Performance-Based Maintenance Contracts for Subnational Roads: Experience from Latin America

The outsourcing of road maintenance to micro- and small enterprises under performance-based contracts (PBCs) has been recognized as an effective approach to rural road maintenance in many developing countries. This approach links payments for the management and/or maintenance of pavements with the contractor successfully meeting or exceeding certain clearly defined minimum performance standards. A review of projects undertaken by the World Bank found that, if structured correctly, these projects can effectively maintain pavements, while at the same time, contributing to improved social welfare and local economic conditions. However, to be successful it is important that the legal and practical elements of the projects be properly structured. The paper presents the findings in terms of the lessons learned from PBCs with micro-enterprises, and the challenges faced to ensure success. It gives specific recommendations in legal, administrative, and technical areas on steps that can be taken by agencies to facilitate PBCs using small or micro-enterprises.