Optimal Maintenance and Rehabilitation Policies for Performance-Based Road Maintenance Contracts

Abstract

Performance-based road maintenance contracts (PBRMCs) are an effective mechanism to transfer risk and responsibility of road maintenance activities to the private sector. Proper structuring of performance indicators and the extent of penalties and incentives in the contract has a significant effect on the overall cost and level of service (LOS) provided to the public. This research develops a series of mathematical optimization models and a computational tool that allows road agencies and contractors to better structure the following contractual conditions in a performance-based contract (PBC) for road maintenance: (1) types of performance indicators to be considered; (2) their threshold levels; and (3) the appropriate levels of penalties and incentives. The availability of such models and tools will allow road agencies and contractors that are unfamiliar with PBRMCs to make informed decisions on their approach to contractual risk allocation. A case study of a major highway in Egypt is presented to demonstrate how slight changes in performance thresholds and contractual penalties affect the overall lifecycle costs (LCC) and eventual road performance. The results demonstrate that: (1) small variations in KPI thresholds can have a significant effect on the overall lifecycle costs and eventual contract price; and (2) the addition of penalties and incentives can be an effective mechanism to ensure contractors adhere to performance requirements in PBRMCs.