Fast and Focused - Building China�s Railways by O3cHK9mW

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China Transport Topics No. 03                                                            February 2012


               Fast and Focused – Building China’s Railways
                            John Scales, Jitendra Sondhi, and Paul Amos
                                       World Bank Office, Beijing

Over the past few years, China’s railway sector has built an astonishing number of large and complex
railway projects under its Mid and Long-Term Railway Development Plan. Many of these projects, such
as high-speed lines, employ state of art technologies. They have been delivered much faster than is
typical of just about any other country. How is it done? The paper argues that three factors dominate:
the concentration of responsibility, power and access to resources in one organization; strong technical
capacity and processes; and a program effect that delivers economies of standardization and scale.
Whether the sheer speed of implementation has adversely affected the overall life-cycle costs and
reliability of project infrastructure is not yet known.

THE CHALLENGE OF A CENTURY
                                                       The World Bank has been actively engaged in the
China’s railways entered a new phase of
                                                       development of China Railways for the past 25
development with the Mid and Long-Term Plan
                                                       years. The authors, who have observed the
(MLTP) adopted in 2004 and revised upwards in
                                                       development and implementation of some of
2008. It currently aims by 2020 to increase the
                                                       the projects, believe that three factors
total rail network from 75,000 to 120,000 route-
                                                       dominate: single-point responsibility; strong
km. It includes construction of 16,000 km of
                                                       technical capacity and process; and what might
high-speed routes, three new regional inter-city
                                                       be called the program effect.
networks, new dedicated coal lines and
substantial double tracking and electrification. It
                                                       SINGLE-POINT RESPONSIBILITY
is the world’s largest national railway
development program for more than a century.           A notable feature of the rail sector in China is the
                                                       commanding role of MOR, which has prime
The government’s 2008 economic stimulus                responsibility for both formulating and
program encouraged and enabled the Ministry            implementing development strategy for the
of Railways (MOR) to bring forward planned             railway sector, for planning and financing of
projects and ramp up individual project                individual projects, for creation of delivery
implementation speed to an unprecedented               mechanisms (such as the joint venture
level. For example, the 1,068km Wuhan-                 companies with provincial governments), and for
Guangzhou      high-speed  railway,     started        administration of China’s national railway
construction in 2005 and was commissioned in           services (which carry over 95 percent of China’s
December 2009. At the time of writing, this line       rail traffic).
and more than a dozen other high-speed lines
initiated in the last five years have been             While the MOR proposes sector-wide plans, the
completed.                                             State Council must approve these and the
                                                       individual Five Year Plans into which MLTP feeds.
A project that in China might take about 5-6           The National Development and Reform
years from government approval of project              Commission (NDRC) must also approve the
concept to system commissioning would, in the          Feasibility Study Report carried out for each
authors’ experience, take 7-15 years in almost         project and agree the priorities for project
any other country. How has China, managed to           implementation. But in just about every other
deliver project after project so rapidly?              material respect, MOR holds the keys. It enjoys a
China Transport Topics No. 03                           2                             World Bank Office, Beijing

potent combination of: (a) the responsibility to            questioning and frequent reappraisal. Further, in
plan, design and deliver major projects; (b) the            many countries, public funding constraints mean
legal and institutional power it needs to do so,            that major new railway infrastructure projects
and; (c) access to the operating cash flows of one          are pursued through public private partnership
of China’s largest single businesses to borrow              (PPP) structures. PPP can sometimes attract
against1, together with a dedicated capital fund            finance and share risks with the private sector
from railway construction surcharges on freight.            but typically take many years to assemble,
                                                            approve, procure, evaluate, negotiate and
                                                            finance, even before the first sod is turned. In
                                                            China, MOR, in other words the sovereign 2 ,
                                                            absorbs virtually all project and financing risks in
                                                            major new railway projects.

                                                            Of course, none of this detracts from the strong
                                                            technical capacity and process that China has
                                                            demonstrated through this program and to
                                                            which we now turn.

                                                            TECHNICAL CAPACITY AND PROCESS
                                                            Although project delivery time is short this
                                                            follows years of investment in building skills and
This heady confluence of responsibility, power
                                                            know-how. For high-speed passenger lines, for
and resources, has created a goal-driven culture
                                                            instance, specialised units were set up many
at all stages of project delivery. It is a moot point
                                                            years in advance to study and adapt
whether       management        theorists      would
                                                            technologies employed internationally such as
characterize this as a ‘command and control’
                                                            track systems, rolling stock design, signalling and
model in which everyone does what they are
                                                            communications, and electric traction. The
told, or a ‘consensual’ model in which clearly
                                                            technologies selected were absorbed, in some
articulated goals are commonly shared. Either
                                                            cases by technology transfer agreements with
way (and in practice we observe elements of
                                                            foreign manufacturers, but with considerable
both approaches) the result is a collective
                                                            adaptation to match China’s needs. MOR
commitment to an approved goal and to the
                                                            undertook years of capacity building leading up
milestones for achieving it. Some critics believe
                                                            to the program.
that this concentration of power in MOR and
fixation on speed of project delivery, may have
                                                            MOR has adopted what it calls the “six in one”
sometimes led to insufficient review of quality
                                                            principle as the foundation for railway project
and safety features, particularly in the absence
                                                            implementation; it encompasses quality, safety,
of an independent quality verification authority.
                                                            completion      time,    investment     benefit,
                                                            environmental protection, and technical
Public governance of the railway sector is not so
                                                            innovation. This six-faceted principle requires
institutionally concentrated in most other
                                                            strong technical capacity at all stages of the
countries. Typically there are administrative
                                                            project cycle from planning and design through
divisions between policy making, regulation and
                                                            to commissioning.
financing, and between public administration
and service delivery. Project goals and
timetables are subject to internal and external
                                                            2
1                                                            In the case of joint venture railways provincial (that is,
    Bond issues are also subject to MOF approval.           sub-sovereign) government, contributes to financing.
China Transport Topics No. 03                         3                          World Bank Office, Beijing

Planning and Design                                       Ministry of Land Resources and Ministry of
There are six major railway design institutes in          Water Protection, the project is ready for
China. All except one are legally independent of          implementation. The detailed design for the
MOR though they are commercially dependent                project is then completed by the contracted
on MOR contracts, for which they compete. All             design institute in accordance with the approved
are state-owned enterprises.                              parameters. Project managers implement them
                                                          with little or no further questioning of the
Their role typically includes route surveys,              concept or design and so there are minimal
environmental assessments (sometimes with                 changes during construction.
specialist    environmental     firms),  project
feasibility reports and preliminary and detailed          Design Standardisation
designs. Typically each major design institute            Published technical specifications for high-speed
employs about 3,000-4,000 people. This capacity           railways utilize a standardisation of designs and
together with a singular focus provides the               technical specifications not only to simplify the
means and the ability to produce a feasibility            design process, but also to help manufacturers
report within a 6-12 month time frame. In most            to attain economies of scale and contractors to
countries feasibility studies for major railway           develop cost-effective ‘repeat’ processes for
construction projects take up to 2 years to               construction. For example, the length and design
specify, procure, complete and report.                    of beams for viaducts has been standardised,
                                                          helping to maximising the production rate of
                                                          bridge beams, improving quality control and
                                                          optimising the cost of production.

                                                          Procurement
                                                          Procurement is typically administered by
                                                          professional tendering companies using routine
                                                          processes. As in other countries, the bidding
                                                          process for contracts requires that bidders must
                                                          meet the qualifying criteria of past experience of
                                                          similar work and project scale, and availability of
                                                          physical and financial capacity to carry out the
                                                          contract in the required time frame.
The feasibility reports and associated preliminary
designs together with the environmental impact            Traditionally, China’s railway construction
assessment are first reviewed by MOR and,                 industry was part of MOR. These units were
when accepted, are submitted to the NDRC that             separated in year 2000 as part of railway
uses its own engineering and economic                     reforms. Construction activities were transferred
consultants to check the technical parameters,            to what is today two large holding companies:
cost estimates and the estimated rates of return.         China Railway Construction Co. (CRCC) and China
MOR and other sponsors (if any) must                      Railway Engineering Corporation (CREC). Each
demonstrate that they have sufficient                     controls 15 to 20 subsidiaries that specialise in
investment funds available. NDRC then sets the            particular aspects of railway construction. They
priority    and     time-frame      for     project       may have more than one subsidiary specialising
implementation: crucially, the project budget,            in the same activity such as bridge or tunnel
technical parameters, preliminary design, and             construction, but these may compete with one
schedule for each project are ‘frozen’ at the             another for contracts. Some railway construction
point of NDRC approval. On receiving necessary            and engineering companies are listed on the
clearance from the Ministry of Environment,               stock exchange but the state usually remains the
China Transport Topics No. 03                                4                         World Bank Office, Beijing

majority shareholder. In addition to the railways                Local county and township governments
construction companies, road construction                        implement land acquisition and resettlement,
companies have begun to win sizable railway                      not the MOR.
construction contracts.
                                                                 Project Management
In domestically-funded procurement 3 the                         MOR establishes a project management team
process is typically skewed toward the interests                 and assigns to it the responsibility of delivering
of the employer rather than the contractors and                  the project in the agreed time frame. Teams
the design institutes, much more so than is                      consist of professionals in project management
typical internationally. For example, the time                   and implementation and are drawn from the
given for submission of contractors’ bids is very                construction management divisions of the
short, typically four weeks. The bid evaluation                  regional railway administrations of MOR. Each
process is then completed within two or three                    project management team is delegated the
weeks of bid opening. Thus, the entire                           funds, the design and above all the authority to
contracting process may be completed in less                     implement the project. The project team is
than three months. Internationally, procurement                  supported by the system integration unit that is
rarely takes less than 12-18 months for very                     responsible for testing and commissioning of
large infrastructure projects, partly because                    various sub-systems as well as the complete new
much longer response, review, and possible                       railway system.
clarification or appeal times are built-in as this is
thought to contribute to fairness in process and                 Following award of contracts, the project team
effectiveness in outcome.                                        prepares a detailed schedule for delivering the
                                                                 project. Critical path activities are closely
In China, turnkey contracts for rail projects are                monitored and in the case of actual or perceived
unusual and separate contracts are usually                       slippage remedial measures are taken
awarded for goods and equipment that are to be                   immediately. The worksites are monitored from
installed for track, signalling, communications,                 the project team’s headquarters, in several cases
traction sub-stations, overhead catenary, power                  by real-time video systems. This also allows
and train dispatch centres and so on.                            video conferences between contractors, site
                                                                 managers and the project team. Meeting the
Land Acquisition                                                 delivery schedule is sacrosanct and the project
In recent years, MOR has tried to reduce the                     team has the authority to incur additional costs
requirement of land for projects to the minimum                  to maintain the schedule for example, by air
as reluctance of the population to part with land                freighting of urgent components.
is growing and its costs are increasing. In
addition, prime agricultural land is protected by                Typically the project team remains together until
national laws. MOR is now placing a much larger                  the job is done and is held fully and collectively
proportion of new railway lines on bridges and                   accountable. This continuity, together with
viaducts and in tunnels. For example around 81                   significant financial incentives built into team
percent of the new 860km high-speed rail line                    earnings for timely delivery of the project, acts
currently under construction between Guiyang                     as a strong motivator of team performance.
and Guangzhou is on viaduct or bridge or in                      Project management teams are provided
tunnel. This reduces the land-take and time to                   temporary housing accommodation, normally
acquire land, but increases the cost of                          without their families.
construction.
                                                                 Major projects are usually divided into
3
 That is, procurements that are not funded under the rules       specialised contracts such as for earthwork,
of International Financial Institutions (IFIs)                   bridges,    tunnels,  track-work,  signalling,
China Transport Topics No. 03                            5                         World Bank Office, Beijing

communications,           and        electrification.        transmission and analysis of data collected
Coordination and interface management                        during static and dynamic tests.
between contractors is the responsibility of the
project management teams but contractors face                The tests include measurement of various track
financial penalties if they fail to meet the agreed          parameters under static and dynamic conditions.
schedules. The chronic ‘gaming’ that dogs major              Laser camera, image processing and digital signal
contracts in many countries, with hold-ups                   processing technologies are used for non-
pending resolution of contract disputes,                     contact measurements. The dynamic response
allocation of blame for delays, and quests for               of the electric multiple unit train-sets (EMUs) is
variation payments, seem not to be tolerated.                measured          through         accelerometers,
Both market power and contract rights fall                   displacement sensors, pressure sensors as well
clearly in favour of the MOR’s project teams and             as instrumented wheel sets. The data is analysed
not with contractors.                                        to evaluate horizontal and vertical forces on the
                                                             wheel and the rail, forces on the axle and the
Quality Monitoring                                           derailment coefficient. Other tests measure the
Each contract and its various components                     pressure inside and outside passenger cars when
contain not only technical specifications but also           trains pass each other in the open and in
quality control parameters. The contractor                   tunnels. Electronic tests are conducted on track
follows an agreed quality control system that is             circuits and signalling and other systems.
monitored by an independent contract                         Similarly, the various parameters of a
management unit reporting to the project                     pantograph under operation are assessed.
management team.
                                                             The commissioning process includes the running
Internationally experienced consultants are                  of normal and test trains on the new railway to
engaged for contract supervision of projects that            carry out integrated tests that verify
use high-precision technologies new to China                 performance, and lead to adjustment and fine
(such as railways with maximum speed of 350                  tuning to optimise the whole system as an
km/h and more). These consultants employ                     integrated unit. In the case of Wuhan-
internationally acquired systems for quality                 Guangzhou line these tests lasted about 12
assurance which in turn helps strengthen China’s             months and covered 17 major sub-systems
own long-term quality monitoring expertise.                  including power supply and sub-stations,
                                                             signalling, electromagnetic capability, vibration
Commissioning                                                and sound shields, track structure, aerodynamics
Several sub-systems of a railway need to be                  of train at turnouts, bridges and tunnels, and
integrated seamlessly for safe, reliable and                 safety monitoring systems. Failure simulations
efficient operation. MOR has, in recent years,               are carried out to test back-up systems. The
developed comprehensive testing systems                      commissioning tests include adjustment and fine
benchmarked against specified standards of                   tuning of track and switches based on test
reliability, availability, maintainability and safety.       results of dynamic performance of trains.
                                                             Similarly the overhead catenary system is fine-
This regime was instituted by MOR during its                 tuned for removing flaws in respect of stagger,
successful efforts over two decades to raise                 hard spots, excessive or continuous sparking.
speed of passenger services, in steps from                   Such tests are conducted at progressively higher
100km/hr to 200 km/hr, by upgrading existing                 speeds. In most part this commissioning has
railways. Methods were refined as MOR moved                  helped to ensure quality but, as demonstrated
on to building new high-speed railways with                  by the Wenzhou accident, there is room for
maximum speeds of 250 to 350 km/hr. Advanced                 improvement.
technologies are used in measurement,
China Transport Topics No. 03                        6                           World Bank Office, Beijing

THE PROGRAM EFFECT                                       sense that what has not gone wrong so far
                                                         cannot go wrong.
So far the paper has described the
implementation cycle of individual projects but
                                                         The recent train crash in Wenzhou has led some
the fact that each project has been part of
                                                         observers in China to doubt whether such
integrated much larger program should not be
                                                         challenging program delivery schedules as have
forgotten.
                                                         been achieved in the last few years can be
                                                         maintained without some diminution of
The fact of there being not one but many of the
                                                         attention to the review and scrutiny necessary
largest railway projects in the world in the
                                                         for the highest life-cycle quality and reliability. A
program might be thought to challenge rather
                                                         recently published investigation report on the
than aid expeditious project delivery. But the
                                                         Wenzhou accident finds that the root cause of
scale of the MLTP created a whole new industry
                                                         the accident was insufficiently robust signalling
that was confident in the continued long-term
                                                         equipment that malfunctioned when struck by
development of China’s railways, a confidence
                                                         lightning. This equipment went into service in
that led to a huge increase in the capacity of the
                                                         late 2007 with little testing. It further concluded
industry, from technical institutes through to
                                                         that the focus on speed of the railway project
contractors, manufacturers, service suppliers
                                                         construction, neglect of safety management and
and many others.
                                                         corruption in award of contract also contributed
                                                         to the accident. MOR has prudently undertaken
Survey and design institutes were geared up to
                                                         a China-wide review of standards of recent and
produce project documents and detailed designs
                                                         planned projects that extends beyond the
in short order. Factories worked round the clock
                                                         individual accident concerned.
to manufacture standardized components such
as slab-tracks, bridge beams, tunnel linings, and
                                                         MOR also decided, on the grounds of energy
so on. Worksites hummed constantly beneath
                                                         savings, to cap the maximum speed of trains at
daylight and floodlights, 7 days a week, with
                                                         300 km/h effective July 01, 2011.
workers confident that when one site closed
another would open up.
                                                         COULD THE CHINA EXPERIENCE BE REPLICATED?
In other words, building new railways has                The question is often asked if it is possible to
become ‘routine’ in China in the way it was              replicate the speed of project implementation
routine in, say, Europe, North America and India         on China Railways in other countries. The
in the nineteenth century, when there were               authors believe there are good and important
comparable feats in project delivery times. There        lessons for many countries to learn, or re-learn,
is a common saying that if you want something            from China about the importance of vision,
done quickly, give it to a busy person. China’s          preparation, commitment and focus in pursuing
railway industry was never been busier than in           large,     complex     but     ‘mould-breaking’
the last decade.                                         infrastructure investments.

WAS QUALITY AND SAFETY COMPROMISED?                      On the other hand, the program effect is not
                                                         easily replicated in most countries which
But the routine of responding to pressured
                                                         typically have few major new lines to build and
deadlines also has its own risks. As the authors
                                                         may not have either the need of or resources for
know well from their experiences in project
                                                         a large-scale program. Those other countries
management outside China, routine may also
                                                         that are planning to build new railway lines are
breed a potentially unfounded sense of security
                                                         typically dealing with only one ‘headline’ project
and continuity that can reduce vigilance – a
                                                         at a time, which is typically subject to a unique
China Transport Topics No. 03                        7                        World Bank Office, Beijing

or highly customised design and delivery                 constraint on the future speed of network
process.                                                 development.

                                                                           **********

                                                         John Scales is Transport Co-ordinator, Beijing
                                                         Office of the World Bank.

                                                         Jitendra Sondhi is a railway engineer and is
                                                         currently a Consultant to the World Bank’s
                                                         railway lending program in China.

                                                         Paul Amos is a transport strategy and
                                                         management consultant to the World Bank and
                                                         previously the World Bank’s Transport Advisor.

It is also the case that the concentration of            This note is part of the China Transport Note
responsibility, power and resources that is              Series to share experience about the
evident in MOR is not favoured by most                   transformation of the Chinese transport sector.
countries. Most have opted for sector                    For comments, please contact John Scales
governance arrangements involving more checks            (jscales@worldbank.org) or Gerald Ollivier
and balances in the public administration of the         (gollivier@worldbank.org), from the Beijing
railway sector, and more external scrutiny of and        World Bank Office.
wider accountability for major public projects
and their funding. Such arrangements have                Any findings, interpretations and conclusions
strong support in public governance theory but           expressed herein are those of the authors and do
inevitably add complexity and time to the                not necessarily reflect the views of the World
process of delivering major public infrastructure.       Bank. Neither the World Bank nor the authors
                                                         guarantee the accuracy of any data or other
Even in China, the high rate of project                  information contained in this document and
implementation experienced between 2008 and              accept no responsibility whatsoever for any
2011 has been curtailed. The economic stimulus           consequence of their use.
package that prevailed over that period
increased the number of projects and
compressed project timetables and thereby
brought forward a significant portion of the
MLTP. But it has also led to a rapid ramp-up of
railway debt, while net revenue returns from the
additional capacity created will take much longer
to accrue.

The economic stimulus has now been phased
out in China including within the railway sector.
Annual investment levels can now be moderated
from those years without compromising the
attainment of MLTP by 2020, but raising
sufficient finance against the backdrop of the
accrued debt may now become the main

								
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