Contractor Network Outcomes Contracts (NOCs)

NOC finer points – the new contract model

The new contract model contains a mix of one-sum and measured-value contracting; and both output and outcome based requirements.

It sets out to clearly define the risk profile within the contract; shares some risk with suppliers, while seeking to transfer risk to suppliers through lump sum payment items.

Where the scope of the works cannot be clearly defined, the NZTA says a transparent and measured cost approach is adopted.

The NOC also contains what it calls, “Clearly defined and measurable outcomes and value for money performance measures; mechanisms to drive performance against a key set of customer focused deliverables; and mechanisms to reward and penalise performance.”

They also involve works that cannot be adequately scoped, such as winter maintenance and ‘emergency response’ beyond an agreed risk profile.

There is flexibility to adjust quantities and levels of service throughout the contract, which also has a tensure risk reward mechanism with performance against (six) Key Results Areas. There is a ‘reward mechanism’ for ‘stretching’ the pavement and asphalt concrete surfacing assets – or getting better life out of those.

A monthly at-risk payment is linked to a significant number of performance measures.

There is a contractor obligation of at least 20 percent of annual turnover, to make sure small or medium contractors get a look in and that part of the market is continuing to be upskilled. There is a ‘desire’ for advance asset management principles documented within the maintenance management plan.

Plus there are expectations of quality and close supervision of construction to avoid the penalty reductions if the quality is not right. There are also expectations of collaborative working and taking ownership or stewardship of the network.

Importantly, there is an expectation of an ‘open relationship’ based on good faith and an expectation for contractors to work closely with local councils.

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