Innovations in the Procurement and Financing of Road Maintenance



Innovations in the Procurement and Financing of Road Maintenance

Authors

HEGGIE I G, Visiting Professor, University of Birmingham, UK

Description

This presentation focuses on two topics: (i) improving the procurement of road maintenance services; and (ii) improving the financing of road maintenance services. The basic principles which underlie recent efforts to improve procurement procedures have c

Abstract

This presentation focuses on two topics: (i) improving the procurement of road maintenance services; and (ii) improving the financing of road maintenance services. The basic principles which underlie recent efforts to improve procurement procedures have concentrated on three main innovations. First, introduction of longer term contracts which provide bidders with better incentives to invest in specialist staff and equipment. Second, combining several roads into one bid package to provide greater economies of scale. Third, moving away from procedural (or method) specifications towards functional (or end-product) specifications. The presentation considers examples of how these principles have been applied to routine maintenance contracts; combined routine and periodic maintenance contracts; rehabilitate, operate and maintain (ROM) contracts; and build, operate and transfer (BOT) contracts. Most of the examples discussed come from Latin America. The presentation also considers the factors hampering introduction of these long term, area wide, performance based contracts. They include weak control and supervision systems, inexperienced contractors, the impact of larger and longer term contracts on competition, and the problems of changing technology over a 15 to 30 year time horizon. The cost effectiveness of these innovations speaks for themselves - costs can come down by over 20 percent and quality improves. On the issue of financing maintenance, the presentation considers two main options. First, tolled maintenance concessions (very poplar in Latin America) and, second, commercially managed (or second generation) road funds. It notes that DBFOs are not a financing instrument, but a better way of procuring road services, since they do not generate additional revenues. The presentation describes how tolled maintenance concessions work, the volumes of traffic required to make them financially viable, and the need to let many of them as negative concessions (i.e., bidders indicate the recurrent or up-front payment needed to make the concession financially viable). The discussion of second generation road funds, describes how they came about and summarizes their key characteristics.

Publisher

Association for European Transport