Tuesday, October 21, 2008

The Power of Performance-Driven Criteria

Performance Driven Contracting
is one of several techniques and technologies in contracting and construction that enable faster and less costly infrastructure project development and completion.

The following post is an abbreviated version of an article written by Pete Rahn who is president of the American Association of State Highway and Transportation Officials (AASHTO) and executive director of the Missouri Department of Transportation (Missouri DOT). He serves on the executive committee of the Transportation Research Board (TRB,) as well as its task force on accelerating innovation in the highway industry. He can be contacted at pete.rahn@modot.mo.gov.

Accountability is a critical component to earning public trust and gaining additional resources. One approach that is working well for some departments of transportation is incorporating stringent performance-driven specifications into design-build projects.
Bloger’s Note: Hawaii has laws that enable Design-Build (DB) projects and the design and construction of the H-3 Freeway was a DB project. DB is a basic form of public-private partnership (PPP.)

The innovative approach of Performance Driven Contracting (versus the traditional methods-and-means specifications) is driving down costs, speeding timetables and helping agencies to be more responsive to citizens.

The key to performance-based specifications is not to tell the proposing teams how to deliver the project. Rather than providing detailed plans and expecting design-build teams to submit design details with costs and completion dates, the Department sets the dollar amount and delivery deadline and asks the team to supply the scope within these parameters. So teams compete on how much project they can deliver. As a result, they are responding with proposals of innovative financing, innovative design and innovative program delivery.

Texas, Utah and Florida use this new dimension of design-build. Missouri DOT incorporated performance-driven specifications into three of its design-build projects:
  • Reconstruction of Interstate 64 in St. Louis
  • kcICON, a major interchange and bridge construction project in downtown Kansas City
  • Safe and Sound Bridge Improvement Program, which involves rebuilding 802 bridges throughout Missouri.
Under the best circumstances, the Missouri DOT estimated the high-profile I-64 reconstruction project would be a six- to eight-year endeavor, costing $750 million.

The performance criteria, however, stated that the 10-mile project would need to be completed in three and half years and within the department’s budget of $535 million. The results have exceeded expectations: The team delivered 95% of the department’s wish list items in less time than stipulated in the contract.

The reconstruction was predicted by some to have an extremely negative impact on the region because it required the interstate be closed for two years—five miles per year—while work was completed. Word of the shutdown provoked “doom and gloom” speculations from citizens and news media. But those speculations never materialized. Instead, the project has transformed Missouri DOT’s image in St. Louis. And, the department has public accolades to prove it.

The I-64 triumph is due not only to performance-driven criteria but also unprecedented collaboration. All design, construction, department and federal highway representatives work in the same building and are empowered to make decisions on the spot.

The use of performance-driven criteria will become more commonplace as agencies discover how flexible and valuable these specifications can be in helping them promise and deliver transportation projects.