DYNAMIC CONTRACTING: An Asset Management Tool in Controlling
1
Infrastructure Maintenance Activities
2 3 4
PhD. Researcher Hatice Cigdem Demirel 5
6
Faculty of Civil Engineering and Geosciences 7
Delft University of Technology 8
Stevinweg 1 2628 CN, Delft, The Netherlands 9 h.c.demirel@tudelft.nl 10 Telephone: 0031152784774 11 12 13
Prof. Dr. Ir. Hennes De Ridder 14
15
Faculty of Civil Engineering and Geosciences 16
Delft University of Technology 17
Stevinweg 1 2628 CN, Delft, The Netherlands 18 h.a.j.deridder@tudelft.nl 19 Telephone: 0031152784774 20 21 22
Prof. Ir. Dr. Marcel Hertogh 23
24
Faculty of Civil Engineering and Geosciences 25
Delft University of Technology 26
Stevinweg 1 2628 CN, Delft, The Netherlands 27 m.j.c.m.hertogh@tudelft.nl 28 Telephone: 0031152784774 29 30 31 32 33 Abstract: 186 34 Main text: 3393 35 Figures+ Tables: 5*250+2*250=1750 36 Total: 5143 37 38 39
Paper submitted for presentation and publication at the 92nd Annual Meeting of 40
Transportation Research Board, January 13-17, 2013 41
42 43 44
ABSTRACT
1
Infrastructure road network is a complex system in a fast changing complicated environment 2
and therefore subject to change. The changes refer to demands, requirements, regulations and 3
financial possibilities as well as advanced technologies. Therefore outsourcing maintenance 4
activities are rather difficult. In result, increasing complexity and changes severely affects the 5
asset management strategies of transportation agencies and reduces their ability to control the 6
maintenance activities. In this case, current traditional contracting based on fixed price lack 7
the capability of dealing with changes to provide improved level of services. The main 8
question is how to do outsourcing of the maintenance activities in this context. 9
Implementation of effective and efficient delivery of services could be mentioned as the goal 10
of agencies for their assets. This paper summarizes and explains the key challenges and 11
preliminary findings with respect to performance parameters of changing circumstances 12
within process of controlling the maintenance activities of managing the outsourcing in the 13
Dutch road network system. A framework is introduced to describe the dynamic behavior of 14
the network that enables to support goal controlled dynamic interaction of network assets, 15
performance measurements and changing circumstances. 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44
INTRODUCTION
1
In road network asset management system, neither infrastructural maintenance activities nor 2
its environment are stable. In recent years road infrastructures are exposed to diverse changes 3
from multitude of sources, requirements, demands, economy, technology and regulations. 4
The constant changes in the field of maintenance are acknowledged to have enabled new and 5
innovative developments in the field of maintenance science (1). Changing complex systems 6
and especially how they change in response to changes in the environment is extremely 7
interesting (2). In this case, the main question is how to do outsourcing of the maintenance 8
activities in this context. 9
The main undesirable character of traditional contracting is early fixation of the 10
project goals that avoid the innovation of maintenance activities. The traditional types of 11
contracts (firm fixed price and pure cost reimbursement) were found to be an inadequate 12
means of controlling the expenditure and management of such developments (3). Road 13
agencies and contractors need to realize that the project goals expressed in fixed performance 14
and price, which will come into inefficient and uncontrolled mechanisms in future, is part of 15
a perception problem of traditional contracting. Both parties have a conflict of controlling the 16
ongoing maintenance activity. The client claims for a better performance of the product 17
where he measures the actual performance below his initial expectations, the contractor 18
claims a financial compensation for his extra efforts, which mainly originate from the fight 19
against the consequences of unexpected events (4). 20
In result, road agencies are struggling with increasing conflicts, complexities and 21
being thought of as outdated, that increases when the duration of the contract increases. 22
Nowadays countries are paying more attention to adapting their road network system to 23
changing circumstances with new perspectives for design management and maintenance of 24
infrastructures (5). It can be stated that contracting play a key role in the control, 25
development and implementation of the maintenance activities for outsourcing facilities in 26
road network asset management system. Therefore, contracting mechanisms have to set up 27
ambitious methods to cope with changes, to provide goal control systems and to avoid 28
conflicts between principle and contractors. 29
Dynamic contracting mechanism is a very strong tool to control and improve 30
maintenance activities dynamically in order to keep them adequate in the constant changes. 31
In a rapid changing world, there are a great variety of difficulties to determine the required 32
performance and to measure actual performance in road network systems. Dynamic 33
contracting which is a mechanism can be dynamically applied and controlled the sequence of 34
performances and price in time during the maintenance activities. This mechanism can be 35
used to develop a set of requirements that establish goals to be met by control. Requirements 36
are the basis for every project, defining what the stakeholders- users, customers, suppliers, 37
developers, businesses- in a potential new system need from it, and also what the system 38
must do in order to satisfy that need (6). For effective control it is necessary to describe 39
aspect requirements for a goal-controlled system with relation to the performance by using 40
system theory. Regarding to system theory, the aim is to find an answer how the mechanism 41
will meet the principle requirements to the maximum effectiveness in the changing 42
circumstances and how to make an optimization between performance and price relation in 43
maintenance activities. 44
The purpose of this paper is to present and explain the key challenges and preliminary 1
findings with respect to performance parameters of changing circumstances within process of 2
controlling the maintenance activities of managing the outsourcing in the Dutch road network 3
system. 4
5
FRAMEWORK TO STUDY MAINTENANCE OUTSOURCING 6
An effective and efficient outsourcing is the backbone of the controlling maintenance actions 7
in infrastructure asset management system. Recently, there has been tremendous pressure on 8
civil infrastructural environment to control the various maintenance functions and to provide 9
timely improvement. In general, complicated civil infrastructural environment comprise 10
interrelated elements in a complex maintenance system. Controlling an optimal contract 11
mechanism requires understanding the entire realization of outsourcing maintenance. A 12
proper framework to study maintenance outsourcing from both client and contractor points of 13
view involves several interlinked elements as indicated in Figure 1. (1) 14
15
16
FIGURE 1: Framework for study of maintenance outsourcing (1). 17
18
Assets and Its Maintenance Activities 19
20
Infrastructure assets are systems or networks that serve define communities where the system 21
as a whole is intended to be maintained indefinitely to a specified level of service by the 22
continuing maintenance and replacements of its components (7). Infrastructure assets and its 23
maintenance activities play a key role in achieving organizational goals of transportation 24
agencies. Owners of infrastructure networks have many physical elements (the assets) to 25
maintain and to keep functioning (8). Table 1 (9) provides an infrastructure inventory of 26
Rijkswaterstaat (the executive agency of the ministry of infrastructure and environment in the 27
Netherlands) to maintain its road network. 28
29
Primary road ways 3250 km Motorways > 2100 km Motorways with traffic signaling approx. 1000 km
Tunnels 14
Traffic management offices 7
Dynamic traffic signaling systems 91
Ramp metering systems 51
Ecoducts (game passages) 5 1
TABLE 1: Infrastructure inventory of Rijkswaterstaat (2004) (9). 2
3
Rijkswaterstaat will have to provide assets, comply with demands and maintain a 4
performance obligation for the outsourcing of work for the Dutch road network system. In 5
case of outsourcing maintenance for infrastructure assets, the goal is to achieve agreed level 6
of services while keeping the desired functions available. An asset is said to be in failed state 7
when it is no longer functioning properly (1). Changing circumstances in infrastructure road 8
network system causes complexity for outsourcing maintenance activities. The occurrence of 9
failures and changes of infrastructure road network system can be controlled through 10
contracting mechanism. To enable and choose appropriate maintenance actions in a road 11
network system, dynamic contracting mechanism takes a central role. Dynamic contracting 12
mechanism can be viewed as a use of suitable type of contract which deals with the set of 13
failures and changes that client and contractors can control the maintenance activity period. 14
Controlling the process of optimal contracting mechanism requires understanding the forms 15
of maintenance activities. 16
17
Definition of Maintenance and its Categories 18
19
According to European standards (10) maintenance can be defined as the combination off all 20
technical, administrative and managerial actions during the life cycle of an item intended to 21
retain it in, or restore it to, a state in which it can perform the required function. Murthy (1) 22
shows that maintenance is categorized into 2 kinds; 23
1. Corrective Maintenance:
24
These are corrective actions performed when the asset has a failure and the most common 25
form of corrective maintenance is “minimal repair” where the state of the asset after repair is 26
nearly the same as that just before failure. 27
2. Preventive Maintenance:
28
In the case of equipment or consumer durables, preventive maintenance actions are carried 29
out at component level where components are replaced on age, usage and/or condition. The 30
degradation in the asset state can be controlled through use of preventive maintenance and, in 31
the case of equipment, this involves regular monitoring and replacing of components before 32
failure. 33
On the other hand, Schoenmaker (11) describes the maintenance as the whole set of 34
activities that are needed for keeping the required functions available at the agreed level of 35
36 37
service. There is variety of terms being used to determine the nature of maintenance. The 1
maintenance activities grouped into 3 categories; (12) 2
1. Execution of work based:
3
Daily maintenance, small maintenance, structural maintenance, large maintenance 4
2. Financial based:
5
Fixed maintenance, variable maintenance 6
3. Strategically based:
7
Preventive and corrective 8
On the basis of strategically based maintenance, a choice can be made as shown figure 2 9 (13). 10 11 small large large large small small Preventive Corrective Part- component
Consequence of failureConsequence of Failure Incident based
Predictability of failure time Measurability of the condition Modify component Usage based Condition based 12 13
FIGURE 2: Weighing of the function, the value and the risks of failure 14
(Rijkswaterstaat, 2002) (13) 15
16
In addition to this definition it is essential that maintenance will be executed in an 17
efficient and effective way by minimizing risks, restoring and preventing defects and 18
minimizing life cycle cost (11). 19
For integrated contracts Pakkala (14) classify maintenance practices into 2 categories; 20
1. Routine Maintenance: Can be defined by those maintenance activities that occur every
21
year on a routine basis or of a cyclic nature. 22
2. Periodic Maintenance: Can be defined as those activities that occur infrequently or every
1
so often and can be termed as “upkeep and improvements”. 2
Maintenance is complex work to achieve agreed level of services in a cost effective 3
manner. In this complex system, dynamic contracting mechanism proposes to make a clear 4
approach to be functionalistic and to achieve lower life cycle costs by giving contractors and 5
client opportunity to choose appropriate contracts according to the type of maintenance 6 activity needed. 7 8 PERFORAMNCE REQUIREMENTS 9
The elicitation and delivery of requirements has long been problematic in construction sector 10
(15). Requirements are a key determinant of principle needs. These needs may be constraint
11
by factors outside their control or may be influenced by other goals which themselves change 12
in the course of time (6). Where clarity of project requirements is low, or constraints are 13
confusing and variable, research managers are more likely to believe that the probability of 14
success is comparatively low (16). 15
To control and manage maintenance activates successfully by a road authority 16
depends on the well defined performance requirements. Some of the performance 17
requirements are clustered in Table 2 for road network maintenance activities. 18
19
Asset Owner
Goals
- Costly effective projects - Fewer traffic jams - Safe roads - CO2 emission
- Sustainable road network
Outcomes - Availability - Safety - Maintainability - Accessibility - Functionality - Reliability - Security - Environment - Cost effectiveness
Asset Provider Contactor
Aspects - Flatness - Roughness - Light burning - Noise production - Resistance - Cleaning - Water drainage - Road signs - Durability - Snow removal 20
TABLE 2: Performance requirements for contracting mechanism in road network 21
maintenance activities 22
23
In order to identify suitable performance requirements that are widely applicable with 24
the contracting mechanism, the challenge is dealing with changes and transferring the 25
necessary assessment of system requirements. Pakkala’s (14) international study on 26
contracting practices reveals that there are some missing gaps between the higher level of 27
performance measures and the performance measures that are used in the contracts. 28
The performance requirements in the different stages can be adjusted to each other, 1
leading to optimal solutions from a system theory perspective. Dynamic contracting in 2
general can be seen as the mechanism that support the changed approach by measuring the 3
performance requirements and making the transfer of these requirements between parties and 4
suggest further improvements for the maintenance outsourcing. (Figure 3) 5 6 Ministry of Environment and Infrastructure Rijkswaterstaat Asset Owner Network Controller Provider Manager Traffic control Information Outcomes Aspects Contractors 7
Figure 3: Transformation of performance requirements 8
9
SYSTEM THEORY AND MAINTENANCE CONTROL 10
The vision of control paradigm stretches from system theory. It is of considerable importance 11
to organizations that wish to have maintenance activities controlled that the variety of system 12
knowledge have to be taken into account before any decisions can be made. The complexity 13
of infrastructure networks limits our understanding of their behavior and, consequently, our 14
options to effectively control and steer that behavior (17). To be able to control infrastructure 15
maintenance activities, system theory can be integrated into the organization’s systems 16
through the implementation of its strategies. The method proposed by systems theory is to 17
model complex entities created by the multiple interaction of components by abstracting 18
from certain details of structure and component, and concentrating on the dynamics that 19
define the characteristic functions, properties, and relationships that are internal or external to 20
the system (18). 21
In terminology In’t Veld (19) defined the system as “depending upon the objectives 22
as defined by the analyst, a set of clearly distinguished elements within the total reality. 23
These elements certainly have relations amongst themselves and may have relations with 24
other elements of the total reality, where: elements are the smallest entities that the 'analyst 25
wishes to consider in his analysis; relations are descriptions of the coherence between these 26
elements. System approach also seeks to understand how they interact with one another 27
and how they can be brought into proper relationship for the optimum solution of the 28
problem (20). An infrastructure can be seen as a large integrated system, which is built from 1
objects (sub-systems) linked together in a system structure (17). 2
3 4
Effective Control of Maintenance Activities 5
Outsourcing of infrastructure road network system can only be efficient if its maintenance 6
activities are effectively and properly controlled. Transportation agencies want to move 7
beyond the traditional contracting methods to growing use of new outsourcing methods in the 8
effective control of infrastructural road maintenance activities. Controlling the maintenance 9
activities play a vital role in contracting mechanism, where set of control rules assist the 10
organizations towards its goals. Set of control rules occupies a very dominant position in the 11
contracting mechanism of infrastructure asset management. This set of control rules is 12
derived from a control paradigm as developed for the control of systems (21). The control 13
paradigm is defined as a class of abstract systems, each consisting of a controlled system, an 14
environment and a controller. 15
The requirements for effective control have been developed by De Ridder (22) can be 16
summarized as follows, 17
- Controller should specify a goal with respect to the controlled system 18
- Controller should have a model of the control system available 19
- Controller should have information available about the situation of the system parameters 20
and influencing parameters of the environment as specified by the model 21
- Controller should have sufficient control variety available. 22
Dynamic Control Model 23
The control performance and process in any organization can be undertaken in three levels. 24
These are; the strategic level, the management level and the operational level (23). 25
- Strategic control: deals primarily with the broad questions of domain definition, 26
direction setting, expression of the organization’s purpose, and other issues that impact 27
the organization's long-term survival. 28
- Management control: deals with effective resource utilization, the state of 29
competitiveness of the unit, and the translation of corporate goals into business unit 30
objectives 31
- Operational control: is primarily concerned with efficiency issues. Occurring at very 32
specific functional or sub-departmental levels of the organizational hierarchy, this mode of 33
control generally conforms to traditional control models. 34
De Ridder (24) explores the levels of control by dynamic control model. (Figure 4) 35
The vertical axis represents the control paradigm, whereas the horizontal axis represents the 36
dynamic system behavior. In this dynamic control model the levels of control demonstrated 37
where, 38
- Strategic control: is aimed at decision making about long term investments 39
- Tactical control: is aimed at programming interventions. 40
- Operational control: is aimed at delivery of network capacity and management of network 41
flow. This contains operational goal control by the controller.
42
People 10 Politics 9 Government 8 Strategic control: Investment decisions 7 Tactical control : Programming 6 3 Network: Capacity (t) 1 Environment: -Users (t) -Nature (t) 2 Output: - Reliability - Safety - Sustainability - Availability 5 Input: - Interventions (t) - Events (t) - State of Assets (t) 4 C B A Budget 12 Expectation11 a b a b a b a b a b a b a = Influence b = Information A = Asset Owner B = Asset Manager C = Service Provider (t) = Time change a b Operational control: Measure & control
Effectiveness Efficiency
1 2
FIGURE 4: Dynamic control model 3
4
It can be seen that effectiveness of control is measured by comparison of the 5
expectations at one side with the output at the other side and the efficiency as result of 6
control is measured by comparison the allocated budget at one side with the input at the other 7
side (24). Consequently this conceptualization of dynamic control model can be used to deal 8
with complex maintenance infrastructure activities. 9
The systems needs to be adaptive (25), because with a duration of the maintenance 10
contract of 20 years or more not everything can be known in advance. In short: complex 11
systems are adaptive when they can learn and evolve; they have the ability to improve. 12
Uncertainty as a characteristic and not something which has to be resolved beforehand in 1
fixed contracts. 2
3
A PROPESED APPROACH TO OPTIMAL CONTRACTING MECHANISM FOR 4
CONTROL MAINTENANCE ACTIVITIES 5
The transportation construction industry needs mechanisms for letting and managing 6
construction projects through which optimal product performance can be realized throughout 7
it’s service life (26). 8
The traditional contracting strategies often do not lead satisfactory results in their 9
service life. State and provincial transportation agencies are faced with growing needs and
10
limited resources to maintain the highway network (27).
11
The key findings of challenges in Rijkswaterstaat maintenance contracts; (28). 12
- Often resulting in conflict situations 13
- Low management attention for this type of work 14
- Insufficient initial data and data management 15
- Insufficient contract control capability 16
- Contract procured on lowest price 17
The resulting challenges have motivated these agencies to expand the amount of
18
contracting they do (27). The objective of a preventive and corrective maintenance contract
19
should be to ensure that mechanism plan and accommodate expectations, control activities, 20
formulate asset strategies and asses adequate functionality throughout its service life cost 21
effectively. Road asset managers are therefore encouraged to adapt their ongoing provisions 22
and facilities of maintenance activities. 23
Within system theory, a dynamic control model is a better understanding of the 24
process of contracting mechanism in maintenance infrastructures. The conceptualism of 25
dynamic contracting mechanism gives the collaboration model between contractors and 26
clients for maintenance activities of road networks with their associated assets by using 27
performance indicators and dynamic control model. (Figure 5) 28 Asset Manager/ Asset Provider Controctor Network System (t) Cluster of Assets (t) Dynamic Contracting Outcomes 29
FIGURE 5: Dynamic contracting 30
31 32 33
CONCLUSION
1
The fast changing complicated environment and complex maintenance infrastructure systems 2
require a contracting mechanism, which is dynamically controlled. 3
The key principles of dynamic contracting mechanism: 4
- Enables to controllers to keep maintenance facilities up to date 5
- Provide effective control of complex system in fast changing complicated environment 6
- Optimization of performance over the entire network per time step 7
- Maintaining level of asset performance through the execution of corrective and preventive 8
maintenance 9
- Dealing with changing circumstances in a cost effective manner 10
- Ensuring performance (availability, safety, environment, etc.) requirements 11
- Ensuring flow of traffic 12
- Potential control on performance and costs 13
- Control transformation of risks between parties 14
- Choosing an appropriate type of contracting mechanism 15
- Is a tool for decision making 16
17 18
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