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Performance-based Management and Maintenance of Roads (PMMR)

Gunter Zietlow e-mail: g@zietlow.com www.zietlow.com. Performance-based Management and Maintenance of Roads (PMMR). Overview of Presentation. Introduction Benefits and disadvantages of PMMR Performance standards and response times Risk identification, sharing, and mitigation

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Performance-based Management and Maintenance of Roads (PMMR)

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  1. Gunter Zietlow e-mail: g@zietlow.com www.zietlow.com Performance-based Management and Maintenance of Roads (PMMR)

  2. Overview of Presentation • Introduction • Benefits and disadvantages of PMMR • Performance standards and response times • Risk identification, sharing, and mitigation • Performance monitoring • Payments and incentive systems SRE 2010 Module 1 Day 2

  3. Overview of presentation (2) • Data management and ownership • Tender design and evaluation • Changes required by the client and consulting and contracting industry • Implementation experiences and strategy • Lessons learned SRE 2010 Module 1 Day 2

  4. Overview of Presentation • Introduction SRE 2010 Module 1 Day 2

  5. SRE 2010 Module 1 Day 2

  6. SRE 2010 Module 1 Day 2

  7. Importance of Timely Maintenance • When roads are in poor condition every $ “saved” in road conservation will cost: • $ 3 to road users in additional vehicle operating costs and • $ 2 to the road administration (or the tax payer) in reconstruction and rehabilitation costs. SRE 2010 Module 1 Day 2

  8. Contracting-Out Road Maintenance Can Save Money • Routine and periodic road maintenance done by in-house labor is being replaced more and more by contracts with the private sector worldwide. • Studies made by the World Bank in the 1980’s revealed that contracting out road maintenance to the private sector can reduce maintenance cost by between 30% and 50%. • Latin American countries where among the first to replace in-house labor by contracts with the private sector. African and Asian countries were following suit. SRE 2010 Module 1 Day 2

  9. Type of Contracts • Unit price contract (admeasured) • Unit rates for work items • Payments are based on quantity of completed work • Performance based contract • Performance Standards or Service Quality Criteria • Fixed monthly payments if performance standardsare complied with • Hybrid contract • Mix of performance standards and unit rates for work items SRE 2010 Module 1 Day 2

  10. Performance-Based Management and Maintenance of Roads (PMMR) • Performance Standards define the minimum conditions of road, bridge and traffic assets as well as the management and operation of the assets during the entire contract period, leaving it to the contractor as to how to achieve them. • The contractor is free to decide • What to do, when to do, how to do, where to do, and to do the physical works himself or subcontract with certain restrictions as long as he meets the performance standards during the whole contract period. SRE 2010 Module 1 Day 2

  11. Performance-Based Management and Maintenance of Roads (PMMR) cont. • Lump sum payments are made periodically and might be adjusted in accordance with the change of certain factors, like inflation or traffic volume. • Major emergency, rehabilitation and improvement works might be paid based on unit rates for works agreed case by case. SRE 2010 Module 1 Day 2

  12. Performance-Based Management and Maintenance of Roads (PMMR) cont. • Payment deductions are being made for non-compliance with terms and conditions of contract, especially with respect to the service level criteria. • Duration of contracts should at least include one periodic maintenance cycle (4-5 years for gravel roads and 8-10 years for bituminous roads). Pure routine maintenance contracts can be 1-4 years. SRE 2010 Module 1 Day 2

  13. Contract Complexity and Duration Complexity Up to 30 years Routine and periodic Routine Construction, periodic and routine maintenance SRE 2010 Module 1 Day 2 2 4 6 8 10 12 14 Contract duration in years

  14. Scope of Services of PMMR (1) Management of the Road Network Routine Maintenance Periodic Maintenance Emergencies Improvements Rehabilitation SRE 2010 Module 1 Day 2 PMMR

  15. Scope of Services of PMMR (2) Management of the Road Network Routine Maintenance Periodic Maintenance Emergencies Improvements Rehabilitation SRE 2010 Module 1 Day 2 PMMR

  16. Scope of Services of PMMR (3) Management of the Road Network Routine Maintenance Periodic Maintenance Emergencies Improvements Rehabilitation SRE 2010 Module 1 Day 2 PMMR

  17. Scope of Services of PMMR (4) Management of the Road Network Routine Maintenance Periodic Maintenance Emergencies Improvements Rehabilitation SRE 2010 Module 1 Day 2 PMMR

  18. Contractual Relationship (1) Audit by Client or External Auditor Client/ Road Administration Performance Contract Contractor SRE 2010 Module 1 Day 2

  19. Contractual Relationship (2) Audit by Client or External Auditor Client/ Road Administration Performance or Conventional Contract Performance Contract Road Manager Contractor SRE 2010 Module 1 Day 2 Performance Audit Supervision for Admeasured Work

  20. Performance-Based Management and Maintenance of Roads (PMMR) is also referred to as • Performance Specified Road Maintenance Contract, PSMC (Australia and New Zealand) • Highway Asset Management Contract (USA) • Maintenance Service Level Contract (Latin America) • Output- and Performance-based Road Contract, OPRC (World Bank) SRE 2010 Module 1 Day 2

  21. Brief History of PMMR • 1988 British Columbia, Canada • 1990 Argentina • 1994-98 Colombia, Uruguay, Chile, Brazil, Peru • 1995 Sydney, Australia • 1996 Virginia, USA • 1998 New Zealand, Finland • 2001 Chad, Zambia,England, India, Spain • ............. SRE 2010 Module 1 Day 2

  22. SRE 2010 Module 1 Day 2 Source: World Bank 2006

  23. Overview of Presentation • Introduction • Benefits and disadvantages of PMMR SRE 2010 Module 1 Day 2

  24. Benefits to the Road Agency • Helps to assures long-term maintenance funding • Provides better transparency and accountability • Reduces maintenance cost • Improves customer focus • Improves control and enforcement of quality standards • Avoids frequent claims and contract amendments to increase quantities of work by the contractor • Reduces road rehabilitation • Reduces risks • Reduces workload SRE 2010 Module 1 Day 2

  25. Benefits to Others • Road Users • Provides better and safer roads with consistent conditions • Reduces road user cost • Consultants and Contractors • Guarantees workload over longer period • Provides potential for increased margins • Opens excellent opportunities for business growth SRE 2010 Module 1 Day 2

  26. Examples of reported savings by introducing PMMR Savings in % • Australia 15-35% • Canada 10-20% • Finland 30-35% • New Zealand 15-30/40% • Sweden 30% • USA 10-18% SRE 2010 Module 1 Day 2

  27. Development of Road Maintenance Cost in Sydney PMMR SRE 2010 Module 1 Day 2

  28. Reasons for Reduction in Road Maintenance Cost Drivers of savings: Incentives / competition / long-term management • Modern management and work procedures • Increased productivity • Total life cycle costing • Just-in-time maintenance • Work package optimization • Use of latest technologies SRE 2010 Module 1 Day 2

  29. CONVENTIONAL METHOD Average Unit Cost: $120 per patch * Production = 20-30 patches per day MOBILE PATCHER Average Unit Cost: $22 per patch *Production = 120 patches per day Mobile Pothole Patching SRE 2010 Module 1 Day 2 Courtesy VMS

  30. Disadvantages of PMMR • Road Agency • Tends to prolong tender period • Requires new procedures,mentality change of staff, and training • Might lead to loss of information if contractor is not obliged to supply detailed information on condition, interventions and inventory of the road • Loss of flexibility • Loss of expertise • Might reduce competition SRE 2010 Module 1 Day 2

  31. Disadvantages of PMMR • Road Users • None • Consultants and Contractors • Increases risks • Requires mentality change of staff, new procedures, and training SRE 2010 Module 1 Day 2

  32. Overview of Presentation • Introduction • Benefits and disadvantages of PMMR • Performance standards and response times SRE 2010 Module 1 Day 2

  33. Objectives of Performance Standards • To satisfy the road user regarding • accessibility • comfort • travel speed • safety • To minimize total system cost (cost to road users and agency – life-cycle cost of assets) • To minimize environmental impacts SRE 2010 Module 1 Day 2

  34. Examples of Performance Indicators/Standards • Absence of potholes and control of cracks and rutting, which affects safety and pavement performance; • Roughness of the road surface, which affects vehicle operating cost; • Amount of obstruction of the drainage system to avoid destruction of the road structure; • Friction between tires and road surfacefor safety reasons; • Retro reflexivity of road signs and markings for safety reasons • ............ SRE 2010 Module 1 Day 2

  35. Examples of Performance Standards SRE 2010 Module 1 Day 2 a asphalt; b bituminous surface treatment; A Argentina; C Chile; U Uruguay

  36. Examples of Performance Standards Paved roads SRE 2010 Module 1 Day 2 World Bank Sample Bidding Document for OPRC

  37. Overview of Presentation • Introduction • Benefits and disadvantages of PMMR • Performance standards and response times • Risk identification, sharing, and mitigation SRE 2010 Module 1 Day 2

  38. In-house Mainte- nance Outsourcing Specific Maintenance Works Performance-Based Road Management and Maintenance Contracts Long-term Road Concessions (BFOT) Short-term Medium-term Long-term Risk to contractor increases Risk to road agency decreases Distribution of Risk SRE 2010 Module 1 Day 2

  39. Risk Identification There are three fundamental risks: • background risks • Political, legal and regulatory risks • Monetary and macro-economic risks • Force majeure, • cost risks, a risk of exceeding initial cost estimates for the construction or operation of the project, and • revenue risksif the client does not pay on time SRE 2010 Module 1 Day 2

  40. Overview of Presentation • Introduction • Benefits and disadvantages of PMMR • Performance standards and response times • Risk identification, sharing, and mitigation • Performance monitoring SRE 2010 Module 1 Day 2

  41. Performance Monitoring • Contractor’s self-control system • Formal monthly inspections • Informal inspections • Road user complaints SRE 2010 Module 1 Day 2

  42. Self-Control Unit of Contractor • Own organizational structure with qualified personnel • Verifying continuously the compliance with the service level criteria • Monthly reporting of compliance to client using standard formats • Participating in monthly formal inspections SRE 2010 Module 1 Day 2

  43. Performance Monitoring • Formal monthly inspection jointly by contractor and client taking between 10 and 30% of the road network selected at random or alternatively the Contractor performs a monthly inspection report that is being verified by the client for payment purposes; • Informal inspections done once a week; • Inspections due to complaint by the public; and • Follow-up inspections to verify if contractor rectified deficiencies detected by one of the inspections mentioned above. SRE 2010 Module 1 Day 2

  44. Overview of Presentation • Introduction • Benefits and disadvantages of PMMR • Performance standards and response times • Risk identification, sharing, and mitigation • Performance monitoring • Payments and incentive systems SRE 2010 Module 1 Day 2

  45. Payments • Fixed monthly payments for scope of work and services contracted under service level or performance standards • Rehabilitation works may be paid as fixed monthly payments as well or based on unite rates and quantities of work performed • Emergency and improvement works to be paid based on unit prices and quantities of work performed • PMMR contracts should include schedules of rates as well, at least for emergency works SRE 2010 Module 1 Day 2

  46. Incentive Systems • Monthly fixed payments to be reduced if contractor does not comply with the service level or performance standards • Contractor has to pay penalties for not rectifying deficiencies within the response times given • Contractor might get bonus payments if he exceeds the performance standards SRE 2010 Module 1 Day 2

  47. Example of Penalties for not Rectifying Deficiencies within Specified ResponseTimes (CREMA, Argentina) 1998 SRE 2010 Module 1 Day 2 Source: World Bank

  48. Example for Penalties per Day for Non-compliance with Service Levels SRE 2010 Module 1 Day 2

  49. Overview of Presentation • Introduction • Benefits and disadvantages of PMMR • Performance standards and standards and response times • Risk identification, sharing, and mitigation • Performance monitoring • Payments and incentive systems • Data management and ownership SRE 2010 Module 1 Day 2

  50. Data Management and Ownership • Collection and management of data is being shifted mainly to the contractor. • Road agency needs to ensure that data previously collected by the agency is being collected by contractor and transferred to the agency. • Proper procedures have to be included in contract for collecting and managing data by contractor. SRE 2010 Module 1 Day 2

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