Performance-based Maintenance Contracts Research Articles

Effective Management of Performance Based Maintenance Contracts (PBMC) by Adopting Asset Management Concepts

Effective Management of Performance Based Maintenance Contracts (PBMC) by Adopting Asset Management Concepts

Performance-based maintenance contract for mission-critical equipment considering spare parts inventory cost-sharing and suppliers' risk attitudes

Performance-based maintenance contract for mission-critical equipment considering spare parts inventory cost-sharing and suppliers' risk attitudes

Proof of Concept Project: Temperature Measurement Using Lora Sensors on the Bridge Over the Danube River Near Smederevo Kovin

Abstract: On the road network in the Republic of Serbia, is establish monitoring of parameters at certain points of road network for the needs of the organization that deals with road maintenance and implementation of PBMC (Performance based Maintenance Contract), which has a need for mass collection of data from roads and road facilities. One of the parameter is the temperature, whose measurement on the bridge structure over the Danube near Kovin/Smederevo will be the primary focus of this paper. New technology Lo Ra sensors were used to collect temperature data. This type of sensor has low energy consumption so it does not require a specially implemented power supply. The service life of such sensors is estimated at a minimum of 5 years in environmental conditions. Communication is achieved using Lo Ra WAN technology that requires an access communication point at a distance of up to 8 km from the sensor with a bandwidth capacity of 3 kbps to 50 kbps. This sensor allows the measurement and collection of temperature data as a primary function and is also able to measure local acceleration in three axes on the structural element on which it is mounted. This way of collecting data using wireless sensors with low power consumption significantly improves efficiency and economy in the field of road maintenance and monitoring.

Formulasi Strategi Bisnis PT Jalan Tol Perkasa

PT Jalan Tol Perkasa (PT JTP) is one of the strategic units of the PT. Jasa Marga (Persero), Tbk. (JSMR) which operates in the field of toll road development and maintenance. With the Covid19 pandemic, JTP needs to formulate the appropriate business strategy so that it can be implemented in order to achieve the business revenue and profit targets for the 2020-2022 period. This research is an applied research that uses a business strategy formulation framework from David & David (2016). Through this framework, the quality of JTP's strategic response to potential opportunities and threats from the external environment is evaluated through the External Factors Evaluation (EFE) matrix, while JTP's strengths and weaknesses are evaluated through the Internal Factors Evaluation (IFE) matrix. The development of alternative strategies is carried out using two matrices: an internal-external matrix (IE) and a SWOT matrix (Strength, Weakness, Opportunity, Threat). From the IE matrix, it is known that JTP is in a position to hold and maintain, where the alternative business strategies that should be taken are market penetration and product development. From the SWOT matrix, three strategies can be implemented: obtaining maintenance work on all Jasa Marga Group and Non Jasa Marga toll roads, implementing Performance Based Maintenance Contracts (PBMC) with long-term contracts, and innovating maintenance products. Finally, the priority strategy that will soon be implemented is determined using the Quantitative Strategic Planning Matrix (QSPM) matrix.

Proposition of a Model for Selection of the Hybrid Contract Implementation Strategy for a Pilot Project of Regular Road Maintenance in Montenegro

Performance-based maintenance contracts (PBMCs) are modern contracts that should allow road maintenance entities to contract maintenance activities more successfully and generate money value. In the case of Montenegro, a gradual approach of PBMC introduction is recommended through a hybrid contract for routine road maintenance. Hybrid contract implementation will enable a lower level of client risk in the early stages of PBM contract. Game theory is used for selection of an adequate model for hybrid contract structure in terms of size and nature of the BoQ elements. In addition to the estimated or charged quantities of works from previous contracts, the model also includes parameters that to some extent take into account the experience and expertise of contractors and clients, but also the availability of road data. In order for model to be applied, historical data from traditional road maintenance contracts, which were implemented in the previous period in Montenegro, are used.

Tantangan Penyelenggaraan Perfomance Based Maintenance Contract (PBMC) Pada Jalan Nasional

The applicaton of Performance Based Maintenance Contract (PBMC)is a kind of updated innovation which recently applied conventional contract. The maintenance contract performance based was applied by General Director of Highways (Bina Marga) to replace conventional maintenance contract. The contrast between conventional contract and PBMC lied on The maintenance system conducted. Conventional contract maintains the input and maintenance, however PBMC maintains the output and the outcome. The contractors independently determined the maintenance work will be conducted. In shake of fulfilling users intentions, the contractors will raise the value added for the maintenance process with fully creative and innovative. PBMC application training has been conducting since 2011 by director of highways, however the rapid overloading described that the condition of national roads application isn’t yet ideal, the provision of infrastructure is unstabel and preservation handling isn’t quite assertive and hasn’t completely conducted. In line with the well management principals, they are planning and organizing PMBC application. The way to handle broken and failed infrastructure. There are some topics being discussed in this paper, such as the deception of PBMC contract based on management principals, gap between field technically and basic concepts. Some challenges ruined over the concept of PBMC in improving the maintenance of national roads near future

Game theoretic models in fleet performance-based maintenance contracts

Game theoretic models in fleet performance-based maintenance contracts

Optimal Design of Uptime-Guarantee Maintenance Contracts

This paper analyzes the contracting of maintenance services provided by an original equipment manufacturer (OEM) to an operator for a device. The service provider can exert different levels of maintenance effort during the course of the contract and the device's reliability (uptime) is influenced by these levels. However, the service provider's effort level is non-contractible. We obtain the optimal design of performance-based maintenance contracts in this context by singling out a unique uptime-guarantee contract structure that contains profit-maximizing contracts in all situations. With the optimal contract structure, the service provider guarantees 100% uptime and compensates the operator's downtime at a higher unit rate than it charges him/her for maintenance services (with the factor of inverse expected downtime under no contract). This finding shows that some of the well-known performance-based contract structures used in practice (e.g., pay-for-performance contracts) can be sub-optimal for the OEMs. When the operator's revenue rate from the device is known to the service provider, the optimal contract compensates for any lost revenue due to downtime yet leaves the operator with zero expected profit from the contract. Under asymmetric information, we provide a closed-form formula for calculating the optimal compensation rate. We also demonstrate the advantages and limitations of offering menus of contracts to increase the service provider's expected profits.

Premises for an optimal model of managing the burden of financial losses stemming from damage to road infrastructure

The empirical analysis of the distribution of risk related to the repair or replacement of road safety devices in existing performance-based maintenance contracts and the analysis of claims adjustment procedures indicate a certain imbalance in risk distribution between the road administrator and the entrepreneurs who have concluded road maintenance contracts, in particular performance based contracts. Relevant legal rules allow for a different, fairer distribution of the risk of suffering repair costs in certain damage scenarios. Insurance policy with a wide coverage of both property and liability risks appears as an optimal way of managing risks of losses to road infrastructure. Both contracting parties have an interest in obtaining first party insurance in the discussed field, although in practice it can be economical only to the General Directorate for National Roads and Motorways (GDDKiA). The law provides parties who suffered loss with a direct action against a traffic liability insurer of the wrongdoer who caused the damage.

Technology investment effects in performance-based maintenance contracts

This work analyses the effects of a fixed initial investment in technology or infrastructure on performance-based maintenance contracts. We present a mathematical expression which reflects the trade-off between an upfront technology investment by the vendor and the cost of required future interventions. We develop a mathematical model of a performance-based maintenance contract that uses this technology trade-off expression and determines the value of the contract for each party. Contractually, the client indicates the duration of the contract and the optimal number of maintenance interventions to maximise asset availability; the vendor quotes the cost for the requested interventions. We study how the initial investment and the contract parameters affect the net present value for each party and the supply chain, demonstrating the existence of an optimal relation between the number of preventive maintenance interventions and level of investment. We derive the optimal contract parameters for the client, vendor and chain and show lack of coordination between the parties. To achieve coordination, we present a revenue sharing mechanism which maximises the value for the chain. Finally, an industry study case with data from the mining sector is presented. Results indicate that by investing and coordinating, the entire supply chain can improve the contract NPV by 149.7%.

Performance-based contracting for maintaining transportation assets with emphasis on bridges

With a large number of aging transportation infrastructure assets in North America and the growing problem of deterioration across the globe, managing these assets have been the subject of ongoing research. There is an overwhelming amount of maintenance and rehabilitation works to be done and selecting a suitable maintenance, repair or replacement (MRR) strategy is one of the most challenging tasks for decision makers. Limited budget and resources are even making the decision making process more challenging. Maintaining infrastructure to the highest possible condition while investing the minimal amount of money has promoted innovative contracting approaches. Transportation agencies have increased private sector involvement through long term performance-based maintenance contracts or what is called Performance-Based Contracting. PBC is a type of contract that pays a contractor based on the results achieved, not on the methods for performing the maintenance work. By looking into the literature, it is observed that agencies are expanding the amount of contracting they do in order to maintain and achieve a better standard of infrastructure facilities. Therefore, the objective of this paper is to study and review performance-based contracting for transportation infrastructure with emphasis on bridge assets.

Assessment of Performance Based Road Maintenance Practices in Nepal

Roads are the major asset of any country and to conserve them maintenance is essential. The delay of maintenance works can lead the road in the stage of expensive rehabilitation and reconstruction. In Nepal, Department of Roads (DoR) is responsible for maintenance of strategic roads of country. The maintenance practice of the road under Department of Road is predominantly based on Strengthen Maintenance Division Process where several maintenance activities like Routine maintenance, Recurrent Maintenance, Periodic Maintenance and Emergency Maintenance are planned and carried out. The maintenance work is based on traditional quantity and unit price based short term maintenance contracts, where maintenance of physical works is outsourced. Client demands the contractor what work is to be done, when to be do it and the extent of the work. The contractor is paid on the basis of a defined output or quantity accomplished, and the schedule of the rates. DoR engineers required full time supervision of work. Pilot based performance based maintenance practice of road started in Nepal in 2003. The study assesses performance road maintenance practices of road maintenance in Nepal on the basis of the framework of cost efficiency, level of service effectiveness and quality of service. The study concluded that implementation of Performance Based Maintenance Contract (PBMC) was not successful in Nepal as Road Asset condition was not maintained to performance standard. One of the reasons is the weak service delivery of contractor alongside weak contract enforcement from the road agency.

PERFORMANCE-BASED-MAINTENANCE: A COMPARATIVE STUDY BETWEEN THE NETHERLANDS AND ISRAEL

Traditional maintenance contracts using the unit price system and prescriptive specifications are simple in their structure and implementation. Implementation of prescriptive-based specification reduces though the flexibility of the procurement and limits the possibilities of the contractor to improve the in-sight operation. Furthermore, the management of the contract faces difficulties such as poor performance of the buildings and ineffective contract management. Performance-Based-Maintenance (PBM) attains an alternative means for outsourcing of maintenance. The objective of the study was to comparatively assess the state-of-the-art of PBM between the Netherlands and Israel, with the focus on performance of public facilities and cost of the service. Pilot studies, carried out in the Netherlands and Israel, reveal that PBM attains high potential of cost-savings (20%) and improved performance. The paper concludes with provision of a future bidding system for PBM contracts.

Performance Based Maintenance of Road Infrastructure by Contracting—A Challenge for Developing Countries

Road authorities always strive to reduce the maintenance costs of road infrastructure systems using various traditional methods of contract. Contracting out road maintenance to the private sector based on performance measures is an alternative solution to maintain road infrastructure in a cost-effective way and is named as Performance Based Maintenance Contracting (PBMC). Many countries have succeeded in minimizing road infrastructure maintenance costs using performance-based maintenance contracts over the last two decades. However, implementation of PBMC is still a challenge for many developing countries because of resource and skill limitations, corruption and poor management systems. This paper discusses and analyses the problems and difficulties in the successful implementation of PBMC in developing countries.

COST SAVINGS FROM PERFORMANCE‐BASED MAINTENANCE CONTRACTING

New procurement approaches combined with performance‐based building approaches should reduce costs, but empirical qualitative and quantitative studies are lacking. Performance‐based maintenance contracts give maintenance suppliers incentives to improve their way of working. Innovative, cost‐effective solutions that meet the performance criteria can be achieved, especially if the principle of whole‐life costing is being adopted. Indirect cost savings are expected as well. It enables maintenance contractors to assume responsibility for certain activities for which they are better equipped to perform than their clients. A calculation model was developed that calculates the net present value of the direct (product) and indirect (transaction) costs at project level for a competitive maintenance tendering approach and for performance‐based maintenance contracts. The findings show that performance‐based maintenance contracts reduce both direct and indirect costs compared to a competitive tendering approach. Essential preconditions are an early supplier involvement and longer term contracts, giving opportunities for maintenance product and maintenance process improvements. Santruka Nauji pirkimo būdai, derinami su subalansuotos statybos būdais, turetu mažinti išlaidas, tačiau trūksta empiriniu kokybiniu ir kiekybiniu tyrimu. Veiklos rezultatais pagristos priežiūros su tar tys skatina priežiūros paslaugas siūlančias bendroves tobulinti savo darbo būdus. Galimi no vatoriški, taupūs sprendimai, tenkinantys rezultatyvios veiklos kriterijus, ypač taikant viso naudojimo laiko išlaidu (angl. whole‐life costing) principa. Tikimasi sumažinti ir netiesiogines išlaidas. Priežiūra atliekantiems rangovams tai leidžia prisiimti atsakomybe už tam tikra veikla, kuriai vykdyti jie turi daugiau priemoniu nei ju klientai. Sukurtas skaičiavimo mo de lis, kuri taikant apskaičiuojama viso projekto tiesioginiu (produktas) ir netiesioginiu (sandoris) sa nau du dabartine grynoji verte (NPV), kai vykdomas priežiūros darbu pirkimo konkursas ir kai sudaromos veiklos rezultatais pagristos priežiūros sutartys. Rezultatai rodo, kad, lyginant su pirkimo konkursais, veiklos rezultatais pagristos priežiūros sutartys mažina ir tiesiogines, ir netiesiogines išlaidas. Būtinos salygos ‐ itraukti i priežiūros vykdyma tiekeja ankstyvuosiuose etapuose ir sutartis sudaryti ilgesniam terminui, suteikiant galimybiu tobulinti produkta ir priežiūros procesa.

Effects of Pavement Spatial Variability on Contractor’s Management Strategies

Performance-based maintenance contracts are becoming an increasingly popular method of outsourcing pavement maintenance work. These contracts transfer performance-related risks to contractors with the objective of reducing the total cost of maintenance over the pavement life cycle by leveraging on the efficiencies of private sector management. In such contractual settings, transportation agencies hedge their exposure to poorly performing pavements that require frequent attention. However, this comes with a price. Contractors price in their bids a premium to account for such scenarios. This paper presents a model for contractors to determine optimal management strategies by taking into account the inherent spatial variability in pavement’s structural characteristics. The model considers a tradeoff between economies of scale associated with managing longer pavement sections and the risk reduction benefits with managing relatively smaller, e.g., more homogeneous sections. The results indicate that the length of optimal management sections depends not only on the expected contract penalty costs (disincentive costs), but also the ability of the contractor to explore economies of scale. The model is illustrated using typical data available to transportation agencies.

Sampling Procedure for Performance-Based Road Maintenance Evaluations

Maintaining the road infrastructure at a high level of condition with generally limited amounts of available funding is a challenge for many transportation agencies. To address this challenge, many road administrators worldwide have implemented performance-based maintenance contracts. In performance-based maintenance contracts, road administrators define performance measures (e.g., performance-based specifications) that specify the minimum condition at which the asset items are to be maintained. To ensure that contractors maintain the asset items according to these measures, road administrators must design and implement a comprehensive and reliable performance monitoring process. One of the most important areas within the performance monitoring process is inspection conducted in the field. Defining a procedure that guarantees the success of field inspections is a challenge. When defining such a procedure, road administrators must consider budget and time limitations, among others. Since performance-based road maintenance contracts are relatively new, the availability of guidelines for such issues (with focus on performance-based contracts) is limited. That need is addressed by presentation of a three-stage and seven-step statistical sampling procedure developed to ensure that findings from field inspections will be reliable and representative with high confidence of the actual condition of asset items in the entire population. Also presented are three alternative approaches for sampling for the cases in which sampling needs to be performed not just once but multiple times over the duration of a performance-based road maintenance contract.

Areawide Performance-Based Rehabilitation and Maintenance Contracts for Low-Volume Roads

To address internal inefficiency and accountability issues, a number of Latin American countries have moved decisively and successfully over the last decade from force-account (direct labor) to contract maintenance. Also, there has been considerable progress in the region in transferring to the private sector, through concessions, the responsibility for improving, maintaining, and operating high-traffic-volume roads, the cost of which is recovered from tolls. Argentina, Brazil, and Chile are among the most advanced countries in this respect. More recently, some countries—particularly Argentina—have switched from the traditional quantities and unit price–based short-term maintenance contracts to long-term performance-type or results-based contracts. The new approach encompasses either routine maintenance activities alone or integrated contracts involving both the rehabilitation and routine maintenance of road networks. The latter form, the so-called CREMA system (Contrato de Recu-peración y Mantenimiento), is now being implemented in Argentina and covers approximately 12 000 km (i.e., about 40 percent of the national paved road network). Such contracts comprise the rehabilitation and subsequent maintenance over a 5-year period of 200-km- to 300-km-long subnetworks. A framework for extending the CREMA concept to low-volume roads is presented. The means by which this newly developed system could be extended to cover both the paving and future maintenance of low-volume roads is explained. Reasons are analyzed as to why this type of contract, which extends the contractor’s share of responsibility over a relatively long period of time, would be well suited to the specific design and construction features of low-cost, low-volume paved roads—in particular, in the risks related to uncertain traffic projections and in the use of local or nontraditional materials in thin pavement structures. Finally, issues related to the use of the CREMA system—especially the need to prepare adequate contract bidding documents, conduct proper bid proposal evaluations, and monitor contractor’s performance during the rehabilitation/paving and maintenance phases—are explored.