Risk Allocation for Indonesia's Performance Based Contract(PBC) for Road Rehabilitation and Maintenance Project

Performance Based Contract for road maintenance is an effort to improve the traditional method. In Indonesia, PBC has been applied on several road rehabilitation and maintenance project. Unfortunately, the implementation of PBC in Indonesia has many problem and needs to develop in several aspects. Experience in some PBC pilot projects (especially in Pantura Lane Road), contractors must bear vehicle load which exceeds the capacity (overloading vehicle) risks and natural disasters that are beyond the control of the contractor. The allocation of risk between project owner and contractor in a PBC contract plays an important role for the success of the project. It should be based on a proper assessment of the involved risks and choosing the party best able to manage them. The purpose of this research is to develop Indonesia’s PBC for road rehabilitation and maintenance project based on fair risk allocation. The study took samples in several national roads in Pantura Lane Road. Risk allocation algorithm proposed by Martin Barnes (1983) is applied to determine the best able party to manage the risk by considering magnitude and cost of each risk factor. The results show that the risk of natural disasters and overloading vehicle risk should not bear by the contractors. Force Majeure risk should be allocated to the owner by creating an addendum contract for recovery works with unit price payment mechanism. If the contractor still bear overloading risk, then the owner must facilitate actual traffic volume data and actual total weight data for engineering designing process.