 Performance-based Contracting for Roads in New Zealand
The first long term (10 year), performance-specified
maintenance contract (PSMC) was let by Transit New Zealand (Transit
NZ) in 1998.
Under this contract the maintenance provider was responsible for
maintaining the road network to meet a number of Key Performance
Indicators (KPIs). Two years later, Transit NZ introduced a shorter
version, so-called “hybrid” contracts, which incorporate
features of traditional method-based and performance-specified maintenance
procurement. These contracts typically run for a period of 5 years.
Now, The PSMC is used on 15% of the entire road network, predominately
on national roads, which are generally sealed. At least one contract
includes a mix of national and regional roads, with both sealed and
unsealed roads.
Definition of PSMC for roads in New Zealand
The PSMC is a single lump-sum contract, which includes:
 Bringing the
assets to the contracted standards, with a provision that changes
in safety legislation (standards) become contractual;
Provision
of all inspections;
Identification,
programming, prioritization and delivery of maintenance services
necessary to achieve specified performance criteria; and
Management
of the integrity of the assets using a cost effective long term
maintenance strategy.
Payments are monthly, are independent of actual works and services
provided, but may vary subject to meeting performance criteria.
Scope and Assets of Contracts
A. Hybrid Model. The hybrid model utilizes five-year output-based
contracting, relying on performance measurement, reporting and self-auditing
to ensure supplier performance. The model relies on a co-operative
environment between the contracted parties and seeks to maximize
the skills, expertise, innovation and systems of the road industry.
The scope of work includes rehabilitation, periodic maintenance,
routine maintenance, winter maintenance, line marking, resurfacing,
lighting maintenance, traffic signs and signals, structure maintenance,
and emergency works (limited liability). Improvements such as seal
widening, emergency work are paid on a unit rate basis.
Services within the hybrid model are predominantly split between
professional services and physical works, but portions of the professional
services (specifically, the short-term life of the asset) are the
responsibility of the network maintenance contractor. The long-term
health of the asset is assigned to the network management consultant.
In reality the contractor and consultant work together to develop
both short and long-term programs to determine least cost, whole-of-life
maintenance options.
B.
Performance-specified Maintenance Contracting (PSMC) Model. The
PSMC consists of a single ten-year contract for providing all the
products or services associated with state highway network maintenance
and management. In a similar way to the hybrid model, the PSMC model
utilizes output-based contracting, relying on self-compliance by
the supplier to ensure performance. It strives to maximize the skills,
expertise, innovation and systems of the road industry, expecting
higher efficiency and improved value for money.
Pre-qualification process
Pre-qualification does not apply to hybrid and PSMC contracts (Transit
NZ 2005a). Risk Transfer
The level of risk taken by to contractor, which is the lowest in
the traditional, method-based procurement model, increases significantly
in the hybrid procurement model. While Transit NZ retains responsibility
for asset consumption, the network contractor takes over risks
relating to surface condition such as texture, roughness and skid
deficiency. These risks are moderated to some extent by contracting
for minimum quantities of pavement and surface treatments.
The most risk transfer occurs in the PSMC procurement model. The
contractor is responsible for all aspects of network condition, including
asset consumption and road surface condition. This substantial risk
transfer is undertaken on the premise that the contractors are in
the best position to identify the risks and determine treatments
to manage them. They are engaged on the basis that they know and
understand the network and will implement proactive management and
maintenance programs that aim to minimize threats and enhance opportunities.
In all current procurement models, Transit NZ retains the risk of
determining the specified service levels meeting the expectations
of the customer.
Contract Tenure
Tenure of traditional and hybrid models beyond five years requires
approval from Land Transit New Zealand. Typically, hybrid contracts
are let for the period of 5 years, while PSMC for 10 years. Bidder Selection
To date, Quality-Price Trade-Off (QPTO) method has been used to evaluate
tenders for the implementation of PSMCs. QPTO refers to the selection
method wherein quality and price of bids are assigned numerical
weights, resulting in a unique ranking of bids.
Performance measures
Performance measures used in PSMCs and hybrid contracts are divided
into (a) management performance measures, (b) long-term performance
measures and (c) operational measures.
Management performance measures drive the planning, management and
implementation aspects of the contract. They usually incorporate
plans for quality, traffic, health, safety, and reporting requirements.
Long-term (or key) performance measures relate to the overall condition
of the pavement, roughness, skid resistance, texture, rutting, surface
life, structural conditions, etc. These drive the contractors’ maintenance
and rehabilitation interventions.
Operational performance measures apply to daily serviceability of
the road network being maintained and include conditions of the pavements
and road furniture.
Monitoring
The contractor has the responsibility to design and implement a
compliance and performance monitoring system throughout the contract
tenure,
sufficient to stand scrutiny under review by Transit NZ, or by
an independent party commissioned by Transit NZ, annually or otherwise.
Partnership
When PSMC models were first introduced by Transit NZ, partnership
between the various parties was recognized as a valuable mechanism
to understand each other’s objectives and the benefits of
working as a team.
Informal partnering is now introduced in the traditional and hybrid
models and involves regular meetings between parties, open lines
of communication and identification of joint goals and objectives.
Formal partnering is arranged at a higher level involves parties
signing up to a Partnering Charter.
Results
Improved
maintenance services at lower costs. The General Manager of Transit
New Zealand reports that “better services are being
delivered at much lower costs.” In New Zealand, there
has been a 30% decrease in professional costs and 17% decrease
in physical
works, while traffic grew by 53% (FHWA 2005).
Replication
of the longer-term PSMC model by local authorities and councils. In recent years, a number of local authorities/councils
have followed the practice of Transit NZ for longer term contracts
with the objective of maintaining an asset for a fixed budget. Typically,
these contracts are issued for three-year term with one-two renewal
possibilities for one year.
Sources:
- FHWA. 2005. "Highway Maintenance Contracting 2004. World
State of Practices." Report of the National Highway maintenance
Contract Seminar, April 2004. Orlando, Florida.
- Porter, T. “Trends in the Procurement Models for Highway
Maintenance.” Opus International Consultants Limited. Courtesy
of Tony Porter.
Also available at: http://www.mrutc.org/about/00950.pdf
- Transit NZ (Transit New Zealand).
2005a. “Pre-Qualification.
Procedure Manual for Trial.” Issue 4. Wellington. Courtesy
of Transit NZ.
Also available at: http://www.transit.govt.nz/projects/tendering/Prequalification-Manual-Iss4.pdf
- Transit NZ. 2005b. “Long-Term Procurement Plan. June 2005.” Wellington.
Courtesy of Transit NZ.
Also available at:
http://www.transit.govt.nz/content_files/news/Publication19_PDFFile.pdf
- Please see New Zealand's Bidding Document
- Please see Western Bay and Plenty District's
Contract Document
Back
to Case Studies
|
© 2006 The World Bank Group , All Rights Reserved. 