66797 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