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23 maintenance contracts because pavement and bridge lives The more an agency does PBMC, the more its role substantially exceed the term of typical performance-based shifts from managing and performing maintenance maintenance contracts (Robert Prezioso, personal commu- work to planning, contract administration, and con- nication, Feb. 2007). tractor oversight. The skills an agency requires must shift accordingly. Determining a good pattern of renewals involves many The RFP and contract both require a clear scope of issues. One is to provide an incentive to the contractor to work. meet or exceed the performance targets in the first term. Agencies beginning with PBMC could start with Contract renewal brings with it the benefits of continuity. projects that have a limited scope, such as one main- Another reason is to provide for the possible replacement of tenance activity (rest area maintenance) or relatively the contractor under the threat of competition. Periodically few activities (e.g., routine maintenance) on a section reissuing RFPs also provides an opportunity to assess the of road. competitive environment and the capacity of contractors to Performance measures must be clearly defined, the ensure downward pressure on bid prices. The province of measurement process repeatable, and targets realistic Alberta has found this periodic tendering process and stock- and in line with the agency goals. In short, perfor- taking valuable (Bucyk and Lali 2005). mance specifications must be clearly defined. The contract must have the proper incentives and disincentives. MAINTENANCE, RESOURCE, AND FINANCIAL A firm funding commitment is required for multiyear MANAGEMENT SYSTEMS performance-based contracts. Cost savings are highly desirable but difficult to docu- The business process for PBMC ideally requires both the ment. Cost savings are often claimed based on the dif- contracting agency and the contractor to have suitable man- ference between the agency's estimated cost and the agement systems. Capabilities of the contractor's system amount of the contract award. could include QC, the ability to keep track of the asset inven- Quality (LOS) sometimes suffers during the first year tory and its condition, a means to predict future condition or on long-term total asset management contracts. Quality remaining life, a way to develop maintenance plans, soft- is likely to improve the first year on performance-based ware to track resource availability and usage, a work order contracts where serious maintenance has been deferred and scheduling system, and a means to conduct important or LOS have been low. financial and economic analysis. The public agency may If the highway or network is severely deteriorated, wish to have many similar capabilities (Markow et al. 1994; it needs to be reconstructed or rehabilitated before Smith et al. 2003). standard performance-based maintenance procedures begin. In numerous cases around the world, the con- tractor has been responsible first for a rehabilitation ADDITIONAL OBSERVATIONS phase and then a maintenance phase. Partnering and trust are imperative between the main- This chapter has highlighted some important considerations tenance organization and the contractor. in PBMC and serves as a prelude to the rest of this synthesis A poorly written contract, or either party misreading report. Some observations pulled from the remaining chap- significant portions of the contract to serve its own ters may be useful to practitioners (see Table 7). interests or point of view, may lead to failure. Failure is likely to occur if agency staff believes strongly that contractors are taking their jobs. If agency LESSONS LEARNED staff are responsible for monitoring contractor perfor- mance, they may be overzealous in holding contrac- The body of knowledge on PBMC has resulted in many les- tors to timeliness requirements and other performance sons learned, including the following: standards. Expect failure to occur occasionally because suc- PBMC involves politically and socially sensitive cess cannot occur 100% of the time. At times, certain decisions. events and conditions will prevent performance-based A significant cultural shift of both the owneragency contracting or performance-based warranty contract- and the contractor is usually required for PBMC to be ing from working. An agency with poor contractor successful. performance or a disappointing outcome might try to Adequate contractor capacity is necessary to ensure learn from its experience and carefully try again. meaningful competition and to be confident that a con- Warranties and performance bonds can help mitigate tractor and its subcontractors can achieve the perfor- failures. Bids will be higher if contractors have to mance standards. ensure against failure.