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9 Albania Reduction in contract administration requirements Cape Verde (Hardy 2001; Pakkala 2002; Stankevich et al. 2005; Chad panel member input; survey input). Madagascar Tanzania Foreign countries have a number of additional compelling Burkina Faso reasons to use PBMC. Developing countries cannot afford to India let their highway systems deteriorate to the point at which Cambodia they must be reconstructed. Reconstruction is very expen- Thailand sive compared with timely maintenance and diverts limited Indonesia funds from transportation or other sectors where money is Vietnam badly needed. Indeed, a maintenance organization using Yemen, Republic of PBMC is likely to benefit from a higher LOS if substantial deferred maintenance has occurred (AASHTO 2002). REASONS FOR DOING PERFORMANCE-BASED Also, securing funds for long-term contracts, such as in MAINTENAnCE CONTRACTING South America, makes it difficult to divert funds to other purposes or sectors (Hardy n.d.). Finally, international lend- An agency might decide to do PBMC or expand the amount ing institutions, especially the World Bank, encourage coun- of this type of contracting for numerous reasons. Many of tries to adopt PBMC (Stankevich et al. 2005). these reasons are discussed in more detail in chapters three and four. Following are commonly cited motivations: IMPEDIMENTS TO PERFORMANCE-BASED Potential to increase the LOS MAINTENAnCE CONTRACTING Potential to reduce agency costs Change in performance criteria from a focus on inputs Although there are many attractive reasons to undertake and outputs to customer-oriented outcomes PBMC, there are numerous reasons for not doing so. Some of Response to a mandate of the executive branch or legisla- impediments cited in the literature and the survey responses ture to outsource more maintenance work or do PBMC include the following: Pressures on the operating expenditures budget Need to do more with less as a result of growing main- Lack of government support (legislative or executive tenance needs in the face of a downsized or fixed main- branch) tenance workforce A significant change in culture required by the con- Ability to achieve expenditure stability--fixed costs-- tracting agency and contractors not familiar with this because PBMC often involves long-term, lump- approach sum contracts with fairly predictable payments to Adjustments required to go from method to perfor- contractors mance specifications A more defensible way to secure maintenance dollars Inadequate experience with PBMC or a negative expe- within the agency and from the legislature when there rience on the first try is receptivity to using performance-based methods of Lack of training contract management Lack of legal authority Means to achieve a fixed level of service, assuming Challenges in estimating in-house and contractor over time a contractor can meet performance targets costs and then maintain constant LOS Loss of quality sometimes observed in the first years of Shifting risks to or sharing risks with contractors a long-term contract Potential to realize significant benefits from effective Insufficient contractor capacity partnering between the agency and the contractor Inability to achieve sufficient competition Ability to encourage the contractor to minimize life- Potential bonding or warranty requirements, including cycle costs assuming the contract term is long enough those established by state law Fostering more innovation by allowing the contractor Incomplete or inaccurate asset inventory and condition the freedom to use any method to meet performance data specifications rather than have to adhere to method Concern over loss of control over methods, equipment, specifications (innovations may pertain to equipment, and material used materials, computer systems and applications, com- Concern that life-cycle costs will increase munications, work methods, partnering, and business Fear that privatization will result in large numbers of practices) staff having to leave government