Ontario Ministry of Transportation maintenance contracts shift to performance focus

Six area maintenance contracts have been awarded by the Ministry of Transportation (MTO) under a performance-based specifications model — a radical departure from the province’s long-standing method-based delivery system.

Responsibility for how work is performed rests with the contractor under the new model, unlike the old model in which direction was provided by the ministry.

The province aims to replace all method-based maintenance contracts with performance-based ones across the province.

“It will be up to the contractor to plan, schedule and choose the method that they feel is the most effective to meet the outcome target that we want,” says Jeff Baker, head of maintenance contracts with MTO’s contract management office.

“It will give the contractor more opportunity for innovation, and allow them to optimize their resources and work methods.”

A case in point is greater use of such equipment as tow plows (a plow truck with a tow plow so two lanes can be plowed at one time), says Baker.

Of the six performance-based area maintenance contracts awarded to date, three are under way. In North Bay Region, Transfield Services has a 12-year, $150 million asset management contract with MTO. It includes road, bridge and systems maintenance, sustaining capital works, snow and ice management and emergency response.

Jay Smith, Transfield spokesperson, says an example of where the performance-based specs could prove more cost effective is when a highway lamp post light burns out. Typically, method delivery specifies immediate replacement. Performance delivery allows the contractor to replace not only the burned-out bulb but all others along the highway if the contractor deems that they are nearing the end of their lifespan, saving time and labour.

And when it comes to annual budgets, a contractor isn’t locked into a set annual figure, unlike governments. A contractor can use as much money as it wants from the multi-year program in, say, its first year if it deems it to be more efficient and cost-effective, Smith adds. “Government doesn’t have the ability to put that kind of investment upfront in one first year.”

The Ontario Road Builders’ Association has its own take on performance-based contracts.

“They allow for greater flexibility of planning and resources for contractors to ensure contract specifications are met,” says Karen Renkema, ORBA’s director of government relations.

But she says it remains to be seen if the assessment and monitoring process of the specs will be difficult for the owner and contractor.

“The variability of Mother Nature and traffic, especially in the winter, will make it challenging for the owner to measure performance,” she says.

One thing that won’t change is the monitoring process, Baker says.

“We will still follow the same audit principles, the sampling, due diligence, field visits and the documentation review to ensure that the outcome targets are being met.”

Still, MTO predicts more efficient monitoring because some field visits can be replaced with desktop audits based on documentation.

Some small capital work (such as patching or shave and pave jobs) can also be incorporated into performance-based maintenance contracts. That should increase bidder interest, which can result in more competitive pricing.

While the new contracts offer contractors more control in how they do a job, there is potential for increased risk. Budget miscalculations, bad weather and other unexpected factors can hike costs.

The risk-sharing clause in method-based contracts is not contained in performance-based contracts, adds Baker, noting that MTO made that decision in consultation with the road building industry. Still, MTO suggests it won’t abandon contractors when things sour. “We will still work with contractors in those kinds of situations to find a workable place for that risk to lie.”

“We as the ministry still carry the biggest liability or risk,” Baker points out. “We indemnify the contractors as long as they are not negligent.”