The Potential of Performance-Based Contracting for ERA Road Projects
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Date
2019-07
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Addis Ababa University
Abstract
The Ethiopian Roads Authority is responsible for the construction and maintenance of the road network
system in the country. ERA is dedicated to reduce cost and time of maintenance activities and to control
quality of work as well as keeping the road infrastructure in an efficient state using the traditional methods
of contracting. Since 2016, ERA has been contracting out road projects (construction and maintenance) on
performance measures as an alternative methods of contracts. This method is named performance based
contract (PBC). Starting from 2016, ERA is implementing PBC on three projects at a pilot level those
financed by local financer (government and road fund) and one project financed by the World Bank.
Therefore, the aim of this thesis is to examine the potential of this method for improving the road
construction and maintenance practice of ERA. In addition, the advantages and disadvantages of the PBC
were investigated by analyzing the challenges faced by ERA during the implementation of PBC at the pilot
projects. Accordingly this thesis presents reviews of literatures recently produced. It also briefly discusses
the problems of traditional methods of contracting in ERA which is supported by a case study. The
implementation of PBC in ERA has been reviewed and analyzed.
The thesis examined those implemented PBC projects to identify the benefits achieved and respectively
differentiated the negative impacts of PBC and Traditional Contracts on ERA projects. To effect this, a
series of questionnaire surveys and interviews were conducted out, which helped to achieved research
objectives.
The main contributions of this thesis are: (i) defining PBC and explaining its advantages and disadvantages
during implementation in ERA projects; (ii) examining the potential of PBC in ERA; and (iii) analyzing
the challenges faced during implementing PBC in ERA. Therefore, the significant achievement of this study
was identification of hindrances in establishing PBC in ERA and examining its potentiality and
effectiveness. The research recommended that PBC is a better alternative that should be adopted by ERA
together with the traditional contract method. The potential of reducing maintenance costs, increasing the
quality of works and reducing the chance of corruption are some of the benefits of PBC.
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Keywords
Performance-Based Contract (PBC), Traditional Contract Method, Cost Overrun, Time Overrun, Ethiopian Roads Authority (ERA)