Course Overview - Ohio Department of Transportation



4784651-508000Participant Workbookleft250002514600Alternative Contracting Training Course900007300Alternative Contracting Training CourseSept 20185819031543179000Course OverviewThis course was designed to provide participants with an overview of the Alternative Contracting Methods (ACM) currently used by ODOT in its construction program... The course addresses the following methods:I/D ProvisionsA+B BiddingLump Sum Minus Incentive (LSM)Quick Completion Incentive (QCI)Flexible Start Window ContractWarrantiesBid-related provisions (Bid Alternates, Additive Alternates, Optional BidsIt also addresses criteria and guidance for project selectionAlternative contracting methods to manage projects have changed the way highway agencies conduct business. Their use has in some cases resulted in dramatic improvements in performance, but not without challenges. This course introduces the ACMs available to ODOT construction. It defines benefits and challenges, and addresses best practices for implementation of these methods including criteria for selection of appropriate projects.Course StructureThe course is divided into six parts:Part 1. Why use Alternative Contracting methods? ODOT ACMs, Benefits/ChallengesPart 2 Time Related ACM Definitions and Implementation Guidance Part 3 Time Related ACM Construction AdministrationPart 4 Quality-Related (Warranty Provisions)Part 5 Bid Related (Alternate Bids, Additive Alternates, Optional Bids Part 6 Selection Process Course MaterialsThis course is designed to provide a fast-paced yet comprehensive review of ACMs. This workbook contains copies of the slides used by the instructor, as well as supplemental background and reference information to help clarify and further emphasize the major points of the discussion. The instructor will use the slides and course notes to guide the discussion through each of the major topic areas. Course OverviewSlide 2: Course Learning OutcomesSlide 3: Course AgendaPart 1: Why Use ACMs? Benefits/ChallengesSlide 5: Why Use Alternative Contracting Methods?ACMs change the way highway agencies conduct business. Generally, their use has resulted in dramatic improvements in performance, but not without challenges. Performance improvements include time savings, cost reduction, and quality enhancement.One of the primary drivers for time-related ACMs is to minimize impacts to highway users. Secondary reason is reduced ODOT overhead.Slide 6: Benefits and Challenges for Time-related ACMsFor accelerated delivery challenges may arise due to project complexity, 3rd party impacts, or overextended personnel.Must assess whether the benefits (cost, schedule, or reduced user impacts) outweigh the challenges.Slide 7: Benefits of Time-Related ACMs A national NCHRP study, completed in 2010, NCHRP 10-58 (01), Time-Related Incentive and Disincentive Provisions in Highway Construction Contracts, found that least 75% of all I/D projects in 17 reporting DOTs resulted in the contractor earning the maximum incentive allowed. These results indicate that time-related ACMs achieve significant time savings, the expected benefit.Slide 8: Do Time-Related ACMs Affect Quality and Cost?Based on the same national study, time-related ACMs do not negatively impact the project quality to the extent anticipated. Only 5 of the 32 reporting highway agencies reported quality deficiencies that they attribute to project acceleration from ACM provisions.[Source: NCHRP 10-58 (01), 2010]Slide 9: Do ACMs Impact Costs?It is assumed that acceleration associated with I/Ds increases project cost. To what degree the cost increases is a function of unique project features and the level of acceleration requested by the DOT. The majority of responses indicate that DOTs perceive the increased cost to be 10% or less.A comparison of A+B projects and non-I/D projects of similar scope in Minnesota showed that the A+B projects had an initial bid price increase of 7.5% when compared with similar non-I/D projects.Innovation—DOTs agree that I/D provisions motivate contractors to use innovative methods and materials that result in time savings. Incentives for early completion provide the means for contractors to recoup the additional costs associated with these innovative methods and materials.[Source: NCHRP 10-58 (01), 2010]Slide 10: Time-Related ACM CriteriaQuite often the preeminent criterion for using time-based provisions is the impact to highway users. Impacts to local communities or business may also trigger use of time-related ACM provisions.Need to address any issue which could delay a project. Excusable delays may require incentive payments even though a time sensitive date is not reached.Projects which do not have enough competition could result in an overly priced acceleration.Slide 11: ACM Project TypesFHWA has identified five characteristics that can be used to evaluate the appropriate use of time-related I/Ds:Projects on high traffic volume facilities, generally in urban areas.Projects that will complete a gap in a significant highway system.Major reconstruction or rehabilitation on an existing facility that will severely disrupt traffic.Major bridges out of service.Projects with lengthy detours.[Federal Highway Administration. Contract Administration Core Curriculum Participant’s Manual and Reference Guide. U. S. Department of Transportation, Washington, DC, 2006.]Part 2 ACMs What Are They and How Implemented?This part of the course addresses:Definitions and basic information,What planning and engineering needs to know to incorporate into a contract, andWhat construction must consider when administering a contract.Slide 13: ODOT ACMsThese alternative contracting methods are currently what ODOT implements for appropriate project types.Time-related ACMs are addressed in referenced PNsODOT warranty specifications are used for pavements, bridge decks, and preservation treatmentsThese warranty types are addressed in the appropriate Supplemental Specs. Warranties require additional effort to ensure that the warranty continues if contractor doesn’t.Bid-related provisions are covered in Location and Design Manual Vol. 3 (L&D Vol 3), 1307.2.7Slide 14: Incentive Disincentive ProvisionsIn 1984, FHWA rescinded its policy of prohibiting Federal participation in bonus payments for early completion. Since this policy change, the use of I/D provisions has grown and is now widely accepted by both agencies and contractors. Approximately 48 states (and provinces in CN) use or have used I/D provisions.Slide 15: I/D Project ExampleWhen a disincentive period and LDs overlap, the disincentive continues to apply.I/D sections need to be clearly defined.Slide 16: How do I/D provisions fit into PDP?Projects that may be candidates for I/D provisions should be identified early in the project development process. Assessing I/D impacts throughout the design process will result in plans and specifications that are well coordinated with I/D milestones. [Source: NCHRP 10-58 (01)] Consideration of I/D provisions should start in planning stage of the project development. Early analysis would include assessments of work zone alternatives, and preliminary estimates of costs. PN 121 can be inserted into contract as late as final engineering, but it’s better to make the decision earlier in the development process to allow time to optimize the I/D rate.What kinds of costs are typically included in the calculation of an I/D rate?Slide 17: Calculation of I/D RateI/Ds are not punitive! They are real costs to highway users and the Department.Some basic information is needed to calculate and I/D daily/hourly rate:Work Zone configurationTraffic volumes (Average Annual Daily Traffic)Highway user costsOther costs (Department)ODOT maintains standard worksheets for calculation of road user delay costs. [See ODOT Construction Administration pages]. QUEWZ-98 was software developed by FHWA to measure work zone delay resulting from a queue based on Texas frontage road configurations. Most agencies have developed their own software or use simple worksheets for calculation purposes. Some calculations include other factors such as additional vehicle operating costs related to stopping and starting, work zone accident costs, and additional environmental impacts resulting from a work zone.Slide 18: RUDC No Lane ClosureSteps for calculating daily RUDC (per ODOT ACM Manual)Define hourly passenger car/truck costs for construction year(s) (Office of Traffic Engineering)Year Car Cost / hr.Truck Cost / hr.2006$20.00$37.252007$21.00$39.00Future+ 4.50% / year+ 4.50% / yearCalculate length of work zoneGet AADT for road section from ODOT Traffic Survey Report on intranetFree flow speed and work zone speedFree flow travel time through work zoneConstruction travel time (lane closures or detours)Delay = Free flow travel time - construction travel timeDelay X hourly user costs/vehicle (cars/trucks) = hourly delay costs AADT X hourly delay costs/vehicle (cars/trucks) = daily I/D costs.Slide 19: RUDC DetourWork zone with DetourSlide 20: Risks Regarding Setting I/D AmountsAnalysis of I/Ds should include a schedule analysis to determine the maximum $ to accelerate and compare with RUDC savingsIncentive typically based on daily RUDC (including operational $ savings)If RUDC are much greater than $ to accelerate, use discounted daily Incentive rate.Slide 21: Analysis Procedure for Optimizing I/D RatesNeed to determine if an I/D is a reasonable and good “business” decision.1. Traffic ImpactsAnalyze Work Zone for delay impacts caused by lane closures or detoursIs construction acceleration feasible in Work Zone?Estimate Work Zone RUDC ( see ODOT Alternative Contracting Manual steps)2. Schedule Analysis Estimate baseline schedule (daily production) with standard resources and work hoursIdentify major resource constraints on critical activitiesIdentify maximum schedule compression with additional resources3. Cost/Benefit AnalysisEstimate Contractor $ to accelerate (using DOT labor and equipment rental rates)Estimate Department (CEI and field $) and Contractor (field operation $) savings from schedule compressionTotal benefit ($ savings) should be ≥ contractor $ to accelerate.Total benefit includes RUC $ savings + Department CEI $Determine whether daily Incentive $ (RUC) should be discounted (in line with $ to accelerate).[Reference: Systematic Procedures to Determine I/D Amounts for Highway Transportation Projects, Mineta Transportation Institute Report 11-22, June 2012]Figure 1 below illustrates graphically the analysis of savings and costs to optimize I/D rates.Figure 1. Comparison of RUDC and Operational Savings with Acceleration CostsAnother factor to consider in arriving at an I/D rate is to start with the maximum incentive amount that is fiscally achievable in the Department’s budget. Once this figure is known, the daily I/D rate can be set as long as it does not exceed the impact on RUDC created by the project. Again, consistency with similar projects must also be considered. This may require adjusting the number of days for which an incentive for early completion will be paid. Offering a longer time frame where incentive can be earned at a lower rate will encourage earlier completion. For example, if the total amount of incentive that the Department is willing to pay for early completion equals $900,000, it would be more advantageous to allow the contractor to earn $10,000 per day for a maximum of 90 days rather than $30,000 per day for 30 days if the additional days of savings are achievable and the contractor can recoup its acceleration costs.Slide 22: I/D Requirements I/D Time Period: Should be based on an accelerated production rate.I/D rates: Incentive may be different than Disincentive.Disincentive costs must not duplicate LD costs if assessed after project completion. L/D are the cost to the Department to manage the project. I/Ds are costs to “others”.Imax = 5% unless waived by Director. Incentives are capped as a method to reduce the Department risk of overpaying for acceleration. It is also limited by Ohio Administrative code.Contractor Perspective: “Five to seven percent of the contract value should be the floor for I/D. This is the amount that it takes to get the contractor’s attention and makes the endeavor worthwhile.”A note about incentive capping: Some of the contractors interviewed questioned the practice of incentive capping. From the Department perspective, there are two issues to consider. First, there is an optimum combination of cost and schedule. DOTS want the project to be accelerated, and they are willing to pay an incentive for acceleration, to a degree at least. The relationship between cost and acceleration, though unique for every project, is definitely not linear (Figure 17). Almost all highway construction projects have characteristics that practically limit how much they can be accelerated at a reasonable cost. In other words, acceleration costs associated with overcoming the limiting characteristics of a project would not be incremental; they may be exponential. As shown in the hypothetical example in Figure 17, the marginal rate of acceleration ($/day) increases dramatically at approximately 70 days; requesting additional acceleration beyond this point would not be cost effective. Incentive capping not only provides the DOTs with a predictable budget, it also puts them in a position to buy an accelerated project at a lower marginal rate, thus reducing the DOT risk of overspending for acceleration. [Source NCHRP 10-58 (01)]Slide 23: A+B Bidding ProvisionsIn 1995, FHWA began promoting A+B bidding as part of SEP-14. In 1995, A+B bidding was approved by FHWA for use without SEP-14 approval. About two-thirds of DOTs have some experience with A+B bidding. Of these, Florida, South Carolina, and New York (along with Ohio) have been the most active users.Slide 24: Consideration of A+B ProposalsThe apparent low bid does not represent the actual contract value. This is for bid comparisons only. As the “B” portion shows up in the Bidding Estimate and is used to determine the Apparent Lowest Bidder, this inflates what initially appears to be the Contract Value.Slide 25: Clarification of A+B Bidding ProvisionsFor consideration of proposals, the “B” cost is added to the “A” cost for the Adjusted Bid. The “B” cost is derived by multiplying the “B” time estimate by a Department-specified daily I/D rate. For the successful bidder, the “A” cost estimate becomes the contract price. The “B” time estimate becomes the contract time.For A+B bidding, the Contractor takes the risk of estimating an accelerated B time. Note: Specifying a maximum or not-to-exceed B value is seen as a method to protect the STA from overpaying for an incentive in a noncompetitive market or forcing a completion date to meet the STA’s objectives. Similarly, specifying that contractors may not bid less than a minimum B value is seen as a way to protect the Department from excessive bid manipulation, which may inhibit the use of innovative materials and/or processes. In short, A + B is best applied when there are adequate market forces to influence accelerated construction and when plans, specifications, and project conditions are such that the potential for bid manipulation is mitigated. When these conditions exist, the need for a DOT to specify minimum or maximum B limits is less important. (Source: NCHRP 10-58 (01)]Slide 26: Sample A+B Bid EvaluationA+B bidding has the potential to “flip” bids. Lowest cost may not be apparent lowest bidder.Per FHWA Technical Advisory T 5080, Incentive/Disincentive (I/D) for Early Completion, FHWA approves the use of RUDC in low bid determination. FHWA has issued opinion that A+B Bidding is consistent with competitive bidding regulations. Slide 27: A+B Bidding with Multiple SegmentsAccording to the in-depth interviewee’s experiences, A+B with multiple milestones (A+B1+B2+Bn) is the most effective at reducing construction time. [Source NCHRP 10-58 (01)]Individual segments must be definable and clearly noted.Slide 28: Application of A+B BiddingA bridge closure/replacement is a good candidate for A+B bidding where the contractor bids on the bridge closure duration as part of a larger project, and can plan for the preparatory front end work and the delivery of materials so that when the bridge closure starts, the contractor can further accelerate critical bridge replacement work to achieve an incentive.Any project with a user impacts and a clearly definable segment of work is a potential candidate.Slide 29: A+B ImplementationA+B Bidding converts to an I/D project. The B time period should be based on an accelerated production rate so that Contractor will have to further accelerate to achieve an incentive.Again, the daily I/D rate must be sufficient to stimulate industry interest (and cover additional costs to accelerate), but not exceed calculated savings to road user. For very high traffic volumes and RUDC, I/D rates may be discounted to be more consistent or in line with expected costs to accelerateI/D rates: Incentive may be different than Disincentive.Disincentive costs must not duplicate LD costs if assessed after project completion. L/Ds are the cost to the Department to manage the project. I/Ds are costs to “others”.Imax = 5% unless waived by Director. Incentives are capped as a method to reduce the Department risk of overpaying for acceleration; also limited by Ohio Administrative Code.The maximum incentive is not determined by difference between Bmax and Bmin!Slide 30: A+B ImplementationThe accuracy of contract duration estimates has a significant impact on the effectiveness of I/D provisions. CPM scheduling can be a powerful tool for estimating time, particularly for larger, more complex projects, but it entails more than just software training. PN 105 and 107 cover CPM scheduling for short duration and multi-season projects respectively. Construction experience must be integrated with calculating durations and assigning logic. Sequencing schedule activities to avoid conflicts that are inherent in the plans requires a complete understanding of highway construction. Small projects (<$1M) may benefit from A+B Bidding, and in the absence of a CPM scheduling requirement, the Department can use historical experience to estimate the duration of the work in question.The Department does not to use a VECP provision when implementing time-related ACMs as they are being compensated for time savings and a VECP design change may result in compensation for the same operational time savings. It violates the CFR!Again, a minimum number of bid days protects against excessive bid manipulationThe maximum number of bid days encourages bidders to produce an accelerated schedule. The B time period should be based on most time efficient production (not necessarily normal construction). It can also be the longest duration reasonably acceptable to the Department.Setting the Bmin/Bmax:The Bmin is the shortest possible duration based on the most accelerated schedule often reduced by an additional factor.The Bmax is the longest duration Department can live with!! It could be based on community or local business commitments, major events or openings, the winter season, or other constraints.Slide 31: Lump Sum, Minus IncentiveLump Sum Minus Incentive (LSM) is similar to I/D provisions; however, it establishes a large lump incentive to motivate the Contractor to finish on or ahead of schedule.The LSM incentive amount is typically determined as a percentage (5%) of the contract value, and is based on the RUDC savings realized by finishing early. The Lump Sum Incentive will be decreased by the Disincentive amount shown in the LSM Incentive Contract Table (PN 123) for each day that the Contractor does not have the items of critical work completed until the Lump Sum Incentive reaches zero. However, the Project will continue to incur the disincentive until critical work is completed.Critical work is defined as having the designated section of work open to unrestricted traffic as shown in the table, or the entire project if not otherwise listed.Slide 32: Example Lump Sum Minus Incentive (LSM)Example of a LSM applied to the critical opening of Ramps A-D as part of a larger roadway widening.If a Disincentive and LDs are assessed during the same period, what are the Disincentive costs based on? And what are the LDs based on? Table 108.07-1 SCHEDULE OF LIQUIDATED DAMAGESOriginal Contract Amount(Total Amount of the Bid)Amount of Liquidated Damages to be Deducted for Each Calendar Day of Overrun in TimeFrom More ThanTo and Including$0.00$500,000$500$500,000$2,000,000$1,000$2,000,000$10,000,000$1,500$10,000,000$50,000,000$2,600Over $50,000,000$3,200Slide 33: LSM ImplementationCritical work is defined as having the designated section of work open to unrestricted traffic as shown in the table, or the entire project if not otherwise listed.Unrestricted traffic is defined as all traffic lanes being available for use at their final design width with all markings, RPM’s, and safety features installed, along with no restrictions within 2 feet of the edge line on the shoulders.For the work items on the longest path of activities driving the Completion dates for the Critical work shown in the LSM Incentive Contract Table, Table 108.06-1 applies for computing weather days.Table 108.06-1MonthNumber of Workdays Lost Due to WeatherJanuary8February8March7AprilMayJuneJulyAugustSeptemberOctoberNovemberDecember655445666Slide 34: Quick Completion Incentive (QCI)A Quick Completion Incentive (QCI) is similar to Incentive/Disincentive & Lump Sum Minus. It establishes a large lump sum incentive for the Contractor if the project is completed considerably ahead of schedule. A QCI does not allow for time extensions due to weather days or added work, but does allow for Extra Work and other excusable delays. The QCI is decreased by the daily deduction amount for each day the Contractor misses the QCI date or revised date until the incentive reaches zero. Inclusion of a QCI will strongly incentive a Contractor to accelerate a project to complete considerably ahead of the Contract Completion date and meet a specific date impacting adjacent project stakeholders. The QCI is not mandatory! The Contractor chooses if they want to pursue the incentive and is not penalized if it is not pursued. The Contractor is not accessed damages for not completing the project by the QCI date. The QCI date shall be established with consideration of the decreasing amount and the targeted stakeholder date. Think “Pre-approved Acceleration Agreement”The QCI applies to the whole project only (its cleaner).Slide 35: Example QCI ProjectIn this example, the QCI is applied to the entire Project.Slide 36: QCI Selection CriteriaPN 122 Criteria for Selection:The project is a high profile project having significant user delays, or other local impact.The project should have date specific impacts to adjacent stakeholders (e.g.: the planned project duration has impacts with an opening to a nearby public facility).The project will be difficult to complete within the QCI Incentive time, but feasible to be completed in the original project Completion date. (e.g.: a three year project complete in two seasons.)The project is large in dollar amount and has substantial impacts. (The incentive is typically 5% of the contract. The dollar amount must be enough to entice the Contractor to complete the project ahead of schedule.)The project is free from complicating issues such as utility conflicts, right-of-way acquisition, high potential of added extra work, or other unresolved issues. These issues may cause delays that may cause the Department to pay the Contractor the incentive payment even if they don't complete work ahead of schedule.The project original duration is long enough that a Contractor has the ability to judge the feasibility of achieving the Incentive date after beginning work.Project Types:Time sensitive projectsLarge Projects- Interstate reconstructionMega Projects- Corridor reconstruction or interstate rehabilitationSlide 37: QCI ImplementationPN 122 Requirements:Include PN 107 (CPM schedule) is recommendedThe Project Impact Advisory Committee (PIAC) & Central Office Contraction Administration must approve the use of a QCI.The lump sum incentive payment shall not exceed more than five per cent of the total contract amount unless the Director or his designee determines that the work is so critical that a higher percentage is warranted.The delay decreasing amount should be set at a value which decreases at approximately 2–10% of the QCI.The QCI Date shall not be established to be after September 1, unless approved by the Central Office Contraction AdministrationThe delay decreasing amount should be at a value at which the Incentive reaches zero before September 30 of any season.The QCI shall apply to the entire project, not a specific section of a projectSlide 38: Lane Value (Unauthorized Lane Use)PN 127: The Contractor shall be assessed Disincentives as designated in the Lane Value Contract Table for each unit of time the described Critical Lane/Ramp is restricted from full use by the traveling public within the restricted time period. Time Savings: If used properly the construction time for specific areas will be decreased. Congestion: Lane Value Contracts allow the Department to minimize the lane closure duration in order to lessen the congestion time. Also lane closures can be held to a minimum, this is the most restrictive note the Department currently uses and allocates road user costs based on RUDC as the Disincentive.To be successful, the project must allow the Contractor flexibility to manage traffic to minimize lane closure impacts. This may entail relaxing standard traffic control constraints.Slide 39: Example Lane Value RatesExample for lane value calculation for hourly rates.Slide 40: LV ImplementationLane rental specifications do not necessarily accelerate the overall work. They are designed to minimize RUDC and safety concerns associated with lane closures on a project. Minimizing the impact on the public requires work to be performed at night or during short disconnected time periods. Construction efficiency is reduced (overall durations increase) when the continuity of the work is disrupted, work is performed at night, or both. If lane rental is used in conjunction with other I/D provisions, DOTs should pay particular attention to avoid using the same RUDC for lane rental and I/D rates during the same time period. Contractors should not be subject to incentive or disincentive charges that in effect double dip on the same RUDC. When I/D and lane rental durations overlap, both should be based on RUDC that are completely independent of each other.Projects where the primary concern is minimizing the disruption of traffic and the nature of work items results in predictable lane closure durations:OverlayFull depth patchingDowel bar retrofitDiamond GrindingFull depth reclamationSlide 41: Flexible Start Window ContractODOT is promoting use with industry flexibility in mind – to get better bids, reduced costs. A Flexible Start Window can be used with or without I/Ds.Flexible start Window contracts may involve acceleration but the primary objective is to allow industry flexibility in return for better bids and cost savings rough more efficient use of resources.Contractors are in favor of Flexible Start Windows. When DOTs allow the contractor to adjust the start of a project into the contractor’s portfolio of work where it fits best, some staffing and resource issues are alleviated. Contractor feedback regarding flex starts was as follows:“If the STA can offer flexibility in when a project is scheduled, the cost to the STA will be lowered.”“Consideration should be given of flex starts up to 180 days, not limited to 90 days.”Except when the completion of a project is tied to a critical date (school opening, special event, etc.), flex starts should be allowed whenever possible to allow contractors the best opportunity to balance resources between projects. Doing so will minimize the cost associated with an I/D provision and should contribute to maintaining acceptable quality levels. Given materials that comply with specification, quality is most affected by the human resources used on a project. Many solutions exist to add equipment and material resources to a project. However, it still takes people to operate the equipment and incorporate the materials; adding human resources while maintaining quality is a much more difficult task. Flex starts are a valuable tool for the contractor to manage staffing issues created by non-I/D or I/D projects.Slide 42: Example Flexible Start WindowCriteria for SelectionThe project is lower profile with or without user delays.The project is of short duration construction.The project completion date does not have to be tightly controlled.There is no incentive, nor disincentive (except L/D for time overruns)Early fall completion dates are recommended, (stay away from end of season work)Project TypesSimpler and shorter duration projects – A construction project without complex issues such as utility, right of way, or other complicating scenarios.Usually single season projectSlide 43: Flexible Start Window Selection CriteriaCriteria for SelectionLower profile where user delays are not primary driver.The project is of short duration construction.The project start date does not have to be tightly controlled.There is no incentive, nor disincentive (except L/D for time overruns)Early fall completion dates are recommended, (stay away from end of season work)Project TypesSimpler and shorter duration projects – A construction project without complex issues such as utility, right of way, or other complicating scenarios.Usually single season projectSlide 44: Flexible Start Window ImplementationPN 129 allows for window time extensions due to weather and excusable delays per 108.06. With Flexible Start Windows, adequate notice must be provided to Department to allow for oversight and suspension.Should always be considered if possible!!!Part 3 Time-Related ACMS Construction AdministrationSlide 46: Time-Related ACMS Construction AdministrationCPM ScheduleContractual time limits for both parties for submittal activities and other administrative activities or 3rd party reviewsInclude calendar and special work restrictions, weather days, holidaysUse weather table to manage/minimize non-working weather days Time Extensions are managed per 108.06 but with limitations related to material deliveries, labor strikes, and weather: The purpose of I/D provisions are to motivate contractor to finish early. Time extensions defeat this purpose. Heightened project planning, scheduling, and coordination is essential to manage accelerated work and avoid delay.Slide 47: Time-Related ACMs Construction AdministrationEvaluate time carefully using CPM schedule based on analysis of critical or longest path activities.Accelerated work schedules are often accompanied by an increase in number of working hours per week. This increase affects the contractors and Department personnel equally. Both contractors and Department acknowledge the impact created by I/D provisions on human resources. Heightened cooperation and coordination, and expedited decision-making is necessary to meet the schedule.Partnering can be a powerful tool to enhance coordination, cooperation and decision-making.Heightened awareness of quality: Pay greater attention to potential quality reduction with an accelerated schedule.Slide 48: ACM Payment IssuesPlanning stage and Prelim Engineering and Planning - funding must consider potential incentives.SiteManager can make Incentive Payments in two methods. Incentives can be done by initiating a Change Order to establish payments, orCan be paid using the Contract Adjustment screens in Contractor Payments.Using the Contract Adjustment screens is the simplest.A+B Items: As the “B” portion shows up in the Bidding Estimate and is used to determine the Apparent Lowest Bidder; this inflates what initially appears to be the Contract Value.This information is transferred to SiteManager as a payment Line Item, but isn’t used to make any actual payments if incentives are reached. Project Engineers should initiate a change order to “non-perform” the “B” portion. Any incentives reached by the Contractor and payments due are made by using the Contract Adjustment screens.In the Bidding software used by Contractors, the value of the day is actually shown as a bid Qty. Bidders then provide the number of bid days as a “price”. This is required as the bidding software “hard codes” quantities. Part 4: Quality-Related WarrantiesSlide 50: Construction WarrantiesFHWA precluded warranties for highway work in the 1970’s on the basis that federal-aid could not be used for maintenance. The FHWA changed its policy with a final rule on warranties in 1995. This rule allows for construction warranties for highway work but must apply to a specific product or feature and warranty should exclude ordinary maintenance items, or features outside the contractor’s control.ODOT has ability to go after contractor post award regardless of time if failures found for neglect.Slide 51: Why Warranties?Warranties have been applied to most manufactured products commonly sold today. The concept of a warranty obligation for repair or replacement of defective items has been carried through to legal codes in effect today. For example, the Uniform Commercial Code (UCC) provides specific remedies to the consumer for repair or replacement of defective products. These remedies are implied warranties of fitness and merchantability. Because the code does not define limitations for implied warranties related to the fitness or merchantability of a product, many producers of products define express warranties that limit producer liability by defining specific exclusions. It appears that the UCC cannot be easily applied within the construction industry because, with specific exceptions, construction work is broadly defined as a service not as a product. This is consistent with a commonly accepted definition for a warranty as: “A guarantee of the integrity of a product and of the maker’s responsibility for the replacement or repair of deficiencies.”Despite this restrictive definition, construction contracts have typically provided some protection to the buyer through short-term (1-year) warranties covering patent or obvious defects in materials or workmanship and manufacturer pass-through warranties for specific products incorporated into the construction project. In highway construction, a 1-year warranty for obvious defects in materials and workmanship and for specific products or manufactured items is a common practice. In fact, warranties have been used in public and private road construction for many years.Slide 52: Warranted PavementIn 1976, the FHWA published regulation 23 CFR 635.413, formalizing restrictions on the use of warranty clauses on federal-aid construction projects, except for mechanical/electrical equipment. The FHWA based its warranty policy on the belief that warranties would result in federal participation in maintenance costs. Despite the restrictions limiting the use of warranties at the federal level, warranty use at the city-level carried on from the 1930s to recent years. In 1991, a survey conducted with members of the National Asphalt Pavement Association (NAPA) showed that HMA pavement warranties continued to be implemented in the public sector on city contracts.One of the earliest providers of warranties on roadway construction in the U.S. was Warren Brothers Paving. From 1890 to 1921, Warren Brothers Paving owned a patent on hot mix asphalt (HMA), and warranted the material and workmanship of its HMA pavements for a period of up to 15 years. In 1921, the asphalt market was opened up to competition and the Warren Brothers Paving warranty program was discontinued. Warranties for concrete pavements also date back to the late 1800’s, when, in 1889, George W. Bartholomew proposed a 5-year warranty for Portland Cement Concrete (PCC) pavement to the city of Bellefontaine, Ohio.Slide 53: Warranty ExperienceIn 1988 SEP-14 was created as a means to test and evaluate innovative contracting practices that have the potential to reduce the life cycle cost of projects, while maintaining the product quality. Under SEP-14, the FHWA allowed agencies to temporarily suspend warranty restrictions on select federal-aid projects to evaluate warranties, as long as the burden for routine maintenance items was not shifted to the contractor. In 1995, the FHWA lifted its prohibition against the use of construction warranties as a result of the positive evaluations reported under SEP-14 and the international scans. The Final Rule, outlining rules for the application of warranties on NHS projects, was published in the April 19, 1996 Federal Register. Since then, state agencies have increasingly used construction warranties as a way to improve quality, improve end-product performance, and allow innovation. As of 2006, more than two-thirds of the state agencies in the U.S. have implemented at least one construction warranty project in their state. Slide 54: Warranty Benefits/ChallengesState DOTs have used warranties for asphalt concrete and Portland cement concrete to varying degrees of success. Some states that use pavement warranties have reported a reduction in costs and an improvement in quality, while others have not. For example, the Wisconsin DOT has reported significant quality increases and overall internal cost reductions through the use of 5-year performance warranties for asphalt concrete pavements. However, an evaluation of 3-year workmanship and materials warranties completed by the Colorado DOT showed no discernible impact on quality or cost. Michigan has been using 3- to 5-year warranties for approximately ten years. Although Michigan has not formerly evaluated quality data, they report that contractors appear to pay more attention to quality issues during construction as a result of warranty provisions.Slide 55: Warranty CriteriaMany agencies have adopted general rules or criteria for warranty use on selected projects. Some agencies, for example FDOT and Michigan DOT have implemented specific types of pavement warranties as the default unless conditions are not favorable for their use. In 1999, the Ohio Legislature passed House Bill 163, which required the ODOT to utilize construction warranties on at least one-fifth of its capital construction projects. This bill has since changed from requiring a minimum number to targeting a maximum number of warranties on capital construction projects.Slide 56: ODOT Construction Warranty TypesODOT maintains Supplemental Specifications for warranted Asphalt and PCC pavements, Bridge Decks, structural steel painting/metalization and preservation treatments.Slide 57: Consideration of Warranties in Project DevelopmentMake decision to use a warranty early enough in the project development process to allow for the development of warranty provisions with associated plans, specifications and details. It is best implemented in preliminary engineering but doesn’t have to be implemented until final engineering. Develop warranted items separately within the Engineers estimate. Deciding to resort to this method too late may result in additional design costs and delays.Slide 58: What to Consider for Warranty ProvisionsProvisions must clearly define:Scope and duration of the warranty work (remedial actions)Performance standards (criteria and thresholds) Roles and responsibilities of each party for inspection and testing during construction.Warranty exclusionsCondition Surveys of warranted itemsAre the existing conditions well defined (i.e. stable base, predictable traffic volume) or would they potentially trigger exclusions to warranty or disputes? Warranty exclusions may include damage caused by accidents, natural disasters or other force majeure events, and Department maintenance or testing activities. Define limits on liability related to third party claims arising from accidents or force majeure events during the warrantyCondition surveys of warranted items may be conducted at periodic intervals (annually) or at the end of the warranty for short-term items such as 2-year pavement preservation. They can be conducted jointly with the contractor or unilaterally. Specify the notification requirements, survey intervals, and where and how measurements will be taken for each pavement sectionODOT’s existing warranty specifications include these requirementsSlide 59: Warranty Considerations for ConstructionPrior to construction, the Department should clearly define warranty requirements for bidders and again with the Contractor at the Preconstruction meeting. The topics should at a minimum discuss what is covered and not covered under the warranty, roles and responsibilities, what potential distresses the surveys will measure for, the schedule and protocol for conducting annual surveys, and what the remedial actions are for distresses that don’t meet the required thresholds. Slide 60: Post-Construction Warranty ConsiderationsDuring post-construction, warranted projects require the attention and administrative support from both the District and Central office staff. The Contractor staff also must continue to participate in annual or periodic reviews.A best practice for reviews is to conduct joint reviews, or at a minimum notify and invite Contractor representatives to attend the periodic or annual reviews (surveys).Slide 61: Post-Construction Warranty ConsiderationsIf remedial work is required, the Supplemental Specifications for warranted work define the process for remedial work, appeals, and dispute resolution.Example AC Warranty SS 880: The intent of this contract is for the Contractor to provide a maintenance free pavement. If performing routine maintenance during the warranty period, limit this routine maintenance to routing and sealing the pavement with Type 1 crack seal in accordance with Item 423 or other repairs authorized by the Department. Provide construction traffic control when performing any work required or allowed by this specification during the warranty period in accordance with current Department policy and the Ohio Manual of Uniform Traffic Control Devices for Streets and Highways. Obtain Department approval for the time the work will be performed. Any major change in Department construction traffic control policy from the time of bid will be considered a changed condition. Supply all materials, equipment, and labor to perform Remedial Actions at no additional cost to the Department. Obtain approval from the Engineer for asphalt concrete used for Remedial Action work or replacement of sampled areas (See Table A Note 5). The Engineer will take into account the Department’s design criteria for the pavement type. The depth of a repair area may be increased by the Engineer to allow for the size of aggregate in the asphalt concrete. The Engineer may approve alternatives to the extent or type of specified Remedial Action.Replace pavement markings or raised pavement markers (RPM) removed or obliterated while performing a Remedial Action with pavement markings or RPMs equal to or better than the original products at no cost to the Department.Perform all Remedial Actions, except crack sealing, on or before September 30. Perform crack sealing between October 1 and November 15. If an appeal process goes to Step 3, the District may revise the date for completion of the Remedial Action for the appealed item. Prior to performing a Remedial Action, submit a Remedial Action plan to the Engineer for approval.State in the plan when and how the Remedial Action will be performed; what material will be used; and how traffic will be controlled. Warrant Remedial Action work for the remainder of the warranty period.The Department will perform emergency work, repairing pavement distresses which are hazardous to the traveling public. If the emergency work is extensive, the Department may authorize the Contractor to perform the repairs. The District Construction Engineer (DCE) will determine if the distress is or is not the responsibility of the Contractor. If the DCE determines the distress is the responsibility of the Contractor, the cost, including construction traffic control, of emergency work performed by the Department will be charged to the Contractor. If the DCE determines the distress is not the responsibility of the Contractor, the Department will pay for Contractor performed repairs according to 109.05. The Contractor is not responsible for pavement damage beyond the Contractor’s control (i.e., car fire, oil spill, etc.). The DCE’s determination may be appealed in accordance with 880.07.Part 5: Bid-Related ACMGENERAL INFORMATIONCovered in Location and Design Manual Vol. 3 (L&D Vol 3)1307.2.7Questions regarding the use of Additive Alternates. Alternate Bid items, and Optional Bid items should be addressed to the Office of EstimatingSlide 63: Bid AlternatesDescription The use of Alternate Bid items is a bidding technique where the Department specifies bid alternates (typically on two competing designs or competing specifications) and asks for alternate bids for each of the competing items. Bidders are required to price all Alternate Bid Items. The Department will use the lowest of the priced Alternate Bid Items (of the bid items with alternates) to determine the apparent lowest bidder. The Department shall award to the lowest responsive bidder. The decision on which Alternate Bid items to incorporate is made by the Department after awarding the project. Benefits Promotes competition based on current market rates, provides equal, desired, or improved performance or a desired construction technique. When Used?This bidding technique may be useful for the following circumstances: Projects where competition will drive the most cost effective material choice or design (e.g. typical on-street lighting vs. decorative lighting). Projects having a well-defined scope, for which viable alternates exist. Projects which may have a perceived desired betterment, but cost is a needed consideration of inclusion.Projects that attract a sufficient pool of bidders, and have potential cost savings that are significant enough to justify the additional costs to develop bids for multiple design alternates. Projects which have funding provided by a 3rd Party or Municipality, with which an implementation decision cannot occur until ultimate costs are known. Information RequiredAll concepts require full plan and specification development for all alternatives. Project provisions may also differ for each alternate dependent on the needsPlans must contain designs for all alternates, including limits. Plans shall provide separate details associated with each Alternate. Project Development /Procurement Considerations The decision to use this type of procurement method should be made early enough in the design process to allow for the development of additional items with the associated quantities, plans, specifications and details. Deciding to resort to this method too late may result in additional design costs and undesirable delays.The summary sheets should clearly distinguish between the Alternates Bid items. Any of the Alternate Bid item must fulfill the basic purpose and need for the project. The number of Additive Bid items should be reasonably limited to reduce undue bidding and estimating efforts.Bidder order is determined using the lowest-priced of the Alternate Bid items.Slide 64: Additive AlternatesDescription The use of Additive Alternates is a bidding technique where the industry competes on the largest scope fitting within the budget. With this procedure, the Department will specify project base-bid items, while also specifying potential Additive Alternates for possible inclusion. The bid documents must specify the priority in which the Additive Alternates will be considered. Bidders are required to price all base-bid items and all Additive Alternate items. The contract is awarded to the lowest responsive bidder considering the sum of the base bid only. If the project is awarded, the Additive Alternates might be included within the contract. If included, the Additive Alternates are added in the priority specified. The Additive Alternates could be included in the awarded project if the base-plus-alternates price is within a defined target cost or budget, or included if the Department so chooses.The decision on the limit, if any, of the Additive Alternates to be incorporated is made by the Department after awarding the project.Benefits Promote competition, maximize or enhance the work within a defined budget, and minimize work (cost) added through the change order process. When Used These provisions may be useful for the following circumstances: To maximize the scope for projects within limited or tight budgets. If there is some uncertainty regarding the cost of the project and features can be incrementally scoped to maximize use of available funds. If the project can be tailored to include add-ons in priority of importance. Information Required The Additive Alternates require full plan and specification development for all. The Summary of Approximate Quantities and subsequent plan sheets contain details and tabulations for all. Plans must contain designs for all Additive Alternates, including limits. Provide separate sheets for the items associated with each Additive Alternate. Project Development /Procurement Considerations The decision to use this type of procurement method should be made early enough in the design process to allow for the development of additional items with the associated quantities, plans, specifications and details. Deciding to resort to this method too late may result in additional design costs and undesirable delays. The summary sheets should clearly distinguish between the base-bid work items with associated quantities and the items and quantities associated with each additive package.The base-bid package must fulfill the basic purpose and need for the project. The intent is to design a project scope that is well within the project budget while providing for additional desired work items to be awarded if the budget allows. The number of additive packages should be reasonably limited to reduce undue bidding and estimating efforts. The proposal form will list which sections are the base-bid set of bid items.Bidder order is determined using the base-bid items only. If all bids exceed the Contract Award Limit, then the bidder with the lowest bid for the base-bid items will be considered for award. The Department may still award a contract to the bidder with the lowest bid for the base-bid that exceeds the Contract Award Limit. The Department objective is to award the maximum amount of work (base and Additive Alternates) within the budget.Slide 65: Optional Bid ItemsDescription The use of Optional Bid Items is a bidding technique where the Department specifies bid options (typically on two competing designs or competing specifications) and asks for bids on only one of the competing items. Bidders are required to price only one of the Optional Bid items. The Department will use the price provided for the priced Optional Bid Items (of the bid items with options) to determine the apparent lowest bidder. The Department shall award to the lowest responsive bidder. The decisions of which Optional Bid item to incorporate is made by the bidder upon the submittal of the bid. Benefits Promotes competition based on current market rates and provides equal performance or an equal construction technique. When Used This bidding technique may be useful for the following circumstances: Projects where competition will drive the most cost effective material choice or design (e.g. concrete pavement vs. asphalt pavement). Projects having a well-defined scope, for which viable options exist. Projects which may have an equal solution to a design or material choice, and allows cost to determine inclusion.Projects that will attract a sufficient pool of bidders, and have potential cost savings that are significant enough to justify the additional costs to consider competing bids. Information Required All concepts require full plan and specification development for all options. Project provisions may also differ for each option.Plans must contain designs for all options. Plans shall provide separate details associated with each option. Project Development /Procurement Considerations The decision to use this type of procurement method should be made early enough in the design process to allow for the development of additional items with the associated quantities, plans, specifications and details. Deciding to resort to this method too late may result in additional design costs and undesirable delays. The summary sheets should clearly distinguish between the Options. Any of the Optional Bid item must fulfill the basic purpose and need for the project and must be considered a technically equal solution.Plans and specifications must include options for any impacted work item (i.e. Maintenance of Traffic schemes to address asphalt vs. concrete pavement construction).P The number of Optional Bid items should be reasonably limited to reduce undue bidding and estimating efforts.Bidders price only one of the Optional Bid items. Bidder order is determined using the priced Optional Bid item.Slide 66: Bid-Related ACM Final ConsiderationsThese kinds of Bid alternates require up-front design work from the Department. This can’t be used to just assess the feasibility of alternates. It adds time and effort to all bidders and the Department.Part 6: Project SelectionThe ODOT ACM manual includes guidance on what innovative methods would be appropriate for various typical project types. Although a method may be permitted on a project type, the district must perform analysis to determine if a potential innovative contracting method is truly appropriate for the specific project. Warranty and Value Engineering techniques can be used in combination with most of the listed innovative contracting methods to promote a contractor innovation.Slide 68: Administrative Project Selection Steps1.The District Production Administrator coordinates with the District Planning/Program Administrator and Highway Management Administrator in the review of all current projects under development to determine if Innovative Contracting Methods should be used. Candidate projects will be identified by Project Criteria.2. After a candidate project is identified, the District Production Administrator shall coordinate with District Planning/Program Administrator, Highway Management Administrator and Central Office Program Manager (when applicable) to determine what contracting method(s) will be used on the project. The Program Manager will be notified of possible Incentives offered so they can be properly budgeted for.3. When the method selection is complete, the District Production Administrator will submit an "Innovative Contracting Notification Form (ICNF)" along with the plan package submittal. (CO Estimating will forward the ICNF to Construction). Alternatively the District Production Administrator may submit the ICNF directly to CO Construction directly. The District Production Administrator will coordinate the development of the Innovative method selected with District Planning/Program Administrator, and Central Office Program Manager (when applicable).4. The District Production Administrator will keep the ELLIS system up to-date with the innovative method selection as appropriate. The District Construction Engineer will keep the CMS system up-to-date with Incentive and Disincentive payments as appropriate.Slide 69: Candidate Projects for ACMProjects that meet any of the following criteria may use an innovative contracting method (see ODOT ACM Manual):A.Projects on the Interstate or Freeway that have any of the following Ellis work types:Major ReconstructionMajor WideningMinor WideningNew Bridge/Bridge ReplacementBridge Rehabilitation, Repair & WideningInterchange UpgradeB.Projects in urban areas with high volumes.C. Projects that complete a gap in a significant highway system.D. Major reconstruction or rehabilitation on congested locations as defined by the Office of Planning Congestion Model.E. Projects on any system that require the complete closure of a road; typically, a critical bridge out of service and/or a project with a detour.F. Any project that applies for a Maintenance of Traffic Exception Committee exception.G. Projects on any system that will significantly impact commercial businesses school transportation or emergency medical response/access.Slide 70: Project Selection MatrixA project selection matrix is relatively simple and straightforward approach for the alignment of potential ACMs to project types. More complex selection methods involve scoring systems combined with the evaluation of project goals and risks. For larger, more complex projects, it may be worthwhile to perform more in-depth analysis, but for the majority of projects, a selection matrix should be sufficient.Slide 71: Screening Criteria for ACMsIt is advisable as an interim step to screen a candidate project for complicating issues that might affect the schedule or budget. If issues are compounded, and cannot be mitigated, the project is probably not good candidate for an ACM.Slide 72: Example 1 Decision ProcessUsing the selection matrix, (1) select the most appropriate project scope, (2) identify candidate ACMs to achieve ACM goals (time savings, quality enhancement or reduction of highway user impacts). After (3) screening for potential complications, the (4) evaluation can distinguish specific attributes of the ACMs to (5) select the most appropriate ACM or combination of ACMs for the project. For this project scope, an A+B method was selected so that the Contractor expertise can be utilized to estimate critical project time, and a warranty was recommended to enhance quality.Slide 73: Example 2 Decision ProcessIn the second example using the same steps with a much different project scope, a secondary analysis of RUDC for the project would be needed to make the final ACM selection..Part 7: Recap and QuestionsSlide 75: Recap of ACM Course Learning OutcomesQuestions Thank you for your interest and participation!! ................
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