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55 Table 21 SELECTED RESPONSES CONCERNING WHETHER AGENCIES SEEK AGREEMENT WITH BIDDERS REGARDING PERFORMANCE MEASURES TO BE USED State/Province Responses The department identifies the required performance measures with the bidder based on their technical proposal and Florida bid price accordingly. Idaho No. We have goal-oriented reasons and the bidders are the same two firms regardless of the type of contract used. Maryland We set the standard, not industry. Oklahoma Our agency wants to determine the level of service. Texas We expect bidders to identify problems during the specification development stage or pre-bid process. Utah We gave contractors minimum standards and did not negotiate adjustments. Virginia Only to the extent that the bidders ask questions prior to or at the mandatory pre-bid meeting. The RFP submission, in addition to the question-and-answer period, will ensure that the standards are clear and will New Brunswick be met. Table 22 SELECTED RESPONSES CONCERNING WHETHER AGENCIES SEEK AGREEMENT FROM BIDDERS AS TO WHETHER INCENTIVES AND DISINCENTIVES ARE REASONABLE State/Province Responses District of The department spent enough time preparing the RFP, tries to take all possible scenarios into consideration, and Columbia believes that whatever is incorporated is very reasonable. We do not seek bidder approval for each contract; instead, we send out our "standard scope" for industry review. Florida Potential bidders have the opportunity to comment on incentives/disincentives at the time of the industry review. Idaho No. Goal-oriented reasons and the bidders are the same two firms regardless of the type of contract used. There are no incentives in the performance-based contracts that we use for maintenance. The contractor already has overhead and profit built into the bid price (lump-sum). The contractor has a real internal financial incentive to per- Virginia form as efficiently as possible to increase his level of profit. Disincentives or penalties are used in Virginia's perfor- mance-based contracts as a way to ensure contract compliance. The RFP submission in addition to the question and answer period will ensure all the contract requirements are New Brunswick understood. As shown in Table 23, 70% of respondents that have done The type of contract PBMC use some type of MQA coupled with incentives and Contractor selection criteria disincentives. Benchmarking is not so common. Only 3 of 10 The base term, extensions, and the maximum possible respondents indicated that they benchmark the performance duration of internal organizational units against contractors. The maximum contract award for the base period and for the maximum duration Key performance measures, measurement procedures, EXAMPLES OF PERFORMANCE-BASED MAINTENANCE and performance targets CONTRACTS How the performance targets or standards were set Questions on the quality of measurements Respondents who said they were involved in PBMCs were Who monitors the contractors performance asked to think of a particular performance-based contract The incentives and disincentives in the contract and answer a series of questions about it. The questions The main steps of business process used for this contract addressed the following: Lessons learned Key contractual provisions The name of the PBMC The scope of work

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56 Table 23 USE OF THE MAINTENANCE QUALITY ASSURANCE PROCESS AND BENCHMARKING Question Yes No 4 6 Does your agency use a MQA process to measure outputs and outcomes of in-house maintenance efforts? (40%) (60%) 6 4 Does your agency use a MQA process to measure outputs and outcomes of contract maintenance? (60%) (40%) 7 3 Does your agency use PBMC consisting of a MQA process coupled with incentives and/or disincentives? (70%) (30%) Do you use benchmarking to compare the maintenance performance of organizational units in your 5 5 agency? (50%) (50%) Do you use benchmarking to compare the maintenance performance of organizational units in your 3 2 agency with the performance of contractors? (60%) (40%) Four state agencies provided fairly complete responses, FDOT on a 1 to 5 scale (1 = does not agree; 5 = fully TxDOT, FDOT, Maryland SHA, and the Utah DOT (UDOT). agrees) gave a rating of 3 with respect to the following The following sections present their responses to the ques- assertions: our measurement procedures are repeat- tions for a specific PBMC. able, have a high statistical accuracy and confidence interval, and conform to measurement protocols that Texas DOT are commonly recognized in the industry. FDOT depends on three sources to monitor contrac- Figure 8 provides highlights of some of TxDOT's responses tor performance: agency staff, the contractor, and an concerning five performance-based rest area contracts that independent third party. cover the state. In addition to the information presented here, The performance-based maintenance contracts only TxDOT noted the following regarding these performance- have disincentives for failure to comply with specific based contracts: contractual provisions and failure to meet performance targets or standards. The measurement procedures used are quite repeatable. The disincentives are based entirely on measurable TxDOT does not rely on industry measurement pro- outcomes and outputs. tocols. The measurement procedures have a very high Some performance measures are expressed in units of statistical accuracy and confidence intervals. time, such as response time or the period of time in Agency staff monitor the contractor's performance. which work must be done. This performance-based contract uses a combination The results of the performance measures affect the of positive and negative financial incentives to ensure contractor's ability to secure future work with the that the contractor is conforming to contract provisions agency. or exceeding performance targets or standards. FDOT sees the following as strengths of its perfor- The incentives and disincentives are based entirely on mance-based contracting process: a defined RFP, a measurable outcomes and outputs. defined scope of service, and defined specifications. Florida DOT Maryland SHA Figure 9 provides highlights regarding the numerous asset Figure 10 highlights Maryland SHA's experience with two management contracts used in Florida. FDOT provided the rest area performance-based contracts. In responding to the following additional information in the survey concerning survey, Maryland SHA provided the following additional its asset management contracts: information: FDOT uses an MQA process and has followed the gen- Maryland SHA uses an MQA process and has fol- erally accepted practice of establishing a desired level lowed the generally accepted practice of establishing a of service of 80 for each measure. desired level of service of 80 for each measure. Key maintenance managers from throughout the Key managers from throughout the agency recom- department recommend to top management what the mend to top managers what the performance targets or performance targets should be. standards should be.

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57 TxDOT Name and Type of Contract: Total Rest Area Maintenance and Operation Scope: Five rest area contracts for approximately 92 rest areas across the state. Contractor Selection Criteria: Low Bid Length of Contract: Base number of years Extension years Max. duration 2 6 8 Maximum award amount for base period and with extension(s) Max. base award Max. award base + extensions N/A N/A Performance Measures Not provided Steps of the Business Process to Carry out this PBMC Description of Action Who Does It? Obtain agreement from management to develop trial PBC Maintenance Division Director Get volunteer department or district to try PBC Staff /Management Write specification Staff Establish limits and type of work to contract Staff Review specification and approval Staff /Management Get legal review Counsel Obtain management agreement Staff to Management Develop detail plans and specification for letting Staff Advertise project Staff Pre-bid meeting Staff Let and select low bidder Staff Award of contract by Transportation Commission Commission Pre-construction meeting and issue work order Staff Start project Staff Close inspection and evaluation of contract Staff Determine if additional contract should be let Staff/Management If satisfactory start development of new contract Staff Select type work for a new project and revise specifications based on Staff finding in trial project Lessons Learned: Clear performance standards Substantial incentives and disincentives Random, unannounced inspections with must be established and com- must be established to ensure compliance no grace periods should control incentive municated to the contractor. with minimum performance standards. and disincentive payments. FIGURE 8 Information on TxDOT rest area performance-based maintenance contracts. Maryland SHA fully agrees with the following asser- procedures have a relatively high statistical accuracy tions: measurement instruments are calibrated where and confidence interval. applicable and are in good working order; where indus- Agency staff monitors contractor performance and the try measurement protocols exist, the agency relies on contractor monitors its own performance and provides them for specific measurements; and the measurement periodic reports to the agency.