Improving value for money on SANRAL's toll operations contracts

[摘要] The South African National Roads Agency Ltd (SANRAL) is the custodianof the 9 208km national road network in South Africa. SANRAL'smandate is to develop, maintain and operate this national economicasset. 26,3°/o of the national road network consists of toll roads. Theoperation and maintenance of the toll facilities are let by SANRALthrough a public open tender process. The successful tenderer is thenappointed by SANRAL on a contract basis as the toll road operator.The operation and management of toll facilities involve various technicaland managerial disciplines, such as electrical, mechanical and civilengineering, toll collection, and operations management. Historically,toll operations contracts were fragmented into separate sub-contractsfor each of the disciplines. This resulted in a substantial amount ofproject management input from SANRAL. In addition to SANRAL's highlevel of management input, it also carried the risk of fraud. SANRALhad no incentives for a toll operator to increase the toll revenues,neither did it impose any penalties for poor performance.In order to simplify the project structure, as well as to improve on theold toll contract format, SANRAL developed a new toll operationscontract model, aptly named Comprehensive Toll Road Operations andMaintenance or CTROM (C-T -ROM). Amongst others, the benefits of thenew contract format are:• That it simplifies SANRAL's management input by providing asingle point of contact between SANRAL and a principal tolloperator, under whose supervision all the sub-contractors reside.The toll operator therefore assumes the responsibility andaccountability to manage the sub-contractors.• The introduction of penalties that are imposed on the tolloperator, should he not perform his contractually specified dutiesand obligations.• The transfer of fraud risk to the toll operator.• An increase in the toll revenue by offering the toll operator arevenue-sharing incentive.The first contracts let under the CTROM format were the N2 North CoastToll Road and the N2 South Coast Toll Road in July 2001. As these tollroutes had been in operation for a while before the CTROM contractswere procured, comparisons could be made on the pre-CTROM andpost-CTROM costs. Initial indications were, although there were somestructural differences between the old and the new format, that thesetwo CTROM contracts were between 7 and 13°/o more expensive thantheir predecessors. An extrapolation of these values to all the currentCTROM contracts results in additional costs to SANRAL of betweenR 10m and R 20m per annum, when compared to the previously usedmanaged contract format.The more expensive CTROM contracts have brought about significantbenefits, such as the tra'nsfer of fraud risk from SANRAL to the tolloperator, as well as a simpler project structure in the form of a singlepoint of responsibility. The intention of this research report is todetermine whether the increase in cost has been worthwhile, andwhether there are areas for further improvement. In other words, arethe more expensive CTROM contracts providing SANRAL with anassociated increase in value for its money? Not only is SANRALconcerned with the prudential expenditure of its toll revenues, but it isalso under legislated obligations to ensure that funds are spent in themost appropriate and efficient ways.In order to better understand value for money and related concepts, theauthor explores various academic theories in the form of a literaturestudy. By building a platform from which to conduct further analyses,the author can then apply the newly found knowledge to test thehypothesis that SANRAL is not achieving optimal value for money on itsCTROM contracts.Concepts and theories that are studied in the literature review include:• The legislative and institutional framework; and• Key terminology such as risk management, the public sectorcomparator, value for money, and performance penalties oncontracts.Many of the concepts have been explored worldwide, especially indeveloped countries such as Australia, Canada, Hong Kong and theUnited Kingdom, where those countries' governments activelyencourage private sector investment in public infrastructure.In the analytical part of the research report, the author explores thecauses of the additional costs on two of SANRAL's toll routes, namely:• The Mariannhill Toll Route, which is located on the N3 betweenPinetown and Key Ridge in the province of KwaZulu-Natal; and• The N 17 Toll Route between Springs and Wemmer Pan in theprovince of Gauteng.The analyses suggest that the operations and maintenance (O&M) costsof the N3 Mariannhill and N 17 toll routes under the CTROM contracts are46,3°/o and 20,4°/o more expensive than on the previous contracts.Some of the factors that could play a role in the increased cost of theCTROM contracts are:• The contract duration;• Risk transfer to the toll operator;• Penalties applied when the toll operator does not conform to therequired specifications; and• Complex performance specifications.University of PretoriaGraduate School of ManagementMBA Research Report RPJ820 vP Suremann91052719October 2004Digitised by the University of Pretoria, Library Services, 2014The author concludes that there are a number of factors that negativelyinfluence the cost of the CTROM contracts. The author thereforerecommends that the factors that are within the control of SANRAL bechanged. These improvements should bring about better value formoney on SANRAL's toll operations contracts.

[发布机构] University of Pretoria