> taking best practice to the world International Experience with Performance Based Maintenance Contracts.

> taking best practice to the world

International Experience with Performance Based Maintenance

Contracts


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)


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?”


Lessons Learned


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.


Risk

Risk should lie with the organisation best able to manage and resource it;

An understanding of the network’s 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.


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;


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;


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.


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.


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;


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.


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.


Training

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


Risks and challenges

From a recent workshop in Papua New Guinea


High Level Risks & Challenges

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


Medium to High Level Risks & Challenges

Competition Technical competencies Inadequate Design Understanding of Risk Partnering


Low to Medium Level Risks & Challenges

Maintenance Standards Corruption Contract enforceability Communications Political Risk Law & Order


The steps to success

Current Status


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


Egypt

?A great success story because of

total commitment of all the parties



> taking best practice to the world International Experience with Performance Based Maintenance Contracts.

Documents

best practice

world risk risk

world introduction

world lessons

contract simple

world international

maximum potential benefits

perceived benefits