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13 regarding different efforts to estimate cost savings for many contractor is also better able to amortize facility and equip- performance-based contracts. Despite different cost esti- ment costs. Using a prequalification process further mini- mates, different methodologies, and information that is often mizes the risk to the contracting agency. less than persuasive, some patterns do emerge. Interpreta- tion of these patterns and conclusions that might be drawn PBMC is a two-way street, a partnership. If an agency is left to the reader. goes too far in trying to shift risks to contractors, there can be a negative effect. For example, if an agency forces a con- Value for Money tractor to bear all the risks of severe weather in a hurricane- prone state, the contractor may raise its price to perform the The equation (shown earlier) representing "value for money" work, refuse to work in an area, or go out of business. accounts for changes in LOS relative to changes in cost. Many are persuaded that PBMC results in value for money. Others question whether estimates of cost savings are cred- BASIC STEPS OF PERFORMANCE-BASED MAINTENANCE CONTRACTING ible ("Review of Highway Outsourcing" 2004) and point to legislative audits that conclude that particular estimates of cost savings are not defensible. Still others may be skeptical The literature and the surveys administered for this synthe- of specific results concerning changes in LOS. sis revealed that there are many different ways to list the steps of a PBMC. One state provided a list of steps for a rest Value for money does not always reduce to two factors. area performance-based contract. This list of steps, with a Having a guaranteed price, being able to shift resources few modifications, is fairly generic and is applicable to many (labor and equipment) to other parts of the network where PBMC business processes that states, provinces, cities, and they are needed, and achieving administrative efficiencies counties have adopted or might adopt: not easily reflected in costs are just some of the other factors that can cause PBMC to yield net positive value. 1. Discuss types of maintenance, geographic areas, and portions of the roadway network that would benefit from PBMC; ALLOCATION OF RISKS 2. Decide on the types of maintenance and area/roads Another primary motivation for transportation agencies to that will be the focus of the contract; adopt PBMC is to shift a significant portion of risk to the contractor. Maintenance contracting has the following types 3. Complete an inventory of assets; of risks, among others: 4. Assess inventory condition; Poor quality of construction Unexpectedly severe weather 5. Bring items up to par or make this a contractor Unanticipated environmental problems requirement; Emergencies Unanticipated legislative change 6. Determine the scope of services; Unexpected traffic growth A short-term focus that fails to minimize long-term 7. Define the LOS (condition) to be achieved; life-cycle costs Difficulty in acquiring the resources needed to perform 8. Define qualifications of prime and subcontractors; the work (e.g., subcontractors) The possibility of having to correct problems covered 9. Set term of contract; under a warranty. 10. Address recordkeeping; Certain types of performance-based maintenance con- tracts place an upper limit on a transportation agency's 11. Define owner responsibilities; payments to the contractor. Lump-sum contracts with deductions for failing to meet performance targets are used 12.Define contractor insurance requirements; around the world, although contracts that also have positive financial incentives may produce better outcomes. Further- 13. Determine bonding requirements; more, by lengthening the period of performance of a PBMC, the agency can reduce the risk that a contractor will ignore 14. Establish payment criteria including incentives and long-term goals, such as minimizing life-cycle costs, when disincentives; it makes short-term decisions. With long-term contracts, the