International Experience with Performance Based Maintenance Contracts

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International Experience with Performance Based
Maintenance Contracts
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Introduction 1

• Performance- and outcome- based road maintenance
  contracts have been implemented around the world
• The concept is based on the separation of the
  owner and service provider roles
• The move to contracting out of road maintenance
  tended to coincide with the smaller government
  movement
• The benefits are readily articulated but often
  not proven (e.g. where are the published
  cost-benefit studies)

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Introduction 2

• New Zealand remains at the forefront of the
  out-sourcing movement. Even in New Zealand the
  more radical reforms have not moved past the
  conceptual stage
• There is no consensus on the benefits of
  outsourcing road maintenance and even in the land
  of free enterprise, the USA, some states have
  actually legislated against the concept
• A valid question that might be asked is
• Would the same perceived benefits have resulted
  if the road authority adopted the owner/service
  provider and kept the service provider in-house?

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Lessons Learned
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Institutional Issues

• Institutional strengthening must be taken
  seriously at all levels
• A clear understanding that, although maximum
  potential benefits are expected, substantial
  improvement in the condition or reduction in
  costs cannot be expected immediately
• Pilot studies should be carefully planned and
  implemented
• Finances must be secured on a multi-year basis.

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Risk

• Risk should lie with the organisation best able
  to manage and resource it
• An understanding of the networks risk profile is
  required so that equitable risk sharing can be
  documented. This would assist in tendering and
  the management of risks. A good database for the
  network would assist in this instance.
• Modelling for long-term competitive tendering
  required a much greater understanding of
  financial and network risks.

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The Contract

• Simple and transparent bidding
• An initial condition assessment of the asset
  should be undertaken at the commencement of the
  contract
• The length of the contract played a part as the
  contract should be long enough for staff to
  retain technical skills to ensure consistent
  delivery but not too long to eliminate local
  competition. It should include at least one
  periodic maintenance application in order to
  maximise potential benefits
• Contract requirements should be adapted to
  achieve maximum competition e.g. the need to
  continually market test the prices of
  sub-contractors      

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The Contractcontinued

• The bottom line is to meet the terms and
  conditions of the contract for the lowest cost
• Contractor being held responsible for the design
  as well as physical works
• Emphasis must be on innovation and for
  contractors introducing new technologies
• All asset types should be evaluated to ensure
  contractor compliance
• There should be quarterly evaluations of
  contractor performance to ensure no long-term
  non-compliance
• There should be an incentive to preserve the
  asset in the contract
• Penalties should apply for failure to meet
  performance criteria

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The Contractcontinued

• The contract should include easy to follow and
  understand dispute resolution procedures
• There should be comprehensive written guidelines
  for collection of performance data including
  inspection protocols
• The contractor must have the flexibility to meet
  performance requirements as per the contract.

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Contractual relationships

• Confidence in the maintenance contracting
  industry is required
• Developing a contractual relationship was
  important in order to promote sharing of
  knowledge and having an open an honest
  relationship. This would contribute towards the
  success of the contract
• A cooperative relationship between all parties as
  contractual adjustments may be required during
  the contract term as well as for renegotiation of
  contracts.

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Levels of Service

• Clearly defining the level of service and the key
  performance indicators by the Road Authority was
  important in ensuring that there are clear target
  that are attainable
• Performance indicators which are simple to
  measure and achieved the desired results
• Targets for performance levels of services should
  be determined from a road user and general public
  viewpoint

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Levels of Service(cont)

• Level of service must be evaluated on the
  specified level not on what is currently been
  provided and should be set at an appropriate
  level and not too high resulting in an excessive
  allocation of funds to the detriment of other
  government services
• Non-safety related level of service could be
  maintained at the current condition with an
  increase of 5 or 10 per year until it is
  improved to the desired level.

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Skills Required

• Technically skilled personnel are required
• Having appropriately skilled staff was considered
  a crucial factor for managing road maintenance
• Experienced contractors introduce new
  technologies through PSRM
• Well qualified contractors and inspectors.

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Training

• Providing training of new contractors in
  management, financial and technical issues.

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Risks and challenges

• From a recent workshop in Papua New Guinea

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High Level Risks Challenges

• Customary landholder interference
• Funding
• Acts of Nature Natural Disasters
• Vehicle Overloading

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Medium to High Level Risks Challenges

• Competition
• Technical competencies
• Inadequate Design
• Understanding of Risk
• Partnering

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Low to Medium Level Risks Challenges

• Maintenance Standards
• Corruption
• Contract enforceability
• Communications
• Political Risk
• Law Order

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The steps to success

• Current Status

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Current Status

• Undertake extensive training program -
  continuing
• Determine assets to be included ?
• Select pilot site ?
• Determine performance criteria ?
• Collect data
• Model network performance
• Prepare contract documents ?
• Call tenders
• Evaluate tenders
• Set up evaluation criteria ?
• Award tenders
• Supervise work
• Evaluate performance ?

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Egypt

• ?
• A great success story because of total commitment
  of all the parties

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