Victorian government launches performance-based road repair contracts

The new Victorian Road Maintenance Contracts came into force on February 1, 2023 across the Barwon South West region, and on December 22,2022 in the Hume, and Gippsland regions. The overhaul flew under the radar because the government didn't announce the overhaul and the change bypassed the media entirely.

The government disclosed the new contracts after South West Coast MP Roma Britnell questioned Roads Minister Melissa Horne about reports major road repair projects were having their funding withdrawn.

Fulton Hogan won the new Barwon South West contract after an open tender process. It is worth $363.5 million over about 5.5 years, expiring on June 30, 2028. Fulton Hogan's existing contracts were supposed to run until 2025.

In some respects the contracts are similar to the previous South Western, North Eastern and Eastern alliances - the same giant construction companies, Fulton Hogan and Downer Group, will hold the contracts, which have roughly the same value as the alliance agreements - the big difference will be the addition of strict monitoring and performance requirements.

Under the new agreements contractors must undertake monthly "contract management meetings" with the Department of Transport to check the contractor is sticking to its obligations, including its key performance indicators. There are also "quarterly performance meetings" to discuss "the contractor's monthly performance reports and performance of the maintenance services against the KPIs during the quarter preceding the meeting".

Government payments to the contractor will depend on how the contractor performs against its KPIs.

A government spokesperson said the new contracts would "modernise" road maintenance in regional Victoria, bringing it in line with the maintenance regimes in Melbourne.

"We've modernised the way we maintain Victoria's regional road network thanks to the establishment of the Victorian Road Maintenance Contract," the spokesperson said.

"This new model for road maintenance delivery across regional Victoria means a more consistent approach, more performance guidelines for our contractors, and most importantly, smoother, more reliable journeys for Victorian drivers."

Performance-based contracts make it much more important for contractors to deliver high quality work that doesn't fail prematurely and require rectification. The Standard has reported dozens of instances of minor and major roadworks in the south-west failing mere months after the contractor had finished the work.

The government said Fulton Hogan would have to begin its work under the contract by doing routine maintenance work. If it completes that work to the standard set out in the contract guidelines it will be considered for more substantial resurfacing and road rehabilitation projects.

This requirement appears to explain Ms Britnell's claims that funding for major repair projects had been withdrawn.

The contract also states that any defective maintenance work must be rectified by the contractor at its own expense.

"The contractor must, when undertaking and completing any activity, function or task to rectify and make good any maintenance services defect, do so at its own cost," the contract states. If the contractor doesn't fix the defective repair within the required time frame the Department of Transport will fix it and invoice the contractor.

The contractor will also have to provide rigorous data on the condition of roads it is responsible for and the repair work it completes.

An audit of Victoria's road network after the 2022 floods revealed the state's roads were in worse condition than previously thought. The government said the improved data and monitoring would enhance its long-term planning under its 10-year road maintenance strategy.