Reports on performance based/output based contracting.
More than 30 years of implementation of PBCs has resulted in a broad base of global experiences with PBCs and demonstrated their strengths across diverse environmental, economic, and engineering circumstances. Proponents of PBCs claim that they have the potential to significantly reduce lifecycle costs compared to traditional contracting approaches. The most frequently cited research on the efficiency of PBC versus traditional contracting modalities was done by Pekka Pakkala (2002, updated in 2007). The comparisons between PBCs and traditional contracting approaches in those studies need to be treated with caution, however, as both studies report potential savings rather than confirmed and proven savings based upon comparative analysis of the actual spending on PBCs and traditional civil works contracts. The research effort described in this report sought to carry out an evidence-based analysis of the cost-effectiveness of PBCs by undertaking a comprehensive ex post performance assessment of road projects and road assets from the viewpoint of evaluating different long-term road asset management strategies. In doing so, this research activity also attempted to answer the following question on adoption of PBCs as much as possible: Are PBCs actually leading to more efficient road asset management than traditional civil works/maintenance contracts?
This document provides an overview of the experiences with routine road maintenance groups (RMG) and routine road maintenance microenterprises (ME) in eight countries in Latin America (Colombia, Peru, Honduras and Bolivia), Asia (China, Nepal and Laos) and the Pacific (Kiribati). It was prepared by the World Bank as a reference document for other countries interested in introducing a similar approach, providing them with a description of the steps followed and approaches applied in different countries, and allowing them to better understand the different options available and the reasons for selecting any specific one. The following chapter provides an overview of the experiences in the eight countries, describing the general characteristics of routine maintenance groups and microenterprises, and highlighting the similarities and differences between the countries. This is done by looking at the coverage of the RMGs and microenterprises in the different road networks, the maintenance activities carried out by them, the management of the RMGs and microenterprises by the entity responsible for the roads (including formation, training, procurement, supervision and payments), and the costs and financing of the RMGs and microenterprises. This section concludes with a table providing a full overview of the current status of the road maintenance groups and microenterprises in the eight countries. The subsequent chapters provide more in-depth detail of the different experiences in the eight countries. In the case of Peru, the approach in the departmental and rural roads has been treated separately from that in the national roads, due to the very different nature of the microenterprises concerned in terms of their formation, activities, management and financing. Apart from the information regarding the current coverage, activities, management and costs, the case studies also provide a historical overview of the introduction of the approach and its replication and expansion over the years. This document was prepared by Serge Cartier van Dissel, road management and maintenance consultant for the World Bank who has been working with road maintenance groups and microenterprises for over 15 years. He has been involved directly or indirectly in most of the experiences described in this document.
Climate change has negative implications for transportation investments, especially those managing maintenance using output and performance-based road contracts (OPRC).
Currently, climate change risks are generally carried by the asset owner through the Force Majeure provisions of the contract, and treated as ‘unforeseen’ events, with costs reimbursed as Emergency Work reimbursements. This not only impacts on the financial performance of the OPRC, but in some situations, may make OPRCs a less than ideal modality for maintaining road networks.
OPRC projects therefore face a number of pressing climate related issues compared to traditional contracting arrangements which, if addressed, will contribute to more resilient infrastructure:
· Explicitly recognizing that climate change presents serious challenges to operations and maintenance (O&M) and long-term viability of infrastructure assets
· Finding a way to estimate climate change risks since historic data does not reliably represent future climate
· Accounting for climate change in OPRC design to realize the full potential economic and social benefits
Managing these uncertainties is key to development successful OPRCs. Allocating the risk of climate change to the stakeholder parties best suited for handling the impacts is essential.
Report from Ontario which reviewed experiences with winter maintenance under performanced based contracting.
It was found that there were serious failings. Even though ministry staff, including engineers, raised serious concerns during the procurement process that the majority of winning contractors would not be able to meet their winter maintenance commitments because of insufficient equipment, these lowest-price contractors were still awarded the contracts.
It was found that over the past five years, since MTO changed its highway maintenance contract process in 2009, the state of Ontario’s highways has deteriorated immensely, costing money and lives.
World Bank Transport Report TB-42C.
The support of Performance Based Contracts (PBCs), from initial concept to final delivery, is essential if the best outcomes are to be achieved for the road users. This report, completed as part of the Opus International Consultants overall review of PBCs for the World Bank under contract 7158253, focusses on the existing training materials and resources available and provides recommendations on the updating, expansion or creation of materials to increase the chances of overall success.
The report recommends a more structured approach to the materials available, with a clearer intent on the audience and the topics addressed. Although some material would be duplicated between the audiences, it is recommended that materials be developed that focus specifically on:
• The Executive Levelo World Bank Staffo Government/Road Agency Exec Management• The Management Levelo Road Agency “Owner” of the PBCo Agency Procurement Team• The Delivery Teamso Road Agency contract management teamo Consultants ando Contractors.
Based on the review, a modular “topics of focus” approach to the training and resource materials is recommended, with the following modules included to address the primary issues that have been observed to be hampering success:
• Introduction/Objectives of Asset Management and how PBC facilitates the paradigm shift;• PBC Types and Case Studies;• Structuring the PBC according to AM Strategy;• Governance Structures (and the impact of outsourcing on the Road Agency);• Contract Development;• Tender Process;• Risk Management; and• PBC Delivery.
The review has also considered the means of delivery of the training, with a mix of face-to-face and remote training considered appropriate for various levels of training.1
World Bank Report TP-42A.
Performance Based Contracts (PBC’s) are not new to the transport sector, with many variants in use in different countries for close to two decades. International lending institutions – such as the World Bank – have played a significant role in pushing PBCs into developing nations as part of loan assistance packages.
However, there has been a tendency for a “one-size-fits-all” approach to the implementation, with the result being a variation in the success of any implemented PBCs, as well as a significant proportion of the proposed PBCs not making it to the contract award stage. To address these issues, the World Bank has commissioned a Review of Performance Based Contracting in the Road Sector (contract number 7158253) led by Opus International Consultants Limited.
The project is in two phases:
• Phase 1: Being about reviewing projects to determine what makes projects succeed; and• Phase 2: Being the development of better guidance on the selection of the appropriate PBC for given situations.
This report presetns the results of Phase 1 wherein experiences in a range of sites are reviewed.
World Bank Transportaton Research Note 46.
The road sector represents a significant asset to any country – both in terms of the physical cost to build it, and the social and economic benefits that it facilitates. Good asset management in the road sector is about obtaining the desired benefits at the least whole-of-life cost, and it is therefore natural to seek to implement a robust asset management approach on what is typically a nation’s largest asset.
Performance based contracting (PBC) necessitates the identification of many of the cornerstones to asset management, such as knowing your asset, managing risks and determining the sustainable level of service for the funds available. Performance based contracting is therefore a proven method to deliver a paradigm shift in all parties responsible for the management and preservation of the road infrastructure, including addressing construction quality issues, delivering consistent levels of service and reducing the opportunities for corruption.The document is intended to provide World Bank transport sector staff, Ministries of Transport and road agencies of developing and transition countries with a summary understanding of the benefits, and risks, of applying the PBC approach. The aim of this note is to help the reader understand:• What asset management is and why it is important;• How performance based contracting delivers good asset management; and• What the issues and challenges are to successfully implementing a performance based contract.
This note is supported by the Review of Experience (Opus 2012a) and a Technical Guide (Opus 2012b) documents. The focus of the work is on PBCs with a significant contract term and not performance based Design-Build contracts. It is not intended to cover performance based design-build only contracts. Similarly the work does not seek to address in any detail the funding options (road taxes, general taxes, external borrowing, tolls etc.) that may be used to fund the works and for this reason it does not address public-private-partnerships specifically, noting however, that a robust PBC underpins all successful PPP projects.
World Bank Report TP-42B.
Performance-Based Contract (PBC) methods are widely used for road maintenance in developing countries. There are many reasons why road agencies have decided to introduce these methods, e.g., better transparency, increased focus on workmanship and reduced long term costs. The World Bank (the Bank) has supported and financed almost 50 PBC projects over the last 15 years. Currently, most PBC projects are developed on the basis of Sample Bidding Document for Output- and Performance-based Road Contracts (OPRCs).
This guide has been developed on the underlying presumption that good asset management is an essential goal of any Bank investment in the on-going management of a road network, and that PBC is a proven way (but not the only way) to drive the paradigm shift in all parties typically needed to achieve good asset management.
The term OPRC represents a spectrum of contract models, while the term PBC is the general term for all contracts using performance-based methods. Currently, in order to maximize value for money, OPRCs are dramatically evolving in line with road asset management principles. According to the results of the PBC review project (P118614), there are three principal scenarios where PBCs are applied:
I. unpaved roads PBC;II. paved roads in a generally poor-fair condition (DBMOT PBC); andIII. paved roads in a generally good-excellent condition (Network Management PBCs).
This guide is intended to assist those new to the topic of PBCs to understand what they are, how they align with good asset management and what the key issues are to consider before (and during) implementation.
The guide commences with a discussion on what constitutes good asset management, before describing how PBCs assist in the delivery of good asset management. The guide then addresses the key issues associated with making an implementation successful, concluding with an overall PBC implementation decision tree and checklist.
TRB’s National Cooperative Highway Research Program (NCHRP) Legal Research Digest 61: Legal Aspects for Performance-Based Specifications for Highway Construction and Maintenance Contracts explores how performance-based specifications differ from traditional design or method-based specifications and the risk allocation differences between the these methods.
TRB’s National Cooperative Highway Research Program (NCHRP) Synthesis 426: Performance-Based Highway Maintenance and Operations Management explores performance-based management practices that are applied by state departments of transportation (DOTs) in highway maintenance and operations.
The report investigates and details Brazil’s successful experience with performance based contracts for the management of the road infrastructure and explores approaches for future improvements in Brazil’s performance based program.
This report reviews recent experience in the Europe and Central Asia (ECA) region with contractual public private partnerships (PPPs) in the transport sector. The review and evaluation of successes and failures of past investment projects can provide valuable lessons to governments on the options they have for infrastructure spending and the pre-requisites for those options. Whilst the review covers the whole region, the primary focus is on the Central and Eastern European and South-Eastern European (CEE/SEE) countries as they were the first within the Europe and Central Asia region to follow the global trend of using PPPs 1 in the implementation of infrastructure projects. For the purposes of the study, the CEE countries are defined as the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovak Republic, and Slovenia, and the SEE/economies countries as Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Kosovo, FYR Macedonia, Montenegro, Romania and Serbia.
TRB’s National Cooperative Highway Research Program (NCHRP) Synthesis 389: Performance-Based Contracting for Maintenance explores experience with performance-based maintenance contracting in places where it has been adopted, including such issues as whether it has the potential to reduce costs and improve maintenance levels of service.
A short flyer from the FHWA outlining the advantages and opportunities of performance based contracting for new construction.
Presentation on key issues that need to be considered before introducing performance based contracts ... at least if you want them to be successful!
The successful introduction of performance based maintenance requires that a country have in place appropriate policies, legislative framework, institutional capacity (client, contractors and consultants), as well as the necessary technical expertise. This report evaluates the viability of introducing performance based maintenance to Indonesia. It identifies a number of key issues which need to be addressed to ensure successful implementation.
A set of presentations and training materials associated with the report (13 MB) can be downloaded here.
Materials presented at a training course to introduce performance based contracting to China
The successful introduction of performance based maintenance requires that a country have in place appropriate policies, legislative framework, institutional capacity (client, contractors and consultants), as well as the necessary technical expertise. This report evaluates the viability of introducing performance based maintenance for expressways in Hubei province, China. It identifies a number of key issues which need to be addressed to ensure successful implementation.
The method of delivering road maintenance has progressively evolved. Historically, road agencies have moved from using in-house force account to traditional method-based maintenance contracting. Many countries are now heading towards performance-based contracting (PBC), an approach that has been deployed rapidly in the road sector in the past decade. However, while PBC offers a number of benefits for road agencies and road users, it is a relatively new approach and there are several aspects that need careful consideration to ensure that the goals of PBCs are fully achieved.
The purpose of this Note is to review the worldwide experience with the PBC approach, highlight the main advantages, the steps involved and the results generated. The document is intended to provide World Bank transport sector staff, Ministries of Transport and road agencies of developing and transition countries with a clear understanding of the benefits, and risks, of applying the PBC approach. A separate Resource Guide (to be released by the World Bank in 2006) will offer more detailed information and resources pertaining to performance-based contracting.
World Bank Transport Note TRN27. The purpose of this Note is to review the worldwide experience with the PBC approach, highlight the main advantages, the steps involved and the results generated. The document is intended to provide World Bank transport sector staff, Ministries of Transport and road agencies of developing and transition countries with a clear understanding of the benefits, and risks, of applying the PBC approach. A separate Resource Guide (to be released by the World Bank in 2006) will offer more detailed information and resources pertaining to performance-based contracting.
Funded by PPIAF, this is a comprehensive three-day training course covering the key aspects of performance based road maintenance developed for the World Bank by Cowi consultants in Denmark. This course was presented in Thailand and China, and variations of it in other countries. The file contains all training and background materials. The contents include:
Module 1: Introduction and overview of PMMRModule 2: Compliance monitoringModule 3: Long- term asset modelingModule 4: Changes required by road administration and the consulting and contracting industryModule 5: Sample Bidding Document of the World Bank for PMMRModule 6: Other resources for getting information on PMMRCase Study 1: ArgentinaCase Study 2: UruguayCase Study 3: DenmarkCase Study 4: PMMR for routine maintenance using micro-enterprises in Latin AmericaCase Study 5: LebanonWorkshop 1: Development of performance standards and response times – introduction Workshop 2: Development of a strategy of implementing PMMR in your country
Supplementary materials for China can be downloaded here.
Presentations and materials from a workhop held to consider the viaibility of introducing performance based contracting to Indonesia
This document describes the key issues involved in developing performance specifications and presents a number of strategic options for changing the way the Agency specifies its work.
Conference Paper by R Dunlop of Transit New Zealand