Performance-Based%20Road%20Management%20and%20Maintenance%20Contracts

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Performance-Based Road Management and Maintenance
Contracts
Ministry of Transport and Communications,
Kazakhstan World Bank / European Bank for
Reconstruction and Development / Asian
Development Bank Road Asset Management Workshop,
31 May 3 June 2005 Astana, Kazakhstan
Dr. Gunter Zietlow

e-mail gunter.zietlow_at_gtz.de http//www.zietlow.c
om
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Overview ofPresentation

• Introduction
• Brief history of Performance Contracts
• Main reasons for implementing Performance
  Contracts
• Service level criteria and response times
• Performance monitoring and payments
• Bidding and award of contract
• Implementation experiences and strategy
• Lessons learned

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Overview ofPresentation

• Introduction

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Poor maintenance
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Importance of timely Maintenance

• When roads are in poor condition every KZT
  saved in road conservation will cost
• KZT 3 to road users in additional vehicle
  operating costs and
• KZT 2 to the road administration (or the tax
  payer) in reconstruction and rehabilitation
  costs.

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Contracting out road maintenance can save a lot
of money

• Routine and periodic road maintenance done by
  in-house labor is being replaced more and more by
  contracts with the private sector.
• Studies made by the World Bank in the 1980s
  revealed that contracting out road maintenance to
  the private sector can reduce maintenance cost by
  between 30 and 50.
• Latin American countries where among the first to
  replace in-house labor by contracts with the
  private sector.
• Asian countries in general are still lagging
  behind.

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Type of contracts

• Unit price contract (admeasured)
• Unit rates for work items
• Payments are based on quantity of completed work
• Lump sum contract
• Definition of total work
• Payment based on single price for total work
• Performance based contract
• Service level criteria (performance criteria)
• Fixed monthly payments if service level criteria
  are complied with
• Hybrid contract
• Mixture of performance contract and unite price
  contract

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Performance-Based Management and Maintenance of
Roads (PMMR)

• Service level criteria define the minimum
  conditions of road, bridge and traffic assets as
  well as the management and operation of the
  assets , leaving it to the contractor as to how
  to achieve them.
• The contractor is free to decide
• What to do
• When to do
• How to do
• Where to do
• To do the physical works himself or subcontract
  (with certain restrictions)
• as long as he meets the performance indicators
  during the contract period

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Performance-Based Management and Maintenance of
Roads (PMMR) cont.

• Lump sum payments are made periodically and might
  be adjusted in accordance with the change of
  certain factors, like inflation or traffic
  volume.
• Major emergency, rehabilitation and improvement
  works might be paid based on unit prices for
  works agreed case by case.

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Performance-Based Management and Maintenance of
Roads (PMMR) cont.

• Deductions or penalties are being made for
  non-compliance with terms and conditions of
  contract, especially with respect to the service
  level criteria.
• Duration of contracts should at least include one
  periodic maintenance cycle (4-5 years for gravel
  roads and 8-10 years for bituminous roads). Pure
  routine maintenance contracts can be 1-2 years.

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Performance-Based Management and Maintenance of
Roads
Complexity
Up to 30 years
Routine and periodic
Routine
Construction, periodic and routine maintenance
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4
6
12
10
8
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Contract duration in years
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Distribution of risk
 
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Performance-Based Management and Maintenance of
Roads (PMMR)

• is also referred to as
• Performance Specified Road Maintenance Contract
  (Australia and New Zealand)
• Highway Asset Management Contract (USA)
• Maintenance Service Level Contract (Latin America)

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Scope of Services of PMMR (1)
Management of the Road Network
Periodic Maintenance
Routine Maintenance
Rehabilitation
Improvements
Emergencies
PMMR
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Scope of Services of PRRM (2)
Management of the Road Network
Periodic Maintenance
Routine Maintenance
Rehabilitation
Improvements
Emergencies
PMMR
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Scope of Services of PMMR (3)
Management of the Road Network
Periodic Maintenance
Routine Maintenance
Rehabilitation
Improvements
Emergencies
PMMR
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Scope of Services of PMMR (3)
Management of the Road Network
Periodic Maintenance
Routine Maintenance
Rehabilitation
Improvements
Emergencies
PMMR
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Contractual Relationship of PMMR (1)
Audit by Client or External Auditor
Client/ Road Administration
Performance or Conventional Contract
Performance Contract
Road Engineer Consultant
Contractor
Performance Audit Supervision for Admeasured Work
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Contractual Relationship of PMMR (2)
Audit by Client or External Auditor
Client/ Road Administration
Performance Contract
Consultant/Contractor
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Overview ofPresentation

• Introduction
• Brief history of Performance Contracts

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Brief history of Performance Contracts

• 1988 British Columbia, Canada
• 1990 Argentina
• 1996/7/8 Uruguay, Chile, Colombia, Brazil
• 1995 Sydney, Australia
• 1996 Virginia, USA
• 1998 New Zealand
• 2000 Chad
• 2001 India (Karnataka)
• 2001 Spain (Alava)

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Examples of PMMR in Latin America (12/2001)
Country No contracts Total km Duration Type of maintenance Av. annual US/km
Argentina 59 11295 5 CREMA 11000
Argentina 11 3623 4 Km months 2100
Brazil 7 2000 5 CREMA 7000
Colombia ME 280 11487 1 routine 1500
Chile 2 747 5 CREMA 3200
Guatemala ME 130 4200 1 routine 1500
Uruguay 7 1473 4 - 5 CREMA 7000
Uruguay ME 9 1768 2 2 routine 3800
Cleaning of drainage system and right of way
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Overview ofPresentation

• Introduction
• Brief history of Performance Contracts
• Main reasons for implementing Performance
  Contracts

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Main reasons for implementing Performance
Contracts

• Reduces maintenance cost
• Provides better transparency
• Improves customer focus
• Improves control and enforcement of quality
  standards
• Improves overall road conditions
• Helps to reduce road user costs and road
  rehabilitation costs

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Overview ofPresentation

• Introduction
• Brief history of Performance Contracts
• Main reasons for implementing Performance
  Contracts
• Service level criteria and response times

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Service level criteria

• Objectives
• To minimize total systems cost
• To satisfy the road user
• accessibility
• comfort
• travel speed
• safety
• To minimize environmental impacts
• Service level criteria and response times
• Examples

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Examples of service level criteria

• International Roughness Index (IRI)
• Absence of potholes and control of cracks and
  rutting
• Minimum amount of friction between tires and road
  surface
• Maximum amount of obstruction of the drainage
  system
• Retro reflexivity of road signs and markings
• ............

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Scope (assets or services)

• Drainage System
• Pavement, incl. markings
• Traffic assets (safety, signs, markings, signals,
  etc.)
• Roadside Assets
• Bridges
• Tunnels
• Traffic Services
• Emergency Response
• Snow Ice Control

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Examples of service level criteria (1)
Asset Class Component Service Level Criteria
Pavement Potholes Roughness (a) Roughness (b) Rutting Cracks gt 3mm No potholes IRI lt 2.0 (A), lt 2.8 (U) IRI lt 2.9 (A), lt 3.4 (U) lt 12mm (A), lt 10mm (U) Sealed
Gravel surfaces Potholes Roughness Thickness of gravel layer No potholes IRI lt 6 (U), lt 1 (C) gt 10cm (C,U)
Paved Shoulders Potholes Cracks gt 3mm Joints with pavement No potholes Sealed Vertical alignment lt 1cm (C,U)
a asphalt b bituminous surface treatment A
Argentina C Chile U Uruguay
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Examples of service level criteria (2)
Asset Class Component Service Level Criteria
Drainage system Obstructions Structures No obstructions. Should allow for unhindered flow of water Structurally sound with no damages
Road signs and markings Road signs Reflectivity of Road markings Complete, visible, and clean gt 160 mcd/lx/sqm (Argentina), gt 70 mcd/lx/sqm (Chile)
Right of way Vegetation Foreign objects lt 15 cm height of grass (Argentina) 5 15 cm height of grass (Uruguay) No foreign objects allowed
a asphalt b bituminous surface treatment A
Argentina C Chile U Uruguay
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Service level criteriaand response times
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Performance Specified MaintenanceContract, New
Zealand
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http//www.vmsom.com/news/pro-paper.asp

• Mainly input (hours worked) or output based (lane
  kilometers cleared) payment with some outcome
  based criteria like the response time of one hour
  when called upon or snow level reaches 2 inches.
• Pure performance contract the contractor
  receives a lump-sum per year and the client calls
  the contactor to achieve bar pavement within 24
  hrs.

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Overview ofPresentation

• Introduction
• Brief history of Performance Contracts
• Main reasons for implementing Performance
  Contracts
• Service level criteria and response times
• Performance monitoring and payments

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Quality control and assurance

• Formal monthly inspections
• Informal inspections
• Contractors self-control system
• Road user complaints

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Performance monitoringInspection system in Chile

• Inspections for purposes of payment done once a
  month taking 10 of the road network selected at
  random different stretches of 1 km length
• Regular inspections done once a week selecting 5
  of the network at random
• Inspections due to complaint by the public and
• Follow-up inspections to verify if contractor
  rectified deficiencies detected by one of the
  inspections mentioned above.

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CHILESystem of payment

• During the monthly inspection the compliance of
  performance standards is being evaluated for each
  category having different importance. Based on a
  pre-established formula compliance is calculated
  as a percentage which is multiplied by the
  monthly payment foreseen for 100 compliance.
  During the first year of the contract compliance
  has been around 95, mainly due to deficiencies
  related to road safety and right-of-way. In
  addition, penalties are being applied if the
  contractor does not rectify deficiencies within
  the time periods defined in the contract.

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Evaluation of service level for a one-km test
section (World Bank)
The overall coefficient of compliance for a
specific road (or road section) in a particular
month is determined by calculating the simple
average of the coefficients of compliance of all
test sections of that month within the road
concerned.
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Example of penalties for not responding to
rectify deficiencies within specified response
times (CREMA, Argentina)
Service level criteria Penalty in US
No pothole gt 2cm deep on paved roads 110/day/pothole
No edge failure on paved roads 110/day/failure
No rutting gt 20cm long and 12mm deep on paved roads 66/day/rut
No cracking or raveling on paved roads 88/week/km
Travel speed of at least 50km/hr on earth and 70km/hr on gravel roads 176/day/km
No potholes gt 2cm on paved shoulders 44/day/pothole
Drains, ditches, culverts and other drainage structures to be clean 44/day/structure
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Self-Control Unit of Contractor

• Own organizational structure with qualified
  personnel
• Verifying continuously the compliance with the
  service level criteria
• Monthly reporting of compliance to client using
  standard formats
• Participating in monthly formal inspections

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Performance monitoring by contractor

• Example Virginia, USA
• Asset inventory and condition assessment (updated
  annually)
• Pavement management program
• Bridge management program
• Safety management and traffic control plan
• Emergency response plan
• Hazardous materials communications plan
• Customer response plan
• Public information plan
• Annual work plan updated every 3 months

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Quality Management System

• ISO 90012000 Quality Management System
  Requirements requires contractor to establish,
  document, implement, and maintain a QMS that
• Identifies processes
• Illustrates sequences and interactions
• Identifies criteria and methods to ensure
  effectiveness
• Documents resources and information necessary
  operate, monitor, measure and analyze the
  processes
• Defines action required to achieve the planned
  results and continually improve the process

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Overview ofPresentation

• Introduction
• Brief history of Performance Contracts
• Main reasons for implementing Performance
  Contracts
• Service level criteria and response times
• Performance monitoring and payments
• Bidding and award of contract

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Bidding and award of contract

• Legal and financial feasibility
• Preparation of bidding documents
• Scope of Work
• Time frame
• Pure performance-based or hybrid
• Role of contractor in preparing bidding documents
• Risk allocation
• Pre-qualification
• Evaluation criteria
• Contract award

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Examples of Bidding Documents

• Sample Bidding Document for Performance-based
  Management and Maintenance of Roads prepared by
  the World Bank (World Bank 2002)
• State Highway Maintenance Contract Proforma
  Manual SM032 (Transit New Zealand 2002)

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Overview ofPresentation

• Introduction
• Brief history of Performance Contracts
• Main reasons for implementing Performance
  Contracts
• Service level criteria and response times
• Performance monitoring and payments
• Bidding and award of contract
• Implementation experiences

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Uruguay
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Pilot ProjectUruguay

• Extension 359 km
• 154 km bituminous concrete
• 88 km concrete
• 37 km bituminous surface treatment
• 21 km forced impregnation
• 59 km gravel
• Variable conditions
• 30 km of roads need initial rehabilitation and
  others require strengthening during the contract
  period.

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Pilot Project Uruguay Examples of Service Level
Criteria

• Remaining thickness of gravel surface layer
• 5 cm during and 10 cm at the end of the contract
  period
• Roughness ( IRI ) of pavements
• lt 2,8 for bituminous concrete
• lt 3,4 for bituminous surface treatment
• lt 6 for gravel
• Bituminous surfaces
• Absence of potholes
• Settlements lt 10 mm
• Shoulders
• Absence of potholes and settlements

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Pilot Project Uruguay Examples of Service Level
Criteria

• Drainage systems, like culverts and ditches,
  should be clean to allow for a permanent free
  flow of water.
• Right of way should be clear of trash and other
  foreign objects.
• Vegetation should not exceed 6 cm on the median
  strip and 15 cm up to 5 m from the borders of
  ditches.
• Traffic signs and markings standards defined by
  the Traffic Department apply.

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Pilot Project UruguayDeadlines, Payments, and
Sanctions

• Contract period 4 years
• Deadlines to comply with performance indicators
• 2 months for potholes
• 6 months for other defects on main roads
• one year for all roads
• The contractor is being paid a fixed monthly fee
  per kilometer and type of road surface.
• Sanctions for non-compliance

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Pilot Project Uruguay Redeployment of Displaced
Staff

• Started with 2 routine maintenance contracts and
  1 maintenance contract for traffic signs and
  markings with former road agencys staff.
• Contracts have been let for 2 2 years.
• The former road agencys staff had the right to
  take up their former employment with the road
  agency, if they wish to do so, within one year of
  contract commencement.

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PMMR Uruguay Improvement in road conditions
Contractor Year Very good Good Regular Bad
A 1996 0 60 40 0
A 1998 25 60 15 0
B 1996 23 13 64 0
B 1998 37 46 17 0
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PMMR - Uruguay
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PMMR - Uruguay
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PMMR - Uruguay
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Pilot Project Montevideo
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Pilot Project Montevideo
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Pilot Project Montevideo
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Pilot Project Montevideo
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Uruguay PMMR

• Actually 46 of the national road network is
  being managed and maintained by PMMR
• Contracts are of fourth generation
• Contracts receive priority for financing

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Argentina
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Argentina
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National Road Network
Paved (km) Unpaved (km) Total (km)
Tolled concessions 9508 9508
Untolled concessions 1879 1879
CREMA 14399 14399
Under contract by provinces 1503 5220 6723
Contracted on km/month 3623 3623
DNV force-account 2612 2612
Total 30912 7832 38744
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Australia
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AUSTRALIAPMMR

• Actually, more than 20000 kilometers of road are
  being managed and maintained under PMMR in
  several provinces of Australia
• Some of the contracts are hybrid contracts (some
  works are being paid on a unit price basis)
• Reported savings are between 15 and 35

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New Zealand
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New ZealandPMMR

• First PMMR covers 406 kilometers, has a duration
  of 10 years and was let in 1998
• Two years later a similar contract was concluded
• In 2002 a PMMR covering 1040 km of local roads
  and 122 km of state highways
• While the first contract resulted in 10 savings
  the latest one came in 22 below the cost
  estimate for comparable conventional contracts

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USA
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First Performance Based Road Management and
Maintenance Contract in the State of Virginia
(Comprehensive Agreement for Interstate Highway
Asset Management Services)

• Maintain and refurbish 1250 lane-miles on three
  Interstate Highways, 62 rest areas, and 7 visitor
  centers
• 5 year contract since early 1997
• 131 million US for 5 years with approximately
  16 savings over VDOT cost
• Contractor is VMS
• 15 of work is done by VMS staff

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Washington D.C.Performance-Based Asset
Preservation

• pavement (344 lane-miles)
• drainage (2950 catch basins, 7 miles of ditches)
• roadside and landscape (450,000 of curb and
  gutter)
• bridges (109 structures)
• tunnels (4 major)
• snow and ice control
• traffic control and safety
  (108,270 guardrail, 51 crash
  attenuators)

contact james.sorenson_at_fhwa.dot.gov
Source FHWA
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Overloading
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Weigh Station Caminos del Río Uruguay
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Cost savings
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Contracting out can reduce road maintenance cost
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Cost of Road Maintenance in Sydney
Performance Specified Contract
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Mobile Pothole Patching
CONVENTIONAL METHOD Average Unit Cost
120 per patch 900 per lane mile
5,900 per ton Production
20-30 patches per day MOBILE PATCHER
Average Unit Cost 22 per patch 38
per lane mile 880 per ton
Production 120 patches per day

Courtesy VMS
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Innovative RoadFlexPothole Patching Material

• Multiple Benefits
• Permanent patch material
• No failures in 3 years
• No rework required
• Reduced labor and lane closures
• Less disruption to motorists

Courtesy VMS
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Cost savings summary

• Performance Contract Incentives / competition /
  long-term management
• Modern management and work procedures
• Increased productivity
• Total life cycle costing
• Just-in-time maintenance
• Work package optimization
• Use of latest technologies
• Helps to reduce road user costs and road
  rehabilitation costs

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Implementation strategy
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Ideal conditions for PMMR

• Well developed contracting environment with local
  contractors experienced in road maintenance
• Road agency with good contract management
  experience, committed to the PMMR concept
• Good knowledge and data of network, maintenance
  needs and cost
• Network does not need mayor rehabilitation
• Financing secured for contract duration

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Performance-Based Management and Maintenance of
Roads- Implementation Strategy -

• Phased introduction of service
  level criteria.
• Routine maintenance
• Roughness and friction
• Deflection
• Increase time span of contracts.
• 1 to 2 years
• 4 to 5 years
• lt 12 years
• Monitor implementation process.

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Pilot Projects for PMMR (1)

• Legal feasibility
• Financial feasibility
• Technical feasibility

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Pilot Projects for PMMR (2)

• Constitution of a working group and definition of
  responsibilities.
• Definition of the road network and scope to be
  contracted.
• Selection and definition of performance
  indicators.
• Definition of how to measure the performance
  indicators.

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Pilot Projects for PMMR (3)

• Preparation of the inventory of the road network
  selected and determination of its present
  condition.
• Determination of the traffic volume by type of
  vehicle.
• Definition of maintenance works required and
  estimation of their cost.

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Pilot Projects for PMMR (4)

• Preparation of Tender Documents.
• Selection of contractors and award of contract.
• Monitoring and evaluation.

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Pilot Projects for PMMR (5)- Criteria for
Selecting the Road Network -

• Moderate climate and topography
• Length 300 to 500 km
• Concentrated area
• Close to a major city
• Include different types of road surfaces, road
  conditions, and traffic levels

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Overview ofPresentation

• Introduction
• Brief history of Performance Contracts
• Main reasons for implementing Performance
  Contracts
• Service level criteria and response times
• Performance monitoring and payments
• Bidding and award of contract
• Implementation experiences and strategy
• Lessons learned

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Lessons learned (1)

• Financing needs to be secured for the entire
  contract period.
• Performance Contracts have to be tailored to each
  specific situation
• Pilot schemes should be carefully planned and
  implemented
• Risks shall be assigned to the party that can
  best manage the risk
• Performance Contracts should be longer than 5
  years and should include periodic maintenance as
  well

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Lessons learned (2)

• Qualification of contractors and inspectors is
  key to success
• All contractors should use proper Quality
  Management Systems (QMS)
• Performance Contracts need strict performance
  monitoring and application of penalties for
  non-compliance
• Performance Contracts might not produce cost
  saving immediately.

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VISION
No potholes
Business Opportunities
Transport Cost
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http//www.zietlow.com
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Thank you for your attention