Innovative Contracting Techniques

“Partnering with Industry to Create a Better Roadway”

Presented by

Doyt Bolling

Director Utah Technology Transfer Center

Innovative Contracting Techniques

• Design-Build

• Lane Rental

• A+B Bidding

• Warranty

• Job Order Contracting

Premise for the Implementation of Innovative Contracting

Techniques

• Traditionally highway projects are designed, bid, and built with the contract awarded to the lowest bidder.

• Innovative contracting allows for other factors such as time, quality, and innovation to be considered, in addition to low bid.

General Warrants and Objectives

• Projects suitable for any innovative contracting technique are:– Projects in which right-of-way, utility,

environmental, and other socio-political issues have been resolved.

– Projects where the potential exists for increasing quality, decreasing costs, decreasing time, reducing administration costs, and reducing the possibility for legal claims and change orders.

Design-Build

• Definition: When a single entity provides both the design and construction through a single contract between the owner and the Design-Build firm.

Why Pursue Design-Build

• Primary Objective– Time Savings

• Other Objectives– Singular responsibility.– Reduce administrative costs.– Allow for contractor innovation and flexibility.– Provide additional expertise not available in house.– Allow contractor to pursue new technologies and

approaches that will facilitate design, construction, and improve final product quality.

Framework of Design-Build

• There are three principal project categories for which Design-Build procurement has been effective:– Emergency repair and rehabilitation projects.– Specialty type projects (I.e. ITS, Ferry Boats,

and etc.).– Mega-reconstruction projects.

Emergency Repair and Rehabilitation Projects

• Design-Build is used for these projects to decrease project delivery time and road user costs.

Specialty Type Projects

• Design-Build is used because there is:– Limited expertise in house.– Opportunity for innovation, alternative designs,

and innovative construction approaches.

Mega-Reconstruction Projects

• Design-Build is used to:– Shorten delivery time for the project by allowing

construction to proceed before design is completed.

– Allow for contractor innovation and flexibility to be incorporated in the design and construction of the project.

– Save time and reduce road user costs.– Meet specific delivery dates.

Utah Example “Reasons for Pursuing Design-Build”

• Time– The Olympics and increasing traffic congestion called for early

completion.• For example- A project that under traditional methods would have

taken10 years to complete will now take just 4.5 years to finish under Design-Build.

• Innovation– The contractor can provide early insight to the design to facilitate

construction.

• Administration and Legal Issues– Single source responsibility for both design and construction

reduces legal issues and facilitates administration of the project.

States Using Design-Build

• Arizona

• Colorado

• California

• Florida

• Hawaii

• Kentucky

• Alaska

• Michigan

• Minnesota

• Missouri

• New Jersey

• Virginia

• North Carolina

• North Dakota

• New Mexico

• Ohio

• Pennsylvania

• South Carolina

• Utah

• Maine

• Oregon

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

• Maryland

• Colorado

• California

• Virginia

• Texas

• North Carolina

• Wisconsin

• Washington

• New York

• North Dakota

• Iowa

• New Jersey

• Missouri

• Idaho

• Indiana

• Kansas

• Maine

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

• 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:

• 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.

• 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

• Colorado• New York• North Carolina• Utah• Oklahoma• Oregon• Washington

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

• 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

• Wisconsin• Michigan• North Carolina• California• Missouri• Ohio• Montana• New Hampshire

Job Order Contracting/Indefinite Delivery

• Definition: The combining of like projects into one contract that is administered by the owner/agency.

• These projects are competitively bid with indefinite quantity and indefinite delivery at fixed unit construction prices.

How is Job Order Contracting Different from Traditional

Contracts?• Two Ways

– Job Order Contracts cover a variety of similar types of construction including: maintenance, repair, renovation, and traffic control projects that are combined under a single contract at fixed unit prices.

– The contracts are in place before the owner identifies where and when the work is to be done. These contracts are based on a minimum yearly amount of work as long as the contractor performs acceptable work.

Advantages of Job Order Contracting

• Lower costs– Quantities are larger by combining similar projects, therefore

resulting in lower unit bid prices.

• Incentives for quality– The contractor is motivated by the fact that they will continue to

receive work so long as their performance is satisfactory.

• Less owner time and administration cost required– Several projects can be accomplished under one contract.

• Opportunities for small disadvantaged businesses– Small firms that can’t compete for larger construction projects can

provide services required by individual job orders.

States Using JOC

• Armed Forces• Illinois• California

Accessing WebSite

Connect to www.utaht2.usu.eduClick on the Innovative Contracting Link.OrGo directly to the Innovative Contracting Page by entering http://www.utaht2.usu.edu/IC/Default.html

Viewing Documents

Click on the Link “Search for Innovative Contracting Documents”.Then use the pull-down menus to select a “state” and a “contracting procedure”.

NOTE: to view all leave the pull-down menus blank.Click Run QueryAfter the query loads click on the title of the document you wish to view.A full description of the document will load.Click on “View Full Document” at the bottom of the page.If you have Adobe Acrobat Reader the document will load.OrIf you do not have Adobe Acrobat Reader, click on the icon, or visit www.adobe.com/prodindex/acrobat/readstep.html to download a free copy.

Also, utilize the website for other information on innovative contracting practices. It includes links, basic definitions, and the draft of “Best Practices Management Guidelines for Innovative Contracting.

Innovative Contracting Website Access

Questions?