1. AASHTO SOC 2009 - Doug Gransberg 1 Performance Contracting Kiwi Style: Building Good Roads and Keeping Them That Way Douglas D. Gransberg, PhD, PE University of Oklahoma dgransberg@ou.edu

2. AASHTO SOC 2009 - Doug Gransberg 2 Motivation When the roads run through country like this, how can you let them go bad?When the roads run through country like this, how can you let them go bad? If you stopped to take a picture of every beautiful scene, you wouldn’t get anywhere.If you stopped to take a picture of every beautiful scene, you wouldn’t get anywhere.

3. AASHTO SOC 2009 - Doug Gransberg 3 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

4. AASHTO SOC 2009 - Doug Gransberg 4 Results Cost savings: 10% - 30% Risk transfer to contractor promotes innovation/initiative Improved asset management and levels of service Accelerated construction Reduced administration

5. AASHTO SOC 2009 - Doug Gransberg 5 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.

6. AASHTO SOC 2009 - Doug Gransberg 6 Contract Structure

7. AASHTO SOC 2009 - Doug Gransberg 7 PBC Contractor’s Control Process

8. AASHTO SOC 2009 - Doug Gransberg 8 GIS Real-Time Condition Status

9. AASHTO SOC 2009 - Doug Gransberg 9 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.

10. AASHTO SOC 2009 - Doug Gransberg 10 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

11. AASHTO SOC 2009 - Doug Gransberg 11 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.

12. AASHTO SOC 2009 - Doug Gransberg 12 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

13. AASHTO SOC 2009 - Doug Gransberg 13 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

14. AASHTO SOC 2009 - Doug Gransberg 14 The Results

15. AASHTO SOC 2009 - Doug Gransberg 15 The Results - OPM Operational Performance Measure Compliance

16. AASHTO SOC 2009 - Doug Gransberg 16 The Results - KPM

17. AASHTO SOC 2009 - Doug Gransberg 17

18. AASHTO SOC 2009 - Doug Gransberg 18

19. AASHTO SOC 2009 - Doug Gransberg 19 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.

20. AASHTO SOC 2009 - Doug Gransberg 20 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

21. AASHTO SOC 2009 - Doug Gransberg 21 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

22. AASHTO SOC 2009 - Doug Gransberg 22 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.

23. AASHTO SOC 2009 - Doug Gransberg 23 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

24. AASHTO SOC 2009 - Doug Gransberg 24 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

25. AASHTO SOC 2009 - Doug Gransberg 25 Conclusions** “Evolution not Revolution – Sensible transfer of risk.” “Reduced costs – 10% - 30% savings” “Success is primarily about the people.” Could work in US if we can break the maint. vs. construction barrier. ** Tony Porter – Opus Consultants