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


1
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
2
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

3
Overview ofPresentation
  • Introduction

4
Poor maintenance
5
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.

6
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.

7
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

8
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

9
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.

10
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.

11
Performance-Based Management and Maintenance of
Roads
Complexity
Up to 30 years
Routine and periodic
Routine
Construction, periodic and routine maintenance
2
4
6
12
10
8
14
Contract duration in years
12
Distribution of risk
 
13
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)

14
Scope of Services of PMMR (1)
Management of the Road Network
Periodic Maintenance
Routine Maintenance
Rehabilitation
Improvements
Emergencies
PMMR
15
Scope of Services of PRRM (2)
Management of the Road Network
Periodic Maintenance
Routine Maintenance
Rehabilitation
Improvements
Emergencies
PMMR
16
Scope of Services of PMMR (3)
Management of the Road Network
Periodic Maintenance
Routine Maintenance
Rehabilitation
Improvements
Emergencies
PMMR
17
Scope of Services of PMMR (3)
Management of the Road Network
Periodic Maintenance
Routine Maintenance
Rehabilitation
Improvements
Emergencies
PMMR
18
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
19
Contractual Relationship of PMMR (2)
Audit by Client or External Auditor
Client/ Road Administration
Performance Contract
Consultant/Contractor
20
Overview ofPresentation
  • Introduction
  • Brief history of Performance Contracts

21
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)

22
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
23
Overview ofPresentation
  • Introduction
  • Brief history of Performance Contracts
  • Main reasons for implementing Performance
    Contracts

24
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

25
Overview ofPresentation
  • Introduction
  • Brief history of Performance Contracts
  • Main reasons for implementing Performance
    Contracts
  • Service level criteria and response times

26
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

27
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
  • ............

28
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

29
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
30
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
31
Service level criteriaand response times
32
Performance Specified MaintenanceContract, New
Zealand
33
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.

34
Overview ofPresentation
  • Introduction
  • Brief history of Performance Contracts
  • Main reasons for implementing Performance
    Contracts
  • Service level criteria and response times
  • Performance monitoring and payments

35
Quality control and assurance
  • Formal monthly inspections
  • Informal inspections
  • Contractors self-control system
  • Road user complaints

36
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.

37
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.

38
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.
39
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
40
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

41
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

42
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

43
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

44
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

45
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)

46
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

47
Uruguay
48
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.

49
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

50
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.

51
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

52
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.

53
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
54
PMMR - Uruguay
55
PMMR - Uruguay
56
PMMR - Uruguay
57
Pilot Project Montevideo
58
Pilot Project Montevideo
59
Pilot Project Montevideo
60
Pilot Project Montevideo
61
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

62
Argentina
63
Argentina
64
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
65
Australia
66
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

67
New Zealand
68
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

69
USA
70
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

71
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
72
Overloading
73
Weigh Station Caminos del Río Uruguay
74
Cost savings
75
Contracting out can reduce road maintenance cost
76
Cost of Road Maintenance in Sydney
Performance Specified Contract
77
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
78
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
79
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

80
Implementation strategy
81
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

82
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.

83
Pilot Projects for PMMR (1)
  • Legal feasibility
  • Financial feasibility
  • Technical feasibility

84
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.

85
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.

86
Pilot Projects for PMMR (4)
  • Preparation of Tender Documents.
  • Selection of contractors and award of contract.
  • Monitoring and evaluation.

87
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

88
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

89
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

90
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.

91
VISION
No potholes
Business Opportunities
Transport Cost
92
http//www.zietlow.com
93
Thank you for your attention
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