Performance-Based Contracts Offer a Smarter Way to Maintain Roads Worldwide

Roads are the backbone of economic activity, connecting people to jobs, healthcare, education, and markets. Yet in many developing countries, road networks suffer from poor maintenance, unstable funding, and inefficient procurement systems. As a result, roads deteriorate quickly, increasing transport costs and reducing safety for millions of users. To address these challenges, the World Bank Group, drawing on expertise from institutions such as the Global Road Safety Facility, the International Road Assessment Programme (iRAP), the U.S. Army Corps of Engineers, and the American Association of State Highway and Transportation Officials, has developed new guidelines to help governments improve road asset management through performance-based contracts.

These guidelines promote a system where contractors are paid based on the quality and condition of roads rather than the quantity of work they perform. The goal is simple: maintain better roads while using public funds more efficiently.

Why Traditional Road Contracts Often Fail

For decades, road projects were managed through traditional input-based contracts. In this system, governments specified exactly what contractors had to do, including the amount of materials used and the type of engineering work required. Contractors were then paid according to the tasks completed.

While this method gave governments technical control, it often led to inefficiencies. Projects could take longer because governments had to prepare detailed designs and supervise every activity. Small design mistakes or changes in road conditions frequently resulted in contract amendments and cost overruns. Maintenance was often reactive rather than preventive, meaning roads were repaired only after serious damage had already occurred.

These problems placed heavy administrative burdens on road agencies and often resulted in higher costs without improving road quality.

How Performance-Based Contracts Work

Performance-based contracting changes the way road maintenance is organized. Instead of telling contractors exactly how to repair or maintain a road, governments set clear performance targets that the road must meet. These targets may include smooth pavement, functioning drainage systems, visible road markings, and the absence of potholes.

Contractors are free to decide the most effective technical solutions to meet these standards. Payments are linked to whether those service levels are maintained. If road conditions fall below the agreed standards, payments are reduced.

This approach creates strong incentives for contractors to keep roads in good condition at all times. Preventive maintenance becomes more attractive than waiting for damage to appear. Contractors also have greater flexibility to introduce innovative methods and technologies that can improve efficiency.

International experience shows that roads managed under performance-based contracts can remain in better condition and cost significantly less to maintain compared with traditional contracts.

From Recovery to Long-Term Maintenance

Performance-based road programs usually follow several stages. The first stage focuses on initial recovery, where contractors fix urgent problems that threaten road safety. This includes repairing potholes, clearing blocked drainage, restoring signs, and removing roadside hazards. These actions quickly make roads safer for traffic.

The next stage is rehabilitation, where contractors carry out structural repairs to restore the road's durability. Pavement layers may be strengthened, bridges repaired, and drainage systems improved. Once these works are completed, the road must meet the performance standards defined in the contract.

Some projects also include improvement works aimed at increasing safety and resilience. These improvements can involve safer intersections, installation of guardrails, pedestrian crossings, or better drainage systems to handle heavy rainfall and flooding.

Throughout the entire contract period, contractors must carry out routine maintenance. This includes monitoring road conditions, repairing small defects, clearing vegetation, and maintaining road markings and safety devices. The objective is to prevent small problems from turning into expensive repairs later.

Monitoring Quality and Managing Risks

A key feature of performance-based contracts is regular monitoring. Road agencies or independent auditors periodically inspect roads to check whether the agreed standards are being maintained. Technical indicators such as pavement roughness, surface condition, and drainage performance help determine whether contractors are meeting their obligations.

Financial incentives play an important role. If contractors fail to maintain road conditions, payment deductions are applied. This encourages quick repairs and long-term planning.

Risk management is also carefully defined. Contractors are responsible for construction quality and routine maintenance, while governments retain responsibility for risks beyond the contractor's control, such as major geological problems or extreme weather events.

Building Better Roads for the Future

Performance-based road contracts require institutional changes. Road agencies must move away from detailed supervision of construction activities and instead focus on monitoring performance outcomes. Contractors, in turn, must develop stronger planning and management skills to maintain infrastructure over long periods.

Despite these challenges, the benefits are clear. Performance-based contracts reduce administrative complexity, encourage innovation, and help governments use limited infrastructure budgets more effectively. Most importantly, they keep roads safer and more reliable for the millions of people who depend on them every day.

As countries search for more sustainable ways to manage infrastructure, performance-based road asset management is emerging as a practical and promising solution.