Biniyam Regassa

ADDIS ABABA UNIVERSITY
ADDIS ABABA INSTITUTE OF TECHNOLOGY

SCHOOL OF CIVIL AND ENVIRONMENTAL ENGINEERING
Study of Performance Based Road Maintenance Contracting System for

Ethiopian Federal Roads
By: Biniyam Regassa
Advisor: Prof.Dr.-Ing. Abebe Dinku
A Thesis submitted to School of Civil and Environmental Engineering, Addis Ababa

University, Addis Ababa Institute of Technology, for partial fulfillment of the
requirement of Master of Science Degree in civil Engineering
(Construction Technology and Management)
September 2015
Addis Ababa, Ethiopia
Study of Performance Based Road Maintenance Contracting System for Ethiopian Federal Roads
ACKNOWLEDGEMENTS
First of all and for most, I thank my God for safeguarding me and for the helps He has been
providing me. Thereafter, I am grateful to my advisor, Professor Abebe Dinku (Dr-Ing) who
has been teaching and closely advising me as well as sharing me his experience and skills
throughout my study. I would like to thank all key informants who took part in the interview
to share their experiences. I would also like to thank all the staffs of ERCC and ERA for their
support during the study period.
Last but not least, I would like to extend my special thanks to my families and all friends who
gave me continued support during the study period.
Msc Thesis by Biniyam Regassa Page i

Table of Contents Pages

Acknowledgements………………………………………………………….……………………i
List of Tables……………………………………………………………………………….……..ii
List of Figures……………………………………………………………………………….……v
List of Graphs……………………………………………………………………………….……vi
List of Acronyms……………………………………………………………………..……….…vii
Abstract………………………………………………………………………………….………..ix
Introduction …………………………………………………………………….….……...….1
1.1 Back ground ………………………………………………………………….………....1
1.2 Statement of Problems ……………………………………………………......….....…..3
1.3 Significance of the study…………………………………………………….....….……3
1.4 Scope of the study……………………………………………………………..........…...3
1.5 Research Questions………………………………………………………......……….…4
1.6 Research objectives………………………………………………………......…………4
1.7 Research Methodology……………………………………………………….....…..…..4
1.8 Contribution of the research... ........................................................................................6
2. Literature Review
2.1 Introduction......................................................................................................................7
2.2 General Overview of Road Maintenance ........................................................................8
2.2.1 Maintenance Definition.......................................................................................8
2.2.2 Road Maintenance Definition..............................................................................9
2.2.3 Importance of Road Maintenance........................................................................9
2.2.4 Objective of Road Maintenance.........................................................................13
2.2.5 Road Maintenance at Design Stage....................................................................14
2.2.6 Road Maintenance Activities.............................................................................15
2.2.6.1 Routine Maintenance.............................................................................16
2.2.6.2 Periodic Maintenance.............................................................................16
2.2.6.3 Emergency Maintenance........................................................................17
2.2.7 Construction and Maintenance...........................................................................17
2.2.8 Levels of Maintenance and rehabilitation..........................................................18
Msc Thesis by Biniyam Regassa


2.2.9 Timely Maintenance....................................................................................................18
2.2.10 Effects of neglecting Maintenance...................................................................19
2.2.11 Impact of poor road Maintenance....................................................................21
2.3 Road Maintenance Contracts.........................................................................................24
2.3.1 Performance Based Maintenance contracts.......................................................24
2.3.2 History of Performance Based Maintenance Contracts....................................25
2.3.3 Advantage of Performance Based Maintenance Contracts...............................26
2.3.4 Reason for Doing Performance Based Maintenance Contracts........................27
2.3.5 Impediments of Performance Based Maintenance Contracts...........................29
2.3.6 Basic step of Performance Based Maintenance contracts.................................30
2.3.7 Acquisition Process for Performance Based Road Contracts...........................31
2.3.8 Types of Performance Based Contracts............................................................31
2.3.9 Basic Categories of measures............................................................................33
2.3.10 Contractor Selection Criteria for Performance Based Contracts....................34
2.3.11 Monitoring and Evaluation of Contractor.......................................................35
2.3.12 Allocation of Risks..........................................................................................36
2.3.13 Methods for Quality inspection Service..........................................................36
2.3.13 performance level criteria for pavements.........................................................38
2.3.2 Normal Measurement Contract................................................................................42
2.3.3 Difference between Performance and Traditional Contracts...................................44
2.3.4 Overview of International Experience of PBMC……………………………….…45
2.3.4.1 Canada.............................................................................................................45
2.3.4.2 Australia..........................................................................................................46
2.3.4.3 New Zealand...................................................................................................48
2.3.4.4 Unite Kingdom...............................................................................................49
2.3.4.5 Finland............................................................................................................50
2.3.4.6 Latin America.................................................................................................51
Argentina.........................................................................................................51
Uruguay...........................................................................................................53
2.3.4.7 Chad................................................................................................................53


2.4 Road Management In Ethiopia..............................................................................................54
2.4.1 Ethiopian Roads Authority.....................................................................................54
2.4.2 Road Fund Administration.....................................................................................55
2.4.3 Ethiopian Road Construction Corporation.............................................................56
2.5 Assessment of Road Maintenance In Ethiopia..........................................................57
2.5.1 Introduction......................................................................................................57
2.5.2 Road Maintenance in the Past..........................................................................59
2.5.3 The Funding and Experience of Road Maintenance........................................61
2.5.4 Road Maintenance Procedure...........................................................................62
2.5.4.1 Road Maintenance Activities...................................................................62
2.5.4.2 Defect Identification................................................................................63
2.5.4.3 Bidding Strategies Road Maintenance.....................................................63
2.5.4.4 Road Maintenance Activity Unit rate.......................................................63
2.5.4.5 Performance Based Maintenance..............................................................64
3. Research Design and Methodology..........................................................................................65
3.1 Introduction.................................................................................................................65
3.2 Research Design..........................................................................................................65
3.3 Data Collection............................................................................................................65
3.3.3.1 Case study.......................................................................................................65
3.3.3.2 Desk Study......................................................................................................66
3.3.3.3 Interview.........................................................................................................66
3.4 Sample Size/Research Population................................................................................68
3.5 Data Analysis...............................................................................................................67
4. Results and Discussions
4.1 General Overview........................................................................................................69
4.2 Case Study...................................................................................................................69
4.2.1 Adigirat Road Maintenance Project..................... ....................................................69
4.2.1.1 Overview of Road Maintenance Contracting Data and Road Conditions
under Adigirat RMP...............................................................................................71
4.2.2 Shashemene Road Maintenance Project...............................................................................72


4.2.2.1 Overview of Road Maintenance Contracting Data and Road Condition under
Shashemene RMP..................... .......................................................................................73
4.2.3 Combolcha Road Maintenance Project......................................... ......................................75
Combolcha RMP..................... .........................................................................................76
4.2.4 Dire Dawa Road Maintenance project.................................................................................77
4.2.4.1 Overview of Road Maintenance Contracting Data and Road Condition under Dire
Dawa RMP..................... ..................... ..................... ..................... .................................79
4.2.5 Debre-Markos Road Maintenance Project..................... ..................... ................................80
D/Markos RMP..................... ..................... ..................... ..................... ..........................81
4.2.6 Sodo Road Maintenance Project..................... ..................... ..................... .........................82
Sodo RMP..................... ..................... ..................... ..................... .................................84
4.2.7 Jimma Road Maintenance Project........................................................................................85
Jimma RMP.......................................................................................................................86
4.2.8 Gonder Road Maintenance Project ..................... ..................... .........................................87
Gonder RMP..................... ..................... ..................... ....................................................89
4.2.9 Nekempte Road Maintenance Project..................... ..................... .......................................90
Nekempte RMP..................... ..................... ..................... ................................................92
4.2.10 Alemgena Road Maintenance Project..................... ..................... .....................................93
Alemgena RMP..................... ..................... ..................... ................................................94
4.2.11 Findings of the case study...................................................................................................96
4.3 Desk Study ..................... ..................... ..................... ..................... ......................................98
4.3.1 Study of performance Based Road Maintenance Contracting System ................................98
4.3.1.1 General Overview..................................................................................................98


4.3.1.2 Cost Saving ..................... ..................... ..................... .......................................101
4.3.1.3 Expenditure Certainty..................... ................... ................................................106
4.3.1.4 Improved Condition of Roads..................... ........................................................107
4.4 Interview ...............................................................................................................................109
4.4.1 Draw Backs in Implementing Performance based Road Maintenance

Contracts......................................................................................................................................110
4.4.1.1 Cultural Change..................... ..................... ..................... .................................110
4.4.1.2 Insufficient Contractors Capacity........................................................................110
4.4.1.3 Fear of Risks .......................................................................................................111
4.4.1.4 Incomplete and Insufficient Inventory and condition data..................................112

4.4.1.5 Inability to Achieve Sufficient Competition........................................................112
4.5 Lessons to be Learned from Countries Using Performance Based Contracting System for
Road Maintenance……………………………………………………….…………...........…...112
4.6 Road Maintenance Unit rate………………………………………………………………..115
4.7 Summary……………………………………………………………………………………118
5. Conclusions and Recommendations
5.1 Conclusion …........................................................................................................................121
5.2 Recommendation...................................................................................................................122
5.3 Future Researh.......................................................................................................................123
Reference………………………………………………………………………………………...
Annex-1: interview schedule......................................................................................................
Annex-2: Geographical road map of RMPs................................................................................

List of Tables
Table 2.1: Some Differences of Construction and Maintenance_________________________________ 17
Table 2.2: Cost Savings of Different Countries Under pbmc Over the Conventional Contracts________ 26
Table 2.3: Contractor Selection Criteria for Different Countries.________________________________ 34
Table 2.4: Performance Service Level Criteria for Pavements___________________________________ 39
Table 2.5: Performance Service Level Criteria for Structures___________________________________ 41
Table 2.6: Performance Service Level Criteria for Drainage System_____________________________ 42
Table 2.7: Traditional Road Maintenance Contracting Systems._________________________________ 43
Table 2.8: Cost Saving In Alberta Canada Using Pbmc____________ ___________________________ 46
Table 2.9: Cost Saving In Alberta Canada Using Pbmc________________________________________ 47
Table 2.10: Cost Saving In New Zealand Using Pbmc___________________ ______________________ 49
Table 2.11: Cost Saving In Finland Using Pbmc________________ ______________________________ 51
Table 2.12: Road Maintenance Districts Under Ercc_____________ _____________________________ 57
Table 2.13 Change in Selected Indicators_____________________ _____________________________ 58
Table 2.14: Road Condition Improvement___________________________________________________ 58
Table 2.15: Condition of Roads 2014_________________________________ _____________________ 60
Table 2.16: Maintenance Budget and Disbursement on the Federal Network________________________ 61
Table 4.1: Contractual Data for Routine Maintenance under Adigrat
District_______________________________________________________________________70
Table 4.2: Contractual Data for Periodic Maintenance under Adigrat District_______________ _______ 70
Table 4.3: Routine Maintenance Contract Price and Road Condition under Adigrat District.________ __ 71
Table 4.4: Basic Contractual Data and Status of road conditions for periodic maintenance under Adigrat
RMP_______________________________________________________________________ 71
Table 4.5: Adigrat Road Maintenance Project Contractual price and Status of the road_ _____________ 72
Table 4.6: Contractual Data for Routine Maintenance under Shashemene RMP____________________ 73
Table 4.7: Contractual Data for Periodic Maintenance projects under Shashemene District___________ 73
Table 4.8: Routine Maintenance Contract price and status of the road under Shashemene
RMP________________________________________________________________________ 74
Table 4.9: Basic Contractual Data and Status of road conditions for periodic maintenance projects under
Shashemene RMP_____________________________________________________________ 74
Table 4.10: Shashemene Road Maintenance Project Contract price and Status of the road______________ 75
Table 4.11: Contractual Data for Routine Maintenance Under Combolcha RMP._____________________ 76
Table 4.12: Contractual Data for Periodic Maintenance Under Combolcha RMP._____________________ 76
Table 4.13: Routine Maintenance Contract price and status of the road under Combolcha RMP._________ 76
Table 4.14: Basic Contractual Data and Status of road conditions for periodic maintenance under Combolcha
RMP.________________________________________________________________________77
Table 4.15: Combolcha Road Maintenance Project Contract price and Status of the road______________ 77
Msc Thesis by Biniyam Regassa Page i

Table 4.16: Contractual Data for Routine Maintenance under Dire Dawa District_____________________ 78
Table 4.17: Contractual Data for Periodic Maintenance Under Dire Dawa District___________ ________ 78
Table 4.18: Routine Maintenance Contract price and status of the road under Dire Dawa RMP.____ _____ 79
Table 4.19: Basic Contractual Data and Status of road conditions for periodic maintenance under Dire Dawa
RMP._______________________________________________________________________ 79
Table 4.20: Dire Dawa Road Maintenance Project Contract price and Status of the road______________ 80
Table 4.21: Contractual Data for Routine Maintenance under D/Markos RMP.______________________ 80
Table 4.22: Contractual Data for Periodic Maintenance under D/Markos RMP.________ _____________ 81
Table 4.23: Routine Maintenance Contract price and status of the road under D/Markos RMP._________ 81
Table 4.24: Basic Contractual Data and Status of road conditions for periodic maintenance under D/Markos
RMP.______________________________________________________________________ 82
Table 4.25: D/Markos Road Maintenance Project Contract price and Status of the road________________ 82
Table 4.26: Contractual Data for Routine Maintenance under Sodo RMP.___________________________ 83
Table 4.27: Contractual Data for Periodic Maintenance under Sodo RMP.__________________________ 84
Table 4.28: Routine Maintenance Contract price and status of the road under Sodo RMP_______________ 84
Table 4.29: Periodic Maintenance Contract price and status of the road under Sodo RMP______________ 85
Table 4.30: Sodo Road Maintenance Project Contract price and Status of the road.___________________ 86
Table 4.31: Contractual Data for Routine Maintenance under Jimma RMP.__________________________ 86
Table 4.32: Contractual Data for Periodic Maintenance under Jimma RMP.__________________________ 86
Table 4.33: Routine Maintenance Contract price and status of the road under Jimma RMP______ _______87
Table 4.34: Periodic Maintenance Contract price and status of the road under Jimma RMP_________ ____ 87
Table 4.35: Jimma Road Maintenance Project Contract price and Status of the road.________________ __ 87
Table 4.36: Contractual Data for Routine Maintenance under Gonder RMP._______ __________________88
Table 4.37: Contractual Data for Periodic Maintenance under Gonder RMP.________________________ 89
Table 4.38: Routine Maintenance Contract price and status of the road under Gonder RMP_____________ 89
Table 4.39: Periodic Maintenance Contract price and status of the road under Gonder RMP___________ __90
Table 4.40: Gonder Road Maintenance Project Contract price and Status of the road.____________ ______ 92
Table 4.41: Contractual Data for Routine Maintenance under Nekempte RMP.________________ _______ 91
Table 4.42: Contractual Data for Periodic Maintenance under Nekempte RMP._______________________ 91
Table 4.43: Routine Maintenance Contract price and status of the road under Nekempte RMP___________ 92
Table 4.44: Periodic Maintenance Contract price and status of the road under Nekempte RMP___________92
Table 4.45: Nekempte Road Maintenance Project Contract price and Status of the road.________________ 92
Table 4.46: Contractual Data for Routine Maintenance under Alemgena RMP._______________________ 94
Table 4.47: Contractual Data for Periodic Maintenance under Alemgena RMP._______________________ 94
Table 4.48: Routine Maintenance Contract price and status of the road under Alemgena RMP_____ ______95
Table 4.49: Periodic Maintenance Contract price and status of the road under Alemgena RMP___________95
Table 4.50: Alemgena Road Maintenance Project Contract price and Status of the road._______________ 95
Msc Thesis by Biniyam Regassa Page ii

Table 4.51: Cost savings of different countries under PBMC over the conventional
contracts____________________________________________________________________ 102
Table 4.52: Maintenance Budget and Disbursement on the Federal Network_______________________ 103
Table 4.53: Schedule of Routine Maintenance needs for federal and regional roads__________________ _103
Table 4.54: Schedule of Periodic Maintenance Needs for federal and Regional roads__________________104
Table 4.55: Comparison of Maintenance Needs and road Fund Revenue____________________________105
Table 4.56: Road Status Condition _________________________________________________________107
Table 4.57: Socio demography of the interviewed informants___________________________________ 109
Table 4.58: Comparison of Unit rates for Periodic Maintenances between 2000 E.C and 2007 E.C______ 116
Table 4.59: Comparison of Unit rates for Routine Maintenances between 2000 E.C and 2007 E.C______ 117
Table 4.60: Comparison of Unit rates for Asphalt Maintenances between 2000 E.C and 2007 E.C______ 118
Table 4.61: Road Maintenance cost and cost overruns of ten districts_____________________________ 119
Msc Thesis by Biniyam Regassa Page iii

List of Figures
Fig 1.1: Research Design_________________________________________________6
Fig 2.1: Illustration of Pavement Life Cycle__________________________________19
Fig 3.1: Geographical model______________________________________________68
Fig 4.1: Road Conditions in Sub Saharan Africa______________________________97
Msc Thesis by Biniyam Regassa Page iv

List of Graphs
Graph 2.2: Road Condition Improvement______________________________________________59
Graph 4.1: Comparison of Maintenance Needs and road Fund Revenue____________________104
Graph 4.2: Road Condition data____________________________________________________108
Msc Thesis by Biniyam Regassa Page v

LIST OF ACRONYMS
AASHTO American Association of State Highway Transportation Officials
ASCE American Society of Civil Engineers
CREMA Contracts for Rehabilitation and Maintenance
EFY Ethiopian Fiscal Year
ERA Ethiopian Roads Authority
ERCC Ethiopian Road Construction Corporation
FHWA Federal Highway Agency
FRE Finish Road Enterprise
GDP Gross Domestic Product
KRE Knish Road Expertise
LOS Level of Service
MAC Managing Agent Contract
MQA Maintenance Quality Assurance
NCHRP National Corporative Highway Research Program
NPV Net Present Value
NZ New Zealand
PBC Performance Based Contracts
PBMCs Performance Based Maintenance Contracting System
Msc Thesis by Biniyam Regassa Page vi

PSMC Performance Specified Maintenance Contracts
QBS Qualification Based Selection
QC Quality Control
RFPs Request for Proposals
RFQs Request for Qualifications
RMI Road Maintenance Initiative
RMP Road Maintenance Project
RSDP-I Road Sector Development Program One
SANRAL South African National Road Agency
SNNP Southern Nation’s Nationalities People
UK United Kingdom
USA United States of America
VOC Vehicular Operating Cost
WRA World Road Association
Msc Thesis by Biniyam Regassa Page vii

ABSTRACT
Performance Based Road Maintenance Contracting System (PBMCs) is a new way of

contracting road maintenance projects used in most developed and some developing countries.
The reduction of road maintenance costs and improvement of contracted road assets has been a
challenge in Ethiopian road maintenance industry. This research was designed to study
performance based road maintenance contracting system for Ethiopian federal roads and to
assess the current contractual practice while identifying the status of contracted federal roads.
Case studies of contractual practices in the ten road maintenance projects from July 2013 to June
2014, supported by semi structured interview and 10 years of recorded documents were used for
the study. The results of case studies conducted on the ten road maintenance districts indicated
that out of the 49 routine and periodic road projects investigated, 30 projects (62.5%) suffered
cost overrun while 15 projects (30.6%) suffered cost under run in their execution. For these
maintenance projects, the average cost overrun was found to be 18% of the contract amount, the
actual cost overrun ranging from -100% to 140 %.The results also revealed that the current road
maintenance industry is suffering from expenditure uncertainty and poor condition of road
assets. Moreover, it was found that the activity unit rates for routine and periodic maintenance
projects have not been revised for the last eight years. Thus, road maintenance community in the
country could benefit from proper implementation of PBMCs and the revision of activity unit
rates.
Key Words: Case Study, Ethiopia, Federal Roads, Road Maintenance
Msc Thesis by Biniyam Regassa Page viii

1. INTRODUCTION
1.1 Background
Roads are essential to a country‟s economic and social development. For most sectors of the
economy, they form vital links between production centers and markets. Their multiple function
of providing access to employment, social and health services and education makes them key
elements in the fight against poverty by opening up rural areas and stimulating economic and
social development.
Olivier et al. (2002) stated road maintenance as a fundamental necessity, as important as original
road provision. But for reasons that are difficult to assess, road maintenance is often viewed as
an activity that is carried out only when the road is damaged. As no one would apply this
approach to his house or even his own health, it is strange that it seems to be a pervasive attitude
in the road sector. The situation is particularly critical with unsealed roads, which is the case with
the majority of provincial, district and commune roads.
According to Heggei and Vickers: World Bank (1998), roads are among the most important
public assets in many countries. Road improvements bring immediate benefits to road users
through improved access to hospitals, schools, and markets; improved comfort, speed, and
safety; and lower vehicle operating costs. For these benefits to be sustained, a well-planned
program of maintenance must follow road improvements.
The failure to maintain roads is tantamount to an act of disinvestment, for it implies the sacrifice
of past investments in roads. According to the study carried out by The World Bank in the
eighty-five developing countries an estimated $45 billion worth of road infrastructure has been
lost over the past two decades owing to inadequate maintenance. This loss could have been
averted with preventive maintenance costing less than $12 billion (Harral and Faiz, 1988).
According to Heggie and Vickers: World Bank (1998), maintenance reduces the rate of
pavement deterioration. It lowers the cost of operating vehicles on the road by improving the
running surface and it keeps the road open on a continuous basis.
Msc Thesis by Biniyam Regassa Page 1

The traditional way of contracting out road maintenance is based on the amount of work being
measured and paid for on agreed rates for different work items. These are also referred to as unit
price contracts.
According to NCHRP (2009), Performance-Based Maintenance Contracting (PBMC) is a

contracting method that provides incentives and/or disincentives to the contractor to achieve
desired outcomes or results; in its purest form, PBMC does not detail how, when, or where to do
the work. Performance-Based Road Management and Maintenance Contracts define minimum
conditions of road, bridge, and traffic assets that have to be met by the contractor, as well as
other services such as the collection and management of asset inventory data, call-out and
attendance to emergencies, and response to public requests, complaints and feedback (Zietlow,
2005).
In the highway arena, where low-bid contracting combined with method specifications has been
the norm for most of the twentieth century, PBMC represents a departure from standard practice.
Based on increasing experience with PBMC around the world, PBMC has much to recommend
it. This approach to contracting is not a panacea, it is not universally accepted, and failure might
occur. However, transportation agencies see it as an important option to consider and a valuable
or potential instrument in their contracting tool kit.
Ethiopia has a total of around Forty Five thousand kilometers of road to be maintained and is
caring out a maintenance work on an average of twenty thousand kilometers annually by the
Federal Road Agency. Though the current status of the country towards maintenance of road is
showing glimpse of development, there is still a lot of work to be done in order to improve the
road network (ERA,2014).
The research will study performance based road maintenance contract in Ethiopian Federal
roads, since it is a new road maintenance contracting method for the current practice of the road
maintenance in the country. It will further assess the current contractual road maintenance
practice, the draw backs in implementing PBMC and the potential outcomes expected from the
system.

1.2 Statement of Problem
According to data obtained from Ethiopian Road fund financial report (2013), with an excess of
1 Billion Birr has been spent for federal road maintenance in 2013 but still nearly half of the road
network in the country is regarded as „Fair and Good‟ state. According to Zietlow (2005), the
principal advantage of contracting out road maintenance based on performance indicators is its
potential for reducing road maintenance costs and improving road conditions.
Ethiopia Currently uses Traditional method of contracting System (Contracting unit Rate) for
Road Maintenance Projects.
1.3 Significance of the study
I. Implementing proper road maintenance saves the countries budget and time spent on
reconstruction.
II. Proper maintenance enhances the safety of passengers while reducing operating cost for
vehicles.
1.4 Scope of the study
The scope of the study is limited to the study of federal road maintenance contracts, status of
contracted road assets and road maintenance costs of projects under the ten road maintenance
districts in Ethiopian federal roads. The study has focused on the road segments contracted under
routine and periodic projects for the year 2013/2014 supported by ten years of recorded
documents. Thus, specific techniques for road maintenance are not analyzed in detail.

1.5 Research Questions
I. Is the current road maintenance contractual practice implemented in Ethiopia

Satisfactory?
II. Can PBMCS be a solution in improving the federal roads in the country?
III. What are the major drawbacks in implementing performance based contracting system
for the maintenance of federal roads in Ethiopia?
IV. What are the lessons to be learned from other countries in implementing performance
based contracting system in road maintenance?
1.6 Research Objectives
I. To study the existing practices of road maintenance contracts, costs and status of the road
condition in Ethiopian federal Roads.
II. To study performance based contracting system for Ethiopian federal roads.
III. To identify the major drawbacks in implementing performance based contracting system
for the current federal road maintenance in Ethiopia.
IV. To learn from experience of others who have previously implemented performance
PBMCs.
V. To forward recommendations based on the findings of the study
1.7 Research methodology
The research strategy adapted for this research is qualitative research of exploratory type, which
diagnoses a situation, assess alternatives, and discover new ideas. The methodology followed for
the research is described here under:
I. Establishing the basis of the research: aimed at defining the theoretical basis, and
formulating the research questions through the following steps.
 Literatures were reviewed to obtain a theoretical basis for the research and
formulating the research questions and defining the scope. To this effect, the main
authors of textbooks in the field of road maintenance and performance based
contracting system were identified. The books were then reviewed in order to get a
general understanding of the research area.

 Interview schedule was prepared based on the findings of the literature review.
II. Conducting the study: aimed at finding out how road maintenance contracts are
implemented in Ethiopian federal roads with the following approach.
 A case study of how road maintenance contracts are used in contractors engaged
with road maintenance, Mainly Ethiopian Road Construction Corporation (ERCC)
was studied.
 A desk study to get a picture of road maintenance contracts both at international and
local level was studied.
 Interviewing key informants (Road Asset Management D/Director, Road fund
D/Director, Road maintenance division Manager and project managers of districts
and Contractors and Contract Administration, ERA) to get in-depth understanding of
contracting system in road maintenance being practiced, and to explore their
opinions on the ongoing road maintenance practice.
III. Analyzing the findings; aimed at analyzing the findings of case study and desk studies in
relation to theoretical propositions, and that of the interview using descriptive statistics
method of analysis.
IV. Conclusions and Recommendations: aimed at concluding the research findings, and
drawing recommendations (Figure 1.1).

Figure 1.1: Research Design.
1.8 Contribution of the research
The results of the research will discover whether or not performance based road maintenance
contract in Ethiopian Federal roads can be successfully implemented and be a solution for the
current practice of the road maintenance in the country. Furthermore, the study will give a brief
description of performance based road maintenance contracting system, as it is a new concept in
Ethiopian road maintenance industry.

2. LITERATURE REVIEW
2.1 Introduction
According to Mohammed (2010), citing Ahmad (2002) maintenance is always a must for any
structure in order to maintain its serviceability and to prevent deterioration that may shorten the
service life. In reality, maintenance works are not given the attention it should have; a budget
allocated for construction work is usually given a prior consideration. However, it is a fact that
maintenance is the most important activity, which is carried out to prolong or at least maintain
serviceability of structure until the end of its service life.
Harral and Faiz (1988), noted that the developing world‟s road-building boom in the 1960s and
1970s that led to a significant development of road infrastructures; threaten to collapse, if not
maintained accordingly. The cost of restoring or reconstructing these deteriorated roads is going
to be three to five times greater than the bill would have been for timely and effective
maintenance and strengthening. Furthermore, the current state of the economy imposes
limitations on the money available for investments in roads and their maintenance. Thus, there
must be a more stringent control on the planning and the management of the road maintenance
system.
Reducing maintenance costs and providing timely improvement of transportation facilities are
the major goals of public transportation agencies for the preservation of the existing
infrastructure. Performance-Based Road Management and Maintenance Contracts define
minimum conditions of road, bridge, and traffic assets that have to be met by the contractor, as
well as other services such as the collection and management of asset inventory data, call-out and
attendance to emergencies, and response to public requests, complaints and feedback (Zietlow,
2005).
Performance-Based Maintenance Contracting (PBMC) was first implemented on a wide scale in

British Columbia and since then has become a mainstay of maintenance contracting in Australia,
New Zealand, England, and Finland, and to an increasing degree in other countries, including the
United States, Chad Tanzania and South Africa (NCHRP 2009).

2.2 General Overview of Road Maintenance
Before assessing the situation in Road Maintenance practices, it is important to address the issue
of the term “maintenance”. The basic objective of road maintenance is implicit in the word itself.
It is done to ensure that the road that has been constructed, or improved, is maintained in its
original condition. It is accepted that over the life of the road it will deteriorate due to factors
with which maintenance activities cannot deal. Nevertheless maintenance is intended to begin on
the first day after the road improvement works are completed.
2.2.1 Maintenance definition
According to Haas (1978), the definition of maintenance varies among agencies. In a physical
sense, maintenance consists of a set of activities directed towards keeping a structure in a
serviceable state. For pavement, this includes such work as patching, resurfacing, crack filling
and so on. The following are some definition of maintenance from different sources.
I. Definition from BS3811:(1984), describes maintenance as combination of technical and

management work done on a specific asset or structure to ensure the structure is in good
condition and is functioning at its maximum capacity. There are two types of maintenance
involving repairing work and prevention work.
Reparation can be described as rehabilitation or replacement of spoiled components

meanwhile prevention is to prevent defects from occurring.
II. Definition from Oxford Advance Learner‟s English Dictionary describes maintenance as
the action of maintaining something or the state of being maintained.
III. From Majdi et al. (2002), definition of maintenance can be described as methods and
techniques used to restore or maintain a specified level of service and to prolong pavement
life by slowing its deterioration rate. As a summary, the main and only objective of
maintenance is to ensure the specific structure being maintained is in a good and acceptable
condition and will not cause inconvenience to the users.

2.2.2 Road maintenance definition
According to the ASCE (1971), road maintenance is defined under two subdivisions: physical
maintenance and traffic services. Physical maintenance is the preservation and upkeep of a
highway, including all of its elements, in as nearly as practicable its original, as-constructed
condition or its subsequently improved condition.” Traffic services are defined as “the operation
of a highway facility and services incidental thereto, to provide safe, convenient, and economical
highway transportation.”
AASHTO (1976), defined highway maintenance as a program to preserve, repair and restore a
system of highways with its elements to its designed or accepted configuration. System elements
include travel way surfaces, shoulders, roadsides, drainage facilities, signs, markings, lightening,
fixture etc.
World Road Association (1994), defined road maintenance as “activities to keep pavement,
shoulders, slopes, drainage facilities and all other structures and property within the road margins
as near as possible to their as-constructed or renewed condition” It includes minor repairs and
improvements to eliminate the cause of defects and to avoid excessive repetition of maintenance
efforts. Maintenance does not include rehabilitation, building shoulders, or widening roads. Haas
(1994) defined road maintenance as a set of preventive activities directed towards limiting the
rate of deterioration of a structure or corrective activities directed towards keeping the road in a
serviceable state.
Tyler and Francis (2006) defined road maintenance as an action taken to retain the road
pavement in a safe and useable condition. Road maintenance normally excludes upgrading and
strengthening of the road elements, but may be done if these appear to be the most cost effective
actions in the long terms.
Regarding to Ethiopian Roads Authority (2003), road maintenance is defined as routine, periodic
and emergency works to keep pavements, shoulders, slopes, drainage facilities and structures in
as near as possible to their as constructed or renewed condition to ensure its design life is
attained.

2.2.3 Importance of road maintenance
Roads are of vital importance in order to make a nation grow and develop. There is however a
problem, common throughout the world, of neglecting the maintenance of roads. Building new
roads costs money, but without properly maintaining the roads, they deteriorate very quickly. If
nothing is done, roads with a design life of decades may need replacing or major repair work
after just a few years (Levik, 2003).
According to Heggei and Vickers (1998) roads are among the most important public assets in
many countries. Road improvements bring immediate benefits to road users through improved
access to hospitals, schools, and markets; improved comfort, speed, and safety; and lower
vehicle operating costs. For these benefits to be sustained, a well-planned program of
maintenance must follow road improvements. Without regular maintenance, roads can rapidly
fall into disrepair, preventing realization of the longer-term impacts of road improvements on
development, such as increased agricultural production and growth in school enrollment
(SANRAL, 2004).
Too often, decision makers are left unaware of the importance of road maintenance because
justification for funding is based only on a narrow range of considerations and is not described in
terms of the impacts on users and wider society. But maintenance often offers some of the best
returns for investment in the transport sector. For example, recent plans for renewal and
expansion of USA‟s infrastructure (Department of the Treasury, 2012) quoted earlier
economists: „some types of highway investment still seem highly desirable, such as plain old
maintenance‟.
According to Zietlow (2007), when roads are in poor condition every $ “saved” in road
maintenance will cost: $ 3 to road users in additional to vehicle operating costs and $ 2 to the
road administration (or the tax payer) in reconstruction and rehabilitation. According to Heggie
and Vickers: World Bank (1998), maintenance reduces the rate of pavement deterioration. It
lowers the cost of operating vehicles on the road by improving the running surface and it keeps
the road open on a continuous basis. Robinson et al. (1998), in their book „Road Maintenance
Management Concepts and Systems „stated the importance of maintenance as the following;-

I) Reducing Deterioration: Eventually the end of pavement design life will be reached and
there is a need for pavement reconstruction or upgrading. These are normally relatively
expensive and should be postponed for as long as possible carrying out effective and
timely maintenance.
II) Lowering Vehicle Operating Cost: Robinson (1998), explained that the relative
proportions of road administration costs and vehicle operating costs in the total life time
transport cost with road vary depending on the traffic level. The relative proportion of
vehicle operating cost rises from about 40 percent at 50 vehicles per day to over 90
percent at 6000 vehicles/day. For a good condition road having a traffic level of about
1000 vehicles/day requires 2% of discounted cost to be spent on maintenance. However if
maintenance funds are reduced, the pavement will start to crack and potholes will
gradually appear and with these levels of deterioration, vehicle-operating costs are likely
increase by about 15 percent. If there is complete neglect of maintenance, a paved road
will eventually start to disintegrate and annual vehicle operating cost will increase by
about 50 percent.
III) Keeping the Road Open: Robinson (1998), explained the third reason for carrying
out maintenance as to keeping the road open continuously. Since their closure for
whatever reason causes potentially serious social and economic consequences.
IV) Safety: Accidents have proved to be an inevitable result of road transport and deaths and
injuries are very tangible impacts of the roads on the community. Road maintenance
works can often provide an opportunity for improvement of road safety by contributing
engineering factors in the areas of pavement and foot way surfaces, carriageway
markings and signs, streetlights and road furniture
V) Environmental Issues; - the conditions of roads affect the environment (World Bank
1994).
A study made by international labor organization on rural road maintenance (2007), cited Road
Maintenance as an important because it:
I. prolongs the life of the road by reducing the rate of deterioration, thereby safeguarding
previous investments in construction and rehabilitation,
II. lowers the cost of operating vehicles on the road by providing a smooth running surface

III. keeps the road open for traffic and contributes to more reliable transport services
IV. Sustains social and economic benefits of improved road access.
The first purpose is primarily in the interest of the responsible government authorities. The last
three are of more general interest to the inhabitants of the area traversed by the road and to the
vehicle operators.
Olivier et al. (2002), listed importance of maintenance into four categories;

I. First, various Acts of parliament place legal obligation on road authorities to maintain
their roads in a safe condition and insure that maintenance operations are carried out
safely.
II. Second, roads are very often the „vehicles‟ for caring the apparatus of statutory
undertakers. Example, electricity, gas, water and telephone and maintenance of this
equipment are also controlled by statue.
III. Third, well-maintained roads support national and local economies by ensuring that
freight and businesses can move efficiently and safety.
IV. Fourth, the way of life in developed countries defends substantially on the availability of
road network. The vast majority of trips to schools, shops, hospitals and leisure
activities are made via the road network.
Mohammed (2010), in his thesis work, revealed the importance of road maintenance into three
different aspects. These are:
I. Time
Compared to time required for reparation and renovation on a structure, maintenance consumes
less time, but can produce better quality results. Besides, work qualities for maintenance are also
relatively lesser compared to reparation and renovation.
II. Cost
Definitely the costs required by maintenance are lesser than the cost required to repair or to
rebuild a structure. Furthermore, a specific structure can still be running under maintenance
hence saving cost from the economic perspective. For example, closing a runway is a must for
resurfacing, will lower the benefit that can be generated during that period.

III. Structure value and performance

Structure will have high value and good performance during its service life if maintenance works
are done according to schedule and plan. Without proper maintenance, a structure will not be
able to provide services at its maximum performance all the time.
2.2.4 Objective of Road Maintenance
According to Linard (2000), the objective of road maintenance is to make the road safe and
smooth. The rationale for road maintenance is clear. The basic objective is implicit in the word
itself. It is done to ensure that the road that has been constructed, or improved, is kept in its
original condition. It is accepted that over the life of the road it will deteriorate due to factors that
maintenance activities will need to address. Maintenance is organized as a preventive measure
and for this reason starts from the day the road improvement works are completed (International
labor Organization, 2007).
The main objective of highway maintenance is to maintain the highway network for the safe and
convenient movement of people and goods. The core objectives of highway maintenance are to
deliver a safe, serviceable and sustainable network, taking into account the need to contribute to
the wider objectives of asset management, integrated transport, corporate policy and continuous
improvement (Well-maintained Highways-code of practice, 2011). Dipak (2005), conducting a
study for roads maintenance at Nepal found that the main objectives of road maintenance is to
ensure the serviceability of the road network and minimize the cost of road transportation, which
is comprised of agency cost (capital cost of construction and maintenance of the facilities over
their design life) and road user cost.
A study made by international labor organization (2007), revealed that the objective of road
maintenance is ensuring that the road remains serviceable or at least to sustain the life of the road
by putting off the date at which it needs to be reconstructed. This has several benefits, the most
important being that it stretches the period over which the benefits of the investment made are
available and therefore provides a higher rate of return on the initial investment. In addition, it
puts off the date when large investments are required for reconstructing the road.

According to Travis (2013), the major objectives of a road maintenance program include the
following:
 Maintain all highway features and components in the best possible condition
 Improve substandard features, with the ultimate goal to at least meet minimum
standards
 Provide proper maintenance devices for a minimum of traffic disruptions and/or
hazards to traffic
 Locating and reporting of inadequate safety features
 Identify needs
 Establish priorities
 Establish procedures
 Establish and maintain a regular program of maintenance for all aspects of highway
maintenance
Haas (1994), summarized the objective of road maintenance as follows:

I. to plan, direct and control maintenance activities so that an acceptable level of
service, consistent with the class of pavement is achieved.
II. to evaluate the methods and materials used in maintenance so that the economical and
efficient practices are developed.
III. to acquire and report maintenance cost data so that the unit cost for specific sections
may be determined
2.2.5 Road Maintenance at Design stage
According to Reginald (1987), it is important to view maintenance in the context of the overall
construction process. The role played by maintenance in the construction process can start from
design stage. The involvement of maintenance department in this stage is as an advisor to the
designer to figure out the maintenance problem in the future. Regarding to Armstrong (1984),
some of the advantages of the involvement of maintenance department in early stage is to be able
to check the practicability of the design details, the suitability of the structures that can prevent
further defects in the future caused by inappropriate design.

P.Orr (2006), stated that the first step in design is selecting the correct repair to fix the problem.
In too many cases, the choice of repair is made for non- technical reasons. In addition, many
maintenance repairs are made without any design. Knowing what needs to be done to get the
right repair is one of the most critical steps in the design of pavement maintenance.
According Derek et al. (1986), it is uncommon for both the designer and the owner to give
emphasis to maintenance at the design stage. He further stressed that the main problem of
maintenance stars at design stage.
2.2.6 Road Maintenance Activities
Paterson (1987), stated that road maintenance activities can be subdivided into three main
categories, namely routine works, periodic works, and emergency works.
2.2.6.1 Routine Maintenance
Routine maintenance operations are those that may be predicted and planned in advance. These
operations, which may be preventive or corrective in nature, are conducted on a regularly
scheduled basis using standard procedures. Proper scheduling of these operations is utilized to
provide minimum disruptions and hazards to the driving public (Travis, 2013).
Regarding to John (2006), Routine maintenances are all maintenance activities that have to be
carried out at least once per year, if not more frequent. Such activities include inspections,
cleaning of drains, controlling of vegetations, filling of potholes and ruts, etc.
According to World Road Association (WRA) (1994), routine maintenance comprises small-
scale works conducted regularly, aims “to ensure the daily passability and safety of existing
roads in the short-run and to prevent premature deterioration of the roads”. Frequency of
activities varies but is generally once or more a week or month. Typical activities include
roadside verge clearing and grass cutting, cleaning of silted ditches and culverts, patching, and
pothole repair. For gravel roads it may include regarding every six months.
Routine maintenance works are works that are undertaken each year and funded from the
recurrent budget. Activities are grouped into cyclic and reactive work types. Cyclic works are

those undertaken where the maintenance standard indicates the frequency at which activities
should be undertaken. Examples are verge cutting and culvert cleaning, both of which are
dependent on environmental effects rather than on traffic levels. Reactive works are those where
intervention levels, defined in the maintenance standards, are used to determine when
maintenance is needed. An example is patching, which is carried out in response to the
appearance of cracks or potholes (World Bank, 1994).
Routine maintenance remains as the key activity as it is the least costly activity, which provides
the greatest benefits. Some of the most common types of routine works are road patching,
sealing of surface cracks, edge repairs, treatment for rutting and pavement repairs, re-grading of
road shoulder, grass cutting, maintenance of road furniture, maintenance of bridges and culverts,
cleaning of drains, landscaping, and routine inspection.
2.2.6.2 Periodic Maintenance
According to Operational Guidance Transport Note No.TRN-4: World Bank (2005), periodic
maintenance covers activities on a section of road at regular and relatively long intervals, aims
“to preserve the structural integrity of the road”. These operations tend to be large scale,
requiring specialized equipment and skilled personnel. They cost more than routine maintenance
works and require specific identification and planning for implementation and often-even design.
Activities can be classified as preventive, resurfacing, overlay, and pavement reconstruction.
Resealing and overlay works are generally undertaken in response to measured deterioration in
road conditions. According to the operational guidance presented by World Bank, a paved road
repaving is needed about every eight years; for gravel road re-graveling is needed about every
three years. Periodic maintenance is required at periods of several years where frequency
depends on the damaging factor as well as the standard of maintenance.
According to John (2006) all repairs that carried out at a regular interval are considered to
periodic maintenance. Periodic maintenance includes all sorts of repairs including resurfacing,
overlays, and reconstruction of pavement, base and even sub base course. Periodic maintenance
is an activity that is undertaken approximately every 3-5 years and is concerned with rectifying
defects that are outside the scope of routine maintenance. The key reason of periodic
maintenance is to preserve the structural integrity of the road, or to enable the road to carry

increased axle loadings. The category normally excludes those works that change the geometry
of a road by widening or realignment.
2.2.6.3 Emergency Maintenance
Regarding to John (2006) Emergency repairs are all maintenance activities that have to be
carried out immediately to safe lives or prevent disastrous consequences of damaged
infrastructure. Typical examples of such emergencies are structural damages to fly overs due to
accidents. Maintenance departments need unrestricted access to emergency maintenance budgets
that allow them to carry out repairs that mitigate immediate dangers. Some senior management
may wish to control access to emergency repairs for works with more long-term focus.
2.2.7 Construction and Maintenance
The preoccupation of road professionals in the past has been mostly with road construction.
However, as road networks around the world are substantially completed and as existing network
age, the emphasis work is now changing away from construction towards maintenance
(Robinson et al., 1998). Compared with construction the problem of managing road maintenance
has proved to be particularly difficult issue for many countries (Schlissier and Bull: World Bank,
1998). Maintenance is an ongoing activity with a start or end. It is a process rather than a project.
Table 2.1 below shows the difference between maintenance and project.
Table 2.1: Some differences of construction and maintenance
Item Construction Maintenance
Nature of Activity Project Process
Duration Tend to be short term Ongoing-long term
Location Relatively constrained Normally wide spread
Cost per kilometer Relatively high Relatively low
Principal skill required Engineering, Project Engineering, Business Management
Management
Source: (Robinson et al., 1998)

2.2.8 Levels of Maintenance and Rehabilitation
Many agencies have developed and used their own strategies for maintaining the condition of
their roadway networks. These strategies may vary from maintenance to reconstruction action
depending on the extent of the observed deficiencies, execution time, and the expected future
performance of the pavement (Chairul, 1991). According to FHWA (1987), the strategies used at
different pavement condition levels can generally be classified into four categories. Detailed
descriptions of these classifications, drawn from the FHWA Pavement Rehabilitation Guide are
given below:
1. Restoration - includes work required to return the existing pavement structure to a suitable
condition to perform satisfactorily for period of time or prepare it for an overlay.
2. Resurfacing - is the placement of an asphalt layer over an existing pavement surface. It is the
most popular method of rehabilitation for existing pavements. This is probably because it can be
used to correct several surface deficiencies and also to increase the structural capacity of a
pavement.
3. Recycling - is the process of utilizing materials in an existing pavement in the rehabilitation of

that pavement.
4. Reconstruction- is construction on the existing pavement section where the entire existing
pavement structure is removed and replaced.
2.2.9 Timely Maintenance
Carrying out timely maintenance on a road in good condition will extend the life of a pavement,
as illustrated in Figure 2.2 below. On the other hand, delays in executing maintenance generally
leads to increased severity of deficiencies (i.e., to poor or very poor conditions) and can
eventually lead to a need for complete pavement rehabilitation or reconstruction in later years.
This can increase the life cycle costs associated with a particular pavement section (Chairul,
1991).
Besides the timing of maintenance execution, Chairul (1991) stated that the strategy used to

correct a deficiency can also have a significant effect on the performance of a pavement. The
choice of strategy is also an important parameter in determining the long-term performance of a
pavement.
Figure 2.2: Illustration of Pavement Life Cycle

Source: (Chairul, 1991)
2.2.10 Effects of Neglecting Road Maintenance
An area of major concern for most highway agencies today is the maintenance of deteriorating
pavements. According to a World Bank report (World Bank, 1988) the developing countries
have lost precious infrastructure worth billions of dollars through the deterioration of roads. The
cost of restoring these roads is going to be three to five times greater than the bill would have
been for timely and effective maintenance. Vehicle operation costs rapidly outpace the costs of
road repair as the condition of road passes from good to fair to poor'. In developing countries, the
problem of highway pavement maintenance is of immense significance due to high traffic
growth and inadequate funding. In India, (2003) it is estimated that an amount of $ 20 Billion
was spent by road users on vehicle operation cost. The loss due to poor road condition is
assessed to be around $ 4 Billion per annum.

Levik (2003), in his work „Road Maintenance is Necessary‟ described the effect of neglecting
road maintenance by raising different cases all over the world.
In Oslo, Norway a bridge deck did not have adequate waterproof membrane. It could have been
done as a simple job for a cost of approximately 0.6 million US dollars. The job was not given
preference and was therefore not done. The result was that after some years the whole bridge had
to be torn down and replaced by a new bridge. The total cost for the new bridge was 15 million
US dollars. There was an additional cost to the users, because they had to travel on lengthy
detours for a long period of time.
In Kenya, years of inadequate maintenance left the main Nairobi-Mombasa road highly
vulnerable. In 1997, heavy rain damaged two bridges and several sections of the road. The result
was that the national users experienced months of disruptions as long stretches of the road
became unusable in the rains and very difficult in dry weather.
In Tanzania, failure to improve a simple stream crossing caused damage to 3 kilometers of road
and led to lengthy delays. The result was a bill five times higher than would have been needed to
make the original repair.
In Sub-Saharan Africa 150 billion US dollars was spent in 3 decades building roads.
Maintenance was neglected and a third of that investment has now been lost. The result is that 50
billion US dollars of key national assets are gone.
A recent analysis of how 85 countries allocated road maintenance funds showed that, spending
12 billion US dollars on preventive maintenance would have eliminated reconstruction costs of
40 billion US dollars. The result is that an average net cost of 330 million US dollars, are wasted
on avoidable reconstruction in each country.
A new road is expensive. In Norway a two-lane paved new road costs about 0.5million US
dollars per Km on average. Routine maintenance of this road costs about8, 000 US dollars per
year per Km. If maintenance is neglected, it will cost five or six times as much to restore the
road. It is an indefensible waste economically.

If money is short, and it usually is, there is only one rational course of action maintain existing
roads before funding new ones; make sure it is done today, and every day. Tomorrow it might be
much more expensive.
It is often forgotten that building of roads is only a part of the total transport cost. While this total
cost includes maintenance and building costs, it also includes the full cost of running vehicles on
a road, an expense that rapidly increases as the surface starts to deteriorate. It is essential to take
the total transport cost into account when making decisions concerning your roads. You have to
have a policy that reflects the economic realities.
2.2.11 Impact of Poor Road Maintenance Practice
Based on the study made by World Bank (2007), most roads in Africa are poorly managed and
badly maintained and almost without exception, the roads are managed by bureaucratic
government road departments. The study further reveled that it would take nearly $43 billion to
fully restore all roads classified as being in poor condition (i.e., requiring immediate
rehabilitation or reconstruction). In other words, African countries have spent far too little on
routine and periodic maintenance during the past twenty years. As a result, nearly a third of the
$150 billion invested in roads has been eroded through lack of maintenance. Africa has been
living off its assets. Restoring only those roads that are economically justified and preventing
further deterioration will require additional annual expenditures over the next ten years of at least
$1.5 billion. This amounts to nearly one percent of regional GDP and would increase current
road spending from one percent to nearly two percent of regional GDP. The remaining roads in
poor condition will have to receive minimal maintenance or be handed over to lower levels of
government and local communities (Heggie: World Bank 2007).
According to Heggie (2007), the economic costs of poor road maintenance are borne primarily
by road users. In rural areas, where roads often become impassable during the rainy season, poor
road maintenance also has a profound effect on agricultural output. When a road is not
maintained and is allowed to deteriorate from good to poor condition each dollar saved on road
maintenance increases VOCs by$2 to $3. Far from saving money, cutting back on road
maintenance increases the costs of road transport and raises the net cost to the economy as a
whole.

It is estimated that the extra costs of insufficient maintenance in Africa amount to about $1.2
billion per year, or 0.85 percent of regional GDP. About 75 percent of these costs must be paid
with scarce foreign exchange. During preparation of the Integrated Roads Project in Tanzania, it
was estimated that the annual economic costs of poor road maintenance were between $100 and
$150 million. Likewise, during an RMI workshop in Kenya, it was estimated that the $40 million
annual shortfall in road maintenance expenditure increased VOCs by about $150 million per
year. In general, road maintenance and rehabilitation projects produce economic rates of return
of over 35 percent.
Poor road maintenance also raises the long-term costs of maintaining the road network as
maintaining a paved road for fifteen years costs about $ 60,000 per km. If the road is not
maintained and allowed to deteriorate over the fifteen-year period, it will then cost about $
200,000 per km to rehabilitate it. In other words, rehabilitating paved roads every ten to twenty
years is more than three times as expensive, in cash terms, as maintaining them on a regular
basis, and 35 percent more expensive in terms of NPVs discounted at 12 percent per year.
The same is true of gravel roads maintaining a gravel road for ten years costs between$10,000
and $ 20,000 per km, depending on climate and traffic volumes. On the other hand, leaving it
without maintenance for ten years will require rehabilitation costing about $ 40,000 per km.
Rehabilitating gravel roads every ten years is thus twice as expensive, in cash terms, as regular
routine and periodic maintenance, and between 14 and 128 percent more expensive in terms of
NPVs discounted at 12 percent per year (Heggie: World Bank, 2007).
Heggie (2007), identified two factors that have contributed to the above shortsighted policies.
First, lack of market discipline has encouraged governments to minimize their own (road
maintenance) expenditures, disregarding the impact that this has on total road transport costs
(road maintenance costs plus VOCs). Second, maintenance is normally financed under the
recurrent budget, and recurrent revenues are nearly always in short supply. Since donors have
been willing in the past to finance rehabilitation under the development budget (often on a grant
basis), governments had every incentive to capitalize road maintenance and charge it against the
development budget. Rehabilitation, rather than recurrent maintenance, became the optimal
solution.

Donors quickly recognized this mistake, and most will no longer finance rehabilitation programs
until sustainable road maintenance policies have been introduced.
As mentioned earlier, the extra cost of insufficient maintenance in Africa amounts to $1.2 billion
per year. In developing countries like Latin America and Caribbean equivalent figures were
estimated at $1.7 billion per year (Heggie and Vickers, 1998).
Heggie and Vickers ( 1998), citing Indian Ministry of Surface Transport (1998), stated that $4
billion of the roughly $39 billion in annual VOCs could be saved by proper maintenance.
Moreover, a study made on Republic of Kazakhstan analyzed how the absence of periodic
maintenance due to insufficient fund affected the national road network. The analysis
demonstrated that if the periodic maintenance was deferred for years on 7500 Km of roads, the
government would save $180 million per year in maintenance costs.
In Latin America a rough estimate made in 1992 showed that it would cost about $22.5 billion
per year for a decade to remove the backlog and prevent further accumulation of deferred
maintenance. The estimated backlog of maintenance in Kazakhstan was $1.8 billion while that in
Russia for federal highway network alone is $4.5 billion per year over unspecified period
(Heggie and Vickers, 1998).
Based on the study of Heggie and Vickers (1998), attempts to improve road financing
concentrated on increasing allocations for maintenance in Africa and Latin America, earmarking
funds to secure a stable flow. Donor countries often asked governments to set aside part of their
general tax revenue (usually specified as percentage of overall fuel tax revenue), deposits the
money into a road fund and use the proceeds to finance maintenance of core road network. But
apart from pointing out the economic costs of deferred maintenance and suggesting that funds be
reallocated from construction to maintenance, little advice was offered on where the addition
revenues might come from and how the road fund should function.
The study summarized that it will be almost impossible to overcome the numerous technical,
organizational and human resource problems that hampers sound road maintenance policies, with
weak road maintenance institutional arrangement for managing and financing of road networks.

2.3 Road Maintenance Contracts
According to Segal et al. (2003) there are two main types of contracts that public officials choose
from when contracting for road maintenance, these are Traditional and performance based
contracts, in which the later will be discussed further.
2.3.1 Performance Based Road Maintenance Contracts
According to National Cooperative Highway Research Program (NCHRP) (2009) performance

based maintenance contracts is an approach to contracting that provides disincentives, incentives,
or both to the contractor to achieve performance standards or targets for measurable outcomes
and sometimes outputs.
The NCHRP further stressed that the disincentives or incentives can consist of reductions or
increases in payments for respectively falling short or exceeding the desired targets. Some
disincentives or incentives are not directly tied to measurable outcomes and outputs. These
disincentives or incentives include liquidated damages for failing to satisfy a contract provision,
an award fee for satisfying qualitative criteria, and a contract extension if the contractor performs
well. Performance-based contracts (PBC) differ significantly from traditional method-based
contracts that have been traditionally used to maintain roads. PBMC is a type of contract in
which payments for the management and maintenance of road assets are explicitly linked to the
contractor successfully meeting or exceeding certain clearly defined minimum performance
indicators (World Bank, 2005).
According to the World Bank Procurement Guidelines (2004), performance-based procurement,

also called output-based procurement, refers to competitive procurement processes resulting in a
contractual relationship where payments are made for measured outputs instead of the traditional
way where the measurement and payment reflects the quantity of input. For example, the
contractor is not paid for the number of potholes he has patched, but for the output of his work:
no pothole remaining open (or 100% patched). Failure to comply with the performance
indicators or to promptly rectify revealed deficiencies adversely affects the contractor's payment
through a series of clearly defined penalties. In case of compliance the payment is regularly
made, usually in equal monthly installments.

PBC within the road sector can be "pure" or "hybrid". The latter combine features of both
method- and performance-based contracts. Some services are paid on a unit rate basis, while
others are linked to meeting performance indicators (World Bank, 2005).
2.3.2 History of Performance Based Road Maintenance contract
The first PBMC of road maintenance was piloted in British Columbia, Canada, in 1988 (Zietlow,
2004). Later, PBMCs were introduced and adopted in two other Canadian provinces: Alberto and
Ontario.
In 1995 Australia launched its first PBMC to maintain urban roads in Sydney. Since then New
South Wales, Tasmania, and Southern and Western Australia have started using performance-
based and “hybrid” approaches (Zietlow, 2004). In 1998, PBMC was introduced in New Zealand
to maintain 405 km of national roads (Zietlow, 2004). PBMCS was first introduced in the USA
in Virginia State in 1996. Since then, four other states (Alaska, Florida, Oklahoma, and Texas)
and Washington DC have started applying a PBMC approach to maintain highways, bridges,
tunnels, rest areas and urban streets (FHWA, 2005).
In the developing world Latin America was the pioneer in developing and adopting its own
performance based contracting model. In 1995, Argentina introduced performance-based
contracts, which at present cover 44% of its national network (Liautaud, 2004). In the mid
nineties Uruguay also piloted PBMCS, first on a small portion of its national network and then
on the main urban roads of Montevideo. Shortly thereafter, other Latin American countries, such
as Brazil, Chile, Colombia, Ecuador, Guatemala, Mexico and Peru, also started adopting a
performance-based approach.
Gradually, this trend has spread to other developed and developing countries in Europe, Africa
and Asia, e.g., UK, Sweden, Finland, Netherlands, Norway, France, Estonia (63% of national
roads), Serbia and Montenegro (8% of national roads), South Africa (100% of national roads),
Zambia, Chad (17% of all season roads), the Philippines (231 km of national roads). At present,
preparations for launching PBC programs are underway in Albania, Cape Verde, Chad,
Madagascar, Tanzania, Burkina Faso, India, Cambodia, Thailand, Indonesia, Vietnam and

Yemen (World Bank, 2005). Some of the above countries use “pure” performance-based contract
while others (e.g., Finland, South Africa, Serbia and Montenegro) use “hybrid” contracts.
2.3.3 Advantages of performance Based Road Maintenance Contracts
According to World Bank (2005), Road agencies that have adopted a PBMC approach have
achieved:
I. Cost savings from 10% up to 40%: For example, the USA Virginia Department of
Transportation pays USD 22,400 per mile per year under PBC, while in-house maintenance costs
USD 29,500 per mile per year In New Zealand, there has been a 30% decrease in professional
costs and 17% decrease in physical works with traffic growth by 53% (FHWA, 2005). In
addition, evaluations made by Liautaud (2005), indicate that the savings in costs accrued from
the PBC are in order of 12 to 18% compared to the traditional method-based contracts. Cost
comparisons are not readily available for other developing countries that have adopted a PBC
approach (Table 2.2).
Table 2.2: Cost savings of different countries under PBC over the conventional contracts
Country Cost saving per cent (%)
Norway About 20-40%
Sweden About 30%
About 30-35%; about 50% less
Finland
cost/km
Holland About 30-40%
Estonia 20-40%
England 10% minimum
Australia 10-40%
New Zealand About 20-30%
USA 10-15%
Ontario, Canada About 10%
Alberta, Canada About 20%
British Columbia, Some, but might be in the order of
Canada 10%
Source: (Pakkala, 2005)
II. Expenditure certainty: As the contractor is paid a fixed price, based on a regular schedule the
road agency enjoys full control of expenditures without unexpected variation orders.

III. Improved conditions of contracted road assets and reduction of roads in poor condition:
Many road agencies have acknowledged that on completion of a PBMC, road assets are
generally returned either in an improved condition or in a condition similar to when the PBC was
awarded, but not in a worse condition. The Department of Transportation in Texas State, USA,
has reported “after the first year of the performance-based contracts, [road] facilities were rated
at an average of 91%, an 18-point increase over their pre-contract condition” (FHWA, 2005).
Argentina has reduced the share of roads in poor condition from 25 percent to less than 5 percent
by the end of 1999 due to the PBMC approach (Liautaud, 2004).
IV. Greater road user satisfaction: Road users appear to become more satisfied with the services
delivered and the condition of the roads maintained under PBMCs. No quantified results of
improved road user satisfaction, reflecting PBMC implementation have been reported to date,
some agencies have noticed a decline in the number of complaints from road users. For example,
in Chad “road users appreciate that the road is always in good conditions and not only after
specific works were completed. Especially important is that they can use the road in the rainy
season, which was impossible before” (Zietlow, 2004).
V. Multi-year financing of a maintenance program: For example, by making the long-term

payment obligations legally binding on the government, the CREMA contracts in Argentina have
deterred the Treasury from failing to provide funding for road maintenance (Liautaud, 2004).
The growth and expansion of a PBC approach to other roads in the network is the best indicator
of its success. The Department of Transportation in Washington DC, USA, recognizes PBC as an
effective way to keep assets at or above their current condition. It has therefore decided to apply
this approach for management and maintenance of tunnels, street lighting, and other streets in
Washington DC.
2.3.4 Reasons for Doing Performance-Based Road Maintenance Contracting
NCHRP (2009), citing (Hardy 2001; Pakkala 2002; Stankevich et al., 2005) stated that an agency
might decide to do PBMC or expand the amount of this type of contracting for numerous
reasons. Following are commonly cited motivations:
 Potential to reduce agency costs

 Change in performance criteria from a focus on inputs and outputs to customer-oriented

outcomes
 Response to a mandate of the executive branch or legislature to outsource more
maintenance work or do PBMC.
 Pressures on the operating expenditures budget
 Need to do more with less as a result of growing maintenance needs in the face of a
downsized or fixed maintenance work force
 Ability to achieve expenditure stability fixed costs because PBMC often involves long-
term, lump sum contracts with fairly predictable payments to contractors
 A more defensible way to secure maintenance dollars within the agency and from the
legislature when there is receptivity to using performance-based methods of contract
management
 Means to achieve a fixed level of service, assuming, over time a contractor can meet
performance target sand then maintain constant Level of Service (LOS).
 Shifting risks to or sharing risks with contractors
 Potential to realize significant benefits from effective partnering between the agency and
the contractor
 Ability to encourage the contractor to minimize life cycle costs assuming the contract
term is long enough
 Fostering more innovation by allowing the contractor the freedom to use any method to
meet performance specifications rather than have to adhere to method specifications
(innovations may pertain to equipment, materials, computer systems and applications,
communications, work methods, partnering, and business practices)
According to Zietlow (2004) the main reasons for implementing performance based contract are
to:
 reduce maintenance costs through the application of more effective and efficient
technologies and work procedures;
 provide transparency for road users, road administrations and contractors with regard to
the conditions roads have to be maintained;

 Improved control and enforcement of quality standards; and

 Improved overall road conditions.
According to AASHTO (2002), foreign countries have a number of additional compelling

reasons to use PBMC. Developing countries cannot afford to let their highway systems
deteriorate to the point at which they must be reconstructed. Reconstruction is very expensive
compared with timely maintenance and diverts limited funds from transportation or other sectors
where money is badly needed.
2.3.5 Impediments to Performance-Based Maintenance Contracting
According to NCHRP (2009), citing (Pakkala 2002; Ribreau 2004; Hill et al., 2007; Science
Applications International Corporation 2007; survey responses; and panel member input) the
following are some of the reasons for not taking performance based road maintenance contracts.
 Lack of government support (legislative or executive branch)

 A significant change in culture required by the contracting agency and contractors not
familiar with this approach
 Adjustments required going from method to performance specifications
 Inadequate experience with PBMC or a negative experience on the first try
 Lack of training
 Lack of legal authority
 Challenges in estimating in-house and contractor costs
 Loss of quality sometimes observed in the first years of a long-term contract
 Insufficient contractor capacity
 Inability to achieve sufficient competition
 Potential bonding or warranty requirements, including those established by state law
 Incomplete or inaccurate asset inventory and condition data
 Concern over loss of control over methods, equipment, and material used
 Concern that life-cycle costs will increase
 Fear that privatization will result in large numbers of staff having to leave government

2.3.6 Basic Steps of Performance-Based Maintenance Contracting
According to Zietlow (2004), the approach taken to implement Performance Contracts varies
from country to country. According to NCHRP (2009), the following steps can be taken as a
guide line for implementation of performance based road maintenance contracts.
 Geographic areas, and portions of the roadway network that would benefit from PBMC;
 Decide on the types of maintenance and area/roads that will be the focus of the contract;
 Complete an inventory of assets;
 Assess inventory condition;
 Bring items up to par or make this a contract or requirement;
 Determine the scope of services;
 Define the LOS (condition) to be achieved;
 Define qualifications of prime and subcontractors;
 Set term of contract;
 Address record keeping;
 Define owner responsibilities;
 Define contractor insurance requirements;
 Determine bonding requirements;
 Establish payment criteria including incentives and disincentives;
 Develop approach of performing inspections;
 Draft Request for Proposals (RFPs);
 Establish monthly payment with adjustments for performance incentives and
disincentives;
 Hold pre bid meeting;
 Finalize and issue RFP;
 Make award;
 Conduct meeting with contractor before start of work;
 Authorize work to begin;
 Allow contractor to perform work;
 Conduct periodic and random inspections of performance;

 Make monthly payments to the contractor in accordance with performance; and

 End contract, unless it is renewed for a subsequent term.
But, Zietlow (2004) argues that before the implementation of PBMC it is important to analyze
the countries legal and financial feasibility first. One of the most important legal aspects is the
maximum contract period allowed by law. In most of the countries in Latin America, for
example, the maximum contact duration is restricted to either four or five years, making it
necessary to change laws in order to accommodate long-term contracts. Financing has to be
secured for the entire duration of the contract.
2.3.7 Acquisition Process for PBMC
According to NCHRP (2009), obtaining qualified contractors to perform under a performance-

based maintenance contract requires the contracting agency to have an appropriate selection
process. The contracting agency must perform due diligence to ensure that the winning
contractor is able to achieve the desired performance standards.
An agency cannot start too early in identifying potential contractors. The ways to do so include
(1) identifying contractors that have performed similar work for other government agencies, (2)
issuing a Request for Qualifications (RFQ), (3) inviting contractors to an information meeting or
a pre bid conference designed to encourage contractors to form teams, and (4) examining the
feasibility of restructuring the government maintenance organization into a part that will
administer the contract and another part that will compete for the work (Pakkala, 2002; Hyman
2003).
In a number of countries, governments will contract with a consultant or the equivalent of a

system manager who in turn will oversee the activities of the contractor that will enter the
performance based maintenance contract (Pakkala, 2002).
2.3.8 Types of Performance-Based Contracts
According to NCHRP (2009), citing AASHTO (2002), there are a handful of different types of
performance-based contracts. These are:

 Single activity. A simple performance-based contract may deal with only a single
activity such as sign replacement or striping.
 Single asset. A performance-based contract may pertain to just one type of asset, but it
could involve a single maintenance activity or multiple activities. A performance-base
contract for bridge maintenance is likely to involve numerous bridge maintenance
activities such as joint repair bearing replacement, and washing and cleaning.
 Set of related activities. Sometimes a performance based contract pertains to a set of
activities that are related by virtue of their location, the type of asset they concern, or
other factors. A good example is a contract that concerns rest area maintenance.
 Corridor. Many performance-based contracts pertain to corridors, often long sections of
limited access highways. These contracts are likely to address all activities necessary to
maintain the assets in the corridor and ensure safe and efficient highway operations.
These contracts frequently concern everything in the right-of-way and are sometimes
called fence-to-fence maintenance contracts.
 Area wide. A performance-based contract can concern areas of different size. A garage
or area shop might have a performance contract that pertains to its area. An area wide
PBMC could also concern a district, city, town ship, county, state, or country. An area
wide contract could cover one activity or all types of maintenance activities and assets
within the relevant boundary.
 Hybrid. There are a variety of different hybrid contracts. One has a combination of
method specifications and performance specifications. Another has incentives and
disincentives that are both output- and outcome-driven. A third uses a combination of
unit prices and a lump-sum payment, where the latter is adjusted based on whether or not
the contractor meets performance standards.
 Agency-to-agency. A public agency responsible for maintaining a roadway network
contracts with one or more other public agencies to perform the maintenance. States may
contract with counties to perform maintenance, as in Wisconsin. Many Michigan counties
contract with the state for maintenance. States may also contract with cities or authorities
for maintenance services under certain circumstances.
 Warranty-based. These are contracts that require the contractor to warranty the
workmanship and materials for one or more maintenance activities. Warranties require

the contractor to maintain the end product in the condition specified for a certain number
of years. Warranties can apply to pavements, rest areas, signs, striping, and so on. If the
contractor fails to meet the terms of the warranty, then the contractor must fix the
problem.
2.3.9 Basic Categories of Measures
According to NCHRP (2009), citing (Hatry, Fountain, Sullivan, and Kremer 1990;
Government Performance and Results Act 2003; Hyman 2004). PBMC requires a clear
understanding of the fundamental types of measures the basic categories of measures are as
follows:
I. Inputs: These are resources applied to maintenance. They usually consist of labor,
equipment, materials, and the associated financial expenditures. In some instances,
resources can include other things; for example, facilities or land.
II. Outputs: These are accomplishments or, in other words, how much work gets done.
Traditional maintenance management systems record accomplishments (outputs) and
resources used (inputs) upon completion of work. Some performance-based contracts
specify the outputs to be achieved. Examples of outputs include lane-miles of
bituminous resurfacing or linear feet of guardrail replaced. The amount of work done
is a reflection of the efficiency and effectiveness of the organization performing the
maintenance.
III. Outcomes: These are the results or changes that occur as a result of maintenance. To an
increasing degree, PBMC is concerned with outcomes that are important to customers
of roads. Depending on the type of maintenance being performed, customers can be
viewed as road users, those who pay for the roads, and owners of property adjacent to
roads that experience spillover effects such as the spread of invasive plants from the
right-of-way. Examples of customer oriented outcomes are as follows smoothness of
pavements; visibility of signs and markings at night; cleanliness of rest areas; traffic
signals quickly restored to operating condition after they stopped working properly
(i.e., response times are frequently a part of performance based maintenance
contracts).

IV. Explanatory Variables: It is desirable for the contracting agency and contractor to keep
track of variables that can help explain resource utilization, outputs, and outcomes.
Many explanatory variables are outside the control of the contractor and agency and
include traffic growth, weather, emergencies, and terrain. Accounting for explanatory
variables outside the contractor‟s control provides a basis for adjusting incentives and
disincentives and more fairly allocating risk.
2.3.10 Contractor Selection Criteria for PBMC
According to NCHRP (2009), Contractor selection criteria include low bid, modified low bid,
best value, Qualifications-Based Selection (QBS), and technical submittal and negotiation. Low
bid may be elective or a legal requirement. Modified low bid introduces non-price considerations
by weeding out potential bidders that cannot satisfy minimum qualifications. Using a pre- or post
bid qualification process can accomplish modified low bid. The contracting agency picks the
contractor offering the lowest bid from the set of pre- or post qualified bidders (Science
Applications International Corporation, 2007).
Selecting a contractor based on best value involves giving a certain percentage weight to
technical considerations and the remainder to costs. Table 2.3 shows representative weights used
in different countries from around the world. Many different criteria may be used to determine
the technical score, such as the following:
Table 2. 3: Contractor selection criteria for different countries.

Country Weights for Selection Criteria
Australia (Sydney, WA, Tasmania) 50% price; 50% other, varies with Territory
Canada (Alberta, British Columbia, 78% price, 22% other; 40% price, 60% other;
Ontario) and 90% price; 10% other;
England 30%–40% price; 60%–70% other
Finland 75% price; 25% other
New Zealand 50% price; 50% technical criteria
Sweden 90% price; 10% other
Source: [Pakkala (2002) cited in Stankevich (2005)].

2.3.11 Monitoring and Evaluation of Contractor
There are a variety of approaches to monitoring and evaluating the contractor. The first approach
allows the contractor to monitor it through frequent and periodic reporting. The contracting
agency normally would require the contractor to submit monthly and annual reports on service
levels being achieved. The agency will have to be certain that the evaluation is performed
properly by joining the contractor when it collects data, conducting random inspections, insisting
that the contractor execute a sound QC plan, and ensuring that the contractor provides
documentation suitable for making payment determinations. Once the agency is confident that
the contractor is providing accurate information, the agency does not have to undertake as much
oversight. The big advantage of this approach is that it is less costly than other approaches and
the agency communicates that it trusts the contractor; partnering is strengthened. Many would
say the evaluation responsibility should not be placed on the contractor, however, because the
risk of inaccurate reporting increases (NCHRP, 2009).
In the second approach, the agency has primary responsibility for determining the performance
of the contractor. A disciplined approach is essential, typically Maintenance Quality Assurance
(MQA) process. In addition to periodic inspections, the agency might use random, unannounced
inspections. If the agency conducts the evaluations with the contractor present, it promotes good
communication and understanding. If the agency conducts the evaluation without the contractor
present, the arm‟s-length approach will reduce the strength of the partnering relationship
(NCHRP, 2009).
The third approach is to use an independent third party to conduct contractor evaluations; a
method that provides the most objectivity. It also leaves room for the agency and the contractor
to develop a strong partnering relationship, because the burden of evaluation lies on the
independent third party. There will be an added cost of an independent evaluator, but it is likely
to lead to monetary and nonmonetary benefits (Science Applications International Corporation,
2007).

2.3.12 Allocation of Risks
According to NCHRP (2009), another primary motivation for transportation agencies to adopt
PBMC is to shift a significant portion of risk to the contractor. Maintenance contracting has the
following types of risks, among others:
 Poor quality of construction

 Unexpectedly severe weather
 Unanticipated environmental problems
 Emergencies
 Unanticipated legislative change
 Unexpected traffic growth
 A short-term focus that fails to minimize long-term life-cycle costs
 Difficulty in acquiring the resources needed to perform the work (e.g., subcontractors)
 The possibility of having to correct problems covered under a warranty.
Certain types of performance-based maintenance contracts place an upper limit on a

transportation agency‟s payments to the contractor. Lump-sum contracts with deductions for
failing to meet performance targets are used around the world, although contracts that also have
positive financial incentives may produce better outcomes. Furthermore, by lengthening the
period of performance of a PBMC, the agency can reduce the risk that a contractor will ignore
long-term goals, such as minimizing life-cycle costs, when it makes short-term decisions. With
long-term contracts, the contractor is also better able to amortize facility and equipment costs.
Using a prequalification process further minimizes the risk to the contracting agency (NCHRP,
2009). PBMC is a two-way street, a partnership. If an agency goes too far in trying to shift risks
to contractors, there can be a negative effect. For example, if an agency forces a contractor to
bear all the risks of severe weather in a hurricane prone state, the contractor may raise its price to
perform the work, refuse to work in an area, or go out of business.
2.3.13 Methods for Inspection of Service Quality Levels of Pavements
According to World Bank (2002), the following are the different types of inspections for
pavements service quality measures.

2.3.13.1 Formal Inspections of Service Quality Levels
Formal inspections are those which are scheduled in advance by the Project Manager (who is
responsible for the overall administration of the contract on behalf of the employer), and carried
out by the contractor (through his self-control Unit) under the supervision of the project
manager. The main purpose of the formal inspections is to enable the project manager to verify
the information presented in the contractor‟s monthly statement and to issue the Interim payment
certificate. The project manager must inform the contractor of his intention to carry out a formal
inspection at least 48 hours in advance, indicating the exact date, hour and location where the
formal inspection is to begin. The contractor is obliged to be present at the date, hour and
location specified by the project manager, providing the physical means of inspection as
indicated further below. Formal inspections will normally, but not necessarily are scheduled to
begin within less than five (5) days after the presentation by the contractor of the monthly
statement to the project manager; and they should normally be completed within a maximum of
five (5) days (World Bank, 2002).
The formal inspection allows comparing the information on compliance provided by the
contractor in the standard tables which are part of his monthly statement, with actual
measurements taken in locations to be determined by the project manager. During the formal
inspection, the project manager will prepare a brief memorandum describing (i) the general
circumstances of the site visit, including date, road sections visited, persons present etc., (ii) the
nature and location of any non-compliance which may have been detected, and (iii) the time
granted by the project manager to the contractor to remedy the detected defects. Based on the
outcome of the formal inspection, the project manager will immediately correct any possible
errors or misrepresentations in the contractor‟s monthly statement, countersign it and present it to
the employer for payment, and to the contractor for information. It will also be scheduled for the
follow-up site visits, whose purpose is to verify if the contractor has remedied the causes of
earlier non-compliance, within the time frame granted by the project manager and specified in
the memorandum. During the course of the regular monthly inspections, the project manager
may however increase the total length of the road sections tested, in particular if numerous cases
of non-compliance are detected (World Bank, 2002).

2.3.13.2 Informal Inspections of Service Quality Levels
According to World Bank (2002), the project manager may carry out informal inspections of
service quality levels as part of the general mandate given to him by the Employer. He may do so
on his own initiative, at anytime and anywhere on the roads included in the contract. He must use
his own means for those inspections. If he detects any road sections where the service quality
criteria are not met, he is obliged to inform the contractor within 24 hours in writing, in order to
enable him to take remedial action as soon as possible. The results of informal inspections may
not be used by the project manager for purposes of correcting the Contractor‟s monthly
statements or applying penalties or liquidated damages, except for cases in which the road has
been completely interrupted and the criteria of road usability has not been met.
2.3.14 Performance Level Criteria for Pavements
2.3.14.1 Pavement, Shoulders and Right-of-Way

According to World Bank (2002), the service level criteria for pavements, shoulders and right-
of-way are defined as follows:

Table 2.4: Performance service level criteria for pavements

Item Service quality Measurement/Detection Time allowed for repairs or Tolerance permitted
Pavement width Pavement width must be at least wide as Manual measurement using a metallic No tolerance allowed.
specified in the contract. measuring tape.
Potholes No potholes allowed. Visual inspection. Potholes must be repaired within three (3) days after
their detection.
Patching Patches (i) shall be square or rectangular, (ii)  Visual inspection (for Non-complying patches must be repaired within three
shall be level with surrounding pavement, detection of shape and (3) days after their detection.
(iii) shall be made using materials similar to material used
those used for the surrounding pavement,  Ruler (to check if patch is
and (iv) shall not have cracks wider than level with surrounding
three (3) mm. pavement
 Small transparent ruler (for
cracks)
Cracking in pavement There shall not be cracks more than 3 mm Crack widths measured with small Cracks more than 3 mm wide must be sealed within
(a crack is a linear opening in wide. transparent ruler. seven (7) days after their detection.
pavement with a width of more than For isolated cracks, the “cracked
3 mm.) For any 50m section of the pavement, the area” includes 0,5 m on each side of
cracked area cannot be more than ten (10) the crack, multiplied by the length of
percent of the pavement surface. the crack plus 0,5 m at each end.
For multiple cracks and cracks
crossing each other, the “cracked area”
is equivalent to a square area, parallel
to the lanes, which fully encloses the
cracks, and where the closest crack is
at least 0.25 m away from the sides of
the square.
Cleanliness of the pavement The road surface must always be clean and Visual inspection Dirt, debris and obstacles must be removed: within 1
surface and shoulders. free of soil, debris, trash and other objects. (one) hour if they pose a danger to traffic safety Within
36 hours if they do not pose any danger to traffic
safety.
Pavement roughness Average value for section must be below the Measured with calibrated equipment No tolerance allowed.
threshold value given below (in IRI average) (Bump Integrator).
Section 1:.…… IRI, Section 2: ……..IRI,
Section 3: ……. IRI, Section …..
Deflection Average of section must be below the Measured with Benkelman beam every No tolerance allowed.
threshold values indicated for each road 50 meters. Threshold value is average
section. for sections of ………meters.
Rutting There shall not be ruts deeper than 15 mm. Measured with 2 rulers (horizontal Rutting above threshold value must be eliminated
Rutting of more than ten (10) mm shall not ruler of three 3 m length placed within fifteen (15) days.
be present in more than 5 percent of any of perpendicularly across lane; rut depth
the road sections defined in the contract. measured as space between horizontal

ruler and lowest point of rut, using a

small ruler with scale in mm)
Raveling Raveled areas must not exist. Visual inspection. Raveled areas must be sealed within thirty (30) days
after their detection.
Loose Pavement edges (loose) There shall not be loose pavement edges, or Visual inspection Repairs must be completed within seven (7) days after
pieces of pavement breaking off at the the detection of the defect.
edges.
Height of shoulders vs. height of Difference in height at edge of pavement Measured with ruler, with scale in mm. Repairs must be completed within seven (7) days after
pavement shall not be more than 15 mm. the detection of the defect.
Paved shoulders Must always be sealed to avoid water Visual inspection Repairs must be completed within seven (7) days after
penetration without deformations and the detection of the defect.
erosions free of potholes and erosions
Embankment slopes Without deformations and erosions. Visual inspection Repairs must be completed within seven (7) days after
the detection of the defect.
Slopes in cuts Slopes in cuts must be stable and/or Visual inspection for slope material on Fallen slope material must be removed Quantities
adequate retaining walls and slope shoulders or pavement below 50 m3: from pavement within 4 hours after
stabilization measures must be in place. detection from shoulders within 48 hours after
detection. Between 50 m3 and 500 m3 from pavement
within 24 hours after detection from shoulders within
96 hours after detection
Note: For landslides classified as “emergency”
different rules apply.
Trees within right-of-way Trees within right-of-way must be protected Visual inspection. None.
as necessary.
Right-of-way (outside pavement and Height of vegetation (except trees) must be Visual inspection. Measurement with Vegetation exceeding the threshold height must be cut
shoulders). less than 20 cm on slopes towards the road ruler. back within seven (7) days after detection.
less than 1.0 m otherwise must not disturb
drainage
Trash, debris, etc. Visual inspection. Trash, debris and other objects must be removed
within seven (7) days after detection.
Removal of slides Slides of slope material onto the road are If the contractor intends to invoke the Traffic flow to be reestablished within a maximum of 6
considered an Emergency if the quantity of contract provisions for emergencies, hours.
the material is above 500 m3, or if the slide he estimates the quantities and Period for removal of other slide material is set by
blocks all lanes and the road traffic is immediately informs Project Project Manager as specified under provisions for
completely interrupted, and quantity is Managers, who them verifies. emergencies.
above 50 m3.
Source: World Bank (2002)

2.3.14.2 Structures
According to World Bank (2002), the service quality level requirements for bridges and similar
structures are as shown in the following table.
Table 2.5: Performance service level criteria for Structures
Item Service quality Measurement/ Time allowed for repairs or
Detection Tolerance permitted
Steel or other Guardrails must be present and painted. All Visual Guardrails damaged by accidents
metal metal parts of overall structure painted and inspection must be replaced within seven (7)
structures free of corrosion. Drainage system in good days.
condition and fully functional.
Concrete Guardrails must be present and painted. Visual Guardrails damaged by accidents
structures Beams all other structural parts must be in inspection must be replaced within seven (7)
good conditions and fully functional. days.
Drainage system in good condition and fully
functional.
Expansion Clean and in good condition Visual Damages and defects must be
joints inspection repaired within seven (7) days.
Retention walls Contractor must control presence and Visual Contractor must immediately notify
adequate condition of retention walls and inspection Project Manager in case of any
their drainage. condition which threatens structural
integrity of bridge.
Riverbeds Contractor must ensure free flow of water Visual Causes for non-compliance must be
under bridge and up to 100 meters upstream. inspection eliminated within fourteen (14) days
Contractor must maintain design clearance after water has sufficiently receded
under bridge. to allow minimum working
conditions.
Source: (World Bank, 2002)
2.3.14.3 Drainage Systems
According to World Bank (2002), the service quality level requirements for Drainage structures
are as shown in the following table:

Table 2.6: Performance service level criteria for Drainage System

Item Service quality Detection Time allowed for repairs or
Tolerance permitted
Ditches and vertical Must be clean and lining Tolerance permitted: Obstructions
drains with lining without any significant damage equivalent to less than 10% of
of the lining. capacity of item and must be cleared
Ditches and vertical Must be clean and free of within seven (7) days after detection.
drains without lining obstacles. Damages must be repaired within
Collectors Must be clean and free of three weeks after detection.
obstacles, and without
structural damage. Must be Visual Inspection
firmly contained by
surrounding soil or material.
Culverts and similar Must be clean and free of
obstacles, and without
structural damage. Must be
firmly contained by
surrounding soil or material.
Source: World Bank (2002)
2.3.2 Normal measurement contract/Traditional contract
According to ERA, Traditional road maintenance contracts are contracts in which the Contractor
is responsible for the execution of works, which are normally defined by the Road
Administration or the Employer and the Contractor is paid on the basis of unit prices for different
work items, i.e. a Contract based on “inputs” to the works. The results of traditional Road
Contracts are in many cases less-than-optimal. The problem is that the Contractor has the wrong
incentive, which is to carry out the maximum amount of works, in order to maximize its turnover
and profits. Even if the work is carried out according to plan and considerable money is spent,
the overall service quality for the Road user suffers from deficiencies in the original design,
aggravated by inadequate maintenance

Table 2.7: Traditional road maintenance Contracting systems.

Contract Types Definitions Suitability
Short Term Contracts
Normal measurement Required quantities of each activity are listed on a Periodic maintenance and
contract/Admeasure bill of quantity (BoQ). The price is submitted and rehabilitation.
contract used by the road agency to assess bids and award
the contract. Typically, the quantity of completed
work that meets the technical specification is
measured monthly, and the contractor is paid for
that quantity multiplied by the contract unit rate.
Simple Measurement For work on a larger scale, quantities are Can save on measurement costs
contract estimated, measured, and paid as usual, but the
BoQ includes fewer items. Requires skilled
inspectors to ensure that all necessary work is
carried out under the composite activities.
Cost plus contract Actual costs incurred by the contractor are paid, For contractors undergoing training
plus an agreed percentage for profit. Generally not or for items of work where a
cost effective, and the contractor has little specification is difficult to set.
incentive to provide high-quality output.
Contract Types Definitions Suitability
Long Term Contracts
Term measurement Based on a schedule of unit prices and estimates For routine maintenance. When
contract of quantities listed in BoQ. Bids are assessed and funding is unreliable
contracts awarded as above. Contract specifies
activities to be performed and timing and may
include an emergency response capability.
Payment is based on inputs (amount of physical
works executed and amount of material supplied).
Length worker contract A type of performance contract for one person to For routine maintenance if
implement routine maintenance works on an contractors are adequately trained
allocated length of road (normally 1–2 km). The and supplied with needed equipment
contractor is often paid monthly based on a and material.
specified work time. Performance standards
should be specified, and contractors should be
paid for performance rather than attendance.
Length workers can be subcontracted to a larger
contractor, to avoid the high costs of
administering many small scale contractors.
Community contract Payment is based on measurement or For contractors that have emerged
performance. Contracts are often awarded on from the local community
agreed rates rather than tendered, but if other
community contractors are interested, technical
proposals may also be assessed. Contract
documentation should be transparent and easy to
understand by those unfamiliar with contracting.
A contract may provide for assistance from a road
agency or assign complex work to a commercial
subcontractor.
Source: Heggie and Vickers 1998; TRL and DFID 2003

2.3.3 Differences between Performance Based Contracts and Traditional contracts
The idea that risks should be borne by the party that can manage them best is acknowledged in
the literature (Queiroz 2000; Amos 2004). What significantly differentiates a PBMC is that the
contractor is assigned a number of the responsibilities and risks that used to be borne by the
owner agency under traditional method-based contracts. On the one hand, the contractor is not
tied down by the contracting agency in making his decisions regarding “what to do”, “when to
do” and “how to do”. He is free to innovate with techniques and technologies to reduce his own
costs, as long as the level of service specified in the bidding documents is achieved (WB 2004).
On the other hand, the contractor now bears the entire risk in case of failure of his management
and innovation – his errors in (i) predicting deterioration of contracted assets; (ii) determining
appropriate design, specifications and materials (conforming to the country‟s standards); (iii)
planning needed maintenance interventions; and (iv) estimating quantities (World Bank, 2005).
The selection process in performance-based contracting is normally based on “the best value”,
which may not be necessarily “the lowest bid”. Since the contractor carries more risks and
management responsibilities, the contracting agency wants to ensure management capacity with
the potential contractor, his clear understanding of the new approach, the new responsibilities
and his ability to handle the associated risks. The selection process involves choosing a
contractor who has the capability to assess the condition of the assets, determine the timing of
interventions, select materials and work methods, a suitable work plan and arrange the
monitoring of his own services. Only after ensuring that the bidders are sufficiently qualified
(normally through a pre-qualification process), does the selection process consider cost
proposals. The “best value” approach tries to ensure a high quality product at a low overall cost.
Payment in PBCs is made on a fixed price lump sum basis normally through uniform
installments, linked to continuing to meet performance targets. The contractor is not paid for
physical works completed, but for the final results (or levels of service) he has delivered (World
Bank 2005).
The duration of PBCs is typically longer than that of traditional contracts as the contractor
carries greater risk and responsibility and is obliged to undertake certain maintenance
interventions that occur every few years. Use of PBC requires the existence of a mature and

well-developed contracting industry with capability to undertake long-term management of

contracted assets, assume additional risks, and establish necessary programming and quality
assurance mechanisms. In case of comprehensive PBCs, this is often achieved through formal
collaboration between construction management firms and traditional road contractors (World
Bank 2005).
2.3.4 Overview of International Practices on Performance Based Contract
2.3.4.1 Canada
In Canada, the development of performance-based contracts for road maintenance started in the
late 1980s and early1990s. British Columbia piloted the first PBMC in 1988 (Zietlow, 2005a).
Performance standards still leaned toward required work procedures rather than outputs or
outcomes. British Columbia now uses performance-based contracts to maintain 100% of its
provincial highways (Stankevich et al., 2006).
Since 2003, British Columbia has made lump-sum awards for performance-based maintenance
contracts with 10-yearperformance periods. The contracts address maintenance and repairs and
do not include resurfacing, rehabilitation, and reconstruction. The services include surface
maintenance, winter maintenance, drainage, landscaping, structures maintenance, sign work,
emergency maintenance and repairs, and fixing damage to government property. A variety of
work is quantified and serves as the basis for performance measurement and incentives.
Performance standards are proactive and customer-oriented. The transportation agency does not
prescribe the methods for doing work. Each month contractors receive one-twelfth of the annual
lump sum award provided that all performance standards are met; otherwise, deductions occur
(NCHRP, 2009). The cost savings for the 10-year, lump-sum, and performance based contracts
has been estimated at 10% (Stankevich et al., 2006). Pakkala (2002) asserted cost savings, but no
quantitative estimate was provided.
In the province of Alberta, PBMC was an outgrowth of a premier‟s initiative to reinvent

government. Failure to meet the contract performance criteria results in penalties. In Alberta, the
contract term is 5 years with a renewal term of 1 to 3 years. Price receives the majority of the
weight in the contractor selection criteria (Stankevich et al., 2006).

According to skinner (2007), Ontario, another province of Canada uses 95% lump sum
performance based contracts ranging from 7-9 years. The contracts include all routine
maintenance such as pothole repair, vegetation management, bridge maintenance and cleaning,
electrical work, and line painting. Other types of work addressed include winter maintenance,
patrolling to conduct visual inspections, and emergency assistance to deal with accidents and
spills. Maintenance performance standards include both outcome and time-based performance
criteria. Failure to meet the standards can result in penalties. Over time, the duration of the
contract period has been increasing gradually and the number of maintenance activities has
grown (Stankevich et al., 2006).
Table 2.8: Cost saving in Alberta Canada using PBMC.
Contract Description Source Cost Saving
(World Bank, 2006)  5% savings for first round of

tenders;
Two rounds of tenders of hybrid  25%–35% savings for second
contracts eventually covering round of tenders
100%of provincial roads in 30 (Pakkala, 2002) Clients receive some cost savings
Contract Maintenance Areas (did not provide any quantitative
(CMAs) estimates or supporting data)
(Bucyk and Lali, 2006) a 28% reduction in cost between the
new contracts (year 2000) and the
old contracts (prior to 2000), which
translates into a reduction in unit
prices to $3,705/km from
$5,117/km, representing a total
annual cost reduction of
$26,419,932.
Source: (NCHRP, 2009)
2.3.4.2 Australia
Australia is composed of six states and two territories, a number of which have been among the
world leaders in using performance-based maintenance contracts. One of the first jurisdictions to
try this type of contract was New South Wales. In 1990, this state began a comparative study of
two 100 km pilot projects in Sydney.

According to the World Bank, the objective of the study was to determine the feasibility of
contracting road maintenance and to estimate differences in cost, quality, and responsiveness
between a contractor and the RTA‟s workforce (Stankevich et al., 2006).
According to NCHRP (2009), citing (Stankevich et al., 2006) State forces performed the
maintenance work in one pilot project and a private contractor conducted the maintenance work
in the other. Results also were compared with work done by the in-house force. The RTA of
New South Wales first awarded a management contract to a contractor those urban roads (or
1,900 lane-km) in Sydney. The most important performance criteria were average roughness and
cracking. The World Bank reported a 13% improvement in condition accompanied by a cost
reduction in the 20% to 30% range, but it is not known over how many years of the contract
these results apply. The bid price was 25% lower than estimated. Segal et al. (2003), referring to
the Reason Public Policy Institute reported that since New South Wales started this performance
contract, roadway condition has improved approximately 15% and there has been a 35% cost
savings (Segal et al., 2003).
Since then several new contracts have been let in New South Wales, Tasmania, and Southern and
Western Australia. A number of them are hybrid contracts, in which some of the maintenance is
paid based on both quantities and performance standards (Zietlow, 2005a).
Table 2.9: Cost saving in Alberta Australia using PBMC
Jurisdiction(s) Source Savings
Regional Transport Authority, New South 10% to 35% (bases for comparison not
Wales; Tasmania; Western Australia Pakkala 2002) known)
38% cost savings compared with schedule of
Sydney, New South Wales (Frost 2001) rates type of contracts
Southern Tasmania (Frost 2001) rates type of contracts
South Perth (Frost 2001) rates type of contracts
Mid North Region (Frost 2001) rates type of contracts
Six contracts in Western Australia (Frost 2001) Savings of 15% to 20% against other forms of
maintenance contracting, which in turn were
reported to have achieved 20% savings against
in house operations. Thus, total savings
compared with in-house operations are
estimated to be at least 35%.

2.3.4.3 New Zealand
In New Zealand, the national road agency is known as Transit New Zealand (Transit NZ). In
1998, it let its first long-term performance-based maintenance contract known as a Performance-
Specified Maintenance Contract (PSMC). Today, lump-sum PSMCs with 10-year terms are used
on 15% of the nation‟s entire road network, mainly on national roads. Contractors must satisfy a
detailed set of key performance indicators. Recent PSMCs measure performance at three levels:
management, long-term, and operational measures. The first set of performance measures
concerns contract management and implementation. The second set the long-term measures
pertains to the condition of the pavement and addresses such attributes as roughness, texture
skid, and structural integrity. The third set operational measures include the condition of the
appurtenances along the road, the effect on serviceability, and the user‟s experience.
Transit NZ also has hybrid contracts that incorporate features of both method and performance
specifications. A large number of the performance standards are expressed in terms of
intervention times. The term of the hybrid contracts is only 5 years (Stankevich et al., 2006).
Industry experts have asserted that these PSMCs have resulted in improved maintenance service
and road quality. The general manager of Transit NZ reported that better services were delivered.
It is unclear whether this statement applies to a hybrid contract (with both performance and
method specifications) or to a long-term performance-based maintenance contract. An expert on
PBMC wrote that there were pronounced improvements in the quality of service, bumps, skid
resistance, signs, drainage systems, and market posts for a well-known performance-based
contract (Pakkala, 2002).

Table 2.10: Cost saving in New Zealand using PBMC

Contract(s) Source Savings
10-Years, lump-sum, Reason Public 20% savings based on regular audits
performance-specified Policy Institute
maintenance contracts on part World Bank Less cost according to General Manager
of the national road network of Transit New Zealand
and highway works throughout 30% decrease in cost of professional
country; Highway Maintenance services and 17% decrease in costs of
Contracting professional services; a savings of at
least25% over conventional model
10-Years,lump-sum, Pekka Pakkala Initial savings were about 25%, and
performance-specified were between 14% and 20% at time
maintenance contract (PSMC- report was written. Savings predicted to
001) covering 450 km be 25%.
Source: (NCHRP 2009)
2.3.4.4 United Kingdom
The UK Highways Agency is responsible for 8,850 km of the most strategically important part of
the nation‟s highway network. This portion of the highway system amounts to only 4% of the
total roadway miles in the United Kingdom, but it carries 30% of the total traffic and 60% of the
truck traffic. Performance-based maintenance contracts are known as Managing Agent Contracts
(MAC) in the United Kingdom. These contracts incorporate performance specifications to
increase efficiency and effectiveness, allocate responsibility and risk between the client and the
contractor, foster innovation, and focus the attention of the contractor on outcomes. Some
important characteristics of MACs are as follows:
 Increased outcome orientation

 Lump-sum and unit prices as a basis for payment
 Strengthened partnering
 Emphasis on continuous improvement
 Focus on life-cycle costs
 Better risk management

 Supply chain management (Pakkala 2002; Harding2005).
According to Harding (2005), little is published or easily accessible regarding changes in costs
regarding PBMC in the United Kingdom. An article published in the proceedings of a seminar on
the state of the practice regarding PBMC around the world reported that it is difficult at this time
to determine the effectiveness of the MACs. The author wrote that there is some overall evidence
that service has improved with slightly reduced costs, particularly with respect to routine
maintenance.
2.3.4.5 Finland
In 2001, Finnra undertook a major reorganization. The part responsible for design, engineering,
and maintenance and operations was transformed into a wholly state-owned production
organization known as the Finnish Road Enterprise (FRE) to compete with the private sector
regarding capital, maintenance, and operations projects. Finnra remained the client organization
responsible for procuring contractors and entering into contracts. Initially, public tendering
began in 23of 99 maintenance areas on the network. Because of the potential impact of the FRE
on the competitive position of existing private firms, the FRE was introduced gradually into the
mix of contractors. Full and open contracting involving the FRE throughout the country did not
start until 2005. The original 23 maintenance area contracts were lump-sum, mainly output
(accomplishment). A few were outcome-oriented, and these were 3-year contracts. The
contractor selection criteria were based 75% on price and 25% on technical qualifications
(Pakkala, 2002).
As of approximately 2005, Finnra maintenance contracts were hybrids, 75% of compensation

based on a lump-sum payment with adjustments for failing to meet performance criteria, and
25% based on unit price. The outcome-based portion of the contract, covered by the lump-sum
payment, concerned winter and summer maintenance, minor bridge maintenance, gravel roads,
vegetation management, and drainage and culvert maintenance, among other things. For
example, intervention time and outcome specifications for winter maintenance required the
contractor to respond to snow conditions within 2 hours, remove all snow to no more than 1 cm
within a certain amount of time after it stops snowing, and achieve a measure of skid resistance

of less than 0.3 (NCHRP, 2009). Finnra enters into separate unit price contracts to address
lighting, road markings, traffic signs and signals, resurfacing, and rehabilitation (Stankevich et
al., 2006).
Table 2.11: Cost saving in Finland using PBMC
Source Savings
Cost savings analyzed at 7% to
Finnish Road Enterprise 10% for 3-year contracts and 13%
for 7-year contracts
7% to 10% for 3-year contracts and
13% for 7-year contracts; the current
World Bank (Stankevich et al., price level is 50% to 60% of
2006) the price level when Finnra was
using its own labor and equipment
to do maintenance
World Bank Transport 30% to 35%; about 50% less cost/
2.3.4.6 Latin America
The average condition of one-third of the roads in developing countries is poor. In Latin
America, the condition of roads is even worse. A few years ago it was reported that only 7% to
52% of roads were in good shape. Even in the best-case scenario, nearly half of the roads are in
poor shape (Segal et al., 2003). In an effort to improve road conditions and reduce maintenance
costs, Argentina and Uruguay were pioneers in adopting performance-based contracting models
(NCHRP, 2009).
Argentina: Since 1995 Argentina has pursued a number of different contracting approaches
involving performance-based maintenance, including kilometer/month contracts for routine
maintenance, Contrato de REcuperacion y MAntenimiento (CREMA) Phase I, Phase II, and
concessions (NCHRP, 2009).

Argentina‟s national system of roads totals 38,744 km, of which 30,912 km are paved and 9,508
are concession toll roads. In 1995, Argentina launched a series of performance based
maintenance contracts covering about 3,600 km of these national roads. The government selected
paved roads in fair to good condition for 11 maintenance contracts, each varying from 105 km to
536 km for a total of US $650 million (NCHRP, 2009).
Contracts were lump-sum and payments were made each month according to an amount per
kilometer (based on equivalent liters of gasoline to account for inflation but expressed here as
dollars/kilometer/month). The contracts were for two years and were renewable. Three
inspections, based on a sampling process, occurred once per month. If one or more deficiencies
was found with regard to performance targets both technical specifications and response times
the road agency made deductions from payments in accordance with a table of penalties.
Performance standards addressed specific measures concerning ride quality, safety features, and
aesthetics including vegetation. Penalties were imposed gradually to give the contractor an
opportunity to address the deficiency, but would reach 100% of the penalty if the problem was
not redressed by the third inspection at the end of the month (NCHRP, 2009).
These kilometer/month performance-based maintenance contracts were judged to have worked

well. The average cost of routine maintenance was $175/km/month and penalties resulting from
600 instances of noncompliance totaled only $ 300,000, approximately 1% of the value for all
the contracts (Cabana et al., 1999). Because the first phase of CREMA performance-based
contracts began with rehabilitation followed by maintenance, it had a significant effect on asset
condition. The percent of roads in good to fair condition increased from 59% to 94%.The percent
in critical to poor condition declined from 41% to6%. Also, roughness measurements
deteriorated at a slower rate than predicted by the HDM (Stankevich et al., 2006).
A report of the Reason Public Policy Institute states that Argentina has achieved reduced costs of
maintenance, better Roads, new capital investment in the highway network, and a reduction in
the government‟s maintenance workforces; it also largely eliminated corruption in highway
maintenance and rehabilitation (Segal et al., 2003).

Uruguay: Beginning in 1996, the Ministry of Public Works introduced performance-based

contracts for the maintenance of Uruguay‟s national highway network. There were essentially
two types of contracts; one concerned with routine maintenance and the other involved initial
rehabilitation followed by periodic and routine maintenance. It used a performance-based
contract similar to Argentina‟s that involved both rehabilitation and periodic and routine
maintenance. Rehabilitation occurred on selected sections of highway before maintenance
occurred. By the start of 2000, more than 40% of the national road network was being
maintained under 5-year, performance-based maintenance contracts (Zietlow, 2005b).
In 1996, as Uruguay started transforming its road contracting process, Montevideo commenced
its first performance based contract for nearly 140 km of its city roads. The city entered into a 3-
year contract with a 3-year extension. Portions of the network needed initial rehabilitation.
Montevideo paid the contractor based on unit price for the rehabilitation work. During the 3-year
extension, the contract called for cutting monthly payments by 40% because of the rehabilitation
work that previously occurred (NCHRP, 2009). The city defined performance standards,
response times, and penalties for noncompliance for pavements, shoulders, and drainage
systems. Because road conditions at the start of the contract were significantly below the
performance standards in the contract, the contractor had between 3 months and12 months to
bring the assets up to the required standards. Because the first contract proved to be successful,
Montevideo pursued two additional contracts, one involving gravel roads (Zietlow, 2005b).
Shortly thereafter, other Latin American countries, such as Brazil, Chile, Colombia, Ecuador,
Guatemala, Mexico, and Peru, also started adopting or planned to adopt a performance-based
approach (NCHRP, 2009).
2.3.4.7 Chad
Chad‟s first performance-based road management and maintenance contract occurred in 2001
with the assistance of the World Bank. The 4-year contract addressed 440 km of unpaved roads.
A French firm was the contractor and used mainly local labor. A Cameroon engineering firm
provided contractor over sight. Elements of the contract included the following:

 Management and maintenance as • well as self-monitoring of the contractor

 Rehabilitation over the first 21 months of the contract
 Rebuilding or replacement of drainage structures and signs
 Emergency help for those in accidents
 Rain erosion and axle load control; and
 Other emergency works as needed.
The contractor received a fixed monthly fee based on a lump-sum for the contract period.
However, the contractor was paid on the basis of unit price for emergency work. A performance
guarantee was equal to 10% of the contract value. The contractor received an advance payment
of 20%to perform the rehabilitation. The total cost for road management, rehabilitation, and
maintenance was estimated at US $5,740/km. Thanks to the performance-based contract, the
road was upgraded to excellent condition. Users appreciated that the road was kept in good
condition after the rehabilitation was completed. Cars and trucks were able to use the road during
the rainy season, which was not possible before the roadwork occurred. A negative side-effect of
the improved road quality was that the accident rate increased as travel speeds increased. As of
2004, no other significant difficulties were reported and the contract was judged to be a success
(Zietlow, 2005b).
2.4 Road Management in Ethiopia
2.4.1 Ethiopian Roads Authority
In 1951, when the Ethiopian Roads Authority was established, the total road network amounted
to 6,400 km. This network was built mainly during Italian invasion. By 1997 the road network
had grown to 26,550 km, of which 3,708 km were paved. As a result of investments under RSDP
I and RSDP II the current length of the network has reached 42,429 km, of which 5,452 km
(12.8%) are paved and the remaining 36,977 km (87.2%) are unpaved. Of the present classified
road network, about 20,080 km are considered as the main road network administered by the
Federal Government (Ethiopian Roads Authority) and the remaining 22,349 km of "low level"
roads, generally categorized as "rural roads" under the Regional Rural Roads Authorities (ERA,

2003).
ERA is responsible for the planning, construction, maintenance and administration of Federal
Roads. For the last 10 years (1997-2007) with RSDP I and RSDP II programs, the Ethiopian
Roads Authority invested more than ETB 20 billion for the construction and maintenance of
federal roads. In terms of funding by category of financiers, a little more than 63% has come
from internal sources (the Government, the Road Fund and the Community) while the remaining
amount of funds (37%) has been pooled from the international community (Nagawoo, 2008).
ERA has been carrying out the maintenance of roads by the district maintenance contractors,
which is recently established as a separate enterprise that is ERCC.
2.4.2 Road Fund Administration
In the early 1990s, it was recognized that the limited extent and poor state of the road network
had become a major constraint on measures taken to revive Ethiopia„s economy. In 1995, only
11 per cent of paved roads and 19 per cent of unpaved roads were in an acceptable condition.
Major trunk roads accessing ports and economically important areas were in disrepair. To tackle
these problems in 1997 the Government launched a 10 year Road Sector Development Program
(RSDP). The program attracted a great deal of donor support and involved a major program of
investment (Nagawoo, 2008).
As part of the RSDP it was recognized that road maintenance funding had to be improved. In
line with the World Bank sponsored Road Maintenance Initiative (RMI) a road fund was
established in Ethiopia in 1997 through proclamation by parliament. The Road Fund Board is
chaired by the Minister of Works and Urban Development. Other members of the board include
three Vice Ministers, six Regional Presidents or representatives, the general manager of the
Ethiopian Roads Authority, four representatives of road transport owners and the general
manager of the Office of the Road Fund Administration. Membership of the Board is for two
years (Nagawoo, 2008). The fund was established with the objective to finance road maintenance
and road safety activities through a dedicated road user payment fund. Revenue sources of the
fund were identified as:
 The government budget

 A fuel levy

 A vehicle license renewal fee based on vehicle axle weight and configuration
 Overloading fines
 Other road tariffs that may be fixed as necessary
The Board is empowered to issue directives to define collection and disbursement procedures of
the Fund (including the recommendation of additional sources and levels of tariffs required to
finance road maintenance) and ensure the timely collection and deposit of revenues. It must
review the annual road maintenance programs of the road agencies and submit to the government
proposals for works to be financed by the Fund. It should ensure the transparency and
accountability of disbursements, receive and review management reports from Road Agencies,
initiate financial and technical audits of road maintenance and road safety measures (Nagawoo,
2008).
In order to receive road fund revenues each road agency has to have a separate Road Fund
account purely for road maintenance. Deposited money can be used on a rolling basis from year
to year. This is unlike Ministry of Finance budget accounts that must be used within each budget
year. The separate accounts help prevent the mixing of funds for maintenance with other
activities. Likewise it helps road fund auditing to take place separately from other accounts.
The basic allocation of funds has been on the basis of 65% to the Federal Roads (i.e. for the
ERA), 25% is allocated to the regions and 10% to selected municipalities. The regional
allocation has been divided on the basis of a weighted average ratio with an 80% weight to road
length and a 20% weight to population. The remaining money is distributed to the municipalities
on the basis of population size and regional centrality with Addis Ababa accounting for half the
allocation (Road Fund Administration) (ERA, 2014).
2.4.3 Ethiopian Road Construction Corporation
Ethiopian Road Construction Corporation (ERCC) is a new government development agency;

which was under Ethiopian Roads Authority. Council of Ministers Regulation No 248/2011 has
established ERCC on July 08/2011 to carry out mainly road and bridge construction,
maintenance and enhancement works. Before ERCC was established it was working as operation
using of Ethiopian Road Authority (which changes its name and internal organization structure)

for 60 years and has acquired the experience of road maintenances.

 As consultant 12000 km per year road maintenance
 “Term” Maintenance
 Average 30 seasonal road maintenance every year
 Urgent or emergency road maintenance
Table 2.12: Road Maintenance Districts under ERCC
Maintenance Covered Distance (KM) Total Covered
Project Name Asphalt (KM) Gravel (KM) Distance (KM)
Alemgena 1601 2184 3785
Adigrat 567 1090 1657
Kombolcha 119 1005 2124
Debre-Markos 335 1172 1527
Gondar 761 688 1449
Shashemene 593 2123 2716
Dire Dawa 1393 1467 2860
Nekemte 547 1238 1785
Jimma 582 1980 2562
Sodo 777 1189 1966
Total 8295 14136 22431
Source: (ERCC, 2012)
2.5 Assessment of Road Maintenance in Ethiopia
2.5.1 Introduction
Past failure to undertake adequately funded, planned and managed maintenance programs have
led to the situation where the massive capital investments of the Road Sector Development
Program (RSDP), have become necessary. However, the lessons of the past have been well
learned by the Government and the Ethiopian Roads Authority (ERA), and much attention is
now being focused on maintenance tasks (ERA, 2014).
The total federal road network of which is being administered by ERA has reached to 26,857 km
as of July 2014. Overall road network in Ethiopia has been increasing on the average by 3.2%

each year between 1997 and 2014. The table below summarizes impact of works undertaken
between the year 2002 and 2013 measured in terms of selected indicators.
Table 2.13: Change in selected indicators
Indicators 1997 2002 2007 2013
Proportion of Asphalt roads in Good Condition 17% 35% 64% 71%
Proportion of Gravel roads in Good Condition 25% 30% 49% 36%
Proportion of Total Road network in Good Condition 22% 30% 49% 51%
Road Density/ 1000 sq. km 24.1km 30.3km 38.6km 78.2km
Road Density/ 1000 Population 0.46km 0.49km 0.55km 1km
Proportion of area more than 5km from all-weather road 79% 75% 68% 46%
Average distance to all weather road 21.4km 17km 13km 6km
Source: (ERA, 2014)
Improving the condition of the road network is still a challenge. The improvement of the road
network in the country is only changing the condition of the network slowly. In the first year of
RSDP, 52% of the road network was found to be in poor condition and only 22% was in
reasonably in good condition. Owing to on-going rehabilitation, upgrading and maintenance
intervention under the program, the proportion of the road network in good condition has
increased to 50 percent and the road in poor condition has declined to 22%. The proportion of
roads in good condition has overtaken the proportion of roads in poor condition from 2004
onwards and particularly the last two years owing to a massive intervention in terms of
rehabilitation, upgrading and maintenance on major roads. Another observation is that the roads
in fair and poor condition are consistently declining shifting to good condition since the year
2002. The road condition from year 1997 to 2013 is presented below (ERA, 2014).
Table 2.14: Road Condition Improvement from year 1997 to 2013
Year Good Fair Poor

1997 22 26 52
2002 30 30 40
2007 49 22 29
2013 51 27 22

Source: (ERA, 2014)
Graph 2.2: Road Condition Improvement
2.5.2 Road Maintenance in the Past
At the early 1990s, the road network was generally deteriorated due to long time neglect of
routine and periodic maintenance. Potholes, ruts, gully, depletion, silting of side drains, and
blockage of culverts and bridges, etc. was characteristics of Ethiopian roads. The extent of the
crisis was fully revealed during the Spanish Consultant financed by European Commission in
1995. Only 11 per cent of the 3,656-km of paved roads were deemed to be in an acceptable
condition, 41 per cent was deteriorating fast and the remaining 48 per cent were beyond repair.
The 20,156-km unpaved network was in a worse condition, with only 19 per cent in acceptable
condition, 28 per cent mediocre, and 53 per cent in a poor state. This severe condition was
ameliorated by 2007 whereby 49 per cent of the then 42,429 km was in good condition and 22
and 29 per cents of the total network were in fair and poor condition respectively. However, after
ERA administer the federal road network only, the percentage of the road segment in good and
fair condition has increased in the year 2013 to 51 and 27 per cents respectively (ERA, 2014)
(Table 2.15).

Table 2.15: Condition of roads 2014
Condition of Roads (%)

Year
Good Fair Poor
1995 18 29 53
2007 49 22 29
2014 51 27 22
Source: (ERA, 2014)
The consequence of this situation was grave, and vehicle-operating costs were increasing from
time to time. The extra road user costs resulted in increased transportation costs that would be
transferred, through operators and shippers, to the final consumers of the service. In general, road
infrastructure was deteriorating to such an extent that they were hindering rather than facilitating
the movement of people and goods. This was the direct consequence of inadequate maintenance
fund and failing to provide the road as per its requirement. Specific problems encountered in
carrying out both routine and periodic maintenance were:
 Inadequate funding for works;

 Capacity limitation due to limited equipment, spare parts and materials;
 Giving more priority to new construction;
 Institutional problem of many nature; and shortcoming in maintenance
planning/prioritization;
Therefore, the resulting outcome was as mentioned before deterioration of big proportion of the
road network (ERA, 2014).
Routine Maintenance is a continuous activity that does not depend on the engineering
characteristics of the road or volume of traffic. Routine maintenance is undertaken on a regular
basis and includes grass cutting, clearing ditches, culvert maintenance, drainage clearing, road
signs maintenance etc. It was realized that the sustainability of the major achievements of the
RSDP depends critically on timely and efficient maintenance of the network. The required cost
for routine maintenance work is entirely covered by the Road Fund.

The total cost planned to be disbursed for federal, regional and urban roads routine maintenance
as of June 2007 was 1903.8 million, whereas the amount disbursed during the same period
amounted to Birr 2471.0 million. Out of the total maintenance expenditure Birr 1524.6 million
(61.7%) is for federal roads, Birr 663.4 million (26.8%) for regional roads, and Birr 283.0
million (11.5%) is for urban roads. Currently, 49 per cent of the 42,429 km of total road network
is found to be in good condition while 29 per cent is in poor condition (ERA, 2014).
2.5.3 The Funding and Expenditure of Road Maintenance
Table 2.16 below provides details of planned allocation, accomplishment and disbursement for
road maintenance over the last ten years. Routine maintenance is now entirely funded by the
Road Fund. Currently, 65 per cent of the regular Road Fund Budget is allocated to the Ethiopian
Roads Authority for the Federal Network, 25 per cent is allocated to the Regional Road
Authorities and 10 per cent to the Municipalities.
Table 2.16: Maintenance Budget and Disbursement on the Federal Network (Birr in Millions)
Year Routine and Periodic Maintenance Emergency and other Works
Budget Disbursement % Age Acc Budget Disbursement % Age Acc
(Million) (Million) (Million) (Million)
1997/98 158.4 117.9 74.4 10.8 5.6 51.9
1998/99 156.9 123.5 78.7 15.2 12.5 82.2
1999/00 152.0 118.2 77.8 17.0 15.2 89.4
2000/01 114.0 140.4 123.2 70.8 27.8 39.3
2001/02 119.7 176.2 147.2 178.0 31.0 17.4

2002/03 121.5 115.7 95.2 35.1 68.6 195.4
2003/04 127.0 192.8 151.8 163.2 140.5 86.1
2004/05 63.5 137.1 215.9 162.2 482.6 297.5
2005/06 144.1 172.5 119.7 112.4 298.4 265.5
2006/07 150.0 230.3 153.5 257.8 394.7 153.1
2007/08 186.7 234.8 125.7 161.3 400.6 248.3
2008/09 227.8 527.8 231.7 200.7 500.7 249.4
2009/10 223.4 516.9 251.5 196.2 491.1 250.3
2010/11 158.9 368.1 231.6 140.0 367.4 262.4
2011/12 426.9 493.1 115.5 320.3 310.9 97.1
2012/13 302.1 440.7 145.8 439.9 410.2 93.2
2013/14 516.8 577.2 111.6 370.9 376.1 101.4
Source: (ERA, 2014)

2.5.4 Road Maintenance Procedure
ERA identifies defects, determines the type and level of intervention required, and apportions the
budget for a Ethiopian Fiscal Year (EFY) for each road segment. It then issues a series of Work
Orders to ERCC to carry out certain quantities of different types of work in a road segment
(approx. 50km). When it receives a specific maintenance contract (i.e. Work Order), ERCC shall
plan Road Maintenance Works by:
 Identifying and determining ERA‟s requirements; and

 Making use of all ERA‟s planning procedures and guidelines for condition surveys, defect
identification, intervention planning, prioritization tools, etc (Smec, 2014).
According to Smec inception report (2014), ERA‟s Work Orders may not identify the locations
of the work items to be carried out, but may state only that a certain type of work (e.g. 300 Esq.
of pothole repairs) is to be carried out in a particular segment of road. In this case ERCC is then
responsible for determining the order of priority of defects in the segment and for carrying out
the specified quantities of Different types of repair. The report further emphasized that ERCC
conducts maintenance only when it receives a Work Order from ERA. ERCC shall not exceed
the value of the Work Order unless this is authorized by ERA. The following parties hold
maintenance supervision
 Routine maintenance is usually not supervised closely by ERA or other clients.

 Periodic maintenance is dealt with on a project basis as a small contract and is frequently
supervised by an independent consultant.
 Emergency maintenance is ordered by ERA and paid on a day works basis.
2.5.4.1 Road Maintenance Activities
ERCC shall implement road maintenance activities using ERA‟s maintenance requirements,
which include:
 Working in accordance with the Technical Specification for Road Maintenance Works, 2nd
Edition, August, 2003;
 Repairing defects in the segments nominated by ERA, according to the priority determined

by ERCC‟s inspection, or as otherwise instructed by ERA and

 Recording and reporting the maintenance works completed in the specified road segments
(source ERCC).
2.5.4.2 Defect Identification
Unless otherwise specified by specific contract conditions, Road Asset Defects in the road
network shall be identified by ERA. However, if so permitted, ERCC shall make use of all
ERA‟s procedures and guidelines to carry out inspections to survey road condition, and
document defects in the road network in accordance with ERA‟s Asset Inspection System; and
identify any defects, which have reached the Intervention Levels nominated in ERA
Specifications.
Once ERA has identified defects and issued Work Orders to ERCC for repairs, ERCC shall then
inspect each road segment to establish which particular defects should have priority within the
funding limits of the work that they have been authorized to do (Smec, 2014). ERCC should
obtain ERA‟s approval for their proposed priority for defect repairs, if this is required, and for
any suggestions that funds should be transferred to one type of repair in preference to another
repair, which ERCC considers to be less critical. When and where ERCC identifies defects,
which have not been identified by ERA previously, then ERCC should inform ERA of these
defects.
2.5.4.3 Bidding Strategies for Maintenance Projects
Maintenance projects are also apportioned every year based on fixed prices for work items
negotiated when ERCC was within ERA, so there is presently no practical trend / experience that
can be discussed with regards bidding strategy, processes and procedures. ERCC‟s draft
Transformation Plan (in Amharic), with regard to pricing, states that it must be fair and
competitive when addressing the Stakeholders‟ analysis (Smec, 2014).
2.5.4.4 Road Maintenance Activity unit rates
According to Smec (2014), it is noted that the current activity unit price was developed some
years ago, possibly in early 2000 E.C, and has been not been revised since then. The cost of

materials, labor rates, and machinery rental rates has increased many times in the intervening
period. In 2005, ERA had commissioned a study aiming to structure unit rate analysis for
maintenance works to be used for negotiations with Road fund, but the unit rates have not been
revised since 2000 (EC) (that is around 2008 (GC)). In fact, the prices of cost components have
increased considerably since 2000 (EC) and yet it was also noted that generally RMPs have been
recording profits each year (Smec, 2014).
2.5.4.5 Performance Based Maintenance
Performance-based contracting for the management and maintenance of roads is a recent model
designed to increase the efficiency and effectiveness of road maintenance operations. It should
make sure that the physical condition of the roads under contract is adequate for the need of road
users, over the total period of the contract which is normally several years. This form of contract
significantly develops the role of the private sector, from the simple execution of works to the
management and conservation of road assets.
One fundamental feature of the performance-based contract is that the Contractor is responsible
for designing, scheduling, and carrying out the actions he believes are necessary in order to
comply with the service quality levels stated in the contract. The service quality levels are
defined from a road user‟s perspective and may include factors such as average travel speeds,
riding comfort, safety features, etc. If the service quality is not achieved in any given month, the
payment for that month may be reduced or even suspended. Under the performance-based
contract, the Contractor has a strong financial incentive to be efficient. In order to maximize
profits, he must reduce his activities to the smallest possible volume of intelligently designed
interventions, which nevertheless ensure that pre-defined outputs (measured indicators of service
level) are achieved and maintained over time. To start a performance based maintenance
contract, ERA intended to employ the services of a qualified consulting firm to provide support
for the preparation and procurement of a pilot performance-based contract for the management
and maintenance of a still to identified selection of roads. The network of road to be included in
the contracts will total approximately 1,000 km and will include both paved and unpaved roads.

3. RESEARCH DESIGN AND METHODOLOGY
3.1 Introduction
The aim of the research is to study PBMCS in Ethiopian Federal Roads, thereby contributing to
effective implementation of the country‟s road maintenance program. The main objective is to
study Performance based Maintenance contracting system for the current federal road
maintenance practice in the country in reference with the current contracting system in place.
The research design and methodology to be followed towards this end are discussed as follows.
3.2 Research design
Qualitative Research of explanatory type will be adopted in order to diagnose a situation, assess
alternatives, and discover new ideas. The overall approach to be followed are; having established
the basis of the research, necessary data will be collected, analyzed, and conclusions and
recommendations will be made based on the findings. The methods of data collections employed
for the research are case study, desk study, and interview. The case study and desk study were
analyzed in relation to theoretical propositions, and the responses obtained from the interview
were also be analyzed. The next sections discuss the tools used for data collection and method of
analysis.
3.3 Data collection
3.3.1 Case study
In this study, the road maintenance contracts used in federal roads were chosen as one of the
tools to find out the answer for the 1st research question, “Is the current road maintenance
contractual practice implemented in the country satisfactory? The approach used to select
samples/projects for the case study was Criterion-based sampling in which, a case that serves the
real purpose and objectives of the research is selected. The criteria used for selecting projects are
listed here under:
 The projects shall be administered by Federal Road Agency (ERA).

 All Projects shall be contracted under routine and periodic maintenance in the ten districts.
 The duration of the contract shall be one year (from July 2013 to June 2014).

Status of road conditions in 2013/2014 FY., contract price, contact length, cost overrun/under
run and total birr consumed of all routine and periodic maintenance projects in the ten districts
were the data extracted from the case studies.
3.3.2 Desk study
Desk study was chosen as one of the instruments to assess and obtain actual data about the
practices road maintenance contracts from relevant studies, reports and documents.
3.3.3 Interview
Information for research questions was searched from key informants in order to deepen the
findings of the case study and desk study. Purpose of the interview was to assess the practices
and perceptions of key informants on road maintenance contracts and federal road maintenance
practices in general.
The interview schedule shown in the Appendix consists of four main questions as enumerated
from No. 2 to 4, Question 1 being inquiry about the informants‟ profile. The questions (2-4)
focus on the following issues.
Question No.2 focused on the current road maintenance contractual practice implemented in
Ethiopian federal roads. “What type of road maintenance contracting system do you use for
federal road maintenance”, “Do you find the current contractual practice implemented in the
country satisfactory?”, “If No, What are the major impediments of the current contractual
practice?” were the questions raised for the informants. These questions were intended to achieve
the first objective of the research.
Question No.3 was meant to study PBMCs for Ethiopian federal roads. “Do you use PBMCs for
maintaining federal Road?”, “Do you think the current road maintenance industry is suffering
from cost overrun/under run and poor condition of contracted road assets?” were some of the
questions forwarded to the key informants. The questions were intended to answer the the first
and second research objectives.

Question No.4 dealt with the major drawbacks in implementing PBMCs for the current
maintenance industry in Ethiopia. The questions were intended to achieve the fourth objective of
the research. Detail interview questions ad sample format is attached in the Annex-1.
3.4 Sample Size/Research population
The research population will be drawn from agencies involved in federal road maintenance
projects. ERA, ERCC, Ethiopian Road Fund and others contractors (very few) who are involved
in road maintenance. As much as possible attempts have been made so that the samples drawn
from the population are representatives. Professionals include those reputed experts engaged in
the road maintenance and were involved in it in the near past.
Based on the geographical locations Ethiopian Roads Authority has classified the countries road
network in to five regional areas. These are:
1. Northern ERA Regional areas

 Gonder District
 Adigrat District
 Debre Markos District
 Combolcha District
2. Southern ERA Regional areas
 Shashemene District
 Sodo District
3. Eastern ERA Regional areas
 Dire Dawa District
4. Western ERA Regional areas
 Jimma District
 Nekempte District
5. Central ERA Regional areas
 Alemgena District

Figure 3.1: Geographical model
The researcher uses each district on the road network for the study, as each represent the entire
population size.
3.5 Data Analysis
The case study and desk study were analyzed in relation to the theoretical propositions. The
method used to analyze the interview data is descriptive statistics method. This method of
analysis helps to analyze the responses in actual numbers.
All the data collected were organized and relevant answers were summarized in order to reach at
meaningful conclusion. Secondary data were used as supplementary source of information.

4. RESULTS AND DISCUSSION
4.1 General Overview
This chapter deals with the analysis of the information‟s gathered from case study, desk study
and interview, which includes analysis of contractual data for the ten road maintenance districts
in the country, tendency of cost overrun versus contract amount, its extent, the status of the road
conditions contracted, the type of contracts practiced and overview of performance based road
maintenance contracting system for Ethiopian federal roads. The case study was conducted
within the parties engaged in road maintenance i.e. ERA (client), Ethiopian Road fund
Administration (Financer) and ERCC (Contractor). The documents referred during desk study
include, progress reports, contract documents, Financial Reports and other related documents.
Interviews were also conducted with key informants involved in road maintenance in order to
deepen the findings of case study and desk study.
4.2 Case Study
In this study, the road maintenance contracts used in federal roads were chosen as one of the
tools to find out the answer for the 1st research question, “Is the current road maintenance
contractual practice implemented in the country satisfactory? The approach used to select
samples/projects for the case study was Criterion-based sampling in which, a case that serves the
real purpose and objectives of the research is selected. Thus, 10 districts under ERCC under
contract to maintain federal roads were studied.
4.2.1 Adigirat Road Maintenance Project
Adigrat Road Maintenance Project is located in the Northern corridor of Ethiopia in Tigray
Regional State. The Head Quarter of the Project is located at 903 Km from Addis Ababa in
Adigrat Town. The road maintenance area is divided into four work executions. These are:
 Maichew Work Execution Team

 Adiabun Work Execution Team
 Shire Work Execution Team and
 Mekelle Work Execution Team.

Under all work execution teams there is 1090 km of asphalt road and 567 km of gravel road.
Adigrat road maintenance district is connected at Waja with Combolcha road maintenance
project, at Boya river and Humera with Gonder road maintenance project and at Zalambeassa
with Eritrea.
The road network links the other parts of Ethiopia with the northern extremes of the country,
facilitating the social, economic and political interactions of people with in the regional state and
the country as a whole. It also links the vast Farmland Humera with the central part of the region.
The network also facilitates the transportation of industrial and agricultural products to the other
parts of Ethiopia, further enhancing access for tourism in the areas of Axum, Debre-Damo and
and Yeha Temple. In 2013/14, fiscal year (FY) 707km of roads was under Routine Maintenance
contract while the periodic maintenance contracts covers 53 km.
Table 4.1: Contractual Data for Routine Maintenance under Adigrat District
Basic Contractual Data for Routine Maintenance under Adigrat District

Original
Source commencement Type of Contract Advance Contract Completion
No Project (Fund) Client Contractor Consultant Date Contract Price Payment Length Date
ERCC Adigrat
Ethiopian
Routine (Adigrat Road Road Taditional 15,600,000 3,120,000
1 Road fund Roads July,2013 707 km 365 Days
Maintenance maintenance Network Unit Rate ETB ETB
Authority
Project) Management
Table 4.2: Contractual Data for Periodic Maintenance under Adigrat District
Basic Contractual Data for Periodic Maintenance project under Adigrat District
Original
No Project (Fund) Client Contractor Consultant Date Contract Price Payment Length Date
ERCC (Adigrat
Ethiopian Nomy
Road Taditional 8,000,000 1,600,000
1 Sekota Agbe Road fund Roads consulting July,2013 20 km 365 Days
maintenance Unit Rate ETB ETB
Authority PLC
Project)
ERCC (Adigrat
Ethiopian Nomy
Maichew Road Taditional 800,000
2 Road fund Roads consulting July,2013 4,000,000 ETB 15 km 365 Days
Betmera maintenance Unit Rate ETB
Authority PLC
Project)
ERCC (Adigrat
Ethiopian Nomy
Mehoni Road Taditional 5,100,000 1,020,000
3 Road fund Roads consulting July,2013 18 km 365 Days
Maichew maintenance Unit Rate ETB ETB
Authority PLC
Project)

4.2.1.1 Overview of Road Maintenance Contracting Data and Road Conditions under Adigrat
RMP
Routine Maintenance: Routine Maintenance contract price, status of road condition and cost
overrun for road segments contracted under routine maintenance in 2013/2014 FY of Adigrat
Road Maintenance Project.
Table 4.3: Routine Maintenance Contract Price and Road Condition under Adigrat District
%cost Status of the Road condition (%) 2013/2014
Original Total Birr Original Executed
Cost Over Overrun FY.
No. Project Contract Consumed Contract Contract
Run Original
Price 2013/2014 FY. Length length
Price Good Fair Poor
Routine
1 Maintenance 15,600,000 9,268,000 24,868,000.00 59.41 707 km 707 km 76 14 10
Periodic Maintenance: Periodic Maintenance contract price, status of road condition and cost
overrun for road segments contracted under Periodic Maintenance in 2013/2014 FY of Adigrat
Road Maintenance Project.
Table 4.4: Basic Contractual Data and Status of road conditions for periodic maintenance under Adigrat
RMP
%cost Status of the Road condition (%)
Cost Over Overrun/ 2013/2014 FY.
Run Original
Price 2013/2014 FY. Length length
1 Sekota Agbe 8,000,000 0 8,000,000.00 - 20 km 21 km 70 20 10

Maichew
2 Betmera 4,000,000 10,000,000 14,000,000.00 100+ 15 km 15 km 60 15 25
Mehoni
3 Maichew 5,100,000 951,000 6,051,000.00 18.65 18 km 18 km 80 10 10
Total 17,100,000 10,951,000 28,051,000 64.04 53 km 54 km
Table 4.5 below shows Adigrat Road Maintenance Project overall contacting Price, Cost overrun
and Status of Road Condition in 2013/2014, FY for both routine and periodic maintenance
projects.

Table 4.5: Adigrat Road Maintenance Project Contractual price and Status of the road
Original Total Birr
Cost Over Overrun/ 2013/2014 FY.
No. Project Contract Consumed
Run Original
Price 2013/2014 FY.
1 Adigrat RMP 32,700,000 20,219,000 52,919,000.00 61.83 76 14 10
4.2.2 Shashemene Road Maintenance Project
Shashemene Road maintenance is located in the southern parts of the country and is composed of
Oromia Region (North, West and East), Southern Region (South) and Somalia Region (South
Eastern). Shashemene project is located 246 km from Addis Ababa at Shashemene town. The
terrain of the project is mountainous (bale mountains) at Dodola and Robe work executions team
and plane for the rest.
The district is composed of six maintenance sections. These are:
 Alaba-Shashemene-H/Mariam Execution Team

 Asela-Bokoji-Sebsbewasha Execution Team
 K/Mengist section Execution Team
 Robe section Execution Team
 Robe-Goro-Ginner Execution Team and,
 Dilla Execution Team.
The district covers a total network length of 2716 km of which 593 km is asphalt and 2123 km
Gravel road. The road network links parts of Northern, Eastern and Southern Oromia regions
acting as the only means of for transportation of goods to the other areas of Ethiopia. Bale
Mountains, National Park, Dinsho National Park and Soph-omore cave can be accessed through
this network. The southern part of the network also leads to Kenya. In 2013/2014 Fiscal year
1035km of roads was under Routine Maintenance contract while the periodic maintenance
contracts cover 138 km.

Table 4.6: Contractual Data for Routine Maintenance under Shashemene RMP
Basic Contractual Data for Routine Maintenance under Shashemene District
Original
commencement
Source Type of Contract Advance Contract Completion
Date
No. Project (Fund) Client Contractor Consultant Contract Price Payment Length Date
ERCC
Shashemene
Ethiopian (Shashemene
Routine Road Taditional 22,000,000 4,400,000
1 Road fund Roads Road July,2013 1035 km 365 Days
Maintenance Network Unit Rate ETB ETB
Authority maintenance
Management
Project)
Table 4.7: Contractual Data for Periodic Maintenance Projects under Shashemene District
Source commencement Type of Original Advance Contract Completi
No. Project (Fund) Client Contractor Consultant Date Contract Contract Price Payment Length on Date
ERCC
Fine Taditional 6,347,826.09 1,269,565
1 Bidre Bitata Road fund Roads Road July,2013 25 km 365 Days
Engineers Plc Unit Rate ETB ETB
Project)
ERCC
Shashemene
Goba Road Taditional 1,760,000
2 Road fund Roads Road July,2013 8.800,000 ETB 25 km 365 Days
Dollemena Network Unit Rate ETB
Management
Project)
ERCC
Shashemene
Bulbula Road Taditional 1,500,000
3 Road fund Roads Road July,2013 7,500,000 ETB 25 km 365 Days
Algae Network Unit Rate ETB
Management
Project)
ERCC
Shashemene
Apposto- Road Taditional 660,000
Yirgalem Network Unit Rate ETB
Management
Project)
ERCC
Shashemene
H/mariam- Road Taditional 1,660,000
Burji Network Unit Rate ETB
Management
Project)
Shashemene RMP
overrun for road segments contracted under Routine Maintenance in 2013/2014 FY of
Shashemene road Maintenance Project.

Table 4.8: Routine Maintenance Contract price and status of the road under Shashemene RMP
Total Birr %cost Status of the Road condition (%)
Original Original Executed
Cost Over Consumed Overrun / 2013/2014 FY.
No. Project Contract Contract Contract
Run 2013/2014 Original
Price Length length
FY. Price Good Fair Poor
Routine
Periodic Maintenance: Periodic maintenance contract price, status of road condition and cost
overrun for road segments contracted under periodic maintenance in 2013/2014 FY of
Shashemene Road Maintenance Project.
Table 4.9: Basic Contractual Data and Status of road conditions for periodic maintenance
projects under Shashemene RMP

Price Length length
FY. Price
Good Fair Poor
1 Bidre Bitata 6,347,826 5,177,485 11,525,311.00 81.56 25 km 25 km 50 50
Goba
2 Dollemena 8,800,000 8,440,928 17,240,928.00 95.92 25 km 25 km 35 40 25
Bulbula
3 Algae 7,500,000 3,491,311 10,991,311.00 46.55 25 km 29 km 90 10
Apposto-
4 Yirgalem 3,300,000 -3,300,000 - (100.00) 8 km 70 20
H/mariam-
5 Burji 8,300,000 -1,404,245 6,895,754.68 (16.92) 30 km 30 km 80 20
Total 34,247,826 12,405,479 46,653,305 36.22 113 km 109 km
Table 4.10 below shows Shashemene Road Maintenance Project overall contacting Price, Cost
overrun and Status of Road Condition in 2013/2014 FY for both routine and periodic
maintenance projects.
Table 4.10: Shashemene Road Maintenance Project Contract price and Status of the road

Total Birr
Consumed %cost Status of the Road condition (%)
Original
Cost Over 2013/2014 Overrun / 2013/2014 FY.
No. Project Contract
Run FY. Original
Price
Price
Good Fair Poor
Shashemene
1 RMP 56,247,826 17,132,949 73,380,774.68 30.46 62 22 16
4.2.3 Combolcha Road Maintenance Project

Combolcha road maintenance is located in Amhara Region, at Combolcha town about 375 Km
North East of Addis Ababa. In the region where the road network of the project is located, the
terrain is composed of almost all classes; flat, rolling, hilly and mountainous. The network is
very essential for socio economic development of the region.it facilitates the measure trade
activity of the country since it has the road segment linking Ethiopia Djibouti port and those off
the region for exchange of commodities, business and marketing.
There are five sections under the Combolcha road maintenance project these are:
 Combolicha work Execution Team
 Woldia work Execution Team
 Dithoto work Execution Team
 Tenta work Execution Team and
 Gashena work Execution Team.
The district covers a total network length of 2124 km of which 119 km is asphalt and 2005 km
Gravel road. In 2013/2014, FY 840km of roads was under Routine Maintenance contract while
the three selected periodic maintenance contracts covers 70km.
Table 4.11 below shows Basic Contractual Data for Routine and selected Periodic Maintenance
projects under Combolcha Road Maintenance Projects.
Table 4.11: Contractual Data for Routine Maintenance under Combolcha RMP
Basic Contractual Data for Routine Maintenance under combolicha District
Original
No. Project (Fund) Client Contractor Consultant Date Contract Price Payment Length Date
ERCC
Combolcha
Ethiopian (Combolcha
Management
Project)

Table 4.12: Contractual Data for Periodic Maintenance under Combolcha RMP
Basic Contractual Data for Periodic Maintenance project under Combolcha District
Original
ERCC
Combolcha
Bito River Road Taditional 7,300,000 1,460,000
Akesta Network Unit Rate ETB ETB
Management
Project)
ERCC
Ethiopian (Combolcha Segenet
Guguftu Taditional 7,600,000 1,520,000
2 Road fund Roads Road Engineering July,2013 20 km 365 Days
Dogolo Unit Rate ETB ETB
Authority maintenance Plc.
Project)
ERCC
Ethiopian (Combolcha Segenet
Lalibela Taditional 11,286,253.53 2,257,250.7
3 Road fund Roads Road Engineering July,2013 20 km 365 Days
Kobo Unit Rate ETB 1 ETB
Authority maintenance Plc.
Project)
ERCC
Combolcha
Degolo-Beto Road Taditional 10,050,000 2,010,000
River Network Unit Rate ETB ETB
Management
Project)
4.2.3.1 Overview of Road Maintenance Contracting Data and Road Condition under Combolcha
RMP
overrun for road segments contracted under routine maintenance in 2013/2014 FY of Combolcha
road Maintenance Project.
Table 4.13: Routine Maintenance Contract price and status of the road under Combolcha RMP
Original Total Birr Original Executed 2013/2014 FY.
Cost Over Overrun /
Run Original
Price 2013/2014 FY. Length Length
Routine
Periodic Maintenance : Periodic maintenance contract price, status of road condition and cost
overrun for road segments contracted under Periodic Maintenance in 2013/2014 FY of
Combolcha road Maintenance Project.

Table 4.14: Basic Contractual Data and Status of road conditions for periodic maintenance under
Combolcha RMP
Cost Over Overrun / 2013/2014 FY.
Run Original
Beto River
25 km 25 km
1 Akesta 7,300,000 105,140 7,405,140.00 1.44 60 40
Gugufto 20 km 21 km
2 Dogolo 7,600,000 0 7,600,000.00 - 27.5 72.5
Lalibela 20 km 27 km
3 Kobo 11,286,254 713,746 12,000,000.00 6.32 27.5 72.5
Degolo-Beto 30 km 30 km
4 River 10,050,000 0 10,050,000.00 - 40 60
Total 36,236,254 818,886 37,055,140.00 2.26 95 km 103 km
Table 4.15 below shows Combolcha Road Maintenance Project overall contacting Price, Cost
overrun and Status of Road Condition in 2013/2014 FY for both routine and periodic
Table 4.15: Combolcha Road Maintenance Project Contract price and Status of the road
Original Total Birr %cost Status of the Road condition (%)
Cost Over
No. Project Contract Consumed Overrun / 2013/2014 FY.
Run
Price 2013/2014 FY. Original Good Fair Poor
1 Combolcha
RMP 50,336,254 16,814,287 67,150,541 33.40 50 24 26
4.2.4 Dire Dawa Road Maintenance project
Dire Dawa Road Maintenance Project is located at Dire Dawa Town, 515 km from Addis Ababa.
The road network under Dire Dawa connects Afar, Somalia, Oromia and Harari Regions. The
network stretches from flat terrain and arid area in the afar and Somalia region to the very rugged
mountainous terrain in the middle and western Hararge in the Oromia Region. It plays a great
role in the socio economic development of the regions as well as facilitating the mobilization of
people and goods from one region to the other.

Dire Dawa road maintenance project has five operational work execution tems under it. These
are:
 Awash Dengego Work Execution Team
 Dire Dawa-Harar-Jijiga Work Execution Team
 Dengego work Execution Team
 Albereket Shek Husen Work Execution Team and,
 Jijiga Work Execution Team.
The project is composed of 1393 Km paved and 1467 Km Unpaved roads. In 2013/2014 Fiscal
year 1093 km of roads was under Routine Maintenance contract while the periodic maintenance
contracts covers 80km.
Table 4.16: Contractual Data for Routine Maintenance under Dire Dawa District
Basic Contractual Data for Routine Maintenance under Dire Dawa District
Original
commencement
Date
ERCC (Dire Dire Dawa
Ethiopian
Routine Dawa Road Road Taditional 20,600,00 4,120,000
Maintenance maintenance Network Unit Rate 0 ETB ETB
Authority
Project) Management
Table 4.17: Contractual Data for Periodic Maintenance under Dire Dawa District
Basic Contaractual Data for Periodic Maintenance under Dire Dawa District
commencement Original
Source Date Type of Contract Advance Contract Completion

Ethiopian
Dire Dawa Dawa Road Road Taditional 25,500,00 5,000,000
Dewelle maintenance Network Unit Rate 0 ETB ETB
Authority
Project) Management

Ethiopian
Melka Jebdu Dawa Road Road Taditional 6,700,000 1,340,000
Hurso maintenance Network Unit Rate ETB ETB
Authority
Project) Management

Ethiopian
Dawa Road Road Taditional 5,200,000 1,040,000
3 Kobo Deder Road fund Roads July,2013 13 km 365 Days
maintenance Network Unit Rate ETB ETB
Authority
Project) Management

4.2.4.1 Overview of Road Maintenance Contracting Data and Road Condition under Dire Dawa
RMP
Routine Maintenance: Routine maintenance contract price, status of road condition and cost
overrun for road segments contracted under Routine Maintenance in 2013/2014 FY of Dire
Dawa road Maintenance Project.
Table 4.18: Routine Maintenance Contract price and status of the road under Dire Dawa RMP

Price Length Length
Routine
Periodic Maintenance :Routine maintenance contract price, status of road condition and cost
overrun for road segments contracted under Periodic Maintenance in 2013/2014 FY under Dire
Dawa road Maintenance Project.
Dire Dawa RMP
Price Length Length Good Fair Poor
FY. Price
Dire Dwa
1 Dewelle 25,000,000 17,002,128 42,002,128.18 68.01 50 km 50 km
Melka Jebdu-
2 Hurso 6,800,000 -401,077 6,398,923.19 (5.90) 17 km 14 km 60 30 10
3 Koba Deder 5,200,000 -320,763 4,879,236.61 (6.17) 13 km 19 km 60 30 10
Total 37,000,000 16,280,288 53,280,288 44.00 80 km 83 km
Table 4.20 below shows Dire Dawa Road Maintenance Project overall contacting Price, Cost
overrun and Status of Road Condition in 2013/2014, FY for both routine and periodic

Table 4.20: Dire Dawa Road Maintenance Project Contract price and Status of the road
Original 2013/2014 FY.
Cost Over Consumed Overrun /
Price
Dire Dawa
1 Project 57,600,000 22,557,074 80,157,074.40 39.16 59 23 18
4.2.5 Debre-Markos Road Maintenance Project
Debre-Markos Road Maintenance Project, which undertakes maintenance activities within

Amhara and Benishangul Gumuz eight regions in the northwestern part of Ethiopia, is located at
300 km from Addis Ababa. The terrain can be taken as flat, rolling and mountainous. The project
road network is divided into 27 road segments, classified as trunk and link roads. The district
performs planned maintenance activities through four work execution, namely;
 Dejen Work Execution Team

 Bure Work Execution Team
 Bahirdar Work Execution Team and
 Chagnie Work Execution Team.
The Project covers a total network length of 1527 km of which 335 km is asphalt and 1172 km
Gravel road.
In 2013/2014 Fiscal year 1093km of roads was under Routine Maintenance contract while the
periodic maintenance contracts covers 80km.Table 4.21 below shows Basic Contractual Data for
Routine and Periodic Maintenance Works under D/Markos Road Maintenance Project.
Table 4.21: Contractual Data for Routine Maintenance under D/Markos RMP
Basic Contractual Data for Routine Maintenance under Debre Markos District
commencement Original
Source Date Type of Contract Advance Contract Completion
ERCC (Dire Debre
Ethiopian
Routine Dawa Road Markos Road Taditional 35,000,00 7,000,000
Maintenance maintenance Network Unit Rate 0ETB ETB
Authority
Project) Management
.

Table 4.22: Contractual Data for Periodic Maintenance under D/Markos RMP
Basic Contractual Data for Periodic Maintenance under Debre Markos District
Original
commencement
Date
ERCC (Dire Debre
Powe Ethiopian
Dawa Road Markos Road Taditional 10,000,00 2,000,000
1 Juncttion Road fund Roads July,2013 30 km 365 Days
maintenance Network Unit Rate 0ETB ETB
Guba Authority
Project) Management
ERCC (Dire Debre

Ethiopian
D/Markos Dawa Road Markos Road Taditional 8,300,000 1,660,000ET
Rob Gebeya maintenance Network Unit Rate ETB B
Authority
Project) Management
ERCC (Dire Debre

Ethiopian
D/Markos Dawa Road Markos Road Taditional 10,296,39 1,660,000ET
Bitchena maintenance Network Unit Rate 6 ETB B
Authority
Project) Management
ERCC (Dire Debre

Debate- Ethiopian
Dawa Road Markos Road Taditional 7,000,000 1,400,000
4 junction- Road fund Roads July,2013 25 km 365 Days
maintenance Network Unit Rate ETB ETB
Debate Authority
Project) Management
ERCC (Dire Debre

Ethiopian
Felegeberhan- Dawa Road Markos Road Taditional 8,000,000 1,600,000ET
B/Dar maintenance Network Unit Rate ETB B
Authority
Project) Management
4.2.5.1 Overview of Road Maintenance Contracting Data and Road Condition under D/Markos
RMP
overrun for road segments contracted under Routine Maintenance in 2013/2014 FY of
D/Markos road Maintenance Project.
Table 4.23: Routine Maintenance Contract price and status of the road under D/Markos RMP
Price Length Length
Routine
1 Maintenance 35,000,000 -2,047,560 32,952,440 (5.85) 1278 km 1071km 35 26 39

Periodic Maintenance :Periodic maintenance contract price, status of road condition and cost
D/Markos road maintenance Project.
D/Markos RMP
Price Length Length
Powe
junction
1 Guba 10,000,000 7,300,000 17,300,000 73.00 30 km 30 km 10 20 70
D/Markos
2 Rob Gebeya 8,300,000 -1,759,148 6,540,852 (21.19) 25 km 25 km 30 30 40
D/Markos
3 Botchena 7,200,000 3,096,396 10,296,396 43.01 25 km 33 km 30 30 40
Debate-
junction-
4 Debate 7,000,000 0 7,000,000 - 25 km 25 km 10 20 70
Felegeberhan-
5 B/Dar 8,000,000 -2,375,167 5,624,833 (29.69) 30 km 30 km 10 40 50
Total 32,200,000 14,562,081 46,762,081 45.22 135 km 142 km
Table 4.25 below shows D/Markos Road Maintenance Project overall contacting Price, Cost
overrun and Status of Road Condition in 2013/2014, FY for both routine and periodic
Table 4.25: D/Markos Road Maintenance Project Contract price and Status of the road
Original
Price
D/Markos
1 Project 67,200,000 12,514,521 79,714,521 18.62 35 26 39
4.2.6 Sodo Road Maintenance Project
Sodo Road Maintenance Project is located in the southern part of the country, at Wolaita-Sodo
town, 330 km south west of Addis Ababa. In the region where the road network is located, the
terrain is composed of almost all classes; flat, rolling, hilly and mountainous.

There are four road maintenance work executions (sections) under the management of sodo road
maintenance district. These are:
 Soda Work Execution Team
 Konso Work Execution Team
 Turmi Work Execution Team and
 Mega Work Execution Team.
The Project covers a total network length of 1966 km of which 777 km is asphalt and 1189 km
Gravel road. Important resources for the region for socio economic development include cash
crops like coffee, fruits, teff and butter. The road network facilitates the transportation of people
within the region and those off the region for exchange of commodities, business and marketing.
In 2013/2014, FY 921 km of roads was under Routine Maintenance contract while the periodic
maintenance contracts covers 60 km. Table 4.26 below shows Basic Contractual Data for
Routine and Periodic Maintenance Works under D/Markos Road Maintenance Project.
Table 4.26: Contractual Data for Routine Maintenance under Sodo RMP
Basic Contractual Data for Routine Maintenance under Sodo District
Original
commencem
ent Date
ERCC (Sodo
Ethiopian Sodo Road
1 Road fund Roads Network July,2013 921 km 365 Days
Maintenance maintenance Unit Rate ETB ETB
Authority Management
Project)

Table 4.27: Contractual Data for Periodic Maintenance under Sodo RMP
Basic Contractual Data for Periodic Maintenance under Sodo District

Original
commencem
ent Date
No. project (Fund) Client Contractor Consultant Contract Price Payment Length Date
ERCC (Sodo
Ethiopian Fine
1 Sodo Areka Road fund Roads Engineers July,2013 10 km 365 Days
Authority Plc
Project)
ERCC (Sodo
Ethiopian Sodo Road
Wachile Road Taditional 7,000,000 1,400,000
2 Road fund Roads Network July,2013 25 km 365 Days
Bulbule maintenance Unit Rate ETB ETB
Project)
ERCC (Sodo
Ethiopian Sodo Road
3 Konso Burji Road fund Roads Network July,2013 25 km 365 Days
Project)
4.2.6.1 Overview of Road Maintenance Contracting Data and Road Condition under Sodo RMP
overrun for road segments contracted under Routine Maintenance in 2013/2014 FY of Sodo road
maintenance Project.
Table 4.28: Routine Maintenance Contract price and status of the road under Sodo RMP

Price Length Length
Routine
1 Maintenance 24,700,000 15,596,825 40,296,825 63.15 921 km 921 km 27 48 24
Periodic Maintenance: Periodic maintenance contract price, status of road condition and cost
overrun for road segments contracted under Periodic Maintenance in 2013/2014 FY of Sodo road
Maintenance Project.

Table 4.29: Periodic Maintenance Contract price and status of the road under Sodo RMP

Price Length Length
1 Sodo Areka 6,500,000 1,000,000 7,500,000 15.38 10 km 4 km 100

Wachile
2 Bulbule 7,000,000 1,908,085 8,908,085 27.26 25 km 25 km 100
3 Konso Burji 7,500,000 1,015,377 8,515,377 13.54 25 km 25 km 100
Total 21,000,000 3,923,462 24,923,462 18.68 60 km 54 km
Table 4.30: Sodo Road Maintenance Project Contract price and Status of the road

Original 2013/2014 FY.
Cost Over Consumed Overrun /
Price
1 Sodo Project 45,700,000 19,520,287 65,220,287 42.71 27 48 24
4.2.7 Jimma Road Maintenance Project
Jimma Road maintenance project is responsible for the maintenance of federal roads found in
south west Ethiopia namely Oromia, SNNP and Gambella Regional states. Currently, the total
network of the road maintenance project covers 2562 km of road, out of this 582 km is asphalt
and the remaining 1980 km being gravel. Most of the existing condition of the road is highly
deteriorated due to high traffic, heavy rainfall prevailing in the network area and absence of
timely maintenance intervention.
There are five work execution teams under Jimma road maintenance project. These are:
 Jimma Work Execution Team

 Metu Work Execution Team
 Teppi Work Execution Team

 Chidda Work Execution Team and

 Gambella work Execution Team.
The road network traverse through coffee, and the maintenance of the road plays important role
in terms of social ,economical and political aspects of the local regions in particular and the
country as a whole. In 2013/2014, FY 1297 km of roads was under Routine Maintenance
contract while the periodic maintenance contracts covers 65 km.
Table 4.31: Contractual Data for Routine Maintenance under Jimma RMP
Original
commencement
Date
Project (Fund) Client Contractor Consultant Contract Price Payment Length Date
ERCC (Jimma
Jimma Road
Routine Ethiopian Roads Road Taditional 60,000,000 12,000,000
Road fund Network July,2013 1297 km 365 Days
Maintenance Authority maintenance Unit Rate ETB ETB
Management
Project)
Table 4.32: Contractual Data for Periodic Maintenance under Jimma RMP
Basic Contractual Data for Periodic Maintenance under Jimma District
Source commencement Type of Original Advance Contract Completion
No. project (Fund) Client Contractor Consultant Date Contract Contract Payment Length Date
ERCC (Jimma
Jimma Road
Ethiopian Roads Road Taditional 10,000,000 2,000,000
1 Jimma Agaro Road fund Network July,2013 15 km 365 Days
Authority maintenance Unit Rate ETB ETB
Management
Project)
ERCC (Jimma
Jimma Road
Gimbo Ethiopian Roads Road Taditional 8,000,000 1,600,000
2 Road fund Network July,2013 25 km 365 Days
Gojebe Authority maintenance Unit Rate ETB ETB
Management
Project)
ERCC (Jimma
Limmu Jimma Road
Ethiopian Roads Road Taditional 8,000,000 1,600,000
3 Junction Road fund Network July,2013 25 km 365 Days
Authority maintenance Unit Rate ETB ETB
Kosse Management
Project)
4.2.7.1 Overview of Road Maintenance Contracting Data and Road Condition under Jimma
RMP
overrun for road segments contracted under Routine Maintenance in 2013/2014 FY of Jimma
road maintenance Project.

Table 4.33: Routine Maintenance Contract price and status of the road under Jimma RMP
Status of the Road condition (%)
%cost
Overrun /
No. Project Contract Cost Over Run Consumed Contract Contract
Original
Price
Good Fair Poor
Routine
1 Maintenance 60,000,000 -11,269,092 48,730,908 (18.78) 1297 km 955 km 27 27 46
overrun for road segments contracted under Periodic Maintenance in 2013/2014 FY of Jimma
Table 4.34: Periodic Maintenance Contract price and status of the road under Jimma RMP
Overrun /
No. Project Contract Cost Over Run Consumed Contract Contract
Original
Jimma Agaro
1 10,000,000 -9,614,627 385,373 (96.15) 15 km 12 km 10 20 70
Gimbo Gojebe
2 8,000,000 306,393 8,306,393 3.83 25 km 28 km 20 80
Limmu Junction
3 Kosse 8,000,000 -7,376,763 623,237 (92.21) 25 km 5 km 10 20 70
Total 26,000,000 -16,684,997 9,315,003 (64.17) 65 km 45 km
Table 4.35: Jimma Road Maintenance Project Contract price and Status of the road

Original Total Birr
Overrun / 2013/2014 FY.
No. Project Contract Cost Over Run Consumed
Original
Price 2013/2014 FY.
1 Jimma RMP 86,000,000 -27,954,089 58,045,911 (32.50) 27 27 46
4.2.8 Gonder Road Maintenance Project
Gonder Road Maintenance Project is one of the ten road Maintenance projects in the country
undertaking routine and periodic maintenance activities in the north and northwestern part of the
country. The road network lies partly on Amhara and Partly on Tigray regional states. The head
quarter of the maintenance project is located at Historic city of Gonder Town about 750 km away
from Addis Ababa.

The road network passes through mountainous terrain of Limalimo rough ad rugged area closer
to Semien Mountain; the plateau of Wagera and Fogera and low land areas of Tach Armacheho
and Metema. The road network has an access to Port Sudan, Djibouti, Lake Tana and vast
agricultural fields of Humera and Maikadra.
Gonder is a home for Fassiladas castle, island of Lake Tana, Nile Fall and Semien Mountains,
which have a great attraction for tourists and accessed by using the road network under the
district. The network plays a vital role in boosting trade, tourism and Transportation. The RMP is
responsible for the maintenance of 1449 km of roads, out of which 688 km is gravel surfaced and
the rest 761 km is Asphalt.
Gonder has three work executions under taking maintenance activities on 25 road segments. These are:
 Debre Tabor Work Execution Team
 Debark Work Execution Team and
 Azezo Work Execution
In 2013/2014, FY 1155 km of roads was under Routine Maintenance contract while the three
selected periodic maintenance contracts cover 150 km. Table4.36 below shows Basic
Contractual Data for Routine and Periodic Maintenance Works under Gonder Road Maintenance
Project.
Table 4.36: Contractual Data for Routine Maintenance under Gonder RMP
Basic Contaractual Data for Routine Maintenance under Jimma District
Original
ERCC
Gonder
Ethiopian (Gonder
Management
Project)

Table 4.37: Contractual Data for Periodic Maintenance under Gonder RMP
Basic Contractual Data for Periodic Maintenance under Gonder District
Original
commence
ment Date
ERCC
Gonder
Ethiopian (Gonder
1 Shehdei Gelgo Road fund Roads Road July,2013 35 km 365 Days
Network Unit Rate ETB ETB
Management
Project)
ERCC
Gonder
Ethiopian (Gonder
Addis Zemen Road Taditional 7,300,000E 1,460,000
Abnet Network Unit Rate TB ETB
Management
Project)
ERCC
Gonder
Ethiopian (Gonder
3 Hamusit Aste Road fund Roads Road July,2013 35 km 365 Days
Management
Project)
ERCC
Gonder
Ethiopian (Gonder
4 Delgi Chwahit Road fund Roads Road July,2013 25 km 365 Days
Management
Project)
ERCC
Gonder
Ethiopian (Gonder
Gasay - Road Taditional 8,000,000 1,600,000
Semada Network Unit Rate ETB ETB
Management
Project)
4.2.8.1 Overview of Road Maintenance Contracting Data and Road Condition under Gonder
RMP
overrun for road segments contracted under Routine Maintenance in 2013/2014 FY of Gonder
Table 4.38: Routine Maintenance Contract price and status of the road under Gonder RMP
Price Length Length
Routine

Periodic Maintenance :Periodic Maintenance price, status of road condition and cost overrun
for road segments contracted under Periodic Maintenance in 2013/2014 FY of Gonder road
maintenance Project.
Table 4.39: Periodic Maintenance Contract price and status of the road under Gonder RMP
Price Length Length
Shehdei Gelgo
1 6,800,000 5,807,903 12,607,903 85.41 35 km 35 km 60 20 20
Addis Zemen
2 Abnet 7,300,000 1,143,091 8,443,091 15.66 30 km 20 km 50 50
Hamusit Aste
3 7,500,000 2,752,571 10,252,571 36.70 35 km 35 km 30 70
Delgi Chwahit
4 6,700,000 3,486,101 10,186,101 52.03 25 km 25 km 30 70
Gasay -
5 Semada 8,000,000 -13,436 7,986,564 (0.17) 25 km 25 km 30 70
Total 36,300,000 13,176,230 49,476,230 36.30 160 km 140 km
Table 4.40: Gonder Road Maintenance Project Contract price and Status of the road
Original
Price
1 Gonder RMP 61,500,000 5,945,153 67,445,153 9.67 62 23 15
4.2.9 Nekempte Road Maintenance Project
Nekempte road maintenance project is located in western part of the country, at Nekempte Town,
330 km away from Addis Ababa. Most of the network passes through mountainous area,
anticipating heavy rainfall most of the time. The road network serves the society of the region by
facilitating transportation in parts of Oromia, Gambela, Amhara and Benishangul Region. It
provides access for health centers further enhancing socioeconomic development of the country.
The area is well known for coffee, marble stone and „selit‟ and the road network helps to
transport these products to the various parts of the country.

The road network covers 1785 km of road out of which 547 km is paved and the remaining 1268
km is gravel. The road maintenance project has five work execution teams undertaking
maintenance activities. These are:
 Bako work Execution Team
 Nedjo Work Execution Team
 Assosa Work Execution Team
 Nekempte Work Execution Team and
 Gimbi Work Execution Team.
In 2013/2014 Fiscal year 1035 km of roads was under Routine Maintenance contract while the
three selected periodic maintenance contracts covers 67 km. Table 4.41 below shows Basic
Contractual Data for Routine and Periodic Maintenance Works under Nekempte Road
Table 4.41: Contractual Data for Routine Maintenance under Nekempte RMP
Basic Contractual Data for Routine Maintenance under Nekempte District
Original
ERCC
Nekempte
Ethiopian (Nekempte
Management
Project)
Table 4.42: Contractual Data for Periodic Maintenance under Nekempte RMP
Basic Contractual Data for Periodic Maintenance under Nekempte District
Original
commencement
Date
ERCC
Nekempte
Ethiopian (Nekempte
1 Gedo Fincha Road fund Roads Road July,2013 17 km 365 Days
Management
Project)
ERCC
Nekempte
Ethiopian (Nekempte
Shambu Road Taditional 7,800,000 1,560,000
Agemsa Network Unit Rate ETB ETB
Management
Project)
ERCC
Nekempte
Ethiopian (Nekempte
Uke Gutin Road Taditional 7,600,000 1,520,000
Gida Network Unit Rate ETB ETB
Management
Project)

4.2.9.1 Overview of Road Maintenance Contracting Data and Road Condition under Nekempte
RMP
overrun for road segments contracted under Routine Maintenance in 2013/2014 FYof Nekempte
road Maintenance Project.
Table 4.43: Routine Maintenance Contract price and status of the road under Nekempte RMP
Total Birr %cost Status of the Road condition
Cost Over Consumed Overrun / (%) 2013/2014 FY.
Price Length Length
Routine
1 Maintenance 21,600,000 25,692,447 47,292,447 118.95 1035 km 1035 km 39 56 5
Nekempte road Maintenance Project.
Table 4.44: Periodic Maintenance Contract price and status of the road under Nekempte RMP
Total Birr %cost Status of the Road condition
Cost Over Consumed Overrun / (%) 2013/2014 FY.
Price Length Length
Gedo Fincha
1 6,800,000 1,707,129 8,507,129 25.10 17 km 17 km 100
Shambu
2 Agemsa 7,800,000 3,597,310 11,397,310 46.12 25 km 36 km 100
Uke Gutin
3 Gida 7,600,000 2,354,959 9,954,959 30.99 25 km 25 km 100
Total 22,200,000 7,659,398 29,859,398 34.50 67 km 77 km
Table 4.45: Nekempte Road Maintenance Project Contract price and Status of the road
Original
Price
Nekempte
1 RMP 43,800,000 33,351,845 77,151,845 76.15 39 56 5
.

4.2.10 Alemgena Road Maintenance Project
Alemgena Road Maintenance project is one of the ten road maintenance Projects of ERCC
responsible for maintaining federal roads connecting Oromia, Amhara and Southern People
regional states. The road network projects into five major outlets from the capital city of Addis
Ababa. The rod is of high economic importance used entrance of agricultural and industrial
products distributed to people living in the city and a exit for export items through Djibouti port.
The Road Network compromises 1601 km of Asphalt and 2184 km of gravel road. Alemgena
road maintenance project consists six work execution teams performing maintenance activities.
These are:
 Butajira Work Execution Team
 Woliso Work Execution Team
 Ambo Work Execution Team
 Huruta Work Execution Team
 Debre Birhan Work Execution Team and
 Robit Work execution Team.
In 2013/2014, FY 1700 km of roads was under Routine Maintenance contract while the three
selected periodic maintenance contracts cover 85 km. Table below shows Basic Contractual Data
for Routine and Periodic Maintenance Works under Alemgena Road Maintenance Project.

Table 4.46: Contractual Data for Periodic Maintenance under Alemgena RMP
Basic Contractual Data for Periodic Maintenance under Alemgena District
Original
commencement
Date
ERCC
Alemgena
Ethiopian (Alemgena
Road Taditional 10,500,000 2,100,000
1 Ambo Gedo Road fund Roads Road July,2013 30 km 365 Days
Management
Project)
ERCC
Alemgena
Ethiopian (Alemgena
Alem ketema Road Taditional 10,000,000 2,000,000
Dogolo Network Unit Rate ETB ETB
Management
Project)
ERCC
Alemgena
Ethiopian (Alemgena
Meki Dugdi Road Taditional 6,200,000 1,240,000
Kella Network Unit Rate ETB ETB
Management
Project)
ERCC
Alemgena
Ethiopian (Alemgena
Comando- Road Taditional 4,000,000 800,000
Fitche Network Unit Rate ETB ETB
Management
Project)
ERCC
Alemgena
Ethiopian (Alemgena
D/birhan- Road Taditional 8,900,000 1,780,000
Jihur Network Unit Rate ETB ETB
Management
Project)
Table 4.47: Contractual Data for Routine Maintenance under Alemgena RMP
Basic Contractual Data for Routine Maintenance under Alemgena District
Original
ERCC
Alemgena
Ethiopian (Alemgena
Management
Project)
4.2.10.1 Overview of Road Maintenance Contracting Data and Road Condition under Alemgena
RMP
Routine Maintenance: Routine Maintenance contract price, status of road condition and cost overrun
for road segments contracted under Routine Maintenance in 2013/2014 FY under Alemgena road

Table 4.48: Routine Maintenance Contract price and status of the road under Alemgena RMP

Price Length Length
Routine
Periodic Maintenance :Periodic maintenance contrat price, status of road condition and cost
overrun for road segments contracted under Periodic Maintenance in 2013/2014, FY under
Alemgena road Maintenance Project.
Table 4.49: Periodic Maintenance Contract price and status of the road under Alemgena RMP
Price Length Length
Ambo Gedo
1 10,500,000 -7,277,140 3,222,860 (69.31) 30 km 7 km 40 30 30
Alem ketema
2 Dogolo 10,000,000 1,220,146 11,220,146 12.20 25 km 25 km 50 30 20
Meki Dugdi
3 Kella 6,200,000 2,971,426 9,171,426 47.93 20 km 23 km 40 25 35
Comando-
4 Fitche 4,000,000 -3,747,068 252,932 (93.68) 7 km 0.5 km 45 25 30
D/birhan-
5 Jihur 8,900,000 844,899 9,744,899 9.49 25 km 27 km 60 25 15
Total 39,600,000 -5,987,737 33,612,263 (15.12) 107 km 82.5 km
Table 4.50: Alemgena Road Maintenance Project Contract price and Status of the road
Original Total Birr %cost Status of the Road condition (%)

Cost Over
No. Project Contract Consumed Overrun / 2013/2014 FY.
Run
Price 2013/2014 Original Good Fair Poor
Alemgena
1 RMP 101,600,000 -32,677,940 68,922,060 (32.16) 54 23 23
*all data for the above case studies is obtained from ERCC(Road Maintenance projects progress report
and Financial Accomplishment) and ERA road network condition survey.

4.2.11 Findings of the case study
The following key findings are obtained from case studies:
 In accurate cost Estimation

 Increased percentage of contracted roads in a state of „fair and poor‟ condition.
 Under accomplishment of contracted road maintenance projects
 Cost overrun in road maintenance projects
The results of these case studies showed that routine and periodic maintenances are suffering
from poor cost estimation, scarcity of allocated contractual budget, cost overruns, under
accomplishment of contracted assets and poor condition of roads at the end of contracted period.
This is in line with World Bank (2008), a study conducted on sub Saharan African roads in
relation to road maintenance unit costs for roads that have recently undergone a significant
escalation, which threatens to further dilute the adequacy of current budget allocations. These
escalations can be attributed to a lack of competition and to increases in the prices of road-
construction inputs, most traceable to the recent escalation in the oil price.
The study further stressed that with road maintenance costs rising, it is more important than ever
that engineering standards should be cost effective. On average around 30 percent of main road
networks are over budgeted relative to observed traffic volumes, while only 10 percent of main
road projects (and 15 percent of rural projects) are under budgeted. The failure to follow
appropriate engineering standards suggests that resources have been wasted, but it also points to
the way to cost savings in the future. Greater efforts are also needed to adapt road design
standards to local conditions and materials so as to avoid excessive costs in road construction.
The other result of the case study was poor condition of contracted roads, which is line with the
study of World Bank (2008) on sub Saharan countries. On average, about half of sub Saharan
main network is in good condition and a further third in fair condition. The same cannot be said
for the rural network. In the countryside, only about a quarter of the road network is in good
condition and a further quarter in fair condition. Things may be improving, however. The limited
time series evidence available suggests that most countries have achieved improvements in road

quality in recent years. Notwithstanding substantial variation in the percentage of roads in good
condition, there is surprisingly little variation in the asset value of road networks as a percentage
of its potential maximum were it all to be in good condition. All countries realize at least 70
percent of this potential asset value, suggesting they have concentrated their efforts on preserving
the high-value paved road network.
Figure 4.1 below shows the status of road conditions in sub Saharan countries.
Source: (World Bank, 2008 citing SSATP RMI Matrix, 2007; AICD RONET Database, 2008)
Figure 4.1: Road conditions in sub Saharan Africa

4.3 Desk Study
Desk study was chosen as one of the instruments to assess and obtain actual data about the
practices of road maintenance contracts from relevant studies, reports and documents.
Accordingly the 2nd research Questions “Can performance Based contracting system be a
solution in improving the federal roads in the country” and the 4th research questions “What are
the lessons to be learned from other countries in implementing performance based contracting
system in road maintenance” were searched from desk study.
All case studies taken above are contracted under traditional unit rate contract. The results of
traditional Road Contracts are in many cases less-than-optimal. The problem is that the
Contractor has the wrong incentive, which is to carry out the maximum amount of works, in
order to maximize its turnover and profits. Even if the work is carried out according to plan and
considerable money is spent, the overall service quality for the Road user suffers from
deficiencies in the original design, aggravated by inadequate maintenance
4.3.1 Study of performance Based Road Maintenance Contracting System
4.3.1.1 General Overview
According to NCHRP (2009), the hallmark of PBMC is to pay a contractor based on the results
achieved, not on the methods for performing the work. PBMC is an approach to contracting that
provides disincentives, incentives, or both to the contractor to achieve performance standards or
targets for measurable outcomes and sometimes outputs. Measures of performance are often
expressed in terms of levels of service (LOS) represented by specific rating scales corresponding
to the condition of different assets achieved or to the outcomes of a particular type of
maintenance service. Measures also may be expressed in response times.
The disincentives or incentives can consist of reductions or increases in payments for

respectively falling short or exceeding the desired targets. Some disincentives or incentives are
not directly tied to measurable outcomes and outputs. These disincentives or incentives include
liquidated damages for failing to satisfy a contract provision, an award fee for satisfying
qualitative criteria, and a contract extension if the contractor performs well.

Ethiopia Uses traditional maintenance contracts for maintenance works, in which the Contractor
is responsible for the execution of works which are normally defined by the Road Administration
or the Employer, and the Contractor is paid on the basis of unit prices for different work items,
i.e., a contract based on “inputs” to the works.
Under this traditional way of “contracting out” maintenance works, it has been observed that
even if a lot of work is carried out and much money is spent, the overall service quality for the
road user depends on the quality of the design given to the Contractor who is not accountable for
it and the results are sometimes not satisfactory.
According to World Bank (2002), the Performance-Based Management and Maintenance

Contract try to address the issue of inadequate incentives. During the bidding process,
contractors compete among each other by proposing a fixed monthly lump-sum fee per km of
road to be paid to them.
It is important to understand that contractors are not paid directly for “inputs” or physical works
(which they will undoubtedly have to carry out), but for “outputs,” i.e., the initial rehabilitation
of the road to pre-defined standards (if so required by the bidding documents), the maintenance
service of ensuring certain quality levels on the roads under contract and specific improvements
(if so required by the bidding documents). The monthly lump-sum remuneration paid to the
Contractor will cover all physical and non-physical maintenance services provided by the
Contractor, except for unforeseen emergency works which would be remunerated separately.
The initial rehabilitation works which have been explicitly specified by the Employer in the
contract would be quoted on the basis of measurable output quantities and paid as performed. In
order to be entitled to the monthly payment for maintenance services, the Contractor must ensure
that the roads under contract comply with the service quality levels which have been specified in
the bidding document. It is possible that during some months he will have to carry out a rather
large amount of physical works in order to comply with the required service levels and very little
work during other months. Yet the monthly payment remains the same as long as the required
service levels are complied with.

One fundamental feature of the performance-based contract is that the Contractor is responsible
for designing and carrying out the actions he believes are necessary in order to comply with the
service quality levels stated in the contract. The service quality levels are defined from a road
user‟s perspective and may include factors such as average travel speeds, riding comfort, safety
features, etc. If the service quality is not achieved in any given month, the payment for that
month may be reduced or even suspended.
Under the performance-based contract, the Contractor has a strong financial incentive to be
efficient. In order to maximize profits, he must reduce his activities to the smallest possible
volume of intelligently designed interventions, which nevertheless ensure that pre-defined
outputs (measured indicators of service level) are achieved and maintained over time. This type
of contract makes it necessary for the Contactor to have a good management capacity. Here,
“management” means the capability to define, optimize and carry out in a timely basis the
physical interventions which are needed in the short, medium and long term, in order to
guarantee that the roads remain above the agreed service quality levels.
Maintaining a road network includes routine and periodic tasks. Routine maintenance consists of
many different tasks frequently necessary to maintain the function of the road (such as pothole
repairs, cleaning of drainage, sealing of cracks, cutting of vegetation, etc.). Periodic maintenance
consists of predictable and more costly measures of a less frequent nature designed to avoid road
degradation (such as resurfacing, asphalt concrete overlays, etc.). Intelligent management, the
timeliness of interventions and the adequacy of technical solutions are critical. It is expected that
the use of private specialized firms under performance-based contracts will unleash significant
efficiency gains, and stimulate innovation in comparison with traditional road administration
practices (World Bank, 2002).
Road conditions can be expressed through indicators for service quality levels, and these are
used under the performance-based contract to define and measure the desired performance of the
Contractor. In the Performance-Based Management and Maintenance Contracts, the service level
indicators are thus the accepted minimum thresholds for the quality levels of the roads for which
the Contractor is responsible.

Under the terms of the contract, the Contractor will also be responsible for the continuous
monitoring and control of road conditions and service levels for all roads or road sections
included in the contract. This will not only be necessary to fulfill the contract requirements, but it
is an activity which will provide him with the information needed in order to be able (i) to know
the degree of his own compliance with service level requirements, and (ii) to define and plan, in
a timely fashion, all physical interventions required to assure that service quality indicators never
fall below the indicated thresholds.
According to Zietlow (2004), the main reasons for implementing performance based contract are
to:
 Reduce maintenance costs through the application of more effective and efficient
technologies and work procedures;
 Provide transparency for road users, road administrations and contractors with
regard to the conditions roads have to be maintained;
 Improve control and enforcement of quality standards; and
 Improve overall road conditions
Case studies conducted on ten districts shows that road maintenance projects suffer from cost
overruns, poor condition of roads and road agencies expenditure uncertainty. Zietlow (2004),
argues that performance based road maintenance contracting system helps to minimize the cost
of maintenance while improving the condition of contracted road assets further providing
transparency for road users.
4.3.1.2 Cost Saving
According to the data obtained from ERA (2014), the cost of road maintenance has passed the
allocated budget significantly in the past ten years. Table 4.51 below shows the cost of road
maintenance for routine, periodic and emergency works for the past ten years.

Table 4.51: Maintenance Budget and Disbursement on the Federal Network

Year Routine and Periodic Maintenance Emergency and other Works
Budget Disbursement %age Acc Budget Disbursement %age Acc
(Millions) (Millions) (Millions) (Millions)
1997/98 158.4 117.9 74.4 10.8 5.6 51.9
1998/99 156.9 123.5 78.7 15.2 12.5 82.2
1999/00 152.0 118.2 77.8 17.0 15.2 89.4
2000/01 114.0 140.4 123.2 70.8 27.8 39.3
2001/02 119.7 176.2 147.2 178.0 31.0 17.4
2002/03 121.5 115.7 95.2 35.1 68.6 195.4
2003/04 127.0 192.8 151.8 163.2 140.5 86.1
2004/05 63.5 137.1 215.9 162.2 482.6 297.5
2005/06 144.1 172.5 119.7 112.4 298.4 265.5
2006/07 150.0 230.3 153.5 257.8 394.7 153.1

2007/08 186.7 234.8 125.7 161.3 400.6 248.3
2008/09 227.8 527.8 231.7 200.7 500.7 249.4
2009/10 223.4 516.9 251.5 196.2 491.1 250.3
2010/11 158.9 368.1 231.6 140.0 367.4 262.4
2011/12 426.9 493.1 115.5 320.3 310.9 97.1
2012/13 302.1 440.7 145.8 439.9 410.2 93.2
2013/14 516.8 577.2 111.6 370.9 376.1 101.4
Source: (ERA, 2014)
Based on the current practices of ERA, routine maintenance is estimated at Birr 200,000 on
average per km for gravel roads and Birr 400,000 for asphalt roads. During the analysis a price
escalation of 7% has been considered. The cost estimated has dropped based on the assumption
that the road under consideration will be constructed or improved. It could safely be estimated
that the new roads would not include activities involving heavy capital maintenance, which in
turn leads to a reduction of cost. The Schedule of Routine Maintenance for Federal and Regional
Roads and City roads are presented in the following tables.

Table 4.52: Schedule of Routine Maintenance needs for federal and regional roads
Asphalt Gravel Total
Cost Cost Cost
Year Length (Millions) Length (Millions) Length (Millions)
2015/16 8,730 3,776.89 11,378 2,164.06 20,107 5,940.94
2016/17 9,416 4,277.37 11,897 2,375.91 21,312 6,653.29
2017/18 9,546 4,553.25 12,357 2,591.17 21,902 7,144.42
2018/19 9,622 4,818.98 12,525 2,757.72 22,146 7,576.70
2019/20 9,817 5,162.48 12,481 2,885.43 22,297 8,047.91
Total 47,131 22,588.97 60,638 12,774.29 107,764 35,363.26
Source: (ERA, 2014)

Table 4.53: Schedule of Periodic Maintenance Needs for federal and Regional roads
Asphalt Gravel Total
Cost Cost Cost
Year Length (Millions) Length (Millions) Length (Millions)
2015/16 599 1,592.20 1,120 662.02 1,719 2,254.23
2016/17 730 2,037.44 959 595.20 1,689 2,632.64
2017/18 151 442.51 1,051 684.92 1,202 1,127.43
2018/19 245 753.89 854 584.36 1,099 1,338.25
2019/20 126 407.10 925 664.59 1,051 1,071.69
Total 1,851 5,233.14 4,909 3,191.10 6,760 8,424.24
Source: (ERA, 2014)
According to the data obtained from ERA, the following procedure were adopted in determining
the length of road network that require routine maintenance,
 For gravel and rural roads, those roads under rehabilitation, upgrading and periodic
maintenance are deducted to arrive at the length of roads expected to be included in routine
maintenance and
 In the case of asphalt roads, the roads contracted out or scheduled for periodic maintenance
and rehabilitation are deducted to arrive at that paved road network to be put under routine
maintenance.

On the basis of the foregoing, the total financial requirement for both routine and periodic
maintenance for is estimated at about Birr 43,787.5 million (USD 2,134.7 million using current
prevailing rate of 1USD=20.512098). The cost of road maintenance in the coming years is
expected to be covered from Road Fund. A rough analysis is made to estimate the road fund
revenue for three years in future assuming the current fuel levy rate, municipal and sales taxes;
and the expected resumption of collection vehicle license renewal fee based on axle weight and
configuration; and overloading fine (ERA, 2014).
The annual disbursement schedules or need for maintenance and expected Road Fund revenue
collection are shown below: The expected road fund revenue is far from the maintenance need
(shown hereunder). The forecasted revenue does not include the accumulated deposit since the
establishment of the fund.
Table 4.54: Comparison of Maintenance Needs and road Fund Revenue
Road Fund Revenue

Year Maintenance Need (Millions) Gap (Millions)
(Millions)
2015/16 8,282.3 808.32 7,473.98
2016/17 8,415.2 808.32 7,606.88
2017/18 8,617.3 808.32 7,808.98
2018/19 8,955.4 808.32 8,147.08
2019/20 9,320.1 808.32 8,511.78
Total 43,590.3 4041.6 39,548.7
Source: (ERA, 2014)
Graph 4.2: Comparison of Maintenance Needs and road Fund Revenue

It can be realized from table 4.54 that the forecasted revenue from the Road Fund doesn‟t match
with the maintenance need. The Figure is comparing the total maintenance need expected to be
covered from the Road Fund versus the road fund revenue to show how unsustainable and
unstable the flow of fund over time is.
Moreover, Case studies on the ten road maintenance projects contracted under routine and
selected periodic road maintenance projects in 2013/2014 on Ethiopian federal road revealed that
the cost of maintaining the federal roads has increased substantially. On the basis of rough
estimation done on the need for maintenance money for the coming five years a data obtained
from ERA, it is clear that the maintenance need overpasses the available fund. The results
indicated that there is a gap between maintenance costs and allocated budget which requires a
cost effective way of maintaining the road network.
However, the previous studies conducted on developed countries showed that implementing
PBMCs minimizes the cost of road maintenance projects.
The NCHRP (2009), citing (Pakkala 2002; Segal et al., 2003; Stankevich et al., 2005; Zietlow
2005a) states that PBMC saves the cost of road maintenance projects. Though the literature does
not cite the base for comparison, there is a considerable cost reduction in countries implementing
performance based road maintenance contracts. Table below shows cost reduction of different
countries using performance based contracting system.
Table 4.55: Cost savings of different countries under PBMC over the conventional contracts
Country Cost saving (%)
Norway About 20-40%
Sweden About 30%
Finland About 30-35%; about 50% less cost/km
Holland About 30-40%
Estonia 20-40%
England 10% minimum
Australia 10-40%
New Zealand About 20-30%
USA 10-15%
Canada (Ontario, Alberta, About 10%; About 20% ; and Some, but
& British Columbia) might be in the order of 10%
Source: (Pakkala, 2005)

But, Ribreau (2004), argues that many maintenance agencies regard the cost savings of
performance-based contracting as unproven or difficult to substantiate. It is difficult to establish
the difference in the cost of government agency forces and private contractors performing the
same types of maintenance work.
Ribreau also further stressed the problem by raising the difficulty of establishing defensible
direct and indirect costs for each type of maintenance activity in both the public and private
sectors. The private firms will not publicize their cost structure, because it would undermine their
ability to compete successfully.
In 2007, a Swedish analyst published articles that attempted to apply regression analysis to
determine whether cost savings resulted from PBMC in Sweden, southern Canadian provinces,
and the state of Washington (Stenbeck, 2007). Although the analysis suggested that cost savings
were achieved contrary to the author‟s expectations, the estimated savings was not defensible for
many reasons, including unclear explanations, choice of explanatory variables, and a small data
set.
In Canada Ontario, the Road Transport Agency determined that, during the first year, the private
entity was able to achieve, relative to the state forces, a 16% savings in costs, a 22%
improvement in productivity, and a 13% improvement in the condition of assets (Segal et al.,
2003). On the other hand the World Bank reported a 13% improvement in condition
accompanied by a cost reduction in the 20% to 30% range, but it is not known over how many
years of the contract these results apply. The bid price was 25% lower than estimated.
4.3.1.3 Expenditure Certainty
According to data obtained from ERA, most of the cost overrun resulted from the current activity
unit price developed some years ago, possibly in early 2000 E.C. that has not been revised since.
The unrevised unit rate has forced the Road Fund Agency to face expenditure uncertainty and is
finding it difficult to allocate sufficient budget for maintenance projects. In 2005 E.C., ERA had
commissioned a study aiming to structure unit rate analysis for maintenance works to be used for
negotiations with Road fund, but the unit rates have not been revised. A case study conducted on
ten road maintenance projects undertaking routine and periodic project on Ethiopian Federal

Roads showed that the cost overrun is more than 102,647,058.80 Birr in 2013/2014 which is
incurred directly to the road fund administration.
But, the road maintenance contracting agency using PBMCs enjoys full control of expenditures
without unexpected variation orders. This is because PBMCs is paid to the contractor on a fixed
lump sum Contracts (World Bank, 2005).
4.3.1.4 Improved Condition of Roads
Improving the condition of Ethiopian federal roads is still a challenge. The improvement of the
road network in the country is only changing the condition of the network slowly. In the first
year of RSDP, 52% of the road network was found to be in poor condition and only 22% was in
reasonably in good condition. Owing to on-going rehabilitation, upgrading and maintenance
intervention under the program, the proportion of the road network in good condition has
increased to 50 percent and the road in poor condition has declined to 22%. The proportion of
roads in good condition has overtaken the proportion of roads in poor condition from 2004
onwards and particularly the last two years owing to a massive intervention in terms of
rehabilitation, upgrading and maintenance on major roads. Another observation is that the roads
in fair and poor condition are declining shifting to good condition since the year 2002 (ERA,
2014). According to data obtained from Ethiopian Roads Authority nearly half of the road falls
under „fair and poor‟ state. Table below shows the status of Road conditions.
Table 4.56: Road Status Condition

Year Good Fair Poor
1997 22 26 52
2002 30 30 40
2007 49 22 29
2013 51 27 22
Source: (ERA, 2014)

Graph 4.3: Road Condition Data
The consequence of this situation was grave, and vehicle-operating costs were increasing from
time to time. The extra road user costs resulted in increased transportation costs that would be
transferred, through operators and shippers, to the final consumers of the service.
Nevertheless, many road agencies have acknowledged that on completion of PBMCs, road assets
are generally returned either in an improved condition or in a condition similar to when the
PBMC was awarded, but not in a worse condition (World Bank, 2005). The Department of
Transportation in Texas State, USA, has also reported “after the first year of the performance-
based contracts, road facilities were rated at an average of 91%, an 18 percent increase over their
pre-contract condition” (FHWA, 2005). Similarly, Argentina has reduced the share of roads in
poor condition from 25 percent to less than 5 percent by the end of 1999 due to the PBMC
approach (Liautaud, 2004).
Stankevich et al. (2006), stressed that using PBMCs, Argentina had shown a significant effect on
asset condition. The percent of roads in fair to good condition increased from 59% to 95%. The
percent in critical to poor condition declined from 41% to 5%. Segal et al. (2003), referring to
the Reason Public Policy Institute reported that since New South Wales started this performance
contract, roadway condition has improved approximately 15% though the World Bank reported a

13% improvement in road conditions.
4.4 Interview
The 3rd research question was “What are the drawbacks in implementing performance based
contracting system for the maintenance of federal roads in Ethiopia?” The answer for this
question and supplementary information for other research questions were searched from key
informants through interview in order to deepen the findings of the research.
Table 4.57: Socio-demography of the Interviewed Informants
Number of Informants
Socio-demography
Civil Eng. Highway Eng. Construction Mgt Total
BSc 2 - 2 4
Educational
status
MSc 7 - - 7
Total 9 2 11
0-6 years - - - -
Experience 6- 10
1 - 1 2
in the road years
sector
≥10 years 8 1 9
Total 9 - 2 11

4.4.1 Draw Backs in Implementing Performance based Road Maintenance Contracts
The following are some of the draw backs obtained from interview and desk study in
implementing PBMCs.
4.4.1.1 Cultural Change
Information obtained from an interview of key informants involved in Ethiopian Federal Road
Maintenance, supported with a desk study from literatures shows that a significant shift in
culture is required while implementing performance based road maintenance contracts.
According to the informants, ERA uses traditional road maintenance contracting system i.e. the
Contractor is responsible for the execution of works, which are normally defined by the Road
Administration or the Employer and the Contractor is paid on the basis of unit prices for different
work items, i.e. a Contract based on “inputs” to the works. The results of traditional Road
Contracts are in many cases less-than-optimal. The problem is that the Contractor has the wrong
incentive which is to carry out the maximum amount of works, in order to maximize its turnover
and profits. Even if the work is carried out according to plan and considerable money is spent,
the overall service quality for the road user suffers from deficiencies in the original design,
aggravated by inadequate maintenance.
Regarding to World Bank (2002), PBMCS tries to address the issue of inadequate incentives. In
PBMCs the contractor is responsible for performance and is free to choose the methods it wishes
to achieve performance. A true performance based contract promotes innovation and efficiency,
which are major benefits of this approach. Shifting form works based on “input” to delivering
performance “out puts” requires cultural change by the governmental agency and the contractor.
4.4.1.2 Insufficient Contractors Capacity
According to the informants, the road maintenance contractor in the country taking most of
routine and periodic projects is ERCC, a new government development agency; which was under
Ethiopian Roads Authority and established under Council of Ministers Regulation No
248/2011.on July 08/2011.

Before ERCC was established, it was working as operation using of ERA (which changes its
name and internal organization structure) for 60 years. Most of the other GC1 and RC1
contractors in the country are engaged with the construction of new roads giving less attention to
road maintenance.
The selection criteria for contractors involved in PBMCs is of “best value” not “always lowest
bidder”, since the road agency wont risk losing its asset to unqualified contractors, not many
fulfill this requirements requested by PBMCs. Furthermore, maintenance quality assurance has
been adopted by a large number of states and is frequently used in PBMC (Smith et al., 1997;
Stivers et al., 1999). According to informants, even ERCC is on the way to adopt QMA
consulted by Australian company SMEC, which many contractors in Ethiopia do not possess yet.
The other draw back mentioned by the informants is lack of a contractor who has prior
experience in implementing Performance based road maintenance contracts.
However, NCHRP (2009), stated that adequate contractor capacity is necessary to ensure
meaningful competition and to be confident that a contractor and its subcontractors can achieve
the performance standards.
4.4.1.3 Fear of Risks
Interview findings has revealed that most contractors are scared off taking too much risks that
may jeopardize their long term stability.
According to NCHRP (2009), PBMC is a two-way street, a partnership. If an agency goes too far
in trying to shift risks to contractors, there can be a negative effect. For example, if an agency
forces a contractor to bear all the risks of severe weather in a hurricane prone state, the contractor
may raise its price to perform the work, refuse to work in an area, or go out of business. Some of
the risks involved in performing performance based maintenance are:

 Poor quality of construction

 Unexpectedly severe weather
 Unanticipated environmental problems
 Emergencies
 Unanticipated legislative change
 Unexpected traffic growth
 A short-term focus that fails to minimize long-term life-cycle costs
 Difficulty in acquiring the resources needed to perform the work (e.g., subcontractors)
 The possibility of having to correct problems covered under a warranty.
4.4.1.4 Incomplete and Insufficient Inventory and condition data
According to the informants, the current road maintenance practice in the country is suffering
from insufficient inventory and condition data. During a visit to road maintenance offices, the
researcher was able to witness that there are insufficient survey data and was able to find road
condition data only for the year 2013/2014. This however, is in line with the findings of NCHRP
(2009), in which one of the impediments to implementing PBMCs is lack of incomplete and
insufficient data from road agency.
4.4.1.5 Inability to Achieve Sufficient Competition
As discussed earlier very few contractors in the country have the capacity to fulfill the
requirements requested by road agencies when implementing PBMCs. According to the
informants, lack of contractor‟s capacity possesses its own problem by inhibiting competition
between contractors and leaving the road agency with no alternatives. The agency loses the
benefits obtained from fair competitions.
4.5 Lessons to be Learned from Countries using PBMCS for Road Maintenance
According to NCHRP (2009), the following lessons can be taken from countries who have
successfully implemented PBMCs. These are:
1. PBMC involves politically and socially sensitive decisions.

2. A significant cultural shift of both the owner–agency and the contractor is usually
required for PBMC to be successful.
3. Adequate contractor capacity is necessary to ensure meaningful competition and to be
confident that a contractor and its subcontractors can achieve the performance standards.
4. The more an agency does PBMC, the more its role shifts from managing and performing
maintenance work to planning, contract administration, and contractor oversight. The
skills an agency requires must shift accordingly.
5. Agencies beginning with PBMC could start with projects that have a limited scope, such
as one maintenance activity) or relatively few activities (e.g., routine maintenance) on a
section of road.
6. Performance measures must be clearly defined, the measurement process repeatable, and
targets realistic and in line with the agency goals. In short, performance specifications
must be clearly defined.
7. The contract must have a proper incentives and disincentives
8. A firm funding commitment is required for multiyear performance-based contracts
9. Cost savings are highly desirable but difficult to document. Cost savings are often
claimed based on the difference between the agency‟s estimated cost and the amount of
the contract award.
10. Quality (LOS) sometimes suffers during the first year on long-term total asset
management contracts. Quality is likely to improve from the first year of performance-
based contracts.
11. If the highway or network is severely deteriorated, it needs to be reconstructed or
rehabilitated before standard performance-based maintenance procedures begin. In
numerous cases around the world, the contractor has been responsible first for a
rehabilitation phase and then a maintenance phase.
12. Partnering and trust are imperative between the maintenance organization and the
contractor.
13. A poorly written contract, or either party misreading significant portions of the contract
to serve its own interests or point of view, may lead to failure.
14. Failure is likely to occur if agency staff believes strongly that contractors are taking their
jobs. If agency staff is responsible for monitoring contractor performance, they may be

overzealous in holding contractors to timeliness requirements and other performance

standards.
15. Expect failure to occur occasionally because success cannot occur 100% of the time. At
times, certain events and conditions will prevent performance-based contracting or
performance-based warranty contracting from working. An agency with poor contractor
performance or a disappointing outcome might try to learn from its experience and
carefully try again.
16. Innovation will be the most significant under long term, performance-based, lump-sum
agreements with selection based predominantly on best qualifications.
17. The client will experience a perceived loss of control and flexibility.
18. Three ways to monitor contractor performance have been observed and each has different
implications. First, the contractor can monitor itself. This approach requires a strong bond
of trust with the contracting agency and is generally the least expensive. Second, the
contracting agency can monitor the contractor‟s performance. Agencies using this
approach believe they can observe contractor performance effectively and have a good
deal of control. Third, an independent third party can monitor the contractor. This method
provides the most objectivity but is the most expensive.
19. A program plan that lists upcoming performance-based procurements is valuable for
alerting qualified contractors to bidding opportunities. This could be part of a long-term
procurement strategy that sends a message to industry.
20. Develop criteria for prequalification of contractors and use the criteria to identify a
suitable number of competitors.
21. Share risks in an equitable manner; shift risks appropriately-the contractor should not
bear all the risks.
According to Zietlow (2004), the following are some of the lessons taken from countries
implementing performance based road maintenance contracts.
1. Securing finance on a regular basis is critical to success. Normally, Performance

Contracts have duration between 4 and 10 years. It is important to secure financing for
the entire contract period before starting such a contract.
2. Each Performance Contract has to be tailored to each specific situation. Performance

Contracts are still in an early stage of development and differ widely from country to
country and even within countries. Studying the experiences of existing Performance
Contracts in several countries is recommended before embarking on this new type of
contract
3. Well-qualified contractors and inspectors are keys to the success of Performance
Contracts. Training programs which have been conducted for small-scale enterprises
and inspectors in Uruguay and Honduras have shown good results. Equally, traditional
contractor require training in modern management techniques and the application of
new maintenance procedures and technologies.
4. Proper performance monitoring and strict application of penalties for noncompliance
have proven to be critical to the success as well. Wherever road administrations did not
properly monitor the performance of the contractor or did not apply proper penalties for
non-compliance, contractor's performance was deficient.
5. Performance indicators need to be developed further. The development of performance
indicators is still at its early stage. Until now each road administration has developed its
own indicators by slightly modifying the ones they used before for in-house labor or
contractors.
6. Performance Contracts might not result in cost savings immediately. Contracts also
might turn out to be more expensive than expected. Recently, the DNER of Brazil had
to cancel a tender for Performance Contracts, as the prices offered were much higher
than expected. This was mainly due to the high risks perceived by the bidders that the
government might not honor its payment commitments.
4.6 Road Maintenance Unit rate
Regarding to Smec (2014), the current activity unit price for routine and periodic maintenance in
Ethiopia was developed in early 2000 E.C, and has been not been revised since then. The cost of
materials, labor rates, and machinery rental rates has increased many times in the intervening
period. Tables 4.58, 4.59 and 4.60 below shows comparison of road maintenance unit price for
periodic and routine developed in early 2000 E.C and the current price.

Table 4.58: Comparison of Unit rates for Periodic Maintenance between 2000 E.C and 2007 E.C (ERCC,
2014)
Unit Rate (Birr/unit)
Code Name of Activity Unit PERCENTAGE

DIFFERENCE
2000 E.C (A) 2007 E.C (B) INCREASE
(B-A)
(B/A*100)
121 Culvert Cleaning m3 69.27 155.71 86.43 225

122 Ditch Cleaning (Manual) m 6.90 30.80 23.90 446
125 Mortared Masonry Repair m3 517.36 1,156.34 638.98 224
126 Dry Masonary Repair m3 259.51 442.90 183.38 171
127 Gabion Structure m3 461.08 832.73 371.66 181
131 Brush Clearing m2 0.28 0.74 0.45 260
210 Asphalt Patching (Seal Coat) m2 25.19 59.53 34.34 236
211 Asphalt Patching (Single Surface Treatment) m2 28.94 61.96 33.01 214
212 Asphalt Patching (Double Surface Treatment) m2 50.24 113.13 62.89 225
213 Asphalt Patching (Cold Mix) m3 2,215.73 6,799.76 4,584.04 307
214 Asphalt Patching (Hot mini-mix)) m3 2,511.75 6,750.00 4,238.25 269
215 Crack Sealing (Individual cracks) Lm 22.90 46.71 23.81 204
230 Ditch Cleaning (Machine) km 3,686.75 7,164.73 3,477.99 194
240 Shoulder Blading Km 653.74 1,289.65 635.91 197
241 Shoulder Rehabilitation m3 99.81 162.06 62.25 162
251 Concrete Construction (Class 1) m3 1,809.93 4,821.99 3,012.06 266
252 Concrete Construction (Class 2) m3 1,453.56 3,300.47 1,846.92 227
253 Steel Reinforcement kg 16.53 49.04 32.51 297
310 Single Bituminous Surface Treatment (SBST) m2 16.49 55.63 39.15 337
311 Double Bituminous Surface Treatment (DBST) m2 35.76 108.09 72.33 302
312 Mix-In-Place Overlay (Cold-mix) m3 1,462.85 6,704.57 5,241.72 458
313 Asphaltic Concrete Overlay m3 2,109.27 6,325.00 4,215.73 300
314 Bitumen Prime Coat Lt 15.72 45.26 29.54 288
315 Bitumen Tack Coat Lt 17.22 45.52 28.30 264
317 Gravel resurfacing (Select Material) m3 130.37 181.47 51.10 139
318 Gravel resurfacing (Crushed aggregate) m3 282.68 524.12 241.44 185
510 Overhaul m3 km 3.82 6.16 2.35 161
M10 Cold Mix Production (Pug-mill) m3 1,234.03 6,298.88 5,064.85 510
M11 Cold Mix Production (Mix-In-Place) m3 1,030.55 4,703.71 3,673.16 456
M12 Hot Mini-Mix Production (Mobile Unit) m3 1,449.87 3,836.28 2,386.41 265
M13 Hot Mini-Mix Production (Central Plant Mix) m3 1,533.37 3,958.94 2,425.56 258
M14 Crushed Aggregate (Bituminous Surfacing) m3 319.12 333.98 14.86 105
M15 Crushed Aggregate (Road Base) m3 210.91 370.41 159.49 176
M16 Selected Material (Gravel Road Surfacing) m3 29.08 42.63 13.55 147
M17 Crushed Aggregate (Gravel Road Surfacing) m3 188.27 354.26 165.99 188
M18 Masonary Stone Production m3 58.83 98.81 39.99 168
434A Base Course Placing m3 323.31 490.70 167.39 152
412B Common Excavation to Embankment m3 42.33 121.44 79.12 287
415B Common Excavation to Waste m3 59.27 63.42 4.16 107
417 Borrow Placing m3 252.71 182.66 -70.06 72
414 Rock Excavation m3 44.30 287.27 242.97 648
464 Class "B" Masonary m3 491.95 1,461.63 969.68 297
452 Pipe Production(36") Lm 703.91 2,592.40 1,888.49 368
453 Pipe Installation(36") Lm 1,148.35 4,006.33 2,857.98 349
418 Road Bed Preparation (Gravel Road) Lm 60.06 85.52 25.46 142
419A Road Bed Preparation (Asphalt Road) Lm 81.30 145.96 64.67 180
421B Borrow Production m3 10.94 46.40 35.47 424
472 Detour Construction Lm 22.95 103.18 80.23 450
461 Structural Excavation in Common Material m3 56.35 126.39 70.04 224
417 Granular Backfill m3 84.48 150.95 66.46 179
411 Clearing & Grubbing Ha 6,653.94 23,109.37 16,455.43 347
471 Paved Waterway m2 139.51 325.34 185.84 233
Demolishing Existing Masonry m3 113.53 233.18 119.66 205

Table 4.59: Comparison of Unit rates for Routine Maintenance between 2000 E.C and 2007 E.C
(ERCC,2014)

DIFFERENCE
2000 E.C (A) 2007E.C (B) INCREASE
(B-A)
(B/A/100)
110 Spot Repair Gravel Road-Selected Material m3 137.05 199.63 62.58 145.67
111 Spot Repair Gravel Road-Crushed Aggregate m3 286.00 488.50 202.49 170.80
121 Culvert Cleaning m3 66.82 155.71 88.89 233.02
122 Ditch Cleaning (Manual) m 5.50 30.80 25.31 560.48
123 Repair Erosion Damage (Selected fill) m3 117.63 206.06 88.43 175.18
124 Repair Erosion Damage (Rock fill) m3 210.63 313.60 102.97 148.89
125 Mortared Masonry Repair m3 459.53 1,156.34 696.81 251.64
126 Dry Masonary Repair m3 252.21 442.90 190.68 175.60
127 Gabion Structure m3 426.80 832.73 405.93 195.11
131 Brush Clearing m2 0.26 0.74 0.48 281.73
210 Asphalt Patching (Seal Coat) m2 25.15 59.53 34.37 236.66
211 Asphalt Patching (Single Surface Treatment) m2 28.81 61.96 33.14 215.03
212 Asphalt Patching (Double Surface Treatment) m2 49.74 113.13 63.40 227.46
215 Crack Sealing (Individual cracks) Lm 22.85 46.71 23.86 204.39
216 Pothole Reinstatement (Double Surface Treatment) m2 48.09 112.64 64.55 234.21
219 Pothole (Base Failure Repair) m3 307.11 468.64 161.53 152.60
220 Blading Gravel Road (Light) Km 656.30 1,725.22 1,068.92 262.87
221 Blading Gravel Road (Heavy) km 3,922.17 4,184.15 261.98 106.68
222 Gravel Provision- Selected Material (Extra- Over) m3 83.28 106.98 23.70 128.46
223 Gravel Provision- Crushed Aggregate (Extra- Over) m3 246.05 425.45 179.40 172.91
230 Ditch Cleaning (Machine) km 2,814.99 7,164.73 4,349.75 254.52
240 Shoulder Blading Km 463.38 1,289.65 826.27 278.31
241 Shoulder Rehabilitation m3 94.29 162.06 67.78 171.88
251 Concrete Construction (Class 1) m3 1,804.47 4,821.99 3,017.52 267.22
252 Concrete Construction (Class 2) m3 1,449.75 3,300.47 1,850.72 227.66
253 Steel Reinforcement kg 16.29 49.04 32.75 301.06
309 Sand Seal Coat m2 13.80 58.92 45.12 426.86
310 Single Bituminous Surface Treatment (SBST) m2 16.01 55.63 39.62 347.41
311 Double Bituminous Surface Treatment (DBST) m2 35.29 108.09 72.80 306.31
312 Mix-In-Place Overlay (Cold-mix) m3 1,414.29 6,704.57 5,290.29 474.06
313 Asphaltic Concrete Overlay m3 2,064.46 6,325.00 4,260.54 306.37
314 Bitumen Prime Coat Lt 15.80 45.26 29.46 286.50
315 Bitumen Tack Coat Lt 16.72 45.52 28.80 272.20
316 Pavement Reconstruction (Aggregate Road Base) m3 319.53 464.24 144.72 145.29
317 Gravel Resurfacing (Selected Material) m3 130.37 181.47 51.10 139.20
318 Gravel Resurfacing (Crushed Aggregate) m3 282.68 524.12 241.44 185.41
410 Emergency Repair DWs Variable Variable DWs DWs
411 Other Routine Maintenance DWs Variable Variable DWs DWs
412 Betterment DWs Variable Variable DWs DWs
413 Environmental Protection DWs Variable Variable DWs DWs
510 Overhaul m3 km 3.87 6.16 2.29 159.25
M10 Cold Mix Production (Pug-mill) m3 1,265.95 6,298.88 5,032.93 497.56
M11 Cold Mix Production (Mix-In-Place) m3 1,009.87 4,703.71 3,693.85 465.78
M12 Hot Mini-Mix Production (Mobile Unit) m3 1,468.97 3,836.28 2,367.31 261.15
M13 Hot Mini-Mix Production (Central Plant Mix) m3 1,503.30 3,958.94 2,455.64 263.35
M14 Crushed Aggregate (Bituminous Surfacing) m3 300.74 333.98 33.24 111.05
M15 Crushed Aggregate (Road Base) m3 207.20 370.41 163.21 178.77
M16 Selected Material (Gravel Road Surfacing) m3 38.95 42.63 3.68 109.46
M17 Crushed Aggregate (Gravel Road Surfacing) m3 188.27 354.26 165.99 188.16
M18 Masonary Stone Production m3 54.39 98.81 44.43 181.69

Table 4.60: Comparison of Unit rates for Asphalt Maintenance between 2000 E.C and 2007E.C
(ERCC,2014)

DIFFERENCE
2000E.C (A) 2007E.C (B) INCREASE
(B-A)
(B/A*100)
210 Asphalt Patching (Seal Coat) m2 25.15 59.53 34.37 236.66
211 Asphalt Patching (Single Surface Treatment) m2 28.81 61.96 33.14 215.03
212 Asphalt Patching (Double Surface Treatment) m2 49.74 113.13 63.40 227.46
213 Asphalt Patching (Cold Mix) m3 2,137.12 6,799.76 4,662.64 318.17
3
214 Asphalt Patching (Hot mini-mix)) m 2,433.69 6,750.00 4,316.31 277.36
215 Crack Sealing (Individual cracks) Lm 22.85 46.71 23.86 204.39
216 Pothole Reinstatement (Double Surface Treatment) m2 48.09 112.32 64.22 233.54
217 Pothole Reinstatement (Cold mix) m3 2,264.72 6,978.00 4,713.28 308.12
218 Pothole Reinstatement (Hot mini- mix) m3 2,541.69 6,778.00 4,236.31 266.67
310 Single Bituminous Surface Treatment (SBST) m2 16.01 55.63 39.62 347.41
311 Double Bituminous Surface Treatment (DBST) m2 35.29 108.09 72.80 306.31
312 Mix-In-Place Overlay (Cold-mix) m3 1,414.29 6,704.57 5,290.29 474.06
3
313 Asphaltic Concrete Overlay m 2,064.46 6,325.00 4,260.54 306.37
314 Bitumen Prime Coat Lt 15.80 45.26 29.46 286.50
315 Bitumen Tack Coat Lt 16.72 45.52 28.80 272.20
M10 Cold Mix Production (Pug-mill) m3 1,265.95 6,298.88 5,032.93 497.56
M11 Cold Mix Production (Mix-In-Place) m3 1,009.87 4,703.71 3,693.85 465.78
M12 Hot Mini-Mix Production (Mobile Unit) m3 1,468.97 3,836.28 2,367.31 261.15
M13 Hot Mini-Mix Production (Central Plant Mix) m3 1,503.30 3,958.94 2,455.64 263.35
M14 Crushed Aggregate (Bituminous Surfacing) m3 300.74 378.21 77.47 125.76
4.7 Summary
The results of case studies conducted on the ten road maintenance districts indicated that out of
the 49 routine and periodic road projects investigated, 30 projects (62.5%) suffered cost overrun
while 15 projects (30.6%) suffered cost under run in their execution. For these maintenance
projects, the average cost overrun was found to be 18% of the contract amount, the actual cost
overrun ranging from -100% to 140 %.
The failure to properly estimate road maintenance costs has caused the agency cost overrun of
87,423,088 (ETB) than first planned. On the contrary, the analysis also indicates that Alemgena
and Jimma Road maintenance projects has been over budgeted while still more than 50% and
40% of their network is under poor condition respectively.

This is in line with a study made in sub Saharan country by World Bank (2008), where it showed
that nearly 30% of main road networks are over budgeted while 10% of main road projects are
under budgeted. The study further stressed that the failure to follow appropriate road
maintenance engineering standards has resulted in resource wastage. Table 4.62 below shows
total road maintenance costs and cost overruns of the ten districts.
Table 4.61: Road maintenance costs and cost overruns of ten districts
Toatal Budget
Total Budget For Routine Consumed
Maintenance and Periodic Maintenance 2013/2014 Cost Overrun/Cost
No District 2013/2014 FY.(Birr) FY.(Birr) Under Run (Birr)
1 Adigrat 32,700,000 52,919,000 20,219,000
2 Alemgena 101,600,000 68,922,060 (32,677,940)
3 Combolcha 50,336,254 67,150,541 16,814,287
4 Dire Dawa 57,600,000 80,157,074 22,557,074

5 Debre Markos 67,200,000 79,714,521 12,514,521
6 Gonder 61,500,000 67,445,153 5,945,153
7 Jimma 86,000,000 58,045,911 (27,954,089)
8 Nekempte 43,800,000 77,151,845 33,351,845
9 Shashemene 56,247,826 73,380,775 17,132,949

10 Sodo 45,700,000 65,220,287 19,520,287
TOTAL 602,684,080 690,107,167 87,423,088
The other findings of the case studies shows that more than half of the road network contracted
under routine and periodic maintenance projects is categorized under „poor‟ condition. This, in
addition with poor cost estimation and cost overruns, might force the Ethiopian maintenance
industry to consider PBMC as an option in contracting tool kit.

Zietlow (2005), stated that proper implementation of PBMC saves road maintenance costs by
improving the condition of contracted road assets and enables the agency to enjoy full control of
expenditures without any variation.
But, proper implementation of PBMC requires a significant cultural change from input to
outcome based method, fair allocation of risks between contracting agency and contractor,
complete and sufficient condition data of the road networks and contractors who are capable of
performing tasks with the expected quality and time.

5. CONCLUSIONs AND RECOMMENDATIONS
The main objectives of the research as mentioned earlier was to study PBMC and the existing
practices of road maintenance contractual data, costs and status of contracted road conditions and
make recommendations based on the findings. The following conclusions and recommendations
were therefore presented.
5.1 Conclusions
Despite Governments increased maintenance intervention in recent years, most of the road
network in the country is still in need of timely maintenance. The results of the case studies
indicated that the current road maintenance contracting system in Ethiopia is suffering from cost
overruns, inappropriate maintenance cost estimation, and poor condition of contracted road
assets. In line with this, the maintenance industry is also facing expenditure uncertainty which
makes it difficult to sufficiently allocate budget to the road network contracted under periodic or
routine projects. Moreover, the findings also revealed that the activity unit rate used for routine
and periodic maintenance was developed in early 2000 E.C and has not been revised since and
has been a bottleneck for establishing proper maintenance costs for a specific project. The
overall maintenance contracting practice implemented by maintenance agencies can be regarded
as unsatisfactory.
A strong road infrastructure system is the backbone of poverty eradication and maintaining a
sustainable socioeconomic structure in developing countries. PBMC is a new concept designed
to resolve the problems related to traditional methods of contracting and has significant potential
to improve the maintenance and management of road infrastructure. PBMC reflects a long-term
trend in changing the focus of upper management and maintenance managers to outcomes,
especially those that are customer oriented.
The study revealed that if properly implemented, PBMC can be an alternative solution for the
current road maintenance practice as it results in cost saving and improved condition of roads.
Evidences also suggests that PBMC results in better outcomes at lower cost with less risk and
more financial predictability for highway agencies.

Though, it is feasible to implement PBMC for Ethiopian road maintenance industry, the
following points can be taken as major drawbacks that can be encountered during
implementation stage in the current maintenance practice. These are:
I. Significant cultural change required both by the contractor and the agency in
order to adapt from input method to outcome based method of maintenance.
II. Insufficient contractor capacity in the country.
III. Contractors fear of risks
IV. Incomplete and insufficient inventory condition data
V. Bidders in ability to find sufficient competition.
5.2 Recommendations
Based on the findings of the research, the following recommendations were forwarded towards the
current contractual practice and study of PBMC in Ethiopian federal roads.
I. Proper road maintenance contracting system need to be established by ERA

II. It would be vital to use hybrid contract which include performance and method
specifications, payments based on both lump-sum and unit prices, maintenance and
rehabilitation work, so as to minimize difficulties occurred in transforming from method
to performance contracts.
III. Capacity building and training programs would be useful for PBMCS. A variety of
audiences and formats could be addressed, including maintenance organizations of
transportation agencies, contractors, subcontractors, in house staff and contractors
working together, and contractor-subcontractor interaction
IV. There is a need to revise road maintenance activity unit rates which was developed in 2008
and is still used for the current maintenance activity.
V. There is a need to change maintenance organizational structure, acquire a new set of skills
and expertise to enable the road agency staff to effectively develop and manage PBMCs.

5.3 Future Research Needs
I. Research is needed on methodologies for evaluating cost savings of performance-based

contracting. This research could include an analysis of administrative savings.
II. Research could be conducted to explore performance measures and measurement protocols
concerning LOS for different types of maintenance assets and operations.
III. Further research can be carried out on the challenges to implement PBMCs successfully in
the developing countries.
IV. More research is required on how to implement an effective benchmarking process that can
be used to compare road agency and contractor costs with respect to performance, identify
best performers, and determine the corresponding best practices.

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Annex-1
Interview Schedule
Introduction
This interview schedule is prepared to obtain information from key informants with semi
structured questions. The information was required for the academic research entitled “Study of
Performance Based Road Maintenance Contracting System for Ethiopian Federal Roads”
which is being conducted as partial fulfillment of MSc in construction technology and
management. The main objective of the research was to examine current contractual practice in
relation to the status of the road conditions and make recommendations based on the findings.
The schedule consists of four sections with a total of 21 questions. Section one contains general
questions about the informants. Section two, assesses the current practices of road maintenance
contractual system at Federal level. Section three examines performance based contracts for
Ethiopian federal roads. Section four investigates the in implementing the PBMCs. Section five is
left for general comments on the research.
Your response, in this regard, is highly valuable and contributory to the outcome of the research.
All feedback will be kept strictly confidential, and utilized for this academic research only.
Biniyam Regassa
Graduate student, Construction technology and management
Addis Ababa University, Institute of Technology, School of Civil and Environmental

Engineering; Tel: +251 (0) 9-11-37-02-90; [email protected]
Addis Ababa, Ethiopia

I. General Profile of the respondents

1.1 Name_______________________
1.2 Position_____________________
1.3 Organization__________________
1.4 Address______________________
1.5 Educational status?
1. BSc 2. MSc 3. Others specify ____________
1.6 What is your field of specialization?
1. Civil Eng.
2. Transportation Eng.
3. Highway Eng.
4. Geotechnical Eng.
5. Others specify
1.7 How long have you worked in the road sector?
1. 0-5 years 2. 6-10 years 3. 11-15 years 4. ≥15years
.
II. Questions for Current Road Maintenance Contractual Practice
2. Several literatures reveal that there are two main types of contracts that road agencies
choose from when contracting road maintenance, these are; traditional unit rate and
performance based contract.
2.1 What type road maintenance contracting system do you use for federal road
maintenance?
1. Traditional unit rate contracts 2. Performance based contracts 3. Others
2.2 Do you find the current contractual practice Implemented in the country satisfactory?
1. Yes 2. No
2.3 If you answer is No, what are the impediments of the current contractual practice?
Please specify ------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------

2.4 Is your contractual unit rate price for road maintenance established through proper
consideration of the current construction costs?
1. Yes 2. No
2.5 If your answer is No, would you like to share your experience on how you deal with
activity unit rates that may have an Impact on road maintenance costs?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
2.6 Do you find the current status of roads contracted under routine and periodic
maintenance satisfactory?
1. Yes 2. No
2.7 Do you think the current activity unit rates in place is one of the reasons for the
allocation of maintenance budget for routine and periodic maintenance projects?
1. Yes 2. No
III. Questions for Performance Based Road Maintenance Contracting System
3. Performance based maintenance contracting (PBMC) is a contracting method that provides

incentives and /OR disincentives to the contractor to achieve desired out comes or results in its
purest form PBM does not detail how, when, or, where, to do the work, but sets performance to
be achieved.
3.1 Do you use PBMCs for federal roads?

1. Yes 2. No
3.2 If yes, what are the results achieved by using PBMCs? Please
specify____________________________________________________________
__________________________________________________________________
3.3. Studies conducted on the countries who have previously implemented PBMCs reveal
that road maintenance community has benefited from cost saving and improved road

conditions? Do you think the current road maintenance industry is suffering from high
cost and poor condition of road?
1. Yes 2. No
3.4 If your answer is Yes, what are the solutions proposed torwards decreasing
maintenance cost and improving road assets? Please specify
_____________________________________________________________________________
_____________________________________________________
3.5 Evidences suggest that PBMCs allows highway agencies to fully control expenditures.
Does your company encounter any problems in controlling expenditures?
1. Yes 2. No
3.6 If your answer is yes, please specify

______________________________________________________________________
_____________________________________________________________________
IV. Questions for major draw backs in implementing Performance Based Road
Maintenance Contracting System
4. Studies conducted on different countries revealed that countries implementing PBMC has its
own challenges. Which of the following are the draw backs in Implementing PBMCs in the case
Ethiopia?
1. Cultural change required
2. Inadequate experience
3. Insufficient contractor capacity
4. concern overall life cycle cost increment
5. Fear of risks
6. Incomplete and insufficient inventory and condition data
7. Lack of legal authority
8. Lack of training
9. Inability to achieve contractor’s competition
10. Fear PBMCs results in large number of staff having to leave government.
Thank you for your time!

Annex 2: Geographical Road Maps of RMPs

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ADDIS ABABA UNIVERSITY

ADDIS ABABA INSTITUTE OF TECHNOLOGY

Study of Performance Based Road Maintenance Contracting System for

By: Biniyam Regassa

Advisor: Prof.Dr.-Ing. Abebe Dinku

A Thesis submitted to School of Civil and Environmental Engineering, Addis Ababa

Msc Thesis by Biniyam Regassa Page i

Table of Contents Pages

Msc Thesis by Biniyam Regassa

Table of Contents Pages

Msc Thesis by Biniyam Regassa

Table of Contents Pages

Msc Thesis by Biniyam Regassa

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Msc Thesis by Biniyam Regassa

Table of Contents Pages

4.4.1 Draw Backs in Implementing Performance based Road Maintenance

4.4.1.1 Cultural Change..................... ..................... ..................... .................................110

4.4.1.2 Insufficient Contractors Capacity........................................................................110

4.4.1.3 Fear of Risks .......................................................................................................111

4.4.1.4 Incomplete and Insufficient Inventory and condition data..................................112

Msc Thesis by Biniyam Regassa

Msc Thesis by Biniyam Regassa Page i

Msc Thesis by Biniyam Regassa Page ii

Msc Thesis by Biniyam Regassa Page iii

Msc Thesis by Biniyam Regassa Page iv

Msc Thesis by Biniyam Regassa Page v

AASHTO American Association of State Highway Transportation Officials

ASCE American Society of Civil Engineers

CREMA Contracts for Rehabilitation and Maintenance

EFY Ethiopian Fiscal Year

ERA Ethiopian Roads Authority

ERCC Ethiopian Road Construction Corporation

FHWA Federal Highway Agency

FRE Finish Road Enterprise

GDP Gross Domestic Product

KRE Knish Road Expertise

LOS Level of Service

MAC Managing Agent Contract

MQA Maintenance Quality Assurance

NCHRP National Corporative Highway Research Program

NPV Net Present Value

PBC Performance Based Contracts

PBMCs Performance Based Maintenance Contracting System

Msc Thesis by Biniyam Regassa Page vi

PSMC Performance Specified Maintenance Contracts

QBS Qualification Based Selection

RFPs Request for Proposals

RFQs Request for Qualifications

RMI Road Maintenance Initiative

RMP Road Maintenance Project

RSDP-I Road Sector Development Program One

SANRAL South African National Road Agency

SNNP Southern Nation’s Nationalities People

USA United States of America

VOC Vehicular Operating Cost

WRA World Road Association

Msc Thesis by Biniyam Regassa Page vii

Performance Based Road Maintenance Contracting System (PBMCs) is a new way of

Key Words: Case Study, Ethiopia, Federal Roads, Road Maintenance