Assessing the Effectiveness of K.P.M.s

1. Assessing the Effectiveness of K.P.M.s Alex Finn – WBoPDC Transportation Manager David McDougall – Inroads Asset Manager

2. Where and What • Population 42,000 • 3x national growth rate • 10th fastest growing (96-01) • 14th fastest growing (01-06) • 212,000 hectares • 1030 km roads • 790/240 (sealed/unsealed) • 177 Bridges and Structures • Encompass Tauranga City • 110,000 pop • Largest port in NZ

3. Background • The problem faced in 1999 • Growth at 4% • Declining Levels of Service • Escalating costs • Council not wanting rate rises • The Solution • Lump sum, performance based, long term maintenance contract ….PBC-01

4. PBC-01 - Introduction 10 Years – 2002-2012 Joint Principals – NZTA & WBOPDC 2-Tier Governance structure

5. PBC-01 Features Outcome based (measured by KPM) Lump sum Transfer of Operational Control & therefore some risk transfer Single provider

6. Investment $3million investment including subsidy Gathering data Setting up KPMs Developing contract document Tendering process Compensating tenderers

7. Savings for Council Estimate for 10 years $135m Tender $105m Saving $30m Tender/Estimate $78%

8. In Summary Investment $3 million Savings over 10 years $30 million Includes savings in NZTA subsidy

9. Setting up Performance Measures Affordable Level of Service Necessary for community and the asset Must drive the contractor to provide the correct response

10. Basis of PBC Savings Economy of scale Contract period – 10 years Risk allocation Definition of Level of Service

11. Economy of Scale • Efficiency • Multi-skilled workforce

12. Contract Period Better resources Opportunity to invest in asset High value staff

13. Risk Allocation To party suffering consequences of failure to manage To party best able to lower risk

14. What has Worked Average road roughness has improved Smooth travel exposure has improved Surface condition (SDI) has improved Condition of structures has improved Provision of streetlighting has improved Roads are safer than peer local authorities Customer service has improved

18. What has not worked Dust KPM Difficult to measure Subject to environmental conditions

19. What has not Worked (2) Sealed Width KPM Good idea in principle Formula weighting focused on long straight underwidth roads Mountainous, winding roads were avoided New roads agreed by negotiation

20. What has not Worked (3) Streetlighting Intended to provide consistent level of illumination Difficult to measure consistently Difficult to address if lights are too far apart

21. David McDougall Asset Manager - Inroads

22. Asset Consumption • Whole of Life Value for money • Consuming inherent value/life of an asset by deferring maintenance and thereby incurring more expense later • Assessing the long term impacts that negate initial gains • Applies to assets where life cycle>> contract period • Big Ticket Items • Resurfacing ($350k per annum) • Pavement Reconstruction ($1M p.a.)

23. Resealing • Why Resurface in a Performance Based Contract? • Minimise maintenance costs (internal) • Texture KPM (%<0.5mm thresholds) • Surface Defects Index KPM • f(RAMM Rating, High Speed Data) • Residual Seal Life KPM

24. Residual Seal Life – Issues • RAMM Default life - based on average performance over similar geographical areas in NZ • Measured @ Start = Matched @ End • Compares existing age to RAMM default age f(traffic, seal type) • ∑network • Set at Year 0 • KPM requires same Y0 profile @ Yr 8, 9 & 10 • Flawed…? Why?

25. Residual Seal Life – Flawed? Why? • Large variation in actual performance • Not necessarily optimal @ start of Yr 0 • Previous MIS, philosophy • Conservative seal selection criteria • Snapshot • To insist @Yr 10 to match Yr 0? • Counter productive • Could extract more value with careful MIS

26. Residual Seal Life – Why is it Important? Measurement of value left in a network Difficult to measure Now favour comparison to previous top surface Tracking texture change over time

27. Existing Top Surface vs Previous Top Surface

30. Seal Residual Life - Summary • Extending the life of an asset through a careful and proactive MIS thereby adding value • Residual Life KPM should encourage the extraction of its maximum potential life through • an effective MIS • tracking age profiles • not through Y0 profiles • flexible • risk transfer • needs to have understanding/management

31. Pavement Residual Life • “Consuming inherent value/life of an asset by deferring maintenance and thereby incurring more expense later” • What pavement KPMs drive Reconstruction? • Roughness – STE • Maintenance Costs • Residual Life

32. Pavement Residual Life • Intent in 2002: • Design Checks pre construction • Performance Measurement Post Construction • Use FWD deflection to measure Residual Life • Transfer maintenance consequences • Reality in 2010 • Design Checks • Verify Design Assumptions Post Construction • Maintenance is only short term (  life)

33. Design Theory • Measure subgrade deflections • Calculate thickness of aggregate to protect subgrade based on stiffness (Es)of aggregate • Empirical • Based on what has worked in past • If we do this in these situations then % failures should be less than 5% • No guarantees

34. Pavement Residual Life • We don’t know how to measure residual life of pavements • Deflection (e.g. FWD) does not measure life • We know when they have failed/about to fail • Measurement/prediction of actual life is difficult

35. Pavement Residual Life • What have we learnt? • Rely on good investigation, design • Rely on Quality Assurance and Control during construction • Monitor over time rutting and roughness • Expected life projection based on actual annual trends in rutting and roughness

37. Alex Finn Transportation Manager - WBoPDC

38. Team Culture Mindset “best for the network” Win-win approach Drive for innovation Danger of under-pricing Contractor must make a profit Reported through Balanced Scorecard

40. Customer Care Contractor and client support each other Sharing information Act jointly to resolve issues Managing community expectations Customer processes measured and reported Customer satisfaction surveys reported

42. Conclusion More for less Partnering relationship based on mutual respect Data specific Clearly articulated outcomes Councils seeks to extend Subject to NZTA endorsement

43. Questions