Contractual Means of Achieving High-level Performance in Transit Contracts

Document Type


Publication Date


Subject Area

place - north america, organisation - contracting, economics - subsidy


Contract administration, Contractors, Contracts, Quality of work, Transit operating agencies


Financial pressures within the transit industry require that contract performance be on time and within the allocated budget. There are a variety of contractual means that transit agencies have used with varying degrees of success to achieve on-time contract performance. All types of contracts can involve payment for performance, including construction, service, materials, supplies, and rolling stock, as well as payment for maintenance and repair. Contracts can also include incentive payments for on-time or early contract performance. Essential to an effective contract are well-defined performance standards. Standards must include all important criteria and definitive and objective means for monitoring performance. Of equal importance is a schedule for performance with consequences for failure to meet that schedule. These contracts often include liquidated damages and sometimes include provisions authorizing incentive payments for early or enhanced performance. A nationwide survey of transit agencies of all sizes was undertaken for this project to obtain information regarding transit agencies’ success or failure in using performance-based provisions in their contracts; to identify any legal or other restrictions on their use of incentives or liquidated damages in their contracts; to obtain information on how the agencies determine the amounts of incentives and liquidated damages to specify in their contracts; to ascertain whether there are any risks or adverse consequences associated with the use of such clauses, such as litigation, claims, delays, limiting of competition, problems in enforcement, or increased costs; to evaluate the contractual provisions that have been successful; and to identify practices that respondents believed to be effective to achieve early or on-time performance. The responses to this survey are discussed throughout this digest. This digest should be useful to attorneys, transit administrators, contracting officers, engineers, construction contractors, and transportation planners.


Permission to publish the abstract has been given by Transportation Research Board, Washington, copyright remains with them.