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Determining Innovative Contracting Methods to Reduce User Costs
Stuart ThompsonUtah Technology Transfer Center
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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
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FHWA Road User Survey
Growth in reconstruction Growth in congestion Growth in crashes
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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.
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Road User Impacts
High Accident RatesTravel Delay CostsAdditional Fuel Consumption
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Product Quality
SmoothnessExtended Service LifeMaintenance ObjectivesImproved Serviceability
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Contracting Procedures
Traditional Contract (Design-Bid-Build)Design-BuildA+B BiddingLane RentalWarranty
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Traditional Contracts
Projects with Third Party ConflictsCookie Cutter ProjectsProjects with Negligible Impacts to the Road User, Public, & EnvironmentProjects with Potential Risks
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Design-Build
Decrease Time (Emergency/Event)Complex DesignComplex ConstructionTechnical IntegrationLimited In-house ResourcesProjects Procured Just-In-Time
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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
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A+B Bidding
Decrease Time (Emergency/Event)Potential for High Road User CostPotential Impact to Local BusinessesPublic PerceptionVital Corridor
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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.
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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.
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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.
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States Using A+B Bidding
MarylandColoradoCaliforniaVirginiaTexasNorth CarolinaWisconsinWashington
New YorkNorth DakotaIowaNew JerseyMissouriIdahoIndianaKansasMaine
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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
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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
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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.
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Lane Rental
Decrease Time (Emergency/Event)Potential for High Road User CostPotential Impact to Local BusinessesNo Alternative RoutesHigh ADT
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Lane Rental
Definition: An innovative contracting technique by which a contractor is charged a fee for occupying lanes or shoulders to do the work.
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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.
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Lane Rental Uses
Lane Rental has been used for projects that contain one or more of the following:
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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.
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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.
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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.
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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.
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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.
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States Using Lane Rental
ColoradoNew YorkNorth CarolinaUtahOklahomaOregonWashington
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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
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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
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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.
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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
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Warranty
Definition: “A guarantee of the integrity of a product and of the makers responsibility for the replacement or repair of deficiencies.”
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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.
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States Using Warranties
WisconsinMichiganNorth CarolinaCaliforniaMissouriOhioMontanaNew Hampshire
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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
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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
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Innovative Contracting Methods – Selection Flow Chart
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Questions?