Post on 22-Feb-2016
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AASHTO SOC 2009 - Doug Gransberg 1
Performance Contracting Kiwi Style:
Building Good Roads and Keeping Them That Way
Douglas D. Gransberg, PhD, PEUniversity of Oklahoma
dgransberg@ou.edu
AASHTO SOC 2009 - Doug Gransberg 2
MotivationMotivation• When the roads run through country When the roads run through country
like this, how can you let them go bad?like this, how can you let them go bad?
• If you stopped to take a picture of every If you stopped to take a picture of every beautiful scene, you wouldn’t get beautiful scene, you wouldn’t get anywhere.anywhere.
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Performance Contracts• Two types:
– Pure performance-based– Mixed with method-based
• Two models:– Complex – entire network in defined area – Simple – single feature; pavement only,
bridge only• Duration: 3 - 10 years
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Results• Cost savings: 10% - 30%• Risk transfer to contractor promotes
innovation/initiative• Improved asset management and levels of
service• Accelerated construction• Reduced administration
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Complex – PBC w/ATC• Blurs the line between construction and
maintenance.• Adds rehabilitation projects to PBC.• Adds small upgrade/reconstruction
projects to PBC.• Operates like a long term CM/GC with
O&M.
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Contract Structure
Agency
ContractorConsultant Required Contractual Collaboration
AuditorCo
ntra
ct P
erfo
rman
ce
Contract Mngr
Design Mngr
Quality Mngr
Trade Subs
Ops Mngr
Own Forces
Design Products
Design Products
QMP Output
QMP Output
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Contract Manager Operations Manager
Monthly Programming Daily ReactiveAnnual Programming
GIS Based Highway Condition Rating System
Federal Highway Inspection & Monitoring Procedures
Daily Inspections + Client/Consultant/ Public Reports
Incident Response: Pot holes
Crack sealingTraffic ServicesEdge Markers
LandslidesRock Fall
Accident AnalysisOther Reactive
Maint.
Record Details
Consultant/ OwnerPrioritize Work
Consultant/ OwnerPrioritize Work
Assess Overall Workload by Ops & Contract Mngrs
Urgent:Contract
Non-Compliance
& Safety Work
High Priority:Programmed
Reactive Maintenance
Routine:Programmed PM, Rehab,
Replacement Preseal Repairs
Weekly/ Monthly Program for Work
Monthly Reporting
Computer Input Data
Annual Deterioration
Modeling & Site Confirmation
Site Survey & Draft Agreement
w/ Consultant
Detailed Site Investigation, NPV Calcs, &
Design
Final Annual Rehab/
Upgrade/Replacement Plan & Maint Intervention Strategy by Consultant
Detailed Design
Quantity Survey & Annual Plan Achievement
PBC Contractor’s Control Process
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GIS Real-Time Condition Status
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Contractor’s Bidding Rationale• “Clear understanding of the Client’s expectations• Achieving “Best for Road”, and meeting the specified
outcomes• Superior systems, strategies and tools• Strong local knowledge• Developing best practice• Rigorous self-auditing• Smart treatments and programming• Regular, accurate, user-friendly and informative
reporting• Strong relationships”
Simon Hunt, Fulton Hogan, Ltd.
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The REAL Rationale• Clear understanding of client
– Price the consultant– Price the “real” expectations
• “Best for Road”– Superior technical knowledge = lower cost
treatments – also means more network covered for $$$.
• Strong local knowledge– Identify areas of network that are above
standards & price accordingly
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The REAL Rationale• Rigorous self-auditing
– Find the noncompliance BEFORE the consultant and fix it with “smart treatments & programming”
• Strong relationships– Know the client’s hot buttons– Know the consultant’s preferences– Know the public’s local issues
• Maximize profit margin within the constraints spelled out in the contract.
• Get the next contract for the same network.
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Contract Quality Plan• Key to profitability and getting the next contract• List the key project objectives• List the performance measures for each key project objective• Identify the risks of achieving each of the performance
measures• Specify the Methodology to minimize, isolate or eliminate
the risks such that the Client and Consultant has a high degree of confidence that the Performance Measures will be achieved
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Contract Quality Plan• Identify relevant means for each
Performance Measure to ensure compliance
• Develop the detailed Contract Quality Achievement Plan for each KPI.
• Detailed testing regime to meet or exceed the specified requirements
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The Results
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The Results - OPMOperational Performance Measure Compliance
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The Results - KPMPSMC 001 Network Mean Roughness
60
65
70
75
80
85
90
95
1 2 3 4 5 6 7 8 9 10
Contract Year
Mea
n N
AA
SRA
Cou
nt
Northern Network Contract Req't NorthSouthern Network Contract Req't SouthEast-West Network Contract Req't East-West
Worse
Better
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PMSC 001 Skid Resistance
00.25
0.50.75
11.25
1.51.75
2
Bench-mark
1 2 3 4 5Contract Year
Max
% w
/Ski
d R
esis
tanc
e <
0.45
Act % w Skid < 0.45 KPM Skid KPM Tolerance
Better
Worse
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PMSC 001 Crash and Social Cost Key Performance Measures
40
50
60
70
80
90
100
1 2 3 4 5
Contract Year
Perc
ent o
f NZ
Ave
rage
Crashes KPM Crashes Social Cost KPM Social Cost
Better
Worse
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The Payment Scheme• Lump sum 10-year contract• Indexing per Ministry of Commerce• Three possible progress pay systems:
– Unit price – bid pricing– Lump sum – Rehab, upgrade, & replace projects not
in tender offer– Performance output payment
• Incentive/disincentive scheme for all three• 12-36 month bond/escrow for features with
deterioration models.
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Contractor’s Perspective• Essentially bidding a cash flow rather than
a dollar amount.• Focus on performance-paid items first
– Get incentive every month– Unbalance from high risk items to low risk
items• Evaluate non-maintenance work
– Predict client/consultant’s preferred design– Identify viable design alternates– Price accordingly
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Contractor’s Perspective• Price local knowledge of the network’s
actual condition versus the condition described in the RFP.
• Evaluate impact of aggressive pavement preservation program that exceeds OPM on ability to extend service life beyond contract completion
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Contractor’s Perspective• Evaluate deterioration models
– Know their sensitivity to inputs– Know their ability to model actual conditions– Quantify their relative effectiveness– Price accordingly
• Price cost of contractor QA activities ahead of Consultant QA actions versus cost of noncompliance.
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The Impact• Contractors like these contracts – must be
profitable• Drove FH to create a 4-5 person
“Technical Services Group”– Headed by a PhD Pavement Expert– Own labs, own software development
capability, forensic analysis– “in-house” consultant to operations managers
& superintendents
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The Impact• Compete for and win research contracts• Write/present papers on results• Develop and submit standard test procedures
– Residual Emulsion Binder Extraction to ASTM.– Ultra High Pressure Watercutter Specification to NZTA
• Why? – Superior technical knowledge = Technical credibility in a
small country– R&D costs recovered in the PBC contract
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Conclusions**• “Evolution not Revolution – Sensible
transfer of risk.”• “Reduced costs – 10% - 30% savings”• “Success is primarily about the people.”• Could work in US if wecan break the maint. vs.construction barrier.
** Tony Porter – Opus Consultants