Government to Engage International Consultants for ML-1 Project

The government has decided to engage international consultants for the preparation of governance, human resource structures, development of business and cash flow models for upgraded Main Line (ML-1) project under the China Pakistan Economic Corridor (CPEC).

The Central Development Working Party (CDWP) has recommended the $7.2 billion ML-1 railway project to the Executive Committee of the National Economic Council (ECNEC) for approval and Railways Ministry is planning to execute physical work in January 2021.

The Ministry is in the process of hiring consultants to frame terms of references (ToRs) to engage consultants for the preparation of governance, human resource structures & development of business and cash flow models for upgraded ML-1.

ML-1 has been picked up for up-gradation as an Early Harvest Project under the CPEC arrangement. The project envisages the up-gradation of ML-1, the establishment of a dry port near Havelian Railway Station; up-gradation of Pakistan Railway Academy Walton, Lahore; and passenger facilities improvement at important railway stations.

The project will require a new system of governance and fully equipped human resources to get the intended benefits and ensure the repayment of foreign loans.

According to documents, the prime objective of this consultancy service is to prepare TORs along with RFP to engage a national/international consultant for the organizational and human resource structures and all other aspects related to the successful management of ML-1.

The TORs to be prepared by the consultant shall cover two phases:

  • Phase-I detailed TORs for preparation of governance & HR structures, development of business and cash flow, and other models for upgraded ML-1.
  • Phase-II detailed TORs for implementation of various structures and models prepared by the management consultant.

TORs should also identify areas to be discovered by the management consultant to improve operational efficiency and management through an enhanced organization structure. The consultant will be required to prepare a governance structure for ML-1 with a view to separate it from the rest of the PR network to transform ML-1 into a competitive, profitable, self-sustainable entity.

It should have defined the complete hierarchy along with roles, responsibilities, and authorities of each tier and stipulate a strategy for the communication channels and interfaces with its clients covering all risks.

Proposed TORs must ensure to conduct an HR Systems Audit to analyze the gap in existing and required HRM policies, practices and procedures, and design customized policies for ML-1 in line with international best practices. This may include a study of the recruitment & selection process, performance appraisal/management system, training, and development practice, and compensation system and strategy by the Management Consultant.

TORs should also seek comprehensive HR Policies and Procedures covering recruitment and selection, training, performance management systems, career planning, compensation, disciplinary rules, and employee well-being.

TORs must ensure to conduct capability analysis of existing HR resources and indicate specialized training required to enhance their capabilities to adjust to the upgraded ML-1 or identify recruitment needs for additional staff under a new governance system. TORs will also cover a transparent and results-based performance management system that could ensure assessment of achievements through an elaborative and integrated system of Key Performance Indicators (KPIs).

Proposed TORs must cover the study of existing Financial Model/Analysis which is an integral part of updated PC-1 and point out deficiencies along-with workable suggestions for their rectification by analyzing the current and future passenger and freight markets. The projected growth of freight and passenger businesses should be backed by reliable resources, verifiable data, previous studies (if any), and nationally/are internationally accepted models/calculations.

The TORs should also emphasize upon the study of the operating cost incurred by PR and build projections for ML-1 based on verifiable factors including but not limited to consumption of oil and lubricants as per projected operation’s volume, projections of global oil prices, labor requirements as per new system, wage rates and maintenance costs associated with the new system. The Management Consultant will be required to develop a detailed financial model by calculating the NPV, IRR, and payback period based on Capital Cost and incorporating the Track Access Regime as the main instrument of business under enhanced capacity.

The TORs will also address the need for sensitivity analysis on the major parameters including but not limited to the price of tickets, freight/passenger traffic, fuel escalation, impact on debt repayment due to exchange rate fluctuation, and any other factors deemed necessary for best-in-class appraisal of railway projects.

TORs are required to cover increased business volume at ML1 after up-gradation. The role of the Management Consultant may include but not limited to identify different “Business Models” for revenue generation like a public-private partnership, commercial management outsourcing and track access regime, etc. and analyze the pros and cons of these models. How these models can be run successfully by formulating passenger, freight and non-fare revenue strategies should also be made part of these TORs.

Identification of costs, mechanisms, and policy requirements for the implementation of suggested models will also be part of the exercise.

After up-gradation of ML-1, line capacity will increase many folds providing additional room for inviting the private sector to run passenger and freight trains under Track Access Regime. Proposed TORs should include a comprehensive private sector engagement model to fully utilize this increased line capacity by identifying private sponsors for investment in both passenger and freight sectors such as the provision of the new fleet for both passenger and freight, handling operation at freight terminals and door to door service of freight operation.