Performance contracting is designed to encourage the use of innovative products like temporary signals that adjust automatically based on traffic volume. Photos: Michigan DOT
The extra time and materials cost of paving the shoulder was justified by the advantages of keeping two lanes of traffic open throughout construction.

Performance contracting offers opportunities to try new construction methods and techniques that might otherwise be precluded. The funding offered by the program was designed to help “federal-aid-eligible” projects — essentially, state DOTs — cover potentially higher initial costs and overcome obstacles to innovation.

While the methodology gives contractors more freedom to decide how best to meet the goals of a construction project, other requirements — such as American Association of State Highway and Transportation Officials (AASHTO) standards, Manual of Uniform Traffic Control Devices (MUTCD) guidelines, state DOT policies, and environmental regulations — still apply.

To help determine if performance contracting might be suitable for a particular project, the Federal Highway Administration (FHWA) suggests considering whether the following conditions are met:

  • Both the owner agency and the contractor community support the concept.
  • The project is goal-oriented and the goals are under the contractor's influence.
  • The owner agency is able to use incentives and disincentives.
  • The contractor has flexibility in how to perform the work.
  • The owner agency has adequate resources for both contract development and performance measurement.
  • The owner agency is able to use best-value or enhanced low-bid award processes.
  • There is enough time for contract development and workforce education.

As part of the Highways for Life program, the FHWA has produced the Performance Contracting Framework, a comprehensive guide that explains the concept and how state and local agencies can implement it. The Framework includes recommended processes, lessons learned, and sample materials that were developed with input from both public- and private-sector stakeholders. It's available for free at

Next month: In light of skyrocketing prices, contractors have been pressuring state and local road-building agencies to lower the cost of asphalt pavement by increasing the allowable contents of reclaimed asphalt. We'll report on how agencies are responding.