performance-based road management and maintenance contracts

1 e-mail: [email protected]://www.zietlow.com

Dr. Gunter Zietlow

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

Ministry of Transport and Communications, KazakhstanWorld Bank / European Bank for Reconstruction and Development / Asian Development Bank

Road Asset Management Workshop, 31 May – 3 June 2005Astana, Kazakhstan

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Overview ofPresentationOverview 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

Introduction Brief history of Performance Contracts Main reasons for implementing


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Overview ofPresentationOverview ofPresentation Introduction Introduction

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Poor maintenance

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Importance of timely MaintenanceImportance 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.

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

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 1980’s 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.

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 1980’s 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 contractsType of contracts

Unit price contract (admeasured)Unit rates for work itemsPayments are based on quantity of completed work

Lump sum contractDefinition of total workPayment based on single price for total work

Performance based contractService level criteria (performance criteria)Fixed monthly payments if service level criteria are

complied with

Hybrid contract Mixture of performance contract and unite price contract

Unit price contract (admeasured)Unit rates for work itemsPayments are based on quantity of completed work

Lump sum contractDefinition of total workPayment based on single price for total work

Performance based contractService 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

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.

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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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.

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

Contract duration in years

2 4 6 12108 14

Routine

Routine and periodic

Construction, periodic and routine maintenance

Up to 30 years

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In-house Mainte-nance

Outsourcing Specific

Maintenance Works

Performance-Based Road Management and Maintenance Contracts

Long-term Road Concessions (BFOT)

Short-term

Medium-term

Long-term

Risk to contractor increases

Risk to road agency decreases

Distribution of riskDistribution of risk

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is also referred to asPerformance Specified Road

Maintenance Contract (Australia and New Zealand)

Highway Asset Management Contract (USA)

Maintenance Service Level Contract (Latin America)

is also referred to asPerformance 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)Scope of Services of PMMR (1)

Management of the Road Network

Routine Maintenance

PeriodicMaintenance

RehabilitationImprovementsEmergencies

PMMR

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Scope of Services of PRRM (2)Scope of Services of PRRM (2)


Routine Maintenance

PeriodicMaintenance


PMMR

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Routine Maintenance

PeriodicMaintenance


PMMR

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Routine Maintenance

PeriodicMaintenance


PMMR

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Contractual Relationship of PMMR (1)Contractual Relationship of PMMR (1)

Client/Client/Road AdministrationRoad Administration

Road EngineerRoad EngineerConsultantConsultant ContractorContractor

Performance or Performance or Conventional ContractConventional Contract Performance ContractPerformance Contract

Performance AuditSupervision for Admeasured Work

Audit by Client

or ExternalAuditor

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Contractual Relationship of PMMR (2)Contractual Relationship of PMMR (2)

Client/Client/Road AdministrationRoad Administration

Consultant/ContractorConsultant/Contractor

Performance ContractPerformance Contract

Audit by Client

or External Auditor

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Overview ofPresentationOverview ofPresentation Introduction Brief history of Performance Contracts

Introduction Brief history of Performance Contracts

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Brief history of Performance ContractsBrief 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)

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)Examples of PMMR in Latin America (12/2001)

CountryNo

contractsTotal 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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Performance Contracts


Performance Contracts

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Main reasons for implementing Performance ContractsMain reasons for implementing Performance Contracts

Reduces maintenance costProvides better transparencyImproves customer focusImproves control and enforcement of

quality standardsImproves overall road conditionsHelps to reduce road user costs and

road rehabilitation costs

Reduces maintenance costProvides better transparencyImproves customer focusImproves control and enforcement of

quality standardsImproves overall road conditionsHelps to reduce road user costs and

road rehabilitation costs

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Performance Contracts Service level criteria and response times


Performance Contracts Service level criteria and response times

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Service level criteriaService level criteria

ObjectivesTo minimize total systems costTo satisfy the road user

accessibilitycomfort travel speedsafety

To minimize environmental impacts Service level criteria and response times Examples

ObjectivesTo minimize total systems costTo satisfy the road user

accessibilitycomfort travel speedsafety

To minimize environmental impacts Service level criteria and response times Examples

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Examples of service level criteria 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 ............

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)Scope (assets or services)

Drainage System Pavement, incl. markings Traffic assets (safety, signs, markings,

signals, etc.) Roadside Assets Bridges Tunnels Traffic ServicesTraffic Services Emergency ResponseEmergency Response Snow & Ice ControlSnow & Ice Control

Drainage System Pavement, incl. markings Traffic assets (safety, signs, markings,

signals, etc.) Roadside Assets Bridges Tunnels Traffic ServicesTraffic Services Emergency ResponseEmergency Response Snow & Ice ControlSnow & Ice Control

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Examples of service level criteria (1)Examples of service level criteria (1)

Asset Class

Component Service Level Criteria

Pavement Potholes

Roughness (a)

Roughness (b)

Rutting

Cracks > 3mm

No potholes

IRI < 2.0 (A), < 2.8 (U)

IRI < 2.9 (A), < 3.4 (U)

< 12mm (A), < 10mm (U)

Sealed

Gravel surfaces

Potholes

Roughness

Thickness of gravel layer

No potholes

IRI < 6 (U), < 1 (C)

> 10cm (C,U)

Paved Shoulders

Potholes

Cracks > 3mm

Joints with pavement

No potholes

Sealed

Vertical alignment < 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)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

> 160 mcd/lx/sqm (Argentina),

> 70 mcd/lx/sqm (Chile)

Right of way

Vegetation

Foreign objects

< 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 timesService level criteriaand response times

SERVICE LEVEL CRITERIA RESPONSE TIME

Roughness IRI < 2.5 and < 2.4 at the end of contract

-----------

Surface defects < 50 mm < 50 mm

24 hrs. 4 hrs.

Underground drainage -blocked -siltation > 15%

4 weeks 4 weeks

Road markings -missing, not legible, worn > 50% -loss of reflectivity > 70%

4 weeks 4 weeks

Warning signals -missing -loss of reflectivity > 50% -Traffic signals

24 hrs. 4 weeks 2 hrs. to 7 days

SERVICE LEVEL CRITERIA RESPONSE TIME

Roughness IRI < 2.5 and < 2.4 at the end of contract

-----------

Surface defects < 50 mm < 50 mm

24 hrs. 4 hrs.

Underground drainage -blocked -siltation > 15%

4 weeks 4 weeks

Road markings -missing, not legible, worn > 50% -loss of reflectivity > 70%

4 weeks 4 weeks

Warning signals -missing -loss of reflectivity > 50% -Traffic signals

24 hrs. 4 weeks 2 hrs. to 7 days

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Performance Specified MaintenanceContract, New ZealandPerformance Specified MaintenanceContract, New Zealand

Feature Contract Standard (Service Level Criteria) Response time

Potholes on highways > 10000 vpd

Not more than 3 potholes with a diameter greater than 70mm on any 10km section

48 hours

Potholes on all highways

No potholes greater than 150mm in diameter

48 hours

Depressions and Rutting

No ponding greater than 30mm in depth at any location

6 months

Lined Channels

No lined channels with more than 10% of the cross-sectional area obstructed and free of vegetation

1 week

Edge Break No more than 2m of edge break within any continuous kilometer greater than 0.5m

1 month

Feature Contract Standard (Service Level Criteria) Response time

Potholes on highways > 10000 vpd

Not more than 3 potholes with a diameter greater than 70mm on any 10km section

48 hours

Potholes on all highways

No potholes greater than 150mm in diameter

48 hours

Depressions and Rutting

No ponding greater than 30mm in depth at any location

6 months

Lined Channels

No lined channels with more than 10% of the cross-sectional area obstructed and free of vegetation

1 week

Edge Break No more than 2m of edge break within any continuous kilometer greater than 0.5m

1 month

33http://www.vmsom.com/news/pro-paper.asphttp://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.

• 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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Performance Contracts Service level criteria and response times Performance monitoring and payments


Performance Contracts Service level criteria and response times Performance monitoring and payments

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Quality control and assuranceQuality control and assurance

Formal monthly inspectionsInformal inspectionsContractors self-control systemRoad user complaints

Formal monthly inspectionsInformal inspectionsContractors self-control systemRoad user complaints

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Performance monitoringInspection system in ChilePerformance 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.

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 paymentCHILESystem 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.

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)

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.

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)

Example of penalties for not responding to rectify deficiencies within specified response times (CREMA, Argentina)

Service level criteria Penalty in US$

No pothole > 2cm deep on paved roads 110/day/pothole

No edge failure on paved roads 110/day/failure

No rutting > 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 > 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 ContractorSelf-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

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 contractorPerformance 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

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 SystemQuality Management System

ISO 9001:2000 “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

ISO 9001:2000 “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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Performance Contracts Service level criteria and response times Performance monitoring and payments Bidding and award of contract


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 contractBidding and award of contract

Legal and financial feasibility Preparation of bidding documents

Scope of WorkTime framePure performance-based or hybridRole of contractor in preparing bidding

documentsRisk allocation

Pre-qualification Evaluation criteria Contract award

Legal and financial feasibility Preparation of bidding documents

Scope of WorkTime framePure performance-based or hybridRole of contractor in preparing bidding

documentsRisk allocation

Pre-qualification Evaluation criteria Contract award

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Examples of Bidding DocumentsExamples 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)

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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Performance Contracts Service level criteria and response times Performance monitoring and payments Bidding and award of contract Implementation experiences


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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Extension: 359 km154 km bituminous concrete88 km concrete37 km bituminous surface treatment21 km forced impregnation59 km gravel

Variable conditions30 km of roads need initial rehabilitation

and others require strengthening during the contract period.

Extension: 359 km154 km bituminous concrete88 km concrete37 km bituminous surface treatment21 km forced impregnation59 km gravel

Variable conditions30 km of roads need initial rehabilitation

and others require strengthening during the contract period.

Pilot ProjectUruguayPilot ProjectUruguay

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Remaining thickness of gravel surface layer: 5 cm during and 10 cm at the end of the contract

period

Roughness ( IRI ) of pavements:< 2,8 for bituminous concrete< 3,4 for bituminous surface treatment< 6 for gravel

Bituminous surfacesAbsence of potholesSettlements < 10 mm

ShouldersAbsence of potholes and settlements

Remaining thickness of gravel surface layer: 5 cm during and 10 cm at the end of the contract

period

Roughness ( IRI ) of pavements:< 2,8 for bituminous concrete< 3,4 for bituminous surface treatment< 6 for gravel

Bituminous surfacesAbsence of potholesSettlements < 10 mm

ShouldersAbsence of potholes and settlements

Pilot Project Uruguay Examples of Service Level CriteriaPilot Project Uruguay Examples of Service Level Criteria

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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.

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.

Pilot Project Uruguay Examples of Service Level CriteriaPilot Project Uruguay Examples of Service Level Criteria

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Contract period: 4 years Deadlines to comply with performance

indicators:2 months for potholes6 months for other defects on main roadsone year for all roads

The contractor is being paid a fixed monthly fee per kilometer and type of road surface.

Sanctions for non-compliance

Contract period: 4 years Deadlines to comply with performance

indicators:2 months for potholes6 months for other defects on main roadsone year for all roads

The contractor is being paid a fixed monthly fee per kilometer and type of road surface.

Sanctions for non-compliance

Pilot Project UruguayDeadlines, Payments, and SanctionsPilot Project UruguayDeadlines, Payments, and Sanctions

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Started with 2 routine maintenance contracts and 1 maintenance contract for traffic signs and markings with former road agency’s staff.

Contracts have been let for 2+ 2 years. The former road agency’s 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.

Started with 2 routine maintenance contracts and 1 maintenance contract for traffic signs and markings with former road agency’s staff.

Contracts have been let for 2+ 2 years. The former road agency’s 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.

Pilot Project Uruguay Redeployment of Displaced StaffPilot Project Uruguay Redeployment of Displaced Staff

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PMMR Uruguay Improvement in road conditionsPMMR Uruguay Improvement in road conditions

Contractor Year Very good

Good Regular Bad

A1996 0% 60% 40% 0%

1998 25% 60% 15% 0%

B1996 23% 13% 64% 0%

1998 37% 46% 17% 0%

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PMMR - UruguayPMMR - Uruguay

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56


57

Pilot Project Montevideo

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59


60


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Actually 46% of the national road network is being managed and maintained by PMMR

Contracts are of fourth generationContracts receive priority for

financing

Actually 46% of the national road network is being managed and maintained by PMMR

Contracts are of fourth generationContracts receive priority for

financing

Uruguay PMMRUruguay PMMR

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Argentina

63

Argentina

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National Road NetworkNational Road Network

Paved (km) Unpaved (km) Total (km)

Tolled concessions

9508 9508

Untolled concessions

1879 1879

CREMA 14399 14399Under 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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AUSTRALIAPMMRAUSTRALIAPMMR

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%

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 ZealandPMMRNew 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

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)

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

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

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)

Source: FHWA contact “[email protected]”

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OverloadingOverloading

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Weigh Station Caminos del Río Uruguay

Weigh Station Caminos del Río Uruguay

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Cost savings

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Contracting out can reduce road maintenance cost

Contracting out can reduce road maintenance cost

0

20

40

60

80

100

120

in-house unite pricecontract

performancecontract

range

minimum cost

0

20

40

60

80

100

120

in-house unite pricecontract

performancecontract

range

minimum cost

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Cost of Road Maintenance in SydneyCost of Road Maintenance in Sydney

0 10 20 30 40 50 60 70

Time (months from June 1991)

0

20

40

60

80

100% 1991 Rates

RTA

SOR Contract

Transfield Contract

0 10 20 30 40 50 60 70

Time (months from June 1991)

0

20

40

60

80

100% 1991 Rates

RTA

SOR Contract

Transfield ContractPerformance Specified Contract

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Mobile Mobile Pothole Pothole PatchingPatching

CONVENTIONAL METHODCONVENTIONAL METHOD Average Unit Cost:Average Unit Cost:

$120 per patch$120 per patch $900 per lane mile$900 per lane mile $5,900 per ton$5,900 per ton * Production = * Production = 20-30 patches per day20-30 patches per day

MOBILE PATCHERMOBILE PATCHER Average Unit Cost:Average Unit Cost: $22 per patch$22 per patch $38 per lane mile$38 per lane mile $880 per ton$880 per ton

*Production = *Production = 120 patches per day120 patches per day

Courtesy VMS

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Innovative RoadFlex™Innovative RoadFlex™Pothole Patching MaterialPothole Patching Material

Multiple Benefits:Multiple Benefits: Permanent patch Permanent patch

materialmaterial No failures in 3 yearsNo failures in 3 years No rework requiredNo rework required Reduced labor and Reduced labor and

lane closureslane closures Less disruption to Less disruption to

motoristsmotorists

Courtesy VMS

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Cost savings summaryCost savings summary

Performance Contract: Incentives / competition / long-term management

Modern management and work procedures

Increased productivityTotal life cycle costingJust-in-time maintenanceWork package optimizationUse of latest technologies

Helps to reduce road user costs and road rehabilitation costs

Performance Contract: Incentives / competition / long-term management

Modern management and work procedures

Increased productivityTotal life cycle costingJust-in-time maintenanceWork package optimizationUse 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“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

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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- Implementation Strategy -


- Implementation Strategy -

Phased introduction of service level criteria.

Routine maintenanceRoughness and frictionDeflection

Increase time span of contracts.1 to 2 years4 to 5 years< 12 years

Monitor implementation process.

Phased introduction of service level criteria.

Routine maintenanceRoughness and frictionDeflection

Increase time span of contracts.1 to 2 years4 to 5 years< 12 years

Monitor implementation process.

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Pilot Projects for PMMR (1)Pilot Projects for PMMR (1)

Legal feasibilityFinancial feasibilityTechnical feasibility

Legal feasibilityFinancial feasibilityTechnical feasibility

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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.

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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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.

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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Preparation of Tender Documents.Selection of contractors and award

of contract.Monitoring and evaluation.

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 -

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

Moderate climate and topographyLength: 300 to 500 kmConcentrated areaClose to a major cityInclude different types of road

surfaces, road conditions, and traffic levels

Moderate climate and topographyLength: 300 to 500 kmConcentrated areaClose to a major cityInclude different types of road

surfaces, road conditions, and traffic levels

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Lessons learned (1)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

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)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.

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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VISIONNoNo

potholespotholes

Transport CostBusiness

Opportunities

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http://www.zietlow.com

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Thank you for your attentionThank you for your attention