Performance-Based Road Contracts in Zambia

Public infrastructure procurement involves significant incentive problems because contracts are often incomplete. Output- and performance-based road contract (OPRC) is an innovative contractual scheme that has been developed in the road sector. Unlike traditional input-based procurement methods, contractors can freely design, invest in, and maintain roads to deliver an agreed level of road functionality, which helps to ensure the sustainability of road maintenance. Using data from Zambia, this paper shows that major reconstruction works under OPRC arrangements are effective at increasing agricultural production. In particular, small-scale farmers who currently use only a few advanced inputs, can benefit from improved connectivity from improved roads. The results also indicate the possibility of improved accessibility, which allows new economic opportunities for farmers who currently do not participate in market transactions.