5.4.1.1

Typically, U.S. transportation agencies perform some or most of their maintenance work internally, and contract out a large portion – if not all – of their capital projects. The line between the types work performed as maintenance and capital projects varies by organization and is often blurred. Agencies can often use maintenance forces in a flexible manner to perform a wide variety of activities, including preservation activities on pavements, bridges and other assets. However, in the near term, an organization’s maintenance resources – staff and equipment, in particular – are fixed. Consequently, the asset owner is challenged to optimize use of these resources to meet immediate needs, such as winter maintenance and incident response, while performing additional work to improve asset conditions wherever possible.

The ability to contract out maintenance work, such as through Indefinite Delivery/Indefinite Quantity (IDIQ) contracts, provides an agency with flexibility in meeting near-term needs. Other approaches for contracting out maintenance work include use of portfolio or program management contracts in which certain operations and maintenance responsibilities for some group of assets is delegated to a contractor over a specified period of time. Section 4.3.3 provides additional details on considerations involved in outsourcing asset maintenance.

Regarding contracting approaches for capital projects, in the U.S., most transportation agencies rely on Design-Bid-Build (DBB) model for delivering their capital programs. With this approach, the project owner designs a project (or contracts for a private sector firm to prepare a design) and solicits bids for project construction following completion of the design. This provides the project owner with control over the process, but can be time consuming and can result in cases where bids for project construction exceed the expected cost developed during design. In recent years, many transportation agencies in the U.S. and abroad have explored improved approaches to work planning and delivery to accelerate completion of needed work, leverage alternative financing approaches and transfer program and project risk.

All of these approaches are intended to reduce the time from initial conception of a project to its completion, and in many cases transfer risks associated with project completion from the public sector to the private sector. As these examples help illustrate, major trends in this area include:

• Group work together by geographic location or type of work to develop fewer, larger, and more easily contracted projects
• Use Design-Build (DB), Design-Build-Finance-Operate-Maintain (DBFOM) and other contracting strategies, wherein a single contract is awarded to design and complete a project, as opposed to separate contracts for design and construction
• Encourage development of Alternative Technical Concepts (ATCs), wherein a contractor proposes an alternative approach to meeting a contract requirement in the bidding phase
• Select contractors earlier in program/project development through use of Construction Manager-General Contractor (CM-GC) arrangements, where a contractor is selected as Construction Manager while design is still underway
• Use IDIQ contracts and other flexible contracts to provide a more efficient mechanism for performing smaller projects
• Incorporate performance-based specifications, time-based incentives and other specifications in contracts to improve project outcomes
• Outsource operations and maintenance of an asset using program or portfolio management contracts.

Both in the U.S. and abroad there are many examples of public agencies making extensive use of alternative contracting strategies, such as Public-Private Partnerships (P3s) and performance-based contracts to speed project delivery and transfer risk.

While alternate strategies for work planning and delivery hold great promise, all of the approaches described here have advantages and disadvantages and carry their own risks. Use of alternative approaches can save taxpayers money and provide improvements more quickly than a traditional model. Success stories typically result from improving the efficiency of the process and incentivizing the use of better technology and methods, but there are also many cautionary examples in which these strategies have failed to achieve cost savings, time savings or risk transfers as desired. Asset owners should consult the separate body of research in this area (referenced at the end of this section) when exploring the use of alternative approaches and carefully weigh the expected return, advantages and disadvantages of whatever delivery approaches they consider.