Performance-Specified Maintenance Contracts

Abstract

In Australia and New Zealand, there has been a movement toward the private-sector delivery of road maintenance and management by using the performance-specified contract (PSMC) model. These are long-term contracts tendered competitively with a lump sum price. Initially the contracts concentrated on the physical attributes of the network that had to be maintained for the contract period. However, as these contracts matured, a reduction in the crash rates was observed. It was considered that the successful operation of a PSMC contributed to this reduction. By using data and calculation methods developed by Land Transport New Zealand and applying social costs for crashes normally used for justifying capital projects, it can be seen that the social cost of crashes is being reduced at a significantly greater rate on the PSMC 001 network than on the remainder of the state highway network. The value of savings ahead of the national trend has been more than NZ$31 million for a 3-year period. The contractor's performance is measured on the social cost of crashes that occur on the network, regardless of crash causation. To keep the contractor motivated, the contract includes provisions to adjust the contract payments as based on the safety performance. This approach requires a fundamental shift in the attitude of the contractor, moving from a reactive position to a new position of prevention with particular attention on improved safety. Performance data from a 7-year contract and a 3-year contract from New Zealand are presented. Improved safety performance has become a hallmark in these contracts, and safety performance continues to improve through innovations and commitment.