To address rising road maintenance costs and improve road safety, Vietnamese officials sought cost-effective ways to maintain Vietnam’s roads, such as the introduction of Performance Based-Contracts (PBCs).  However, Vietnam’s Ministry of Transport (MoT) lacked capacity to apply PBCs to road maintenance projects, and officials from the Ministry of Finance (MoF) were skeptical of the value of PBCs and lacked commitment to adopt them.  As part of broader Bank assistance, the Bank task team supported a day-and-a-half workshop on PBCs in Hanoi, which included officials from Peru and Brazil and stimulated interest in visiting Brazil to deepen learning. The Bank then organized a study tour to Brazil financed by the South-South Experience Exchange Trust Fund (SEETF), the Public-Private Infrastructure Advisory Facility (PPIAF), and the MoT. The aim of the exchange program was to raise awareness about the strengths of the PBC approach for road maintenance. The goals of the study tour, which is the focus of this story, were to foster dialogue on the value of PBC between MoF and MoT officials, increase the ownership of the approach among MoF officials, and enhance delegates’s skills to design, implement, and monitor this maintenance method.

For six days in October 2011, the Vice Minister and Deputy Head of Vietnam’s MoF and three senior staff from the MoT, including a vice minister, traveled to Iguacu and Salvador to attend an international conference on Public Private Partnerships (PPP), meet with staff from Brazil’s Ministry of Transport and public agencies to learn about Brazil’s CREMA Contratos de Reabilitacao e Manutencao (CREMA) model, and visit with state agencies and a contractor in Bahia State. Delegates learned about the application, monitoring, and advantages of PBC arrangements under the CREMA model and enhanced their skills to develop, execute, monitor, and evaluate PBCs.

Besides building delegates’ skills, the visit helped to resolve an impasse in adopting PBCs in Vietnam, especially by dispelling doubts of the MoF on the value of using PBC arrangements. After the exchange, the Vice Minister of the MoF expressed her full commitment to working with the MoT to apply PBCs for roads and transport projects, and instructed MoF staff to apply newfound knowledge from the visit to PBCs in Vietnam.

Reflecting this commitment, the MoF and MoT established a Road Maintenance Fund and integrated support for PBCs into the World Bank Vietnam Road Asset Management Program (VRAMP), which was approved in December 2013. For example, the VRAMP includes funding to apply PBCs to maintain 270 kilometers of roads, and technical assistance to help Vietnam plan, implement, finance, and monitor PBCs on critical roads in the country’s northern region. 

 

The Government of Vietnam sought to improve road and highway maintenance to support economic growth. As funding for roads was limited, government officials considered using Performance-Based Contracts (PBCs) with state-owned and private contractors to supply efficient and innovative maintenance services at lower costs. Though Vietnam has had moderate success with short-term PBC pilots, officials from the Ministry of Transport lacked the know-how and skills to design, implement, fund, and monitor longer-term projects. Officials from the Ministry of Finance, whose support was critical to ensure funding for PBCs, had previously been skeptical of PBCs and their value in maintaining Vietnam’s road network. However, both Ministries had indicated an interest in learning about PBCs from the World Bank, which in 2011 was supporting the Road Network Improvement Project (RNIP), and preparing the Vietnam Road Asset Management Program (VRAMP) to possibly finance PBCs on key roadways. 

 

The World Bank task team prepared a policy note detailing international good practices for designing and delivering PBCs and describing case studies, and presented it at a “mini-workshop” in Vietnam in November 2010. This mini-workshop stimulated Vietnamese officials’ interest in South-South learning, which led the Bank to organize a day and a half workshop in Hanoi on PBC. Attendees included officials from the World Bank and Vietnam’s MoT, as well as staff from road agencies in Peru and Brazil, two countries with track records in applying complex PBC arrangements to road rehabilitation and maintenance.  At this workshop Vietnamese officials expressed interest in visiting Brazil to learn more about its experiences. The Bank then organized a visit to Brazil financed by the South-South Experience Exchange Trust Fund (SEETF), the MoT, and the Public-Private Infrastructure Advisory Facility (PPIAF). The aim was to counter MoF officials’ skepticism about the value of PBCs, increase Vietnamese officials’ knowledge of and skills  in implementing PBCs, and foster a consensus on next steps, such as securing financing (e.g., through a Road Maintenance Fund).