DOI: https://doi.org/10.62204/2336-498X-2025-1-2

ANTI-CRISIS MANAGEMENT OF ROAD MAINTENANCE

IN THE APPLICATION OF PERFORMANCE-BASED CONTRACTS 

Natalya Sokolova,

Ph.D. in Economics, Associate Professor,

National Transport University, Kyiv, Ukraine,

nata_ns@ukr.net; ORCID: 0000-0003-0678-8882 

Annotation. The purpose of the article is to propose a modification of the existing simulation model of Performance Based Contract (PBC) implementation to analyze the effectiveness of crisis management of the contract when designing a PBC in the context of: 1) lack of domestic historical experience in the practical use of PBC; 2) insufficiency and incompleteness of data from surveys and inspections of the operational condition of road components necessary to create models of changes in operational condition over time in order to predict the risks inherent in PBC and the possible occurrence of crises during the implementation of PBC.

The analysis of foreign research data based on the actual materials of PBC implementation in many countries of the world generally confirms the effectiveness of PBC and their superiority over traditional method-based contracts. However, for example, for specialized PBCs for road marking maintenance, the results of the “before and after” analysis conducted to assess the impact of PBCs on road safety did not provide convincing evidence that performance-based contracts for road marking maintenance are an effective safety countermeasure that helps reduce accidents.

It is established that a sufficient regulatory framework has been created for the implementation of PBC in Ukraine, but the lack of actually implemented PBC projects makes it impossible to comprehensively test them in practice.

The way of research on creating a simplified simulation model of PBC is demonstrated. It is shown that crisis management of road enterprises using PBC can be assessed using a simulation model implemented in Excel. For an expert manager (PBC designer), this software implementation of the simulation model will be a useful simulator mechanism with which he or she can feel and evaluate the impact of various input parameters on the studied contract project, in particular, to explore different crisis scenarios. The author’s hypothesis is that an experienced expert manager is able to feel the threat to the organization’s operations and reputation caused by such a hypothetical virtual crisis.

Keywords: road maintenance, long-term contract, PBC, Level of Service, crisis, crisis management, risk, simulation model.

 

Statement of the problem in general terms and its connection with important scientific or practical tasks. Road transport is the basis of economic activity in most countries. Roads are one of the main financial assets of the community, which brings significant benefits to society. Maintaining the road network is essential for preserving and increasing these benefits. Without proper maintenance of the road network, its condition deteriorates rapidly, causing significant losses to road users and society as a whole.

The global crisis caused by the Covid-19 coronavirus pandemic has had a negative impact on human health and has led to the use of online activities in many areas [1].

The Russian armed aggression against Ukraine has led to a severe crisis in most road sector enterprises [2]. Therefore, effective overcoming of this crisis now and later in peacetime requires research on further improvement of crisis management of road enterprises.

Due to limited human and financial resources, road administrations in many countries around the world have begun to use a new type of road maintenance contract over the past almost four decades. It is based on the achievement and maintenance by the contractor of certain performance qualities of roads (Performance Based Contract- PBC or Output and Performance Based Road Contracts – OPRC) [3, 4, 5].

In traditional method-based contracts, the road authority determines the technique, technology, composition, and quantity of inputs used, on which the contractor’s payment depends. In contrast, a PBC is a type of contract in which payments to the contractor for maintaining road assets are linked to how the contractor maintains or exceeds certain contractually specified road performance targets, rather than for the resources used. Failure to meet performance targets or to timely address identified defects and deficiencies in road elements reduces the contractor’s payment through clearly defined penalties. In case of compliance with the performance indicators established in the contract, payments to the contractor are made regularly, usually in equal monthly installments [3, 4, 5].

The Law of Ukraine “On Automobile Roads” [6] stipulates in Article 6 that “operational maintenance of public roads and other types of roads may be carried out on the basis of long-term (up to seven years) agreements (contracts) for the maintenance of public roads on the principle of ensuring their operational condition in accordance with regulations, norms and standards”. Pursuant to the requirements of Article 6 of the Law of Ukraine [6], the Order of the Ministry of Communities, Territories and Infrastructure of Ukraine No. 1023 dated November 07, 2023 approved the “Model Form of Agreement (Contract) for the Maintenance of Public Roads”. However, the developed regulatory and technical documents do not yet fully ensure the fulfillment of the tasks of designing and practical implementation of PBC. In particular, the PBC imposes a significant burden of risks on the contractor, in addition to those caused by natural disasters and major man-made accidents, changes in legislation, unexpected increase in traffic, etc.

It is worth noting that the design and implementation of PBCs in Ukraine is burdened by the almost complete lack of experience in the practical use of such contracts. The only example of a hybrid OPRC is a pilot project implemented under the rules of an international treaty, the experience of which should be applied to the development of PBCs, taking into account purely Ukrainian scientific, technical and legal practice.

Moreover, there is a lack of historical data on the operational condition of road elements, as well as measurements of traffic intensity and composition. These data are needed to predict changes in the operational condition of roads over time, and thus to predict risks and possible crises and the associated possible bankruptcy of the enterprise. Solving these problems is an important scientific and practical task.

The problem of overcoming crises by enterprises that will carry out road maintenance on the basis of PBC is, in general, the problem of allocating crisis management functions that should take into account the risks and uncertainties inherent in PBC that can cause a crisis in the implementation of PBC and, in the worst case, premature abandonment of PBC, as well as the crisis of the enterprise itself. This problem is associated with the important scientific task of developing the theoretical and methodological foundations of crisis management of operational maintenance of infrastructure facilities, and the practical task is to develop tools for crisis management.

 Analysis of recent research and publications. The concept of crisis, its essence, principles and tools for crisis management of enterprises have been studied by many foreign and domestic scholars.

Economic crises have been studied in their cycles: D. Ricardo, C. Gide, L. de Sismondi, K. Marx, J. Schumpeter, M. Kondratiev, J. Keynes, M. Tugan-Baranovsky, C. Juglar, J. Kitchin, and others.

Various aspects of crisis management were studied: E. Altman, J. Barton, W. Beaver, R. Lis, R. Mann, G. Springate, R.J. Taffler, G. Tisshaw, H. J. Vollmuth, J. Fulmer, D. Hahn, P. Drucker, M. Porter, T. Peters, P. Samuelson, M. Friedman, et al.

Fundamental economic theories have been developed, including contract theory, firm theory, agency theory, game theory, etc.

The modern framework of the theory and practice of crisis management of organizations was laid down by well-known foreign researchers: S. Fink, I. Mitroff, T.C. Pauchant, P. Shrivastava, J. Burnett, T. Jacques, C. Alpaslan, S. Green, W.T. Coombs, K.M. Hearit, S. Holladay, W. Benoit; P. Buzzanell, E. Rogers, C.M. Pearson, J.A. Clair, A. Paraskevas, D. Pollard, S. Hotho, J.F. Preble, B. Robert, C. Lajtha, S. Sahin, S. Ulubeyli, A. Kazaza, P.J.H. Schoemaker, C.G. Wagner, J. Bundy, M.D. Pfarrer, K.D. Elsbach, N. Gillespie, G. Dietz, S.D. Graffin, E.H. James, L.P. Wooten, K. Dushek, et al. [7, 8, 9, 10].

In Ukraine, the development of scientific research on crisis management began in the late nineties of the last century. Ukrainian researchers: I. Blank, L. Sytnyk, V. Vasylenko, S. Ivanyuta, L. Ligonenko, O. Tereshchenko, A. Chernyavsky, A. Stangret, S. Piletska, A. Oleshko, N. Antoniuk, O. Yurynets, O. Sova, A. Yu. Pogrebnyak, N. Gavkalova, L. Akimova and many other researchers have found that the content, main directions and problems of crisis management are very complex and multifaceted.

In the works of foreign and domestic researchers, the theory of the emergence and course of crises, as well as measures to bring enterprises out of crisis situations, have been further developed. However, even today, organizations face complex and rapidly changing circumstances that can lead to crises.

Many researchers in crisis management have given their own definitions of the concepts of ‘crisis’ and ‘crisis management’. The International Organization for Standardization (ISO) has introduced the comprehensive ISO 22361 system [11]. This standard helps companies, institutions, organizations and enterprises, etc. to navigate the complexities of responding to crisis situations.

ISO 22361 defines a crisis as an abnormal or extraordinary event or situation that threatens an organization or community and requires a strategic, adaptive and timely response to maintain its viability and integrity. The event or situation may have a high degree of complexity, instability and uncertainty. The event or situation may exceed the organization’s response capabilities or capacity. Given the nature of the crisis, a flexible and dynamic approach is required in addition to any established plans and procedures. Threats can affect an organization’s ability to function, its reputation, brand, physical, political or intellectual property, organizational structure, human, environmental and economic factors.

According to ISO 22361, crisis management is a coordinated activity to lead, direct, and control an organization in a crisis [11].

The analysis of scientific sources on crises and crisis management of road sector enterprises that can perform road and bridge maintenance based on PBC is a problem that is still pending.

Over the years of practical application of PBC (and its various variants), a certain amount of evidence has been accumulated around the world, sufficient to analyze its advantages and disadvantages.

The authors of [12] performed a thorough analysis of cost savings from performance-based contracts. They investigated the likelihood and amount of cost savings that road agencies can realize. The developed models can be used to predict the amount and likelihood of cost savings for a particular PBC project at the preliminary planning stage. The percentage change in the application of the new contracting method compared to traditional internal practices was used to reflect actual cost savings where %CS is the percentage of cost savings; CB is the maintenance cost before the new contracting method is applied; CA is the cost of a contract with the same characteristics, such as contract duration, road section length, etc. after the new method is implemented.

 The analysis used data from maintenance contracts signed in the United States and globally between 1996 and 2007. A total of 337 contracts, including 91 PBCs and 137 traditional contracts, were implemented in Africa, Asia, Europe, South America, North America and the Pacific.

Based on the results of a rather complex mathematical processing of the collected data and their analysis, the authors made the following conclusions:

– traditional methods of contracting are still the default approach;

– models have been created and substantiated to compare traditional and innovative methods of contracting. The amount of PBC cost savings was investigated using regression analysis;

– the existence of cost savings in PBC indicates the superiority of this innovative method over the in-house method in terms of the amount and probability of cost savings;

– projects with high in-house costs have better performance when they are outsourced. However, if cost savings are not expected, it is not worth considering designing the contract in such a way as to attract many bidders;

– PBC outsourcing projects with longer durations tend to have better results. PBCs are more prone to cost savings and have a higher amount of cost savings;

– projects with long road sections have better performance. The length of the road section in the project should not be too long;

– projects with very short road sections tend to perform better when outsourced;

– contract road lengths of more than 600 km increase the amount of cost savings for contracts that will have cost savings, while contract road lengths of less than 10 km increase the likelihood that cost savings will not be achieved;

– inclusion of many types of works in a contract can be effective, especially in PBC conditions, as the amount and probability of cost savings increases with the number of works;

– maintenance of emergency facilities is not efficient under PBC;

– although this work is exploratory in nature, it suggests that the evaluation of alternative options for performing maintenance works can help road agencies in making decisions that would contribute to better use of resources;

– further analysis of other geographical regions and other contract characteristics such as duration, extension, size, etc., as well as contracting methods, is warranted, which could potentially provide more information on the impact of contracting methods and their characteristics on road maintenance.

The authors of another project [13] investigated performance-based pavement marking maintenance contracts (PBPMMC). The Texas Department of Transportation (TxDOT) has awarded two specialized PBPMMC contracts for pavement markings.

The project participants gathered information to evaluate the effectiveness of PBPMMC by assessing the quality of pavement markings, safety, potential cost savings, and the most appropriate performance indicators and measurement protocols to include in performance-based pavement marking maintenance contracts.

The study results led to the following conclusions and recommendations:

 – they can be used by TxDOT to improve the performance-based pavement marking maintenance contracting mechanism. As with any contracting technique, the costs and benefits of any changes should be analyzed and understood;

– increased performance requirements will typically result in an increase in price to the DOT.

The results of the before-and-after analysis conducted to evaluate the impact of PBPMMC on road safety provide strong evidence that performance-based pavement marking maintenance contracts are an effective safety countermeasure that helps reduce accidents:

 – before-and-after analysis showed that PBPMMC reduced accidents by an average of 0.1%, a result that was not significant at the 95% confidence level;

– further analysis on a county-by-county basis showed that in San Antonio County, performance-based contracts did not lead to significant changes in safety, while in Dallas County, a statistically significant positive effect was found;

– when evaluating crashes by severity, the study results showed inconclusive evidence of safety improvements;

– analysis by road class found that PBPMMCs had no statistically significant effect on crashes occurring on U.S. highways, state highways and byways, and farm-to-market roads;

– however, performance-based contracts have had a significant positive impact on interstate highway safety;

– it is important to note that other countermeasures may have been implemented during the same period that could have affected nighttime crashes, so it is difficult to isolate the impact of performance-based contracts from others;

– overall, the safety study showed that PBPMMCs do not have a negative impact on traffic safety and can potentially improve safety under certain conditions.

A recent baseline study [14] noted that many developing countries in the world already have examples of PBCs under the guidance and assistance of the World Bank (WB), but still face challenges in establishing them after the end of assistance. This study examined (i) how JICA’s technical cooperation can facilitate the establishment of PBCs at the local level with donor assistance according to the actual situation in each recipient country, and (ii) how PBCs can be used to complement the organizational vulnerabilities that arise in conventional technical cooperation in road maintenance.

Road maintenance contracting (RMC) is a relatively new contract type, and therefore, even in donor-funded projects, many challenges have been encountered, such as (i) lack of understanding of RMC among stakeholders, (ii) incompatibility with the current legal system, and (iii) difficulties with financing from the state budget. This hinders the sustainable implementation and development of RMC in the post-donor phase.

Given the above, the study [14] aimed to develop a proposal for JICA technical cooperation, including PBC, to be implemented in partner countries in the future. This study was conducted to identify and analyze areas not covered by previous donor projects, current implementation status and challenges in each country; identify considerations and opportunities for deploying technical cooperation through desk research and field research. In addition, as outputs of this study, draft standard specifications with high versatility for application across countries, training materials to promote understanding of PBC among stakeholders, and materials to present JICA’s technical cooperation achievements and directions to stakeholders were developed.

Article [15] found that from the standpoint of contract theory, it is possible to establish how the optimal contract should be drawn up, which variables should be included in the contract, and what the consequences will be of the fact that certain variables can or cannot be included in the contract. The implementation of public infrastructure projects using PBC involves the provision of efficient, reliable and timely services at an agreed price, in compliance with agreed quality standards, in accordance with the law and financially beneficial. The study concluded that the development of long-term performance-based contracts (PBC) in the road sector of Ukraine will lead to the mitigation or even elimination of one of the main economic contradictions: it will ensure economic growth while reducing public spending, and at the same time, government functions will be performed at a higher level without compromising national security and socio-economic stability.

Article [16] describes the Information and Analytical Management System for Long-Term Contracts Based on Road Service Levels – IAMS-OPRC, created in 2014 on behalf of Ukravtodor. The work was carried out in accordance with clause 8 of the Action Plan for the implementation of the Concept of Reforming the System of Public Road Management. IAMS-OPRC is a software and analytical complex designed to accumulate, analyze and display data on road defects accounting and their elimination, as well as to calculate payment for current minor repairs and operational maintenance of roads. IAMS-OPRC is implemented on the basis of web technologies, which does not require users to install any special software to use it. This significantly reduces costs.

Article [17] presents the results of a study on the creation of a database of service levels in the management of long-term contracts based on the final quality indicators of roads that were commissioned by Ukravtodor. The classifications of road element types and their inherent defects developed by the authors of the article create a structural basis for systematizing the levels of service of road elements. One defect of a road element can be assigned several levels of service, depending on the type of element, severity and distribution of the defect. The developed levels of service characterize the requirements for the elimination of defects in road elements during the implementation of long-term contracts for current minor repairs and operational maintenance of public roads.

In publications [18, 19], the authors, for the first time in the field of developing practically applicable tools, outlined the principles of developing a simulation model of PBC performance, which they implemented in the Microsoft Excel 2007 environment. The developed program allows to calculate the risk of PBC and evaluate its effectiveness.

Determining the PBC price for routine minor repairs and maintenance of roads is a complex problem, and a simulation model was proposed to solve it. Simulation allows avoiding strict requirements for the type of welfare and utility objective functions of the contractor. The road maintenance level indicators should be set better than the minimum conditions for ensuring safety, speed and comfort of traffic and preservation of road elements. The contract price is set by sequentially searching its possible values with a given step and is chosen to correspond to the maximum value of the social welfare function. The proposed simulation model can be used in the ex-ante phase – during procurement and ex-post – during contract execution for risk management and crisis management, revision of contract terms, etc. The task of the theory of highway operation should be to develop models of the impact of service levels on the value of public welfare.

In further studies related to the development of national standards of Ukraine (DSTU) and some methodological documents, the above-mentioned database and simulation model were modified.

Formation of the article’s objectives (statement of the task). The purpose of the article is to propose a modification of the existing simulation model of PBC implementation to analyze the effectiveness of crisis management of a contract when designing PBC in the context of:

1) lack of domestic historical experience in the practical use of PBCs;

2) insufficiency and incompleteness of the data of surveys and inspections of the operational condition of road components necessary to create models of changes in operational condition over time in order to predict the risks inherent in PBC and possible occurrence of crises during the implementation of PBC.

Summary of the main research material. A road is a linear complex of engineering structures designed for continuous, safe and convenient movement of vehicles (hereinafter referred to as the road). The elements of the road components are under the influence of external and internal natural and artificial forces, other factors that lead to a violation of the integrity and/or shape of the elements or make it impossible to use them in a standardized manner.  The action of these forces and/or other factors causes the emergence and negative progression of defects, and road enterprises eliminate these defects by repairing or maintaining them. The action of these opposing processes changes the operational state of the road. These processes are random in nature, and therefore risky and can cause crises. The maintenance of roads or their components is the subject of PBC – comprehensive or specialized.

The contractor, which in the future will carry out its production activities on the basis of one or more PBCs, in order to ensure the efficiency of its activities and competitiveness, must timely identify unfavorable trends in the course of PBC performance and foresee the possibility of termination of such a contract and its bankruptcy. The contractor shall find adequate ways and means to overcome crisis situations with minimal losses and in the shortest possible time.

Successful solution of this problem is possible if there are appropriate tools, which are being sought by both domestic and foreign researchers. This problem is particularly acute for Ukrainian enterprises, especially in the current environment. According to the research of many scholars, a successful solution to this problem requires both a substantiation of the method of crisis management and tools that allow quantifying the depth of the crisis. Therefore, the goal is to choose a method of crisis management that is acceptable for all stages of the enterprise’s functioning and an apparatus that can be used to measure the degree of risk of termination of the PBC and possible bankruptcy of the enterprise. According to the analysis of scientific sources, the main methods of crisis management include: monitoring, controlling, diversification, restructuring and rehabilitation of the enterprise [20].

The tools used for anti-crisis monitoring remain a serious problem. The current state of development of methodological support for diagnosing the crisis state of an enterprise is characterized by a variety of approaches and tools for its implementation. Virtually no research by foreign and domestic experts in financial analysis and crisis management is complete without describing certain methods that can be used to carry out this work. Many attempts to formalize the process of assessing the level of bankruptcy risk have not led to the creation of a model that would be protected from uncertainty [21]. This fact can be explained by the incompleteness of contracts. There are always factors unknown to the manager.

However, the key limitation of any statistical method, in our opinion, is not even the problem of availability of high-quality statistical data. The fact is that classical probability is not a characteristic of a single object or event, but of their general aggregate. When considering an individual enterprise, it is quite possible to describe its membership in a certain group. However, the uniqueness of any enterprise is that it can survive even with very weak chances, and, of course, vice versa. This means that it is necessary to take into account its uniqueness, not to “shave it under one comb”; not to look for similarities, but rather to diagnose and describe differences. In addition, the assessment of bankruptcy risk is significantly influenced by the level of qualification of managers, i.e. a subjective factor. Thus, when conducting anti-crisis monitoring, it is necessary to take into account these factors, namely the uniqueness of the enterprise (or PBC) and the level of qualification of managers.

PBC can cover only individual objects, for example, only road signs, only road surface, or all road components within a road corridor. The level of complexity of a PBC can vary from “simple” to “complex” depending on the number of objects and the range of services covered [3, 4, 5]. Rehabilitation is not a mandatory component of a comprehensive PBC. Some road agencies include rehabilitation as part of the PBC (hybrid PBC); others choose to conduct rehabilitation using traditional method-based approaches.

It can be argued that in the conditions of: 1) lack of domestic historical experience in the practical use of PBC and 2) insufficiency and incompleteness of data from surveys and inspections of the operational condition of road elements, it is necessary to create a model for reproducing the possible course of PBC in a computer experiment. Such a simulation model [22] was developed by the author of this article on the basis of previous studies [18, 19]. The computer program of the model, called LTCSimula, was created in the Microsoft Excel environment, so it can be easily mastered by managers who are familiar with Excel.

In order to implement PBC in the road sector of Ukraine, national standards of Ukraine (DSTU) were developed:

–    DSTU 8992:2020 Roads.  Directive for Levels of Service Grounding At the Routine Maintenance;

–    DSTU 8993: 2020 Roads. Levels OF Service At the Routine Maintenance.

DSTU 8992:2020 contains: requirements for service levels, an analytical model for assessing the risk of exceeding the response time, justification of road maintenance levels, a procedure for assessing the level of maintenance, assessing the number of defects, a model for predicting the number of exceedances of response times, a procedure for justifying service levels, a form for specifying operational service levels.

DSTU 8993:2020 contains, among other things: characteristics and parameters of service levels and maintenance levels of public roads; a method for assessing road maintenance levels. Each row of the tables of operational service levels (11 tables in total) contains: a code (identifier), a criterion for the level of intervention to eliminate the defect, signs of the season of the year of elimination (spring, summer, autumn, winter or all year round), time to eliminate the defect (days or hours), four response times according to the number of requirements for each level of maintenance (satisfactory, medium, high), so there are 12 values of the terms in total. In total, the tables contain more than 3700 service levels.

Thus, to simplify: DSTU 8992:2020 are the rules, and DSTU 8993:2020 is the database of operational service levels.

Recommendations for substantiation of parameters of long-term contracts for the operational maintenance of public roads Р Д 2.4-37641918-926:2021 were also developed, which contain User manual of the LTCSimula program. The program allows assessing the risks of PBC implementation, as well as modeling various operational crisis situations by manipulating the initial data by an expert.

These documents use important concepts, particularly for modeling.

Defect – non-compliance of a road element or its part with the requirements of regulatory or design documentation caused by: destruction (loss of integrity, material); deformation (change in actual size or shape); inadequate quality of materials used and quality of repair; influence of external factors that make it impossible to use the element in the normative way (pollution, snow, winter slipperiness, influence of obstacles on the visibility of the sign, etc.) There are cumulative defects (potholes, cracks, etc.) or sudden defects (damage to the guardrail due to a vehicle collision, sign knockdown, cargo falling on the roadway, etc.);

Operational Level Of Service – a set of characteristics and parameters (criteria) established for each type of defect of a road element or its part: description of the defect and parameters of the level of intervention, season of the year of elimination, unit of measurement, response time;

Maintenance Level is a characteristic of a certain condition of an element, component, road section, a set of road sections, road network, which is determined by the timeliness, completeness and quality of defect elimination. Three standard levels of maintenance are used: satisfactory, medium, high and one non-standard level – unsatisfactory;

Level Of Requirements is the classification number of the road type depending on their value and average annual daily traffic intensity in the requirements for the operational condition of public roads according to DSTU 3587:2022 “Road Safety. ROADS. Requirements for operational condition”:

1 – international and national with a traffic intensity of more than 7,000 vehicles per day;

2 – international and national roads with traffic intensity up to 7,000 vehicles per day;

2 – regional and territorial with a traffic volume of more than 3,000 vehicles per day;

3 – regional and territorial with traffic intensity up to 3,000 vehicles per day;

3 – regional with a traffic intensity of more than 1,000 vehicles per day;

4 – all others not included in (1-3);

Regulatory response time – a period of time (hours or days) specified by applicable regulations from the moment a defect is detected until it is eliminated.

Actual response time is the actual period of time from the moment the defect is detected (date, hour, minute) until the moment it is eliminated (date, hour, minute), minus the time of impossibility of performing work caused by adverse weather conditions and/or adverse technical and economic conditions.

LTCSimula contains the following worksheets:

–    LOS is a table of operational service levels specification;

–    Template – contains the title and “header” of the future spreadsheet and one row of sample data with the corresponding formulas for calculating the values of individual indicators;

–    Roads – contains data on PBC road sections, some basic PBC parameters and controls for the program’s operating modes;

–    Graphs – contains the results of processing the simulation data obtained after launching the ‘Simulation’ mode and performing a specified number of runs of the simulation model of the PBC execution to assess the laws of distribution of the amounts of deductions from the monthly payment, the cost of performing works and services, and the contractor’s profit;

–    Costs – contains, among other things, a monthly schedule of the contractor’s costs, adjusted to the year of the contract (net present value) with a discount factor adjusted for the forecasted inflation rate;

–    Penalties – contains, among other things, a schedule of the net present value of deductions from payment to the contractor for accrued penalty points due to late elimination of defects;

–    Profit – contains, among other things, a monthly schedule of the net present value of loss/gain;

–    Worksheets – contain worksheets of source data. A worksheet is created automatically using one of the two modes available in the program (Fig. 1).

Regardless of the level of complexity of the PBC, all data rows are left, and for specialized PBCs, the estimated number of defects per season is set to a different value from zero only for those operational levels of the facility that are relevant to the specialization of the PBC (e.g., only for asphalt pavement or only for bridges, etc.).

After that, all the variables of the initial data are edited, regarding the values of which a decision needs to be made, namely the values of the parameters a, b, and c of the triangular laws of distribution of random coefficients: to the time of elimination, the number and cost (per case) of defects, and estimates of the expected values of the number (for a year or season). This stage of preparing the initial data is the most responsible and time-consuming. After receiving the results of the simulation modeling, the initial data can be adjusted and re-simulated.

Thus, the probabilistic nature of the PBC process is modeled by three random coefficients defined by triangular distribution laws, with three parameters (minimum, mode, maximum) set by the expert. These are the coefficient of advance/delay in defect elimination, the coefficient of increase in the cost of defect elimination, and the coefficient to the number of defect cases. The random duration and cost of eliminating one defect and the number of defect cases are determined by the product of the value of the base value and the corresponding coefficient obtained by the Monte Carlo method. The modeling algorithm is given in [22].

Due to the parameters of the triangular distribution laws, the expert, by setting higher values of the b parameter of these laws, as well as the basic values of response time, cost of defect elimination, and their average number, can get a virtual crisis after the simulation. In this case, all results will be recalculated and displayed. The hypothesis is that an experienced expert-manager is able to sense the threat to the organization’s operations and reputation caused by such a hypothetical virtual crisis.

An important problem in monitoring the operational condition is the meticulous recording of the moments when defects occur and when they are eliminated, which means that there is a problem of the reliability and validity of the collected data and their registration. This problem is still awaiting resolution both in terms of theory and practice.

Conclusions. The analysis of foreign studies based on actual PBC implementation in many countries of the world generally confirms the effectiveness of PBC and their superiority over traditional method-based contracts. For specialized PBCs for road marking maintenance, the results of the “before and after” analysis conducted to assess the impact of PBCs on road safety did not provide convincing evidence that performance-based road marking maintenance contracts are an effective safety countermeasure that helps reduce accidents.

Only one pilot PBC (or, more precisely, OPRC) project has been implemented in Ukraine so far, funded by loans from international financial organizations, but its results, in our opinion, are not yet well known to a wide range of scholars.

It can be assumed that, with some exceptions, a sufficient regulatory framework has been created for the implementation of PBC in Ukraine, but the lack of actual PBC projects makes it impossible to comprehensively test them in practice.

Crisis management of road companies using PBC can be evaluated using the proposed LTCSimula simulation model, which is implemented using Excel. For the PBC expert manager – designer, this software implementation of the simulation model will be a useful simulator mechanism with which he or she can experience and evaluate the impact of various input parameters on the contract project under study, including exploring different crisis scenarios. The hypothesis is that an experienced expert manager is able to sense the threat to the organization’s operations and reputation caused by such a hypothetical virtual crisis.

 

References:

 

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