Performance-Based Contracting for Roadway Maintenance Operations in Indiana

Abstract

The Indiana Department of Transportation (INDOT) initiated a study to investigate Performance Based Contracting (PBC) of maintenance operations. One of the main impetuses for the study is that INDOT started a ten-year road building program called Major Moves that will add over 1900 lane miles to the current network. With this addition and coupled with a trend of reduction in maintenance personnel, INDOT is planning how maintenance will be performed. One viable option is the use of PBC. This study has evaluated many aspects of PBC and the current INDOT maintenance program. Study specifics included: Investigated foreign agencies' PBC programs; Evaluated cost data; Interviewed and analyzed three state agencies that use PBC - Virginia, Florida, and North Carolina - and studied several other states, including South Carolina, Oklahoma, Massachusetts, and Texas; Evaluated contracting options and the Indiana contracting community; Investigated and defined the activities that are better performed In-House, and those that, potentially, could be privatized; Defined the requirements for creating, contracting, monitoring, and managing a PBC system at INDOT; Developed an understanding and a plan for INDOT maintenance that includes the added capacity from Major Moves over the next 10 years; Analyzed, defined, and described risk factors (e.g. contractor protection from 3rd party lawsuits); Developed guidelines for INDOT that objectively state the facts learned from analyzing PBC; Described maintenance options that could include PBC, expanding subcontracts, and INDOT maintenance forces; Described how other state agencies calculate overhead costs and apply to maintenance costs; and Described Level of Service (LOS) programs developed and used by other state agencies. PBC is being used extensively in some states, while other states have tried and backed away for various reasons which are explained in the report. Due to higher costs experienced with PBC and the fact that long term contracts lock in prices leaving agencies with no flexibility to reduce during economic downturns, the report is not recommending PBC to INDOT. What is recommended is that INDOT should: establish a LOS program; develop and test snow and ice removal subcontracts; and further develop a hybrid maintenance program where private contracts are used to supplement INDOT maintenance force.