Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

Railway Reform: Toolkit for Improving Rail Sector Performance
Annex 4: Concession Contract Guide
mencement of the Term that involves assuming any part of Concessionaire risk,
unless under exceptional circumstances, for example, anything that would give
rise to the Authority stepping in and arranging temporary operations for all or
part of the facilities. In this context, the issues referred to in section 2.9 are important.
The deadline for the Concessionaire to complete the New Upgrades should be
explicitly stated. Incentives may be better than penalties to encourage the Concessionaire
to complete the Upgrades on time, for example by preventing increases
in tariff or service payments until specified degrees of completion are
achieved, rather than claiming damages for failure to complete on time.
If the scheme must meet a public service obligation, the Authority bears a residual
risk if the scheme should get into difficulty. Therefore, it is advantageous if
the Authority has mechanisms to verify Concessionaire progress. One such
method is to audit the application of a quality control program and for that purpose
the Concessionaire should develop a quality assurance procedure in accordance
with its proposals submitted at the time of tender. These procedures may
be signed off on a no objection basis by the Independent Engineer. It might be
prudent for the Authority to require that the Concessionaire procure the services
of an Independent Designer to monitor or review the design and construction.
The Independent Designer is appointed by either the Concessionaire or more
likely by the Concessionaire’s construction contractor. The Independent Designer
should have an international reputation and should sign off on all key designs for
important structures. For other designs, a less onerous signing-off regime could
be developed. The Independent Designer could issue certificates to confirm that
design and construction were prepared or carried out according to the requirements
of the Agreement, or according to the lighter regime, and present these to
the Independent Engineer along with the relevant design. This can be done electronically
if the Independent Engineer and the Authority have ‘read-only’ access
to the Concessionaire or contractor design databases.
If the Concessionaire is to provide key equipment, the supplier(s) should be identified
in the Agreement, or a list of agreed prospective suppliers could be set out
in the Agreement, leaving the Concessionaire to negotiate the best value with
those listed.
A regime for testing during works implementation, and for testing and commissioning
to achieve completion should appear in the Agreement. The Concessionaire
should develop a completion schedule specifying tests, sequencing, and timing.
The completion schedule should include provisions relating to periods for
notification of testing, implementation of commissioning procedures, attendance
of the Independent Engineer and the Authority, and protocols for retesting in the
event of failure. The Authority would benefit from including some tolerance to
allow financial adjustment if specified standards are not achieved.
Should the Agreement include a right to terminate the Contract if a core standard
level is not met? That depends upon the particular New Upgrade, but if a right to
terminate is included, the Concessionaire should be given a reasonable amount of
time to overcome the default but with a final cut-off date.
The World Bank Page 254