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performance-based contracting

Addressing the risks from climate change in performance-based contracts

Chris Bennett's picture


Output and performance based road contracts (OPRC) is a contracting modality that is increasingly being used to help manage roads. Unlike traditional contracts, where the owners define what is to be done, and oftentimes how to do it, OPRC contracts define the outcome that the owners want to achieve, and the contractor is responsible to meet those outcomes. Performance is measured against a series of key performance indicators (KPIs) or service levels.
 
Critical to the success of any OPRC contract is the assignment of risk between parties. Climate change has major implications for OPRC contracts because it affects the risk exposure of both parties. With funding from the Public Private Infrastructure Advisory Facility (PPIAF), a new analysis considered how to incorporate climate change risks into OPRC contracts.
 
What’s Happening Right Now?
 
Without clear expectations around climate risk, neither the asset owner nor the companies bidding for performance contracts will adequately address the risks. Bidders cannot be held accountable for risks that are not specifically cited or linked with performance criteria.
 
At present, climate change risks are generally carried by the asset owner through the Force Majeure provisions of the contract, and treated as ‘unforeseen’ events, with repair costs reimbursed to the contractor. This impacts the overall cost of the OPRC, and where extreme weather events are becoming common-place, reduces the efficacy of OPRC as a contracting modality. The most pressing issues challenging stakeholders during each phase of development are summarized in this chart.

In India, this transport engineer is racing toward the future… with German supercars

Shigeyuki Sakaki's picture
Harsh, a civil engineer from Surendranagar, the western State of Gujarat in India, proudly has a collection of supercars recently delivered from Germany. They are all brand new with sleek designs, glossy paint, and fully loaded with state-of-the-art features. One of them is a 600 horse-power monster, another is the first of its kind in India.
 
Without further ado, let's see what he has...

Featured Tools: Peformance-based Contracting Resource Guide

Anna Barbone's picture

The Peformance-based Contracting Resource Guide is designed to assist national and sub-national road agencies in developing and transition countries to launch or enhance a performance-based contracting (PBC) program to manage and maintain their road networks. The Guide contains information and practical documentation to: