 In this three-part series on contract maintenance, provided an overview. It described the two-phase process of creating a contract maintenance program, development and implementation. In this second program, we will look in more detail at the first phase, development. We'll cover the preparation of the transition plan and the development of detailed contract documents. The transition from maintenance performed by the agency to contract maintenance is a critical period. To ensure success, an agency should gather an experienced group together to prepare a detailed transition plan. A transition plan has five components, defining objectives, creating maintenance plans, determining the contract approach, defining responsibilities and establishing a plan for existing resources. The agency must define its objectives. What does it hope to accomplish through a contract maintenance program? Then, when the objectives are clear, the agency must communicate them to its staff, potential contractors and the public. The objectives must be realistic and stated simply and directly. Other agencies with experience in contract maintenance may be of help. Common objectives of these agencies are to improve work effectiveness, gain better cost control and stretch the maintenance budget. Contract maintenance, just like agency performed maintenance, requires careful planning. There are two kinds of maintenance plans, routine and periodic. The routine maintenance plan includes annual work quantities for activities like patching, mowing or line striping. Routine work is paid on a lump sum basis against performance measures. Periodic maintenance plans cover several years. They establish annual amounts for major activities like overlays, seal coats or slab replacement. These activities are paid on a unit price basis. There are two common approaches to contract maintenance. Activity contracting and region wide maintenance contracting. Activity contracting works well for agencies that have been around for decades and have a fixed labor force. With this approach, the agency contracts specific activities like mowing or trash pickup. The Texas Department of Transportation and Chile's Ministry of Transportation are two of the largest highway agencies in the world using this method. There are three excellent reports on activity contracting. Maintenance activities accomplished by contract, NCHRP synthesis number 125 and maintenance contracting, NCHRP report number 344 were prepared by the U.S. Transportation Research Board. The third report by the American Association of State Highway and Transportation Officials, AASHTO is called a Guide for Methods and Procedures in Contract Maintenance. The other common approach is region wide maintenance contracting. For this approach, the agency selects a specific geographic region for a contractor to maintain. The agency pays the contractor on the basis of lump sum for routine maintenance and unit prices for periodic maintenance. The contract defines an annual quantity of routine maintenance activities like patching or mowing. Then the contractor bids a lump sum for the annual quantity. Using performance standards, the agency determines accomplishment. Then it uses a unit price schedule to pay for emergency and periodic maintenance activities. The length of the base contract is very important. The term must be a long enough period for the contractor to amortize a portion of its fixed investment. Agencies using region wide maintenance contracting have discovered that two or three year contracts are most economical. A shorter contract period is so risky for contractors that they may raise the price of their bids. Most region wide maintenance contracts also provide the option for additional contract years. It requires the mutual consent of the agency and the contractor. Additional years accomplish two very important objectives. They reduce the agency's cost and time to negotiate another contract and they provide a continuing incentive to the contractor to satisfy the agency's demands for quality work. If the agency is dissatisfied with contractor performance, it simply does not exercise contract options. To define responsibilities, managers must ask themselves three key questions. Who should develop and implement the contract maintenance process? What portion of the highway network should contract maintenance cover? And who should do the maintenance program? Let's deal with each question. First, whoever is responsible for the development and implementation of a contract maintenance program will be very busy. The effort usually exceeds the time and expertise available to agency staff. To overcome these problems, one option is to use outside organizations to both develop and supervise their program. These experienced outside organizations have the advantage of knowing what works. They can shorten the implementation period and avoid known problem areas. The Philippines, British Columbia and Australia were all very successful using this approach. The second question. What portion of the highway network should contract maintenance cover? The Massachusetts Department of Transportation contracts over 50% of its network. Brazil, 60% of its network. And Pakistan, 100%. There is no one right solution. Each agency is unique. On average, however, agencies have found they can contract a substantial portion of their work program. For example, the Florida Department of Transportation has a significant contracting effort. Currently, the department contracts with private industry for approximately 50% of all the dollar volume allocated to routine maintenance purposes. Our contract decision model now tells us that we can go as high as 65% with contract maintenance forces and the additional 35% of the work being done internally with the core group to accomplish our workload. The third question. Who should perform the maintenance program? There are many options. The private sector, unions and other government agencies among them. For the majority of programs worldwide, the private sector has been the answer. Even in areas with limited private sector experience, such as Honduras, the marketplace quickly responded. Soon, private sector expertise was available to accomplish the program. In Massachusetts and British Columbia, former government employees have won maintenance contracts through their union or employee associations. Still, another option is to have lower governmental units carry out contract maintenance. The transportation departments in Michigan, Wisconsin and Brazil contracted with city, county and states for their maintenance. The most effective programs have been those with a combination of competing sources. Competitive bidding between private sector firms, government entities and employee associations improves the chances for success. A transition plan is not complete without providing for existing maintenance personnel, equipment and resources. Management must restructure them to meet new responsibilities. It may mean shifting personnel from the public to the private sector. It may mean shifting equipment resources as well. The private sector could lease or buy them, or the agency could transfer them to other departments. The agency may also lease facilities to the contractor. Whatever the situation, make sure existing resources are covered in the transition plan. While one agency group prepares the transition plan, another should generate the documents and procedures for awarding the maintenance contract. There are five documents to create, instructions to bidders, contract provisions, pricing documents, measurement procedures and performance standards. The instructions to bidders is an important document, both before and during pre-bid conferences. The instructions cover such subjects as the scope of work, an overview of the contracting program, procedures on preparing, submitting or withdrawing bids, and the date and time of bid opening. It clearly explains the program to the potential bidders and reduces confusion during the bidding process. Contract provisions are legal definitions. Some examples are the term of the contract and option periods, payment procedures and indemnity, bonds and insurance requirements. Pricing documents are the forms bidders use to indicate their prices. There are two ways the agency may ask bidders to respond. The agency may indicate quantities of work and require bidders to bid their own unit prices. However, there is a risk for agencies. The low bidder may be unrealistically low and perform poor quality work or even default. For the other method, the agency may provide a list of pre-established unit prices developed by a professional engineering and construction firm. A bidder then applies an adjustment factor to these unit prices. This adjustment factor remains fixed for the initial contract period. For each option year, it can increase according to an accepted construction cost index. Measurement procedures for the lump sum portion of the contract are based on performance standards. These standards quantify the effort for each activity, such as so many mowings per year or a minimum and maximum height of vegetation. Measurement procedures for a unit price contract are based on fixed prices and adjustment factors for quantities of material. Performance standards are usually based on an agency's standard specifications manual. Wherever possible, the contract should refer to sections of the manual. In this program, we have covered the development phase of contract maintenance. The two stages of development are devising a transition plan and creating the contract documents. A transition plan has five components. Defining objectives, creating maintenance plans, determining the contract approach, defining responsibilities, and establishing a plan for existing resources. The agency must define its objectives. What does it hope to accomplish through a contract maintenance program? Common objectives of these agencies are to improve work effectiveness, gain better cost control, and stretch the maintenance budget. Contract maintenance, just like agency-performed maintenance, requires careful planning. There are two kinds of maintenance plans, routine and periodic. There are two common approaches to contract maintenance, activity contracting and region-wide maintenance contracting. Activity contracting works well for agencies that have been around for decades and have a fixed labor force. With this approach, the agency contracts specific activities, like mowing or trash pickup. The other common approach is region-wide maintenance contracting. For this approach, the agency selects a specific geographic region for a contractor to maintain. The agency pays the contractor on the basis of lump sum for routine maintenance and unit prices for periodic maintenance. To define responsibilities, managers must ask themselves three key questions. Who should develop and implement the contract maintenance process? What portion of the highway network should contract maintenance cover? And who should do the maintenance program? A transition plan is not complete without providing for existing maintenance personnel, equipment, and resources. Management must restructure them to meet new responsibilities. While one agency group prepares the transition plan, another should generate the documents and procedures for awarding the maintenance contract. There are five documents to create. The instructions to bidders is an important document, both before and during pre-bid conferences. Contract provisions are legal definitions. Pricing documents are the forms bidders use to indicate their prices. Measurement procedures for the lump sum portion of the contract are based on performance standards. Performance standards are usually based on an agency's standard specifications manual. For more information on this or other IRF videotapes, write to the International Road Federation or call the numbers on your screen.