Determining Innovative Contracting Methods to Reduce User Costs

Stuart ThompsonUtah Technology Transfer Center

FHWA Road User Survey

32% dissatisfied with work zones Travelers rated highway improvements that would most help overcome delays. Of more than 20, the top 3 relate to work zones and how we build roads

FHWA Road User Survey

Growth in reconstruction Growth in congestion Growth in crashes

Innovative Contracting

The primary goal of Innovative Contracting is to provide timely delivery of a quality project or facility with limited User & Social Impacts.User & Social Impacts- Costs incurred by the road user or public that are not directly accounted for in Traditional Contracts.

Road User Impacts

High Accident RatesTravel Delay CostsAdditional Fuel Consumption

Product Quality

SmoothnessExtended Service LifeMaintenance ObjectivesImproved Serviceability

Contracting Procedures

Traditional Contract (Design-Bid-Build)Design-BuildA+B BiddingLane RentalWarranty

Traditional Contracts

Projects with Third Party ConflictsCookie Cutter ProjectsProjects with Negligible Impacts to the Road User, Public, & EnvironmentProjects with Potential Risks

Design-Build

Decrease Time (Emergency/Event)Complex DesignComplex ConstructionTechnical IntegrationLimited In-house ResourcesProjects Procured Just-In-Time

Design/Build Questionnaire Results

Alaska Colorado Michigan South CarolinaArkansas Florida New Jersey UtahCalifornia Maine Ohio

STATES KNOWN TO HAVE USED DESIGN-BUILD, BUT DID NOT RESPOND

State# of

Projects

Reduce Time

Constraints

Design Construction

InnovationLimited

ResourcesReduce

User Cost

Q uality Performance/

End ResultRisk

SharingReduce Total Project Cost

Emergency Construction

AZ 4 1 2 7 3 6 5 4 8GA 2 3 4 1 7 2 8 6 5IN 5 2 3 1 5 7 4 8 6KY 2 1 3 2 6 7 4 5 8MN 1 1 2 5 3 6 4 7 8NC 4 1 3 4 7 5 8 6 2PA 17 2 1 8 7 4 6 3 5UT 2 1 3 4 5 8 6 7 2WA 1 2 3 6 1 4 5 7 8WV 0 1 2 3 8 7 5 6 4

A+B Bidding

Decrease Time (Emergency/Event)Potential for High Road User CostPotential Impact to Local BusinessesPublic PerceptionVital Corridor

A+B Bidding

Definition: A cost plus time bidding procedure that selects the low bidder based on a monetary combination of the contract bid items (A) and the time (B) needed to complete the critical portion of the project.

Benefits of A+B Bidding

A+B Bidding is used to motivate the contractor to minimize the delivery time for high priority and highly trafficked roadways. This encourages contractors to finish early by: Offering bonuses for early completion. Assessing disincentives for late

completion.

Criteria for Selection of A+B Bidding as a Contracting Procedure

Traffic restrictions, lane closures, or detours result in high road user costs.Safety concerns, or significant impacts to the local community or economy during construction warrant expediting the project.Traffic control phasing can be structured to maximize a contractor’s ability to reduce the duration of construction.The project is relatively free of third party conflicts.It is in the public interest to complete the project as soon as possible.

States Using A+B Bidding

MarylandColoradoCaliforniaVirginiaTexasNorth CarolinaWisconsinWashington

New YorkNorth DakotaIowaNew JerseyMissouriIdahoIndianaKansasMaine

Multi-Parameter Bidding (A + B) Questionnaire Results

Arkansas Idaho Maryland Nebraska OklahomaColorado Iowa Michigan Nevada South CarolinaDelaware Maine Mississippi North Dakota Missouri

STATES KNOWN TO HAVE USED A + B, ETC BUT DID NOT RESPOND

State# Of

ProjectsReduce

User Cost

Reduce Time

Constraints

Quality Performance/ End Result

Design Construction

InnovationReduce Total Project Cost

Risk Sharing Emergency

Limited Resources

AZ 8 2 1 5 6 4 3 8 7CA 38 2 1 7 6 5 4 3 8GA 2 2 1 3 6 4 7 5 8IN 19 2 6 1 3 7 4 5 8KY 7 1 2 6 3 5 4 8 7LA 40 2 2 2 7 4 8 7 4MN 10 2 1 5 4 6 3 8 7NY 130 1 2 4 3 7 5 6 8NC 30 1 4 3 2 7 6 5 8PA 27 2 1 6 3 4 8 5 7UT 12 2 1 5 3 6 4 8 7TN 3 2 1 4 7 3 5 8 6TX -5 7 2 1 7 7 6 5 7WA 5 2 5 3 6 1 4 8 7WV 0 2 1 5 4 6 3 7 8

Lessons Learned – A + BState

 AR 

 AZ 

 CA 

 GA 

 IN 

 KY

 LA 

 MN 

 NC 

 NY 

 PA 

 TN 

 TX 

UT

 WA 

Description

 A + B: Contractors have earned incentives on almost every project let with these provisions, even though they consistently use less than the maximum days allowed in their days bid.

 A + B causes jobs to be completed quicker and operations to be better planned.

 Although on the current projects employing A+B have averaged a 14% reduction in Contract Time (Contractor's Bid vs. the Engineer's Estimate), the advantage of this bidding can be lost if there are constraints beyond the contractor's control such as

 A + B With Incentive. When used the contractor dedicates resources at the expense of other projects. Quality reduced to marginally acceptable.

 A + B, A + B + C + Design/Build, A + B + PRS C = Warranty. All A + B contracts reduce construction time and save user costs. The B amount must be large enough to influence contractor.

 Contractor work at night, more overtime to get incentives. Some other projects suffer from lack of resources.

 Reduced construction time.

 A + B: Make sore jobs are in good shape, (good plans, no utility conflicts, row available, etc) 

 Maximize bonus/incentive 

 A+B Bidding is being used in Washington. So far, it has not been well received by contractors. Designers tend to set the maximum allowable time at the smallest calculated CPM schedule. This does not leave contractors with much room to decrease the tim

 We've found that quality contractor seem to get more of these projects. There is a time savings. The Low A Bidder normally is the overall low bidder.

 Good process, we do not normally tie to incentives so guarantee nothing.

 A + B: Very positive results on most projects. Should only be used for critical projects or project phases. Need clear description of work to be performed. Need good CPM scheduling provisions and experienced schedulers. Staff must be available day an

 Too early to assess any impacts.

A+B was used on several projects. Time became the overall driver on the project with quality suffering. Projects must be well defined with no utility or R/W delays. Contractor will always expect to achieve total incentive amount. Contractors tend to

New York’s A+B Bidding

New York has completed 33 projects since 1994.Projects were completed an average of 19 days earlier than bid and an average of 87 days earlier than the engineer’s estimate.An average of 9 days were added for change orders.Only one project took more days to complete than engineer’s estimate and only two took more days than bid.An estimated 20.32 million dollars in road user costs were saved.4.75 million dollars were paid for incentives.

Lane Rental

Decrease Time (Emergency/Event)Potential for High Road User CostPotential Impact to Local BusinessesNo Alternative RoutesHigh ADT

Lane Rental

Definition: An innovative contracting technique by which a contractor is charged a fee for occupying lanes or shoulders to do the work.

Why Pursue Lane Rental?

Primary Objective To motivate the contractor to

minimize the time that a lane, a shoulder, or a combination of lanes and shoulders are out of service so there is minimized traffic delay to highway users.

Lane Rental Uses

Lane Rental has been used for projects that contain one or more of the following:

Lane Rental Uses

Traffic restrictions or lane closures result in high road user costs.The use of alternate routes or off-site detours is impractical.The traffic control plan allows the contractor flexibility in scheduling work to minimize the impact of lane closures.

Lane Rental Uses

The agency seeks contractor expertise to minimize the time that lanes are out of service.The project is relatively free of third party conflicts (I.e. right-way issues, utilities, etc.).The benefit in terms of reduced impact to the highway user is greater than the additional cost to minimize lane closures.

How are Lane Charges Calculated?

Charges for lanes or shoulders can be on either an hourly or daily basis. Charges per lane can vary depending on time of day, amount of traffic, and other road user costs.

Oregon Example

Traditionally the State of Oregon specified times at which lane closures were not allowed.State law did not permit the use of road user costs in the determination of liquidated damage amounts.Therefore: no disincentive for closures or incentive to keep lanes open.

Oregon DOT US 26 Reconstruction Lane Rental Project

Major reconstruction of a 2.08 mile stretch of a primary commuter route from the west suburbs to downtown Portland.ADT ranges from about 100,000 to 130,000 vpd, with less than 2% trucks.Rates for every 15 minutes ranged from $0 to $21,000 for lane use.

States Using Lane Rental

ColoradoNew YorkNorth CarolinaUtahOklahomaOregonWashington

Lane RentalQuestionnaire Results

Colorado Indiana Maine Oklahoma Oregon

STATES KNOWN TO HAVE USED LANE RENTAL BUT DID NOT RESPOND

State# of

ProjectsReduce

User Cost

Reduce Time

Constraints

Quality Performance/ End Result

Risk Sharing

Design Construction

Innovation

Reduce Total

Project Limited

ResourcesEmergency

Constructions

AZ 5 1 2 3 4 8 5 6 7CA 0 1 6 3 2 5 4 7 8KY 5 1 2 4 3 5 7 6 8LA 2 2 2 3 8 5 7 6 8NY 25 1 5 3 4 2 7 8 6PA 7 2 1 7 5 3 6 8 4TN 5 2 1 4 5 7 3 6 8UT 2 1 2 0 3 6 8 5 7WA 0 1 5 6 2 3 7 4 8WV 0 1 2 5 4 3 7 6 8WY 6 1 2 3 7 5 4 8 6

State

 AZ 

 CA 

 KY 

 LA  MN  NC 

 NY 

 PA  TN 

UT

 TX  WY 

Description Used successfully 4 times. Reduces congestion and caused contractor to carefully plan and perform at maximum efficiency during lane closure.  Originally, on contracts where user delay costs for late lane closure pickups would exceed $6,000/hour we employed a spec. that charged the contractor a liquidated damage of $1,000 for every 10 minutes or portion of 10 minutes for late pickups.  Contractor works at night, more efficient and organized. Gets in, traffic control good. Does job right so will not have to return  Reduced lane closures.

 N/A

 Tried once - bids to high. Getting reason to try again.  Method of allocating Lane Rental charges within the bid items is problematic. It causes unbalanced bids, cash flow problems. Best use is for short duration daily lane closure operations.  Too early to assess impacts.

 Effective for minimizing disruptions to traffic.

 This concept works well if on the correct project.

 We used a variation of lane rental. We give contractor x number of days of lane reduction and apply Constant and continuous monitoring is required to document times and enforce specifications. Potential for decreasing road user costs is high. Efficiency in the contractor's operations and use of innovative materials and methods are encouraged with this

Lessons Learned – Lane Rental

New York’s Lane Rental

New York has completed 6 projects since 1995.Total project costs were 3.6 million dollars below the engineer’s estimate.Three projects were above and three projects were below the engineer’s estimate.

Warranty

Projects in which Performance can be MeasuredMinimize Overall Life-Cycle CostsProject Conditions are Well-DefinedIncorporation of New Technology in Materials, Equipment, and Construction Processes

Warranty

Definition: “A guarantee of the integrity of a product and of the makers responsibility for the replacement or repair of deficiencies.”

Advantages of Warranty Contracting

Less owner risk.Eliminates cost of owner QA/QC by transferring this responsibility to the contractor.Creates an incentive for overall project quality.Assures acceptable level of service or performance for a work item and/or major project element.

States Using Warranties

WisconsinMichiganNorth CarolinaCaliforniaMissouriOhioMontanaNew Hampshire

Warranty Questionnaire Results

State# of

Projects

Quality Performance/ End Result

Risk Sharing

Design Construction

InnovationReduce

User CostLimited

ResourcesReduce Time Constraints

Total Project Cost

Emergency Constructions

CA 17 1 2 3 4 5 6 7 8IN 7 1 2 3 7 4 6 8 5KY 2 1 2 4 3 7 5 6 8LA 1 3 8 8 8 8 8 8 8MI 1 1 2 3 4 5 6 7 8NY 89 2 1 6 4 8 3 5 7PA 1 1 3 2 7 5 6 4 8TN 2 1 2 6 4 5 7 3 8TX 6 7 3 8 6 4 7 6 8WA 1 1 3 2 5 4 6 7 8WI 40 + NR NR 2 NR 1 NR 4 3WV 0 2 1 3 6 4 5 7 8

Michigan Missouri MontanaNorth

Carolina

STATES KNOWN TO HAVE USED WARRANTIES BUT DID NOT RESPOND

User Id Description CA   Piloting one-year warranties. Construction Evaluation currently being performed.

 MN  We are requiring a 5-year workmanship warranty for the Design/Build project which will start this summer. We may pilot short-term workmanship warranties on some Design/Build projects next year.

 PA   Only one project currently underway. Too early to assess impacts.  TX   Will evolve into more in Texas.

 WA  WSDOT incorporated a five-year pavement warranty into its first design-build project. All three bidders incorporated the cost of a future overlay into the bid to ensure a successful warranty. Not cost effective for WSDOT.

Lessons Learned - Warranty

Innovative Contracting Methods – Selection Flow Chart

Questions?