2018 - Performance Based Contracts and Climate Change

Climate change has negative implications for transportation investments, especially those managing maintenance using output and performance-based road contracts (OPRC).

 

Currently, climate change risks are generally carried by the asset owner through the  Force Majeure provisions of the contract, and treated as ‘unforeseen’ events, with costs reimbursed as Emergency Work reimbursements. This not only impacts on the financial performance of the OPRC, but in some situations, may make OPRCs a less than ideal modality for maintaining road networks.

 

OPRC projects therefore face a number of pressing climate related issues compared to traditional contracting arrangements which, if addressed, will contribute to more resilient infrastructure:

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·        Explicitly recognizing that climate change presents serious challenges to operations and maintenance (O&M) and long-term viability of infrastructure assets

·        Finding a way to estimate climate change risks since historic data does not reliably represent future climate

·        Accounting for climate change in OPRC design to realize the full potential economic and social benefits

 

Managing these uncertainties is key to development successful OPRCs. Allocating the risk of climate change to the stakeholder parties best suited for handling the impacts is essential.