Situation

The total annual in-house cost for routine maintenance operations on the 100 roadway miles of IH-45 from Galveston County to Montgomery County was $10.5 million per year, or $52.5 million for five years. This amount included preventative and routine maintenance, incident management, and snow and ice removal.

These in-house costs reflect five different TxDOT offices or shops conducting work along different portions of IH-45.

Solution

TxDOT identified a cost savings opportunity by converting the in-house IH-45 work to a performance-based maintenance contract. After a thorough review and targeted reduction of items and estimated quantities, TxDOT negotiated a five-year, $26.9 million contract.

• End Item Savings. A performance-based contract provides the contractor the flexibility to deliver the right item quantities necessary to complete the work to-standard. It also reduces the risk to TxDOT of the contractor under-running item quantities and delivering only a portion of the estimated cost per item. A routine maintenance contract would indicate pre-determined items and quantities.
• Labor/Schedule Savings. The performance-based contract provides specific details concerning how and when work will be performed. It provides prospective bidders enough detail and understanding of the project requirements to more effectively plan the work and provide more accurate cost estimates. A routine maintenance contract provides less distinct project schedule requirements with tasks instead being called out on an as-needed, and thus less efficient, basis.

Cost Savings

The new maintenance strategy has resulted in $25.6 million in cost savings over the life of the five-year contract. It freed up TxDOT funding and full-time equivalent (FTE) positions for other priority agency tasks.

This performance-based contracting methodology is now being considered for use on similar maintenance operations activities.