CONSULTANCY SERVICES FOR MANAGEMENT CONSULTANT FOR
NAIROBI PHASE I BUS RAPID TRANSIT PROJECT
SCOPE OF WORK AND TERMS OF REFERENCE
1. PROJECT BACKGROUND
1. General
The Master Plan for Urban Transport in the Nairobi Metropolitan Area for 2006 2025, apart from recognizing the need for Improvement of Uhuru Highway to
foster the new image of a modern capital city, also proposes improvement of
the bus/matatu transport system through better route assignment, corridor
improvement, introduction of shuttle bus and mode interchange area
improvement.
The Feasibility Study for Mass Rapid Transit System for the Nairobi Metropolitan
Region (CES/APEC, 2011) that was commissioned by the Ministry of Transport
then recommended a mixed LRT and BRT system for further detailing. The
Nairobi Railway Station – JKIA – Athi River and the Nairobi Railway Station –
Kabete – Kikuyu were among the 9 corridors identified to be appropriate for a
Mass Rapid Transportation System.
The Government of Kenya through its agency, the Kenya National Highways
Authority (KeNHA), is now proceeding with BRT on the Uhuru Highway corridor,
from JKIA to Kikuyu. KeNHA now requires the services of a Management
Consultant who can assist with the necessary business-related tasks of
operationalizing the BRT.
2. Purpose
The business model for the Nairobi Phase I Bus Rapid Transit project is being
developed based on successful Bus Rapid Transit (BRT) systems that have been
developed in Bogotá, Colombia; Johannesburg and Cape Town, South Africa,
and other cities internationally. The purpose of contracting a Management
Consultant is to help adapt the proposed business structure to local conditions.
Further, the Management Consultant, with business know-how in Kenya, will be
the major entity responsible for ensuring a financially solvent system,
recruiting private investment into the system, and ensuring the inclusion of the
paratransit operators in a way that is consistent with the proposed business
structure and international best practice.
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Scope of Work for Nairobi Phase I BRT Management Consultant
3. Methodology
Several on-going and previous planning activities will form the basis of this
tender. Three engineering consultancies - Gibb Africa, COWI, and ESER - are
carrying out the design activities for the Bus Rapid Transit infrastructure.
The Institute for Transportation and Development Policy (ITDP) is building a
model and creating an Operational Plan for the BRT services which will make
use of the BRT infrastructure. The Operational Plan will dictate how buses shall
be routed, how many buses will be needed and what their specifications shall
be, where stations shall be located, how stations shall be sized, projected costs
and revenues, and which bus and minibus routes shall be affected by the new
BRT system. This Operational Plan shall form the basis of the work to be
carried out by the Management Consultant.
ITDP is also developing a business plan, based on international best practice,
which shall serve as an input into the financial model to be developed by the
Management Consultant.
The Operational Plan, business plan, financial model and, to some degree,
infrastructure designs, are closely linked and fine-tuning them will be an
iterative process. Throughout iteration, the three engineering consultancies
shall be responsible for updating the BRT infrastructure designs, ITDP shall be
responsible for updating the Operational Plan, and the Management Consultant
shall be responsible for updating the business plan and financial model.
Therefore, all parties must work closely together and in concert with the BRT
Project Office.
Throughout the course of the Management Consultant's contract, a BRT Project
Office will be developed. The Management Consultant shall assist in its
development.
2. SCOPE OF WORK
4. General
The Consultant shall perform all tasks called for in these Terms of Reference.
In carrying out their work, the Consultant shall cooperate fully with the
concerned agencies of the Government of Kenya, in particular the Clients’
Special Projects Department, the Ministry of Roads, Ministry of Transport,
Kenya Urban Roads Authority, Kenya Railways Corporation, Ministry of Nairobi
Metropolitan Development, the City Council of Nairobi and the Ministry of
Lands, amongst others. The Consultant shall also cooperate fully with project
partners - in particular, the consultants responsible for BRT infrastructure
design (Gibb, COWI, ESER) and the Institute for Transportation and
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Scope of Work for Nairobi Phase I BRT Management Consultant
Development Policy (ITDP), an NGO tasked with several of the inputs which are
to be provided to the Management Consultant (as below) and with supporting
the Management Consultant and the BRT Project Office in general.
The Consultant shall provide the necessary support services related to and
necessary for the completion of the assignment. The work shall cover but not
be limited to the aspects outlined in these Terms of Reference.
5. Services
The tasks for services will include the following:
a. Establish a BRT Project Office
b. Develop a financial model for each private agent as well as for the full
Phase I BRT system.
c. Refine Business Plan
d. Prepare documents for a competitive bid
e. Facilitate the implementation of the matatu industry transition policy
f. Provide a legal and regulatory review
g. Guide and assist the BRT Project Office in locating and creating
qualified bidders.
3. DETAILED SCOPE OF WORK
1. General
The Consultant shall perform all analyses and related work as described herein
to attain the objectives of the study.
The overall responsibility for administration and coordination of the
Management Consultant rests with the Kenya National Highways Authority.
Oversight of the contract will be the responsibility of the Special Projects
Department of the Authority. The Institute for Transportation and Development
Policy (ITDP) will provide additional review and guidance, where applicable, to
the Management Consultant's tasks and outputs.
The Client will provide the Consultant with the data and services outlined
herein. The Consultant shall be responsible, however for the analysis and
interpretation of all information received, and the conclusions and
recommendations in his outputs.
2. Establish a BRT Project Office
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Scope of Work for Nairobi Phase I BRT Management Consultant
The Management Consultant shall help to establish a BRT project office by:
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Conceptualizing the structure of the BRT project office and related
support agencies by detailing the organizational roles and
responsibilities, based on input provided by ITDP
Creating job descriptions, supervision of recruitment and hiring
Establishing management procedures and protocols that eventually will
bring financial management and other management practices sufficient
to become compliant with ISO 9000 requirements.
3. Develop a financial model for each private agent as well as
for the full Nairobi Phase I BRT System
The aim of the Nairobi Phase I BRT project is to make the entire system
operations are self financing, and as much of the system as possible profitable
and hence possible to operate by profit making entities. The bus operators will
be paid a flat rate per bus kilometer, and their profitability will increase based
on their ability to lower their operating costs. In addition, if demand increases,
the number of bus kilometers programmed by the government will increase,
also increasing their profit. In this way, the bus operator’s profit is linked to
efficiency and customer satisfaction. The fare collectors and other elements of
the BRT system will be paid a share of the total revenue, also giving them a
stake in maintaining ridership.
Starting with the relevant demand and passenger revenue estimates and the
estimated bus kilometers needed to implement the Operational Plan received
from ITDP, the Consultant will then estimate the full operational cost and
financial rate of return of the project as a whole and each component of the
system to be contracted out.
The Management Consultant shall develop a set of financial models for each of
the private agents anticipated to play a role in BRT operations. These shall
include two BRT operators, one fare collector, and one fund manager. Each
financial model shall provide significant detail regarding the total investment
and operational expenditures cost for the private agents in issues such as the
following:
Total Investment List for the Operation:
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Buses + CIF Cost (The number and the kind of the buses will be given by
ITDP)
Garage Tools Cost. (The general maintenance conditions of the buses will
be given by ITDP)
Capital works for Transport Companies
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Scope of Work for Nairobi Phase I BRT Management Consultant
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Fare Collection System hardware and software (The number and station
placements will be given by ITDP)
Payment System
Capital work for Fare Collection System Company
Control Centre and data and voice network
Total Operational Cost List per kilometer:
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Bus kilometer operational cost, fuel, tires, oil, etc. (The number of
kilometers, per kind of buses, to be served will be given by ITDP)
Drivers’ cost
Maintenance Cost
Administration cost
Equipment Depreciation
Tax treatment of all necessary spare parts and other replacement
equipment
Profit margin for Transport Companies
Collection activity cost
Ticket tellers
Money transportation
Replacement of Payment Media.
Software and Hardware Maintenance and Actualization
Profit margin for Fare Collection Systems Companies
The operational cost and income expected by the BRT project office will be
checked and included in the model, but it is necessary to double-check:
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Administration and Control activities Cost
Stations and Pedestrian Paths Maintenance Cost
Stations and Pedestrian Path Cleanness Cost
Stations Security Cost
Communication Cost
Based on the total projected passenger revenues provided by ITDP, the outputs
from each of the independent financial models developed, as well as other
system costs, the Management Consultant shall estimate the financial
feasibility of the entire system as a whole through the creation of a full Phase I
BRT system financial model, and quantify the estimated need for government
operating subsidy if any.
The Consultant should then propose a fare structure which will ensure that the
system is operationally profitable, including the cost of depreciation of the
rolling stock. The Consultant must then seek a clear statement of policy from
the government with respect to the fare and the fare structure. If the fare
necessary to ensure profitable operations cannot be agreed upon by the
government, the consultant must then propose ways in which this financial gap
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Scope of Work for Nairobi Phase I BRT Management Consultant
can be closed in a way that ensures long term sustainable and profitable
operation of the system. The following options should be explored:
1. Seek tax exemptions from the government
2. Cut some of the investment (for example, reducing the cost of the bus by
changing the technical specification. In this case, it would be necessary to
coordinate with ITDP and the BRT Agency regarding which investments are
possible to cut).
3. Cut some of the operational costs (for example by reducing bus frequency).
It is necessary to coordinate with ITDP and the BRT Agency regarding which
expenditures are possible to cut)
4. Shift some of the costs to be covered by fare revenues, to the cost to be
covered by the government, such as part of the bus procurement, station
security, etc.
5. Remove various exemptions from specific categories of passengers and
require them to pay, such as school children, government officials, military
personnel, police, etc.
If the system turns out to be profitable, the Consultant will be responsible for
getting an agreement from the government with respect to the allocation of
this surplus, either requiring a lowering of the fare, or as bonuses to the
operators themselves, or the transit authority, or earmarked for the expansion
of the BRT system infrastructure, or to the general budget. This eventuality is,
however, somewhat unlikely.
The fare needed to make the system as a whole profitable and the politically
agreed upon fare must be calculated for the expected life of the rolling stock,
normally 10-12 years, in order to show a complete business plan for investors
and banks.
The Management Consultant shall then create a complete list of investments
and operational expenditures and to assign each one to one of the agents (bus
operator companies, fare collection companies, BRT Agency and Trust Fund)
before calculating the feasibility of these investments for the private agents.
This allocation of the investment and the operational costs must take into
consideration the roles of each agent. The Management Consultant shall:
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Finalise the given operating cost structure based on the proposed business
plan
Refine the proposed fare policy in conjunction with the proposed business
structure
This stage enables the results from the Operational Plan to be reconciled with
the findings and conclusions of the Business Plan (see following section). To an
extent, elements of the Financial Model, Business Plan, and Operational Plan
require an iterative process to optimise efficiencies and cost levels. If the
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Scope of Work for Nairobi Phase I BRT Management Consultant
Operational Plan delivers a plan that does not result in the cost recovery of the
bus procurement, the Consultant has the right to ask for up to two revisions in
the Operational Plan to try and improve the financial performance. The
Consultant should assume that the range of improvement will be within 20%. If
and when the Consultant receives revisions in the Operational Plan, it is their
obligation to update the Financial Model with these new versions a minimum of
two times.
4. Refine Business Plan
The Business Plan is the principal planning document for determining the
profitability of the system, the flow of revenues, the incentive structures, the
institutional arrangements for managing the system, the marketing and
branding strategies, the capacitation of the existing operators, and the
financing of the system.
The Business Plan is being developed by the Institution for Transportation and
Development Policy (ITDP) and based generally on international best practice.
Best practice, however, will vary with local conditions. This Draft Business Plan
will be presented at a meeting of the MRTCC, and the Consultant will begin its
role on the Business Plan by revising the document according to inputs from
this meeting. The Consultant must account for local conditions of which ITDP
was not aware and any key inputs and decisions to emerge from this meeting.
The Business Plan will need to evolve with changes in government decisions and
also changes in the Financial Model and Operational Plan. The Business Plan
developed by ITDP will be structured to ensure that as many elements of the
system as possible are self financing, and that the agency responsible for
managing the BRT system also has full control over the fare revenue, so that
the system is insulated from political interference as much as possible so that
funds and personnel are not diverted away from functions and expenditures
critical to the sustainable operation of the system.
The Consultants will be obligated to update the Business Plan drafted by ITDP a
minimum of three times based on changes in the Operational Plan, the
Financial Model, and critical government decisions.
5. Prepare documents for a competitive bid
The objective of this task is to deliver to the government legal tender
documents for all the contracted out functions identified in the business plan,
which will probably include the following:
1.
2.
3.
4.
5.
Bidding Process for the two Bus Operating Companies.
Two contracts to be signed with the Bus Operating companies.
Bidding Process for the Fare Collection Company.
Contract to be signed with the Fare Collection Company.
Bidding Process for the Fund Manager.
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Scope of Work for Nairobi Phase I BRT Management Consultant
6. Contract to be signed with the Fund Manager.
Any deviation from this list must be agreed to with the Client.
The Management Consultant must work with the BRT Agency lawyer in order to
prepare the contracts in accordance with Kenyan law.
5. Facilitate the implementation of the matatu transition
policy
Qualified bidders for the bus operating contracts should be encouraged to form
consortiums that include existing matatu operators operating in the corridor as
shareholders and staff. This is important because a local labor pool is necessary
and because politically the project will be very difficult to implement if local
powerful matatu owners are not brought into the new system. ITDP will draft a
matatu transition policy and will work towards government approval.
Once approved, the government will need help with the implementation of the
matatu transition policy, and assisting the government with this will become
the responsibility of the Management Consultant. It will probably require the
clear identification of which matatu routes and operators will be affected, or
partially-affected, by the BRT system, the legal status of the operators’
licenses, the status of their legal and informal representatives (whether they
belong to associations and if so which ones) and a rough independent valuation
of their businesses. This will need to be done primarily in coordination with the
Transport Licensing Board under the National Transport and Safety Authority.
The degree of difficulty of these tasks and their importance depends on the
ultimate matatu transition policy adopted by the government, the condition of
the records held by the Transport Licensing Board, and the level of cooperation
by the Matatu Owners’ Association and the Matatu Welfare Association.
Depending on the outcome of the policy decisions, this is likely to involve
facilitating an orderly process of converting existing route licenses into
shareholdings in a new corporate entity and explaining to those impacted
operators why, and what they need to do to qualify.
7. Review legal, policy, and regulatory risks, devise
mitigation measures, and elevate these risks and
mitigation recommendations to the appropriate
government authority.
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Scope of Work for Nairobi Phase I BRT Management Consultant
Securing investments into BRT operations in Kenya will require the government
to mitigate as many legal, policy, and regulatory risks to the investor as
possible. These are likely to involve the following:
a. Fare policy: The government might set fares at a level too low for the
system to cover its debts, or provide obligations that allow students,
military, or government officials to be transported for free,
compromising system financial solvency.
b. Licensing authority: It is common in Africa for multiple agencies to
have overlapping jurisdiction over the right to issue operating licenses,
creating the risk of legal confusion over operating licenses or
destructive competition on certain routes. It is also possible depending
on the legal structure that affected matatu operators could place legal
claims against the investors for loss of business.
c. Taxation: It is likely that a number of project elements will face
ambiguous tax treatment that will need to be clarified.
It is the Consultant’s responsibility to identify these risks to the investor,
suggest mitigation strategies, and try to elevate to the government these
concerns and resolve them prior to the issuing of the tender.
8. Guide and assist the BRT Project Office in locating and
creating qualified bidders
The Consultant is responsible for identifying qualified bidders, convincing them
to bid on the project, and ensuring that qualified bidders actually bid when the
tender is released. The Consultant will be paid in such a manner that if the
tender fails they will not receive full payment for this task. Ultimately, the
securing of successful investors to operate the BRT system is the benchmark of
the contract’s fulfillment. It will be up to the Consultant to determine how this
is best done, but it normally requires the creation of promotional materials,
the hosting of site visits, and direct marketing to potential investors.
4. DEILVERABLES AND TIME SCHEDULE
1. Commencement
The Management Consultant shall commence work within x calendar days of
the effective date of the contract.
2. Deliverables
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Scope of Work for Nairobi Phase I BRT Management Consultant
The Consultant shall prepare and submit to the General Manager, Special
Projects the following reports. All reports shall be in English and prepared on
A4 metric size paper.
a. Quarterly reports on BRT Project Office
Quarterly reports shall be written on the status of the BRT Project office, the
current structures, staffing, management procedures and protocols
established, etc.
b. MS Excel spreadsheets containing five (5) financial models
The Management Consultant shall provide two draft and one final version of
each of the five financial models as follows:
1.
2.
3.
4.
5.
Bus Operator 1
Bus Operator 2
Fare Collector
Fund Manager
Full Phase I BRT system
Financial models must be developed and submitted in MS Excel. The first draft
version will be submitted to and reviewed by the project team (BRT Project Office,
ITDP, etc), while the second draft and final versions will be submitted to and
reviewed by the Mass Rapid Transit Consultative Committee (MRTCC). The
Management Consultant will also be required to make up to two (2) additional
revisions based on revisions to the Operational Plan and government decisions that
affect the financial viability of the project.
c. Business Plan
The Management Consultant must submit two draft and one final version of the
Business Plan, based on the initial version provided by ITDP. The first draft version
will be submitted to and reviewed by the project team (BRT Project Office, ITDP,
etc), while the second draft and final versions will be submitted to and reviewed
by the Mass Rapid Transit Consultative Committee (MRTCC). The Management
Consultant will also be required to make up to two (2) additional revisions based
on revisions to the Operational Plan and government decisions that affect the
financial viability of the project.
d. Bidding documents for competitve bid
The Management Consultant must submit two draft and one final version of each
bidding document for each of the following agents:
1. Bus Operator 1
2. Bus Operator 2
3. Fare Collector
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Scope of Work for Nairobi Phase I BRT Management Consultant
4. Fund Manager
The first draft version will be submitted to and reviewed by the project team (BRT
Project Office, ITDP, etc), while the second draft and final versions will be
submitted to and reviewed by the Mass Rapid Transit Consultative Committee
(MRTCC). The Management Consultant will also be required to make up to two (2)
additional revisions based on revisions to the Operational Plan and government
decisions that affect the financial viability of the project.
e. Implementation of matatu industry transition plan
The Management Consultant must, if required by the approved matatu industry
transition policy, do the following:
1. Provide a list of all of the affected matatu licenses and their owners
and vehicle registration numbers, their names, addresses, and
telephone and email contact information.
2. Collect signed affidavits from each affected operator which state their
preference of whether they want to become shareholders in the new
operating companies or receive compensation (if any) and exit the
industry, and identifying a legal representative who can speak on their
behalf and represent them in negotiations relating to the formation of
any BRT operating company.
3. Minutes of meetings held with all affected matatu owners where the
manner in which they are being invited to participate in the new BRT
operating companies is disclosed and understood.
4. Outlining of a process by which the affected matatu owners will be
joined with interested national and international investors, and minutes
from the meetings whereby this process has been carried out.
5. Drafts of two BRT operating companies’ articles of incorporation,
ensuring that a minimum number of bidders with affected matatu
industry owners are formed into companies that meet the minimum
qualification requirements.
f. Provide a legal and regulatory review
The Management Consultant must provide the following legal findings, first
in draft form and then in complete form:
1. A clear legal finding with respect to which government agency has the
authority to sign operating contracts on behalf of the Nairobi BRT
system and cancel competing operating licenses, or any other regulation
that materially affects the profitability of the BRT system.
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Scope of Work for Nairobi Phase I BRT Management Consultant
2. A clear legal finding with respect to the precise nature of any
compensation that may be owed to matatu operators who will have
their routes cancelled or changed as a result of the BRT project
3. A clear legal finding with respect to who has the right to change the
fare and the fare structure for the BRT operations
4. Draft inter-agency agreements ensuring that the public works done on
behalf of the BRT project are under the supervision of engineers
managing the BRT system’s operations.
5. A clear legal opinion with respect to the best legal structure for the BRT
management authority that ensures the system can control its own
revenues, is insulated from political intervention and optimizes the
quality of management
f. Guide and assist the BRT Project Office in locating and creating
qualified bidders
The Consultant will provide the following as evidence of progress towards
identification of qualified bidders:
1. A list of potential investors in each element of BRT operations and
their qualifications, and a list of all financial institutions interested
in financing the required procurement
2. Copies of promotional materials developed to attract investors
3. Minutes from all conversations held with potential investors and
financial institutions
4. A short list of qualified bidders
5. Signed contracts with each of the winning bidders.
3. Time Schedule
[should correspond with the project timeline – need KeNHA
to work on this]
4. Payment Schedule
[TBD. Note, however, that the only true indicator of
success for this scope of work is the successful signing of
the operating contracts, so it is important that no
consultant simply does what is required to get the bulk of
the payment and then leaves the project with a failed
tendering process. Therefore, we suggest that at least 1/3
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Scope of Work for Nairobi Phase I BRT Management Consultant
of the payment is not released until operating contracts are
signed (see deliverable f5 above).]
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Scope of Work for Nairobi Phase I BRT Management Consultant