fhwa life cycle costs analysis and pavement type selection guidance maryland concrete 2014...
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FHWA Life Cycle Costs Analysis and Pavement Type Selection Guidance
Maryland Concrete 2014 ConferenceMarch 18, 2014
Presentation Outline
1 •Background on FHWA Policy & Guidance
2 •Overview of Pavement Type Selection Methods
3 •FHWA Technical Advisory
Background on FHWA Policy & Guidance Information
• Federal Register Oct 8, 1981 PTS Policy▫If designs equivalent then alternate bidding
(AB) permitted•Federal Register Nov 9, 1981 Clarification
▫Discourages use of price adjustment clauses w/ AB
•23 CFR, Part 626 Non-Regulatory Supplement April 8, 1999▫FHWA does not encourage use of AB for PTS
due to issue of equivalent pavement designs
Background on FHWA Policy & Guidance Information
• FHWA Memo Nov 13, 2008 ▫Clarifies and consolidates FHWA policy ▫Alternate Bidding is not encouraged• Use of commodity price adjustments should
not be used▫Special Experimental Project #14 (SEP14)
approval needed if using price adjustments
• NCHRP Report 703 “Guide for Pavement Type Selection,” 2011
PTS Method #1
Identify feasible
alternatives
Perform LCCA
Cost within specified % of
lowest estimate
Eliminate alternative
NO
YESConsider subjective factors:
constructability, adjoining pavement, competition, traffic control,budget, etc.
Make Decision
Cost within specified % of
lowest estimate
8 states
PTS Method #2 (MI)
Identify feasible
alternatives 1 rigid, 1 flexible
Perform LCCA
Alternate with lowest
LCC
Eliminate alternative
NO
YES
Make selection decision
PTS Method #3Identify feasible
alternatives
Perform LCCA
Submit to selection committee
Committee evaluates
engineering and economic factors
Committee
recommends
a decision
PTS Method #4
Identify feasible
alternatives
Perform LCCA
Both rigid and flexible alternatives are feasible
Eliminate alternative
NO
YES
Prepare LCC Adjustment
factor
Alternate Bids to determine
pavement type
10-25 states
FHWA Technical Advisory•Elimination of SEP 14 approval for price
adjustments, November 8, 2012
•Use of Alternate Bidding for Pavement Type Selection, T 5040.39 December 20, 2012
Question 1: Purpose of TA?
•Guidance on use of Alternate Bidding for Pavement Type Selection on Federal-aid projects on NHS
Question 2: Does TA Supersede other Guidance?
•TA Supersedes:▫Federal Register FHWA PTS Policy
Statement November 11, 1981
▫23 CFR 626 NR Supplement issued April 8, 1999
▫FHWA Memorandum issued November 13, 2008
Question 3: Background on AB for PTS?
•Risk to Agency associated with variation of material costs and performance
•23 CFR 626 NR Guidance did not encourage use of AB
•Limited use due to:▫Lack of national guidance, ▫Consistent approach to AB and ▫Open competitive bidding environment
Question 4: Scope/Applicability of TA?
•Recommended practice for use on Federal Aid projects on NHS▫Process suitable for any project
▫Contracting agencies may use State design and construction practices for non-NHS projects
Question 5: FHWA Position?
•Suitable approach when,▫Engineering/economic analysis shows no
clear choice between different pavement designs
Question 6: When is AB Appropriate?
•Equivalent Designs▫Similar level of service over same
performance period (use of Pavement ME-Design software)
▫Similar life-cycle costs Performance period should include min one
major rehab cycle Life cycle costs considered similar if NPV for
higher cost alternative is less than 10% higher than lower cost alternative
Question 6: When is AB Appropriate?
•Discount Rate
▫Guidance available in FHWA “LCCA in Pavement Design – Interim Tech Bulletin”, September 1981
▫Recommend use of NPV for future costs
▫Recommend use of Real Discount Rate consistent w/ OMB Circular A-94, Appendix C
Question 6: When is AB Appropriate?
•Consideration of Uncertainty▫Determine total LCC for each alternative▫Consider use of RealCost software
Question 6: When is AB Appropriate?
•Maintenance and Rehab Strategy▫Should reflect realistic pavement
management practices▫Should utilize realistic timing and extent of
M&R activities▫Provide similar level of service over
performance period▫NCHRP Report 703 Section 3.5 has a
reasonable approach
Question 6: When is AB Appropriate?
•Non-Economic Factors▫Agency may consider:
Constructability Continuity of adjacent pavements Availability of local materials Experience
Question 6: When is AB Appropriate?
•Appropriate Application▫Only use where pavement items impacted
by AB are likely to influence lowest costs
▫Projects w/ substantial quantities of non-pavement items may not be good candidates for AB
Question 6: When is AB Appropriate?
•Work Zone User Delay Costs▫Not suited when user delay costs for initial
construction and M&R exceed 20% between alternates
Question 7: Administration of AB?
•LCCA Bid Adjustment▫Should be used for all AB projects▫Compute NPV of all unique costs over
performance period▫Establish process w/ industry input▫Include LCCA bid adjustment in project specs▫Should not include non-agency costs
User delay costs Vehicle operating costs Environmental costs, etc.
Question 7: Administration of AB?
•Commodity Price Adjustment▫Not desirable
Difficult to administer equal treatment May result in in different levels of material
cost risk
Question 7: Administration of AB?
•Quality Price Adjustment Clauses▫If used,
Provide similar incentives/disincentives for all alternate pavement types
Question 7: Administration of AB?
•Material Quantities▫Materials pay items based on weight/mass
may result in cost overruns Materials pay items based on area are less
likely to result in a materials overrun Overruns may result in a higher cost to
Agency, which makes LCCA invalid
▫Recommend agency establish process to monitor actual costs to prevent any systematic bias
Question 7: Administration of AB?
•Approvals▫Title 23 U.S.C. 112 FA construction
contracts awarded based on lowest responsive bid
▫SEP 14 Innovative Contracting Approval Process no longer required Evaluated use of alternate pavement type
bidding using LCCA bid adjustments and is no longer considered experimental per FHWA Memo dated November 8, 2012
Question 7: Administration of AB?
•Change Orders▫Should not allow post-award change order
for pavement type Negates purpose of alternate bid process
Question 8: Program Effectiveness?
•Monitor number of bidders and unit cost of projects
•Solicit input from respective pavement industry groups
Question 9: Reference Materials?
•NCHRP Report 703 “Guide for Pavement-Type Selection,” 2011
http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_rpt_703.pdf
Additional Information or Questions
Gary CrawfordFHWA Office of Asset Management, Pavements, and ConstructionPavement Design and Analysis Team
Gina AhlstromFHWA Office of Asset Management, Pavements, and ConstructionPavement Design and Analysis Team