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52 REASONS FOR NOT DOING PERFORMANCE-BASED Many agencies see PBMC as being consistent with "man- MAINTENANCE CONTRACTING agement by results" and continuous quality improvement. Additionally, PBMC is consistent with agencies desiring to Those agencies that reported they had not tried PBMC were become outcome and customer oriented. asked why they had not. As shown in Table 17, generally, the agencies said they have had no prior experience with PBMC, A reasonably large percentage of agencies that currently they have the resources to perform the work with in-house do PBMC recognized that they could use incentives and dis- staff, they find their current contracting methods satisfac- incentives to motivate contractors and to achieve measurable tory, or they contract out only what is essential. A number maintenance outcomes. said they do not have the maintenance management systems and QA procedures in place to support PBMC. Political pressure to rely more on the private sector has been a factor in turning to PBMC and so has predictability Transportation agencies that have not done PBMC were of future expenditures because of lump-sum financial com- asked to offer a written explanation. The written responses mitments to contractors. appear in Table 18. Potential cost savings and the ability to shift risk to the contractors have not been significant considerations for U.S. PLANS, PERFORMANCE MEASURES, AND TARGETS and Canadian highway agencies in deciding whether to do PBMC. The reported success in other states and countries, Respondents were asked whether any plans (long-range, however, has been a factor in encouraging some agencies to strategic, policy, or business) or programs (maintenance, try PBMC. highway, or the Transportation Improvement Program) call for PBMC. Four respondents reported that their agency has plans or programs that call for PBMC. Twenty-nine respon- MARKET RESEARCH, PARTNERING, AND PROCUREMENT dents said their agency has no such plans or programs. The survey posed a related question that asked whether Laying a sound foundation for PBMC involves market the agencies published plans or programs to identify specific research to identify qualified candidates, determine the performance measures that concern important categories of cost of maintenance services, set the stage for a partnership maintenance. Sixteen answered "yes" and 18 answered "no." between the contractor and the client, and design and con- duct the procurement to achieve the goals and objectives of Respondents were also asked whether any of their pub- the performance-based contract. lished plans or programs establish maintenance performance targets or standards corresponding to the performance mea- Table 20 presents the respondents' answers to questions sures. Roughly an equal number of respondents have plans regarding these types of issues. The following findings are or programs that do (16) and do not (17) set performance based on those answers. targets for the maintenance measures. All agencies let potential bidders inspect the facilities to assess the current asset inventory and its condition and esti- MOTIVATION FOR PERFORMANCE-BASED mate the cost of performing the work. Seventy percent of the CONTRACTING agencies engaged in PBMC provide bidders with inventory and condition data in advance of the procurement or as a part Transportation agencies that have been involved in PBMC of the RFP. Twenty percent sometimes do. have multiple reasons for doing so. Respondents were asked to rate on a scale from 1 (not relevant) to 5 (highly relevant) More than 70% of those agencies engaged in PBMC each possible reason listed in Table 19 explaining why their responded that they (1) identify potential bidders and their agency decided to use performance-based contracting. capabilities during the procurement phase, (2) hold one or more preproposal conferences, (3) respond to both oral and A main reason that these departments did use PBMC written questions, (4) place importance on developing a is that they do not have enough labor to do all the mainte- strong partnership with potential bidders as an essential part nance required. Management regards PBMC as an effective of PBMC, and (5) reflect the importance of partnering in all response to downsizing. Another reason cited is that PBMC the agency's procurement announcements and the RFP. Half was a logical extension of these agencies' normal approach of the agencies doing PBMC interview industry leaders to to maintenance contracting. obtain their input before drafting a RFP.

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53 Table 19 REASONS FOR TRYING PBMC R=5 R=1 (highly Question (not relevant) R=2 R=3 R=4 relevant) Over time the number of staff in our agency has been reduced and we do not have sufficient labor resources to conduct all the 2 2 1 4 2 maintenance required. Management views PBMC as an effec- (18%) (18%) (9%) (36%) (18%) tive response to downsizing. There has been political pressure to rely increasingly on the 2 3 3 1 2 private sector and PBMC because they are driven by profit and other performance measures that affect their bottom line. (18%) (27%) (27%) (9%) (18%) We decided to try PBMC based on the reported success of this 3 3 4 0 1 approach in other states and/or countries. (27%) (27%) (36%) (0%) (9%) Reported cost saving of other states and countries prompted us 6 4 1 0 0 to do PBMC. (54%) (36%) (9%) (0%) (0%) We believed we could shift most of the risk of contracting 2 4 2 0 3 from our agency to the contractor by using PBMC. (18%) (36%) (27%) (0%) (27%) Our PBMCs use lump-sum contracts that provide predictable 1 0 3 6 1 financial obligations and promote stable expenditures for con- tract work. (9%) (0%) (27%) (54%) (9%) Our agency applies the philosophy of "management by 2 3 2 3 1 results." PBMC fits well with this management approach. (18%) (27%) (18%) (27%) (9%) The management approach of our agency has become outcome 1 1 4 4 1 and customer-oriented. PBMC is consistent with this approach. (9%) (9%) (36%) (36%) (9%) Our agency contracts out a lot of maintenance and the use of 2 3 0 3 2 PBMC is a logical extension of our past contracting practices. (20%) (30%) (0%) (30%) (20%) Our agency's commitment to continuous quality improvement 2 2 3 3 0 was an important reason for adopting PBMC because of its focus on measurable outcomes and outputs of contractors. (20%) (20%) (30%) (30%) (0%) Management had a conviction that the efficiency and effective- ness of maintenance could be improved if contractors were 2 1 2 4 1 given incentives (or disincentives) for achieving measurable (18%) (9%) (18%) (36%) (9%) maintenance outcomes. Only a relatively small number do the following as part of Seek agreement with bidders that the incentives conducting market research, partnering, or developing the and disincentives incorporated in the PBMC are procurement: reasonable. Have prospective bidders review and comment on the Issue Requests for Information to learn more about what draft RFP. PBMC entails from the private sector point of view. Issue an RFQ or request for Letter of Interest with a Respondents were asked two questions to clarify in writ- request for supporting qualifications before issuing an ing how they handle key issues that must be addressed in RFP or PBC. developing a procurement and contract language. Allow potential contractors to have individual dis- cussions with a PBMC technical program manager in The first question was "Do you seek agreement with advance of issuing an RFP. bidders that the performance measures that will be used Seek agreement with bidders that the performance are practical to apply and will yield measurements con- measures to be used are practical to apply and will sistent with the project objectives the agency is trying to yield measurements consistent with the project objec- achieve? If not, why not?" Responses are presented in tives the agency is trying to achieve. Table 21.