-QUALIFICATION
- About half of the pre-qualified firms do not bid
- The overall number of pre-qualified firms to bid
for large works seems competitive (more than 6
firms on average). However, the actual
participation in tenders is quite low
- Average Number of Pre-qualified Firms, Bidders,
and Bidders Accepted for Detailed Examination -
9KEY TRENDS BIDDING PATTERNCONTRACTS WITHOUT
PRE-QUALIFICATION
- Half or more firms buying bidding documents do
not bid in the reviewed contracts in Mozambique,
Madagascar, DRC, Zambia, and Malawi
- Average Number of Firms Buying Bidding
Documents, Bidders, and Bidders Accepted for
Detailed Examination, by Country
10KEY TRENDS BIDDING PATTERNCONTRACT VALUE AND
ENGINEERS ESTIMATE
- Several road works contract values exceed the
engineers estimate by more than 30 percent
- Difference between Contract Values and
Engineers Estimates, Averages and Ranges
11KEY TRENDS BIDDING PATTERNBID OPENING AND
CONTRACT SIGNING DATES
- Extensions of the original bid validity period
seem to be a norm - Only the DRC, Congo, and Madagascar have the
contracts awarded within the original period of
validity of bids (90 or 120 days in the sample)
12KEY TRENDS IMPLEMENTATIONCOST OVERRUNS
- Contract cost increase during implementation is
substantially high in some of the countries in
the sample
- Cost Overruns, Averages and Ranges by Country
13KEY TRENDS IMPLEMENTATIONCOST OVERRUNS (contd)
- Cost overruns vary across the countries. The
highest number of contracts with cost overruns is
in Nigeria where almost 43 percent of all the
reviewed contracts increased their value by more
than 15 percent. Mozambique and Ghana had cost
overruns in 30 percent of the contracts in the
sample - Percentage of Contracts with Cost Overruns of
more than 15 by Country
14KEY TRENDS IMPLEMENTATIONTIME OVERRUNS
- The delays in completion of work reaches up to a
year and half - Average Delay in Completion of Work in Months,
by Country
15KEY TRENDS ROAD WORKS COST PER KM OF A 7-M WIDE,
2-LANE ROAD
16KEY TRENDS ROAD WORKS COST PER KM OF A 7-M WIDE,
2-LANE INTER-URBAN ROAD
- A wider range of the average costs per km is
observed for the re-gravel and periodic
maintenance works the range is relatively
narrower for the upgrade to paved and
rehabilitation/reconstruction works - Cost per km of a 2-Lane Road by Type of Work for
Inter-Urban Roads (2007 US/km)
17KEY TRENDS UNIT COSTSASPHALT CONCRETE AND
PORTLAND CEMENT CONCRETE (2007 US/M3)
- Large variations are observed in the unit costs
of road works across the countries in the sample
18KEY TRENDS UNIT COSTSBASE AND SUBBASE (2007
US/M3)
19KEY TRENDS UNIT COSTSEARTHWORKS AND SURFACE
TREATMENT (2007 US)
20KEY STATISTICAL TRENDS BY GEOGRAPHICAL GROUP OF
CONTRACTORS
- The African firms outperform the Chinese and
European contractors in several indicators
related to the procurement process but
underperform in the implementation - Statistical Averages by Geographical Groups
21KEY TRENDS BY GEOGRAPHICAL GROUP OF CONTRACTORS
COST PER KM
- The African firms have a cost advantage over the
Chinese and European firms in the sample, when
implementing rehabilitation or reconstruction
works or upgrading a road to pavement standards - Cost per km of a 2-Lane Road Equivalent by
Geographical Group and Type of Work (2007 US)
22LEADING ROAD WORKS CONTRACTORS
- A Chinese contractor carried out about 19 of
Bank-financed road works in the sample (in
financial terms) - The total value of road works contracts in the
sample is about US 1.5 billion -
- Leading Contractors by Awarded Contract Totals
23SUPERVISION CONSULTANCY CONTRACTS RATIOS
- The supervision contract amounts vary between 3
and13 of the respective road works contract
amounts in the countries reviewed - Ratio of Supervision Contract Amounts to Road
Works Contract Amounts
24SUPERVISION CONSULTANCY CONTRACTS COST PER KM
- There is a wide range between the average costs
of supervision per kilometer of similar road
works across the countries - Average Cost of Supervision per km of a 2-Lane
Road by Country (2007 US) -
25SELECTION OF RED FLAGS
- The following is a set of red flags that was
selected under the study - Period between bid opening and contract signing
is more than 7 months - Cost increases by more than 20 during
implementation - Time overrun is more than 30 of the originally
contracted period - Contract value is more than 20 above the
Engineers Estimate - Half or more firms buying bidding documents do
not bid - 20 or more of pre-qualified firms do not bid
- Difference between winning bid and next lowest
bid is within 2 - Difference between contract price and read-out
bid price is more than 10 - Winning bid is not the lowest bid accepted for
detailed examination - Only one or two bidders
- Cost per km for similar works and unit road works
costs are higher than the 75 percentile
26EXAMINATION OF RED FLAGS
- An inventory of risks was performed for each road
works contract using a checklist of red flags - The presence of red flags does not prove that
corrupt or fraudulent practices have taken place
in the procurement and implementation of a
contract - A red flag is rather a warning signal of a
potential procurement and implementation problem
that may justify further investigation - Conversely, the absence of red flags does not
imply that fraud or corruption did not occur
27RED FLAGS FREQUENCY IN THE SAMPLE OF 109
CONTRACTS
28RED FLAGS FREQUENCY BY COUNTRY
29RED FLAGS NORMALIZED BY NUMBER OF CONTRACTS IN
EACH COUNTRY
30RED FLAGS NORMALIZED BY NUMBER OF CONTRACTS IN
EACH COUNTRY AND WBI CONTROL OF CORRUPTION INDEX
31RED FLAGS IN THE CONTRACTS WITH COMPLAINTS
RECEIVED BY INT
- The Department of Institutional Integrity (INT)
received complaints on 14 contracts from the
sample of 109 road works contracts (13 of total) - The nature of complaints was mainly related to
allegations of bidder collusion or bid rigging,
paying bribes, and bidding irregularities - The pattern of red flags in the contracts with
complaints received by INT slightly differs from
the overall pattern observed across all the
contracts in the sample
32RED FLAGS PATTERN IN THE CONTRACTS WITH
COMPLAINTS RECEIVED BY INT
33RED FLAGS ROAD WORKS UNIT COSTS
- Frequency of Red Flags for Unit Costs in the
Contracts with Complaints Received by INT in
Comparison with other Contracts in the Sample
34SELECTED ISSUES AS ADDRESSED BY PROJECT
IMPLEMENTING AGENCIES
- Reasons for high bids
- The effect of increase in prices of fuel, power,
materials, and equipment on major cost items of
contracts - A fixed price contract that is not subject to
price adjustment - Supply and demand effect
- Potential collusion by bidders
- Inadequate prediction of major market forces by
the engineers estimate - Perception of risks incorporated by bidders in
their bid prices (e.g., provisions of extended
contract procurement cycle time associated with
price inflation risks) - Other factors (e.g., a delayed delivery of goods
due to congestion and transport problems, the
high cost of input taxes, political instability
and insecurity)
35OTHER SELECTED ISSUES
- Reasons for low response to invitation to bid
- Increased demand for contractors services
- Insecure areas in a post-conflict country (DRC)
- Reasons for cost overruns
- Global trend of rising oil prices
- Labor cost increase and impact of other
regulatory measures (taxation) - Unsatisfactory contractor performance
- Time lag between design and contract execution
dates - Time extensions
36RECOMMENDED ACTIONS
- The following is a set of selected
recommendations geared to enhance accountability
and attain a higher degree of control of
corruption in Bank-financed projects in the road
sector in Sub-Saharan Africa - Consider establishing a tighter timeframe for
contract signing. A stricter adherence to the
Banks procurement guidelines should be observed
that provide for an extension of bid validity if
justified by exceptional circumstances
(Procurement Guidelines). A delayed bid
evaluation process provides opportunities for
corrupt practices and back-door negotiations. - Allow using a selection procedure of
post-qualification in bidding for large works
instead of pre-qualification. Knowledge of other
pre-qualified firms carries a potential risk of
collusion. Also, other firms may choose not to
bid due to a potential collusion of
well-connected companies.
37RECOMMENDED ACTIONS
- Create a system to monitor and assess
contractors and consultants performance.
Tracking of information on contractors and
consultants in the road industry in the region
could mitigate risks of misjudging on
qualifications of firms as well as ensure due
diligence on poor performers. The rankings of
major contractors and consultants could identify
strong performers who could be encouraged to bid
or hired through direct contracting in case of
emergencies. - Strengthen the monitoring over the procurement
and implementation processes to enhance detection
of the risks to integrity. It is important to
generate the data to increase accountability.
38CONCLUSIONS
- It is critical to continue collecting data on the
procurement and implementation processes of the
road sector contracts to allow comparison of cost
trends, bidding competition, and performance in
the road sector. A standard framework (including
a template) has been developed within this study
to provide the platform for monitoring and
evaluation of prices, bidding data, and
contractors information to help improve
governance. - Capturing costs and unit price information of
road works is important for evaluation of the
trends across countries and regions. Empirical
evidence could be built on such indicators as
price increases relative to the engineers
estimates, cost increases, and key roads input
costs to investigate the sources of increased
costs and possible factors behind the increase in
bid prices.
39CONCLUSIONS
- Assessing bidding behavior is essential for
measuring the level of competition and road works
activity financed by the Bank. Verifying the
extent of competition in the bidding environment
is an important tool for procurement decisions.
Detailed bidding data could facilitate measuring
if the procurement process is affected by
collusion and bid rigging through detection of
patterns and red flags in the structure of bids
and firms. - Measuring performance more consistently would
help to address inefficiencies that arise in the
current procurement and implementation practices.
This would ensure that irregularities are
properly captured in the observed trends in a
specific country or area. It is important to link
the performance measures to contractors and
consultants as well as project implementing
agencies for accountability.
40Thank you!
41References
- Monitoring Road Works Contracts and Unit Costs
for Enhanced Governance in Sub-Saharan Africa.
World Bank Transport Paper No. TP-21. 2008.
http//siteresources.worldbank.org/INTTRANSPORT/Re
sources/336291-1227561426235/5611053-1229359963828
/tp_21.pdf - Monitoring Road Works Contracts and Unit Costs
for Enhanced Governance in Europe and Central
Asia. World Bank Transport Paper No. TP-33.
2011. http//go.worldbank.org/9XN7FBUCD0 - Prediction model for the cost of road
rehabilitation and reconstruction works. 2nd
International Conference on Road and Rail
Infrastructure, Dubrovnik, Croatia, 7-9 May 2012.
http//www.grad.hr/cetra/ocs/index.php/cetra/cetra
2012
42AttachmentAn example of a regression model to
predict the cost of road works
Source Prediction model for the cost of road
rehabilitation and reconstruction works. 2nd
International Conference on Road and Rail
Infrastructure, Dubrovnik, Croatia, 7-9 May 2012
http//www.grad.hr/cetra/ocs/index.php/cetra/cetra
2012
43Example of a regression model to predict the cost
of road rehabilitation and reconstruction
Y - the dependent variable Xi - independent
variables p - the number of independent
variables e - the residual error ?i -
regression coefficients, and ?0 - a constant
44Methodology
- Data sample covered 94 completed or on-going road
works contracts in Europe and Central Asia - The correlation between independent variables was
tested - Four diagnostic methods were used for testing the
dataset for outliers - Analyses of the (square) residuals
- Standardized residuals
- Cooks distance
- Leverage matrix
- A backward analysis was used based on the removal
of the variable with the highest p-value
45Resulting regression models
Independent variable Coefficient Model 1 Model 2
Constant 9.912 11.088
Country specific variables TICPI 0.256
Country specific variables Climate 0.606 0.639
Country specific variables GNI 1.406x10-4
Project specific variables of local bidders -7.815x10-3 -6.662x10-3
Project specific variables Duration 0.064 0.044
Project specific variables Ln (road length equivalent) -0.367 -0.268
Project specific variables AC cost (/m3) 0.425 0.221
Dependent variable Ln (cost/km) Ln (cost/km) Ln (cost/km) Ln (cost/km)
p-value lt 0.01, p-value lt 0.05, p-value lt
0.1
46Comparison of predicted and actual cost per km
47Resulting regression models
Statistics Model 1 Model 2
R2 0.831 0.835
Adjusted R2 0.803 0.807
Standard error of the estimate 0.2782 0.2753
F value 29.506 30.258
Sample size 43 43
48Cesar QueirozRoad and Transport Infrastructure
ConsultantFormer World Bank Highways AdviserTel
1 301 755 7591queiroz.cesar_at_gmail.comWashington
, DC, USA