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7 CHAPTER two OVERVIEW OF PERFORMANCE-BASED MAINTENANCE CONTRACTING WHAT IS PERFORMANCE-BASED maintenance nance contract in California for public streets in the late 1970s CONTRACTING? and a pilot for the Pennsylvania Department of Transportation (DOT) in the early 1980s. Lawyers stopped the California effort, and union and tort liability issues brought the Pennsyl- The hallmark of PBMC is to pay a contractor based on the vania DOT effort to a halt (A5T60 Task Force 2004). results achieved, not on the methods for performing the work. PBMC is an approach to contracting that provides dis- More recently Virginia, Texas, and Florida have used incentives, incentives, or both to the contractor to achieve PBMC on a large scale, including fence-to-fence maintenance performance standards or targets for measurable outcomes contracts on Interstate highways. Texas and Florida have used and sometimes outputs. Measures of performance are often PBMC for rest area contracts and the Maryland State High- expressed in terms of levels of service (LOS) represented by way Administration (SHA) recently did as well. The District specific rating scales corresponding to the condition of dif- of Columbia entered into a performance-based maintenance ferent assets achieved or to the outcomes of a particular type contract for 75 miles of the National Highway System (NHS) of maintenance service. Measures also may be expressed in within its jurisdiction (Stankevich et al. 2006). response times. The Oklahoma DOT sought to implement PBMC in five The disincentives or incentives can consist of reductions counties encompassing Tulsa and Oklahoma City. However, or increases in payments for respectively falling short or a dispute arose (Hill et al. 2007). New Mexico entered into exceeding the desired targets. Some disincentives or incen- a performance-based warranty contract on State Route 44 tives are not directly tied to measurable outcomes and out- (renamed US-550). The contractor failed to deliver to New puts. These disincentives or incentives include liquidated Mexico a quality product and was required to repair the damages for failing to satisfy a contract provision, an award highway under the warranty provisions (Lowry 2007). fee for satisfying qualitative criteria, and a contract exten- sion if the contractor performs well. Table 2 shows the states and provinces that have tried or are currently doing PBMC among those who responded to There are many names for PBMC used around the world the survey administered for this synthesis project. The infor- and within certain states or provinces including: mation in this table says nothing about each agency's experi- ence with PBMC. As noted previously, some states have had Performance-Based Maintenance Contract (United considerable success with the approach. The experience of States) some was not so positive. Others are getting their feet wet and Performance Contract (Western Australia) have not seen a contract to the completion of its term. Note Total Maintenance Contract (Texas) that Wisconsin contracts with all of its counties. Although Performance-Specified Maintenance Contract (Australia the contracts do not mandate PBMC, they include a clause and New Zealand) that allows reimbursement of the costs of the county mainte- Asset Management Contract (originally more common nance managers to partner with state regional managers and abroad, but this term now used in the United States) conduct performance evaluations of randomly selected road Contract for Rehabilitation and Maintenance (Argentina) sections (A. Lebwohl, personal communication, 2007). Managing Agent Contract (United Kingdom) Area Maintenance Contract (Finland and Ontario, Canada). BRIEF OVERVIEW OF INTERNATIONAL EXPERIENCE In 1988, the British Columbia Ministry of Transportation BRIEF OVERVIEW OF U.S. EXPERIENCE conducted a pilot performance-based maintenance contract. The provinces of Ontario and Alberta followed suit with There were a variety of early efforts to pursue PBMC in the performance-based contracts of their own (Stankevich et al. United States. These included a performance-based mainte- 2005). New Brunswick indicated in its survey response that

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8 it does use PBMC; Manitoba and Nova Scotia said they do Table 3 not (see Table 3). CANADIAN PROVINCES THAT DO PBMC BASED ON SURVEY RESPONSES Table 2 Canadian Province Yes No STATE AGENCIES THAT DO PBMC BASED ON SURVEY RESPONSES Ontario X State Yes No New Brunswick X Arizona X Manitoba X Arkansas X Nova Scotia X California X Colorado X PBMC has become widespread in South America. The first Connecticut X major performance-based maintenance contract occurred in Delaware X Argentina in 1995 and is known as Contrato de REcupera- District of Columbia X cion y MAntenimiento (CREMA), which means Contract for Florida X Rehabilitation and Maintenance. The initial CREMA was structured to first rehabilitate part of the network; simulta- Hawaii X neously, maintenance under performance-based specifica- Illinois X tions began on the other sections of the network under the Iowa X CREMA contract and then was expanded to the rehabilitated Idaho X sections of road. Today, performance-based maintenance contracts cover 44% of Argentina's roadway network. Based Kansas X on Argentina's success, Uruguay followed suit and so did Louisiana X the city of Montevideo on its main city streets. Other Latin Maryland X American countries have followed Argentina's and Uru- Michigan X guay's lead and adopted or have begun to adopt some form of PBMC. These include Brazil, Chile, Columbia, Ecuador, Minnesota X Guatemala, Mexico, and Peru (Stankevich et al. 2005). Mississippi X Missouri X PBMC has been prominently used in Australia, New Zea- Nebraska X land, England, and Finland. Sydney, Australia, sought to use PBMC to maintain its city roads beginning in 1995. Sub- Nevada X sequently, New South Wales, Tasmania, and Southern and New Hampshire X Western Australia have used performance-based and hybrid New Mexico X contracts (Pakkala et al. 2007). New York X The use of PBMC is accelerating throughout the world. North Carolina X The following countries are also using PBMC (Stankevich North Dakota X et al. 2005): Ohio X Sweden Oklahoma X Netherlands South Carolina X Norway South Dakota X France Tennessee X Estonia (63% of national roads) Serbia and Montenegro (8% of national roads) Texas X South Africa (100% of national roads) Utah X Zambia Vermont X Chad (17% of all season roads) Virginia X Philippines (231 km of national roads). Washington X According to the World Bank, preparations were being West Virginia X made for PBMC in the following countries as of approxi- Wisconsin X mately 2005 (Stankevich et al. 2006):