Risk management in new performance based contracts

To control risks in performance-based contracts for pavements a combination of instruments (end specifications, warranty, financial instruments, third parties, prescription of methods and materials) is used. End performance specifications alone are inadequate to guarantee the performance of a road pavement, given the lack of adequate instruments to assess residual life after a warranty period and to control political and social risks. This means that besides end specifications, the degrees of freedom for a contractor have to be limited to a certain extent, still allowing him more freedom than in traditional contracts. The further development of better instruments and a bidding system based on price performance ratio is necessary to better control those risks and stimulate a contractor to deliver high quality. Then additional degrees of freedom for design and realisation of works can be given to the contractor.