Outsourcing transportation infrastructure maintenance : a theoretical approach with application to JR East

Abstract

In transportation agencies, how to reduce maintenance and operation cost is one of the biggest and most common concerns, because their revenue is not expected to increase drastically in the future. One of the solutions undertaken nowadays is contracting out and utilizing contractors' efficiency for cost cutting and performance improvements. Actually, highway agencies in the US have already tried several pilot programs, employing performance-based contract, aiming at reducing their cost of maintenance and rehabilitation of their assets. It has been reported that these agencies achieved huge cost-reduction and performance improvement at the same time by implementing these strategies. Railway infrastructure maintenance is not outsourced as much as highway maintenance in the US. However, a theoretical discussion about outsourcing and contracting shows that railway track maintenance can be outsourced to enhance operating efficiency. Exploring the cases in several railway organizations and highway agencies, fixed-price contract with incentive schemes turn out to be mainly utilized. Evaluating maintenance contractor's performance by several comprehensive performance metrics is also a useful tool to manage and control the contractor's performance, which is linked to reward or penalty payments.

(cont.) Considering the lessons learned in the discussions above, applications for railway maintenance in JR East is discussed. Its maintenance contract structure is in the midst of transition, but still imbues a traditional style. Instead, a long-term, performance-based contract with incentive scheme is suggested to improve the efficiency of infrastructure maintenance and adjust the future environmental changes JR East faces.