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Pavement Type Selection Updated Guidance on Use of Alternate Bidding Virginia Concrete Conference Richmond, VA March 6, 2014

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Session Outline 1 Background on FHWA Policy & Guidance on Alternate Bidding for Pavement Type Selection 2 State Usage 3 FHWA Technical Advisory 2

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Background on FHWA Policy & Guidance Information Federal Register Oct 8, 1981 PTS Policy If designs equivalent then alternate bidding 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 3

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Background on FHWA Policy & Guidance Information FHWA Memo Nov 13, 2008 Clarifies & consolidates FHWA policy AB is not encouraged Use of commodity price adjustments should not be used SEP 14 approval needed if using price adjustments NCHRP Report 703 Guide for Pavement Type Selection March 2011 4

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PTS Method #1 Identify feasible alternatives Perform LCCA Cost within specified % of lowest estimate Eliminate alternative NO YES Consider subjective factors: constructability, adjoining pavement, competition, traffic control, budget, etc. Make Decision Cost within specified % of lowest estimate 8 states

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PTS Method #2 (MI) Identify feasible alternatives 1 rigid, 1 flexible Perform LCCA Alternate with lowest LCC Eliminate alternative NO YES Make selection decision

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PTS Method #3 Identify feasible alternatives Perform LCCA Submit to selection committee. Committee evaluates engineering and economic factors Committee recommends a decision

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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

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Components of Agency Processes Selection of alternatives Structural design Economic Analysis Primary/Secondary Factors Contractor-based processes Alternate Bidding Design Build Long Term Warranty Other ( PPP, Value Engineering, BV Contracting, Contract Maintenance) Overview of Pavement Type Selection

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State Usage 10 State has advertised at least 1 alternate bid job State has not utilized alternate bidding State did not reply to survey

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Technical Advisory Use of Alternate Bidding for Pavement Type Selection, T 5040.39 December 20, 2012 Elimination of SEP 14 approval for price adjustments, November 8, 2012 11

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Question 1 Purpose of TA Guidance on use of AB for PTS on Federal-aid projects on NHS 12

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Question 2 Does TA Supersede other Guidance TA Supersedes: Federal Register FHWA PTS Policy Statement 11/9/81 23 CFR 626 NR Supplement issued 4/8/99 HIPT Memorandum issued 11/13/08 13

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Question 3 Background on AB for PTS Risk associated w/ 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 14

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Question 4 Scope/Applicability of TA Recommended practice for use on FA projects on NHS 15

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Question 5 FHWA Position Suitable approach when, Engineering/economic analysis shows no clear choice between different pavement designs 16

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Question 6 When is AB Appropriate Equivalent Designs Similar level of service over same performance period (use of ME Design software) Similar life-cycle costs Performance period should include min one major rehab NPV < 10% of alternative 17

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Question 6 When is AB Appropriate Discount Rate Guidance available in LCCA in Pavement Design Interim Tech Bulletin Sept 1981 Recommend use of NPV for future costs Recommend use of Real Discount Rate consistent w/ OMB Circular A-94 18

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Question 6 When is AB Appropriate Consideration of Uncertainty Determine total LCC for each alternative Consider use of RealCost software 19

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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 reasonable approach http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_rpt_70 3.pdf 20

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Question 6 When is AB Appropriate Non-Economic Factors Agency may consider, Constructability Continuity of adjacent pavements Availability of local materials Experience 21

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Question 6 When is AB Appropriate Appropriate Application Only use when AB will likely influence determination of lowest bid Projects w/ substantial quantities of different pavement items not suited for AB 22

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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% 23

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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 24

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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 25

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Question 7 Administration of AB Quality Price Adjustments If used, Provide similar incentives/disincentives for all alternate pavement types 26

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Question 7 Administration of AB Material Quantities Pay items based on weight/mass may result in cost overruns Recommend agency establish process to monitor costs to prevent any systematic bias 27

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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 Evaluated use of alternate pavement type bidding using LCCA bid adjustments Approval of LCCA bid adjustments no longer required per Nov 8, 2012 memo 28

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Question 7 Administration of AB Change Orders Should not allow post-award change order for pavement type 29

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Question 8 Program Effectiveness Monitor number of bidders and unit cost of projects Solicit input from respective pavement industry groups 30

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Question 9 Reference Materials NCHRP Report 703 dated November 2011, Guide for Pavement Type Selection http://onlinepubs.trb.org/onlinepubs/nchrp/nchrp_rpt_703. pdf 31

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Questions Gary Crawford Pavement Design and Analysis Team Tele: (202) 366-1286 E-mail: gary.crawford@dot.gov 32