Risk-Based Model for Valuation of Performance-Specified Pavement Maintenance Contracts

Abstract

Many transportation agencies have started outsourcing maintenance activities to contractors by means of performance-based contracts. These outsourcing contracts are intended to transfer performance-based risk from transportation agencies to private contractors for a premium cost. Even though such contracts provide numerous benefits to both contractual parties, there are equally many concerns with their implementation. Certainly, one of the most important concerns is how to quantify performance-based risk. This paper presents a general and flexible framework for quantifying the performance-based risk in terms of premium cost for different contract specifications and preventive maintenance and rehabilitation strategies. The framework developed consists of three modular components: (1) the reliability-based pavement performance model; (2) the preventive maintenance and rehabilitation models; and (3) the pricing model. The developed framework is illustrated using the current design and rehabilitation methods for flexible pavements.