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APPENDIX C
EVIDENCE ON CHANGES IN LEVELS OF SERVICE AND COST
SAVINGS
Information in the two tables in the appendix was assembled to determine whether published information on changes in
levels of service and published information on changes in costs were consistent. The body of the text includes more up-to-
date information not included here.
LEVELS OF SERVICE
Agency or Contract Reported Change in Levels of Service
VDOT Total Asset Management Washington Policy Center: Contract met or exceeded the performance targets
for nearly 90% of the items evaluated--no information on change in LOS.
James Bryant: In 1995, a report card indicated that the contractor received an
overall rating of A with 95% confidence on all mainline sections and all sets
of ramps. VDOT's grades on control sections were generally B's.
Pekka Pakkala: Better level of service--no data.
AASHTO: Improved levels of service--no data.
District of Columbia World Bank: LOS improved as a result of the performance-based
maintenance contract. During the first year, maintenance rating scores
increased from the high 20s before starting the contract to the low 80s (out of
100).
Pekka Pakkala: Better level of service--no data.
Reason: LOS ratings rose to the low 80s in the first year from the high 20s
before PBMC occurred.
Texas DOT TxDOT: Levels of service initially declined on I-20 and I-35 and then started
to rise (Graff 2007).
World Bank: Relative to their precontract condition, the condition rating of
[rest area] facilities maintained under performance-based contracts increased
18 points to 91%.
AASHTO: Contractor provided higher-quality snow and ice control than the
agency previously did (Note: Washington State DOT cited newspaper
articles about poor contractor response to icy road conditions in a Texas
contract for highway maintenance (Ribreau n.d.). The articles did not
acknowledge these were the worst ice storms in years. The contractor
deployed its personnel and equipment. However, in numerous instances,
equipment became stuck in traffic and could not get to the areas needing
treatment (Segal 2004).
British Columbia Ministry of Pekka Pakkala: Better level of service; quality of network is good or better
Transportation (MOT) than before--no data.
Ontario Pekka Pakkala: Better level of service; quality of network is good or better
than before--no data.
Sydney, Australia (1995, 10-year World Bank: 13% improvement in condition.
performance-based contract) Reason: 13% increase in asset quality condition.
New Zealand World Bank: The general manager of Transit New Zealand said better
services were delivered. Unclear whether this statement applies to a hybrid
contract (with both performance and method specifications) or to a long-term
performance-based maintenance contract.
Pekka Pakkala: Pronounced improvement in quality of service; reduction in
bumps; improved skid resistance, signs, drainage systems and marker
posts--no data.
Argentina World Bank: The CREMA performance-based contract began with
rehabilitation followed by maintenance. The percent of roads in good to fair
condition increased from 59% to 94%. The percent in critical to poor
condition declined from 41% to 6%. Also roughness measurements
deteriorated at a slower rate than predicted by the Highway Design and
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Agency or Contract Reported Change in Levels of Service
Maintenance (HDM) Standards Model.
Reason: For performance-based maintenance contracts on concession toll
roads, Argentina experienced higher levels of service and reduced
maintenance costs--no supporting data.
Uruguay World Bank: The first performance-based maintenance pilots in Uruguay
resulted in an improvement in road conditions by the two contractors from
1996 to 1998. The first contractor increased roads in very good condition
from 0% to 25% and reduced roads in regular condition from 40% to 15%.
Roads in good and bad condition remained unchanged at 60% and 0%,
respectively. The second contractor increased roads in very good condition
from 23% to 37%, in good condition from 13% to 46% and reduced roads in
regular condition from 64% to 17%. The percent of roads in bad condition
remained unchanged at 0%.
Sources: World Bank refers to Stankevich, Qureshi, and Querioz (2006); Pekka Pakkala refers to Pakkala (2002);
AASHTO refers to AASHTO (2002); Washington Policy Center refers to Segal and Montague (2004).
COST SAVINGS
Location
and Description of Project Source Change in Costs
Florida DOT
Seven asset management Office of Inspector General, Florida Not able to determine whether Asset
contracts awarded as of June DOT Management Contracts are cost-effective.
30, 2004 Method used does not reflect actual savings and
does not comply with cost estimation Procedure
No. 375-000-005. Actual cost savings are not
reflected even when the procedure cited above is
followed, which compares estimated to letting
amounts.
I-75 (253 centerline miles) Reason Public Policy Institute (Segal et 12.2% below estimate in year 1 and ranging up
al. 2003) to 22.2% below estimate in year 7. These cost
savings appear to apply to a contract with both
performance and method specifications.
Lump-sum contract to AASHTO 2002 15% to 20% cost savings.
manage contract awarded in
2001 to operate and maintain
431 centerline miles on the
state system in five counties
(District 3)
I-4, from Orlando to Reason Public Policy Institute (Segal et Costs remained constant. These cost savings
Lakeland al. 2003) appear to apply to a contract with both
performance and method specifications.
I-95 near Jacksonville Reason Public Policy Institute (Segal et Costs decreased 10%. These cost savings appear
al. 2003) to apply to a contract with both performance and
method specifications.
AASHTO 2002 Case study provides no information.
Virginia DOT
251 miles of Interstate Reason Public Policy Institute (Segal et $16 to $23 million savings based on a Virginia
al. 2003) Tech study
Ribreau 2004 The Joint Legislative Audit Review Commission
concluded that the savings claim of $16 to $23
million was, on inspection, neither accurate nor
verifiable. Furthermore, the narrow scope of the
Virginia Tech study might not provide verifiable
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Location
and Description of Project Source Change in Costs
conclusions on the cost-effectiveness of the
approach.
De La Garza and Vorster 2000 80% of the contractor work was contracted out;
based on a comparison of the contractor
subcontracts and VDOT bid tabs for 1999 as
well as unit price comparisons, the contractor
was able to perform the work for 4.1% less than
VDOT could have performed similar work.
Extending this analysis so it covered the scope
of work in the VDOT interstate maintenance
contract, Virginia Tech estimated the cost
savings to be 6.1%. Estimated total contract
savings over the contract period under baseline
conditions was $8 million and accounting for
price escalation reached $18.7 million.
Sensitivity analysis based on varying the
overhead rate of the contractor relative to
VDOT, after escalating costs according to a
price index, suggested cost savings ranged from
$6.5 million to $22 million.
AASHTO 2002 Contractor guaranteed cost savings of 17%;
VDOT estimated the total cost of the 5.5-year
contract at $131 million. Contractor successfully
negotiated a renewal for an additional 5 years.
Not clear to what the 17% applies, just first term
or both, estimated future costs or actual costs
before the contract.
Pakkala 2002 Cost savings--no substantiating information.
World Bank (Stankevich et al. 2006) 17% cost savings by VDOT. Based on a study
performed by the contractor, its cost per mile
was $22,400 compared with $29,500 for VDOT.
Highway Maintenance Contracting VDOT calculates a 25% contractor cost savings
2004 relative to the state. On a per mile basis, the
contractor cost $22,400 compared with $29,500
for VDOT.
Stivers 2001 Guaranteed cost savings of roughly 17% versus
in-house
Frost 2001 20% cost savings.
Joint Legislative Audit and Review The VDOT estimate of $23 million in cost
Commission (JLARC) 2001 savings was based mainly on estimates and
forecasts of its future costs in comparison to
payments it would make to the contractor.
JLARC staff reported in 1998 that the savings
could not be supported with documentation and
the soundness of the analysis could not be
verified. JLARC recognized that the Virginia
Tech study might shed light on the cost-
effectiveness of this contract. However, JLARC
concluded that the narrow scope may not
provide conclusive findings.
Lande and Dennis 1999 VDOT estimated cost savings of $22 million
over the 5.5-year contract.
Washington Policy Center 2004 Three estimates of cost savings cited. The
original VDOT estimate of $23 million was
based on the difference of usual cost of
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Location
and Description of Project Source Change in Costs
maintenance and the proposed contract cost.
Virginia Tech estimated savings of between $16
million and $23 million, amounting to 12%. The
contractor's estimate of savings was $8,000 per
lane mile of maintenance.
Bryant 2007 No information provided.
Texas DOT
Four, 2-year rest area Graff 2007 No information available.
performance-based
maintenance contracts at $6
to $8 million each
World Bank (Stankevich et al. 2006)
Highway Maintenance Contracting Not stated whether costs went up or down.
2004 Contracts cover enhancement of facilities,
janitorial services, and ongoing maintenance.
Pakkala 2002 Cost savings--no substantiating information.
500-mile Waco and 400-mile AASHTO 2002 Bids came in below estimate based on average
Dallas hybrid contracts, TxDOT costs to perform the work plus 20% for
including performance profit
measures and method
specifications
Stivers 2001
Ribreau 2004 No information provided.
Georgia DOT
Performance-based contract AASHTO 2002 Case study provides no information.
for mowing interstates
District of Columbia Dept. of
Public Works
75 miles of National Highway Reason Public Policy Institute (Segal et No information provided.
System, $69 million, 5-year al. 2003)
contract
Pakkala 2002 Cost savings--no substantiating information.
World Bank (Stankevich et al. 2006)
AASHTO 2002 Case study provides no information.
Robinson et al. 2005 No information.
Aspen, Colorado
15-year, maintenance Reason Public Policy Institute (Segal et Unspecified cost savings.
warranty contract for al. 2003)
rehabilitation and
maintenance
New Mexico DOT
Former Corridor 44 (now US Reason Public Policy Institute (Segal et Speculative information.
550) 20-year design, al. 2003)
construction, maintenance
warranty project
British Columbia MOT
10-year lump-sum World Bank (Stankevich et al. 2006) Reported savings on order of 10%.
performance-based contracts
covering all types of
maintenance for 100% of
British Columbia (since
2003)
Pakkala 2002 Clients receive some cost savings (unable to
provide any figures).
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Location
and Description of Project Source Change in Costs
Whole province Stenbeck 2007 Included British Columbia in an analysis of
change in costs due to performance-based
maintenance contracting for a number of
Canadian Provinces, parts of others, the State of
Washington, and Sweden. Determined that
PBMC resulted in an average increase in costs.
Paper does not report cost savings of individual
jurisdictions. Results are questionable given that
the sample size was small, in most cases there
was only one observation per jurisdiction, only
one variable was statistically significant, and the
Internet paper was not well written or peer
reviewed.
Alberta
Two rounds of tenders of World Bank (Stankevich et al. 2006) 5% savings for first round of tenders;
hybrid contracts eventually 25%35% savings for second round of tenders.
covering 100% of provincial
roads in 30 Contract
Maintenance Areas (CMAs)
Pakkala 2002 Clients receive some cost savings (unable to
provide any figures)
Bucyk and Lali (2005) Based on an independent KPMG report, there
were cost savings based on tendering in 17
CMAs: a 28% reduction in cost between the new
contracts (year 2000) and the old contracts (prior
to 2000) which translates to a reduction in unit
prices to $3,705/km from $5,117/km
representing a total annual cost reduction of
$26,419,932.
Whole province Stenbeck 2007 Included Alberta in an analysis of change in
costs due to performance-based maintenance
contracting for a number of Canadian Provinces,
parts of others, the State of Washington, and
Sweden. Determined PBMC resulted in an
average increase in costs. Paper does not report
cost savings of individual jurisdictions. Results
are questionable given that the sample size was
small, in most cases there was only one
observation per jurisdiction, only one variable
was statistically significant, and the Internet
paper was not well written or peer reviewed.
Ontario
Lump-sum, 7- to 9-year Area World Bank (Stankevich et al. 2006) No information provided.
Maintenance Contracts
Pakkala 2002 Clients receive some cost savings (unable to
provide any figures).
Highway Maintenance Contracting 12.5% savings at end of first round of 3-year
2004 contracts.
Whole province Stenbeck 2007 Included Ontario in an analysis of change in
costs due to performance-based maintenance
contracting for a number of Canadian Provinces,
parts of others, the State of Washington, and
Sweden. Determined PBMC resulted in an
average increase in costs. Paper does not report
cost savings of individual jurisdictions. Results
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Location
and Description of Project Source Change in Costs
are questionable given that the sample size was
small, in most cases there was only one
observation per jurisdiction, only one variable
was statistically significant, and the Internet
paper was not well written or peer reviewed.
Australia
Regional Transport Pakkala 2002 10% to 35%
Authority, New South Wales;
Tasmania; Western Australia
10-year, $130 million, 450 Reason Public Policy Institute (Segal et 35% cost savings through some initial portion of
km urban road contract al. 2003) contract.
World Bank (Stankevich et al. 2006) 20%30% cost reduction; bid price 25% lower
than estimated.
Sydney, New South Wales Frost 2001 38% cost savings compared with schedule of
rates type of contracts.
Southern Tasmania Frost 2001 20% cost savings compared with schedule of
rates type of contracts.
South Perth Frost 2001 25% cost savings compared with schedule of
rates type of contracts.
Mid North Region Frost 2001 30% cost savings compared with schedule of
rates type of contracts.
Six contracts in Western Frost 2001 Savings of 15%20% against in-house
Australia operations.
New Zealand
10-year, lump-sum Reason Public Policy Institute (Segal et 20% savings based on regular audits.
performance-specified al. 2003)
maintenance contract for
nearly all road and highway
works throughout country;
includes rehabilitation and
maintenance
World Bank (Stankevich et al. 2006) Reduced cost according to general manager of
Transit New Zealand
Highway Maintenance Contracting 30% decrease in cost of professional services
2004 and 17% decrease in costs of professional
services; a savings of at least 25% over
conventional model.
10-year, lump-sum, Pakkala 2002 Initial savings were about 25%, and were
performance-specified between 14% and 20% when the report was
maintenance contract (PSMC- written. Savings predicted to be 25%.
001) covering 450 km
Argentina
9,600 km of national roads Reason Public Policy Institute (Segal et Unspecified lower maintenance costs.
under 12-year toll concession al. 2003)
and additional 10,000 km
under 5-year rehabilitation
and maintenance contract
World Bank (Stankevich et al. 2006) Rehabilitation cost savings were due in part to a
difference in pavement thickness under the
CREMA versus the prior Provincial Roads
Rehabilitation Projects. Savings varied
depending on thickness and were actually
greater because design and other costs
customarily taken into account were excluded
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Location
and Description of Project Source Change in Costs
under the CREMA cost estimates. The lump-
sum contract arrangement during Phase I
virtually ensured no overruns except for force
majeure events. Annual costs never exceeded the
lump-sum amount by more than 3%.
Finland
Highway Maintenance Contracting Cost savings analyzed at 7%10% for 3-year
2004 contracts and 13% for 7-year contracts.
30%35%; about 50% less cost per kilometer.
the Finnish Road Enterprise became one of
numerous state companies under Finnra's
umbrella, and won 78% of the 3-year contracts.
World Bank (Stankevich et al. 2006) 7%10% for 3-year contracts and 13% for 7-
year contracts; the current price level is 50% to
60% of the price level when Finnra was using its
own labor and equipment to do maintenance.
World Bank Transport Note No. TN-27 30%35%; about 50% less cost per kilometer.
(Stankevich, Qureshi, and Querioz
2005)
United Kingdom
Highway Maintenance Contracting Slightly reduced costs. No supporting data
2004 provided.
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Abbreviations used without definition in TRB Publications:
AAAE American Association of Airport Executives
AASHO American Association of State Highway Officials
AASHTO American Association of State Highway and Transportation Officials
ACINA Airports Council InternationalNorth America
ACRP Airport Cooperative Research Program
ADA Americans with Disabilities Act
APTA American Public Transportation Association
ASCE American Society of Civil Engineers
ASME American Society of Mechanical Engineers
ASTM American Society for Testing and Materials
ATA Air Transport Association
ATA American Trucking Associations
CTAA Community Transportation Association of America
CTBSSP Commercial Truck and Bus Safety Synthesis Program
DHS Department of Homeland Security
DOE Department of Energy
EPA Environmental Protection Agency
FAA Federal Aviation Administration
FHWA Federal Highway Administration
FMCSA Federal Motor Carrier Safety Administration
FRA Federal Railroad Administration
FTA Federal Transit Administration
IEEE Institute of Electrical and Electronics Engineers
ISTEA Intermodal Surface Transportation Efficiency Act of 1991
ITE Institute of Transportation Engineers
NASA National Aeronautics and Space Administration
NASAO National Association of State Aviation Officials
NCFRP National Cooperative Freight Research Program
NCHRP National Cooperative Highway Research Program
NHTSA National Highway Traffic Safety Administration
NTSB National Transportation Safety Board
SAE Society of Automotive Engineers
SAFETY-LU Safe, Accountable, Flexible, Efficient Transportation Equity Act:
A Legacy for Users (2005)
TCRP Transit Cooperative Research Program
TEA-21 Transportation Equity Act for the 21st Century (1998)
TRB Transportation Research Board
TSA Transportation Security Administration
U.S.DOT United States Department of Transportation
