 Introduction
to Performance-based Contracting
A performance-based contract (PBC) differs significantly from a
method-based contract that has been traditionally used to maintain
roads. PBC is a type of contract in which payments for the management
and maintenance of road assets are explicitly linked to the contractor
successfully meeting or exceeding certain clearly defined minimum
performance indicators.
In traditional method-based (unit rate) contracts, the road agency as a client normally specifies techniques, technologies,
materials
and quantities of materials to be used, together with the time
period during which the maintenance works should be executed. The
payment
to the contractor is based on the amount of inputs (e.g., cubic
meters of asphalt concrete, number of working hours).
In PBC the
client does not specify any method or material requirements.
Instead he specifies performance indicators that the contractor
is required to meet when delivering maintenance services. For
example, the contractor is not paid for the number of potholes
he has patched,
but for the output of his work: no pothole remaining open (or
100% patched). Failure to comply with the performance indicators
or
to
promptly rectify revealed deficiencies adversely affects the
contractor's payment through a series of clearly defined penalties.
In case
of compliance the payment is regularly made, usually in equal
monthly installments.
PBC within the road sector can be "pure" or "hybrid".
The latter combines features of both method- and performance-based
contracts. Some services are paid on a unit rate basis, while
others are linked to meeting performance indicators.
It is recommended that users of this Guide start with the Transport
Note (TN-27) “Performance-based Contracting For Preservation
and Improvement of Road Assets” (published by the World
Bank in September 2005) . The Note reviews the worldwide experience
with the PBC approach, highlights the main advantages, the
steps
involved
and the results generated. For convenience, it is offered in
four languages:
 English
French
Russian
Spanish
The TN-27 is also available at: http://www.worldbank.org/transport
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© 2006 The World Bank Group , All Rights Reserved. 