Highway Maintenance Outsourcing Experience: Synopsis of Washington State Department of Transportation's Review

Abstract

Can outsourcing of traditional categories of state-provided highway maintenance produce savings in costs or improvements in service? While marketing materials and promotional press releases tout the attractions of outsourcing, insufficient attention has been paid to a growing body of follow-up information—much of it from official audit sources—of actual outsourcing experience. Presented are after-the-fact reviews of the performance of highway maintenance outsourcing from programs in five states and British Columbia. Cases noted include ones in which costs may have gone up instead of down, services deteriorated rather than improved, administrative and supervisory arrangements proved problematic, and contractor failures left states scrambling to provide services or caught in the distraction of litigation. Despite the range of experiences, common themes emerging from these reviews can be translated into lessons learned for state officials considering programs of this type. One clear lesson is the need for proper planning and scoping. Initial exploratory phases should include asset inventories, activity-based costs, and economic analyses based on before-and-after apples-to-apples cost comparisons. Risk-management reviews should consider litigation risks and costs. Managers should develop program exit strategies in addition to well-written contracts and specifications. Contracts should include clear performance expectations, evaluation schedules, and financial performance incentives or disincentives. Finally, an experienced management team must be in place to administer and evaluate contracts. These lessons can support more effective use of public resources, leading to wiser choices about whether outsourcing should be undertaken, and, if it is, what public management strategies and resource commitments will be necessary to make it successful. This research was undertaken in part to prepare for legislation in Washington State that would open new possibilities for competitive contracting.