Risks associated with performance specifications in highway infrastructure procurement

Abstract

Proper identification, allocation, and pricing of risks are critical to effective procurement and project delivery, particularly when contracts specify the intended performance instead of how the work is to be performed. This paper presents an overview of the sources of project risks when performance specifications are used for highway infrastructure procurement. The findings are based on a comprehensive literature review and interviews with subject-matter experts involved in developing performance specifications for highway infrastructure. The authors conclude that wider use of performance specifications in U.S. highway infrastructure construction requires a fundamental reassessment of risk allocation and pricing. Highway agencies and the contractors need to realign their respective organizational capabilities with the goal of using performance specifications as a facilitator of innovation, a goal that remains elusive after decades of applied research.