Kyrgyz Republic

Performance Based Maintenance (PBM) contracting for Roads is designed to increase the efficiency and effectiveness of road asset management and maintenance.  It should ensure that the physical condition of the roads under contract is adequate for the need of road users, over the entire period of the contract which is normally several years. This type of contract significantly expands the role of the private sector, from the simple execution of works to the management and conservation of road assets.

In traditional road construction and maintenance contracts, the Contractor is responsible for the execution of works which are normally defined by the Road Administration or the Employer, and the Contractor is paid on the basis of unit prices for different work items, i.e. a contract based on “inputs” to the works.  The results of traditional road contracts are in many cases less-than-optimal.  The problem is that the Contractor has the wrong incentive, which is to carry out the maximum amount of works, in order to maximize its turnover and profits.  Even if the work is carried out according to plan and much money is spent, the overall service quality for the road user depends on the quality of the design given to the Contractor who is not accountable for it.  In many cases the roads do not last as long as they should because of deficiencies in the original design, aggravated by inadequate maintenance.

The PBM addresses the issue of inadequate incentives. During the bidding process, contractors compete among each other by essentially proposing fixed lump-sum prices for bringing the road to a certain service level and then maintaining it at that level for a relatively long period.  It is important to understand that contractors are not paid directly for “inputs” or physical works (which they will undoubtedly have to carry out), but for achieving specified Service Levels, i.e., maintaining the road at pre-defined levels. The maintenance service of ensuring certain Service Levels on the roads under contract which represents outputs or outcomes.   A monthly lump-sum remuneration paid to the Contractor will cover all physical and non-physical maintenance services provided by the Contractor, except for unforeseen emergency works which are remunerated separately.  In order to be entitled to the monthly payment for maintenance services, the Contractor must ensure that the roads under contract comply with the Service Levels which have been specified in the bidding document.  It is possible that during some months he will have to carry out a rather large amount of physical works in order to comply with the required Service Levels and very little work during other months. However, his monthly payment remains the same as long as the required Service Levels are complied with.

A fundamental feature of the PBM is that the “Contractor” must not necessarily and in all cases be a traditional works contractor, but can be any type of firm or business venture having the necessary technical, managerial and financial capacity to fulfill the contract.  In any case, the contractor is responsible for designing and carrying out the works, services and actions he believes are necessary in order to achieve and maintain the Service Levels stated in the contract.  The Service Levels are defined from a road user’s perspective and may include factors such as average travel speeds, riding comfort, safety features, etc.  If the Service Level is not achieved in any given month, the payment for that month may be reduced or even suspended.

Under the PBM, the Contractor has a strong financial incentive to be both efficient and effective whenever he undertakes work. In order to maximize profits, he must reduce his activities to the smallest possible volume of intelligently designed interventions, which nevertheless ensure that pre-defined indicators of Service Level are achieved and maintained over time.  This type of contract makes it necessary for the Contactor to have a good management capacity.  Here, “management” means the capability to define, optimize and carry out on a timely basis the physical interventions which are needed in the short, medium and long term, in order to guarantee that the roads remain above the agreed Service Levels.  In other words, within the contract limitations and those required to comply with local legislation, technical and performance specifications and environmental and social regulations, the Contractor is entitled to independently define: (i) what to do, (ii) where to do it, (iii) how to do it, and (iv) when to do it.  The role of the Road Administration and of the Employer is to enforce the contract by verifying compliance with the agreed Service Levels and with all applicable legislation and regulations.

Maintaining a road network includes both routine and periodic tasks. Routine maintenance consists of many different tasks frequently necessary to maintain the function of the road (such as pothole repairs, cleaning of drainage, sealing of cracks, cutting of vegetation, etc.). Periodic maintenance consists of predictable and more costly measures of a less frequent nature designed to avoid road degradation (such as grading, drainage work, resurfacing, asphaltic concrete overlays, etc.). Intelligent management, the timeliness of interventions and the adequacy of technical solutions are critical.  It is expected that the use of private specialized firms under performance-based contracts will unleash significant efficiency gains, and stimulate innovation in comparison with traditional road administration practices.