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4 CHAPTER one INTRODUCTION PERFORMANCE-BASED MAINTENANCE CONTRACTING ments to initiate performance-based maintenance delivery. These include an effective contractor acquisition strategy, prequalification processes, criteria for selecting a contractor, Performance-Based Maintenance Contracting (PBMC) is and criteria for assessing contractor performance. Contrac- a contracting method that provides incentives and/or dis- tual provisions such as payment methods, including incen- incentives to the contractor to achieve desired outcomes or tives and disincentives, need to be identified. PBMC relies results; in its purest form, PBMC does not detail how, when, on identifying performance measures, establishing desired or where to do the work. performance standards or targets, and measuring the levels of service (LOS) achieved. It is important to document such In the highway arena, where low-bid contracting com- measures and standards commonly used in PBMC for differ- bined with method specifications has been the norm for ent types of maintenance activities. Agency experience with most of the twentieth century, PBMC represents a depar- PBMC varies. It is important that the reported costs, ben- ture from standard practice. Based on increasing experience efits, risks, and possible shortcomings of adopting PBMC with PBMC both in the United States and around the world, be explored. PBMC has much to recommend it. This approach to con- tracting is not a panacea, it is not universally accepted, and failure has occurred. However, transportation agencies see it REPORT APPROACH as an important option to consider and a valuable or potential instrument in their contracting tool kit. This synthesis study NCHRP synthesis projects are intended to provide a synthe- offers managers of departments of transportation (DOTs) sis of the state of the practice on a particular topic. The pri- and maintenance programs information on the state-of-the mary motivation is to provide the means, through a synthesis practice regarding PBMC in the United States and abroad report, to allow transportation agencies to share information and provides several case studies and information about about their practices. PBMC. This information could allow managers and practi- tioners to make more informed decisions regarding whether In this NCHRP synthesis project, two primary sources of to pursue PBMC in specific instances. information were used to prepare the synthesis report; one or more surveys or questionnaires and a literature search. PROBLEM WORK STATEMENT AND SCOPE OF WORK In this report on PBMC, surveys were administered to 50 state transportation departments, the District of Columbia This NCHRP synthesis topic, "Performance-Based Con- Department of Public Works, and to the 10 Canadian pro- tracting for Maintenance," was motivated by the following vincial transportation agencies. Surveys were administered problem statement: to private firms engaged in PBMC in the United States or Canada. Table 1 shows the number of surveys sent out and State Departments of Transportation (DOTs) are confronted with both growing needs and resource returned. limitations for maintaining the highway system. This has intensified their interest in contracting To reduce nonresponse bias, an objective was to achieve a maintenance services. Transportation agencies have response rate of roughly 80% from state DOTs. The response developed various performance-based contracting methods, including the means to measure and report on rate from state DOTs and the District of Columbia was 38 of performance. The purpose of this synthesis is to obtain 51 or 75%. The response rate from all transportation agen- information on implementation of performance-based cies in the United States and Canada that were surveyed was contracting. 42 of 61 or 69%. The response rate from private contractors was 4 of 14 or 29%. The scope of work called for investigating a number of topics. Agencies currently engaged in or contemplating The literature search drew on many sources, including doing PBMC in the future need information on the basic ele- the following: