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PERFORMANCE CONTRACTING

Performance contracting is in its infancy in the U.S. transportation sector, but the tools and techniques are well established in Europe. Performance contracting provides a builder or maintenance operator with performance specifications that must be met, by employing whatever means the contractor determines most economical. These performance specifications are then continuously measured against a set of performance indicators as a basis for payment. Performance contracts are thought to allow much more room for innovation through creative construction methods--lowering the overall price of a given project. Additionally, performance contracts necessitate alternative procurement and payment practices, typically utilizing past performance and end-product qualities as measurements.

The scan team discovered applications of performance contracts in Europe for term maintenance, design-build, DBFO, and concession contracts. Since design-build and concession contracts have previously been discussed in this report, this chapter will focus on term maintenance contracts. The Netherlands and the United Kingdom are utilizing performance contracts for term maintenance contracts, but France and Portugal employ concessions for long-term maintenance agreements. This chapter focuses on examples from the Netherlands and the United Kingdom.

In 2000, the Netherlands decided to include more innovative types of contracts as part of its market approach to procurement. Within a few years, about one-third of all contracts for construction and maintenance will be performance oriented. In most cases these contracts will be integrated contracts containing design, construction, maintenance planning, and maintenance execution. In special cases contractors will be selected on the basis of their design proposals. A more detailed discussion of performance contracting in the Netherlands is included later in the chapter.

The United Kingdom uses several forms of performance contracting. Since performance contracting on its DBFO projects was discussed in the previous chapters, the discussion in this chapter will focus on MACs used for term maintenance of the Dutch motorway and trunk road system. The United Kingdom started with 3-year maintenance contracts for a limited scope of work. Currently, the term is 5+1+1 (5 years as a base plus two 1-year options) if the provider, the contractor, is achieving the performance indicators successfully. The scope of work also has expanded from the initial concept. Emphasis is being place on ISC management. The selection process includes evaluation of the plan to provide goods/services and also risk allocation within the contractor team. Maintenance includes routine matters and limited reconstruction work. If reconstruction costs are above a specified level, the job is separately procured.

The essential lessons learned concerning performance contracting on this scan can be summarized into the categories of performance specifications, performance indicators, warranties, and QA/QC. The Dutch have developed a method of performance specification using five levels of specifications, which range from road-user wishes to requirements for basic materials and processing. The British have created a definitive set of performance indicators for measuring the performance of maintenance contractors in their MAC contracts. They also have also created a Performance Review Improvement and Delivery (PRIDe) group to audit and ensure the integrity of the system. The length of warranties, along with the projects/products being warranted, is examined across all of the host countries later in this chapter. The chapter concludes with a discussion of how QA/QC is being employed differently in performance contracts.

PERFORMANCE SPECIFICATIONS

Performance specifications are perhaps the most critical elements of performance contracting. U.S. highway agencies have a long history of creating and maintaining extensive prescriptive specifications that detail the materials and processes for construction. Performance specifying for contracts involving maintenance and operations is not commonplace in U.S. industry. Performance specifying is a complete change in direction from prescriptive specifying because the main objective of the highway agency is to specify the performance level or outcome of the project and not the means and methods as to how that outcome is achieved. To transfer the responsibility for a design-build or maintenance agreement, the highway agency must allow the providers to create their own means and methods. This transfer of risk and responsibility is advantageous for the owner. If the design-builder or maintenance contractor provides the means and methods, they also are liable for the outcome. Again, there is a shift for the agency from provider of services to network operator.

In the Netherlands, the team observed a systematic approach to the drafting of performance specifications. The Dutch utilize a unique method of defining performance specifications in five levels of requirements, which range from road-user wishes to requirements for basic materials and processing. Performance specifications detail both the operating level and minimum condition of the facility at the time it is returned to public ownership. The following description of the process is adapted from a document given to the scan team by Mr. Arie L. Korteweg, MSc, Project Manager Quality Assurance, Ministry of Transport, Public Works and Water Management. It succinctly describes the Dutch method of performance specification in all types of contracts.

The Netherlands National Public Works Department has recently decided to innovate its market approach considerably. Within a few years about one third of all contracts for construction and maintenance will be performance oriented. A list of 60 pilot projects has been scheduled. In most cases these contracts will be integrated contracts containing design, construction, maintenance planning and maintenance. In special cases contractors will be selected on the basis of their design proposals. The central division supports this change process by developing standard functional requirements.

In fact the new approach will award more tasks to the private companies. They will have to bear more responsibilities and liabilities. In these situations the national agency branch offices will make careful decisions regarding the tendering procedure, the form of contract and the contract management. This should be done on the basis of risk analysis. More innovative behavior in this decision making process is being supported by our division. The contractor should have no longer obligations based on detailed technical prescriptions; instead only functional contract requirements, describing the desired performance of the object, should be used.

Requirement Levels

RWS tries to distinguish certain performance levels in specifications. In road construction and maintenance, five levels may be used:

  1. Road-User Wishes - the car driver wants a usable road from A to B, which is safe and convenient.
  2. Performance Requirements - road-user wishes are translated into requirements for the pavement surface, such as skid resistance, smoothness, noise reduction, and evacuation of precipitation.
  3. Construction Behavior - to achieve performance requirements the behavior of the construction may be specified (e.g., elastic and plastic deformation, durability). Construction and materials may be freely chosen by the contractor.
  4. Materials Behavior - such as elasticity, plasticity, fatigue, and compactability. The contractor can optimize materials in the specified layers.
  5. Requirements for Basic Materials and Processing - current standard requirements are on this level.

For a good preparation of new contract forms, it is essential to distinguish these levels clearly and consistently, not only for the pavement but also for realization and maintenance of all other objects, such as green surfaces and hydraulic engineering structures. (This department is also responsible for the main rivers and canals.)

Relation Between Form of Contract and Requirement Level (see table below)

There is a relation between the form of contracts and the levels of specifications, although not a straightforward (one-to-one) relation. Level 2, for instance, is usable in maintenance performance and DC(M) contracts. But when desired lifetime is longer than the contract time, there might be risks that make it unavoidable to go down to level 3. The contractor has to ensure future construction behavior.

Traditional Contracts:

Maintenance Performance Contracts:

Design-Build

Public-Private Partnership


LEVELS OF REQUIREMENTS IN DIFFERENT CONTRACT FORMS.
Contract Form Level 1
Road Users Wishes
Level 2
Performance Requirement
Level 3
Construction Behavior
Level 4
Materials Behavior
Level 5
Raw Materials and Processing
Traditional ---------> ---------> ---------> X x
Maintenance Performance ---------> X x x x
Design-Build ---------> X x Contractor Contractor
Design-Build-Maintain ---------> X Contractor Contractor Contractor
Public-Private Partnership X x Contractor Contractor Contractor

 

Key to symbols in the table above
Symbol Meaning
X In these contracts this will be the first level to think of.
x In many cases these levels will be used for considerable parts of the project.
---------> The arrows indicate that during initial preparation of a project one should always start with level 1, reasoning down to the desired contact level
Contractor The contractor will have to translate the contract specifications down to the instructions for his personnel, on level 5 or even lower.

The table above provides a general framework for the level of specification required for the various contract methods. The following tables provide more specific details on the technical work categories and the characteristics for each of the specification levels. The technical work categories are divided into construction field and maintenance field definitions. These levels must still be disaggregated further for individual project contracts, but the following two tables offer insights for the technical work category operation and the characteristics of the specifications.

Construction Field ­ Definition Specification Levels, Character of Specifications
Technical work-category Level 1
Road Users Wishes
Level 2
Performance Requirement
Level 3
Construction Behavior
Level 4
Materials Behavior
Level 5
Raw Materials and Processing
Geotechnics safety and convenience resulting from settlements, stability, influence on adjoining structures settlements, consolidation time, stability, influence on adjoining structures drainage capacity for consolidation, stability, deformations materials, drain distance  
Groundwork conformity with political alignment decision settlements, consolidation time, stability, influence on adjoining structures dimension according to design, permeability, stability general properties, embankment materials % fines, compaction
Road drainage - drainage pavement surface discharge drains watertight, durable  
Pavement Base - - bearing capacity, crack distance durable particle sizes, adhesive agent, compaction
Asphalt Pavement section traffic speed, number and seriousness of accidents, noise complaints smoothness, skid resistance, noise level, water on pavement, life time smoothness, skid resistance, strength, fatigue, noise emission smoothness, skid resistance, mix properties particle sizes, bitumen quality, compaction
Concrete Pavement section traffic speed, number and seriousness of accidents, noise complaints smoothness, skid resistance, noise level, water on pavement, life time smoothness, skid resistance, strength, fatigue, noise emission smoothness, skid resistance particle sizes, cement quality, compaction
Markings road safety and drivers' satisfaction reflection, degradation reflection durability product and process certificate for paint, thermoplastics and their application
Crash Barrier traffic safety crash behavior, life time   durability materials
Noise Barrier political decisions noise reductions, aesthetics   durability according to drawing, materials
Green Surfaces citizens' satisfaction realization of landscape design realization of specified greens quality   quality planting material, soil end planting methods
Shore Protection Mattresses maximal ground surface loss, ecologically sound     permeability, sand-tightness  
Stone Revetment maximal ground surface loss, ecologically sound     stone sizes, mass weight, stone strength  


Maintenance Field - Definition Specification Levels, Character of Specifications
Technical Work-category Level 1
Drivers and Politicians Wishes
Level 2 Performance Object Level 3
Construction Behavior
Level 4
Materials Behavior
Level 5
Raw Materials and Processing
Asphalt Pavement
section traffic speed, number and seriousness of accidents Smoothness, skid resistance, water on pavement, life time, traffic disruptions from maintenance smoothness, skid resistance, degradation, cracking, traffic disruptions from maintenance smoothness, skid resistance, mix properties particle sizes, bitumen quality, compaction
Concrete Pavement
section traffic speed, number and seriousness of accidents Smoothness, skid resistance, water on pavement, life time, traffic disruptions from maintenance smoothness, skid resistance, joints behavior, cracking, traffic disruptions from maintenance   materials and processes
Markings
traffic safety reflection, skid resistance, durability, traffic disruptions from maintenance reflection, skid resistance, traffic disruptions from maintenance durability product and process certificate for paint, thermoplastics and their application
Crash Barrier
traffic safety crash behavior, life time, traffic disruptions from maintenance   durability materials
Mowing
  according to green management plan     weather conditions, wound treatment, removal of waste

Pruning of Tress and Bushes

  according to green management plan     weather conditions, wound treatment, removal of waste
Rubbish Removal
traffic safety, environment pollution traffic safety, environment pollution, convenience of parking lot users      
Concrete Repair
  aesthetics, protection of reinforcement bars, durability aesthetics, protection of reinforcement bars   according to process certificate
Stone Revetment
maximal ground surface loss, ecologically sound     stone sizes, mass weight, stone strength  
Dredging
unrestricted navigation maintenance of certain depths   dredging quantities of solid materials  

Even a casual examination of the specification characteristics above reveals a significant change from traditional prescriptive specification methods. As the risk for operation and maintenance is shifted to the private sector, so is the responsibility for creating the final prescriptive specifications. The agency's goal is to write comprehensive outcome definitions, which allow for maximum innovation from the private sector without compromising long-term quality or safety. In fact, the responsibility for quality and safety also becomes the responsibility of the maintenance contractor. Quality and safety are achieved through a process of continuous improvement as benchmarked against performance indicators established in conjunction with the performance specifications.

PERFORMANCE INDICATORS

Performance specifications can only be used successfully if the outcomes are measurable and verifiable. Each performance specification must have a set of performance indicators associated with it so that the highway agency can measure and verify the quality and execution of the product. In essence, the highway agency creates the performance specification and then audits the performance via the performance indicators. Again, there is a shift for the agency from provider of services to network operator, in this case through the auditing system.

The United Kingdom provided the scan team with an extremely comprehensive set of performance indicators for its MAC contracts. The system begins with a general Performance Requirements describing the desired outcome of the product from the owner. It then defines Key Performance Indicators, which describe the targets used to measure the performance requirements. These are further defined in the Area Performance Indicators, which enable the specific targets to be set. Finally, the system provides a Mechanism for Setting the Targets. The figure below graphically depicts the process.

4 linked blocks showing performance requirements, key performance indicators, area performance indicators, mechanism for setting targets

To further clarify the process, definitions for these terms are given below, followed by actual examples of each step in the following tables. The definitions and tables are provided verbatim from the British Highways Agency's Model Document MAC, Performance Indicators, Annex 12, Issue No. 3, Revision No. 1, British Highways Agency, London, England (British Highways Agency 2001). Only a few brief examples are provided for illustration in the tables. An entire set of performance indicators contains many more individual items, but it is much less voluminous than even the simplest set of U.S. construction specifications.

Key Performance Indicators (KPIs) - are published by the Highway Agency (HA) in connection with its strategic aims and objectives. The Managing Agent Contractor (MAC) assists in the collection and reporting of KPIs and HA collates the results and reports nationally. Overall relative performance in achievement of the KPI targets will be used as a measure of the MAC's performance to the extent that the MAC, through the Network Board, will assist and enable the Secretary of State to achieve such targets.

Area Performance Indicators (APIs) - are identified within the MAC Contract. The indicators have been developed to be common to the different forms of procurement for maintenance management. Services are to be carried out and the work is to be performed in such manner as will enable the specified targets to be met. Overall relative performance in achievement of those API targets identified as being primary responsibility of the MAC will be used as a measure of performance.

Target Setting - except where network wide targets are specified within the Contract, setting of targets for APIs is to be agreed via the Network Board. However in the event of failure to agree, a mechanism by which targets will be set is included within the MAC Conditions of Contract.

The table on the next page describes the Performance Requirement for Emergency Response. This is only one example of a Performance Requirement. Numerous Performance Requirements are actually used to describe the entire project--much like an outline specification would be used at the conceptual design stage in the U.S.

Example of Performance Requirement Table
Objective Performance Requirement Response to Incidents Measurement Basis
Emergencies are responded to quickly and effectively and assistance is given to emergency services as appropriate to minimize danger, delay and disruption

A suitably qualified member of staff shall be on standby 24 hrs a day 7 days a week

Respond to all incidents as quickly as practicable, but in any event within the maximum response times.

Attend the scene of any emergency affecting any element of the network and assist the emergency services as necessary in order to minimize any danger, disruption or delay to the public and pollution of watercourses or groundwaters into which the road surface water drains. Attendees shall be suitably equipped and trained to assist with the incident and shall provide relevant information about local drainage systems, outfalls and roadways as necessary.

0700 - 1900

within 1 hour

1900 - 0700

within 1.5 hours

Emergency Response

Audit

The following table provides examples of Key Performance Indicators for Customer Satisfaction and Road Traffic Accidents. Along with a description of the Key Performance Indicators, the table provides for a target type, target value and the data source that will be used to gather these targets. As this table is provided from model contract documents, the target values are left blank. These target values are established on a project-by-project basis as described in the two tables that follow. Again, these are only two short examples used to illustrate key Performance Indicators.

Example of Key Performance Indicators
Key Performance Indicator Description Target Type Target Value Data Source
Customer Satisfaction

Number of complaints per month raised through Highways Agency Information Line (HAIL) and Road Users' charter Unit (RACU), measured under:

  • Poor traffic management- Peak time closures
  • Litter and appearance of the network
  • Poor carriageway condition
  • Poor user facilities
  • Poor advanced signing of roadworks and diversions
Area Target [max] [ ] number HAIL database of all public contacts reported on a monthly basis.
Road Traffic Accidents (a) Accident rate in PIA per 100 vehicle km Area Target (max) [ ] rate STATS 19 forms, accident data acquired and reported by the Provider
(b) Severity ratio measured as ratio of severe accidents to total accidents Area Target (max) [ ] rate

To further define the key performance indicators, Area Performance Indicators are employed. The Area Performance indicators refine the responsibilities, performance targets and data sources used to actually measure the performance. The table below illustrates the Area Performance Indicator for Response to Emergency Incidents.

Example of Area Performance Indicator
Area Performance Indicator Primary responsibility Description Target Type Target Value Data Source
Response to Emergency Incidents MAC (a) Percentage of incidents for which a response is provided within target time against total number of incidents reported. Area Target (max) [ ]% RMMS Database, incident log and police records
(b) Average time of appropriate response to incidents from the time at which notification of the initial incident is logged by the Provider for each road/route Area Target (max) [ ] minutes

Finally, the system is based upon continuous improvement principles--namely setting a baseline and continuously improving upon this baseline. The tables for Key Performance Indicators and Area Performance Indicators leave space for setting target values on each individual contract. Defining the mechanism to set these targets is a critical element of the process. The table below illustrates how targets are set for each project.

Example Mechanism for Setting Target
Period Target Type Mechanism for Setting Target
First 12 months of the Contract Period

Area Target (max)

(measured value of the indicator is required to be less than the target)

Area Target shall be no greater than the measured value of the indicator for the Area Network averaged over each of the first 12 months of the Contract Period. Notwithstanding the foregoing criterion, the Area Target shall be not greater than 110% of the mean measured value of the indicator for each month for the relevant period averaged over each of the areas where such data are available within the whole of the trunk road network.

Area Target (min)

(measured value of the indicator is required to be greater than the target)

Area Target shall be no less than the average measured value of the indicator for the Area Network for each of the first 12 months of the Contract Period. Notwithstanding the foregoing criterion, the area Target shall be not less than 90% of the mean measured value of the indicator for each month of the relevant period averaged over each of the areas where such data are available within the whole of the trunk road network.
Second and subsequent years of the Contract Period

Area Target (max)

(measured value of the indicator is required to be less than the target)

Where the measures value of the indicator over the relevant period averaged over each of the areas where such data are available within the whole of the trunk road network is less than the measured value for the previous year, and where the Employer determines that a benefit accrues either to the Employer or to the road user as a result of the reduction in the average measured value, the area Target shall be reduced by the amount of such reduction. Where there is no reduction in the measured value of the indicator as referred to above, the Area Target shall remain unchanged from its previous value.

Area Target (min)

(measured value of the indicator is required to be greater than the target)

Where the measures value of the indicator over the relevant period, averaged over each of the areas where such data are available within the whole of the trunk road network is greater than the measured value for the previous year, and where the Employer determines that a benefit accrues either to the Employer or to the road user as a result of the increase in the average measured value, the area Target shall be increased by the amount of such reduction. Where there is no reduction in the measured value of the indicator as referred to above, the Area Target shall remain unchanged from its previous value.

The performance indicators as described above allow for benchmarking and continuous improvement of performance contracts. In this manner, the government has transferred the risk and the responsibility for design and construction. The contractual terms define how the performance indicators are performed, but who measures this performance is the next question.

The United Kingdom is taking the posture to allow the contractor to measure and record many of these performance indicators. It then audits the results of these measurements in a rigorous manner through the use of the PRIDe group. The definition of the PRIDe team and its role is given below as taken from the MAC contract:

The Role of PRIDe

PRIDe operates outside formal contractual arrangements to establish and agree with the Project Sponsor a baseline audit and monitoring program of MAC.

Audits and Quality Management Systems

It is a contractual requirement for the MAC to operate effective, rigorous and comprehensive "first party audits" of their own activities and to operate under a certified system that requires regular third party audits. The baseline audit program performed by PRIDe as a "second party audit" is not intended to provide day-to-day verification of a provider's management activities. It would be serious cause for concern if PRIDe were to identify management or system issues that had not already been identified by the MAC.

Additional Auditing by PRIDe

In certain circumstances additional monitoring by PRIDe may be determined necessary by the Project Sponsor or may be requested by the NIAC and the Conditions of Contract include provisions for such additional audits to be carried out at the expense of the relevant service provider in the event of Quality Management System failures.

Performance Analysis and Benchmarking

In addition to the audit and monitoring role, PRIDe will analyze performance and establish benchmarks for future performance. This process will drive implementation of best practice and so deliver continuous improvement.

This method of setting performance indicators and auditing performance equitably transfers the risk and responsibility to the design-builder or maintenance contractor. The owner defines a desired outcome, requires the providers to measure their performance, and then audits the outcomes. The contractor has the ability to design the system that meets the cost, schedule, and scope requirements of the owner. The contractor is therefore accountable for the product quality, because it owns the design and construction methods used to achieve the performance requirement. Finally, there is no need for long-term warranties because the performance contractor is responsible for the project for a much longer portion of its lifecycle.

U.S. Parallel: Contractor Controlled QA/QC

In the United States, there is increasing recognition on the part of State and Federal highway agencies that, on nontraditional projects (for instance, design-build), the QA/ QC programs require significant procedural revisions. More responsibility is being placed on the contractor, and highway agencies are assuming more of an audit role. This is very similar to the approach that Europe already uses. Utah, Arizona, and Colorado have already begun using this approach for several good-sized design-build projects (I-15 in Utah, Legacy Highway in Utah, Superstition Freeway in Arizona, and the Southeast Corridor in Colorado) and Washington State is using this method on a smaller design-build project (SR500 Thurston Way Interchange).

WARRANTIES

CATQUEST, the previous contract administration scan tour, discovered the use of longer-term warranties in Europe than are typically employed in the United States. The 2001 contract administration scan planned to collect data on the length of typical warranties and the types of projects being warranted. However, the team found that the use of DBOM, concessions, and performance contracting was more prevalent than the use of long-term warranties. Many of the concessionaire-subcontractor relationships contain warranties, and some of these have longer terms than typically found in the United States. Unfortunately, the scan team was not given information on these warranties because of the limited time with concessionaires and the proprietary nature of the companies.

The Netherlands was able to provide information on warranties for its traditional contracts. It is slightly different from the U.S. system. Normal warranty periods for the entire projects are 3 years. In cases of doubts during construction, this period may be extended. Beyond the warranty period, the designer and the contractor are only liable in case of faults that were not noticeable in spite of due surveillance. For traditional contracts the Dutch have found that warranties are not cost-effective.

The host countries visited on the 2001 contract administration scan were not focusing their alternative contracting techniques on warranties. From what was witnessed, the United States is developing more comprehensive long-term warranties than those being used in the European host countries. The host countries are focusing their efforts on tying maintenance performance contracts to construction in lieu of long-term warranties through performance methods similar to those presented in this chapter.

QUALITY ASSURANCE/QUALITY CONTROL

An item of concern in performance contracting in the United States is QA/QC. In the United States, traditional QA/QC roles and responsibilities are not effective with performance contracting. Performance contracts observed during the scan tour placed the responsibility for quality control solely with the contractor, and the owner retained only a minimal quality assurance audit role. However, there is use of "stop" or "control" points on projects as a means for owner verification testing at critical points.

The Netherlands also is employing a unique process for quality audits in lieu of heavy owner inspection. The Dutch do this through a system of penalty points. Akin to the referee in a soccer match, the owner gives the contractor yellow or red cards for quality violations. One yellow card is a warning; two yellow cards, or one red card, mean that the contractor must stop work until the violation is remedied. The following is a summary of the Dutch QA/QC system for the high-speed rail line earthwork and bridge contract.

Yellow and Red Cards Keep HSL Under the Budget

In order to obtain the high-speed line at not much more expensive than planned, the project bureau works with yellow and red cards. A red card stops the payments to the contractor. Supervision is concentrated on process management by the contractor. In case of severe defects, where quality and/or security are affected, the project manager can show the contractor a yellow card. If the problem has not been solved within the agreed time span, a red card follows and all payments in the sub-project involved are stopped. As far as known in the Ministry no cards have yet been used.

In the Netherlands, the project bureau is first to use yellow and red cards (as in soccer) in the construction field. In this way it wants to keep the design-build contracts under control without a large supervision organization. This application of the so-called Brussels model is preferred over the Bahamas-model (no interference at all) and the construction-site-model (intensive supervision).

The project bureau has learned from experience of Rijkswaterstaat's Construction Division, the Project Organization Betuweroute (freight rail track Rotterdam-Germany) and the Project Organization Westerscheldt Tunnel. The construction of the high-speed line from Amsterdam to the border with Belgium is a huge project, which has been subdivided into several parts and then tendered. The bored tunnel under the Green Heart is under construction and the contracts for earth works and bridges have been signed. That comprises 1 billion and 4.4. billion guilders. In total contracts of 7.7 billion have been signed. In addition to the system with the yellow and red cards the project bureau works with fines and bonuses. By including strong financial incentives the contractors are stimulated to advance completion.

The process outlined above constitutes a significant change from the traditional U.S. owner-specified QA/QC programs. The owner is entrusting the contractor to ensure the quality of the end product, and the owner ensures this through an audit process. The owners are conducting much less frequent verification and testing. This would be a significant change for U.S. owners, but it is not unprecedented. The key to the system involves setting appropriate performance indicators and then monitoring them throughout design and construction. The audit system will not be effective if there is not a mechanism for the owner to "stop work or withhold payment" for an unacceptable audit. This result also can be achieved through an incentive/disincentive plan.

SUMMARY

The scan team discovered applications of performance contracts in Europe for term maintenance, DBM, and concession contracts. Performance contracting provides a contractor with performance specifications or requirements. These requirements must be met through means and methods determined by the contractor. These performance requirements are then continuously measured against a set of performance indicators as a basis for payment. Performance contracts are thought to allow much more room for innovation through creative construction methods, thus lowering the overall price of a given project. The essential lessons learned on performance specification on this scan can be summarized into the categories of performance specifications, performance indicators, warranties, and QA/QC. The scan team recommends that the following concepts be explored in the United States as a means to speed the delivery of our infrastructure and to increase the quality of construction and maintenance:

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