Maintaining roads: Experience with output-based contracts in Argentina

Creating capacity and incentives for ongoing maintenance of capital investments is a challenge across all infrastructure sectors, but especially for services that cannot attract cost-covering user fees, such as low-volume roads. The Argentine government has responded to this challenge in its nonconcessioned road network by using output-based contracts with the private sector for rehabilitation and maintenance. The multiyear, lump sum contracts, funded by the government and the World Bank, specify required road service outputs and use incentive-based payment schedules to ensure the quality of the work. After three years of operation the 60 contracts (averaging US$10 million) in the first phase are working well. By 2002 around 75 percent of Argentina’s nonconcessioned roads should be operating under output-based contracts.