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Effects of outsourcing and performance-based contracting on innovations
KTH, School of Architecture and the Built Environment (ABE), Civil and Architectural Engineering.
2006 (English)In: Management and delivery of maintenance and operations services / [ed] TRB, 2006, 3-8 p.Conference paper, Published paper (Refereed)
Abstract [en]

A savings of 13% to 28% was recorded as outsourcing and performance-based contracting were introduced in Swedish highway maintenance, in line with 21% gained in Massachusetts and 12% in Virginia. Few negative effects on service, invironment, and quality were noted. However, there is concern that a slowdown of research and development (R&D) and innovations may lead to higher costs and a less effective transport system in the long run. France has used a benchmark for the effects on technical development, with an in-house policy similar to Sweden's before the reform. Initial results of an explorative study are that France has continued to produce technical development in the same period while it seems to have stalled in Sweden. This international comparison tends to support that outsourcing has lowered the pace of R&D compared with a situation if the in-house production system prevailed. However, innovation frequency is not a goal itself, so further study is needed to find the optimal mix of measures to develop an effective transport system. Professionals and politicians representing the Swedish taxpayers are reluctant to return to in-house production just to produce perhaps unnecessary technical development. Instead, the policy to develop complementary innovation promotion within the outsourcing model will continue. Measures within or complementary to the model are multicriteria bid evaluation, alternative bids, on-line monitoring, bonus, penalties and profit sharing, competence development, partnering, and weather-regulated performance-based con tracting. Such measures are used and evaluated continuously.

Place, publisher, year, edition, pages
2006. 3-8 p.
Series
Transportation research record, ISSN 0361-1981 ; 1948
Keyword [en]
Engineering, Civil; Transportation; Transportation Science & Technology
National Category
Building Technologies
Identifiers
URN: urn:nbn:se:kth:diva-24151ISI: 000241635200001Scopus ID: 2-s2.0-33750312830ISBN: 3-309-09957-9 (print)OAI: oai:DiVA.org:kth-24151DiVA: diva2:344349
Conference
85th Annual Meeting of the Transportation-Research-Board Washington, DC, Jan. 22-26, 2006, Transportat Res Board
Note
QC 20100819Available from: 2010-08-19 Created: 2010-08-19 Last updated: 2010-08-19Bibliographically approved
In thesis
1. Promoting Innovation in Transportation Infrastructure Maintenance: Incentives Contracting and Performance Based Specifications
Open this publication in new window or tab >>Promoting Innovation in Transportation Infrastructure Maintenance: Incentives Contracting and Performance Based Specifications
2007 (English)Doctoral thesis, comprehensive summary (Other scientific)
Abstract [en]

Knowledge of what action that is needed to drive innovation at a desired speed is in demand in civil engineering and its related maintenance. 1. What measures to stimulate innovation have been tested? 2. How much innovation has been achieved by contracting? 3. How much innovation was achieved by performance-based specifications? 4. How can cost models contribute to innovation? Methods include qualitative and quantitative methods that have been timed and mixed to optimize their merits. Sweden, France, USA and Canada have used as research ground.

Technology transfer, multi-criteria evaluation, variant bidding, idea mailbox, weatherregulated payment, contests and earmarked funds for innovative projects were some of the method beside and within contracting and performance-based specifications that have been tested.

Contracting as such has cut costs in Sweden but not in North America. Neither Sweden nor North America has noticed any increase of innovation, rather the contrary. The savings have primarily been achieved by cuts on staff and by using standardized, less expensive and less advanced machinery. Contracted highway maintenance provinces in Canada and Sweden on average had about 50 % higher costs than inhouse provinces and Washington State. The difference is reduced to 26 %, when corrected by weather and the higher traffic in the contracted provinces. Prestige, politics and competitivity made it difficult to extract economic data from private contractors, and even from the public owners and may explain the contradictory results in previous studies. The internally driven innovation appears small and incentives to innovation weak in inhouse systems, but contrary to expectation even less in contracted systems.

Performance-based specifications (PBS), such as Design-Build (DB), have reduced delivery times and kept the budget better than traditional contracts, but quality, lifecycle cost and technical progress was rarely analyzed and even less confirmed in the literature, why a multiple case study was carried out. The result was that three out of four PBS cases delivered lower quality in the long run or showed higher costs already on the opening day, when compared to a traditional contract alternative.

Cost models contribute to innovation by making regions with different conditions comparable and provide tools for rational planning and decision making. One model for how highway maintenance costs depend on snow, bridges and traffic and one model for how bridge maintenance costs depend on size and age were elaborated. Models included in contracts, e.g. to allow a contractor to reduce the weather risk, appear to have contributed to a more successful contracting rollout in Sweden than in Canada.

France provides experience of how inhouse innovation contests and industry-own patent-like routines can promote innovation. After the first two years with an incentive contract, Banverket received 10 % better quality measured as train delay and 20 % better quality measured as the number of technical errors at no cost. A lesson learnt is that the success of performance-based specifications depends on how well the owner can describe and define the contracts, how compliance is measured and how deviations are handled, i.e. how the contractor is penalized for non-fulfillment or awarded for excess delivery

Place, publisher, year, edition, pages
Stockholm: KTH, 2007. 32, 13 p.
Series
Trita-BKN. Bulletin, ISSN 1103-4270 ; 2007:91
National Category
Building Technologies
Identifiers
urn:nbn:se:kth:diva-4311 (URN)
Public defence
2007-03-23, Sal F3, KTH, Lindstedtsvägen 26, Stockholm, 10:00
Opponent
Supervisors
Note
QC 20100819Available from: 2007-03-15 Created: 2007-03-15 Last updated: 2012-02-21Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
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More styles
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  • Other locale
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Output format
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