Skip to contentUnited States Department of Transportation - Federal Highway AdministrationSearch FHWAFeedback
Highways for LIFE

ArrowDelivering Performance and Harnessing the Innovation of the American Industry

<< PreviousContentsNext >>

What is Performance Contracting?
Delivering Performance and Harnessing the Innovation of the American Industry

January 22, 2007
Sidney Scott, III, P.E.
Trauner Consulting Services, Inc.

PowerPoint Version (135 kb)

Slide 1

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)
Slide 2

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
Slide 3

Trends in Highway Contracting

Prescriptive RequirementsPerformance Contracting
QC/QA End-Result
  • Performance Warranty
  • Performance-based Maintenance
  • Best-Value
  • Design-Build
  • Incentives
  • Highways for LIFE
Slide 4

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
Slide 5

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?
Slide 6

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
Slide 7




How Do We Order it?

Fixed-Price Sealed BiddingBest-ValueSole Source Selection
Price Considerations
  • Historically Public Sector
  • Typically Fixed-Price
  • Open Bidding
Price and Other Key ConsiderationsQualification Considerations
  • Historically Private Sector
  • Typically Negotiated
  • Prequalification Processes
Slide 9

How Do We Order it?

How do we order it? There is a clip art picture of a scale with a bag of money on the left side and gears grinding in a human head on the right side.

Slide 10


  • Can the work be described in terms of end result performance?
    • Smoothness
    • Strength
    • Durability
    • Aesthetic features
    • Time
    • Safety
Slide 11


  • 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?
Slide 12

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
Slide 13

How Do We Know We Got What We Asked For?

  • Trust but Verify
  • Tests
    • Rapid and Reliable
    • Repeatable
    • Achievable and Economical
Slide 14

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
Slide 15


  • Performance contracting is new way of doing business
  • A cultural shift
  • Not for all projects
  • Requires risk/reward sharing
  • Requires a framework and specifications
Slide 16

More Information



Scott Wolf
Center for Accelerating Innovation

PowerPoint files can be viewed with the PowerPoint Viewer
Updated: 04/04/2011

United States Department of Transportation - Federal Highway Administration