|FHWA > Engineering > Construction > Contract Admin > Performance Measurement Methodology|
Performance Contracting Framework
|Category||Element||Performance Goal||a. Improve Safety||b. Reduce Congestion due to Construction||c. Improve Quality||d. Improve User Satisfaction||Computed Relative Weight (a+b+c+d)/2|
|Construction Congestion||Capacity||Capacity in the work zone [or work zone and alternate route(s)] during peak traffic periods is greater than or equal to 90% of the pre-construction capacity||3||5||1||4||6.5|
|Environmental||Recycling and Reuse||Capture and recycle/recover 90% of recyclable materials used on project||1||1||4||3||4.5|
Incentive and Disincentive fees are an innovative approach to motivate the contractor to meet the Performance Goals. If the Owner Agency is going to apply incentives and disincentives, there needs to be an objective system of determining the fees applied. The Owner Agency also needs to determine what reasonable incentive and disincentive fees are for the project and the locale. We have used 5% here as a sample, but 10% might be more appropriate depending on the situation. As Owner Agencies and contractors get more experienced with incentives and disincentives, the process will evolve.
The incentives and disincentives must be reasonable and meaningful. The incentives also must be achievable, or they will not have an impact.
While including disincentives is appropriate, the Owner Agency must realize that this level of risk will come at a cost. Disincentives are effective to push performance up to a point, but after that, you also need an incentive.
The measurement methodology sample materials included below provide language for the solicitation package on applying incentive and disincentive fees. Some assumptions are made in this contract language. For example, the contractor shall be eligible for an incentive fee or subject to a disincentive fee for each Category, which is tied to the comprehensive annual evaluation, and is based upon performance throughout the year. This award is designed to reward performance that meets or exceeds the performance goals.
We also recommend that the Owner Agency form a Performance Evaluation Board (PEB) that will advise the Contracting Officer on the amount of the total incentive fee to be received by the Contractor or the disincentive fee to be applied to the Contractor. The PEB personnel should be kept consistent throughout the project's life. After each evaluation, the PEB would convene to review the scores and determine the appropriate course of action. In the sample materials, the PEB generates a score with a scale of 0 to 100; in the scale, 40 points come from monthly evaluation scores, 50 points come from the comprehensive annual score, and 10 points are subjectively produced:
(40%*Monthly Evaluations) + (50%*Comprehensive Evaluation) + 10% subjective score
Note that the materials provide a detailed breakdown of how to compute the incentive/disincentive fees. For the incentive/disincentive fee structure, the Owner Agency must decide how these should be linked to performance. For example, should each category be tied to individual incentive/disincentive fees, or should the collective categories be tied to an overall incentive/disincentive fee? We recommend tying each category to individual incentive and disincentive fees, as this allows the Owner Agency to adjust any project management strategies in case a category is deficient or problematic.
The following measurement methodology and incentive/disincentive lessons have been learned in real-world performance contracts:
The following table provides the sample set of measurement methods for the menu of performance measures and categories presented in the Performance Goals Section of this framework. All entries in this table can be adjusted to be suitable for the specific locality of the project.
Following the Measurement Methods Table are sets of sample supplemental wording for RFP Sections:
|Category||Element||PM #||Performance Goal||Measure of Effectiveness?|
Units of Measure?
|How to measure? What processes?||How often? When?||Who will Evaluate This?|
||1||Incident Rate (IR) for Worker injuries is less than 4.0||Incident Rate for the Entire Project||Contractor's officially reported Incident Rate||End of Project||Construction Contractor or Independent Evaluator or State DOT|
||2||Site Crash Rate during construction divided by the Crash Rate prior to construction is equal to 1.0||Site Crash Rate for the Entire Project divided by the Site Crash Rate prior to Construction||Each State Agency / Contractor shall record the Crash Rate during construction. For long term projects, the annual Crash Rate during construction should be used and divided by the Crash Rate prior to construction. For short term projects, the overall Crash Rate during construction should be used.||End of Project||Construction Contractor or Independent Evaluator or State DOT|
||3||Work zone crash rate equal to pre- construction crash rate||Work Zone Crash Rate for the Entire Project Compared to the Pre- Construction Crash Rate||Each State Agency / Contractor shall record the Crash Rate during construction. For long term projects, the annual Crash Rate during construction should be used and divided by the Crash Rate prior to construction. For short term projects, the overall Crash Rate during construction should be used.||End of Project||Construction Contractor or Independent Evaluator or State DOT|
||4||85% of the motorists travel at the posted speed limit or less||Percentage of Motorists traveling at the posted speed limit or less each day||Monitoring devices, police radar, police tickets||Each Day||Construction Contractor or Independent Evaluator or State DOT|
||5||No one travels more than 20 mph over the posted speed limit.||Frequency of recorded speeds greater than 20 mph over the posted speed limit||Monitoring devices, police radar, police tickets||Each Day||Construction Contractor or Independent Evaluator or State DOT|
||6||Rural: Average motorist delay less than 15 minutes (as compared to pre- construction travel time)
Urban: Average motorist delay less than 20 minutes (as compared to pre- construction travel time)
|Average Delay for Each Hour for Each Direction (as applicable) computed using to Baseline Pre- Construction Travel Time||Options:
||1 hour averages for the entire work zone period
||Construction Contractor or Independent Evaluator or State DOT|
|7||Average travel time through the work zone is equal to or less than the established target||Average Travel Time for Each Hour for Each Direction (as applicable) compared to the Established Target Travel Time||Options:
||1 hour averages for the entire work zone period
||Construction Contractor or Independent Evaluator or State DOT|
||8||No stopped queue (speed less than 10 mph)||Maximum Stopped Queue Length for Each Day for Each Direction (as applicable)||RTMS (or similar) units placed upstream of the work zone at 0.5 mile increments||End of Each Day||Construction Contractor or Independent Evaluator or State DOT|
|9||Rural: < ½ mile moving queue (travel speed 20% less than posted speed)
Urban: < 1 ½ mile moving queue (travel speed 20% less than posted speed)
|Maximum Moving Queue Length for Each Day for Each Direction (as applicable)||RTMS (or similar) units placed upstream of the work zone at 0.5 mile increments||End of Each Day||Construction Contractor or Independent Evaluator or State DOT|
|10||Peak period queue length is equal to typical pre- construction peak period queue length||Maximum Queue Length during AM Peak and PM Peak compared to Baseline Typical Queue Length during Pre- Construction AM Peak and PM Peak||RTMS (or similar) units placed upstream of the work zone at 0.5 mile increments||End of AM Peak Period and End of PM Peak Period||Construction Contractor or Independent Evaluator or State DOT|
||11||Non-injury incidents are cleared from the travel lanes within 20 minutes||Clearance Time for Each Non-Injury Incident compared to Target Clearance Time||Electronic or Paper Log capturing reporting time and clearance time||Each Incident for entire project - Incident scores are averaged to obtain overall score||Construction Contractor or State DOT or independent evaluator|
|Capacity||12||Capacity in the work zone [or work zone and alternate route(s)] during peak traffic periods is greater than or equal to 90% of the pre- construction capacity||Measured or Computed Capacity for Each Work Zone Configuration||3 Options:
||Must be computed or measured for each change in work zone configuration||Construction Contractor or State DOT or independent evaluator|
||13||The Contractor achieves a Quality Index Score of 0.8||Quality Index computed on the basis of a number of project or agency- specific quality- related measures
Note: The Quality Index needs to be defined in the Contract along with a description of how it is determined.
|The Owner Agency would define the quality goals important for their project. The Owner Agency would develop 5 levels of performance for each performance measure, and weight each performance measure. The Quality Index would be computed as a weighed average across the various quality performance measure scores. The Owner Agency may consider defining a rejection level.||As desired by the Owner Agency - This could be computed monthly, annually or at the end of the project.||Construction Contractor or State DOT or independent evaluator|
||14||Inertial Profile, IRI, less than 48 inches per mile||IRI (inches per mile) for each Lane for entire length of project||Continuously reported IRI using inertial profiler||At project completion||Independent Evaluator|
||15||Noise less than 96 dBA based on OBSI Method||Each Lane for entire length of project||On-Board Sound Intensity Method||At project completion||Independent Evaluator|
||16||Project completed ahead of the contract completion date||Actual project completion date versus initial scheduled contract completion date||Compare to proposed schedule||End of project||Construction Contractor or State DOT or independent evaluator|
|17||Reduce contractor's actual days on the road by 20% compared to the State DOT MAX working days||Actual days on the road (for example, days in which lane or shoulder closures are required) versus State DOT MAX working days||Use actual calculated days and the States' records||End of project||Construction Contractor or State DOT or independent evaluator|
||18||Reduce working days to complete project by 20% when compared to the State DOT's MAX working days.||Total working days to complete the project versus State DOT MAX working days||Use actual completion time for the project and the States' records.||End of project||Construction Contractor or State DOT or independent evaluator|
||19||Achieve a score of < 1 using the equation "Actual Working Days divided by State DOT MAX working days"||Project actual working days divided by the State DOT MAX working days||Use actual working days as reported by the contractor and verified by the Owner Agency compared to the SDOT MAX working days||End of project||Construction Contractor or State DOT or independent evaluator|
||20||Complete all major milestones on time||Major milestone scheduled date versus major milestone completion date for each major milestone||Use project scheduling software to track major task completion by the contractor||End of each agreed upon major milestone||Construction Contractor or State DOT or independent evaluator|
||21||No contract days where no work is being performed when work is able to be performed and traffic is impacted in the work zone||Actual contract days where no work is performed when work could be performed||Contractor reporting or physically monitoring the work zone or electronically using cameras or other data capture technology||End of each day||Construction Contractor or State DOT or independent evaluator|
||22||Eliminate actual contract growth by achieving a score of 1 using the equation of final cost divided by original contract allotment.||Total final contract costs divided by the original allotment||Using actual final contract cost data versus DOT established contract allotment.||End of contract||Construction Contractor or State DOT or independent evaluator|
|Customer Focus/ User Satisfaction||
||23||Based on survey results, 80% of travelers were satisfied with their driving experience during the project||Each 5-point Likert scale survey (i.e., 1 = very satisfied, 2 = somewhat satisfied, 3 = averagely satisfied, 4 = not satisfied, 5 = very dissatisfied)||Likert scale with one question on user satisfaction (i.e., How satisfied were you with your driving experience?).||At 25%, 50%, 75% and 100% project completion||Construction contractor, Independent Evaluator or State DOT|
||24||Reduce sediment loads to 5% less than the pre- construction conditions||Turbidity||Turbidity Meter||At pre- construction, on a set schedule, and at project completion||Construction contractor, Independent Evaluator or State DOT|
||25||Capture and recycle / recover 90% of recyclable materials used on project||Tons for project||Ratio of recycled / recovered tons over available tons||At 25%, 50%, 75% and 100% project completion||Construction contractor, Independent Evaluator or State DOT|
||26||Noise due to construction work = 95 dBA 100 yards from the construction site||dBA levels for project||Sound level measuring device||Hourly||Construction contractor, Independent Evaluator or State DOT|
||27||Implementation of project innovations is equal to the project goal||Innovations Implemented on the Project Compared to Innovations Proposed by the Contractor for the Project||Ratio of innovations implemented over innovations proposed by Contractor||At project completion||Construction contractor, Independent Evaluator or State DOT|
E.1 Performance monitoring is a key component of this contract. Both the Contracting Officer's Technical Representative (COTR) and the Contractor must actively monitor performance to ensure that the construction is successfully completed and the Performance Goals are met.
E.2 The Contractor is free to use any reasonable method it believes appropriate to monitor performance, discover issues, and take remedial action as appropriate to meet the Performance Goals.
E.3 The Owner Agency's intent is not to dictate how the Contractor chooses to monitor its own performance, but rather to know that the Contractor is meeting the Performance Goals set forth in this RFP. As a result, this section defines the Owner Agency's performance monitoring program. The Contractor must also have its own performance monitoring program, which must be described in the Contractor's Quality Management Plan and proposal (see Section F).
E.4 The Owner Agency and Federal Highway Administration (FHWA) representatives will conduct periodic (i.e., daily, quarterly, monthly, annually, etc.) performance monitoring and evaluations. The combination of the selected monitoring levels shall help ensure progress and acceptable performance throughout the term of the contract.
E.5 The COTR and the Contractor will conduct performance monitoring. The Owner Agency inspectors may inspect the quality of the work performed to ensure that it meets applicable specifications. The COTR's role is to verify that the desired outcome (construction is completed and Performance Goals are met) is produced.
E.6.1 The Contractor shall maintain a daily log for the Project. The log must contain information regarding:
E.6.2 The COTR shall track the daily activities against the work schedule. The Contractor shall advise the COTR of any variations from the work schedule.
E.6.3 The Contractor shall monitor the daily activities of the field crews, and obtain the following data:
E.6.4 The Contractor's daily reports must be available to the COTR to assist in verifying daily progress under the contract. A good working relationship between the COTR and the Contractor's day-to-day Project manager is essential for Project success.
E.6.5 The Owner Agency or its representative will conduct reviews. If it is determined during any review that work does not meet the quality standards outlined in the Standard Specifications, or the required contract Performance Goals, the Owner Agency or the Contractor will address the issue at no additional cost to the Owner Agency.
E.7.1 Note: This section will specify the frequency of the evaluation. There are a number of frequency options for measuring performance, including:
The frequency will depend largely on the specific performance goal, and must be defined for each goal. For example, the frequency of measurement of some congestion goals may need to be continuous, but the pavement smoothness would likely be measured at the end of the project, and perhaps on a long-term basis. Also, as dictated by specific Performance Goals, the Contractor should collect hourly data on an hourly basis, but it may be more reasonable to present these data once a month to the COTR.
E.7.2 At specified intervals throughout the project, the COTR or his designee(s) and the Contractor (or its representative) shall perform an evaluation of the work zone and/or the Contractor's records of actions completed in that period to review Contractor progress and performance.
The COTR also reserves the right to perform unscheduled or "surprise" inspections. These evaluations shall be objective evaluations of the Contractor's performance against the Performance Goals. The evaluators will review the work completed or in progress and shall assign the appropriate Level of Performance score.
The evaluator personnel shall be kept as consistent as possible to ensure comparability of the reviews from month to month. Randomly selected samples may be generated for items included in each category each period; this will help the COTR and Contractor avoid reviewing only problematic or successful areas. An approximate 10% sampling rate may be used to select the review items.
The frequency of data collection may be impacted by the innovations introduced on the Project. For example, if a long-lasting material is proposed and implemented, this may necessitate only intermittent site visits to collect resulting data. There may be other economic, temporal, spatial, or other indicators that allow for reduced data collection/analysis efforts.
The COTR or his designee(s) shall generate reports that summarize the review's findings. The COTR or his designee(s) shall note deficiencies throughout the Evaluation, and the COTR or his designee(s) shall include these deficiencies in the quarterly report.
E.7.3 To help identify trends, the Owner Agency or its designee(s) shall summarize and compare the review results against the results for previous periods. The Owner Agency shall also compare the results against either the baseline condition or the previous Comprehensive Evaluation.
E.7.4 The COTR shall discuss the results of the Evaluations with the Contractor. The COTR shall also report a general level of performance satisfaction along with recommendations and concerns. The Contractor also may bring issues to the attention of the COTR, along with suggestions for future activities. Periodically, the COTR may visit sites where Project personnel have reported deficiencies and for which the Contractor must perform remedial work.
E.7.5 The Owner Agency shall record these Evaluations via electronic media to provide a record of the condition of the project. The Owner Agency shall provide a copy of each recording to the Contractor.
E.8.1 The COTR or his designee (or representative) will perform an extensive, objective Evaluation at least once in every 12-month period. To measure performance, the Owner Agency or its designee(s) will compute performance scores for each performance goal, as well as an overall summary score. The Owner Agency or its designee(s) will compute scores based on averaging results across multiple samples. The Owner Agency or its designee(s) will average the scores across the samples to obtain the score for the performance goal. The Owner Agency or its designee(s) will use these summary scores as an indicator of the Contractor's performance, and will use these scores to compute incentive and disincentive fees. While the averaging technique will be used to generate the summary scores, it must be stressed that the minimum requirement is to have all groups meet the performance goals. The Contractor shall meet with the COTR after each Comprehensive Evaluation to discuss remediation plans for any items that do not meet the performance goals, whether or not the performance goal is met when scores are averaged across multiple samples. Continued failure to perform, as determined by the Owner Agency or its designee(s), may result in default.
E.8.2 In computing the overall summary Performance Score, the Owner Agency shall apply their preferred for the various categories; the example below uses the weights shown in the table for the various categories.
|Customer Focus/User Satisfaction||TBD|
E.8.3 The COTR will compare the results of the Comprehensive Evaluation with prior years' inspections and with the baseline conditions. The COTR will report all failures to meet performance goals. The contractor shall advise the COTR of the actions proposed to remedy any deficiencies along with the time frame for taking those actions. The Contractor must repair all noted problems to meet the performance goals.
E.8.4 To compute the Total score for the Comprehensive Evaluation, the Owner Agency will:
F.3.1 Quality Management Plan
Within 30 Days from the Contract Award Date, the Contractor shall submit to the COTR an electronic copy and 10 bound paper copies of a detailed Quality Management (QM) Plan that describes by Category how the contractor shall monitor its own performance to ensure that Performance Goals are achieved. The QM Plan shall define the procedures to ensure that all work meets or exceeds the Performance Goals. The QM Plan also shall define reporting procedures to the Owner Agency to ensure approval of proposed work, services, and products. The Contractor is allowed to deviate from the Plan only with the express consent of the COTR. The Contractor must highlight innovations that deviate from the specifications set forth in the Owner Agency Standard Specifications in the Quality Assurance/Quality Control Plan. If approved in writing by the CO, these deviations shall become the specifications for this contract. Otherwise, the standard specifications shall govern all work performed under this contract.
H.1.1 The Contractor shall be eligible for an incentive fee or subject to a disincentive fee for each Category, which is tied to the Comprehensive Evaluation, and is based upon performance throughout the year. This award is designed to reward performance that meets or exceeds the Performance Goals. If the Owner Agency determines the Contractor's performance to be above or below the Performance Goals for the Project, the Owner Agency shall compute the incentive fee or disincentive fee as described in Sections H.1.2, H.1.3, H.1.4, H.1.5 and H.1.6.
H.1.2 The amount the Contractor is eligible to receive for performance in a given year shall not exceed five percent (5%) of the fixed price amount paid to the Contractor under this contract for that year. The disincentive fee shall also not exceed five percent (5%) of the fixed price amount paid to the Contractor under this contract for that year. After the Comprehensive Evaluation, the Performance Evaluation Board (PEB) shall advise the Contracting Officer on the amount of the total incentive fee to be received by the Contractor or the disincentive fee to be applied to the Contractor. The Contracting Officer shall exercise the independent discretion in determining whether or not to award to the Contractor an incentive fee or assess a disincentive fee.
H.1.3 In advising the Contracting Officer on the amount of the incentive fee to be received or the disincentive fee to be applied, the PEB shall examine each of the Performance Goals and, based upon the Contractor's reports and reports by Owner Agency personnel, determine the extent to which the Performance Goals have been met or exceeded. The PEB shall generate a PEB score with a scale of 0 to 100 with 40 of the 100 points being made up of Monthly Evaluation scores, 50 of the 100 points being made up of the Comprehensive score, and 10 of the 100 points for a subjective score (See section H.1.4). These proportions or "weights" reflect the Owner Agency's priorities, and the fact that the Contractor must perform throughout the year, and not just at the time of the Comprehensive Evaluation. The Owner Agency will calculate the Monthly Evaluation score portion of the PEB score by taking the average of the 11 Monthly Evaluation scores (out of 100) for that year and multiply by 40/100. The Owner Agency will calculate the Comprehensive score portion of the PEB score by dividing the Comprehensive Evaluation score (out of 100) by 2. The PEB shall carefully consider the results of the Monthly and Comprehensive Evaluations in determining the award.
H.1.4 The final 10% of the PEB score shall be subjective, and shall be assigned by the PEB. In assigning this score, the PEB shall consider to what extent the Contractor has met the Performance Goals system-wide (score of 4 or higher for each sample in the Comprehensive Evaluation), as well as to what extent the contractor has met the Partnering goals that shall be established in the Partnering process.
H.1.5 The PEB will compute the PEB score by summing the Monthly Evaluation score portion, the Comprehensive Evaluation score portion, and the subjective score, as described in H.1.3 and H.1.4.
H.1.6 In advising the Contracting Officer on the incentive fee or the disincentive fee, the PEB shall use the table below. If the PEB score falls between two scores in the table, the PEB will compute the Incentive Fee percentage or Disincentive Fee percentage using a proportional scale. For example, if the PEB score were 98, the percentage of the 5% Incentive Fee awarded would equal:
Step 1. Looking at the table below the example PEB score of 98 falls between the PEB scores of 97.5 and 100 with corresponding percentage of 5% Incentive Fee Awarded of 95 and 100 respectively.
Step 2. Calculate the difference between the example PEB score of 98 and the next lower PEB score from the table below (which is 97.5). The difference is: 98-97.5=0.5.
Step 3. Divide the 0.5 from step 2 by the difference between the PEB scores of (100-97.5=2.5), which would be 0.5/2.5=0.2
Step 4. Multiply 0.2 from step 3 by the corresponding differences between the Percentage of 5% Incentive Fee Awarded (100-95=5), which would be 0.2x 5=1.0.
Step 5. To obtain the Percentage of 5% Incentive Fee Awarded for the example PEB score, add 1.0 from step 4 to the Percentage of 5% Incentive Fee Awarded for a score of 97.5 (95), which would be 95+1.0=96
Steps 1-5 as described above, can also be shown in the following mathematical equation:
95+(((98-97.5)/(100-97.5))*(100-95)) = 96
|PEB Score||Percentage of 5% Incentive Fee Awarded||Percentage of -5% Disincentive Fee Applied|
|Less than 70||0||100|
H.1.7 Example of Incentive Fee Calculation
Step 1. Find the average of the 11 Monthly Evaluation Scores by adding the eleven Monthly scores and dividing it by eleven, which is:
Step 2. As described in section H.1.2 "The PEB shall generate a PEB score with a scale of 0 to 100 with 40 of the 100 points being made up of Monthly Evaluation scores, 50 of the 100 points being made up of the Comprehensive Evaluations score, and 10 of the 100 points for a subjective score (See section H.1.3)." Take 40% of the average of the Monthly Evaluation scores (83.9) calculated in step 1 above, which is: 0.4 x 83.9 = 33.6
Step 3. The PEB Score would be equal to 33.6 from step 2 plus 50% (50/100=.5) of 87.5 (assumption B), plus 8 (assumption C) which is equal to 85.1 (as shown in the following mathematical equation): 33.6 + (.5 x 87.5) + 8 = 85.1
Step 4. In order to calculate the Percentage of 5% Incentive Fee Awarded, follow the steps 1-5 of section H.1.6 as follows:
Step 5. Looking at table in section H.1.6 the calculated PEB score of 85.1 falls between PEB scores of 85 and 87.5 with corresponding Percentage of 5% Incentive Fee Awarded of 0 and 50 respectively.
Step 6. Calculate the difference between the calculated PEB score of 85.1 and the next lower PEB score from the table shown in section H.1.6 (85). The difference is: (85.1-85=0.1).
Step 7. Divide the 0.1 from step 6 by the difference between the PEB scores of (87.5-85=2.5), which would be 0.1/2.5=0.04
Step 8. Multiply 0.04 from step 7 by the corresponding differences between the Percentages of 5% Incentive Fee Awarded (50-0=50), which would be 0.04x50=2
Step 9. To obtain the Percentage of 5% Incentive Fee Awarded, add 2 from step 8 to the corresponding Percentage of 5% Incentive Fee Awarded of 0, which would be 0+2=2
Steps 5-9 as described above can also be shown in the following mathematical equation:
|0 +||(85.1-85)||× (50-0) = 2%|
Step 10. So if the price of the Category over the period being evaluated was $10M, the incentive fee awarded would be 2% (2/100=0.02) of 5% (5/100=0.05) of $10M, which can mathematically be shown as:
0.02 x 0.05 x $ 10M = $10,000
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