What does this mean for the economy of a country? Due to the poor road condition in many developing countries between 1% and 3% of GDP are being wasted because of additional vehicle operating and road rehabilitation costs. Including additional accident cost as well as freight losses the total waste will increase to between 2% and 5% of GDP per year.
Besides trying to increase the amount of financial recourses for road maintenance it is of utmost importance to use existing funds more effectively and efficiently . The gains by contracting out road maintenance very much depend on the competitiveness and qualification of the private contractors for road maintenance.
Utilization of equipment in the public sector is between 2 to 3 hours per day on average compared with 10 hours or more in the private sector.
Some restrictions apply like abiding by certain quality standards set by the client (the materials used by the Contractor shall comply with or exceed certain quality criteria defined in the contract) or to labour or environmental laws. This might restrict the use or disposal of certain materials or the manner of executing some of the works.
Price adjustment formulas reflecting the change of prices of the most important inputs like labour and materials are being used in most of the PMMR. A good examples for such formula can be taken from the State Highway Maintenance Contract Proforma Manual SM032 , Maintenance Specifications, Transit New Zealand, 1 March 2005. In this case the adjustment will be made once only in each calendar year. The adjustments are being made based on formulas covering the labor cost index, various producer price indices, and the farm expenses price index. Since the traffic volume and composition have a major impact on road maintenance cost, price adjustments might be necessary if significant deviations from the projected data will occur. This might be taken care off by either reducing or increasing the monthly fixed payments depending on the impact on road maintenance cost.
Bonus payments might be considered as well for exceeding the contracted performance standards. The PMMR in Washington DC is one example for such bonus payments.
Periodic maintenance is referring to the periodic application of overlays or surface treatments in the case of black top roads and re-gravelling in case of gravel roads. To include construction, improvements and/or rehabilitation works in a PMMR gives incentives to the contractor to execute works to a high quality standard. This will help to avoid the often experienced tendency of contractors to execute to deliver poor quality works, since he will have to maintain the road for a long period at a fixed price.
PMMR includes routine maintenance only
PMMR includes routine and periodic maintenance (overlays and re-graveling)
PMMR includes routine and periodic maintenance as well as minor emergency, improvement, and rehabilitation work and some management tasks of the management of the road network. The management of the road network includes tasks such as: Attending to traffic accidents Operating a traffic management information system Operating a telephone emergency system Traffic counts Attending to road user complaints Managing a long-term asset management system …… .
PMMR includes all services including the management of the road network. This is the case of a typical road concession that often includes the construction as well. A typical PMMR that includes all the services mentioned above is the PMMR in Virginia, USA. PMMR in the USA: Virginia Case Study , Kent Lande, P.E., Chief Engineer and Vice President, Louis Berger, Transport Forum 2005, World Bank, 2005
This is the situation where there role of the road engineer/consultant is separated from the contractor. The role of the Road Engineer/Consultant is the same as in traditional contracts in respect to items which are subject to a schedule of rates (unit prices) and as for performance specifications his role would be more equivalent to that of an auditor.
This is the situation where there roles of the road engineer/consultant and the contractor are combined. The performance monitoring is done by the client directly or by an external auditor.
The development of Performance Contracts for road maintenance started in the late 1980’s and early 1990’s. First British Columbia in Canada contracted out its road maintenance in 1988. But performance standards were still more oriented towards work procedures and materials to be used, rather than result oriented, very much limiting the contractor in the application of new technologies. Shortly afterwards, Argentina concessioned approximately 10000 kilometers of its national roads, using end result performance specifications for the maintenance services and a penalty system for not meeting response times for rectifying deficiencies. In the mid 1990 the maintenance of another 10000 kilometers was contracted out using similar performance specifications. But this time without applying tolls, since average traffic levels were below 2500 vehicles per day and therefore could not sustain a tolling system. These contracts are also referred to as CREMA, contracts for rehabilitation and maintenance. In the mid 1990’s Uruguay started its first pilot scheme of Performance Contracts on a small network of 359 kilometers of its national roads. In the same year Montevideo followed suit by contracting out the maintenance of 150 kilometers of its main arterial urban roads. The new contracting scheme proved to be so successful that now, only five years later, 50% of the national roads in Uruguay are being maintained through Performance Contracts. Several other countries in Latin America such as Brazil, Chile, and Colombia have started similar contracts and others such as Ecuador, Guatemala, and Peru are planning to do so. Most of these contracts include partial rehabilitation to bring roads to maintainable conditions. Today more than 40000 kilometers of roads in Latin America are being maintained under Performance Contracts. Australia started its first Performance Contract in 1995 covering 459 kilometers of urban roads in Sydney (Frost, M. and C.Lithgow. 1996). Since then several new contracts have been implemented in New South Wales, Tasmania, and Southern and Western Australia. Some of them as so called hybrid contracts, where some of the works are being paid based on quantities and unit prices an others based on performance criteria. In 1998 New Zealand let its first Performance Contract for the maintenance of 406 kilometers of national roads. Presently, 10% of New Zealand’s national roads are maintained using the new contract scheme. In the United States of America , the State of Virginia pioneered a Performance Contract called “Asset Management and Maintenance Contract” for the maintenance of 402 kilometers of Interstate Highways in 1996. Four years later Washington D.C. followed suit with a similar contract that covers 119 kilometers of federal roads (Federal Highway Administration. 1999). Both contracts are considered pilots. Several other states have started to contract out maintenance on parts of their road networks applying a mixture of performance specifications and unit prices. Since than, several other countries have started Performance Contracts such as Chad in 2000, India (Karnataka), and Spain, to name a few of them. As the World Bank, the Asian Development Bank, the European Bank for Development and Reconstruction, and the Inter-American Development Bank are promoting this new contracting scheme world-wide numerous countries have either started or are planning to introduce PMMR.
The examples are indicative at best, since the basis of comparison is not always the same.
New South Wales initiates pilot road maintenance contract project in Australia In 1990 the Roads and Traffic Authority of New South Wales (RTA) initiated the development of a pilot road maintenance contract in its Sydney region. The objective was to establish the feasibility of contracting road maintenance and to measure differences in cost, quality, and responsiveness between a contractor and the RTA workforce. Prior to the time when the pilot contract was let, road maintenance was essentially a government monopoly. The private sector had little involvement other than as an activity, or job, contractor; see Improving Quality and Cutting Costs through Performance Contracts - Australian Experiance , Malcolm Frost , General Manager, Infrastructure Maintenance and Christine Lithgow , Manager, Contract Legal Services, World Bank Road Management Training Seminar Washington DC, USA 17 - 18 December 1996. “ The RTA pilot comprised two contracts with the private sector and, for the purposes of comparison, a “contract agreement” with the RTA workforce entity responsible for the network prior to the pilot. The 2 private sector contracts were: (a) Maintenance management contract A contract for the provision of maintenance management services, including network inspection, defect prioritisation, work definition and direction, budget development and control, quality assurance of works, treatment design, and reporting. This contract included a specifically designed &quot;Code of Practice&quot; as its technical specification, which defined the level of performance, in terms of intervention standards, expected from the maintenance manager. The initial contract was awarded for a 2-year term, and included 2 networks of approximately 100 kilometres of roads in western Sydney. The works delivery on one network was a private sector contractor (see (b) below) and on the other network was the RTA workforce. Identical documentation and management procedures were used on both networks. (b) Maintenance delivery contract A comprehensive Schedule of Rates contract for the provision of maintenance services, which involved the delivery of works as directed by the contracted maintenance manager in accordance with the time, cost and quality requirements specified in the direction. The contract utilised standard construction contract conditions and specifications, which were heavily modified to make them appropriate to a maintenance contract. The contract was a Quality Assurance contract. After tender, the initial contract was awarded for a 2-year term, and included a network of approximately 100 kilometres of roads in western Sydney.” “ Together, the 2 contracts constituted a form of &quot;performance contract&quot; where the product was identified by the performance parameters defined in the maintenance manager's Code of Practice. However, the RTA's retention of budgetary control limited the latitude of the contractor in this instance. The style of maintenance services contract allowed for a detailed evaluation of the comparative costs and productivity of the contractor with the RTA. Such an evaluation is difficult with a performance specified style of contract.” “ The results of the pilot over its initial twelve months were impressive and beyond initial expectations. The contractor demonstrated an ability to respond to all emergency situations, which arose, including accidents and a prolonged flood and storm emergency. The contractor's emergency response capability completely satisfied the requirements of the police and other emergency services agencies. There was no identified or demonstrated difference in the quality of the work undertaken by the contractor and the RTA. The maintenance manager quickly adopted network management processes, and procedures, that were equal to, or in some cases superior to, those traditionally used by the RTA. At the commencement of the contract term the contractor's average costs were measured at 16% less than those of the RTA's workforce operating under similar operating conditions. Over the first twelve months of the contract term the RTA's workforce achieved measured improvements in average productivity of 22%. This improvement was a direct result of the introduction of competition into the workplace. Over the term of the contract the condition of the assets and the level of service provided was maintained. As contractual work is initiated in response to road need, without consideration of resource utilisation constraints, the effectiveness of the distribution of the routine maintenance budget improved by an average 10%. This means that 10% more of the budget was able to be diverted to activities supporting the safety and structural outcomes of road maintenance than was possible in non-contract areas, where the need to utilise available resources led to the scheduling of a greater proportion of labour intensive environmental works than required by the needs of the network”, see Frost and Lithgow 1996. Re-tendering of these maintenance services has produced even more spectacular savings. The second tender in 1993 brought down the private sector contractor’s average rates of maintenance services by 37% in relation to RTA’s rates in 1991 (Frost and Lithgow 1996,6), while the third round of tenders in 1996 produced average rates which were even 52% lower than the 1991 reference rates of the RTA. During this time the competing workforce of the RTA managed to reduce their rates by approximately 40% overall (Frost and Lithgow 1996).
Based on the many experiences by changing from in-house road maintenance to “traditionally” contracting out in Latin America and Asia cost savings have been reported between 30% and 50%. Even more savings have been experienced when changing from “traditional” to PMMR. Total savings of PMMR with regard to in-house maintenance cost is 50% to 70%.
These are the reasons listed by VMS based on there experiences with the first PMMR in Virginia, USA. Performance Led Comprehensive Agreement for Virginia Interstate Highway Asset Management Services, USA , Kent O.. Lande, Dan Dennis, IRF Symposium on “Financing in Transportation Projects”, Vietnam, 1999.
This example shows a mobile pothole patching vehicle in Washington DC. Prior to contracting the road asset management and maintenance to VMS Inc. in Washington D.C. the Public Works Department was paying to the contractor an average of US$ 120 per patch. Patching was done the conventional method using hand tools and simple machinery. It was always done this way and it would have probably continued this way for a long time to come. Everybody was happy. The contractor had his work and the potholes got fixed eventually. And if they the same pothole had to be fixed the following year it was normally blamed on the strong winter and not on poor workmanship. Potholes are subject of frequent complaint by D.C. citizens. All this has changed with the new National Highways System Preservation Contract, at least for those D.C. roads, which form part of the National Highway System. VMS Inc. who won this five-year contract is using a completely different approach. Since the contractor is being paid a fixed monthly fee and not per patch, there is a strong incentive to use the most efficient work method and materials. They came up with a mobil patcher (see picture above) using compressed air, emulsified asphalt and graded stone. Average unit cost per patch is now only US$ 22 per patch. On top of reducing the unit cost per patch the number of patches will be reduced in the future due to the new longer lasting material being used. Traffic will benefit due to reduced lane closures times and last not least D.C. citizens will have less to complain about, as potholes will have to be fixed almost instantly. Potholes that are a safety hazard have to be repaired within 4 hours of the noted deficiency and others within 48 hours. One of VMS’s first tasks was to repair 2000 potholes drastically reducing the complaint rate by D.C. citizens (VMS Inc. 2001).
This is an example for the use of innovative patching material used by VMS in Virginia, USA.
To define the “right“ performance standards is a rather challenging task. The objective is to satisfy a set of goals such as to satisfy comfort and safety of road users to minimize total systems cost, including the long-term cost of preserving road, bridge and traffic assets and the cost to the road user, and to minimize environmental impacts To avoid ambiguity, performance standards have to be clearly defined and objectively measurable.
These are examples reflecting the situation in the year 2000.
The nature of PMMR allocates responsibility for work selection, design and delivery solely to the contractor. Hence, the choice and application of technology and the pursuit of innovation in materials, processes and management are all up to the contractor. This allocates higher risk to the contractor compared to the traditional contract arrangement, but at the same time opens up opportunities to increase his margins where improved efficiency and effectiveness of design, process, technology or management are able to reduce the cost of achieving the specified performance standards. The longer the contract period the higher the risk taken by the contractor. Nevertheless, the contractor should not be burdened with excessive risks that he cannot control. This will certainly lead to higher contract prices since they would reflect such excessive risk. Therefore, the party who can best manage or bear the risk should take this risk. For example, major emergencies and force majeure should be born by the client.
Key to success of PMMR is an effective and efficient performance monitoring and adjustment system that includes incentives for good performance, including sanction for poor performance.
Such self-control unit of the contractor is very important and a significant shift in the way business has been done in the past. This requires a major mind-shift and new expertise, which needs training and time to adapt.
In order to enable the contractor to manage the contract properly and the road administration to monitor, it is vital that the contractor has a proper management and quality control system in place. Since more and more road agencies are adopting the ISO 9001:2000 and it is recommended to only pre-qualify contractors who are certified accordingly.
Performance monitoring is key to the success of this new way of contracting road maintenance. Appropriate control procedures as well as penalties for non-compliance have to be well defined in the contract documents. Procedures defined in various contracts, as well as experiences, vary. In the case of road concessions in Argentina inspectors are inspecting the road and making random checks to verify compliance at least twice per month. Over time, inspectors become more experienced and familiar with trouble spots along the roads. Experience underlines the importance of having a well-documented inventory of the road as well as daily records of activities undertaken by the contractor. This helps to understand the specific behavior of the roads and contributes to better preventive maintenance. Inspectors and personnel of the contractors went through a valuable phase of learning and adaptation to arrive at an effective control system. In Argentina a very important role is given to the active participation and control of the road user. Each toll station is keeping a complaints and suggestions book and users are encouraged to report incidents to the Road Administration. Extensive use of this mechanism has helped to improve road conditions and has revealed an increasing satisfaction of the road users with the new scheme. As for the CREAMA contracts performance monitoring and payment procedures are very similar to the ones in Chile. In Chile there are four kinds of inspections: (i) monthly inspections cover 10% of the roads under contract. Selection of stretches of 1 km each is based on a random sample well defined in the contract; (ii) weekly inspections looking at 5% of the roads randomly selected; (iii) non-programmed inspections to respond to complaints by road users; and (iv) follow-up inspections to verify that appropriate action has been undertaken by the contractor to rectify non compliance. Payments to the contractor are based on the results of the monthly inspections. A percentage of compliance is being calculated based on a formula using the results of each individual performance standard as input data. Full payment will only be made on 100% compliance.
This example demonstrates the complexity of the tasks to be performed by the contractor. These programs and plans (should) have been previously executed by the road administration.
The example is taken from Areawide Performance-Based Rehabilitation and Maintenance contracts for Low-Volume Roads (Seventh International Conference on Low-Volume Roads) , Mm. Guillermo Cabana, Gérard Liautaud, Asif Faiz, World Bank, Dirección Nacional de Vialidad (Agentina), 1999.
Bonus payments are not common in PMMR. One example is the contract in Washington DC, whereby the contractor receives additional payments of up to 2% if he exceeds 80% the performance specifications. Normally, performance standards should be set at an optimal level, reflecting the trade-off between cost and benefits. If exceeding the performance standards adds value to the road user and/or the road agency the contractor should receive an incentive to do so and receive part of the added value. In some concession contracts, the improvement in road safety is encouraged by a bonus scheme, as for example in the UK.
Before embarking on such pilot scheme, it is necessary to analyze its legal and financial feasibility first. One of the most important legal aspects is the maximum contract period allowed by law. In most of the countries in Latin America, for example, the maximum contact duration is restricted to either four or five years, making it necessary to change laws in order to accommodate long-term contracts. Financing has to be secured for the entire duration of the contract. For example, one pilot project in Brazil had to be abandoned only after one year of operation due to a shortage of funds. Prior to the preparation of the bidding documents a number of steps have to be taken to define the road network to be contracted out, to make an inventory of the assets involved and to determine its condition, to select and define the performance standards, select and define the methods of measuring those standards, to define the likely maintenance and possibly rehabilitation works, and to prepare preliminary cost estimates. The data on the inventory and the conditions of the assets are given to the potential contractor as reference only. It is the responsibility of the contractor to make sure that the information is correct, since he has to assume responsibility for meeting the performance criteria. For the preparation of bidding documents, existing bidding documents used for road construction can be used, but they will have to be adapted to suit the special nature of Performance Contracts. Performance Contracts that are being used in other countries might be helpful. Since Performance Contracts are new for road administrations and contractors alike, close cooperation between both parties is vital for success. Both sides have to be comfortable with the contractual arrangement and understand the risks involved. In all Performance Contracts that have been let until now, road administrations and contractors have closely worked together in preparing the bidding documents. In some countries such as Uruguay the road administrations, which were used to prepare bidding documents without consulting contractors, had to adjust to the new situation, because of a lack of interest from contractors to embark on the new contracting scheme. In the United States it was the contractor who actually initiated the process and presented a draft of the bidding documents to the road administration. In this case the Virginia State Parliament had to pass a law first to allow for unsolicited bids to be accepted by the Virginia Department of Transport. In all the other Performance Contracts competitive bidding procedures have been used after pre-qualification of potential contractors. Especially in the case of pilot schemes the qualification of the contractor is a major factor besides the overall price. Therefore, the contractor who offers the lowest price does not necessarily wins the contract. Performance Contracts shift much of the risk, which is normally assumed by the road administration, to the contractor. Therefore, the potential bidders have to be given sufficient time to prepare their bids. This time of course is much longer than in the case of “traditional” maintenance contracts. It is recommended to pre-qualify well qualified contractors only that have a proven track record of good cooperation with the road agency. For further details see Workshop on Implementation of PMMR.
Performance Contracts are essentially management contracts and traditional road construction or maintenance contractors often do not have the required qualifications necessary for this type of contract. Consulting firms with extensive know-how in managing other contractors and experiences in pavement management systems seem to be more suited for the job. In Virginia, for example, the Performance Contract is managed by a firm, which has been formed by two consulting firms. Most of the maintenance works are subcontracted, allowing for an efficient resource allocation (just on time principle). A joint venture of a road construction firm and a consultant might also work well. The evaluation criteria and weights that have been applied to award the Performance Contract in Washington D.C. Giving 50% importance to cost is rather high. A 30% to 40% importance to cost would be more appropriate, since the technical and management skills are of utmost importance in PMMR.
Will be discussed in detail later.
A separate module will deal with this issue.
This indicates the area-wide PMMR contracts on the national highway system of Uruguay
The map of Argentina indicates the national road network and the different kind of PMMR. For further details see Case Study Argentina.
A special risk with long-term Performance-Based Road Asset Management and Maintenance Contracts might pose the overloading of vehicles. A problem often faced by developing countries. Since the deterioration of pavements exponentially rises with the increase of axle loads, maintenance costs increase as well. There are two ways to deal with this problem, either to take this risk into consideration when calculating expected maintenance cost or to enforce axle load limits. To keep costs down Argentina, for example, decided to include the building and operation of axle weigh stations into their road concession contracts. Since the contractors do not have the legal power to enforce axle load limits they have contracted the police force to do so.
This is an example of an effective axle load control by a contractor in Argentina. Since the contractor cannot enforce axle load controls, he hires the police to do so. The picture shows the weigh station built and operated by the contractor.
Each Performance Contract has to be tailored to each specific situation. Performance Contracts are still in an early stage of development and differ widely from country to country and even within countries. Studying the experiences of existing Performance Contracts in several countries is recommended before embarking on this new type of contract. Pilot schemes for contracting out road maintenance based on performance standards should be carefully planned and implemented. The complexity of the contracts, especially with regard to performance standards, road surfaces and contract duration should be based on past experience in contracting out road maintenance, the ability of the road administration to prepare and monitor such contracts, and the qualifications of local contractors to manage this new type road maintenance contract. Wherever there is little experience with contracting out road maintenance, a gradual approach is recommended, starting with short-term contracts and simple performance standards with regard to the control of potholes and cracks and the cleaning of the drainage system. Whenever roads are not in maintainable conditions, prior rehabilitation is necessary, either based on unit prices or included in the fixed monthly payments the contractor receives over the contract period. Roads should be in a maintainable condition. that means they should be in good or regular condition. If roads do not satisfy this criteria they should be excluded or rehabilitated either before or during the implementation of the PMMR.
Whenever circumstances permit, Full Performance Contracts, include the routine and periodic maintenance, should be longer than five years and should include periodic maintenance in order to maximize the potential benefits. The longer the contract the greater is the incentive for the contractor to try-out and apply new technologies and to optimize resource allocation. Risk shall be assigned to the party that can best manage the risk. Assigning to many risks to the contractor will result in proportionally higher cost of the contract. Well-qualified contractors and inspectors are key to the success of Performance Contracts. Training programs which have been conducted for small-scale enterprises and inspectors in Uruguay and Honduras have shown good results. Equally, traditional contractors require training in modern management techniques and the application of new maintenance procedures and technologies. All contractors should use a proper Quality Management System (QMS) like the ISO 9001-2000, covering all aspects of the contract scope
Proper performance monitoring and strict application of penalties for non-compliance have proven to be critical to the success as well. Wherever road administrations did not properly monitor the performance of the contractor or did not apply proper penalties for non-compliance, contractor's performance was deficient. The inclusion of a Dispute Resolution Mechanism is important for all contracts, but is especially recommended for pilot pilot projects since it is more a situation of trial and error. Performance standards need to be developed further. The development of performance standards is still in its early stage. Until now each road administration has developed its own standards by slightly modifying the ones they used before for in-house labor or contractors. Performance Contracts might not result in cost savings immediately. Until now only the contracts in Australia, New Zealand and the United States have reported substantial cost savings. As for the contracts in Latin America no comparable cost analysis has been undertaken. Nevertheless, same of the contracts have been awarded for lower prices that expected by the road administrations, which indicates possible cost savings. But contracts also might turn out to be more expensive than expected. Recently, the DNER of Brazil had to cancel a tender for Performance Contracts, as the prices offered were much higher than expected. This was mainly due to the high risks perceived by the bidders that the government might not honor its payment commitments. Therefore, a balanced approach towards the distribution of risks is recommended. The party that controls the risks should also take the risks.
The PMMR offers great business opportunities, with roads in good condition and lower transport cost.
Performance-Based Contracts for Management and Maintenance of Roads (PMMR) Module 1 Introduction and Overview of PMMR
Fixed monthly payments if performance standards are complied with
Mixture of performance contract and unit price contract
Performance-Based Management and Maintenance of Roads (PMMR)
Performance Standards define the minimum conditions of road, bridge and traffic assets as well as the management and operation of the assets during the entire contract period, 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 standards during the contract period
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.
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.
Performance-Based Management and Maintenance of Roads Complexity Contract duration in years 2 4 6 12 10 8 14 Routine Routine and periodic Construction, periodic and routine maintenance Up to 30 years
Performance-Based Management and Maintenance of Roads (PMMR)
is also referred to as
Performance Specified Road Maintenance Contract, PSMC (Australia and New Zealand)
Highway Asset Management Contract (USA)
Maintenance Service Level Contract (Latin America)
Scope of Services of PMMR (1) Management of the Road Network Routine Maintenance Periodic Maintenance Rehabilitation Improvements Emergencies PMMR
Scope of Services of PMMR (2) Management of the Road Network Routine Maintenance Periodic Maintenance Rehabilitation Improvements Emergencies PMMR
Scope of Services of PMMR (3) Management of the Road Network Routine Maintenance Periodic Maintenance Rehabilitation Improvements Emergencies PMMR
Scope of Services of PMMR (3) Management of the Road Network Routine Maintenance Periodic Maintenance Rehabilitation Improvements Emergencies PMMR
Contractual Relationship of PMMR (1) Client/ Road Administration Road Engineer Consultant Contractor Performance or Conventional Contract Performance Contract Performance Audit Supervision for As-measured Work Audit by Client or External Auditor
Contractual Relationship of PMMR (2) Client/ Road Administration Consultant/Contractor Performance Contract Audit by Client or External Auditor
Provides better and safer roads with consistent conditions
Reduces road user cost
Consultants and Contractors
Guarantees workload over longer period
Provides potential for increased margins
Opens excellent opportunities for business growth
Examples of reported savings by introducing PMMR
Australia Savings in %
Western Australia 15-35
New South Wales 37
New Zealand 15-40
Virginia (USA) 15
Development of Road Maintenance Cost in Sydney Performance Specified Road Maintenance Contract Source: (Team of the Roads and Traffic Authority of New South Wales) Private contractor
Cutting Cost by Contracting out Road Maintenance Cost comparison between road maintenance by force account (in-house) and contracting out
Reasons for reduction in road maintenance cost
Drivers of savings: Incentives / competition / long-term management
Modern management and work procedures
Total life cycle costing
Work package optimization
Use of latest technologies
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
Innovative RoadFlex™ Pothole Patching Material
Performance Indicator (or Service Quality Indicator) is a characteristic of an output that can be measured such as an aspect of quality, quantity or timeliness, which enables a comparison of performance against a desired standard, norm, goal or target value.
Performance (or Service Level) Standard , Criteria, Target Value, Intervention Level or Benchmark is the desired level of performance.
Performance Index relates the value of a performance indicator to a desired Standard, Criteria, Target Value, Intervention Level or Benchmark.
Examples of Performance Standards 12/2000 (1) a asphalt; b bituminous surface treatment; A Argentina; C Chile; U Uruguay No potholes Sealed Vertical alignment < 1cm (C,U) Potholes Cracks > 3mm Joints with pavement Paved Shoulders No potholes IRI < 6 (U), < 10 (C) > 10cm (C,U) Potholes Roughness Thickness of gravel layer Gravel surfaces No potholes IRI < 2.0 (A), < 2.8 (U) IRI < 2.9 (A), < 3.4 (U) < 12mm (A), < 10mm (U) Sealed Potholes Roughness (a) Roughness (b) Rutting Cracks > 3mm Pavement Performance Standards Component Asset Class
Examples of Performance Standards 12/2000 (2) a asphalt; b bituminous surface treatment; A Argentina; C Chile; U Uruguay < 15 cm height of grass (Argentina) 5 –15 cm height of grass (Uruguay) No foreign objects allowed Vegetation Foreign objects Right of way Complete, visible, and clean > 160 mcd/lx/sqm (Argentina), > 70 mcd/lx/sqm (Chile) Road signs Reflectivity of Road markings Road signs and markings No obstructions. Should allow for unhindered flow of water Structurally sound with no damages Obstructions Structures Drainage system Performance Standards Component Asset Class
Performance Specified Maintenance Contract, New Zealand 1 month No more than 2 m of edge break within any continuous kilometer greater than 0.5 m Edge Break 1 week No lined channels with more than 10% of the cross-sectional area obstructed and free of vegetation Lined Channels 6 months No ponding greater than 30 mm in depth at any location Depression and Rutting 48 hrs No potholes greater than 150 mm in diameter Potholes on all highways 48 hrs Not more than 3 potholes with a diameter greater than 70 mm on any 10 km section Potholes on highways > 10000 vpd Response time Performance Standard Feature
Asset modeling is part of the asset management that helps to optimize the benefits and cost of maintaining an asset in the long-term, taking into account road user cost . The development of adequate performance standards is part of this equation.
Distribution of Risk 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
PMMR requires the principle acceptance of sharing risk between the client and the contractor.
Private actors are willing to take some of the project risks, provided that the nature of the risks relates to their expertise so that they will be able to properly assess the consequences. The expected remuneration is proportionate to the level of risk they will bear.
Asking the private sector to bear risks that could best be handled by the public sector will usually result in either withdrawal of the private partners who refuse to take the risk, or premature termination by the contractor, with the possibility of him going bankrupt.
Monthly fixed payments might be reduced if contractor does not comply with the service level or performance standards
Contractor might have to pay penalties for not rectifying deficiencies within the response times given
Contractor might get bonus payments if he exceeds the performance standards
Example of Penalties for not Rectifying Deficiencies within Specified Response Times (CREMA, Argentina) Source: World Bank 44/day/structure Drains, ditches, culverts and other drainage structures to be clean 44/day/pothole No potholes > 2cm on paved shoulders 176/day/km Travel speed of at least 50km/hr on earth and 70km/hr on gravel roads 88/week/km No cracking or raveling on paved roads 66/day/rut No rutting > 20cm long and 12mm deep on paved roads 110/day/failure No edge failure on paved roads 110/day/pothole No pothole > 2cm deep on paved roads Penalty in US$ Performance Standards
Tender Evaluation Criteria Used in First PMMR in Washington DC, USA 5% Quality Control/Quality Assurance Plan 5% Management Plan 50% The extent to which proposed costs are realistic and reflect the likely overall cost to the government over the term of the contract Cost 15% The extent to which the Prime Contractor’s and subcontractors’ past performance on similar asset preservation, maintenance, and management contracts demonstrates a likelihood of successfully performing all of the tasks set forth in this contract. Past Performance 5% Staffing Plan Staffing, Quality Control/ Quality Assurance, Management 20% Experience, knowledge and understanding of issues relating to preservation and maintenance of the assets covered by this contract. Soundness of technical approach for meeting the performance measures for all of the assets referenced in this contract Technical