How Bahia Improved Road Quality and Cut Maintenance Costs with Smarter Contracts

A World Bank study finds that performance-based contracts in Brazil’s state of Bahia cut road rehabilitation and maintenance costs by about 40 percent while maintaining or improving road quality. The model works by paying contractors based on road performance rather than construction work, encouraging better maintenance and more efficient engineering solutions.

A stretch of highway running through Brazil’s northeastern state of Bahia tells an important story about how road infrastructure can be managed more efficiently. A recent World Bank study by researchers Eric Lancelot, Joanna Moody, Gabriel Pereira Caldeira, Carlos Garzón Guinea, Carlos Augusto Costa David, and Anibal Coelho da Costa shows that a different contracting model has helped the state improve road quality while cutting costs significantly. The research, produced under the World Bank’s Mobility and Transport Connectivity Series and the Brazil Transport Cross-Sector Learning Agenda, examines how performance-based contracts have transformed road rehabilitation and maintenance in Bahia over nearly two decades.

The study finds that this approach has reduced the cost of maintaining roads by around 40 percent compared with traditional road contracts, while keeping road conditions equal or even better. The experience of Bahia is now being seen as a promising model for other regions struggling with aging infrastructure and limited public budgets.

Why Road Maintenance Is a Big Challenge

Brazil depends heavily on road transport. With more than 1.7 million kilometers of roads, the network carries most of the country’s freight and passenger traffic. Yet infrastructure quality has long been a concern. Only a small portion of the road network is paved, and many roads suffer from poor maintenance.

One major reason is inconsistent funding. Road maintenance in Brazil is not always treated as a priority in public budgets. As a result, spending often changes from year to year depending on economic conditions. When budgets shrink, routine maintenance is frequently postponed.

This approach leads to a costly cycle. Without regular maintenance, roads deteriorate faster. Governments are then forced to carry out large rehabilitation projects that cost far more than preventive repairs. Experts have long argued that regular maintenance is cheaper and more effective, but financial uncertainty often makes long-term planning difficult.

How Performance-Based Contracts Work

To address these problems, Brazil began experimenting with performance-based contracts in the late 1990s. Instead of paying contractors for the amount of work completed, this system pays them for results. Contractors are responsible for both rehabilitating roads and maintaining them for several years.

Under these contracts, companies must ensure that the road meets specific quality standards throughout the contract period. Indicators such as pavement smoothness and structural condition are used to measure performance. If the road fails to meet these standards, payments can be reduced.

This system changes the incentives for contractors. In traditional contracts, companies are paid once construction is finished, and their responsibility ends there. With performance-based contracts, contractors remain responsible for the road’s condition for several years. This encourages them to design better solutions and carry out regular maintenance to prevent problems before they become serious.

Bahia’s Road Management Success

Bahia became one of the most successful examples of this model in Brazil. The state launched the Bahia Integrated State Highway Management Program, known as PREMAR, with support from international partners. The first phase of the program rehabilitated around 2,000 kilometers of paved roads across key transport corridors.

The results were impressive. By the end of the program, most traffic in the state was traveling on roads classified as being in good condition. Encouraged by this success, Bahia expanded the program and introduced more performance-based contracts in a second phase.

Over time, the state increased the share of its paved road network managed under this system. Today, about a quarter of Bahia’s paved roads are maintained through performance-based contracts. The program has also helped improve access to rural areas and contributed to safer road conditions along important corridors.

Lower Costs and Better Roads

The World Bank study compared performance-based contracts with conventional rehabilitation contracts used in Bahia between 2009 and 2023. The results showed clear advantages.

On average, roads managed through performance-based contracts cost about 40 percent less per kilometer to rehabilitate and maintain. For road sections managed under two consecutive performance-based contracts, costs were nearly 60 percent lower.

These savings come largely from smarter engineering choices. Traditional contracts often apply the same repair solution across long stretches of road, even when conditions vary. This can lead to unnecessary or oversized repairs.

Contractors working under performance-based agreements instead tailor solutions to each road segment. They often combine lighter rehabilitation work with regular maintenance, which keeps roads in good condition while reducing overall costs.

Lessons for the Future

The experience of Bahia shows that performance-based contracting can improve how governments manage road infrastructure. By focusing on results instead of construction activities, the system encourages efficiency, innovation, and preventive maintenance.

However, the model also requires strong government commitment. Long-term contracts depend on stable funding and timely payments. When governments fail to meet these obligations, contractor confidence can decline and programs may collapse.

Bahia’s success demonstrates that when these conditions are in place, performance-based contracts can help governments maintain better roads while spending less public money. For countries facing growing infrastructure needs and tight budgets, this approach may offer a practical path toward more sustainable road management.