What Performance Contracting is Not:

• "Just tell me what to do, I want to build it and move on"
• Traditional way of doing business
  • The way we have always done it
  • Price driven (lowest price)
  • Burden/risk is on the owner to design, specify, and control the work
• Recipe or M&M specifications describing:
  • Materials (products) used
  • Methods (processes required)

What is Performance Contracting?:

• "Tell me what you want, but don't tell me how to do it."
  • Goal or results-oriented
  • Best-value driven (LCC)
  • Doesn't dictate how (except essential needs or functions)
  • Rewards innovation
  • Rewards "better-than-the-minimum" outcome

Trends in Highway Contracting

Performance Specifying

• Umbrella definition
  • "A statement of required results with criteria for verifying compliance" (CSI)
  • Categories
    • QC/QA or End-Result Specifications
    • Performance Warranty provisions
    • Performance-based or -related Specifications
    • Design-Build

Performance Contracting

• Strategic Roadmap (2004)
  • What do we want?
  • How do we order it?
  • How do we measure what we ordered?
  • How do we know we got what we ordered?
  • What do we do if we don't get what we ordered?

What do We Want?

• High-Level Goals (HFL)
  • Safety
  • Congestion Reduction
  • Improved Quality
  • User satisfaction
• Project Goals
  • Time-savings
  • Cost-reduction
  • Traffic Management
  • Environmental
  • Innovation

Innovation

How Do We Order it?

How Do We Order it?

Considerations

• Can the work be described in terms of end result performance?
  • Smoothness
  • Strength
  • Durability
  • Aesthetic features
  • Time
  • Safety

Considerations

• Are there multiple means and methods (alternatives) for achieving intended results?
• Are specified alternatives practical and economical?
• If multiple factors contribute to the desired result, can they be identified?
• Are factors measurable and testable?

How do We Measure What We Ordered?

• Traffic Management ↔ Time thru work zone
• Worker Safety ↔ Incident Rate
• Pavement Quality ↔ Smoothness (IRI)
• Pavement Safety ↔ Skid Resistance
• Time ↔ % ahead of schedule
• User Satisfaction ↔ Survey

How Do We Know We Got What We Asked For?

• Trust but Verify
• Tests
  • Rapid and Reliable
  • Repeatable
  • Achievable and Economical

What Do We Do if We Don't Get What We Asked For?

• Incentive/Disincentive (I/D) Strategies
  • Promote "better than the minimum" performance
• Pay Adjustment Systems
  • I/D for quality
  • Payment based on Value Received or LCC
• Shared Risk Contingency

Summary

• Performance contracting is new way of doing business
• A cultural shift
• Not for all projects
• Requires risk/reward sharing
• Requires a framework and specifications